SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): March 13, 1998
ON STAGE ENTERTAINMENT, INC.
-----------------------------------------------
(Exact Name of Registrant Specified in Charter)
Nevada 0-92402 88-0214292
(State or Other (Commission File (I.R.S. Employer
Jurisdiction of Number) Identification No.)
Incorporation)
- ----------------------------- -------------------------- -----------------------
4625 W. Nevso Drive #2
Las Vegas, Nevada 89103
- ---------------------------------------- ----------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (702) 253-1333
-------------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
<PAGE>
This amendment to the Registrant's Form 8-K filed with the Securities and
Exchange Commission (the "Commission") on March 30, 1998 (the "Form 8-K"),
amends and modifies Item 7 of the Form 8-K.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Audited Financial Statements of business acquired.
(b) Pro Forma Financial Information (Unaudited).
(1) Unaudited Pro Forma Balance Sheet as of December 31, 1997
(2) Unaudited Pro Forma Statement of Operation for year ended
December 31, 1997
(3) Notes to Pro Forma Consolidated Financial Statements
(c) Exhibits.
2.1 Asset Purchase Agreement dated as of December 29, 1997 by and
among the Registrant, King Henry's USA, Ltd., Fort Liberty,
Ltd., Blazing Pianos, Ltd. Wild Bill's Management, Inc. and
Gedco USA, Inc.
<PAGE>
Item 7a
Audited Financial Statements of Business Acquired
<PAGE>
Independent Auditor's Report
To the Board of Directors
Gedco USA, Inc.:
We have audited the accompanying combined balance sheets of The Gedco Entities
(which is comprised of certain entities described in Note 1) as of December 31,
1997 and 1996 and the related combined statements of operations, partners'
capital and cash flows for the years then ended. These combined financial
statements are the responsibility of The Gedco Entities (the "Entities")
management. Our responsibility is to express an opinion on these combined
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of The Gedco Entities
as of December 31, 1997 and 1996, and the results of its operations and its cash
flows for the periods then ended in conformity with generally accepted
accounting principles.
/s/ KPMG Peat Marwick, LLP
February 26, 1998
<PAGE>
THE GEDCO ENTITIES
Combined Balance Sheets
December 31, 1997 and 1996
1997 1996
---------------------------
ASSETS
Cash $ 2,728,508 $ 3,203,590
Accounts receivable (Note 3) 704,769 543,010
Inventory 145,592 113,688
Prepaid expenses 135,938 112,881
---------------------------
Total current assets 3,714,807 3,973,169
Due from related party 468,035 301,193
Property and equipment, at cost, net of
depreciation and amortization (Note 4) 8,316,439 8,601,162
Other assets 138,582 165,736
---------------------------
Total assets $12,637,863 $13,041,260
===========================
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable and accrued expenses $ 308,471 $ 464,536
Customer deposits 527,130 535,890
Due to related party 1,056,251 673,715
---------------------------
Total liabilities 1,891,852 1,674,141
Partners' capital 10,746,011 11,367,119
Commitments (Note 5)
---------------------------
Total liabilities and partners'
capital $12,637,863 $13,041,260
===========================
See accompanying notes to combined financial statements.
<PAGE>
THE GEDCO ENTITIES
Combined Statements of Operations
For the Years Ended December 31, 1997 and 1996
1997 1996
--------------------------
Revenues $13,875,572 $15,689,226
Cost of sales 6,910,555 7,929,821
--------------------------
Gross profit 6,965,017 7,759,405
Operating expenses, excluding depreciation
and amortization 4,241,211 4,927,518
--------------------------
Operating income, excluding
depreciation and amortization 2,723,806 2,831,887
Depreciation and amortization (315,845) (304,433)
Interest income, net 146,923 37,416
Gain on sale of equipment 5,778 - -
Other income 8,730 29,671
--------------------------
Net income $ 2,569,392 $ 2,594,541
==========================
See accompanying notes to combined financial statements.
<PAGE>
THE GEDCO ENTITIES
Combined Statements of Partners' Capital
For the Years Ended December 31, 1997 and 1996
Balance at December 31, 1995 $ 8,989,006
Distributions to partners (217,428)
Net income 2,595,541
-----------
Balance at December 31, 1996 11,367,119
Distributions to partners (3,190,500)
Net income 2,569,392
-----------
Balance at December 31, 1997 $10,746,001
===========
See accompanying notes to combined financial statements.
<PAGE>
THE GEDCO ENTITIES
Combined Statements of Cash Flows
For the Years Ended December 31, 1997 and 1996
1997 1998
------------------------
Cash Flows From Operating Activities:
Net income $2,569,392 $2,595,541
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation and amortization 315,845 304,433
Gain on sale of equipment (5,778) - -
Cash provided by (used for) changes in:
Accounts receivable (161,759) 24,316
Inventory (31,904) 38,203
Prepaid expenses (23,057) 123,667
Due from related party (166,842) (193,712)
Other assets 27,154 5,964
Accounts payable and accrued expenses (157,065) (417,451)
Customer deposits (8,760) (19,250)
Due to related party 382,536 234,742
------------------------
Net cash provided by operating activities 2,740,762 2,696,453
-------------------------
Cash Flows From Investing Activities:
Purchases of property and equipment (31,122) (57,232)
Proceeds from sale of equipment 5,778 - -
------------------------
Net cash flows used in investing
activities (25,344) (57,232)
------------------------
Cash Flows From Financing Activities:
(Payment) of principal on note payable - - (1,062,581)
(Distributions to) partners (3,190,500) (217,428)
------------------------
Net cash flows used in financing
activities (3,190,500) (1,280,009)
------------------------
Net (decrease) increase in cash (475,082) 1,359,212
Cash at beginning of year 3,203,590 1,844,378
------------------------
Cash at end of year $2,728,508 $3,203,590
========================
Supplemental disclosure of cash flow information:
Cash paid during the period of interest $ - - $ 113,827
========================
See accompanying notes to combined financial statements.
<PAGE>
THE GEDCO ENTITIES
Notes to Combined Financial Statements
December 31, 1997 and 1996
(1) Organization and Basis of Presentation
The combined financial statements presented as of and for the years ended
December 31, 1997 and 1996, include the financial position and operations of the
operating units named below and have been referred to as The Gedco Entities (the
"Entities"). All significant intercompany balances and transactions have been
eliminated in combination.
Gedco USA, Inc. ("Gedco") was incorporated in 1995, for the purpose of forming
and investing in four limited partnerships: King Henry's USA LTD, Fort Liberty,
LTD and Blazing Pianos, LTD. and Fun'N Wheels, LTD. (the "Partnerships"). Gedco
is the general partner for each partnership. In addition, the owner of Gedco is
also the 100% owner of Wild Bill's Management, Inc., a subchapter S corporation
which holds the liquor license for Wild Bill's in California.
Pursuant to the Asset Purchase Agreement dated June 30, 1995 and effective July
25, 1995, Gedco, on behalf of the Partnerships, purchased the following
operating units:
Location Operation
-------------------------------------------------------
King Henry's Feast Orlando, Florida Dinner Theater
Fort Liberty Kissimmee, Florida Dinner Theater
Blazing Pianos Orlando Florida Piano Bar
Wild Bill's Los Angeles, California Dinner Theater
The Asset Purchase Agreement also included the purchase of Gedco of certain
vacant land and buildings located in Anaheim, California and land adjoining Fort
Liberty in Kissimmee, Florida.
The purchase price amounted to $8,800,000 plus or minus working capital assets
and liabilities. The purchase price was allocated to the noncurrent assets of
the properties based on their estimated market value, as provided in the Asset
Purchase Agreement.
(2) Summary of Significant Accounting Policies
(a) Revenue recognition
Revenue is recognized as food service and entertainment are
presented.
(b) Inventories
Inventories are primarily comprised of food and beverage and gift
shop merchandise and are stated at the lower of cost or market. Cost
is determined utilizing the first-in, first-out method (FIFO).
(c) Depreciation and Amortization
Depreciation is recorded on a straight-line basis over the estimated
useful lives of the assets as follows:
Buildings 20 years
Equipment and automobiles 3 years
Leasehold improvements are amortized over the lesser of the lease
term or estimated useful life of the assets.
(d) Advertising
The costs of advertising are charged to operations in the year
incurred. Advertising expense was $659,855 and $1,006,204 for the
years ended December 31, 1997 and 1996, respectively.
(e) Income taxes
Under the provisions of the Internal Revenue code and applicable
state laws, the partnerships that form the Gedco Group are not
directly subject to income taxes; the results of its operations are
includable in the tax returns of its partners. Therefore, no
provision for income taxes has been included in the accompanying
combined financial statements.
<PAGE>
(f) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates.
(g) Corporate Overhead
Corporate expenses included in the accompanying combined statements
of operations reflect those corporate expenses allocated to the
Entities. Corporate expenses incurred by GEDCO, who also manages
other commonly owned entities, have been allocated based upon the
relationship of revenue of the Entities to total revenues of the
businesses included in the GEDCO Group.
(h) Accounting Pronouncements
On March 31, 1995, the Financial Accounting Standards Board ("FASB")
issued Statement of Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed of". This Statement establishes accounting standards for the
impairment of long-lived assets, certain identifiable intangibles,
and goodwill related to those assets to be held and used for
long-lived assets and certain identifiable intangibles to be disposed
of. It requires that long-lived assets and certain identifiable
intangibles to be held and used by an entity be reviewed for
impairment whenever events or changes in circumstances indicate that
the carrying amount of an asset may not be recoverable. It also
prescribes the value of these assets to be disposed be reported at
the lower of carrying amount of fair value less cost to sell.
The Entities adopted Statement 121 effective January 1, 1997, and
there is no significant impact on the combined financial statements.
(3) Accounts Receivable
Accounts receivable are summarized as follows as of December 31:
1997 1996
-----------------------
Trade accounts receivable $544,167 $468,026
Tenant receivables 48,164 62,699
Other 112,438 12,285
-----------------------
Total $704,769 $543,010
=======================
(4) Property and Equipment
Property and equipment is comprised of the following as of December 31:
1997 1996
-------------------------
Land $6,900,000 $6,900,000
Buildings 814,735 814,735
Equipment 773,753 741,359
Leasehold improvements 513,029 509,474
Automobiles 26,575 27,575
Accumulated depreciation and amortization (711,653) (391,981)
-------------------------
$8,316,439 $8,601,162
=========================
<PAGE>
(5) Lease Obligations
At December 31, 1997, the Entities were obligated on various noncancellable
operating leases with rental commitments as follows:
Fiscal Year Scheduled Payments
- -------------- ------------------
1998 $ 629,070
1999 629,803
2000 577,876
2001 420,602
2002 412,292
Thereafter 2,999,970
----------
Total $5,669,613
==========
Rent expense for the years ended December 31, 1997 and 1996 amounted to $775,014
and $782,340, respectively.
<PAGE>
Item 7b (1)
Unaudited Pro Forma Balance Sheet as of December 31, 1997
<TABLE>
ASSETS Pro-forma Pro-forma
On Stage Gedco Adjustments Consolidated
-----------------------------------------------------------
<S> <C> <C> <C> <C>
Cash $ 2,402,292 $ 420,600 $ (341,867) (1) $ 2,402,292
Accounts receivable 455,340 - - - - 455,340
Inventory 118,700 145,592 - - 264,292
Deposits & Prepaid Expenses 749,628 135,938 - - 885,566
Direct acquisition costs 258,133 -- (258,133) (1) - -
Property and equipment
(net of depreciation) 2,455,488 8,316,439 6,358,561 (1) 17,130,488
Intangibles and other assets 55,805 - - 750,000 (1) 805,805
------------------------------------------------------------
TOTAL ASSETS 6,416,653 9,018,569 6,508,561 21,943,783
============================================================
LIABILITIES
Accounts payable/accrued expenses $ 880,288 $ - - $ - - $ 880,288
Customer Deposits - - 527,130 - - 527,130
Other accrued liabilities 698,499 - - - - 698,499
Short-term debt 271,918 - - - - 271,918
Long-term debt 550,332 - - 12,500,000 (1) 13,050,332
------------------------------------------------------------
TOTAL LIABILITIES 2,401,037 527,130 12,500,000 15,428,167
EQUITY
Common stock and APIC 7,345,356 - - 2,500,000 (1) 9,845,356
Accumulated deficit (3,329,740) - - - - (3,329,740)
Equity in net assets acquired - - 8,491,439 (8,491,439)(1) - -
------------------------------------------------------------
TOTAL EQUITY 4,015,616 8,491,439 (5,991,439) 6,515,616
TOTAL LIABILITIES
AND EQUITY $ 6,416,653 $ 9,018,569 $ 6,508,561 $21,943,783
=============================================================
</TABLE>
<PAGE>
ON STAGE ENTERTAINMENT, INC.
Project Crocodile (Post Acquisition Illustration)
Notes to Pro Forma Consolidated Financial Statements
NOTE A -
The pro forma adjustments to the condensed consolidated balance sheet are as
follows:
(1)
To record the acquisition of the Crocodile and the allocation of the purchase
price on the basis of the fair value of the assets acquired and liabilities
assumed. New borrowings (collateralized by the property being acquired) were
used to fund the cash payment to Sellers, while acquisition costs were funded
from existing working capital. The components of the purchase price and its
allocation to the assets and liabilities are as follows:
Components of purchase price:
Cash payment to Sellers $11,500,000
Acquisition costs 800,000
Cash portion 12,300,000
Shares of common stock 2,500,000
-----------
Total purchase price $14,800,000
===========
Allocation of purchase price:
Equity of net assets acquired $14,000,000
Increase in property and equipment 380,000
Increase in debt issue costs 420,000
-----------
Total allocation of purchase price $14,800,000
===========
NOTE B -
The pro forma adjustments to the condensed consolidated statements of operations
are as follows:
(2) To record adjustments to interest expense resulting from the use of new
mortgage financing to fund a portion of the purchase consideration, (using
an assumed interest rate of 10.0%), net of the elimination of Crocodile's
historical interest income.
(3) To record adjustments to depreciation expense based on the revised values
of the depreciable assets and to amortization expense relating to debt
issue costs based on the term of the mortgage loan.
(4) To record the income tax effect relating to pro forma adjustments and
treatment of Crocodile as a C-corporation (rather than an S-corporation)
using an effective tax rate of 37.5% before giving retroactive effect to
the utilization (which is limited under Federal Tax Law IRC Section 382) of
existing net operating loss carryforwards.
(5) To record adjustments to operating expense, primarily to salaries and wages
for personnel being retained (eliminated) by the Company in connection with
the acquisition.
<PAGE>
Item 7b (2)
Unaudited Pro Forma Statement of Operation for year ended December 31, 1997
<TABLE>
Historical
------------ Pro Forma Pro Forma
On Stage Gedco Adjustments Consolidated
---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenue $ 15,726,074 $ 13,875,572 $ -- $ 29,601,646
Cost of Revenues 11,413,524 6,910,555 -- 18,324,079
---------------------------------------------------------------------------
Gross Profit 4,312,550 6,965,017 -- 11,277,567
Operating Expenses 5,928,315 4,241,211 -- 10,169,526
Loss on discontinued location 489,285 -- -- 489,285
---------------------------------------------------------------------------
Operating Income (Loss) (2,105,050) 2,723,806 -- 618,756
Depreciation & Amortization -- 315,845 148,935 (3) 464,780
Interest Income (Expense), Net (834,333) 146,923 (1,396,923)(2) (2,084,333)
Other income -- 14,508 -- 14,508
Income Tax Expense 6,673 -- -- 6,673
---------------------------------------------------------------------------
Net (Loss) Income $(2,946,056) $ 2,569,392 $(1,545,858) $(1,922,522)
===========================================================================
Basic income (loss) per share (0.51) (0.30)
=========== ===========
Diluted income (loss) per share (0.51) (0.30)
============ ============
Basic average number of common
shares outstanding 5,800,841 595,238 6,396,079
============ ==================================
Diluted average number of common
shares outstanding 5,800,841 6,396,079
============ ============
</TABLE>
<PAGE>
Item 7b (3)
Notes to Pro Forma Consolidated Financial Statements
On March 13, 1998, On Stage Entertainment, Inc. (the "Company")
consummated the acquisition of certain assets (primarily relating to property,
equipment and leasehold improvements) from Gedco USA, Inc. and its affiliates
relating to three (3) dinner theaters and one piano bar (the "Acquired Dinner
Theaters") for a purchase price of $ 14 million, consisting of $11.5 million
cash and $2.5 million in common stock of the Company (par value $ .01 per
share), plus fees and expenses of approximately $1.6 million. A substantial
portion of the cash payment to sellers was obtained from a $12.5 million
mortgage loan on the properties acquired, with the balance provided for by the
Company's working capital. In connection with the acquisition, the Company
entered into an employment agreement with a shareholder of the Sellers which
included the grant of warrants for purchase of the Company's common stock and
non-competition restrictions.
The Acquired Dinner Theaters were purchased from a selling group
unaffiliated with the Company comprised of Gedco USA, Inc., a Florida
corporation, Wild Bill's Management, Inc., a Florida corporation and Florida
limited partnerships of King Henry's Feast USA Ltd, Fort Liberty Ltd. and
Blazing Pianos Ltd (collectively, the "Sellers"). The Company will account for
the acquisition using the purchase method of accounting with the assets acquired
and liabilities assumed recorded at fair value, and the results of the Acquired
Dinner Theaters included in the Company's consolidated financial statements from
the date of acquisition. Pursuant to the terms of the definitive purchase
agreement, dated December 29, 1997 (as amended), the purchase price is subject
to adjustment to the extent that EBITDA and working capital of the Acquired
Dinner Theaters vary from established threshold levels on the Closing Date.
The accompanying unaudited pro forma condensed consolidated financial
statements illustrate the effects of the acquisition on the Company's financial
position and results of operations. The pro forma condensed consolidated balance
sheet as of December 31, 1997 is based on the historical balance sheets of the
Company and the Sellers as of that date and assumes the acquisition took place
on that date. The pro forma condensed consolidated statements of operations for
the year ended December 31, 1997 are based on the historical statements of
operations of the Company and the Acquired Dinner Theaters for that period. The
pro forma condensed consolidated statements of operations assume the acquisition
took place on January 1, 1996.
The pro forma condensed consolidated financial statements may not be indicative
of the actual results of the acquisition. In particular, the pro forma condensed
consolidated financial statements are based on management's current estimate of
the allocation of the purchase price, the actual allocation of which may differ.
The accompanying condensed consolidated pro forma financial statements
should be read in connection with the historical financial statements of the
Company and the Acquired Dinner Theaters.
<PAGE>
NOTE A - The pro forma adjustments to the condensed consolidated balance sheet
are as follows:
(1) To record the acquisition of the Gedco and the allocation of the purchase
price on the basis of the fair value of the assets acquired and
liabilities assumed. New borrowings (collateralized by the property being
acquired) were used to fund the cash payment to Sellers, while $1,000,000
of acquisition costs were funded from new borrowings and the balance from
existing working capital. The components of the purchase price and its
allocation to the assets and liabilities are as follows:
Components of purchase price:
Cash payment to Sellers $11,500,000
Acquisition costs 1,600,000
-----------
Cash portion 13,100,000
Shares of common stock 2,500,000
-----------
Total purchase price $15,600,000
-----------
Allocation purchase price:
Equity of net assets acquired $ 8,491,439
Increase in property and equipment 6,358,561
Increase in debt issue costs 750,000
-----------
Total allocation of purchase price $15,600,000
-----------
NOTE B - The pro forma adjustments to the condensed consolidated statements of
operations are as follows:
(2) To record adjustments to interest expense resulting from the use of new
mortgage financing to fund a portion of the purchase consideration (using
an assumed interest rate of 10.0%), net of the elimination of Gedco
historical interest income.
(3) To record adjustments to depreciation expense based on the revised values
of the depreciable assets and to amortization expense relating to debt
issue costs based on the term of the mortgage loan.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
ON STAGE ENTERTAINMENT, INC.
(Registrant)
By \s\ Kiranjit S. Sidhu
-------------------------------------
Kiranjit S. Sidhu
Chief Financial Officer and Treasurer
Dated: May 13, 1998
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
2.1 Asset Purchase Agreement dated as of December 29, 1997 by and
among the Registrant, King Henry's USA, Ltd., Fort Liberty,
Ltd., Blazing Pianos, Ltd. Wild Bill's Management, Inc. and
Gedco USA, Inc.
23.2 Consent of KPMG Peat Marwick LLP
Exhibit 2.1
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT is made as of the 29th day of December,
1997, by and among On Stage Entertainment, Inc., a Nevada corporation (the
"Buyer"), King Henry's USA, Ltd., a Florida limited partnership ("King
Henry's"), Fort Liberty, Ltd., a Florida limited partnership ("Fort Liberty"),
Blazing Pianos, Ltd., a Florida limited partnership ("Blazing Pianos"), Wild
Bill's Management, Inc., a Florida corporation ("Wild Bills"), and Gedco USA,
Inc., a Florida corporation ("Gedco" and together with King Henry's, Fort
Liberty, Blazing Pianos and Wild Bills, the "Selling Entities").
Certain other terms are used herein as defined below in Section 1 or
elsewhere in this Agreement.
Background
The Selling Entities desire to transfer to the Buyer the Purchased
Assets (as defined herein) in exchange for the assumption by the Buyer of the
Assumed Liabilities (as defined herein) and the payment by the Buyer of the
Purchase Price (as defined herein) in accordance with the terms and conditions
set forth in this Agreement. The Buyer, itself, or through one or more wholly
owned subsidiaries shall acquire the Purchased Assets and assume the Assumed
Liabilities.
NOW, THEREFORE, in consideration of and reliance on the respective
representations, warranties and covenants contained herein and intending to be
legally bound hereby, the parties hereto agree as follows:
1. Definitions. For convenience, certain terms used in more than one part of
this Agreement are listed in alphabetical order and defined or referred to below
(such terms as well as any other terms defined elsewhere in this Agreement shall
be equally applicable to both the singular and plural forms of the terms
defined).
"1997 Financial Statements" is defined in Section 2.9.
"Accounts Receivable" means as of any date any trade accounts
receivable (billed and unbilled), notes receivable, bid or performance deposits,
employee advances and other miscellaneous receivables included in the Assets.
"Affiliates" means, with respect to a particular party, Persons
controlling, controlled by or under common control with that party, as well as
the officers, directors and majority-owned Persons of that party and of its
other Affiliates. For the purposes of the foregoing, ownership, directly or
indirectly, of 20% or more of the voting stock or other equity interest shall be
deemed to constitute control.
"Agreement" means this Agreement, including the Schedules and Exhibits,
attached.
"Assets" means all of the assets, properties, goodwill and rights of
every kind and description, real and personal, tangible and intangible
(including goodwill), wherever situated and whether or not reflected in the most
recent Financial Statements, that are owned or possessed by a Selling Entity and
used or held for use in connection with the operation of a Business.
"Assumed Liabilities" is defined in Section 2.3.
"Audited Financial Statements" is defined in Section 4.5.
"Benefit Plans" means all employee benefit plans of any Selling Entity
(including without limitation plans within the meaning of Section 3(3) of ERISA)
and any related or separate Contracts, plans, trusts, programs, policies,
arrangements, practices, customs and understandings, in each case whether formal
or informal, that provide benefits to any present or former employee of either
Selling Entity, or present or former beneficiary, dependent or assignee of any
such employee or former employee, including, without limitation, all incentive,
bonus, deferred compensation, vacation, holiday, medical, disability, share
purchase or other similar plans, policies, programs, practices or arrangements.
"Businesses" means collectively the entire existing business conducted
by the Partnerships and the operations, facilities and other Assets (other than
the Excluded Assets) of the Selling Entities that are used or held for use
exclusively in conducting such businesses.
"Business Day" means a day other than a Saturday, Sunday or any day on
which the principal commercial banks located at Las Vegas, Nevada are not open
for business during normal banking hours.
"Buyer" is defined in the preamble.
<PAGE>
"Certified Independent Accounting Firm" means an accounting firm that
includes an entity which, as of January 1, 1997, was widely recognized as one of
the "Big Six." For example, such a firm would include the to-be-combined entity
consisting of Price Waterhouse LLP and Coopers & Lybrand LLP.
"Charter Documents" means an entity's certificate or articles of
incorporation, certificate defining the rights and preferences of securities,
articles of organization, general or limited partnership agreement, certificate
of limited partnership, joint venture agreement or similar document governing
the entity.
"Closing" is defined in Section 3.1.
"Closing Date" means the date of the Closing.
"Closing Statement" is defined in Section 2.9.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the U.S. Securities and Exchange Commission.
"Common Stock" means the common stock, par value $.01 per share, of the
Buyer.
"Confidential Information" means any confidential information or trade
secrets of the Business, including, without limitation, information and
knowledge pertaining to products and services offered, innovations, designs,
ideas, plans, trade secrets, proprietary information, know-how and other
technical information, advertising, marketing plans and systems, distribution
and sales methods and systems, sales and profit figures, customer and client
lists, and relationships with dealers, distributors, wholesalers, customers,
clients, suppliers and others who have business dealings with the Business.
"Contract" means any written or oral contract, agreement, lease, plan,
instrument or other document or commitment, arrangement, undertaking, practice
or authorization that is binding on any Person or its property under applicable
law.
"Copyrights" means registered copyrights, copyright applications and
unregistered copyrights.
"Corporations" means Wild Bills and Gedco.
"Court Order" means any judgment, decree, injunction, order or ruling
of any Federal, state, local or foreign court or governmental or regulatory body
or arbitrator or authority that is binding on any Person or its property under
applicable law.
"Default" means (a) a breach, default or violation, (b) the occurrence
of an event that with or without the passage of time or the giving of notice, or
both, would constitute a breach, default or violation or cause an Encumbrance
(other than a Permitted Encumbrance) to arise or (c) with respect to any
Contract, the occurrence of an event that with or without the passage of time or
the giving of notice, or both, would give rise to a right of termination,
renegotiation or acceleration or a right to receive damages or a payment of
penalties.
"EBITDA" means earnings before interest, taxes, depreciation and
amortization.
"Encumbrances" means any lien, mortgage, security interest, pledge,
restriction on transferability or voting, defect of title or other claim, charge
or encumbrance of any nature whatsoever on any property or property interest.
"Environmental Condition" is defined in Section 4.17(b).
"Environmental Law" is defined in Section 4.17(b).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Escrow Agent" means The First Security Bank of Nevada or such other
bank as may be mutually approved by the Buyer and the Selling Entities.
"Escrow Agreement" means the Escrow Agreement among the Buyer, the
Selling Entities and the Escrow Agent, in the form of Exhibit A hereto.
"Escrow Funds" is defined in Section 2.6.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
<PAGE>
"Excluded Assets" is defined in Section 2.2.
"Excluded Liabilities" is defined in Section 2.4.
"Financial Statements" is defined in Section 4.5.
"Fun `N Wheels" means Fun `N Wheels, Ltd., a Florida limited
partnership.
"GAAP" means generally accepted accounting principles.
"Hazardous Substances" means (i) any "hazardous substances" as defined
by the federal Comprehensive Environmental Response, Compensation and Liability
Act, 42 U.S.C. ss.ss. 9601 et seq., (ii) any "extremely hazardous substance,"
"hazardous chemical," or "toxic chemical" as those terms are defined by the
federal Emergency Planning and Community Right-to-Know Act, 42 U.S.C. ss.ss.
11001 et seq., (iii) any "hazardous waste," as defined under the federal Solid
Waste Disposal Act, as amended by the Resource Conservation and Recovery Act, 42
U.S.C. ss.ss. 6901 et seq., (iv) any "pollutant," as defined under the federal
Water Pollution Control Act, 33 U.S.C. ss.ss. 1251 et seq., and (v) any
regulated substance or waste under any Laws or Court Orders that currently
exist.
"Income Statement" means the income statement that comprises a portion
of the 1997 Financial Statements.
"Indemnified Party" is defined in Section 10.1.
"Intellectual Property" means any Copyrights, Patents, Trademarks,
technology rights and licenses, trade secrets, franchises, know-how and
formulae, inventions, inventional disclosures, designs, processes, drawings,
specifications, patterns, brand names, service marks, logos and other
intellectual property exclusively related to a Business.
"Interim Balance Sheet" is defined in Section 4.5.
"Interim Balance Sheet Date" is defined in Section 4.5.
"Inventory" means any inventory, including raw materials, supplies,
work in process and finished goods.
"Knowledge of a Selling Entity" means either the knowledge of Gerard
O'Riordan, Tyler Piercy, Kathy Lloyd, Claire Oakley, Susan Wade or Dianne
Murphy.
"Law" means any statute, law, ordinance, regulation, order or rule of
any Federal, state, local, foreign or other governmental agency or body or of
any other type of regulatory body, including those covering environmental,
energy, safety, health, transportation, bribery, recordkeeping, zoning,
antidiscrimination, antitrust, wage and hour, and price and wage control
matters.
"Liability" means any direct or indirect liability, indebtedness,
obligation, expense, claim, loss, damage, deficiency, guaranty or endorsement of
or by any Person, absolute or contingent, accrued or unaccrued, due or to become
due, liquidated or unliquidated.
"Litigation" means any lawsuit, claim, action, investigation,
arbitration, administrative or other proceeding or criminal prosecution or, to
the knowledge of an applicable Party, any governmental or regulatory authority
investigation or inquiry.
"Live Stage Show" means a stage show that is the primary reason for
attendance at such venue.
"Material Adverse Effect" means a material adverse effect on the
Businesses or the Purchased Assets or on the financial condition or the results
of operations of the Selling Entities, in each case taken as a whole.
"Non-Assignable Contracts" is defined in Section 2.5.
"Objection Notice" is defined in Section 2.9(b).
"Objections to the Post-Closing Financials" is defined in Section
2.9(b).
"Ordinary course" or "ordinary course of business" means the ordinary
course of business that is consistent in nature and, where relevant, amount with
past practices.
"O'Riordan" means Gerard O'Riordan, an individual residing in the State
of Florida.
"O'Riordan Employment Agreement" means the Employment Agreement between
the Buyer and O'Riordan in the form of Exhibit "B" hereto.
<PAGE>
"Partnerships" means King Henry's, Fort Liberty and Blazing Pianos.
"Patents" means all patents and patent applications.
"Percent Shortfall" means the percentage by which EBITDA on the Income
Statement is less than $2,600,000; provided, however, that the Percent Shortfall
shall be deemed to be zero if the percentage (by which EBITDA on Income
Statement is less than $2,600,000) is less than five.
"Permit" means any governmental permit, license, registration,
certificate of occupancy, approval and other authorization.
"Permitted Encumbrance" is defined in Section 2.1.
"Person" means any natural person, corporation, partnership,
proprietorship, association, trust or other legal entity.
"Personal Property Leases" is defined in Section 4.9.
"Pledge Agreement" means the Pledge Agreement between the Buyer and the
Selling Entities, in the form of Exhibit "C" hereto.
"Post-Closing Financials" is defined in Section 4.5.
"Purchase Price" is defined in Section 2.6.
"Purchased Assets" is defined in Section 2.1.
"Real Estate Leases" is defined in Section 4.7.
"Real Property" is defined in Section 4.7.
"Required Consents" is defined in Section 4.4.
"Securities Act" means the Securities Act of 1933, as amended.
"Selling Entities" is defined above in the preamble.
"Shares" means the shares of Common Stock obtained by dividing
$2,500,000 by the average closing price of the Common Stock for the five trading
days immediately prior to the date of this Agreement.
"Software" means any computer software of any nature whatsoever,
including all systems software, all applications software, whether for general
business usage (e.g., accounting, finance, word processing, graphics,
spreadsheet analysis, etc.) or specific, unique-to-the-Business usage (e.g.,
telephone call processing, etc.) and all computer operating, security or
programming software, that is owned by or licensed to a Selling Entity or used,
in whole or in part, directly or indirectly, or has been developed or designed
for or is in the process of being developed or designed for use, in whole or in
part, directly or indirectly, in the conduct of the Business, and any and all
documentation and object and source codes related thereto.
"Taxes" means any taxes, duties, assessments, fees, levies, or similar
governmental charges, together with any interest, penalties, and additions to
tax, imposed by any taxing authority, wherever located (i.e. whether federal,
state, local, municipal, or foreign), including, without limitation, all net
income, gross income, gross receipts, net receipts, sales, use, transfer,
franchise, privilege, profits, social security, disability, withholding,
payroll, unemployment, employment, excise, severance, property, windfall
profits, value added, ad valorem, occupation, or any other similar governmental
charge or imposition.
"Trademarks" means registered trademarks, registered service marks,
trademark and service mark applications and unregistered trademarks and service
marks.
"Transaction Documents" means this Agreement, the Escrow Agreement, the
O'Riordan Employment Agreement and the Pledge Agreement.
"Transactions" means the purchase and sale of the Purchased Assets and
the consummation of the other transactions contemplated by the Transaction
Documents.
"Working Capital" means current assets (excluding cash related to
customer deposits and pre-paid tickets) minus current liabilities (excluding
customer deposits and pre-paid tickets). "Working Capital" will not include cash
and accounts receivable, because they are Excluded Assets, or accounts payable
because it is an Excluded Liability.
<PAGE>
2. Purchase and Sale of the Businesses and the Purchased Assets.
2.1 The Purchased Assets. Subject to the terms and conditions of this
Agreement, at the Closing, the Selling Entities shall grant, sell, assign,
transfer, convey and deliver to the Buyer, or one or more wholly-owned
subsidiaries thereof, free and clear of all Encumbrances whatsoever, other than
the permitted Encumbrances set forth on Schedule 2.1 (the "Permitted
Encumbrances"), and the Buyer shall purchase from the Selling Entities, the
Businesses as a going concern and all right, title and interest of the Selling
Entities in and to all of the Assets (other than the Excluded Assets), used, in
whole or in part, in the Businesses (collectively, the "Purchased Assets") as
the same shall exist on the Closing Date including, without limitation, the
following:
(a) Real Property Owned. Good, marketable and insurable fee
simple title to the real property owned by each Selling Entity described on
Schedule 2.1(a), together with the buildings, structures, improvements and
fixtures located thereon, and all rights, privileges, easements, licenses,
hereditaments and other appurtenances relating thereto, subject to the Permitted
Encumbrances and the items set forth as title exceptions on Schedule B-II of the
title commitment to be obtained by Buyer in connection with the transaction;
(b) Real Property Leased. Each Selling Entity's interest, as a
lessee, in the real property leased by such Selling Entity described on Schedule
2.1(b), and any easements, deposits or other rights pertaining thereto;
(c) Equipment and Other Tangible Personal Property. All
equipment, leasehold improvements, automobiles, supplies, office furniture and
office equipment, computers and telecommunications equipment and other items of
personal property that are owned by any Selling Entity and used, in whole or in
part, in the conduct of the Businesses, including those described on Schedule
2.1(c);
(d) Contracts Relating to the Businesses. All of the interest
of each Selling Entity in all Contracts, leases of equipment and other personal
property, sale orders, purchase orders, commitments, instruments and all other
agreements, including those listed on Schedule 2.1(d);
(e) Customer Records, Sales and Marketing Materials. All
customer records, including principal contacts, address and telephone number,
purchasing history, payment information and any other information with respect
to the customers of each Business, sales data, catalogs, brochures, suppliers'
names, mailing lists, art work, photographs and advertising material that relate
to each Business, whether in electronic form or otherwise;
(f) Permits. All rights under Permits relating to any
Business, including those listed on Schedule 2.1(f), to the extent such Permits
are transferable to the Buyer;
(g) Intellectual Property. All Intellectual Property,
including, without limitation, the Intellectual Property described in Schedule
2.1(g) and the rights to the names "Wild Bill's," "King Henry's," "Blazing
Pianos," "LA Entertains" and "Orlando Entertains";
(h) Inventory. All Inventory relating to each Business
on the Closing Date;
(i) Prepaid Expenses. All rights relating to any prepaid
expenses of or arising in connection with a Business at the Closing Date,
including those described on Schedule 2.1(i);
(j) Software. All Software, including, without limitation, the
Software described in Schedule 2.1(j), in both object code and source code form,
and all documentation related thereto; provided, however, that all third-party
licensed Software included in the Purchased Assets shall be transferred to the
Buyer subject to the terms and conditions of the third-party licenses listed in
Schedule 2.1(j) under which the particular Selling Entity acquired such licensed
Software;
(k) Other Intangible Assets. All other assets (including all
causes of action, rights of action, contract rights and warranty and product
liability claims against third parties) relating to the Purchased Assets or a
Business.
2.2 Excluded Assets. The corporate seal, Charter Documents, bylaws,
minute book, personnel and accounting records, other corporate records of each
Selling Entity and those assets of any Selling Entity described in Schedule 2.2
(the "Excluded Assets") shall not be included in the Purchased Assets, and the
Excluded Contracts shall not be included in the Purchased Assets in any event.
<PAGE>
2.3 Assumed Liabilities. At the Closing, the Buyer shall assume and
thereafter in due course timely pay and fully satisfy all obligations (the
"Assumed Liabilities"):
(a) that accrue after the Closing under all Contracts and
Permits which are conveyed to Purchaser as Purchased Assets pursuant to the
terms and conditions hereof; and
(b) all expenses and liabilities of the Businesses that
accrue after the Closing; and
(c) customer deposits and pre-paid tickets as of the Closing
Date, only to the extent the Buyer receives, under the terms of this Agreement,
the cash associated with such customer deposits and pre-paid tickets.
2.4 Excluded Liabilities. Except as expressly set forth in Section 2.3,
the Buyer shall not, by virtue of its purchase of the Purchased Assets or
otherwise in connection with the Transactions, assume or become responsible for
any Liabilities (the "Excluded Liabilities") of any Selling Entity; including,
without limitation: (a) Liabilities for any taxes; (b) Liabilities relating to
any employment or labor claim or any claim relating to a Benefit Plan; (c)
Liabilities relating to the violation of any Law; (d) tort Liabilities; (e)
Liabilities from claims arising under any Contract or Permit not assumed by the
Buyer hereunder or included in any arrangement set forth in Section 2.5; (f)
Liabilities for claims arising under any Contract or Permit to the extent such
claim is based on acts or omissions of any Person which occurred prior to the
Closing; (g) Liabilities unknown to the Selling Entities at the Closing; (h)
Liabilities related to any litigation, the cause of action for which arose prior
to the Closing; and (i) Liabilities for any accounts payable or indebtedness for
money borrowed.
2.5 Consent of Third Parties. Nothing in this Agreement shall be
construed as an attempt by any Selling Entity to assign to the Buyer any
Contract or Permit included in the Purchased Assets that is by its terms or by
Law nonassignable without the consent of any other party or parties, unless such
consent or approval shall have been given, or as to which all the remedies for
the enforcement thereof available to the Selling Entities would not by Law pass
to the Buyer as an incident of the assignments provided for by this Agreement (a
"Non-Assignable Contract"). Schedule 2.5 lists the Non-Assignable Contracts as
of the Closing Date that involve remaining obligations in excess of $10,000.
Notwithstanding anything in this Section 2.5 to the contrary, no Selling Entity
shall be obligated to subject any of its monies with regard to any consent or
approval that may be required from the lessors of the real property currently
occupied by Wild Bills in California or Blazing Pianos as a result of such
lessors having a concern over the financial ability of the Buyer to satisfy
lease payments.
2.6 Purchase Price. In addition to assuming the Assumed Liabilities,
the aggregate price to be paid by the Buyer to the Selling Entities (the
"Purchase Price") for the purchase of the Purchased Assets shall be $14,000,000.
The Buyer shall pay the Purchase Price as follows:
(a) at the Closing, the Buyer shall pay by a wire transfer of
immediately available funds (i) $10,250,000 to an account specified by the
Selling Entities and (ii) $1,250,000 to the Escrow Agent in accordance with the
Escrow Agreement (the "Escrow Funds"); and
(b) at the Closing, the Buyer shall issue to the Selling Entities a
certificate for the Shares.
2.7 Pledge Agreement. The Shares delivered to the Selling Entities as a
portion of the Purchase Price will be subject to a Pledge Agreement in order to
support the indemnification obligations of the Selling Entities.
2.8 Allocation of the Purchase Price. The Purchase Price shall be
allocated among the Purchased Assets as set forth on Schedule 2.8 hereto. The
Selling Entities and the Buyer shall prepare their respective Federal, state and
local tax returns employing the allocation set forth on Schedule 2.8 and shall
not take a position in any tax proceeding or otherwise that is inconsistent with
such allocation. The Selling Entities and the Buyer shall give prompt notice to
each other of the commencement of any tax audit or the assertion of any proposed
deficiency or adjustment by any taxing authority or agency which challenges such
allocation.
<PAGE>
2.9 Post-Closing Adjustment to Purchase Price.
(a) As soon as practical, but in any event within 60 days
after the Closing Date, KPMG Peat Marwick, at the direction of the Selling
Entities, shall prepare and deliver to the Buyer (i) an audited statement of net
assets sold of Gedco (excluding Fun `N Wheels) as of the Closing Date prepared
pursuant to the terms of this Agreement in accordance with Statement on Auditing
Standards No. 77, "Special Reports" (the "Closing Statement") and (ii) audited
financial statements consisting of the balance sheet of Gedco (excluding Fun `N
Wheels) as of December 31, 1997 and the related statements of income and cash
flow for the year then ended (the "1997 Financial Statements" and together with
the Closing Statement, the "Post-Closing Financials"). The Post-Closing
Financials shall be prepared in accordance with GAAP, consistently applied,
using the same methods and criteria employed in connection with the preparation
of the Audited Financial Statements. All expenses incurred in connection with
the preparation of the Post-Closing Financials shall be the responsibility of
the Selling Entities.
(b) The Post-Closing Financials shall become final and binding
upon the parties unless within 30 days following their submittal to the Buyer,
the Buyer notifies the Selling Entities of its objections thereto ("Objection
Notice"). If the Buyer delivers an Objection Notice, the Selling Entities and
the Buyer shall negotiate in good faith to resolve any objections ("Objections
to the Post-Closing Financials"). If any Objections to the Post-Closing
Financials have not been resolved within 30 days of the receipt of an Objection
Notice, the Objections to the Post-Closing Financials shall be resolved by a
Certified Independent Accounting Firm selected by the Selling Entities and the
Buyer. If the Selling Entities and the Buyer cannot agree on the choice of such
accounting firm, the Selling Entities and the Buyer shall meet and at such
meeting the Buyer shall choose the Certified Independent Accounting Firm by
randomly selecting a piece of paper from a container holding one piece of paper
for each firm within the eligible group of Certified Independent Accounting
Firms; provided, however, that the name of any Certified Independent Accounting
Firm then engaged by the Selling Entities or the Buyer shall not be included in
the container. The decision of the Certified Independent Accounting Firm and the
resulting Post-Closing Financials shall be final, binding and not subject to any
appeal. The Selling Entities and the Buyer shall pay any expenses relating to
the engagement of any Certified Independent Accounting Firm, allocated between
the Selling Entities and the Buyer so that the Buyer's share of such costs shall
be in the same proportion that the aggregate amount of the disputed amounts
submitted to such accounting firm that are unsuccessfully disputed by the Buyer
(as finally determined by such accounting firm) bears to the total amount of
such disputed amounts so submitted to such accounting firm.
(c) Within 15 days following the final determination of the
Post-Closing Financials, the Escrow Agent shall pay to the Buyer a portion of
the Escrow Funds, up to a maximum of $250,000 as set forth in the Escrow
Agreement, that is equal, in aggregate, to (i) the amount, if any, by which
Working Capital on the Closing Statement is less than $175,000, and (ii) the
amount, if any, equal to the product of the Percent Shortfall and $2,600,000.
(d) Nothing in this Section 2.9 shall preclude any party from
exercising, or shall adversely affect or otherwise limit in any respect the
exercise of, any right or remedy available to it hereunder or otherwise for any
misrepresentation or breach of warranty hereunder, but neither the Buyer nor the
Selling Entities shall have any right to dispute the Post-Closing Financials or
any portion thereof once the Post-Closing Financials have been determined
conclusively in accordance with Section 2.9(b) hereof.
2.10 Escrow Agreement. At the Closing, the Selling Entities and the
Buyer shall enter into the Escrow Agreement with the Escrow Agent under which
the Escrow Agent shall hold the Escrow Funds for possible claims against the
Selling Entities under this Agreement.
30 Closing.
3.1 Location, Date. The closing of the Transactions (the "Closing")
shall take place at the offices of Maguire, Voorhis & Wells, P.A., 2 South
Orange Avenue, Orlando, Florida at 10:00 A.M. local time on March 4, 1998 or on
such earlier date upon the satisfaction of (or waiver by the party entitled to
the benefit of) the conditions set forth in Sections 8 and 9, or at such other
place, date and time as the Selling Entities and the Buyer may agree in writing.
<PAGE>
3.2 Closing Deliveries. In connection with the completion of the
Transactions contemplated in
Section 2, at the Closing;
(a) the Buyer shall deliver or cause to be delivered to
the Selling Entities:
(i) the cash portion of the Purchase Price;
(ii) the Shares;
(iii) a legal opinion of Morgan, Lewis & Bockius LLP,
counsel to the Buyer, in form and substance reasonably
satisfactory to counsel to the Selling Entities;
(iv) the certificate specified in Section 9.5;
(v) an executed copy of each Transaction
Document to which it is a party; and
(vi) an executed assignment and assumption agreement
evidencing the Buyer's assumption of the Assumed Liabilities
in form and substance satisfactory to the Selling Entities;
and
(vii) such other agreements, documents and
instruments contemplated by this Agreement and such other
items as may be reasonably requested the Selling Entities.
(b) the Selling Entities shall deliver or cause to be
delivered to the Buyer:
(i) a legal opinion of Maguire, Voorhis & Wells,
P.A., counsel to the Selling Entities, in form and substance
reasonably satisfactory to counsel to the Buyer;
(ii) the certificate specified in Section 8.4;
(iii) an executed copy of each Transaction Document
to which they are a party;
(iv) a bill of sale and assignment and assumption
agreement transferring each Selling Entity's right, title and
interest in and to the Purchased Assets in form and substance
satisfactory to the Buyer; and
(v) a special warranty deed as to the Real Property
owned by the Selling Entities in fee simple; and
(vi) such other agreements, documents and instruments
contemplated by this Agreement and such other items as may be
reasonably requested by the Buyer or by the lender or lenders
providing financing to the Buyer for the acquisitions
contemplated by this Agreement.
40 Representations and Warranties of the Selling Entities. The Selling Entities,
jointly and severally, hereby represent and warrant to the Buyer as follows:
4.1 Corporate Status. Each Corporation is a corporation duly organized,
validly existing and in good standing under the laws of Florida and each is
qualified to do business as a foreign corporation and is in good standing in
each jurisdiction where it is required to be so qualified, except where the
failure to so qualify would not have a Material Adverse Effect. The Charter
Documents and bylaws of each Corporation that have been delivered to the Buyer
as of the date hereof are effective under applicable Laws and are current,
correct and complete.
4.2 Partnership Status. Each Partnership is a limited partnership duly
organized, validly existing and in good standing under the laws of Florida. The
Charter Documents of each Partnership that have been delivered to the Buyer as
of the date hereof are effective under applicable laws and are current, correct
and complete.
<PAGE>
4.3 Authorization. Each Selling Entity has the requisite power and
authority to own its property and carry on its Business as currently conducted,
and to execute and deliver the Transaction Documents to which it is a party and
to perform the Transactions to be performed by it. Such execution, delivery and
performance by each Selling Entity has been duly authorized by all necessary
action. Each Transaction Document executed and delivered by a Selling Entity as
of the date hereof has been duly executed and delivered by such Selling Entity
and constitutes a valid and binding obligation of the Selling Entity,
enforceable against it in accordance with its terms except to the extent such
enforcement may be limited by the application of bankruptcy laws and similar
laws relating to creditor's rights or the application of equitable principles.
Each Transaction Document to be executed and delivered by a Selling Entity after
the date hereof will have been duly executed and delivered by the relevant
Selling Entity and will constitute, a valid and binding obligation of such
Selling Entity, enforceable against it in accordance with its terms except to
the extent such enforcement may be limited by the application of bankruptcy laws
and similar laws relating to creditor's rights or the application of equitable
principles.
4.4 Consents and Approvals. Except for the consents specified in
Schedule 4.4 (the "Required Consents"), neither the execution nor delivery by a
Selling Entity of any Transaction Document to which it is a party, nor the
performance of the Transactions to be performed by it thereunder, will require
any filing, consent or approval, constitute a Default or cause any payment
obligation to arise under (a) any Law or Court Order to which any Selling Entity
is subject, (b) the Charter Documents or bylaws of any Selling Entity or (c) any
Contract, Permit or other document to which a Selling Entity is a party or by
which any Selling Entity's Business or Assets may be subject.
4.5 Financial Statements. Schedule 4.5 includes correct and complete
copies of audited financial statements consisting of the balance sheets of the
Selling Entities and Fun `N Wheels as of December 31, 1995 and 1996 and the
related statements of income and cash flows for the years then ended, all of
which are audited and reported on by KPMG Peat Marwick (collectively, the
"Audited Financial Statements") and financial statements consisting of the
balance sheet of the Selling Entities as of October 31, 1997 and the related
statements of income and cash flows for the period then ended (the "Interim
Financial Statements" and together with the Audited Financial Statements, the
"Financial Statements"). The Financial Statements are in all material respects
consistent with the books and records of the Selling Entities and there are no
transactions required by GAAP, applied on a consistent basis, to be recorded in
accounting records that have not been recorded in the accounting records
underlying such Financial Statements. The Financial Statements have been
prepared in accordance with GAAP consistently applied and present fairly the
financial position and assets and liabilities of the Selling Entities as of the
dates thereof and its cash flows and the results of its operations for the years
then ended, subject to normal recurring year-end adjustments and the absence of
notes in the case of the Interim Financial Statements. The balance sheet as of
October 31, 1997 that is included in the Financial Statements is referred to
herein as the "Interim Balance Sheet" and the date thereof is referred to as the
"Interim Balance Sheet Date."
4.6 Title to Assets and Related Matters. Each Selling Entity owns and
will transfer to the Buyer at the Closing good, marketable and indefeasible
title to, or with respect to leased assets included in the Purchased Assets, a
valid leasehold interest in, subject to the terms and conditions of such leases,
all of the Purchased Assets, including, without limitation, the material
properties and assets reflected on the Interim Balance Sheet (except as
disclosed in Schedule 4.6 or except as sold or otherwise disposed of by the
Selling Entities after the Interim Balance Sheet Date in the ordinary course of
business not including Excluded Assets), free and clear of all Encumbrances
other than Permitted Encumbrances. The use of the Purchased Assets is not
subject to any Encumbrances (other than Permitted Encumbrances), and such use
does not materially encroach on the property or rights of any other Person. All
Purchased Assets are in the possession or under the control of the Selling
Entities and consist of all of the Assets necessary to operate the Businesses as
currently and heretofore operated. Except as set forth on Schedule 4.6, there
are no major defects in the working condition of any item of tangible personal
property with replacement value greater than $5,000 included in the Purchased
Assets. Except for those items subject to the Personal Property Leases, no
Person other than the Selling Entities owns any vehicles, equipment or other
tangible assets located on the Real Property that are used by the Selling
Entities in the Business (other than immaterial items of personal property owned
by the employees of the Seller) or that are necessary for the operation of the
Business.
<PAGE>
4.7 Real Property. Schedule 4.7 sets forth the complete legal
description of all real estate used in the operation of the Businesses as well
as any other real estate that is in the possession of or leased by a Selling
Entity and a description of the improvements (including buildings and other
structures) located on such real estate (collectively, the "Real Property"),
identifies which Real Property is owned and which is leased, and lists any
leases under which any such Real Property is possessed by a Selling Entity or
leased by a Selling Entity to others (the "Real Estate Leases"). Except as
described on Schedule 4.7, since the date of the Interim Balance Sheet no
Selling Entity has disposed of by sale or termination of lease or otherwise any
Real Property used to conduct its Business. The Real Property is in good
condition, repair and working order consistent with past practices and the
improvements thereon are structurally sound and adequate for the use of the Real
Property by each Selling Entity in conducting its Business, and there is no
condition that will result in the termination of the present access from the
Real Property to any utility services and other facilities that service the Real
Property. No Selling Entity has knowledge of any item or matter that would
prevent the Real Property from being operated in the future in the same manner
in which it has been operated in the past, whether or not the Transactions
contemplated by this Agreement are consummated. The Selling Entity has not
received any notices, oral or written, and no such Person has reason to believe,
that any governmental body having jurisdiction over any Real Property intends to
exercise the power of expropriation or eminent domain or a similar power with
respect to all or any part of the Real Property. No Selling Entity has received
any notices, oral or written, from any governmental body, and no such Person has
reason to believe, that any of the Real Property or any improvements erected or
situated thereon, or the uses conducted thereon or therein, violate, or in the
future will violate, any Laws of any governmental body having jurisdiction over
such Real Property. No Selling Entity has received any notice from the holder of
any mortgage, from any insurance company which has issued a policy with respect
to any of the Real Property or from any board of fire underwriters (or other
body exercising similar functions) claiming any defects or deficiencies in any
of the Real Property or suggesting or requesting the performance of any repairs,
alterations or other work to any of the Real Property.
4.8 Certain Personal Property. The Selling Entities have delivered to
the Buyer a complete fixed asset schedule, describing and specifying the
location of all items of tangible personal property with book value in excess of
$1,000 that are included in the Interim Balance Sheet. Except as listed on
Schedule 4.8, since the Interim Balance Sheet Date, no Selling Entity has (i)
acquired any items of tangible personal property that has, in any case, a
carrying value in excess of $5,000, or an aggregate carrying value in excess of
$20,000 or (ii) disposed of any items of tangible personal property (other than
inventory) that have, in any case, an initial carrying value in excess of
$5,000, or an initial aggregate carrying value in excess of $20,000.
4.9 Personal Property Leases. Schedule 4.9 lists all assets and
property (other than Real Property) that have been used in the operation of the
Businesses and that are possessed by a Selling Entity under an existing lease,
including all trucks, automobiles, machinery, equipment, office equipment,
furniture and computers, except for any lease under which the aggregate annual
payments are less than $5,000 (each, an "Immaterial Lease"); provided, however,
that if the aggregate annual payment obligations under such Immaterial Leases
are in excess of $20,000, each such lease shall be listed on Schedule 4.9.
Schedule 4.9 also lists the leases under which such assets and property listed
on Schedule 4.9 are possessed. All of such leases (excluding "Immaterial
Leases") are referred to herein as the "Personal Property Leases."
4.10 Inventory. At least 80% of the value of the inventory of each
Selling Entity consists of items useable or saleable in the ordinary course and
is valued on each Selling Entity's books and records at the lower of cost or
fair market value. The inventory records for the Selling Entities that have been
delivered to the Buyer or made available for inspection by the Buyer are
accurate with respect to the data contained therein.
4.11 Price Guarantees. Schedule 4.11 sets forth any price
guarantees made by a Selling Entity.
4.12 Liabilities. Except as specified on Schedule 4.12, no Selling
Entity has any Liabilities, and none of the Purchased Assets are subject to any
Liabilities, except (a) as specifically disclosed on the Interim Balance Sheet,
(b) Liabilities incurred in the ordinary course since the Interim Balance Sheet
Date, (c) Liabilities, not in excess of $5,000 individually or $25,000 on an
aggregate basis, incurred outside of the ordinary course since the Interim
Balance Sheet Date, and (d) Liabilities under any Contracts specifically
disclosed (or not required to be disclosed because of the term or amount
involved) that were not required under GAAP to have been specifically disclosed
or reserved for in the Financial Statements.
<PAGE>
4.13 Taxes. Except as set forth on Schedule 4.13, each Selling Entity
has duly filed all returns for Taxes that are required to be filed and has paid
all Taxes shown as being due pursuant to such returns or pursuant to any
assessment received. All Taxes that any Selling Entity has been required by Law
to withhold or to collect have been duly withheld and collected and have been
paid over to the proper governmental authorities or are properly held by a
Selling Entity for such payment. There are no proceedings or other actions, nor
to Knowledge of a Selling Entity, is there any basis for any proceedings or
other actions, for the assessment and collection of additional Taxes of any kind
with respect to any Selling Entity for any period for which returns have or
should have been filed.
4.14 Subsidiaries. No Selling Entity (other than Gedco's interest in
the Partnerships) owns, directly or indirectly, any interest or investment
(whether equity or debt) in any corporation, partnership, business, trust, joint
venture or other legal entity.
4.15 Legal Proceedings and Compliance with Law.
(a) Except as disclosed on Schedule 4.15, there is no
Litigation that is pending or, to the knowledge of the Selling Entities,
threatened against or related to a Selling Entity with respect to a Business. To
the knowledge of the Selling Entities, there has been no Default under any Law
applicable to a Selling Entity, the Purchased Assets or a Business, including
any Law relating to protection or quality of the environment, except for any
Defaults that have been cured without material cost, and no Selling Entity has
received any notices from any governmental entity regarding any alleged Default
or investigation under any written order, instruction or direction pursuant to,
any Law except those that have been cured without material cost. To the
knowledge of the Selling Entities, there has been no Default with respect to any
Court Order applicable to a Selling Entity.
(b) Without limiting the generality of Section 4.15(a), except
as described on Schedule 4.15, to the knowledge of the Selling Entities, there
has not been any Environmental Condition (i) at any premises at which the
Business of a Selling Entity is currently conducted, (ii) at any property owned,
leased or operated at any time by a Selling Entity (or any predecessor of a
Selling Entity that operated the Assets of the Real Property) or any Person
controlled by any Affiliate of a Selling Entity, or (iii) at any property at
which wastes have been deposited or disposed by or at the behest or direction of
a Selling Entity (or any predecessor of a Selling Entity) or any Person
controlled by any Affiliate of a Selling Entity, nor has any Selling Entity
received written notice of any such Environmental Condition or any
investigation, to determine whether any such Environmental Condition exists.
"Environmental Condition" means any condition or circumstance, including the
presence of Hazardous Substances, whether created by a Selling Entity (or any
predecessor of a Selling Entity) or any third party, at or relating to any such
property or premises that would (i) require abatement or correction under an
Environmental Law, (ii) give rise to any civil or criminal liability under an
Environmental Law, or (iii) create a public or private nuisance. "Environmental
Law" means all Laws and Court Orders relating to protection or quality of the
environment as well as any principles of common law under which a Person may be
held liable for the release or discharge of any materials into the environment.
(c) Each Selling Entity has delivered to the Buyer correct and
complete copies of all written reports, studies or assessments in the possession
or control of any Selling Entity that relate to any Environmental Condition. No
Selling Entity knows of any other written reports, studies or assessments,
whether in the possession or control of a Selling Entity, that relate to any
Environmental Condition.
(d) Except in those cases where the failure would not have a
Material Adverse Effect, (i) each Selling Entity has obtained and is in full
compliance with all Permits, all of which are listed on Schedule 4.15 along with
their respective expiration dates, that are required for the ownership of the
Purchased Assets or operation of its Business, (ii) all of the Permits are
currently valid and in full force and (iii) each Selling Entity has filed such
timely and complete renewal applications as may be required with respect to its
respective Permits. To the knowledge of a Selling Entity, no revocation,
cancellation or withdrawal of a Permit has been threatened.
<PAGE>
4.16 Contracts.
(a) Schedule 4.16 lists each Contract of the following types
to which a Selling Entity is a party or by which it is bound:
(i) Contracts with any present or former stockholder,
director, officer, employee, partner or consultant or with any
Affiliate of a Selling Entity;
(ii) Contracts for the purchase of, or payment for,
supplies or products, or for the performance of services, from
or by a third party, in excess of $5,000 in any individual
case, with respect to any supplier or other party;
(iii) Contracts to sell or supply products, inventory
or other property to, or to perform services for, a third
party, that involve an amount in excess of $5,000 in any
individual case, with respect to any customer or other party;
(iv) Contracts to sell any product or provide any
service to a governmental or regulatory body;
(v) Contracts limiting or restraining any Selling
Entity from engaging or competing in any lines or business
with any Person;
(vi) Contracts with any customer providing for a
volume refund, retrospective price adjustment or price
guarantee;
(vii) Contracts to lease to, or to operate for, any
other party any asset that involves an amount in excess of
$5,000 in any individual case (other than Real Estate Leases
and Personal Property Leases identified on a Schedule);
(viii) Any notes, debenture, bonds, conditional sale
agreements, equipment trust sale and lease-back and leasing
agreements, letter of credit agreements, reimbursement
agreements, loan agreements or other Contracts for the
borrowing or lending of money (including loans to or from
officers, directors, partners, shareholders or Affiliates of
any Selling Entity), or agreements or arrangements for a line
of credit or for a guarantee of, or other undertaking in
connection with, the indebtedness of any other Person;
(ix) Contracts creating or recognizing any
Encumbrances with respect to any Assets;
(x) Contracts with distributors, manufacturers' sales
representatives or other sales agents;
(xi) Contracts that relate in whole or in part to any
Software, technical assistance or other know-how or other
Intellectual Property right;
(xii) Contracts for any capital expenditure or
leasehold improvement in excess of $5,000 in any individual
case; and
(xiii) Any other Contracts (other than those that may
be terminated on not more than 30 days' notice without
Liability and those described in any of (i) through (xii)
above) not made in the ordinary course of business or which
are material to a Business or the Assets.
4.17 No Selling Entity is in Default under any Contract. To the
knowledge of each Selling Entity, no Selling Entity has received any
communication from, or given any communication to, any other party indicating
that a Selling Entity or such other party, as the case may be, is in Default
under any Contract, except for a technical Default occasioned by the failure of
a Selling Entity to make a required payment on time, which Default will be cured
by Closing. To the knowledge of each Selling Entity, none of the other parties
to any such Contract to which a Selling Entity is a party is in Default
thereunder.
<PAGE>
4.18 Insurance. Schedule 4.18 lists all policies or binders of
insurance held by or on behalf of each Selling Entity or relating to any
Business or any of the Purchased Assets, specifying with respect to each policy
the insurer, the type of insurance, the amount of the coverage, the insured, the
expiration date, the policy number and any pending claims thereunder. There is
no Default with respect to any such policy or binder, nor has there been any
failure to give any notice or present any claim under any such policy or binder
in a timely fashion or in the manner or detail required by the policy or binder,
except for any of the foregoing that would not, individually or in the
aggregate, have a Material Adverse Effect. There is no notice of nonrenewal or
cancellation with respect to, or disallowance of any claim under, any such
policy or binder that has been received by a Selling Entity, except for any of
the foregoing that would not, individually or in the aggregate, have a Material
Adverse Effect.
4.19 Intellectual Property.
(a) Schedule 4.19 sets forth a correct and complete list and
description of all Intellectual Property and all Software owned by or licensed
to any Selling Entity and used in, in whole or in part, directly or indirectly,
and material to the Business, and indicates whether such Intellectual Property
and Software is owned or licensed by such a Selling Entity. Except as set forth
in Schedule 4.19, each Selling Entity owns or licenses all material Intellectual
Property and Software used in, in whole or in part, directly or indirectly, the
Business. No Selling Entity has received notice that any Person has asserted an
exclusive right to the use of any of the Intellectual Property.
(b) To the Knowledge of each Selling Entity, (a) no
Confidential Information of a Selling Entity has been used, divulged or
appropriated for the benefit of any Person other than the Selling Entities or
otherwise to the detriment of any Selling Entity and (b) no employee or
consultant of a Selling Entity is, or is currently expected to be, in Default
under any term of any employment Contract, agreement or arrangement relating to
the Intellectual Property, or any confidentiality agreement or any other
Contract or any restrictive covenant relating to the Intellectual Property, or
the development or exploitation thereof.
4.20 Employee Relations.
(a) Except as described on Schedule 4.20, no Selling Entity is
(i) a party to or otherwise bound by any collective bargaining or other type of
union agreement, (ii) a party to, involved in or, to the Knowledge of any
Selling Entity, threatened by, any labor dispute or unfair labor practice
charge, or (iii) currently negotiating any collective bargaining agreement, and
no Selling Entity has experienced any work stoppage during the last three years.
Schedule 4.20 sets forth the names and current annual salary rates or current
hourly wages of all present employees of each Selling Entity.
(b) Each Selling Entity is in compliance with all applicable
laws respecting employment and employment practices, terms and conditions of
employment and wages and hours, and is not engaged in any unfair labor practice.
(c) Except as described on Schedule 4.20, no outstanding claim
against any Selling Entity has been made or asserted, nor the Knowledge of a
Selling Entity has any outstanding claim been threatened, by any present or
former employee or any job applicant of any Selling Entity or by any
governmental authority asserting any employment, labor or safety related claim
including, but not limited to, any claims related to pay or wages, severance,
terminations and layoffs, occupational safety or employment discrimination, nor
to the Knowledge of a Selling Entity are there any pending claims relating to
the matters discussed above in this Section 4.20(c).
4.21 ERISA.
(a) Schedule 4.21 contains a complete list of all Benefit
Plans sponsored or maintained by the Selling Entities or under which the Selling
Entities may be obligated. The Selling Entities do not have any current or
contingent liability with respect to any Benefit Plan other than those listed on
Schedule 4.21. For purposes of this Section 4.21 and Section 6.10, the term
"Selling Entity" shall include any partnership or corporation that is a member
of any controlled group of partnerships or corporations (as defined in Section
414(b) of the Code) that includes the Selling Entities, any trade or business
(whether or not incorporated) that is under common control (as defined in
Section 414(c) of the Code) with any Selling Entity, any organization (whether
or not incorporated) that is a member of an affiliated service group (as defined
in Section 414(m) of the Code) that includes a Selling Entity and any other
entity required to be aggregated with a Selling Entity pursuant to the
regulations issued under Section 414(o) of the Code. Each Benefit Plan providing
benefits that are funded through a policy of insurance is indicated by the word
"insured" placed by the listing of the Benefit Plan on Schedule 4.21. All of the
Benefit Plans have been maintained in material compliance with all applicable
laws, including ERISA and the Internal Revenue Code, and each Selling Entity has
performed all of its material obligations with respect to the Benefit Plans.
<PAGE>
(b) The Selling Entities have delivered to the Buyer, to the
extent applicable, accurate and complete copies of all Benefit Plan documents
and all other documents relating thereto, including all summary plan
descriptions, and insurance contracts, and accurate and complete detailed
summaries of all unwritten Benefit Plans.
(c) No Selling Entity sponsors or contributes to, and has not
at any time sponsored or contributed to, a defined benefit plan subject to Title
IV of ERISA, and no Selling Entity has incurred any liability under Title IV of
ERISA. No Selling Entity has a current or contingent obligation to contribute to
any multiemployer plan (as defined in Section 3(37) of ERISA), nor has the any
Selling Entity ever had any obligation to contribute to a multiemployer plan.
4.22 Corporate Records. The minute books of the Corporations contain
complete and correct copies of their respective Charter Documents and bylaws and
of all minutes of meetings, resolutions and other proceedings of their
respective Board of Directors and shareholders. The stock record books of the
Corporations are complete and correct.
4.23 Absence of Certain Changes. Except as contemplated by this
Agreement, since the Interim Balance Sheet Date, the Businesses have been
conducted in the ordinary course and there has not been with respect to any
Selling Entity:
(a) any material adverse change in its Business or its
assets or liabilities;
(b) any change or amendment in its Charter Documents;
(c) any distribution of partnership proceeds by means of a
distribution of property (except cash) or otherwise;
(d) any increase in the compensation payable or to become
payable to any officer, employee or agent, except for increases for non-officer
employees made in the ordinary course of business, nor any other change in any
employment or consulting arrangement;
(e) any sale, assignment or transfer of any material assets,
or any additions to or transactions involving any material assets, other than
those made in the ordinary course of business;
(f) other than in the ordinary course of business, any waiver
or release of any claim or right or cancellation of any debt held;
(g) any incurrence of indebtedness in an aggregate
principal amount exceeding $5,000;
(h) any payment other than a distribution of partnership
proceeds by means of a distribution of cash to any Affiliate, except as
specified on Schedule 4.23;
(i) any change in the accounting policies followed or the
method of applying such principles;
(j) any capital expenditure commitment involving in any
individual case, or series of related cases, more than (i) $10,000 or (ii) an
amount that would cause the sum of all such capital expenditure commitments to
exceed $25,000; or
(k) any other transaction involving a development affecting
its Business or the Assets outside the ordinary course of business consistent
with past practice.
4.24 Customers. Each Selling Entity has used its reasonable business
efforts to maintain good working relationships with all of its customers,
including but not limited to ticket wholesalers and ticketing agencies. Schedule
4.24 contains a list of the names of each of the five customers that, for the
nine months ended September 30, 1997 were the largest dollar volume customers of
each Selling Entity. Except as specified on Schedule 4.24, none of such
customers has given any Selling Entity notice terminating, canceling or
threatening to terminate or cancel any Contract or relationship with a Selling
Entity and none of such customers has given any Selling Entity notice that any
such customer intends to reduce the amount of business that it does with a
Selling Entity.
4.25 Finder's Fees. No Person, retained by a Selling Entity is or will
be entitled to any commission or finder's or similar fee in connection with the
Transactions.
<PAGE>
4.26 Investment Representations.
(a) No Selling Entity has relied on any purchaser
representative, or the Buyer, in connection with the acquisition of the Shares
hereunder. Each Selling Entity (i) has such knowledge, sophistication and
experience in business and financial matters that it is capable of evaluating
the merits and risks of an investment in the Shares, (ii) fully understands the
nature, scope and duration of the limitations on transfer contained in this
Agreement and (iii) can bear the economic risk of an investment in the shares
and can afford a complete loss of such investment. Each Selling Entity has had
an adequate opportunity to ask questions and receive answers from the officers
of the Buyer concerning any and all matters relating to the transactions
described herein including without limitation the background and experience of
the officers and directors of the Buyer, the plans for the operations of the
business of the Buyer, the business, operations and financial condition of the
Buyer, and any plans for additional acquisitions and the like. Each Selling
Entity has asked any and all questions in the nature described in the preceding
sentence and all questions have been answered to its satisfaction. Each Selling
Entity acknowledges that the officers of the Buyer have not assured, guaranteed
or otherwise led any Selling Entity to expect any particular level of
performance in the market value or other value of the Shares.
(b) Each Selling Entity further represents, warrants,
acknowledges and agrees that it (i) is acquiring the Shares under this Agreement
for its own account, and not on behalf of other persons, and for investment and
not with a view to the resale or distribution of all or any part of such shares
and (ii) will not sell or otherwise transfer the Shares unless, in the opinion
of counsel who is satisfactory to the Buyer, the transfer can be made without
violating the registration provisions of the Securities Act and the rules and
regulations promulgated thereunder.
(c) Each Selling Entity further represents, warrants,
acknowledges and agrees that it is making an investment decision based solely on
its review of the SEC Reports and the terms of the Transaction Documents and is
not relying, and has not relied, upon anything outside of the immediately
aforementioned sources in making its investment decision.
4.27 Additional Information. Schedule 4.27 accurately sets forth
the following:
(a) the names of all officers, directors and partners of
each Selling Entity;
(b) the names of all Persons holding powers of attorney from a
Selling Entity and a summary statement of the terms thereof; and
(c) all names under which each Selling Entities has conducted
any Business or which they have otherwise used at any time during the past five
years.
4.28 Transactions with Affiliates. Except as set forth on Schedule
4.28, no Affiliate of any Selling Entity owns or has a controlling ownership
interest in any corporation or other entity that is a party to any Contract with
respect to the Assets or Businesses.
4.29 Full Disclosure. There are and will be no materially misleading
statements in any of the representations and warranties made by a Selling Entity
in this Agreement (including the Schedules and Exhibits attached hereto) or any
other Transaction Document or in any of the documents, certificates and
instruments delivered or to be delivered by a Selling Entity pursuant to this
Agreement and no Selling Entity has omitted to state any fact necessary to make
statements made herein or therein not materially misleading.
50 Representations and Warranties of the Buyer. The Buyer hereby represents and
warrants to each Selling Entity as follows:
5.1 Corporate Status. The Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of Nevada. The
Buyer has the requisite power and authority to execute and deliver the
Transaction Documents to which it is a party and to perform the Transactions to
be performed by it thereunder, and such execution, delivery and performance by
it have been duly authorized by all necessary corporate action.
5.2 Enforceability. The Transaction Documents to which the Buyer is a
party constitute valid and binding obligations of the Buyer, enforceable against
it in accordance with their terms except to the extent such enforcement may be
limited by the application of bankruptcy laws and similar laws relating to
creditor's rights or the application of equitable principles.
<PAGE>
5.3 Consents and Approvals. Neither the execution and delivery by the
Buyer of the Transaction Documents to which it is a party, nor the performance
of the Transactions to be performed by it thereunder, will require any filing,
consent or approval or constitute a Default under (a) any Law or Court Order to
which it is subject, (b) its Charter Documents or bylaws or (c) any Contract,
Permit or other document to which it is a party or by which its properties or
other assets may be subject.
5.4 Capital Stock Ownership. The total authorized capital stock of the
Buyer consists of 25,000,000 shares of Common Stock (of which approximately
6,584,480 shares were issued and outstanding as of November 1, 1997), 1,000,000
shares of preferred stock, par value $.01 per share (of which no shares are
outstanding). As of December 16, 1997, the Buyer had outstanding options and
warrants to purchase 2,868,453 shares of Common Stock. All of the outstanding
shares of Common Stock are duly and validly authorized and issued, fully paid
and non-assessable. Upon completion of the Transactions at the Closing, the
Selling Entities shall receive valid title to the Shares, free and clear of all
Encumbrances (other than restrictions imposed generally by applicable securities
laws).
5.5 SEC Filings. The Buyer has heretofore delivered or made available
to the Selling Entities, in the form filed with the Commission, together with
any amendments thereto, (i) the final prospectus of the Buyer dated August 13,
1997, and (ii) the Quarterly Report on Form 10-Q of the Buyer for the fiscal
quarters ended June 30, 1997 and September 30, 1997 (collectively, the "SEC
Reports"). The SEC Reports were prepared substantially in accordance with the
requirements of the Securities Act or the Exchange Act, as the case may be, and
the rules and regulations promulgated under such act, and did not at the time
they were filed contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
5.6 Finder's Fees. No Person retained by the Buyer is or will be
entitled to any commission or finder's or similar fee in connection with the
Transactions.
5.7 Full Disclosure. There are and will be no materially misleading
statements in any of the representations and warranties made by the Buyer in
this Agreement (including the Schedules and Exhibits, attached hereto), or in
any of the documents, certificates and instruments delivered or to be delivered
by the Buyer pursuant to this Agreement and the Buyer has not omitted to state
any fact necessary to make statements made herein or therein not materially
misleading.
60 Certain Agreements.
6.1 Access. Between the date of this Agreement and the Closing Date,
the Selling Entities, upon reasonable advance notice from the Buyer, shall (a)
give the Buyer and any Person who is considering providing financing to the
Buyer to finance any portion of the Purchase Price and their respective
authorized representatives and legal counsel reasonable access during normal
business hours to all properties, books, Contracts, Assets and records of the
each Selling Entity, (b) permit the Buyer to make inspections thereof, and (c)
cause its officers and its advisors to furnish the Buyer with such financial and
operating data and other information with respect to the Business of each
Selling Entity and to discuss with the Buyer and its authorized representatives
and legal counsel the affairs of the Selling Entities, all as the Buyer may from
time to time reasonably request. For a period of six months following Closing,
the Selling Entities shall give the Buyer access to all personnel and accounting
records relating to the Selling Entities and allow the Buyer to make copies, at
the Buyer's expense, of such records. All such information shall be subject to
the Confidentiality Agreement executed on September 26, 1997 between the Buyer
and Gedco.
6.2 Exclusivity. From the date hereof until the earlier of the
consummation of the Closing or the termination of this Agreement, no Selling
Entity nor any of their respective agents shall, directly or indirectly, solicit
or negotiate or enter into any agreement with any other Person, or provide any
nonpublic information to any other Person, with respect to or in furtherance of
any proposal for a merger or business combination involving, or acquisition of
any interest in, or (except in the ordinary course of business) sale of assets
by, a Selling Entity except for the acquisition of the Purchased Assets by the
Buyer.
6.3 Update Schedules. Between the date hereof and the Closing Date,
each Selling Entity shall promptly disclose to the Buyer in writing any
information set forth in the Schedules that is no longer complete, true or
applicable and any information of the nature of that set forth in the Schedules
that arises after the date hereof and that would have been required to be
included in the Schedules if such information had been obtained on the date of
delivery thereof.
<PAGE>
6.4 Financial Information. Until the Closing, the Selling Entities
shall provide the Buyer, within 15 days after the end of each month, with an
unaudited balance sheet and the related statements of income and cash flow as of
and for the month then ended, prepared on the same basis as the Interim
Financial Statements referred to in Section 4.5, and certified as such by the
chief financial officer or General Partner of each Selling Entity. In addition,
KPMG Peat Marwick, at the direction and the cost of the Selling Entities, shall
deliver to the Buyer within 60 days of the Closing Date, audited financial
statements consisting of the balance sheet of Gedco (excluding Fun `N Wheels) as
of December 31, 1996 and the related statements of income and cash flows for the
year then ended (the "1996 Financial Statements"). The 1996 Financial Statements
shall be prepared in accordance with GAAP, consistently applied, using the same
methods and criteria employed in connection with the preparation of the Audited
Financial Statements.
6.5 Restrictive Covenants.
(a Each Selling Entity covenants that for the period ending
four years after the Closing Date, it will not, directly or indirectly, own,
manage, operate, join, control, finance or participate in the ownership,
management, operation, control or financing of, or be connected as a partner,
principal, agent, representative, consultant or otherwise with or use or permit
its name to be used in connection with, any business or enterprise engaged
directly or indirectly in competition with the business conducted by the Buyer
at any time during such period within a 100-mile radius of the location of any
dinner show, piano bar or Live Stage Show of the Buyer or any subsidiary thereof
existing as of the date of this Agreement and in existence on the date of the
subject prohibited activity of the Selling Entities (the "Restricted Business").
It is recognized by the Buyer and each Selling Entity that given the business
strategies of the Buyer and its development plans a more narrow geographical
limitation of any nature on this non-competition covenant (and the
non-solicitation covenant set forth in Section 6.5(b)) are not appropriate. The
foregoing restriction shall not be construed to prohibit the ownership by any
Selling Entity of a passive investment of not more than five percent (5%) of any
class of securities of any corporation which is listed on a recognized
securities exchange or The Nasdaq Stock Market.
(b No Selling Entity shall, during the period ending four
years after the Closing Date, either directly or indirectly, (i) solicit or
encourage or cause others to solicit or encourage any customer or supplier,
including tour group operators of the Selling Entities to terminate or reduce
its customer or supplier relationship with the Buyer, except for advertising
solicitations to customers to attend Fun `N Wheels, so long as Fun `N Wheels
does not engage in a Restricted Business or (ii) solicit or encourage or cause
others to solicit or encourage any personnel employed by the Buyer, including,
but not limited to: actors, singers, musicians, dancers, tour groups, technical
personnel, chefs, restaurant managers, waiters, bartenders or other
administrative or managerial personnel to terminate their employment
relationship with the Buyer. Notwithstanding anything in this Section 6.5 to the
contrary, for the period ending one year after the Closing Date, no Selling
Entity shall, either directly or indirectly, with respect to the activities
prohibited by Section 6.5(a), call on or solicit, for any purpose whatsoever,
any Person who or which within the past four years has been a supplier of goods
or services totaling more than $10,000 in 1997 or a customer of any Selling
Entity.
(c Each Selling Entity recognizes and acknowledges that by
reason of its ownership of the Business of a Selling Entity, it has had access
to Confidential Information relating to the Restricted Business. Each Selling
Entity acknowledges that such Confidential Information is a valuable and unique
asset and no Selling Entity shall disclose any such Confidential Information
after the Closing Date to any Person for any reason whatsoever, unless such
information (a) is in the public domain through no wrongful act of any such
Person, (b) has been rightfully received from a third party without restriction
and without breach of this Agreement or (c) except as may be required by law.
Each Selling Entity acknowledges that the restrictions contained in this Section
6.5 are reasonable and necessary to protect the legitimate interests of the
Buyer and that any violation will result in irreparable injury to the Buyer.
(d The Buyer shall be entitled to preliminary and permanent
injunctive relief, without the necessity of proving actual damages, as well as
an equitable accounting of all earnings, profits and other benefits arising from
any violation of this Section 6.5, which rights shall be cumulative and in
addition to any other rights or remedies to which the Buyer may be entitled. In
the event that any of the provisions of this Section 6.5 should ever be
adjudicated to exceed the time, geographic, product or service, or other
limitations permitted by applicable law in any jurisdiction, then such
provisions shall be deemed reformed in such jurisdiction to the maximum time,
geographic, product or service, or other limitations permitted by applicable
law.
<PAGE>
6.6 Required Consents, Regulatory and other Approvals. The Selling
Entities will (i) take all commercially reasonable steps necessary or desirable,
and proceed diligently and in good faith and use all commercially reasonable
efforts, as promptly as practicable to obtain the Required Consents, approvals
or actions of, to make all filings with, and to give all notices to,
governmental or regulatory authorities or any other Person required of the
Selling Entities to consummate the transactions contemplated hereby and the
Transaction Documents, (ii) provide such other information and communications to
such governmental or regulatory authorities or other Persons as the Buyer or
such governmental or regulatory authorities or other Persons may reasonably
request in connection therewith and (iii) cooperate with the Buyer as promptly
as practicable in obtaining the Required Consents, approvals or actions of,
making all filings with, and giving all notices to, governmental or regulatory
authorities or other Persons required in order to enable the Buyer to operate
the Businesses as they were operated on the date hereof by the Selling Entities
and consummate the transactions contemplated hereby and by the Transaction
Documents. The Selling Entities will provide prompt notification to the Buyer
when any Required Consent, approval, action, filing or notice referred to in
clause (i) above is obtained, taken, made or given, as applicable, and will
advise the Buyer of any communications (and, unless precluded by Law, provide
copies of any such communications that are in writing) with any governmental or
regulatory authority or other Person regarding any of the transactions
contemplated by this Agreement or any of the Transaction Documents.
Additionally, the Buyer shall take all commercially reasonable steps necessary
or desirable, and proceed diligently and in good faith and use all commercially
reasonable efforts, as promptly as practicable to assist the Selling Entities in
obtaining the Required Consents.
6.7 Publicity. So long as this Agreement is in effect, no Selling
Entity nor the Buyer nor any affiliates which they respectively control shall
issue or cause the publication of any press release or other public statement or
announcement with respect to this Agreement or the transactions contemplated
hereby or thereby without the prior consultation of the other parties hereto,
except as may be required by law or by obligations pursuant to any listing
agreement with the Nasdaq SmallCap Market which, recognizing the importance of
disclosing any such information in a timely manner, shall require the Buyer to
make a reasonable attempt to have prior consultation with the other parties
hereto to insure the accuracy thereof.
6.8 Satisfaction of Liabilities. Each Selling Entity shall at the
Closing, fully satisfy or cause to have been satisfied all third party
Liabilities and obligations of any Selling Entity which are not also Assumed
Liabilities.
6.9 Restrictions on Transfer. The Selling Entities shall not, until
March 31, 1999, (i) offer, pledge, sell, contract to sell, sell any option or
contract to purchase, purchase any option or contract to sell, grant any option,
right or warrant to purchase or otherwise transfer or dispose of, directly or
indirectly, any Shares or (ii) enter into any swap or other agreement that
transfers, in whole or in part, any of the economic consequences of ownership of
the Shares whether any such transaction described in clause (i) or (ii) above is
to be settled by delivery of the Shares, in cash or otherwise, (each, a
"Prohibited Share Action") without the prior written consent of the Buyer. In
addition, the Selling Entities shall enter into an agreement (the "Lock-Up
Agreement") with Whale Securities Co., L.P. pursuant to which each Selling
Entity shall agree not to engage in, directly or indirectly, a Prohibited Share
Action. In furtherance of the foregoing, the Buyer and its transfer agent, are
hereby authorized to decline to make any transfer of securities if such transfer
would constitute a violation or breach of this Section 6.9 or the Lock-Up
Agreement.
6.10 Employee Benefit Matters. At or prior to the Closing, the Buyer
shall offer employment effective at the Closing and for a period of at least 30
days following the Closing to all employees of the Selling Entities who are
active employees of the Selling Entities immediately prior to the Closing. Such
employment shall be on terms and conditions, in the aggregate, substantially no
less favorable to such employees than those in effect immediately prior to the
Closing. No such employment offered by the Buyer shall be deemed an assumption
by the Buyer of any existing employee related liability, contract or obligation
relating to any period prior to the Closing and the Selling Entities shall
remain fully responsible to all of their employees for any obligations related
to their employment by the Selling Entities prior to the Closing.
Notwithstanding anything herein to the contrary, (i) the Buyer shall have no
responsibility, liability or other obligations with respect to any Benefit Plans
(including without limitation any COBRA continuation coverage requirements under
ERISA and the Internal Revenue Code), and Buyer shall have no obligation to
offer or maintain any similar plans, programs or benefits to any employee and
(ii) employment of such employees by Buyer shall be "at will" and nothing herein
shall preclude the Buyer from terminating any such employee at any time after
the Closing. No provision of this Agreement shall create any third-party
beneficiary rights in any employee or former employee (or any beneficiary or
dependent thereof) of the Selling Entities in respect of continued employment
(or resumed employment), and no provision hereof shall create any such
third-party beneficiary rights in any such person in respect of any benefits
that may be provided, directly or indirectly, under any employee benefit plan of
the Buyer.
<PAGE>
6.11 Financing. The Buyer will use commercially reasonable efforts to
enter into definitive agreements providing for the financing of the Buyer's
acquisition of the Businesses hereunder containing terms reasonably satisfactory
to the Buyer, and to obtain on the Closing Date the financing contemplated by
such definitive financing agreements. The Selling Entities shall use
commercially reasonable efforts to assist the Buyer, in whatever manner
requested by the Buyer, in entering into and obtaining the financing
contemplated by such definitive financing agreements; provided, however, that
the Selling Entities shall not be obligated to expend any of its financial
resources in fulfulling its obligations under this Section 6.11 except to the
extent that the Selling Entities receive reasonable assurances from the Buyer
that such expenses shall be reimbursed by the Buyer.
6.12 Piggyback Registration.
(a) For a period of three years after the Closing Date,
whenever John Stuart, the Chief Executive Officer of the Buyer, proposes to
register any of his shares of the Common Stock under the 1933 Act, the Buyer
shall give prompt notice to the Selling Entities and will include in such
registration (the "Piggyback Registration"), subject to the allocation
provisions discussed in Sections 6.12(c) and 6.12(d), all Shares with respect to
which the Buyer has received written request for inclusion within 20 days after
such notice is given by the Buyer.
(b) In all Piggyback Registrations, the Buyer will pay the
expenses related to registration of the Shares; provided, however, the Selling
Entities shall pay the underwriting commissions related to the registration of
the Shares.
(c) If a Piggyback Registration is an underwritten primary
registration on behalf of the Buyer, in which John Stuart intends to sell shares
of the Common Stock which he owns beneficially, and the managing underwriter
advises the Buyer in writing that in the underwriter's opinion the number of
securities to be included in such registration exceeds the number that can be
sold in such offering, at a price reasonably related to fair value, the Buyer
will allocate the securities to be included as follows: first, the securities
the Buyer proposes to sell on its own behalf; and second, pro rata on the basis
of the number of shares of Common Stock owned among (i) John Stuart and any
other Person selling in the registration and (ii) the Selling Entities.
(d) If a Piggyback Registration is initiated as an
underwritten secondary registration on behalf of the holders of the Buyer's
securities, and the managing underwriters advise the Buyer in writing that in
their opinion the number of securities requested to be included in such
registration exceeds the number that can be sold in such offering, at a price
reasonably related to fair value, the Buyer will allocate the securities to be
included as follows: pro rata on the basis of the number of shares of Common
Stock owned among (i) John Stuart and any other Person selling in the
registration and (ii) the Selling Entities.
(e) If any Piggyback Registration is underwritten, the
selection of investment bank(s) and manager(s) and the other decisions regarding
the underwriting arrangements for the offering will be made by the Buyer in the
case of a registration falling under Section 6.12(c) and by John Stuart in the
case of a registration falling under Section 6.12(d).
6.13 Bulk Sales. The Buyer hereby waives the Selling Entities'
compliance with any bulk sales laws that may apply to the Transactions,
including with respect to Taxes, but the Selling Entities hereby jointly and
severally indemnify the Buyer against any Damages that the Buyer may incur that
it would not have incurred if the Selling Entities had complied with any such
bulk sales laws. However, the parties shall comply with and cooperate with one
another with respect to any applicable requirements of the California Commercial
Code as such Code relates to bulk sales and transfers.
6.14 California Liquor License. In connection with the transfer of the
California liquor license for the Wild Bills premise in California, the parties
shall use an escrow agreement in the form of Exhibit "D" hereto or in a form
otherwise mutually acceptable to the Buyer and the Selling Entities, and the
Escrow Agent thereunder shall be a Person mutually acceptable to the Buyer and
the Selling Entities.
7. Conduct of the Businesses Prior to the Closing.
7.1 Operation in Ordinary Course. Between the date of this Agreement
and the Closing Date, each Selling Entity shall conduct its Business in all
material respects in the ordinary course and use commercially reasonable efforts
to maintain the good will of all current business relationships.
7.2 Business Organization. Between the date of this Agreement and the
Closing Date, each Selling Entity shall use commercially reasonable efforts to
preserve substantially intact its respective business organization and keep
available the services of each of its present officers and employees.
<PAGE>
7.3 Corporate Organization. Between the date of this Agreement and the
Closing Date, no Selling Entity shall, without the prior written consent of the
Buyer, amend its Charter Document or bylaws, if applicable, and shall not,
without the prior written consent of the Buyer:
(a issue, sell or otherwise dispose of any of its capital
stock or partnership interest, or create, sell or otherwise dispose of any
options, rights, conversion rights or other agreements or commitments of any
kind relating to the issuance, sale or disposition of any of its capital stock
or partnership interest;
(b reclassify, split up or otherwise change its capital
stock or partnership interest;
(c be party to any merger, consolidation or other
business combination; or
(d sell, lease, license or otherwise dispose of any
of its Assets (including, but not limited to rights with respect to the
Intellectual Property), except in the ordinary course of business;
7.4 Business Restrictions. Between the date of this Agreement and the
Closing Date, except as mutually agreed, no Selling Entity shall, without the
prior written consent of the Buyer:
(a declare, make or pay any dividends or other
distributions other than of cash;
(b borrow any funds or otherwise become subject to,
whether directly or by way of guarantee or otherwise, any indebtedness for
borrowed money;
(c acquire or dispose any of the Assets, other than
inventory in the ordinary course of business consistent with past practices;
(d create any material Encumbrance on any of the Assets;
(e except in the ordinary course of business, increase
in any manner the compensation of any partner, director or officer or increase
in any manner the compensation of any class of employees;
(f create or materially modify any bonus, deferred
compensation, pension, profit sharing, retirement, insurance, stock purchase,
stock option, or other fringe benefit plan, arrangement or practice or any other
employee benefit plan;
(g enter into, amend, modify, terminate (partially or
completely), grant any waiver under or give any consent with respect to any
Contract;
(h violate, breach or default under in any material respect,
or take or fail to take any action that (with or without notice or lapse of time
or both) would constitute a material violation or breach of, or default under
any term or provision of any Contract or any License;
(i engage in any transaction other than the distribution of
partnership proceeds in the form of cash with respect to its Business with any
partner, officer, director, Affiliate or associate of any Selling Entity or any
associate of any such partner, officer, director or Affiliate;
(j make any capital expenditure or acquire any property
or assets (other than raw materials and supplies) for a cost in excess of $5,000
in any one case or $50,000 in the aggregate;
(k enter into any agreement that materially restricts it
from carrying on its Business;
(l cancel any material debts of others or waive any
material claims or rights;
(m act or omit from taking any action that would cause
any of the representations and warranties in Section 4 to be inaccurate; or
(n entering into any Contract to do or engage in any of
the foregoing.
8. Conditions Precedent to Obligations of the Buyer.
All obligations of the Buyer to consummate the Transactions are subject
to the satisfaction (or waiver by the Buyer) prior thereto of each of the
following conditions:
<PAGE>
8.1 Legality. No Law or Court Order shall be pending or threatened that
prevents or that seeks to restrain the consummation, or challenges the validity
or legality, of the Transactions or that would materially limit or adversely
affect the Buyer's acquisition of the Purchased Assets.
8.2 Representations and Warranties. The representations and warranties
of the Selling Entities set forth in this Agreement shall be true and correct in
all respects on the date hereof and (except to the extent such representations
and warranties speak as of an earlier date) shall also be true and correct in
all material respects on and as of the Closing Date (except for changes
permitted under Section 7 hereof or otherwise contemplated by this Agreement)
with the same force and effect as if made on and as of the Closing Date.
8.3 Agreements, Conditions and Covenants. The Selling Entities shall
have performed or complied with all agreements, conditions and covenants
required by this Agreement to be performed or complied with them on or before
the Closing Date.
8.4 Certificates. The Buyer shall have received a certificate of the
Secretary of the general partner each Selling Entity as to the effect set forth
in Sections 8.2 and 8.3 hereof.
8.5 Required Consents and Approvals. All Required Consents, approvals
and actions of, filings with and notices to any governmental or regulatory
authority necessary to permit the Buyer and the Selling Entities to perform
their obligations under this Agreement, to enable the Buyer to operate the
Businesses as they were operated on the date hereof by the Selling Entities and
to consummate the transactions contemplated hereby and thereby (i) shall have
been duly obtained, made or given, (ii) shall be in form and substance
reasonably satisfactory to the Buyer, (iii) shall not be subject to the
satisfaction of any condition that has not been satisfied or waived and (iv)
shall be in full force and effect, and all terminations or expirations of
waiting periods imposed by any governmental or regulatory authority necessary
for the consummation of the transactions contemplated by this Agreement and the
Transaction Documents shall have occurred.
8.6 Third Party Consents. All consents (or in lieu thereof waivers) to
the performance by the Buyer and the Selling Entities of their obligations under
this Agreement or to the consummation of the transaction contemplated hereby as
are required under any Contract to which the Buyer or the Selling Entities are a
party or by which any of their respective Assets are bound (i) shall have been
obtained, (ii) shall be in form and substance reasonably satisfactory to the
Buyer, (iii) shall not be subject to the satisfaction of any condition that has
not been satisfied or waived and (iv) shall be in full force and effect, except
where the failure to obtain any such consent (or in lieu thereof waiver) could
not reasonably be expected, individually or in the aggregate with other such
failures, to materially adversely affect the Buyer, the Assets, the Assumed
Liabilities or the Businesses or otherwise result in a material diminution of
the benefits of the transactions contemplated by this Agreement to the Buyer.
8.7 Satisfactory Completion of its Due Diligence Examination. The Buyer
shall have been satisfied, in its sole discretion, within 30 Business Days from
the date hereof, with the results of its due diligence review of the Selling
Entities, including Buyer's contacts with customers, employees and suppliers,
review of any environmental, tax, employee benefits matters, review of the lease
terms for any and all real property occupied by any Selling Entity and other
legal due diligence to be completed by the Buyer. If the Buyer shall be
dissatisfied with its due diligence review, it must provide written notice of
such dissatisfaction to the Selling Entities within the aforementioned 30
Business Day period or the Buyer shall be deemed to have waived its right to
terminate this Agreement under this Section 8.7.
8.8 Pledge Agreement. The Selling Entities shall have executed
and delivered the Pledge Agreement.
<PAGE>
8.9 Title Insurance. The Buyer shall have received, in form and
substance reasonably acceptable to the Buyer, a title insurance commitment
issued by First American Title Insurance Company, through Morgan, Lewis &
Bockius LLP, as to each of the Florida properties, committing to issue, as
applicable, owner's or leasehold policies of title insurance insuring all real
estate interests (whether owned, leased or otherwise) of each Selling Entity and
lender's policies of title insurance, in form and substance satisfactory, in
their sole and absolute discretion, to the lender or the lenders providing the
financing secured by the real estate interests of the Selling Entities being
conveyed pursuant to this Agreement, insuring such lender or lenders for the
full amount of the loan being obtained by the Buyer in connection with this
transaction or for such greater amounts as required by such lender or lenders by
Closing. The Selling Entities shall pay for the cost of such title insurance up
to a maximum of $10,000. Anything set forth in this Agreement to the contrary
notwithstanding, the Buyer shall have the right to terminate this Agreement by
delivering notice of such termination to the Selling Entities within 25 Business
Days after the date of this Agreement if the Buyer determines, in the Buyer's
sole and absolute discretion, that any one or more of the Permitted Encumbrances
or any other Encumbrances are not acceptable to the Buyer. In the event the
Buyer elects not to terminate the Agreement within the aforesaid 25 Business Day
period, the Buyer shall not be able to raise any issue respecting the effect of
either the Permitted Encumbrances or the items set forth as title exceptions on
Schedule B-II of the title commitment to be obtained by the Buyer in connection
with the transaction on the marketability of the real property owned by the
Selling Entities described on Schedule 2.1(a).
8.10 Opinion of Counsel. The Buyer shall have received the opinion of
Maguire, Voorhis & Wells, P.A., counsel to the Selling Entities in a form
acceptable to the Buyer.
8.11 Real Property Leases. For each of the Real Property Leases wherein
a Selling Entity is the tenant, the Selling Entities shall have delivered to the
Buyer an estoppel certificate and consent to assignment from the lessor
thereunder to the extent required by the affected lease in form and substance
reasonably satisfactory to the Buyer.
8.12 Financing. The Buyer shall have obtained financing having terms
reasonably satisfactory to the Buyer and in an amount at least equal to $11.5
million plus the expenses of the Buyer incurred in connection with the
negotiation, preparation, execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby.
8.13 Environmental Survey. The Buyer shall have received, in form and
substance satisfactory to it, a Phase II environmental report on the Fort
Liberty Real Property that indicates conclusively that an Environmental
Condition does not exist at such location.
8.14 O'Riordan Employment Agreement. O'Riordan shall have executed an
Employment Agreement with the Buyer substantially in the form attached hereto as
Exhibit B and delivered the same to the Buyer.
8.15 Regulatory and other Approvals. The Buyer shall have obtained all
governmental and regulatory approvals, actions, Permits, notices or other
authorizations, including any licenses related to the sale or distribution of
alcoholic beverages or food products, required to operate the Businesses in
accordance with all applicable Laws.
9. Conditions Precedent to Obligations of the Selling Entities.
All obligations of the Selling Entities to consummate the Transactions
are subject to the satisfaction (or waiver by the Selling Entities) prior
thereto of each of the following conditions:
9.1 Legality. No Law or Court Order shall be pending or threatened that
prevents or that seeks to restrain the consummation, or challenges the validity
or legality, of the Transactions.
9.2 Representations and Warranties. The representations and warranties
of the Buyer set forth in this Agreement shall be true and correct on the date
hereof and (except to the extent such representations and warranties speak as of
an earlier date) shall also be true and correct in all material respects on and
as of the Closing Date (except as otherwise contemplated by this Agreement) with
the same force and effect as if made on and as of the Closing Date.
9.3 Agreements, Conditions and Covenants. The Buyer shall have
substantially performed or complied with all agreements, conditions and
covenants required by this Agreement to be performed or complied with on or
before the Closing Date, including the delivery of the Purchase Price.
9.4 Purchase Price. The Buyer shall have delivered to the Selling
Entities the Purchase Price including a certificate representing the Shares.
<PAGE>
9.5 Officer's Certificates. The Selling Entities shall have received a
certificate of the Secretary of the Buyer as to the effect set forth in Sections
9.2 and 9.3 hereof.
9.6 Pledge Agreement. The Buyer shall have executed and delivered
to the Selling Entities the Pledge Agreement.
9.7 O'Riordan Employment Agreement. The Buyer shall have executed and
delivered to O'Riordan the Employment Agreement.
9.8 Required Consents. The Selling Entities shall have obtained
the Required Consents listed in Schedule 4.4.
10. Indemnification.
10.1 By the Selling Entities. The Selling Entities, jointly and
severally, shall indemnify and hold harmless the Buyer and its Affiliates,
officers, directors, employees, agents, successors and assigns (each, an
"Indemnified Party") from, against and in respect of any and all Liabilities,
claims, demands, judgments, settlement payments, losses, costs, damages,
deficiencies and expenses whatsoever (including reasonable attorneys',
consultants' and other professional fees and disbursements of every kind, nature
and description incurred by such Indemnified Party in connection therewith)
(collectively, "Damages") that such Indemnified Party may sustain, suffer or
incur and that result from, arise out of or relate to (a) any Excluded
Liability, (b) any breach of or any inaccuracy in any representation, warranty,
covenant or agreement of a Selling Entity contained in this Agreement, including
any breach of the obligation to indemnify hereunder, (c) any Environmental
Condition existing on or prior to the Closing, and (d) any Liability or
obligation of a Selling Entity involving taxes due and payable by, or imposed
with respect to a Selling Entity for any taxable periods ending on or prior to
the Closing Date which are open to examination by the Internal Revenue Service
pursuant to any applicable statute of limitations under the Code (whether or not
such taxes have been due and payable).
10.2 By the Buyer. The Buyer shall indemnify and hold harmless the
Selling Entities, and its successors and assigns (each, an "Indemnified Party")
from and against any Damages that such Indemnified Party may sustain, suffer or
incur and that result from, arise out of or relate to any breach of any
representation, warranty, covenant or agreement of the Buyer contained in this
Agreement.
10.3 Procedure for Claims.
(a An Indemnified Party that desires to seek indemnification
under any part of this Section 10 shall give notice (a "Claim Notice") as soon
as practicable to each party responsible or alleged to be responsible for
indemnification hereunder (an "Indemnitor") and if applicable, to the Escrow
Agent, prior to the Expiration Date specified below. Such Claim Notice shall
briefly explain the nature of the claim and the parties known to be involved,
and shall specify the amount thereof. If the matter to which a claim relates
shall not have been resolved as of the date of the Claim Notice, the Indemnified
Party shall estimate the amount of the claim in the Claim Notice, but also
specify therein that the claim has not yet been liquidated (an "Unliquidated
Claim"). If an Indemnified Party gives a Claim Notice for an Unliquidated Claim,
the Indemnified Party shall also give a second Claim Notice (the "Liquidated
Claim Notice") within 60 days after the matter giving rise to the claim becomes
finally resolved, and the Liquidated Claim Notice shall specify the amount of
the claim. Each Indemnitor to which a Claim Notice is given shall respond to any
Indemnified Party that has given a Claim Notice (a "Claim Response") within 30
days (the "Response Period") after the later of (i) the date that the Claim
Notice is given or (ii) if a Claim Notice is first given with respect to an
Unliquidated Claim, the date on which the Liquidated Claim Notice is given. Any
Claim Notice or Claim Response shall be given in accordance with the notice
requirements hereunder, and any Claim Response shall specify whether or not the
Indemnitor giving the Claim Response disputes the claim described in the Claim
Notice. If any Indemnitor fails to give a Claim Response within the Response
Period, such Indemnitor shall be deemed not to dispute the claim described in
the related Claim Notice. If any Indemnitor elects not to dispute a claim
described in a Claim Notice, whether by failing to give a timely Claim Response
or otherwise, then the amount of such claim shall be conclusively deemed to be
an obligation of such Indemnitor.
<PAGE>
(b If any Indemnitor shall be obligated to indemnify an
Indemnified Party hereunder, such Indemnitor shall pay to such Indemnified Party
within 30 days after the last day of the applicable Response Period the amount
to which such Indemnified Party shall be entitled. If the Buyer shall be the
Indemnified Party, it shall seek payment of one-half of the related Damages
under the Escrow Agreement, but only to the extent that Escrow Funds are then
being held by the Escrow Agent and are not subject to other claims for
indemnification, and the other one-half of the Damages through recourse under
the Pledge Agreement, but only to the extent that shares are then being held
under the Pledge Agreement and are not subject to other claims for
indemnification. To the extent that either the Escrow Funds or the shares being
held under the Pledge Agreement are unavailable or insufficient to cover
one-half of the Damages, payment of the Damages shall be made by recourse to any
remaining Escrow Funds not subject to other claims for indemnification, then to
any remaining shares held under the Pledge Agreement and thereafter the Buyer
shall seek indemnification directly from the Selling Entities for the payment of
any remaining Damages. If the Selling Entities shall be the Indemnified Party,
they shall seek indemnification directly from the Buyer. If there shall be a
dispute as to the amount or manner of indemnification under this Section 10, the
Indemnitor and the Indemnified Party shall seek to resolve such dispute through
negotiations and, if such dispute is not resolved within twenty days, the
Indemnified Party may pursue whatever legal remedies may be available for
recovery of the Damages claimed from any Indemnitor. If any Indemnified Party
fails to receive all or part of any indemnification obligation when due, then
such Indemnified Party shall also be entitled to receive from the applicable
Indemnitor or, if applicable, the Escrow Agent, interest on the unpaid amount
for each day during which the obligation remains unpaid at an annual rate equal
to 10%.
(c Notwithstanding any other provision of this Section 10, (i)
an Indemnified Party shall be entitled to indemnification hereunder only when
the aggregate of all Damages to such Indemnified Party exceeds $100,000 (the
"Deductible Amount") and then such Indemnified Party shall be entitled to
indemnification for its Damages in excess of the Deductible Amount and (ii) no
Indemnitor as a group shall be liable under this Section 10 for any amount in
excess of $14,000,000, except that any Damages based on a breach of
representations and warranties with respect to tax and litigation matters shall
not be counted against or subject to such maximum limitation. The limitations of
this paragraph (c), however, shall not apply to (x) the Selling Entities'
representations and warranties in Section 4.6, Section 4.7 and Section 4.12, (y)
Damages arising out of common law fraud in connection with the Transactions or
(z) any covenants or agreements to be performed by an Indemnitor after the
Closing. In addition, the calculation of the Deductible Amount shall include any
Damages incurred by an Indemnified Party for which the Indemnified Party would
have been entitled to claim indemnification under this Section 10 with respect
to a breach of representation or warranty but for such representation or
warranty being qualified by materiality, the knowledge of a particular party or
related exceptions.
10.4 Claims Period. Any claim for indemnification under this Section 10
shall be made by giving a Claim Notice under Section 10.3 on or before the
applicable "Expiration Date" specified below in this Section 10.4, or the claim
under this Section 10 shall be invalid. The following claims shall have the
following respective "Expiration Dates": (a) March 31, 1999--any claims that are
not specified in any of the succeeding clauses; (b) the date on which the
applicable statute of limitations expires--any claims related to (i) a breach of
any covenant or agreement to be performed at least in part after the Closing
Date, (ii) a breach of any representation or warranty of a party to this
Agreement that relates to taxes, or (iii) a breach of any representations or
warranties of a party to this Agreement that were untrue when made with an
intent to mislead or defraud; and (c) two years from the date hereof---any
claims relating to (i) an Environmental Condition or (ii) the matters addressed
in Section 4.6 and Section 4.7. If more than one of such Expiration Dates
applies to a particular claim, the latest of such Expiration Dates shall be the
controlling Expiration Date for such claim. So long as an Indemnified Party
gives a Claim Notice for an Unliquidated Claim in good faith for a legitimate
claim on or before the applicable Expiration Date, such Indemnified Party shall
be entitled to pursue its rights to indemnification regardless of the date on
which such Indemnified Party gives the related Liquidated Claim Notice.
<PAGE>
10.5 Third Party Claims. An Indemnified Party that desires to seek
indemnification under any part of this Section 10 with respect to any actions,
suits or other administrative or judicial proceedings (each, an "Action") that
may be instituted by a third party shall give each Indemnitor prompt notice of a
third party's institution of such Action. After such notice, any Indemnitor may,
or if so requested by such Indemnified Party, any Indemnitor shall, participate
in such Action or assume the defense thereof, with counsel reasonably
satisfactory to such Indemnified Party; provided, however, that such Indemnified
Party shall have the right to participate at its own expense in the defense of
such Action; and provided, further, that the Indemnitor shall not consent to the
entry of any judgment or enter into any settlement, except with the written
consent of such Indemnified Party (which consent shall not be unreasonably
withheld), that (a) fails to include as an unconditional term thereof the giving
by the claimant or plaintiff to such Indemnified Party of a release from all
liability in respect of any such Action or (b) grants the claimant or plaintiff
any injunctive relief against the Indemnified Party. Any failure to give prompt
notice under this Section 10.5 shall not bar an Indemnified Party's right to
claim indemnification under this Section 10, except to the extent that an
Indemnitor shall have been harmed by such failure.
10.6 Exceptions to Limitations. Nothing herein shall be deemed to limit
or restrict in any manner any rights or remedies which the Buyer has, or might
have, at law, in equity or otherwise, against any Selling Entity based on a
willful misrepresentation or willful breach of warranty by a Selling Entity
hereunder.
10.7 Effect of Investigation. Any claim for indemnification shall not
be invalid as a result of any investigation by or opportunity to investigate
afforded to the Buyer.
11. Termination.
11.1 Grounds for Termination. This Agreement may be terminated at
any time prior to the Closing
-----------------------
Date:
(a by mutual written consent of the Buyer and the
Selling Entities;
(b by the Selling Entities or by the Buyer, if the Closing has
not occurred on or before the date that is 45 Business Days from the date of
this Agreement; provided, however, that such right to terminate this Agreement
shall not be available to any party (with the Selling Entities collectively
deemed as one party) that has breached any of its covenants, representations or
warranties in this Agreement in any material respect (which breach has not been
cured);
(c by the Selling Entities or the Buyer, if there shall be any
Law that makes consummation of the Transactions illegal or otherwise prohibited
or if any Court Order enjoining the Selling Entities or the Buyer from
consummating the Transactions is entered and such Court Order shall become final
and nonappealable;
(d by the Buyer, if a Selling Entity shall have breached any
of its covenants hereunder in any material respect or if the representations and
warranties of the Selling Entities contained in this Agreement or in any
certificate or other writing delivered by a Selling Entity pursuant hereto shall
not be true and correct in any material respect, except for such changes as are
contemplated by this Agreement, and, in either event, if such breach is subject
to cure, the Selling Entities, as the case may be, have not cured such breach
within 10 Business Days of the Buyer's notice of an intent to terminate; or
(e by a Selling Entity, if the Buyer shall have breached any
of its covenants hereunder or if the representations and warranties of the Buyer
contained in this Agreement or in any certificate or other writing delivered by
the Buyer pursuant hereto shall not be true and correct, except for such changes
as are contemplated by this Agreement, and, in either event, if such breach is
subject to cure, the Buyer has not cured such breach within 10 Business Days of
notice of an intent to terminate.
<PAGE>
11.2 Effect of Termination. If this Agreement is terminated pursuant to
Section 11.1, any party may pursue any legal or equitable remedies that may be
available if such termination is based on a breach of another party.
12. Payment of Expenses; Sales and Transfer Taxes. Each party hereto shall pay
its own expenses for lawyers, accountants, consultants, investment bankers,
brokers, finders and other advisers with respect to the Transactions. The
Selling Entities shall indemnify the Buyer and its officers, directors,
employees, agents and Affiliates in respect of, and hold each of them harmless
from and against, any and all Damages suffered, occurred or sustained by any of
them or to which any of them becomes subject, resulting from, arising out of or
relating to the failure of the Selling Entities to comply with the terms of any
such provisions applicable to the transactions contemplated by this Agreement.
It is further agreed by the parties hereto that all taxes due in the States of
California and Florida as a result of the transfer of title of real estate
occasioned by the transactions contemplated herein shall be paid by the Selling
Entities.
13. Contents of Agreement. This Agreement, together with the other Transaction
Documents, sets forth the entire understanding of the parties hereto with
respect to the Transactions and supersedes all prior agreements or
understandings among the parties regarding those matters.
14. Amendment, Parties in Interest, Assignment, Etc. This Agreement may be
amended, modified, supplemented, or assigned only by a written instrument duly
executed by each of the parties hereto. If any provision of this Agreement shall
for any reason be held to be invalid, illegal, or unenforceable in any respect,
such invalidity, illegality, or unenforceability shall not affect any other
provision hereof, and this Agreement shall be construed as if such invalid,
illegal or unenforceable provision had never been contained herein. This
Agreement shall be binding upon and inure to the benefit of and be enforceable
by the respective heirs, legal representatives, successors and assigns of the
parties hereto. Any term or provision of this Agreement may be waived at any
time by the party entitled to the benefit thereof by a written instrument duly
executed by such party. The parties hereto shall execute and deliver any and all
documents and take any and all other actions that may be deemed reasonably
necessary by their respective counsel to complete the Transactions.
15. Interpretation. Unless the context of this Agreement clearly requires
otherwise, (a) references to the plural include the singular, the singular the
plural, and the part the whole, (b) references to any gender include all genders
(c) "or" has the inclusive meaning frequently identified with the phrase
"and/or," (d) "including" has the inclusive meaning frequently identified with
the phrase "but not limited to," (e) references to "hereunder" or "herein"
relate to this Agreement and (f) all currencies refer to United States dollars.
The section and other headings contained in this Agreement are for reference
purposes only and shall not control or affect the construction of this Agreement
or the interpretation thereof in any respect. Section, subsection, schedule and
exhibit references are to this Agreement unless otherwise specified. Each
accounting term used herein that is not specifically defined herein shall have
the meaning given to it under GAAP.
16. Remedies. The remedies provided by Section 10 shall constitute the exclusive
remedies for the matters covered thereby. With respect to any matters not
covered by such Section, any party hereto shall be entitled to such rights and
remedies as such party may have at law or in equity or otherwise for any breach
of this Agreement, including the right to seek specific performance, rescission
or restitution, none of which rights or remedies shall be affected or diminished
by the remedies provided hereunder.
<PAGE>
17. Notices. All notices that are required or permitted hereunder shall be in
writing and shall be sufficient if personally delivered or sent by mail,
facsimile message or Federal Express or other delivery service. Any notices
shall be deemed given upon the earlier of the date when received at, or the
third day after the date when sent by registered or certified mail or the day
after the date when sent by Federal Express to, the address or fax number set
forth below, unless such address or fax number is changed by notice to the other
party hereto:
If to the Buyer:
On Stage Entertainment, Inc.
4625 West Nevso Drive
Las Vegas, NV 89103
FAX: 702-253-1122
Attn: Christopher Grobl, Esquire
General Counsel
with a required copy to:
Morgan, Lewis & Bockius LLP
2000 One Logan Square
Philadelphia, PA 19103
FAX: 215-963-5299
Attn: James W. McKenzie, Esquire
If to the Selling Entities:
Orlando Entertains
8445 International Drive
Suite 138
Orlando, FL 32819
FAX: 407-351-3593
Attn: Tyler Piercy
In each case, with a required copy to:
Maguire, Voorhis & Wells, P.A.
2 South Orange Avenue
Orlando, FL 32801
FAX: 407-648-9087
Attn: Jeffrey P. Wieland, Esquire
18. Governing Law. This Agreement shall be construed and interpreted in
accordance with the laws of the State of Nevada, without regard to its
provisions concerning conflict of laws.
19. Consent to Jurisdiction; Service of Process, etc.
(a Each party hereto irrevocably and unconditionally (i)
agrees that any suit, action or other legal proceeding (collectively, "Suit")
arising out of this Agreement may be brought and adjudicated in the United
States District Court for the District of Nevada, if such court does not have
jurisdiction or will not accept jurisdiction, in any court of competent civil
jurisdiction in Clark County, Nevada, (ii) consents and submits to the
non-exclusive jurisdiction of any such court for the purposes of any such Suit
and (iii) waives and agrees not to assert by way of motion, as a defense or
otherwise in any such Suit, any claim that he, she or it is not subject to the
jurisdiction of the above courts, that such Suit is brought in an inconvenient
forum or that the venue of such Suit is improper.
(b) Each party hereto also irrevocably consents to the service
of any process, pleadings, notices or other papers in a manner permitted by the
notice provisions of Section 17 or by any other method provided or permitted
under applicable law. Each party hereto agrees that final judgment in any Suit
(with all right of appeal having either expired or been waived or exhausted)
shall be conclusive and that the Buyer shall be entitled to enforce such
judgment in any other jurisdiction of the world by suit on the judgment, a
certified or exemplified copy of which shall be conclusive evidence of the fact
and amount of indebtedness arising from such judgment.
<PAGE>
20. Headings; Gender. All section headings contained herein are for convenience
of reference only, do not form a part of this Agreement and shall not affect in
any way the meaning or interpretation hereof. Words used herein, regardless of
the number and gender specifically used, shall be deemed and construed to
include any other number, singular or plural, and any other gender, masculine,
feminine or neuter, as the context requires.
21. Further Assurances. At any time and from time to time after the Closing, the
parties agree to cooperate with each other, to execute and deliver such other
documents, instruments to transfer or assignment, files, books and records and
do all such further acts and things as may be reasonably required to carry out
the intent of the parties hereunder.
22. Exhibits and Schedules. The Exhibits hereto, and the Schedules referred to
herein and therein are intended to be and hereby are specifically made a part of
this Agreement. Notwithstanding any other provision of this Agreement, each
exception set forth in the Schedules herein shall be deemed to qualify each
representation and warranty set forth in this Agreement as the context requires.
23. No Benefit to Others. The representations, warranties, covenants and
agreements contained in this Agreement are for the sole benefit of the parties
hereto and the heirs, administrators, personal representatives, successors,
assigns, and they shall not be construed as conferring any rights on any other
persons.
24. Counterparts. This Agreement may be executed in counterparts, each of which
shall be binding as of the date first written above, and all of which shall
constitute one and the same instrument. Each such copy shall be deemed to be an
original, and it shall not be necessary in making proof this Agreement to
produce or account for more than one such counterpart.
IN WITNESS WHEREOF, this Agreement has been executed by the parties
hereto on the day and year first written above.
ON STAGE ENTERTAINMENT, INC.
By: \s\ David Hope
--------------------------------
Name: David Hope
Title: President
KING HENRY'S USA, LTD.
By: GEDCO USA, INC.
By: \s\ Gerard O'Riordan
--------------------------------
Name: Gerard O'Riordan
Title: President
FORT LIBERTY, LTD.
By: GEDCO USA, INC.
By: \s\ Gerard O'Riordan
--------------------------------
Name: Gerard O'Riordan
Title: President
BLAZING PIANOS, LTD.
By: GEDCO USA, INC.
By: \s\ Gerard O'Riordan
--------------------------------
Name: Gerard O'Riordan
Title: President
WILD BILL'S MANAGEMENT, INC.
By: \s\ Gerard O'Riordan
--------------------------------
Name: Gerard O'Riordan
Title: President
GEDCO USA, INC.
By: \s\ Gerard O'Riordan
--------------------------------
Name: Gerard O'Riordan
Title: President
