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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) February 23, 1998
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Westminster Capital, Inc.
(Formerly FarWest Financial Corporation)
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(Exact name of registrant as specified in charter)
Delaware 1-4923 95-2157201
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(State or other jurisdiction (Commission file number) (IRS employer
jurisdiction of incorporation) identification no.)
9665 Wilshire Boulevard, Suite M-10, Beverly Hills, California 90212
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (310) 278-1930
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On February 26, 1998, "Registrant" sold the 40% of the issued and
outstanding common stock of Pink Dot, Inc. ("Pink Dot") owned by Registrant
("Registrant's Pink Dot Stock") to William Toro, owner of the other 60% of
the common stock of Pink Dot ("Toro's Pink Dot Stock") and the chief
executive officer of Pink Dot, for a purchase price of $6,000,000. The
purchase price is evidenced by Mr. Toro's promissory note ("Purchase Note")
in the principal amount of $6,000,000, due and payable on May 27, 1998
together with interest at the rate of 9% per annum accruing from March 28,
1998 to the due date. The Purchase Note is secured by a pledge by Mr. Toro
of 100% of the issued and outstanding common stock of Pink Dot ("Collateral").
In connection with the sale of Registrant's Pink Dot Stock, two
outstanding promissory notes payable to Registrant by Pink Dot were replaced
by two new promissory notes ("Replacement Notes"). One promissory note in
the original principal amount of $2,500,000 together with accrued but unpaid
interest through February 26, 1998 in the amount of $302,640, was replaced by
a Replacement Note in the principal amount of $2,802,640. The second
promissory note in the nominal original principal amount of $1,000,000, of
which $415,000 had been advanced through February 26, 1998, together with
accrued but unpaid interest in the amount of $21,193, was replaced with a
Replacement Note in the principal amount of $436,193. The Replacement Note
in the principal amount of $2,802,640 bears interest at the "Prime Rate" as
announced from time to time by Bank of America, not to exceed 10% per annum,
and the Replacement Note in the principal amount of $436,193 bears interest
at the rate of 8% per annum. Both Replacement Notes provide for payment of
interest monthly commencing March 28, 1998 and provide for payment of the
entire principal balances on March 26, 2000. Both Replacement Notes are
secured by the furniture, fixtures, equipment, trademarks, trade names,
service marks, accounts receivable, all other tangible assets of Pink Dot,
and all additions and substitutions thereto.
The purchase and sale of Registrant's Pink Dot Stock was made pursuant
to an Option and Stock Purchase Agreement dated November 10, 1997, as amended
December 16, 1997, (collectively "Purchase Agreement") negotiated at
arms-length between Registrant and Mr. Toro. The Purchase Agreement gave
Registrant the right to purchase the Toro Pink Dot Stock prior to March 10,
1998 for a purchase price of $7,000,000, and further provided that, in the
event that Registrant elected not to purchase the Toro Pink Dot Stock,
Registrant was obligated to sell and Mr. Toro was obligated to purchase
Registrant's Pink Dot Stock for a purchase price of $6,000,000 to be paid at
Mr. Toro's election in cash or by delivery of the Purchase Note secured by
the Collateral. After evaluating Pink Dot, Registrant determined that it was
more advantageous to sell Registrant's Pink Dot Stock than to purchase Toro's
Pink Dot Stock.
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ITEM 5. OTHER EVENTS
The Franchise Tax Board of the State of California ("FTB") submitted a
settlement agreement to Registrant proposing a settlement of Registrant's
claims for refund in the amounts of $2,959,619 for the income year ended
December 31, 1987 and $412,119 for the income year ended December 31, 1988
and on February 23, 1998, Registrant signed the settlement agreement,
indicating its willingness to accept the proposed settlement.
Under procedures of the FTB for settlement of refund claims, the
settlement is not binding on the state until the office of the Attorney
General of the State of California and the executive board of the FTB each
makes an independent review of the claim for refund and the bases for the
proposed settlement and accepts the proposed settlement agreement. While
Registrant has signed the proposed settlement agreement, no assurance can be
given that the settlement will be accepted by the office of the Attorney
General or the executive board of the FTB.
Under the terms of the proposed settlement agreement, the State of
California would refund 50% of the amounts claimed for refund by Registrant
plus interest on those amounts from the date the taxes were originally paid.
The settlement agreement calculates the amount of taxes and interest through
June 30, 1997 to be refunded as $4,051,407.50. If the settlement is
approved, additional interest will be due calculated from July 1, 1997 to the
date the settlement is accepted by the Attorney General and the executive
board of the FTC, computed at the rate of 9% compounded daily.
In 1992 Registrant established a valuation allowance of 50% of the
refund claims plus accrued interest, adjusting the carrying value of the
claims to $1,954,000 at December 31, 1992 to reflect the uncertainties
attributable to the FTB's objections to the refund claims. In the fourth
quarter of 1994, Registrant received preliminary audit results from the FTB
which proposed to deny the refund claims. Due to uncertainties and the
length of time Registrant recognized it would take to resolve the matter,
Registrant established an additional provision for unresolved tax issues of
$1,954,000 during 1994, effectively fully reserving the refund claims.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements. None
(b) Pro Forma Financial Information. None
(c) Exhibits
Exhibit 2.1 - Option and Stock Purchase Agreement dated November 10,
1997.
Exhibit 2.2 - Amendment to Option and Stock Purchase Agreement dated
December 16, 1997.
Exhibit 2.3 - Secured Promissory Note in the amount of $6,000,000
dated February 26, 1998.
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SIGNATURES
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.
Westminster Capital, Inc.
Date: March 5, 1998 /s/ Keenan Behrle
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Keenan Behrle
Executive Vice President
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Exhibit 2.1
OPTION AND STOCK PURCHASE AGREEMENT
THIS OPTION AND STOCK PURCHASE AGREEMENT ("Agreement") is made and
entered into this 10th day of November, 1997 by and among WESTMINSTER
CAPITAL, INC., A DELAWARE CORPORATION ("WESTMINSTER"), and WILLIAM TORO
("TORO").
A. Toro owns (or will own, prior to the Closing Date) 99.92 of the
issued and outstanding shares (the "Toro Shares") of common stock of Pink
Dot, Inc., a California Corporation (the "Company"), which shares (together
with 66.4 Shares owned by Westminster) represent all of the issued and
outstanding securities of the Company.
B. Westminster desires to obtain an option to purchase the Toro
Shares from Toro, and Toro desires to grant such option to Westminster, upon
the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual promises and covenants
set forth herein, the parties hereby agree as follows:
ARTICLE 1
OPTION TO PURCHASE SHARES
Toro hereby grants to Westminster an option (the "Option") to
purchase the Toro Shares, and any other shares of common stock of the Company
hereafter acquired by Toro prior to the Closing (as defined herein), on the
terms and conditions set forth in this Agreement. Toro covenants and agrees
that he will within five (5) business days after execution of this Agreement,
acquire all shares of common stock of the Company which he does not now own
(other than the shares owned by Westminster). The Option shall commence on
the date of this Agreement and shall continue thereafter for a period of
ninety (90) calendar days (the "Option Period"). The Option Period will end
sooner if Westminster gives notice to Toro that Westminster has elected not
to exercise the Option. The Option may be exercised by a written notice from
Westminster to Toro not later than the last day of the Option Period. If the
Option is not duly exercised within the time specified, time being of the
essence, then the Option shall lapse and shall be of no further force and
effect, and in such event the mandatory purchase provisions of Article 13
hereof shall apply. If the Option is duly exercised, the provisions of
Articles 2 - 12, inclusive, hereof shall apply. The provisions of Articles
14-18, inclusive, hereof apply in either event. The Option granted hereunder
is assignable by Westminster to any third party prior to the end of the
Option Period, but no such assignment shall release Westminster from its
representations and obligations under this Agreement, including, but not
limited to, its obligations under Article 13 if the Option is not exercised
by the assignee.
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ARTICLE 2
PURCHASE PRICE, PAYMENT AND RELATED MATTERS
2.1 PURCHASE PRICE. The purchase price for the Toro Shares shall be
Seven Million Dollars ($7,000,000).
2.2 PAYMENT OF THE PURCHASE PRICE. The purchase price for the Toro
Shares shall be paid by Westminster to Toro in cash (which includes a
cashier's check or a wire transfer) at the Closing.
2.3 ALLOCATION OF PURCHASE PRICE TO COVENANTS NOT TO COMPETE. Of the
total purchase price, Two Hundred Fifty Thousand Dollars ($250,000) shall be
deemed to be the consideration paid for the covenants of Toro contained in
Section 11.1 hereof. Each party hereto agrees that such party shall not file
any tax return (or treat any item or items thereon) nor make any other
statement or submission to the Internal Revenue Service, any comparable state
agency, or any court or other judicial or administrative body, which return,
item, statement or submission is inconsistent in whole or in part with the
foregoing agreed allocation of a portion of the purchase price to said
covenants.
2.4 ESCROW. In order to effectuate the transactions contemplated by
this Agreement, within five (5) business days after execution of this
Agreement, Toro shall deliver the Toro Shares to Commerce Escrow Company,
1545 Wilshire Boulevard, Suite 600, Los Angeles, California 90017 ("Escrow
Holder") together with duly executed blank stock powers therefor, and
Westminster shall deliver all of its shares of common stock of the Company
(the "Westminster Shares") to Escrow Holder, together with duly executed
blank stock powers therefor, and together with a voting proxy which will be
exercisable by Toro in the event of the failure or refusal of Westminster to
deliver to Toro the Westminster Shares in accordance with Article 13 hereof.
The parties shall concurrently execute instructions to Escrow Holder, which
shall provide for either (a) the delivery of the Toro Shares and related
stock powers to Westminster, if Westminster exercises the Option, or (b) the
delivery of the Westminster Shares and related stock powers to Toro (subject
to the concurrent delivery of the Toro Shares and the Westminster Shares to a
neutral pledgeholder if the purchase price is not paid in cash, as more fully
described in Section 13.4 hereof), if the mandatory purchase provisions
hereof come into effect.
ARTICLE 3
CLOSING
3.1 TIME AND PLACE. The consummation of the transactions
contemplated by Articles 1 and 2 hereof (the "Closing") shall take place at
the offices of Richman, Lawrence, Mann, Greene, Chizever & Phillips, 9601
Wilshire Boulevard, Penthouse Suite, Beverly Hills, California 90210, at
10:00 a.m., on a date mutually agreed upon by Westminster and Toro, but which
is not later than five (5) business days after Westminster has given notice
of its exercise of the Option, or at such other time and/or place as
Westminster and Toro mutually agree in writing. The date upon which the
Closing occurs is herein called the "Closing Date."
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3.2 TRANSACTIONS AT THE CLOSING. At the Closing, the following shall
occur:
(a) Westminster shall pay the purchase price to Toro.
(b) The Escrow Holder shall deliver the certificates
representing the Toro Shares to Westminster, together with the related stock
powers.
(c) Toro shall deliver the resignations referred to in Section
7.13 hereof.
(d) Toro shall deliver the Non-Competition Agreements and the
Employee Invention and Secrecy Agreements referred to in Section 7.14 hereof.
(e) Westminster shall deliver to Toro the releases (or
indemnifications, as the case may be) referred to in Section 9.2 hereof.
(f) Westminster and Toro shall execute an agreement terminating
the Shareholder Agreement as more fully described in Section 7.12 hereof.
(g) Toro shall deliver to Westminster any and all other
documents and instruments necessary to effect the consummation of the
transactions contemplated by this Agreement.
(h) Westminster shall deliver to Toro all other documents and
instruments necessary to effect the consummation of the transactions
contemplated by this Agreement.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF
TORO REGARDING THE SHARES
Toro represents and warrants to Westminster that:
4.1 TITLE TO SHARES. Toro has good and marketable title to the Toro
Shares, and upon consummation of the purchase contemplated herein,
Westminster will acquire from Toro good and marketable title to the Toro
Shares free and clear of all covenants, agreements, conditions, restrictions,
preemptive rights, voting trust arrangements, liens, charges, encumbrances,
options and adverse claims or rights whatsoever, excepting only such
restrictions upon transfer, if any, as may be imposed by federal or state
securities laws.
4.2 AUTHORITY TO EXECUTE AND PERFORM AGREEMENTS. Toro has the full
right, power and authority to enter into, execute and deliver this Agreement
and all other agreements and instruments to be executed by Toro in connection
herewith and to transfer, convey and sell to Westminster at the Closing the
Toro Shares.
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4.3 DUE AUTHORIZATION; ENFORCEABILITY. Toro has taken all actions
necessary to authorize him to enter into and perform his obligations under
this Agreement and all other agreements and instruments to be executed by Toro
in connection herewith. This Agreement and all other agreements and
instruments to be executed by Toro in connection herewith are the legal,
valid and binding obligations of Toro, enforceable in accordance with their
respective terms.
4.4 NO VIOLATION OF ORDER OR LAW. Toro is not a party to, subject to
or bound by any law, rule or regulation or any judgment, order, writ,
prohibition, injunction or decree of any court or other governmental body
which would prevent the execution or delivery of this Agreement by Toro or
the performance by him of his obligations hereunder.
4.5 ADVERSE AGREEMENTS; CONSENTS. Except as set forth in Section 4.5
of that certain schedule (the "Disclosure Schedule") attached or to be
attached to this Agreement as Exhibit "A", neither the execution or delivery
by Toro of this Agreement or any other agreement or instrument to be executed
in connection herewith, nor the consummation by Toro of the transactions
contemplated herein or therein require the consent of any person, court
or governmental body.
4.6. NO ADVERSE LITIGATION. Toro is not a party to any pending
litigation which seeks to enjoin or restrict his ability to sell or transfer
the Toro Shares hereunder, nor is any such litigation threatened against
Toro. Furthermore, there is no litigation pending or threatened (as used
throughout this Agreement, the word "threatened" shall be deemed to mean
"threatened verbally, in writing, or by electronic medium") against Toro
which, if decided adversely to Toro, could adversely affect Toro's ability to
consummate the transactions contemplated herein.
4.7 NO BROKER. No broker or finder has acted for Toro in connection
with this Agreement or the transactions contemplated herein, and no broker or
finder is entitled to any brokerage or finder's fees or other commissions in
respect of such transactions based in any way upon agreements, arrangements
or understandings made by or on behalf of Toro.
4.8 VOTING RIGHTS. None of the Toro Shares is subject to any proxy,
voting trust or other arrangement which limits or restricts Toro's voting
rights in the Toro Shares (except for a proxy by Toro in favor of
Westminster).
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF
TORO REGARDING THE COMPANY
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Toro represents and warrants to Westminster that to the best of his
knowledge, after reasonable inquiry, and based on facts and circumstances
existing at the time of execution of this Agreement, and through the Closing:
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5.1 ORGANIZATION; AUTHORITY; DUE AUTHORIZATION.
5.1.1 ORGANIZATION AND GOOD STANDING. The Company is a
corporation duly organized, validly existing and in good standing under the
laws of the State of California; has all requisite power to own, lease and
operate its assets, properties and business and to carry on its business as
now conducted and as proposed to be conducted. The Company does not conduct
business in any state other than California.
5.2 CAPITALIZATION. The authorized capital stock of the Company
consists of 1,000 shares of common stock, of which 166.32 shares are issued
and outstanding. All such outstanding Shares are duly authorized, validly
issued, fully paid and nonassessable and, except for such outstanding Shares,
there are no shares of capital stock or other securities or other equity
interests of the Company outstanding. Except as indicated in Section 5.2 of
the Disclosure Schedule:
(a) There are no outstanding subscriptions, warrants, options,
calls or commitments of any character relating to or entitling any person to
purchase or otherwise acquire any capital stock (including the Toro Shares)
or other securities or other equity interests of the Company (except for
certain "phantom stock" options which were granted to Triune Capital pursuant
to an Agreement dated July 24, 1996 (the "Triune Agreement"));
(b) There are no outstanding obligations or securities
convertible into or exchangeable for shares of any capital stock (including
the Toro Shares) or other securities or other equity interests of the Company
or any commitments of any character relating to or entitling any person to
purchase or otherwise acquire any such obligations or securities;
(c) There are no preemptive or similar rights to subscribe for
or to purchase any capital stock (including the Toro Shares) or other
securities or other equity interests of the Company, except as set forth in
the Shareholders Agreement of Pink Dot, Inc. dated as of December 11, 1995
(the "Shareholders Agreement") and the Triune Agreement;
(d) There are no other commitments of any kind or type for the
issuance of any capital stock (including the Toro Shares) or other securities
or other equity interests of the Company; and
(e) The Company has not entered into any agreement to register
any outstanding capital stock (including the Toro Shares) or other securities
or other equity interests of the Company under the Securities Act of 1933, as
amended.
5.3 SUBSIDIARIES. The Company does not own, directly or indirectly,
any interest or investment (whether equity or debt) in any corporation,
partnership, business, trust or other entity.
5.4 NO VIOLATION. Except as disclosed in Section 5.4 of the
Disclosure Schedule, and subject to obtaining the necessary consents
specified in Section 5.5 hereof, neither the execution or delivery by Toro of
this Agreement or any other agreement or instrument to be executed by him in
connection herewith, now consummation of the
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transactions contemplated herein or therein will: (a) violate, or constitute
a default under, or permit the termination or acceleration of the maturity
of, any indebtedness of the Company; (b) constitute a default under any
permit, contract or other agreement material to the business, operations,
properties or financial condition of the Company; or (c) result in the
creation or imposition of any security interest, lien or other encumbrance
upon any properties or assets of the Company.
5.5 REGULATORY APPROVALS AND OTHER CONSENTS. Section 5.5 of the
Disclosure Schedule sets forth a complete and accurate description of each
consent, approval, authorization or other requirement, whether prescribed by
law, rule, regulation or required pursuant to the terms of any contract or
agreement to which the Company is a party or by which it or its properties is
bound (except for any such consent, approval, authorization or other
requirement contained in a document otherwise included in a Disclosure
Schedule), which must be obtained from any governmental body, court or person
or which must otherwise be satisfied by Toro or the Company and which is
necessary for (a) the execution or delivery by Toro of this Agreement or any
other agreement or instrument to be executed by him in connection herewith,
or (b) the consummation of the transactions contemplated herein or therein.
5.6 LIABILITIES. Section 5.6 of the Disclosure Schedule sets forth
all material debts, obligations and liabilities of the Company ("material"
being defined, for the purpose of this Section 5.6 only, as being a debt,
obligation or liability in excess of One Thousand Dollars ($1,000)) as of the
date reflected thereon. Except (a) as incurred in the ordinary course of
business after the date shown in the Disclosure Schedule, or (b) arising
under any Material Contract (as defined herein), or (c) otherwise disclosed
in the Disclosure Schedule, the Company has no indebtedness, liability,
claim, loss, damage, deficiency, obligation or responsibility, secured or
unsecured, accrued, absolute, contingent or otherwise, including, without
limitation, liabilities on account of taxes, other governmental charges or
lawsuits brought, which in the aggregate are material to the condition
(financial or otherwise), properties, business or assets of the Company.
5.7 TAX MATTERS. Except as indicated in Section 5.7 of the
Disclosure Schedule:
(a) Within the times and in the manner prescribed by law, the
Company has filed all income tax, excise tax, sales tax, use tax, gross
receipts tax, franchise tax, employment-and payroll related tax, property
tax, and all other tax returns which the Company is required to file, has
paid or provided for all taxes shown thereon to be due and owing by it and
has paid or provided for all known deficiencies or other assessments of tax,
interest or penalties owed by it; no taxing authority has asserted any claim
for the assessment of any additional tax liability of any nature with
respect to any periods covered by any such returns;
(b) No extensions of time with respect to any date on which any
tax return was or is to be filed by the Company is in force, and no waiver or
agreement by the Company is in force for the extension of time for the
assessment or payment of any tax; and
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(c) The Company has not waived or extended any applicable
statute of limitations relating to the assessment of federal, state, local or
foreign taxes.
5.8 COMPLIANCE WITH LAWS; GOVERNMENTAL MATTERS.
5.8.1 GENERAL. Except as indicated in Section 5.8.1 of the
Disclosure Schedule, the Company has complied with all federal, state,
county, local and foreign laws, ordinances, regulations and orders applicable
to the Company and no material capital expenditures are required in order to
insure continued compliance therewith. Section 5.8.1 of the Disclosure
Schedule sets forth each franchise, license, permit, order and approval
necessary to the conduct of the business of the Company, together with its
date of expiration and a brief description of its material terms. Each is in
full force and effect, no violations are or have been recorded in respect of
any thereof, and no proceeding is pending or threatened, to revoke, amend or
limit any thereof. Except as indicated in Section 5.8.1 of the Disclosure
Schedule, there are no pending or threatened proceedings by or before any
governmental body which involve new special assessments, assessment
districts, bonds, taxes, condemnation actions, laws, regulations, ordinances
or similar matters which, if instituted, would have a material adverse effect
upon the condition (financial or otherwise), assets, liabilities, or business
of the Company.
5.8.2 ENVIRONMENTAL AND INDUSTRIAL HYGIENE COMPLIANCE.
Neither the Company nor any of its properties is in violation of any federal,
state or local law, ordinance or regulation relating to industrial hygiene or
to the environmental conditions on, under or about such properties including,
but not limited to, soil and groundwater condition. During the time in which
the Company owned or occupied its properties, neither the Company nor any
third party has used, generated, manufactured, stored or disposed of on,
under or about such properties or transported to or from such properties any
flammable explosives, radioactive materials, hazardous wastes, toxic
substances or related materials ("Hazardous Materials"). For the purpose of
this Section 5.8.2, Hazardous Materials shall include but not be limited to
substances defined as "hazardous substances", "hazardous materials", or
"toxic substances" in the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended, 42 U.S.C. Section 9601, et seq.; the
Hazardous Materials Transportation Act, 49 U.S.C. Section 1801, et seq.; the
Resource Conservation and Recovery Act, 42 U.S.C. Section 6901 et seq.; and
those substances defined as "hazardous wastes" in Section 25117 of the
California Health & Safety Code or as "hazardous substances" in Section 25316
of the California Health & Safety Code; and in the regulations adopted and
publications promulgated pursuant to said laws.
5.9 LITIGATION. Section 5.9 of the Disclosure Schedule sets forth
an accurate description of every pending or threatened adverse claim,
dispute, governmental investigation, suit, action (including, without
limitation, nonjudicial real or personal property foreclosure actions),
arbitration, legal, administrative or other proceeding of any nature,
criminal or civil, at law or in equity, by or against or otherwise affecting
the Company, or its business, assets, properties or financial condition. Toro
or the Company have or will, within ten (10) days after delivery of the
Disclosure Schedules (or with two (2) days after modification of Section 5.9
of the Disclosure Schedule) delivered to Westminster copies of all relevant
court papers and other documents relating to the matters referred to in
Section 5.9 of the Disclosure Schedule. Except as indicated in Section 5.9 of
the Disclosure Schedule:
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(a) The Company is not in default with respect to any
order, writ, injunction, judgment, award or decree of any court, arbitration
board, administrative agency or other governmental body or entity by which it
is bound or to which its property is subject;
(b) Neither the Company, nor, any officer, director or
employee of the Company, has been permanently or temporarily enjoined by any
order, judgment or decree of any court or any governmental agency, authority
or body from engaging in or continuing any conduct or practice in connection
with the business, assets or properties of the Company; and
(c) There exists no order, judgment or decree of any
court or other tribunal or other agency enjoining or requiring the Company to
take any action of any kind with respect to its business, assets or
properties.
5.10 PROPERTY OF THE COMPANY.
5.10.1 REAL PROPERTY. The Company owns no real property, nor
any interest in real property, except for the real property leases set forth
in Section 5.10.1 of the Disclosure Schedule (the "Leases"). All of the
Leases are in full force and effect and, as respects the performance of the
Company under the Leases, there is no default or event of default which, with
notice or lapse of time or both, would constitute a default under the Leases,
or any of them, and no consent need be obtained from an landlord or lessor
under any of the Leases in connection with the transactions contemplated
hereby.
5.10.2 TANGIBLE PERSONAL PROPERTY. Section 5.10.2 of the
Disclosure Schedule sets forth (a) a description of each item of tangible
personal property owned by the Company having on the date hereof a
depreciated book value per unit in excess of Five Thousand Dollars ($5,000),
or not owned by the Company but in the possession of or used in the business
of the Company and having rental payments therefor in excess of Two Hundred
Fifty Dollars ($250) per month or Three Thousand Dollars ($3,000) per year;
and (b) a description of the owner of, and any agreement relating to the use
of, each such item of tangible personal property not owned by the Company and
the circumstances under which such property is used. Except as indicated in
Section 5.10.2 of the Disclosure Schedule:
(i) The Company has good and marketable title to
each item of such tangible personal property free and clear of all liens,
leases, encumbrances, claims under bailment and storage agreements, equities,
conditional sales contracts, security interests, charges and restrictions,
except for liens, if any, for personal property taxes not due and liens of
repairmen or bailees or other similar liens incurred in the ordinary course
of business in respect of obligations which are not overdue (and except for
liens held by Westminster);
(ii) No officer, director, shareholder or employee
of the Company, nor any spouse, child or other relative or affiliate thereof,
owns directly or indirectly, in whole or in part, any of the items of
tangible personal property described in the Disclosure Schedule;
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(iii) Each material lease, conditional sale
contract, franchise or license pursuant to which the Company holds or uses
any interest owned or claimed by it in or to each item of such tangible
personal property is valid, binding and in full force and effect, and, as
respects the performance of the Company, there is no default or event of
default or event which, with notice or lapse of time or both, would
constitute a default thereunder and no consent need be obtained from any
person in respect of any such lease, conditional sale contract, franchise or
license in connection with the transactions contemplated hereby; and
(iv) Each item of such tangible personal property
is in normal operating condition and repair, and the operation thereof as
presently conducted is not in violation of any applicable building code,
zoning ordinance or other law or regulation.
(v) All of the tangible personal property
necessary to operate the business of the Company as it is now being conducted
is owned by the Company and is situated at either the Company's retail
locations or the corporate headquarters.
5.10.3 INTANGIBLE PERSONAL PROPERTY. Section 5.10.3 of the
Disclosure Schedule sets forth (a) an accurate identification of each
fictitious business name, trademark, service mark, trade name, copyright and
all registrations and applications for any of the foregoing owned by the
Company or used by the Company in the conduct of its business, (b) a true and
complete schedule of each patent, invention, industrial model, process,
design and all registrations and applications for any of the foregoing owned
by the Company or used by the Company in the conduct of its business, (c) a
true and complete list, without extensive or revealing descriptions, of all
trade secrets (i) being used by the Company in the conduct of the business of
the Company, or (ii) the development of which was paid for by the Company,
whether or not the Company is using same in the conduct of its business (the
"Trade Secrets"), including all processes, know-how and other technical data,
and specifically including, without limitation, all web-site information and
related computer programming information, and includes, as to each such Trade
Secret, the specific location of each writing, computer program or other
tangible medium containing its complete description, specifications, source
codes, charts, procedures, manuals and other descriptive material relating to
it, and (d) a true and complete list of all licenses or similar agreements or
arrangements to which the Company is a party either as licensee or licensor
for each such item of intangible personal property (excluding, however,
computer programs which are commercially available). All of the intangible
personal property described in clauses (a) through (d) above is collectively
referred to as the "Intangible Property". Except as indicated in Section
5.10.3 of the Disclosure Schedule:
(i) The Company is the owner of all right, title
and interest in and to each item of Intangible Property, free and clear of
all liens, security interests, charges, encumbrances, equities and other
adverse claims, and except as set forth in Section 5.10.3 of the Disclosure
Schedule, none of the Intangible Property has been licensed to any other
person nor does any other person have any right to use same under any
agreement similar to a license agreement;
<PAGE>
(ii) No officer, director, shareholder or
employee of the Company, nor any spouse, child or other relative or affiliate
thereof, owns directly or indirectly, in whole or in part, any of the items
of Intangible Property (including, but not limited to Trade Secrets);
(iii) The patents and applications for
patents listed in the Disclosure Schedule are valid and in full force and
effect and are not subject to any taxes, maintenance fees, or actions falling
due within ninety (90) days after the Closing Date;
(iv) There have not been any actions or
other judicial or adversary proceedings involving the Company concerning any
of items of Intangible Property (including, but not limited to Trade
Secrets), and no such action or proceeding is threatened;
(v) The Company has the right and
authority to use each item of Intangible Property (including, but not limited
to, Trade Secrets) in connection with the conduct of its business in the
manner presently conducted, and such use does not conflict with, infringe
upon, or violate any patent or other proprietary rights of any other person,
and the Company has not infringed and/or is now infringing on any proprietary
rights belonging to any other person;
(vi) The Company has the right and
authority (subject to the provisions of any agreements pursuant to which a
license was granted to the Company) to use such proprietary rights as are
necessary to enable it to conduct and to continue to conduct all phases of
its business in the manner presently conducted by it;
(vii) There are no outstanding, nor any
threatened, disputes or disagreements with respect to any licenses or similar
agreements or arrangements described in the Disclosure Schedule;
(viii) Each Trade Secret's documentation is
current, accurate, and sufficient in detail and content to identify and
explain it, and to allow its full and proper use without reliance on the
special knowledge or memory of others (except for computer expertise which is
readily available in the marketplace);
(ix) No Trade Secrets have been used,
divulged, or appropriated for the benefit of any person other than the
Company or to the detriment of the Company.
(x) All of the Intangible Property
including, but not limited to, Trade Secrets, necessary to operate the
business of the Company as it is now being conducted is owned by the Company
and, to the extent that such Intangible Property is manifested in a tangible
form (such as computer disks or software) the manifestation of such
Intangible Property is situated either at the Company's retail locations or
at its corporate headquarters.
<PAGE>
5.11 AGREEMENTS. Section 5.11 of the Disclosure Schedule
sets forth a true and correct list of all contracts and other agreements to
which the Company is a party or by which any of its assets are bound or
subject except (a) any contract which is specifically identified in Sections
5.10.1, 5.10.2, 5.10.3, 5.12, 5.13 or 5.14 of the Disclosure Schedule or
which would be required to be disclosed therein but for specific exemptions
contained in any of such Sections; (b) purchase or sales contracts made in
the ordinary course of business and not involving a commitment for a duration
greater than twelve (12) months or an aggregate amount in excess of Ten
Thousand Dollars ($10,000); and (c) any other contract made in the ordinary
course of business and not providing for a duration in excess of six (6)
months or involving aggregate payments or potential liabilities in excess of
Twenty-Five Thousand Dollars ($25,000).
The contracts and other agreements which are required to be
identified anywhere in the Disclosure Schedule are hereinafter referred to as
the "Material Contracts". Except as indicated in Section 5.11 of the
Disclosure Schedule:
(i) Each Material Contract is valid, binding,
enforceable and in full force and effect and there is no default or event
which, with notice or lapse of time or both, would constitute a default by
any party thereunder;
(ii) The Company has fulfilled all material
obligations required pursuant to each Material Contract to have been
performed by it prior to the date hereof, and the Company has no reason to
believe that the Company will not be able to fulfill, when due, all of its
obligations under each Material Contract which remain to be performed after
the date hereof;
(iii) The Company has not received any notice that
any party to any of the Material Contracts intends to cancel or terminate any
such Material Contract or to exercise or not to exercise any option
thereunder; and
(iv) The Company is not a party to, nor is any of
its property bound by, any contract or other agreement which (i) restricts
the conduct of its business anywhere in the world, or (ii) is materially
adverse to its business and operations.
5.12 LABOR AND EMPLOYMENT MATTERS.
5.12.1 LABOR AGREEMENTS. Section 5.12.1 of the
Disclosure Schedule sets forth a true and current list of each (a) employment
agreement, collective bargaining agreement, or other labor agreement to which
the Company is a party or by which it is bound; (b) pension, profit sharing,
deferred compensation, bonus, stock option, stock purchase, savings,
retainer, consulting, retirement, welfare or incentive plan or contract to
which the Company is a party or by which it is bound; and (c) plan or
agreement under which "fringe benefits" (including, but not limited to,
hospitalization plans or programs, medical insurance, vacation plans or
programs, sick leave plans or programs and related benefits) are afforded any
employees of the Company (each of the foregoing is hereinafter referred to as
a "Labor Agreement"). Section 5.12.1 of the Disclosure Schedule also includes
a true and complete schedule listing the names, total annual compensation,
total accrued vacation and other fringe
<PAGE>
benefits of each person employed by the Company presently receiving
compensation aggregating in excess of Fifteen Thousand Dollars ($15,000) per
year.
Except as set forth in Schedule 5.12 of the Disclosure
Schedule:
(i) Each Labor Agreement is valid, binding,
enforceable and in full force and effect and there is no default or event
which, with notice or lapse of time or both, would constitute a default by
any party thereunder;
(ii) The Company has not received any notice that
any party to any of the Labor Agreements intends to cancel or terminate any
such Labor Agreement or to exercise or not to exercise any option thereunder;
and
(iii) The employment of each employee of the Company
may be terminated immediately by the Company, except as otherwise provided by
statute or decisional authority.
5.12.2 COMPLIANCE WITH LABOR LAWS AND AGREEMENTS. The
Company has complied in all material respects with all applicable laws, rules
and regulations relating to the employment of labor (including its own labor
policies and procedures as established in any written manuals or other
instruments, or by custom and practice), including those related to wages,
hours, collective bargaining and the payment and withholding of taxes and
other sums as required by appropriate governmental authorities and has
withheld and paid to the appropriate governmental authorities or is holding
for payment not yet due to such authorities, all amounts required to be
withheld from such employees of the Company and is not liable for any arrears
of wages, taxes, penalties or other sums for failure to comply with any of
the foregoing. No present or former employee, officer or director of the
Company has any claim against the Company for any matter, including but not
limited to (a) overtime pay for work done; (b) wages or salary for the work
done; (c) vacation time off or pay in lieu of vacation time off; (d) any
violation of any statute, ordinance or regulation relating to minimum wages
or maximum hours, workplace conditions, or any other matter; or (e) injuries
or other damages which are not fully covered by the Company's insurance
policies. Except as disclosed in Section 5.12.2 of the Disclosure Schedule,
there is no:
(i) Unfair labor practice complaint against the
Company pending before the National Labor Relations Board or any state or
local agency;
(ii) Pending labor strike or other material labor
trouble affecting the Company;
(iii) Material labor grievance pending against the
Company;
(iv) Pending representation question respecting the
employees of the Company;
(v) Pending arbitration proceedings arising out of
or under any collective bargaining agreement to which the Company is a party.
<PAGE>
In addition: (A) none of the matters specified in clauses (i) through
(v) above is threatened against the Company; and (B) no union organizing
activities have taken place with respect to the Company.
5.13 PENSION AND BENEFIT PLANS. The Company maintains no pension
or other retirement plans for the benefit of its employees, nor has the
company committed to adopt any such plans.
5.14 INSURANCE. Section 5.14 of the Disclosure Schedule sets
forth a true and correct list of all policies or binders of fire, liability,
workers' compensation, vehicular or other insurance held by or on behalf of
the Company specifying the insurer, the policy number or covering note number
with respect to binders, and describing each pending claim thereunder of more
than Five Thousand Dollars ($5,000). Such policies and binders are in full
force and effect and are in all material respects in accordance with the
customary insurance requirements for the industry of the Company. The Company
is not in default with respect to any provision contained in any such policy
or binder or has failed to give any notice or present any claim under any
such policy or binder in due and timely fashion. There are no outstanding
unpaid claims under any such policy or binder. The Company has not received a
notice of cancellation or non-renewal of any such policy or binder. There has
been no inaccuracy in any application for such policies or binders, any
failure to pay premiums when due, or any similar state of facts which may
form the basis for termination of any such insurance.
5.15 SUPPLIERS AND CUSTOMERS. Section 5.15 of the Disclosure
Schedule, sets forth all suppliers, or customers of the Company which are of
material importance to the Company. The relationship of the Company with its
suppliers and customers are good commercial working relationships. The
Company has not received any notice that any such supplier or customer
intends to cancel or otherwise modify its relationship with the Company or to
decrease materially or limit its services or products to the Company or its
usage of the services or products of the Company, and the acquisition of the
Toro Shares by Westminster will not adversely affect the relationship of the
Company with any such supplier or customer.
5.16 POTENTIAL CONFLICTS OF INTEREST. Except for Westminster and
its principals, no officer, director or shareholder of the Company and no key
employee of the Company (a) owns, directly or indirectly, any interest in
(excepting not more than a one percent share holdings for investment purposes
in securities of publicly held and traded companies), or is an officer,
director, employee or consultant of, any person which is a competitor,
lessor, lessee, customer or supplier of the Company; (b) holds a beneficial
interest in any contract, instrument, obligation, commitment or agreement to
which the Company is a party or under which the Company is obligated or bound
or to which its properties may be subject; (c) owns, directly or indirectly,
in whole or in part, any Trade Secret, or any tangible or intangible property
(including, without limitation any patent, trademark, trade name, service
mark, franchise, patent, invention, permit, license or secret or confidential
information) which the Company is using or the use of which is necessary for
the business and operations of the Company; or (d) has any cause of action or
other claim whatsoever against, the Company, except for claims in the
ordinary course of business, such as for accrued vacation pay, accrued
benefits under employee benefit plans and similar matters and agreements
existing on the date hereof.
<PAGE>
5.17 CERTAIN INDEBTEDNESS AND TRANSACTIONS. Except as indicated
in Section 5.17 of the Disclosure Schedule, and except for loans payable to
Westminster, the Company is not indebted, directly or indirectly, to any
person who is an officer, director or shareholder of the Company nor to any
affiliate of any such person in any amount whatsoever other than for salaries
for services rendered or reimbursable business expenses, and no such officer,
director, shareholder or affiliate is indebted to the Company, except for
advances made to employees of the Company in the ordinary course of business
to meet reimbursable business expenses anticipated to be incurred by such
obligor. Furthermore, except as indicated in Section 5.17 of the Disclosure
Schedule all purchases and sales or other transactions, if any, between the
Company, on the one hand, and any such officer, director, shareholder or
affiliate, on the other hand, since the date that Westminster acquired the
Westminster Shares, have been made on the basis of prevailing market rates
and terms such that from the perspective of the Company, all such
transactions have been made on terms no less favorable than those which would
have been available from unrelated third parties.
5.18 POWERS OF ATTORNEY AND SURETYSHIPS. The Company has no
general or special powers of attorney outstanding (whether as grantor or
grantee thereof) or any obligation or liability (whether actual, accrued,
accruing, contingent or otherwise) as guarantor, surety, co-signer, endorser,
co-maker, indemnitor or otherwise in respect of the obligation of any person,
corporation, partnership, joint venture, association, organization or other
entity.
5.19 CHANGES TO CERTAIN CONTRACTS. Since August 1, 1997 (the
commencement of negotiations between Westminster and Toro with respect to the
acquisition of the Toro Shares), there have been no material modifications or
amendments to any contract or other agreement, to which the Company and any
officer, director, employee or shareholder of the Company is a party, which
would benefit, directly or indirectly any such officer, director, employee or
shareholder.
5.20 CORPORATE BOOKS AND RECORDS. Toro has furnished or made
available to Westminster for its examination the following, each of which is,
and will be maintained as to remain until the Closing, accurate and complete
in all material respects:
(a) Copies of the Articles of Incorporation, bylaws or
other charter documents of the Company in each case as in effect on the date
hereof;
(b) The minute books or the Company containing all
proceedings, consents, actions and meeting of its shareholders and Boards of
Directors;
(c) Copies of all permits, orders and consents with
respect to the Company and its securities issued by any administrative agency
or governmental body regulating the issuance or transfer of such securities
and all applications for such permits, orders and consents;
(d) The transfer books of the Company setting forth all
transfers of its securities;
(e) Copies of all outstanding stock certificates;
<PAGE>
(f) All ledgers, financial records, books of account and
files of the Company; and
(g) All other books and records of the Company.
5.21 BANKING FACILITIES. Section 5.21 of the Disclosure Schedule
contains a true and complete list of:
(a) Each bank, savings and loan or similar financial
institution in which the Company has an account or safety deposit box and the
numbers of the accounts or safety deposit boxes maintained by the Company
thereat; and
(b) The names of all persons authorized to draw on each
such account or to have access to any such safety deposit box facility,
together with a description of the authority (and conditions thereof, if any)
of each such person with respect thereto.
5.22 ABSENCE OF ADVERSE CHANGES. Except as set forth in Section
5.22 of the Disclosure Schedule, there are no material facts or contingencies
which might adversely affect the financial condition, business or operations
of the Company.
5.23 DELIVERY OF DOCUMENTS. Toro has delivered to Westminster
true and current copies of all agreements and documents referred to in the
Disclosure Schedule.
5.24 FULL DISCLOSURE. All documents and other papers delivered by
or on behalf of the Company or Toro in connection with this Agreement and the
transactions contemplated hereby are true, complete and authentic. The
information furnished to Westminster by or on behalf of the Company or Toro
in connection with this Agreement and the transactions contemplated hereby
does not contain any untrue statement of a material fact and does not omit to
state any material fact necessary to make the statements made, in the context
in which made, not false or misleading. There is no fact which the Company or
Toro has not disclosed to Westminster in writing which materially adversely
affects the business or condition (financial or otherwise) of the Company.
5.25 REPRESENTATIONS AND WARRANTIES ON CLOSING. Unless the
Disclosure Statements are modified at or prior to the Closing, the
representations and warranties contained in this Article 5 shall be deemed to
be true and complete on and as of the Closing Date with the same force and
effect as though such representations and warranties had been made on and as
of the Closing Date.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF WESTMINSTER
Westminster represents and warrants to Toro as follows:
<PAGE>
6.1 DUE INCORPORATION. Westminster is a corporation duly organized,
validly existing and in good standing under its jurisdiction of incorporation
and has all requisite power and authority to own, lease and operate its
assets, properties and business and to carry on its business as now conducted.
6.2 AUTHORITY TO EXECUTE AND PERFORM AGREEMENTS. Westminster has all
requisite power, authority and approval required to enter into, execute and
deliver this Agreement and all other agreements and instruments to be
executed by Westminster in connection herewith and to perform fully
Westminster's obligations hereunder and thereunder.
6.3 DUE AUTHORIZATION. Westminster has taken all actions necessary to
authorize it to enter into and perform its obligations under this Agreement
and all other agreements and instruments to be executed by Westminster in
connection herewith and to consummate the transactions contemplated hereby
and thereby. This Agreement is, and as of the Closing Date, such other
agreements and instruments will be, the legal, valid and binding
obligations of Westminster, enforceable in accordance with their respective
terms.
6.4 NO VIOLATION. Neither the execution and delivery of this
Agreement and all other agreements and instruments to be executed by
Westminster in connection herewith nor the consummation of the transactions
contemplated hereby and thereby will (a) violate any provision of the Articles
of Incorporation or bylaws of Westminster; (b) violate, conflict with, or
constitute a default under any contract or other material lease, agreement or
other instrument to which Westminster is a party or by which it or its
property is bound; (c) require the consent of any party to any agreement to
which Westminster is a party by which it or its property is bound; or (d)
violate any statute or law or any judgment, decree, order, regulation or rule
of any court or governmental authority to which Westminster or its property
is subject.
6.5 REGULATORY APPROVALS. All consents, approvals, authorizations and
other requirements prescribed by any law, rule or regulation which must be
obtained or satisfied by Westminster and which are necessary for the
execution and delivery by Westminster of this Agreement and all other
agreements and instruments to be executed by Westminster in connection
herewith and the consummation of the transactions contemplated by this
Agreement will be obtained and satisfied prior to Closing.
6.6 INVESTMENT REPRESENTATION. Westminster is acquiring the Toro
Shares for investment purposes only and not with a view to any distribution
or resale thereof.
6.7 NO BROKER. No broker, finder, agent or similar intermediary has
acted for or on behalf of Westminster in connection with this Agreement or
the transactions contemplated hereby, and no broker, finder, agent or similar
intermediary is entitled to any broker's, finder's, or similar fee or other
commission in connection therewith based on any agreement, arrangement or
understanding with Westminster or any action taken by Westminster.
6.8 REPRESENTATIONS AND WARRANTIES ON CLOSING DATE. Unless set forth
in a writing delivered to Toro within fifteen (15) days after the date of
execution of this Agreement, the representations and warranties contained in
this Article 6 shall be deemed to
<PAGE>
be true and complete on and as of the Closing Date with the same force and
effect as though such representations and warranties had been made on and as
of the Closing Date.
ARTICLE 7
COVENANTS AND AGREEMENTS OF THE
PARTIES EFFECTIVE PRIOR TO CLOSING
The parties hereto covenant and agree as follows:
7.1 CORPORATE EXAMINATIONS AND INVESTIGATIONS. Prior to the Closing
Date, Westminster shall be entitled, through its employees and
representatives at Westminster's expense, to make such investigations of the
properties and such examination of the books, records and financial condition
of the Company as Westminster may request. Any such investigation and
examination shall be conducted at reasonable times and under reasonable
circumstances and Toro shall cooperate fully therein. Westminster shall not
unreasonably interfere with the operations of the Company in conducting any
of its investigations or examinations. In order that Westminster may have the
full opportunity to make such business, accounting and legal review,
examination or investigation as it may wish of the business and affairs of
the Company, Toro shall promptly furnish the representatives of Westminster
during such period with all such information concerning the affairs of the
Company as such representatives may reasonably request, including, but not
limited to, any information or documentation relating to the Disclosure
Schedules, or any modifications thereof, and cause the Company's officers,
employees, consultants, agents, accountants and attorneys to cooperate fully
with such representatives in connection with such review and examination and
to make full disclosure to Westminster of all material facts affecting the
financial condition and business operations of the Company. If, through its
examinations and inspections, Westminster obtains actual knowledge of any
fact or circumstance which contradicts or renders false or misleading anything
in the Disclosure Schedules, then the Disclosure Schedules will be deemed to
have been amended prior to the Closing to include such information and
Westminster shall not have the right to bring any action against Toro after
the Closing alleging breach of the representations and warranties with
respect thereto.
7.2 COOPERATION; CONSENTS. Prior to the Closing Date, Toro shall,
upon request of Westminster, reasonably cooperate with Westminster to the end
that Westminster shall be able to (a) in a timely manner make all necessary
filings with, and conduct negotiations with, all governmental and regulatory
bodies or other persons the consent or approval of which, or a license or
permit from which, is required for the consummation of the transactions
contemplated by this Agreement and (b) provide to Westminster such
information as Westminster may reasonably request in order to enable it to
prepare such filings and to conduct such negotiations. The parties shall also
use their respective best efforts to expedite the review process and to
obtain all such necessary consents, approvals, licenses and permits as
promptly as practicable. To the extent permitted by law, the parties shall
request that each governmental body or other person whose review, consent or
approval is requested treat as confidential all information which is
submitted to it.
<PAGE>
7.3 NEW CONTRACTS. To the extent that the Company proposes to enter
into or to materially modify any Material Contract after the date hereof but
prior to the Closing Date, which will continue in effect after the Closing
Date, copies of said contract or modification shall be furnished to
Westminster prior to such contract or modification becoming legally binding.
If such contractor or modification will continue in effect after the Closing
Date, Westminster shall have a period of five (5) business days after receipt
of all documents to examine such documents and, by notice to the submitting
party, may object to any liability, obligation or interest specified therein,
in which event the submitting party shall exert its best efforts to modify or
otherwise alter or clarify such document or documents or such liabilities,
obligations or interests so that on the Closing Date such objections have
been resolved to Westminster's satisfaction. Any such rejection must be upon
reasonable grounds.
7.4 CONDUCT OF BUSINESS. From the date hereof through the Closing
Date, Toro shall cause the Company to conduct its business in the ordinary
course. Toro shall not take any actions (or omit to take any actions) which
Toro knows, or should have reason to know, will cause any of the
representations or warranties of Toro contained in Section 5 to be untrue or
incorrect in any material respect (or which will result in material
modifications to the Disclosure Schedules), or which will result in the breach
or violation of any of Toro's covenants or agreements hereunder.
Without limiting the generality of the foregoing, Toro agrees that
from the date hereof through the Closing Date, Toro will not cause or allow
the Company to do any of the following:
(a) Change its accounting methods or practices;
(b) Revalue any of its assets;
(c) Declare, set aside or pay any dividend or other distribution
in respect of, or any direct or indirect redemption, repurchase or other
acquisition by the Company of its securities;
(d) Increase the salary or other compensation (including fringe
benefits) of Toro or any other employees (except in the ordinary course of
business consistent with past practices);
(e) Sell, assign or transfer any asset of the Company, except in
the ordinary course of business;
(f) Amend or modify the Articles of Incorporation or Bylaws of the
Company;
(g) Make any loan to any person or entity, or guaranty the
obligation of any person or entity;
(h) Cancel, without full payment, any note, loan or other
obligation owing to the Company;
<PAGE>
(i) Mortgage, pledge or encumber in any way any asset of
the Company;
(j) Waive or release any right or claim of the Company,
except in the ordinary course of business;
(k) Issue or agree to issue any securities of the Company;
(l) Enter into any agreement or take any act which would
reasonably be expected to have a material and adverse effect on the Company
or its financial condition, business or, assets.
7.5 PRESERVATION OF BUSINESS. From the date hereof through the
Closing Date, Toro shall cause the Company to use its best efforts to
preserve its business organization keep available the services of its present
officers, employees, consultants and agents, maintain its present suppliers
and customers and preserve its goodwill.
7.6 INSURANCE. From the date hereof through the Closing Date,
Toro shall cause the Company to maintain in force (including necessary
renewals thereof) the insurance policies listed in the Disclosure Schedule,
except to the extent that they may be replaced with equivalent policies
appropriate to insure its assets, properties and businesses to the same
extent as currently insured at the same rates or at lower rates approved by
Westminster.
7.7 NO DEFAULTS. From the date hereof through the Closing Date,
Toro shall use best efforts to insure that the Company shall not default
under any material term or provision of, or suffer or permit to exist any
condition or event which, with notice or lapse of time or both, would
constitute a default under, any Material Contract or any permit, franchise or
license, or under any of the Leases.
7.8 REPORTING AND COMPLIANCE WITH LAW. From the date hereof
through the Closing Date, Toro shall cause the Company to duly and timely
file all tax returns and reports required to be filed with governmental
authorities and duly observe and conform to all laws, rules, regulations,
ordinances, codes or orders.
7.9 LITIGATION. From the date hereof through the Closing Date,
Toro shall promptly notify Westminster of any lawsuits, claims, proceedings
or investigations which after the date hereof are threatened or commenced
against the Company, or any officer, director, employee, consultant, agent or
shareholder or which could result in the imposition of any claim against any
such person or their respective assets.
7.10 INTERIM FINANCIAL STATEMENTS. From the date hereof through
the Closing Date, within fifteen (15) calendar days following the end of each
calendar month, Toro shall cause the Company to deliver to Westminster copies
of any internal financial statements which the Company prepares or cause its
accountants to prepare, it being understood that Toro does not guarantee the
accuracy of any such financial statements.
<PAGE>
7.11 SHAREHOLDER AGREEMENT. At the Closing, Toro and Westminster
shall execute an agreement which terminates that certain Shareholders
Agreement of Pink Dot, Inc. dates as of December 11, 1995, such termination
to be effective as of the Closing Date.
7.12 RESIGNATIONS. At the Closing, Toro shall resign, in writing,
from all positions held by him as an officer, director, and/or employee of
the Company, effective as of the Closing Date.
7.13 EMPLOYEE CONFIDENTIALITY AGREEMENTS. On or prior to the
Closing, Toro shall execute and deliver to the Company the Non-Competition
Agreements and the Employee Invention and Secrecy Agreements, contemplated in
Section 11.1.9 hereof.
7.14 ARRANGEMENTS WITH EMPLOYEES. From the date hereof until the
Closing, Toro shall permit Westminster to approach and negotiate with any or
all employees of the Company, including, but not limited to managerial
staff, to continue in the employ of the Company pending the Closing and
thereafter, and Toro shall use his best efforts to assist Westminster in such
negotiations. However, Westminster shall use discretion so as not to disrupt
the employees from performing their duties to the Company.
7.15 DISCLOSURE SCHEDULES. The Disclosure Schedules shall be
delivered to Westminster within fifteen (15) days after the date of mutual
execution of this Agreement, and the Disclosure Schedules shall thereupon be
attached to this Agreement as Exhibit "A". If, prior to the Closing, Toro
becomes aware of any events or circumstances which would require a change in
the Disclosure Schedules, Toro shall promptly deliver revised Disclosure
Schedules to Westminster reflecting such changes.
ARTICLE 8
CONDITIONS PRECEDENT TO THE
OBLIGATION OF WESTMINSTER TO CLOSE
----------------------------------
The obligation of Westminster to consummate the transactions
contemplated hereby (it being understood that such obligation shall only
arise if Westminster exercises the option) shall be subject to the
fulfillment, at or before the Closing Date, of all of the conditions set out
below in this Article 8. Westminster may waive any or all of these conditions
in whole or in part without prior notice; provided, however, that subject to
the provisions of Section 8.1 hereof, no such waiver shall constitute a
waiver by Westminster of any right or remedy otherwise available to it if
Toro shall be in default of any of his covenants under this Agreement.
8.1 PERFORMANCE OF COVENANTS. Each of the material covenants,
promises and obligations of Toro to be performed by him on or before the
Closing Date pursuant to the terms of this Agreement shall have been duly
performed on or before the Closing Date, including, but not limited to, the
obligations under Sections 2.4 (deposit of Toro Shares into escrow) and 7.16
(delivery of the Disclosure Schedules). In the event that Westminster alleges
that Toro has failed to perform any such covenants, promises or obligations,
it shall give notice to Toro, and Toro shall have five (5) business days to
cure such default (and the Closing Date
<PAGE>
shall be extended for up to five (5) business days to allow for such cure).
If Westminster becomes aware of any such default and fails to give such
notice and closes the transactions contemplated herein, Westminster will be
deemed to have waived any such default.
ARTICLE 9
CONDITIONS PRECEDENT TO THE
OBLIGATION OF TORO TO CLOSE
---------------------------
The obligation of Toro to consummate the transactions contemplated
hereby shall be subject to the fulfillment, at or before the Closing Date, of
all the conditions set out below in this Article 9. Toro may waive any or all
of these conditions in whole or in part without prior notice; provided,
however, that subject to the provisions of Section 9.1 hereof, no such waiver
shall constitute a waiver by Toro of any right or remedy otherwise available
to him, if Westminster shall be in default of any of its covenants under this
Agreement.
9.1 PERFORMANCE OF COVENANTS. Each of the material covenants,
promises and obligations of Westminster to be performed by it on or before
the Closing Date pursuant to the terms of this Agreement shall have been duly
performed on or before the Closing Date, including, but not limited to, the
obligations under Section 2.4 (deposit of Westminster Shares into escrow). In
the event that Toro alleges that Westminster has failed to perform any such
covenants, promises or obligations, he shall give notice to Westminster, and
Westminster shall have five (5) business days to cure such default (and the
Closing Date shall be extended for up to five (5) business days to allow for
such cure). If Toro fails to give such notice and closes the transactions
contemplated herein, Toro will be deemed to have waived any such default.
9.2 RELEASE OF TORO FROM LIABILITY UNDER PERSONAL GUARANTEES.
Westminster shall use best efforts to obtain unconditional releases of
liability of Toro from all personal guarantees by Toro of equipment leases
and Leases of the Company. Section 9.2 of the Disclosure Schedule identifies
all such equipment leases and Leases which have been personally guaranteed by
Toro and copies of such guarantees will be delivered to Westminster. It is
agreed that Section 9.2 of the Disclosure Schedule may not be modified or
changed after a date which is thirty (30) days after its initial delivery to
Westminster. If Westminster is unable to obtain any such releases, in lieu
thereof the Company shall agree to indemnify Toro from any and all liability
under such personal guarantees from and after the Closing Date. In any event,
if Westminster exercises the Option, then any personal guarantee by Toro of
the Existing Notes (as defined herein) shall terminate as of the Closing
Date.
ARTICLE 10
SURVIVAL OF REPRESENTATIONS
AND WARRANTIES OF THE PARTIES
-----------------------------
10.1 REPRESENTATIONS AND COVENANTS OF TORO. Notwithstanding any
right of Westminster fully to investigate the affairs of the Company and
notwithstanding any knowledge of facts determined or determinable by
Westminster pursuant to such investigation or right of investigation,
Westminster shall have the right to rely fully upon the representations,
<PAGE>
and warranties of Toro contained in this Agreement or in any agreement or
instrument delivered to Westminster by or on behalf of Toro (at Toro's
direction) in connection with the transactions contemplated by this
Agreement. With the sole exception of those covenants which are to be
performed by Toro after the Closing (which shall survive until a claim
thereon is barred by the applicable statute of limitations), and subject to
Section 10.3 hereof, all representations and warranties of Toro contained
herein shall survive the execution and delivery of this Agreement and the
Closing and shall thereafter terminate and expire with respect to any
theretofore unasserted (a) General Claim (as defined below) on the first
(1st) anniversary of the Closing, and (b) any Tax Claim (as defined below)
when the liability to which any such Tax Claim relates is barred by all
applicable statutes of limitations. As used in this Agreement, the following
terms have the following meanings:
(i) "General Claim" means any claim arising out of or
otherwise in respect of any inaccuracy in or any breach of any representation
or warranty of Toro contained in this Agreement that is not a Tax Claim.
(ii) "Tax Claim" means any claim arising out of or otherwise
in respect of any inaccuracy in or any breach of any representation or
warranty of Toro contained in this Agreement related to federal, state, local
or foreign taxes.
10.2 REPRESENTATIONS AND COVENANTS OF WESTMINSTER. With the sole
exception of those covenants which are to be performed by Westminster after
the Closing (which shall survive until a claim thereon is barred by the
applicable statute of limitations) and subject to Section 10.3 hereof, all
representations, warranties, covenants and agreements of Westminster
contained herein shall survive the execution and delivery of this Agreement
and the Closing and shall thereafter terminate and expire with respect to any
theretofore unasserted claim on the first (1st) anniversary of the Closing.
10.3 FAILURE TO EXERCISE OPTION. It is understood and agreed that
Toro's liability under Section 10.1 and Westminster's liability under Section
10.2 shall only arise in the event that Westminster exercises the Option and
consummates the purchase of the Toro Shares. In the event that Westminster
does not exercise the Option for any reason, other than a default by Toro
under this Agreement, then in such event all representations, warranties,
covenants and agreements of Toro and Westminster contained herein shall not
survive the Closing. Moreover, in such event, provided that the Purchase Note
is timely and fully paid, Westminster shall not be entitled to institute any
legal action against Toro with respect to any matter which was set forth (or
deemed to have been included) in the Disclosure Schedules, or which was
otherwise disclosed in writing to Westminster prior to the Closing pursuant
to this Agreement.
<PAGE>
ARTICLE 11
COVENANTS AND AGREEMENTS
OF THE PARTIES AFTER CLOSING
11.1 COVENANTS AGAINST COMPETITION. Toro acknowledges that
Westminster would not purchase the Toro Shares but for the agreements and
covenants of Toro contained in this Section 11.1. Accordingly, Toro
covenants and agrees as follows:
11.1.1 COVENANT NOT TO COMPETE. Toro shall not at any time
within the five (5) year period immediately following the Closing (the
"Restricted Period"), have any ownership interest (of record or beneficial)
in or have any interest as an employee, salesman, consultant, officer or
director in, or otherwise aid or assist in any manner, (a) any firm,
corporation, partnership, proprietorship or other business that engages in
any county of California, in the business of home delivery of groceries,
sundries, liquor, prepared food and videocassettes, so long as the Company,
or any successor in interest of the Company to the business and goodwill of
the Company, remains engaged in such business in such county or continues to
solicit customers or potential customers therein, or (b) any firm,
corporation, partnership, proprietorship or other business that engages in
any other geographic area in the United States, in the above-described
business during the Restricted Period, so long as the Company, or any
successor in interest of the Company to the business and goodwill of the
Company, remains engaged in such business in such geographic area or continues
to solicit customers or potential customers therein; PROVIDED, HOWEVER, that
Toro may own, directly or indirectly, solely as an investment, securities of
any person which are traded on any national securities exchange if Toro (i)
is not a controlling person of, or a member of a group which controls, such
person or (ii) does not, directly or indirectly own one percent or more of
any class of securities of such person.
11.1.2 SOLICITATION OF BUSINESS. During the Restricted
Period, Toro shall not solicit or assist any other person to solicit any
business from any present or past customer of the Company; or request or
advise any present or future customer of the Company to withdraw, curtail or
cancel its business dealings with the Company; or commit any other act or
assist others to commit any other act which might injure the business of the
Company. Provided, however, that the foregoing restriction is not intended to
preclude Toro from using mass mailing or similar advertising methods which
are not Trade Secrets to promote a business venture which does not violate
the covenant not to compete described in Section 11.1.1 hereof.
11.1.3 EMPLOYEES. During the Restricted Period, Toro shall
not directly or indirectly (a) solicit or encourage any employee of the
Company to leave the employ of any such entity or (b) hire any employee who
has left the employment of the Company if such hiring is proposed to occur
within six (6) months after the termination of such employee's employment
with the Company.
11.1.4 CONSULTANTS. During the Restricted Period, Toro shall
not directly or indirectly solicit or encourage any consultant then under
contract with the Company to cease work with such entity.
<PAGE>
11.1.5 CONFIDENTIAL INFORMATION. From and after the Closing,
Toro shall keep secret and retain in strictest confidence, and shall not use
for the benefit of Toro or others, except for the Company, all Trade Secrets
and other Intangible Property, and shall not disclose them to anyone outside
of the Company except upon the Company's express prior written consent.
11.1.6 RIGHTS AND REMEDIES UPON BREACH. If Toro breaches, or
threatens to commit a breach of, any of the provisions of this Section 11.1
(the "Restrictive Covenants"), the Company and/or Westminster shall have the
following rights and remedies, each of which rights and remedies shall be in
addition to, and not in lieu of, any other rights and remedies available to
the Company and/or Westminster under law or in equity:
(a) SPECIFIC PERFORMANCE. The right and remedy to
have the Restrictive Covenants specifically enforced by any court having
equity jurisdiction, all without the need to post a bond or any other
security or to prove any amount of actual damage or that money damages would
not provide an adequate remedy, it being acknowledged and agreed that any
such breach or threatened breach will cause irreparable injury to the Company
and that monetary damages will not provide an adequate remedy to the Company;
and
(b) ACCOUNTING AND INDEMNIFICATION. The right and
remedy to require Toro (i) to account for and pay over to the Company all
compensation, profits, monies, accruals, increments or other benefits derived
or received by Toro or any associated party deriving such benefits as a
result of any such breach of the Restrictive Covenants; and (ii) to indemnify
the Company and Westminster against any other losses, damages (including
special and consequential damages), costs and expenses, including reasonable
attorneys fees and court costs, which may be incurred by them and which
result from or arise out of any such breach or threatened breach of the
Restrictive Covenants.
11.1.7 SEVERABILITY OF COVENANTS. If any court determines
that any of the Restrictive Covenants, or any part thereof, is invalid or
unenforceable, the remainder of the Restrictive Covenants shall not thereby
be affected and shall be given full effect, without regard to the invalid
portions. If any court determines that any of the Restrictive Covenants, or
any part thereof, is unenforceable because of the duration of such provision
or the area covered thereby, such court shall have the power to reduce the
duration or area of such provision and, in its reduced form, such provision
shall then be enforceable and shall be enforced. Toro hereby waives any and
all right to attack the validity of the Restrictive Covenants on the grounds
of the breadth of their geographic scope or the length of their term.
11.1.8 DEFINITIVE NON-COMPETITION AGREEMENT; INVENTION AND
CONFIDENTIALITY AGREEMENT. To give full effect to the provisions of this
Section 11.1, Toro shall, upon request of Westminster, deliver to the Company
and Westminster at the Closing or at any time thereafter a definitive
Non-Competition Agreement provided that a form of such definitive
Non-Competition Agreement is delivered to Toro within ten (10) days after the
date of this Agreement. If Toro objects to the form of such agreement, and
the parties cannot resolve their differences within four (4) days thereafter,
then this Agreement shall be null and void, escrow shall be cancelled (and
the share certificates and other documents deposited with Escrow Holder shall
be forthwith be returned to the party who deposited same), and neither
<PAGE>
party shall have any further rights or obligations hereunder. Furthermore, if
the Company or Westminster requests Toro to do so, Toro shall also deliver to
the Company and Westminster at the Closing or at any time thereafter,
Employee Invention and Confidentiality Agreement, in a form provided by
Westminster, whereby Toro agrees to hold in strictest confidence all
confidential proprietary information and Trade Secrets of the Company which
are in his possession or known to him, and agrees that all inventions (to the
extent that they constitute Trade Secrets) conceived by him while engaged as
an employee or independent contractor of the Company are the exclusive
property of the Company. Notwithstanding the foregoing, however, neither the
failure of Toro to deliver either of such agreements nor the failure of
Westminster to require the same shall otherwise affect the enforceability of
the Restrictive Covenants.
11.2 RELEASE. In consideration of the payments to Toro at the
Closing, effective as of the Closing Date Toro, releases and discharges the
Company and its shareholders, officers, directors, employees, agents and
attorneys, from any and all claims, contentions, demands, causes of action at
law or in equity, debts, liens, agreements, notes, obligations or liabilities
of any nature, character or description whatsoever, whether known or unknown,
which they or either of them may now or hereafter have against any such
persons by reason of any matter, event, thing or state of focus occurring,
arising, done, omitted or suffered to be done arising prior to the Closing
Date.
Toro hereby acknowledges and represents that he has been advised by his
attorney of record, and is familiar with, Section 1542 of the Civil Code of
the State of California, which presently provides as follows:
"A general release does not extend to claims which the
creditor does not know or suspect to exist in his favor at the
time of executing the release, which if known by him must have
materially affected his settlement with the debtor."
Toro hereby waives and relinquishes any and all rights and benefits
under Section 1542 of the Civil Code as now worded and as it may from time to
time hereafter be amended.
It is understood by Toro that the facts in respect of which this release
is given may hereafter turn out to be other than or different from the facts
in that connection known or believed to be true. Toro therefore expressly
assumes the risk of the facts turning out to be so different and agrees that
the foregoing release shall be in all respects effective and not subject to
termination or rescission by any such difference in facts.
ARTICLE 12.
INDEMNIFICATION
12.1 INDEMNIFICATION BY TORO. Subject to the provisions of Section
10.3 hereof, Toro shall indemnify, defend and hold harmless (a) Westminster,
(b) each of Westminster's assigns, from and against any and all claims,
lawsuits, arbitrations, losses, liabilities, damages or deficiencies,
including, without limitation (and any lawsuit instituted asserting such claim
<PAGE>
and any appeal therefrom), all interest, penalties and reasonable attorneys'
fees incurred in connection therewith, whether or not such claim is
ultimately defeated and, subject to Section 12.5 hereof, all amounts paid
incident to any compromise or settlement of any such claim (all of the
foregoing being collectively referred to herein as "Losses"), which may be
incurred or suffered by any such party and which may arise out of or result
from a breach of any representation or warranty, covenant or agreement of
Toro contained in this Agreement or in any document or other writing
delivered pursuant hereto. For the purposes of the foregoing indemnification,
Westminster, as the direct or indirect owner of the Company, shall also be
deemed to have been damaged to the extent of any Losses incurred by the
Company.
12.2 INDEMNIFICATION BY WESTMINSTER. Subject to the provisions of
Section 10.3 hereof, Westminster shall indemnify, defend and hold harmless
Toro and each of Toro's assigns, from and against any and all claims,
lawsuits, arbitrations, losses, liabilities, damages or deficiencies,
including, without limitation (and any lawsuit instituted asserting such
claim and any appeal therefrom), all interest, penalties and reasonable
attorneys' fees incurred in connection therewith, whether or not such claim
is ultimately defeated and, subject to Section 12.5 hereof, all amounts paid
incident to any compromise or settlement of any such claim (all of the
foregoing being collectively referred to herein as "Losses"), which may be
incurred or suffered by any such party and which may arise out of or result
from a breach of any representation or warranty, covenant or agreement of
Westminster contained in this Agreement or in any document or other writing
delivered pursuant hereto. For the purposes of the foregoing indemnification,
Toro, as the direct or indirect owner of the Company, shall be deemed to have
been damaged to the extent of any Losses incurred by the Company.
12.3 COMPUTATION OF LOSSES. For purposes of calculating any
Losses suffered by an indemnified party pursuant to Sections 12.1, 12.2, or
12.3 hereof, the amount of the Losses suffered by the indemnified party shall
be the net amount of damage so suffered after giving effect to any insurance
proceeds recoverable with respect to such matter and to any tax benefits
attributable to such damage or to be derived therefrom in the same year or in
a subsequent taxable period, and each Loss shall bear interest at the rate
specified in Section 14.7 hereof from the date incurred to the date the
indemnification payment with respect thereto is made.
12.4 NOTICE TO INDEMNIFYING PARTY. If any party (the "Indemnified
Party") receives notice of any claim or other commencement of any action or
proceeding with respect to which any other party (or parties) is obligated to
provide indemnification (the "Indemnifying Party") pursuant to Sections 12.1,
12.2 or 12.3, or pursuant to any other specific indemnification covenant
contained in this Agreement, the Indemnified Party shall promptly give
Westminster or Shareholders written notice thereof (as appropriate), which
notice shall specify, if known, the amount or an estimate of the amount of
the liability arising therefrom. Such notice shall be a condition precedent
to any liability of the Indemnifying Party under the provisions for
indemnification contained in this Agreement. The Indemnified Party shall not
settle or compromise any claim by a third party for which it is entitled to
indemnification hereunder, without the prior written consent of the
Indemnifying Party (which shall not be unreasonably withheld) unless suit
shall have been instituted against it and the Indemnifying Party shall not
have taken control of such suit after notification thereof as provided in
Section 12.6 hereof.
<PAGE>
12.5 DEFENSE BY INDEMNIFYING PARTY. In connection with any claim
giving rise to indemnity hereunder resulting from or arising out of any claim
or legal proceeding by a person who is not a party to this Agreement, the
Indemnifying Party at its sole cost and expense may, upon written notice to
the Indemnified Party, assume the defense of any such claim or legal
proceeding if it acknowledges to the Indemnified Party in writing its
obligations to indemnify the Indemnified Party with respect to all elements
of such claim. The Indemnified Party shall be entitled to participate in (but
not control) the defense of any such action, with its counsel and at its own
expense. If the Indemnifying Party does not assume the defense of any such
claim or litigation resulting therefrom, (a) the Indemnified Party may defend
against such claim or litigation, after giving notice of the same to the
Indemnifying Party, on such terms as the Indemnified Party may deem
appropriate, and (b) the Indemnifying Party shall be entitled to participate
in (but not control) the defense of such action, with its counsel and at its
own expense. If the Indemnifying Party thereafter seeks to question the
manner in which the Indemnified Party defended such third-party claim or the
amount or nature of any such settlement, the Indemnifying Party shall have
the burden to prove by a preponderance of the evidence that the Indemnified
Party did not defend or settle such third-party claim in a reasonably prudent
manner.
ARTICLE 13
MANDATORY PURCHASE PROVISIONS
13.1 PURCHASE BY TORO. In the event that for any reason (other than
a default by Toro) Westminster does not exercise the Option as provided
herein, then Toro shall be obligated to purchase all of the Westminster
Shares, on the terms and conditions set forth in this Article.
13.2 PURCHASE PRICE. The purchase price for the Westminster Shares
shall be Six Million Dollars ($6,000,000).
13.3 CLOSING. The consummation of the transactions contemplated by
this Article 13 (the "Alternate Closing") shall take place at the offices of
Richman, Lawrence, Mann, Greene, Chizever & Phillips, 9601 Wilshire
Boulevard, Penthouse Suite, Beverly Hills, California 90210, at 10:00 a.m.,
on a date mutually agreed upon by Westminster and Toro, but which is not
later than five (5) business days after the end of the Option Period, or at
such other time and/or place as Westminster and Toro may mutually agree in
writing. The date upon which the Alternate Closing occurs is herein called
the "Alternate Closing Date".
13.4 TERMS OF PAYMENT. The purchase price shall be paid in cash
(which includes a cashier's check or wire transfer) on the Alternate Closing
Date, but, at the option of Toro, the purchase price may be paid by the
execution of a promissory note in the amount of the purchase price (the
"Purchase Note"). The Purchase Note will not bear interest for thirty (30)
days, and will thereafter bear interest at the rate of nine percent (9%) per
annum, all due and payable ninety (90) days after the Alternate Closing Date.
The Purchase Note will be secured by a pledge of one hundred percent (100%)
of the Shares of the Company (including the Toro Shares and the Westminster
Shares). The Purchase Note and security instruments will be in forms
acceptable to Westminster and Toro, but will provide for a notice and cure
period
<PAGE>
(five (5) days) with respect to any default thereunder and which shall allow
prepayment at any time without penalty.
13.5 EXISTING LOANS. The parties acknowledge that the Company is
presently indebted to Westminster under two (2) promissory notes, one dated
December 21, 1995 in the original principal amount of Two Million Five
Hundred Thousand Dollars ($2,500,000), and another dated July 9, 1997 in the
original principal amount of One Million Dollars ($1,000,000) (collectively,
the "Existing Notes"). The Existing Notes are secured by certain assets of
the Company (the "Existing Collateral"). As of the Alternate Closing Date,
the Existing Notes shall be modified as follows: New notes (the "New Notes")
will be executed by the Company in favor of Westminster in the principal
amounts of the then outstanding principal balances of the Existing Notes,
plus all accrued and unpaid interest as of the Alternate Closing Date. The
New Notes will bear interest at the same rate as the Existing Notes, and will
be payable in monthly installments of interest only, commencing thirty (30)
days after the Alternate Closing Date, with all principal due twenty-five
(25) months after the Alternate Closing Date. The New Notes will contain
cross-default provisions and will also accelerate if Toro defaults in the
payment of the Purchase Note, and the Purchase Note will accelerate if the
Company defaults in the payment of the New Notes, or either of them. The New
Notes will be secured by the Existing Collateral and will be personally
guaranteed by Toro to the same extent as Toro had personally guaranteed the
Existing Notes (the "New Guarantees"). Additionally, Toro shall execute
non-recourse personal guarantees (the "Purchase Guarantees") of the New Notes
(which will not provide for personal liability of any kind beyond the
collateral therefor). The Purchase Guarantees and the New Guarantees shall be
secured by one hundred percent (100%) of the Shares of the Company (including
the Toro Shares and the Westminster Shares). The Purchase Guarantees shall
terminate upon payment in full of the Purchase Note. The New Notes, Purchase
Guarantees, New Guarantees and security instruments will be in forms
acceptable to Westminster and Toro.
13.6 TRANSACTIONS AT THE ALTERNATE CLOSING. At the Alternate
Closing, the following shall occur:
(a) Toro shall pay the purchase price to Westminster (in
cash or by execution and delivery of the Purchase Note).
(b) Westminster shall deliver the certificates
representing the Westminster Shares to Toro, together with the related stock
powers.
(c) If the purchase price is not paid in cash, Toro shall
execute all necessary guarantees and security instruments, and the
certificates representing one hundred percent (100%) of the Shares of the
Company (including the Toro Shares and the Westminster Shares), endorsed in
blank or accompanied by blank executed stock powers, will be delivered to a
neutral pledgeholder selected by Westminster.
(d) If the purchase price is not paid in cash, Toro shall
deliver to Westminster a voting proxy for one hundred percent (100%) of the
Shares of the Company (including the Toro Shares and the Westminster Shares),
permitting Westminster to vote such
<PAGE>
Shares upon the occurrence of any default under the Purchase Note, such proxy
to terminate upon payment in full of the Purchase Note.
(e) Westminster and Toro shall execute an agreement
terminating the Shareholder Agreement as more fully described in Section 7.12
hereof.
(f) Toro shall deliver to Westminster any and all other
documents, and instruments necessary to effect the consummation of the
transactions contemplated by this Agreement.
(g) Westminster shall deliver to Toro all other documents
and instruments necessary to effect the consummation of the transactions
contemplated by this Agreement.
(h) If the purchase price is not paid in cash, then until
the Purchase Note has been paid in full, the covenants set forth in Sections
7.3-7.11, inclusive, shall continue to apply.
(i) The parties will execute all documents necessary to
modify the existing loans, as described in Section 13.5 hereof.
13.7 REPRESENTATIONS AND WARRANTIES OF WESTMINSTER REGARDING THE
SHARES. Westminster will execute a certificate in favor of Toro representing
and warranting that as of the Alternate Closing Date, Westminster has good
and marketable title to the Westminster Shares and upon consummation of the
purchase contemplated herein, Toro will acquire from Westminster good and
marketable title to the Westminster Shares free and clear of all covenants,
agreements, conditions, restrictions, preemptive rights, voting trust
arrangements, liens, charges, encumbrances, options and adverse claims or
rights whatsoever, excepting only such restrictions upon transfer, if any, as
may be imposed by federal or state securities laws.
13.8 RELEASE. In consideration of the payments to Westminster at
the Alternate Closing, effective as of the Alternative Closing Date, subject
to the performance by Toro of all of his obligations under this Agreement,
including, but not limited to; the payment in full of the Purchase Note (if
applicable), and except for the obligations created under this Agreement,
Westminster releases and discharges Toro (except for Toro's obligations under
the Purchase Guarantees and the New Guarantees) and the Company (except for
the obligations under the New Notes) and its shareholders, officers,
directors, employees, agents and attorneys, from any and all claims,
contentions, demands, causes of action at law or in equity, debts, liens,
agreements, notes, obligations or liabilities of any nature, character or
description whatsoever, whether known or unknown, which they or either of
them may now or hereafter have against any such persons by reason of any
matter, event, thing or state of facts occurring, arising, done, omitted or
suffered to be done arising prior to the Alternate Closing Date.
Westminster hereby acknowledges and represents that it has been
advised by its attorney of record, and is familiar with, Section 1542 of the
Civil Code of the State of California, which presently provides as follows:
<PAGE>
"A general release does not extend to claims which the
creditor does not know or suspect to exist in his favor at the
time of executing the release, which if known by him must have
materially affected his settlement with the debtor."
Westminster hereby waives and relinquishes any and all rights and
benefits under Section 1542 of the Civil Code as now worded and as it may
from time to time hereafter be amended.
It is understood by Westminster that the facts in respect of which
this release is given may hereafter turn out to be other than or different
from the facts in that connection known or believed to be true. Westminster
therefore expressly assumes the risk of the facts turning out to be different
and agrees that the foregoing release shall be in all respects effective and
not subject to termination or rescission by any such difference in facts.
ARTICLE 14
REMEDIES
14.1 SPECIFIC PERFORMANCE. The parties acknowledge that the Toro
Shares and the Westminster Shares are unique and cannot be obtained by either
party, except from the others, and for that reason, among others, either
party will be irreparably damaged in the absence of the consummation of this
Agreement. Therefore, in the event of any breach by of this Agreement by
either Toro or Westminster, the other party shall have the right, at its
election, to obtain an order for specific performance of this Agreement,
without the need to post a bond or other security, to prove any actual damage
or to prove that money damages would not provide an adequate remedy.
14.2 ATTORNEYS' FEES. If any party shall bring an action
(including arbitration) against any other party by reason of any alleged
breach of any covenant, provision or condition hereof, or otherwise arising
out of this Agreement, the unsuccessful party shall pay to the prevailing
party all reasonable attorneys' fees and costs actually incurred by the
prevailing party, in addition to any other relief to which he or it may be
entitled.
14.3 INTEREST ON AMOUNTS DUE. Any amount payable by one party to
another under any provision of this Agreement shall bear interest at the
maximum legal rate from the date due until paid.
ARTICLE 15
EXPENSES
15.1 EXPENSES OF SALE. Toro shall bear his own direct and indirect
expenses incurred in connection with the negotiation and preparation of this
Agreement and the consummation and performance of the transactions
contemplated herein. Without limitation, such expenses shall include the
fees and expenses of all attorneys, accountants and other professionals
incurred in connection herewith, acting on behalf of Toro. No such expenses
<PAGE>
shall be charged against or paid by the Company, except that if Toro
purchases the Westminster Shares pursuant to Article 13, the Company may pay
all or any part of the foregoing expenses, in Toro's discretion. Westminster
shall bear its own direct and indirect expenses incurred in connection with
the negotiation and preparation of this Agreement and the consummation and
performance of the transaction contemplated therein.
ARTICLE 16
NOTICES
16.1 NOTICES. All notices required or permitted to be given
pursuant to this Agreement shall be in writing, and shall be delivered either
personally, by overnight delivery service or by U.S. certified or registered
mail, postage prepaid, return-receipt requested and addressed as follows:
Westminster: Westminster Capital, Inc.
9665 Wilshire Boulevard, Suite M-10
Beverly Hills, California 90212
Fax: (310) 271-6274
With a copy to: Bruce R. Greene, Esq.
Richman, Lawrence, Mann, Greene,
Chizever & Phillips
9601 Wilshire Boulevard,
Penthouse Suite
Beverly Hills, California 90210
Fax: (310) 205-5348
Toro: William Toro
c/o Pink Dot, Inc.
22625 Pacific Coast Highway
Malibu, California 90265
Fax: (310) 317-0726
With a copies to: Sheldon J. Singer, Esq.
7910 Woodmont Avenue
Suite 1205
Bethesda, Maryland 20814
Fax: 301/654-6506
Notices may also be given by facsimile transmission to the facsimile
telephone numbers which appear below the parties' respective signatures
hereon, provided that either (A) receipt of the facsimile transmission is
acknowledged in writing by the receiving party, which may also be by a
facsimile transmission, or (B) the transmitting party obtains a written
confirmation from its own facsimile machine showing that the entire
transmission was transmitted to the receiving party, without interruption,
and a copy of the notice is also sent by one of the other above-described
methods of service. The parties may change their addresses or facsimile
telephone numbers for notice by giving notice of such change in accordance
with this section. Notices
<PAGE>
sent by overnight delivery service shall be deemed received on the business
day following the date of deposit with the delivery service. Mailed notices
shall be deemed received upon the earlier of the date of delivery shown on
the return-receipt, or the second business day after the date of mailing.
Notices sent by facsimile transmission shall be deemed served on the date of
transmission, provided that such notices are sent during regular business
hours, otherwise on the next business day.
ARTICLE 17
MISCELLANEOUS
17.1 FURTHER ASSURANCES. Each of the parties shall use its
reasonable and diligent best efforts to proceed promptly with the
transactions contemplated herein, to fulfill the conditions precedent for
such party's benefit or to cause the same to be fulfilled and to execute such
further documents and other papers and perform such further acts as may be
reasonably required or desirable to carry out the provisions hereof and the
transactions contemplated herein.
17.2 MODIFICATIONS, AMENDMENTS AND WAIVERS. This Agreement may
not be amended, modified or altered except by a written instrument executed
by both parties hereto.
17.3 ENTIRE AGREEMENT. This Agreement (including the exhibits
hereto and the Disclosure Schedule) and the agreements, documents and
instruments to be executed and delivered pursuant hereto or referred to
herein are intended to embody the final, complete and exclusive agreement
among the parties with respect to the purchase of the Toro Shares and the
Westminster Shares, are intended to supersede all prior agreements,
understandings and representations written or oral, with respect thereto; and
may not be contradicted by evidence of any such prior or contemporaneous
agreement, understanding or representation, whether written or oral.
17.4 GOVERNING LAW AND VENUE. This Agreement is to be governed by
and construed in accordance with the laws of the State of California
applicable to contracts made and to be performed wholly within such State,
and without regard to the conflicts of laws principles thereof. Any suit
brought hereon shall be brought in the state or federal courts sitting in Los
Angeles County, California, the parties hereto hereby waiving any claim or
defense that such forum is not convenient or proper. Each party hereby agrees
that any such court shall have in personam jurisdiction over it or him and
consents to service of process in any manner prescribed in Article 16 or in
any other manner authorized by law.
17.5 ARBITRATION. Any controversy or claim arising out of or
relating to this Agreement, or breach thereof, shall be settled by binding
arbitration in Los Angeles, California, in accordance with the Commercial
Arbitration Rules of the American Arbitration Association then in effect, and
judgment upon the award rendered by the arbitrator(s) may be entered in any
court of competent jurisdiction. The cost of arbitration shall be borne by
the losing party, or, if there is no losing party, as the arbitrator(s) shall
determine.
<PAGE>
In any arbitration proceedings relative to this Agreement, or breach
thereof, all parties shall have the right to take depositions and to obtain
discovery regarding the subject matter of the arbitration pursuant to
California Code of Civil Procedure Section 1283.05, or any successor statute.
Service of any Petition to confirm or vacate the Arbitration award
and Notice of Hearing thereon may be made by certified or registered mail,
return-receipt requested, or by personal delivery.
The arbitrator'(s) award may be limited to a statement that one party
pay to the other a sum of money. The arbitrator(s) will not be deemed to
exceed their powers (per California Code of Civil Procedure Sections 1286.2
or 1286.6) by committing an error of law or legal reasoning, it being agreed
that the decision of the arbitrator(s) shall be final and unreviewable for
error of law or legal reasoning of any kind.
17.6 BINDING EFFECT. This Agreement and the rights, covenants,
conditions and obligations of the respective parties hereto and any
instrument or agreement executed pursuant hereto shall be binding upon the
parties and their respective successors, assigns and legal representatives.
17.7 COUNTERPARTS. This Agreement may be executed simultaneously in
any number of counterparts, each of which shall be deemed an original but all
of which together shall constitute one and the same instrument. In making
proof of this Agreement it shall not be necessary to produce or account for
more than one counterpart.
17.8 SECTION HEADINGS. The section headings of this Agreement are
for convenience of reference only and shall not be deemed to alter or affect
any provision hereof.
17.9 GENDER; TENSE, ETC. Where the context or construction
requires, all words applied in the plural shall be deemed to have been used
in the singular, and vice versa; the masculine shall include the feminine and
neuter, and vice versa; and the present tense shall include the past and
future tense, and vice versa.
<PAGE>
17.10 SEVERABILITY. In the event that any provision or any part of
any provision of this Agreement shall be void or unenforceable for any reason
whatsoever, then such provision shall be stricken and of no force and effect.
However, unless such stricken provision goes to the essence of the
consideration bargained for by a party, the remaining provisions of this
Agreement shall continue in full force and effect, and to the extent
required, shall be modified to preserve their validity.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
"WESTMINSTER" "TORO"
WESTMINSTER CAPITAL, INC., A /s/ William Toro
DELAWARE CORPORATION ------------------------------
WILLIAM TORO
By /s/ W. Belzberg
-------------------------------
WILLIAM BELZBERG, PRESIDENT
<PAGE>
EXHIBIT "A"
DISCLOSURE STATEMENT
--------------------
<PAGE>
CALIFORNIA ALL-PURPOSE ACKNOWLEDGMENT No. 5907
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
State of CALIFORNIA
-----------------------------
County of LOS ANGELES
----------------------------
On NOVEMBER 10, 1997 before me, BJ. W. MERCADANTE
------------------- --------------------------------------------,
DATE NAME, TITLE OF OFFICER - E.G., "JANE
DOE, NOTARY PUBLIC"
personally appeared *************WILLIAM TORO*************
-----------------------------------------------------------,
NAME(S) OF SIGNER(S)
/XX/ personally known to me - OR - / / proved to me on the basis of satisfactory
evidence to be the person whose name is
subscribed to the within instrument
and acknowledged to me that he/she/they
executed the same in his authorized
capacity, and that by his signature
------------------------------------ on the instrument the person, or the
BJ. W. MERCADANTE entity upon behalf of which the person
COMMISSION # 1095895 acted, executed the instrument.
[SEAL] NOTARY PUBLIC -- CALIFORNIA
LOS ANGELES COUNTY
MY COMM. EXPIRES JUN 10, 2000
------------------------------------
WITNESS my hand and official seal.
/s/ BJ. W. Mercadante
------------------------------------
SIGNATURE OF NOTARY
------------------------------ OPTIONAL -------------------------------------
Though the data below is not required by law, it may prove valuable to
persons relying on the document and could prevent fraudulent reattachment of
this form.
CAPACITY CLAIMED BY SIGNER DESCRIPTION OF ATTACHED DOCUMENT
/XX/ INDIVIDUAL
/ / CORPORATE OFFICER
OPTION AND STOCK PURCHASE AGREEMENT
-------------------------------------
------------------------------ TITLE OR TYPE OF DOCUMENT
TITLE(S)
/ / PARTNER(S) / / LIMITED
/ / GENERAL 35 (plus exhibit)
------------------------------------
/ / ATTORNEY-IN-FACT NUMBER OF PAGES
/ / TRUSTEE(S)
/ / GUARDIAN/CONSERVATOR
/ / OTHER: NOVEMBER 10, 1997
------------------------ -----------------------------------
------------------------------ DATE OF DOCUMENT
------------------------------
SIGNER IS REPRESENTING:
NAME OF PERSON(S) OR ENTITY(IES)
WILLIAM BELZBERG
----------------------------------
----------------------------------- SIGNER(S) OTHER THAN NAMED ABOVE
-----------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
CALIFORNIA ALL-PURPOSE ACKNOWLEDGMENT No. 5907
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
State of CALIFORNIA
-----------------------------
County of LOS ANGELES
----------------------------
On NOVEMBER 10, 1997 before me, BJ. W. MERCADANTE
-------------------- --------------------------------------------,
DATE NAME, TITLE OF OFFICER - E.G., "JANE
DOE, NOTARY PUBLIC"
personally appeared *************WILLIAM BELZBERG*************
-----------------------------------------------------------,
NAME(S) OF SIGNER(S)
/XX/ personally known to me - OR - / / proved to me on the basis of satisfactory
evidence to be the person whose name is
subscribed to the within instrument
and acknowledged to me that he executed
------------------------------------ the same in his authorized capacity,
BJ. W. MERCADANTE and that by his signature on the
COMMISSION # 1095895 instrument the person, or the entity
[SEAL] NOTARY PUBLIC -- CALIFORNIA upon behalf of which the person
LOS ANGELES COUNTY acted, executed the instrument.
MY COMM. EXPIRES JUN 10, 2000
------------------------------------
WITNESS my hand and official seal.
/s/ BJ. W. Mercadante
------------------------------------
SIGNATURE OF NOTARY
------------------------------ OPTIONAL -------------------------------------
Though the data below is not required by law, it may prove valuable to
persons relying on the document and could prevent fraudulent reattachment of
this form.
CAPACITY CLAIMED BY SIGNER DESCRIPTION OF ATTACHED DOCUMENT
/ / INDIVIDUAL
/XX/ CORPORATE OFFICER
OPTION AND STOCK PURCHASE AGREEMENT
PRESIDENT -------------------------------------
------------------------------ TITLE OR TYPE OF DOCUMENT
TITLE(S)
/ / PARTNER(S) / / LIMITED
/ / GENERAL 35 (plus exhibit)
------------------------------------
/ / ATTORNEY-IN-FACT NUMBER OF PAGES
/ / TRUSTEE(S)
/ / GUARDIAN/CONSERVATOR
/ / OTHER: NOVEMBER 10, 1997
------------------------ -----------------------------------
------------------------------ DATE OF DOCUMENT
------------------------------
SIGNER IS REPRESENTING:
NAME OF PERSON(S) OR ENTITY(IES)
WILLIAM TORO
WESTMINSTER CAPITAL, INC., A ----------------------------------
----------------------------------- SIGNER(S) OTHER THAN NAMED ABOVE
DELAWARE CORPORATION
-----------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
AMENDMENT TO OPTION AND STOCK PURCHASE AGREEMENT
------------------------------------------------
THIS AMENDMENT TO OPTION AND STOCK PURCHASE AGREEMENT ("Amendment") is
made and entered into this 16th day of December, 1997, by and between
WESTMINSTER CAPITAL, INC., a Delaware Corporation ("Westminster") and WILLIAM
TORO ("Toro").
RECITALS
--------
A. On November 10, 1997, Westminster and Toro executed a certain Option
and Stock Purchase Agreement (the "Agreement").
B. The parties desire to amend the Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the parties agree as follows:
1. The Option Period shall end at 5:00 p.m. on March 10, 1998.
2. Escrow Instructions shall be executed by the parties concurrently
herewith. The Toro Shares, the Westminster Shares and the voting proxy
described in Section 2.4 of the Agreement shall be delivered to Escrow Holder
by 1:00 p.m. on December 17, 1997.
3. The Disclosure Schedules shall be delivered by Toro to Westminster by
5:00 p.m. on December 17, 1997.
4. The parties agree that the form of the definitive Non-Competition
Agreement described in Section 11.1.8 of the Agreement is attached hereto as
EXHIBIT "A". At the Closing, the date of Closing shall be inserted in the
introductory paragraph of said agreement, and said agreement shall be
executed by Toro and Westminster.
5. No further copies of notices given by Westminster to Toro must be
sent to Sheldon J. Singer, who has withdrawn as Toro's counsel in this
transaction.
6. In all other respects the Agreement shall remain in full force and
effect as originally written.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
date first above written.
WESTMINSTER CAPITAL, INC., a
Delaware Corporation
By /s/ William Belzberg /s/ William Toro
----------------------------- -------------------------------
William Belzberg, President WILLIAM TORO
<PAGE>
SECURED PROMISSORY NOTE
-----------------------
$6,000,000 FEBRUARY 26, 1998
BEVERLY HILLS, CALIFORNIA
FOR VALUE RECEIVED, the undersigned WILLIAM TORO ("Maker"), promises to
pay to the order of WESTMINSTER CAPITAL, INC., A DELAWARE CORPORATION
("Holder"), which term shall include any subsequent holder of this Note), at
9665 Wilshire Boulevard, Suite M-10, Beverly Hills, California 90212 (or at
such other place as Holder shall designate in writing) in lawful money of the
United States of America, the principal sum of Six Million Dollars
($6,000,000), with interest thereon commencing as of March 28, 1998 at the
rate (the "Interest Rate") described below.
1. INTEREST RATE. The Interest Rate shall be nine percent (9%) per
annum. Interest shall be computed at the Interest Rate on the basis of the
actual number of days which the Outstanding Principal Balance (as defined
herein) is outstanding divided by three hundred sixty (360), which shall,
for the purposes of this Note, be considered to be one (1) year.
2. OUTSTANDING PRINCIPAL BALANCE. All references to the "Outstanding
Principal Balance" shall mean the sum of Six Million Dollars ($6,000,000),
less any principal repaid.
3. PAYMENTS. The entire Outstanding Principal Balance, together with
accrued interest thereon shall be due and payable on May 27, 1998 (the
"Maturity Date").
4. APPLICATION OF PAYMENTS. All payments on this Note shall be applied
first to the payment of accrued and unpaid interest, and then to the
reduction of the Outstanding Principal Balance.
5. PREPAYMENT RIGHT. Maker shall have the right to prepay at any time,
in whole or in part, the Outstanding Principal Balance of this Note, without
premium or penalty.
6. MODIFICATIONS. From time to time, without affecting the obligation of
Maker to pay the Outstanding Principal Balance or to observe the covenants of
Maker contained herein, and without giving notice to or obtaining the consent
of Maker, Holder may, at the option of Holder, extend the time for payment of
the Outstanding
<PAGE>
Principal Balance or any part thereof, reduce the payments hereunder, release
any person liable hereunder, accept a renewal or extension of this Note, join
in any extension or subordination agreement, release any security given
herefor, take or release security, or agree in writing with Maker to modify
the Interest Rate or any other provision of this Note.
7. EVENTS OF DEFAULT. Time is of the essence hereof. Upon the occurrence
of any of the following events (the "Events of Default"):
(a) Failure of Maker to pay the Outstanding Principal Balance and
all accrued interest in full on the Maturity Date;
(b) Default by Maker in the performance of any other obligation of
Maker under this Note; or
(c) The occurrence of an event of default under that certain Secured
Promissory Note of even date herewith in the stated principal amount of Two
Million Eight Hundred Two Thousand Six Hundred Forty Dollars ($2,802,640)
executed by Pink Dot in favor of Holder; or
(d) The occurrence of an event of default under that certain Secured
Promissory Note of even date herewith in the stated principal amount of Four
Hundred Thirty-Six Thousand One Hundred Ninety-Three Dollars ($436,193)
executed by Pink Dot in favor of Holder; or
(e) Default by Pink Dot under any provision of the Security Agreement
between Pink Dot and Holder; or
(f) Default by Maker in the performance of any obligation under that
certain Option and Stock Purchase Agreement (the "Option Agreement") dated
November 10, 1997 between Maker and Holder, that certain Pledge Agreement of
even date herewith, that certain Affirmation of Covenants or any other
document delivered by Maker in connection with the Option Agreement; then
If Maker does not fully cure any Event of Default within five (5) days of the
date written notice is given by Holder to Maker (at Maker's address set forth
below his signature), payment of the entire Outstanding Principal Balance and
accrued interest on this Note shall, at the option of Holder, be accelerated
and shall be immediately due and payable without notice or demand. In such
event, Holder shall have the right, in addition to all other rights and
remedies hereunder or under any other document, to foreclose or to require
foreclosure of any or all liens securing the payment hereof.
<PAGE>
8. DEFAULT RATE. In the event that Maker fails to pay the Outstanding
Principal Balance and all accrued interest in full on the Maturity Date, the
amount past due and unpaid shall bear interest at an annual rate equal to the
lesser of (i) the then applicable Interest Rate plus five percent (5%), or
(ii) the greater of ten percent (10%) per annum or the rate established by
the Federal Reserve Bank of San Francisco on advances to member banks under
Section 13 and 13(a) of the Federal Reserve Act in effect on the twenty-fifth
(25th) day of the month immediately preceding the date of this Note plus five
percent (5%) per annum (the "Default Rate"), computed from the date on which
said amount was due and payable until paid. The charging or collecting of
interest at the Default Rate shall not limit any of Holder's other rights or
remedies under this Note.
9. GOVERNING LAW. Maker, and each endorser and cosigner of this Note,
acknowledges and agrees that this Note is made and is intended to be paid and
performed in the State of California and the provisions hereof will be
construed in accordance with the laws of the State of California and, to the
extent that federal law may preempt the applicability of state laws, federal
law. Maker, and each endorser and cosigner of this Note further agree that
upon the occurrence of a default, this Note may be enforced in any court of
competent jurisdiction in the State of California, and they do hereby submit
to the jurisdiction of such courts regardless of their residence.
10. REMEDIES CUMULATIVE; WAIVER. The remedies of Holder as provided herein
shall be cumulative and concurrent, and may be pursued singularly,
successively or together, in the sole discretion of Holder, and may be
exercised as often as occasion therefor shall arise. No act of omission or
commission of Holder, including specifically any failure to exercise any
right, remedy or recourse, shall be deemed to be a waiver or release of the
same; such waiver or release to be affected only through a written document
executed by Holder and then only to the extent specifically recited therein.
Without limiting the generality of the preceding sentence, acceptance by
Holder of any payment with knowledge of the occurrence of a default by Maker
shall not be deemed a waiver of such default, and acceptance by Holder of any
payment in an amount less than the amount then due hereunder shall be an
acceptance on account only and shall not in any way affect the existence of a
default hereunder. A waiver or release with reference to any one event shall
not be construed as continuing, as a bar to, or as a waiver or release of,
any subsequent right, remedy or recourse as to a subsequent event.
11. NO USURY INTENDED. All agreements between Maker and Holder are
expressly limited so that in no contingency or event whatsoever, whether by
reason of: error of fact or law; payment, prepayment or advancement of the
proceeds hereof; acceleration of maturity of the Outstanding Principal
Balance, or otherwise, shall the amount paid or agreed to be paid to Holder
hereof for the use, forbearance or retention of the money to be advanced
hereunder, including any charges collected or made in
<PAGE>
connection with the indebtedness evidenced by this Note which may be treated
as interest under applicable law, if any, exceed the maximum legal limit (if
any such limit is applicable) under United States federal law or state law (to
the extent not preempted by federal law, if any), now or hereafter governing
the interest payable in connection with such agreements. If, from any
circumstances whatsoever, fulfillment of any provision hereof at the time
performance of such provision shall be due shall involve transcending the
limit of validity (if any) prescribed by law which a court of competent
jurisdiction may deem applicable hereto, then IPSO FACTO, the obligation to
be fulfilled shall be reduced to the limit of such validity, and if from any
circumstances, Holder shall ever receive as interest an amount which would
exceed the maximum legal limit (if any such limit is applicable), such amount
which would be excessive interest shall be applied to the reduction of the
Outstanding Principal Balance due hereunder and not to the payment of
interest or, if necessary, rebated to Maker. This provision shall control every
other provision of all agreements between Maker and Holder.
12. PURPOSE OF LOAN. Maker certifies that the loan evidenced by this
Note is obtained for business or commercial purposes and that the proceeds
thereof shall not be used for personal, family, household or agricultural
purposes.
13. MISCELLANEOUS PROVISIONS.
(a) Maker, and each endorser and cosigner of this Note expressly
grants to Holder the right to release or to agree not to sue any other
person, or to suspend the right to enforce this Note against such other person
or to otherwise discharge such person; and Maker, and each endorser and
cosigner agrees that the exercise of such rights by Holder will have no
effect on the liability of any other person, primarily or secondarily liable
hereunder. Maker, and each endorser and cosigner of this Note waives, to the
fullest extent permitted by law, demand for payment, presentment for payment,
protest, notice of protest, notice of dishonor, notice of nonpayment, notice
of acceleration of maturity, diligence in taking any action to collect sums
owing hereunder, any duty or obligation of Holder to effect, protect,
perfect, retain or enforce any security for the payment of this Note or to
proceed against any collateral before otherwise enforcing this Note, and the
right to plead as a defense to the payment hereof any statute of limitations.
(b) This Note shall be paid when due without deduction or setoff
of any kind or nature whatsoever.
(c) Maker agrees to reimburse Holder for all costs, including,
without limitation, reasonable attorneys' fees, incurred to collect this Note
if this Note is not paid when due, including, but not limited to, attorneys'
fees incurred in
<PAGE>
connection with any bankruptcy proceedings instituted by or against Maker
(including relief from stay litigation).
(d) If any provision hereof is for any reason and to any extent,
invalid or unenforceable, then neither the remainder of the document in
which such provision is contained, nor the application of the provision to
other person, entities or circumstances shall be affected thereby, but
instead shall be enforceable to the maximum extent permitted by law.
(e) This Note shall be a joint and several obligation of Maker,
and of all endorsers and cosigners hereof and shall be binding upon them and
their respective heirs, personal representatives, successors and assigns.
(f) This Note may not be modified or amended orally, but only by
a modification or amendment in writing signed by Holder and Maker.
(g) When the context and construction so require, all words used
in the singular herein shall be deemed to have been used in the plural and
the masculine shall include the feminine and neuter and vice versa. The word
"person" as used herein shall include any individual, company, firm,
association, partnership, corporation, trust or other legal entity of any
kind whatsoever.
(h) The headings of the paragraphs and sections of this Note are
for convenience of reference only, are not to be considered a part hereof and
shall not limit to otherwise affect any of the terms hereof.
(i) In the event that at any time any payment received by Holder
hereunder shall be deemed by final order of a court of competent jurisdiction
to have been a voidable preference or fraudulent conveyance under the
bankruptcy or insolvency laws of the United States, or shall otherwise be
deemed to be due to any party other than Holder, then, in any such event, the
obligation to make such payment shall survive any cancellation of this Note
and/or return thereof to Maker and shall not be discharged or satisfied by any
prior payment thereof and/or cancellation of this Note, but shall remain a
valid and binding obligation enforceable in accordance with the terms and
provisions hereof, and the amount of such payment shall bear interest at the
Default Rate from the date of such final order until repaid hereunder.
14. SECURITY. This Note is secured by a pledge of certain personal
property of Maker as described more fully in that certain Pledge Agreement
executed by Maker and Holder concurrently herewith.
<PAGE>
IN WITNESS WHEREOF Maker has executed this Promissory Note as of the
day and year first above written.
"MAKER"
/s/ William Toro
-------------------------------
WILLIAM TORO
ADDRESS:
22625 PACIFIC COAST HIGHWAY
MALIBU, CALIFORNIA 90265
FAX NO.: (310) 317-0726
