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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
____________________________________________________________________________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) October 31, 1997
CEC PROPERTIES, INC.
____________________________________________________________________________
[Exact Name of Registrant as specified in its Charter]
Delaware 0-188 13-1919940
- -------- ----- ----------
[state or other [Commission File No.] [IRS Employer
jurisdiction of Identification No.]
Incorporation]
1500 W. Balboa, Suite 201, Newport Beach, California 92663
____________________________________________________________________________
[Address of principal executive offices; Zip Code]
Registrant's Telephone No., including Area Code: (714) 673-2282
____________________________________________________________________________
Former address, if changed since last report
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Item 2. Acquisition or Disposition of Assets.
- -----------------------------------------------
On October 31, 1997, Registrant acquired all of the outstanding shares of
Classic Golf Management, Inc., a Georgia corporation, privately owned by
Milton Abell, an unrelated party. The acquired entity manages three golf
courses in Georgia. Registrant paid $103,250 cash down and delivered 29,500
of its shares of common stock. Additionally, subject to certain conditions,
Registrant agreed to pay an additional $14,750 and deliver an additional
14,750 shares of its common stock on the 13th and 24th anniversary months.
The number of shares and cash to be delivered is subject to reduction
depending on future revenues. Similarly, Registrant has agreed to provide
additional cash to make up any differential between the public price of
Registrant's common stock and $3.00 per share at the 24th anniversary month.
Additionally, on October 31, 1997, Registrant acquired three
proprietorships owned by Milton Abell known as Classic Golf Shops (operator
of golf apparel and accessory shops located adjacent to the Classic managed
golf courses) Golf 101 (golf teaching facilities and programs) and Hydroturf
(a golf greens maintenance entity) in exchange for $31,750 cash and 20,500
shares of Registrant's common stock delivered at the closing with $10,250
cash and 10,250 shares of common stock to be delivered on the 13th and 25th
anniversary months. The same contingency and guaranty applies to the future
delivery in this transaction as applied in the Classic transaction
referenced hereinabove.
Funds necessary for the transactions came from Registrant's general
working capital except that $59,000 of such funds was loaned to Registrant
by its president, Paul Balalis, repayable in one year plus 10% interest.
Additionally, Milton Abell, class "A" golf professional, teaching pro and
respected agronomist, entered into a five year employment contract pursuant
to which he agreed to continue to manage the acquired entities.
Paul Balalis, president of Registrant personally guaranteed the
hereinabove referenced future cash payments to Mr. Abell.
Item 7. Financial Statements and Exhibits.
- --------------------------------------------
(a)(b) Financial statements of the businesses the acquired will be
filed within 60 days after the date of this Report.
(c) Exhibits
(2) Stock Purchase Agreement as to acquisition of Classic Golf
Management, Inc., marked Exhibit 2A.
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Asset Purchase Agreement as to certain related assets, marked Exhibit 2B.
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 heretunto duly authorized.
CEC PROPERTIES, INC.
Dated: November 10, 1997 By:/s/ Paul Balalis
------------------------
Paul Balalis, President
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EXHIBIT 2A
STOCK PURCHASE AGREEMENT
The Stock Purchase Agreement (the "Agreement") dated as of ___________,
1997, among, MILTON ABELL, a resident of the state of Georgia ("ABELL") and
CEC PROPERTIES, INC., a Delaware corporation ("PURCHASER"). Certain
capitalized terms used in this Agreement are defined in Exhibit A.
RECITALS
A. ABELL is the owner of all of the outstanding capital stock (the
"Shares") of Classic Golf Management, Inc. a Georgia corporation
("CLASSIC").
B. CLASSIC owns and operates a golf course management business known as
Classic Golf Management.
C. PURCHASER wishes to purchase the Shares from the ABELL, and ABELL
wishes to sell the Shares to PURCHASER, on all the terms and conditions set
forth in this Agreement.
The PURCHASER and ABELL intending to be legally bound, hereby agree as
follows:
AGREEMENT
Article 2.
2.1 SALE AND PURCHASE OF SHARES. At the closing, ABELL shall sell,
assign, transfer and deliver the Shares to PURCHASER, and PURCHASER shall
purchase the Shares from ABELL, on the terms and subject to the conditions
set forth in this Agreement.
2.2 PURCHASE PRICE. The aggregate purchase price payable by PURCHASER
for the Shares (the "Purchase Price") shall be One Hundred Thirty-Two
Thousand Seven Hundred Fifty Dollars ($132,750) cash and Fifty-Nine Thousand
(59,000) shares of PURCHASER's common stock. The Purchase Price shall be
paid by the PURCHASER to ABELL as follows:
(a) PURCHASER will pay One Hundred Three Thousand Two Hundred Fifty
Dollars ($103,250) in cash and deliver Twenty-Nine Thousand Five Hundred
(29,500) shares of CEC common stock at the Closing Date.
(b) PURCHASER will pay Fourteen Thousand Seven Hundred and Fifty
Dollars ($14,750) and deliver an additional Fourteen Thousand Seven Hundred
and Fifty Thousand (14,750) shares of its common stock on the thirteenth
(13th) and twenty-four (24) anniversary months of the Closing Date, subject
to certain conditions as hereinafter set forth.
2.3 CLOSING.
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(a) The closing of the sale of the Shares to the PURCHASER (the
"Closing") shall take place at the offices of the Talley & Darden, P.C., 271
Roswell Street, Marietta, Georgia 30061 at 10:00 a.m. Local Time on
_____________, 1997 or at such other place or time as the PURCHASER and
ABELL may jointly designate. For purposes of this Agreement, "Closing Date"
shall mean the time and date as of which the Closing actually takes place.
(b) At the Closing:
(i) ABELL shall deliver to the PURCHASER the stock certificates
representing the Shares, duly endorsed (or accompanied by duly executed
stock powers);
(ii) PURCHASER shall deliver to ABELL the Purchase Price for the
Shares;
(iii) CLASSIC and ABELL shall have entered into a five year
employment agreement in the form of Exhibit 1.3 attached; and
(iv) PURCHASER shall have delivered the personal guaranty of
Paul Balalis ("PB") in the form attached hereto as Schedule 1.4.
2.4 GUARANTY.
(a) At the twenty-four month anniversary date of the Closing Date if
the average bid and asked price of the CEC common stock as traded in the
public market in which such stock trades shall for ten (10) days preceding
the twenty-four (24th) month anniversary date of the Closing Date (the
"Average Price") be less than three dollars ($3.00) per share then CEC shall
within forty-five (45) days pay to ABELL the difference between the Average
Price and $3.00 per share in cash.
(b) Notwithstanding the foregoing, in the event the annual "Net
Revenues" received by CLASSIC in each of the two (2) fiscal years subsequent
to the Closing Date commencing with the fiscal year ending October 31, 1998
shall not at least equal Two Hundred Forty-Four Thousand Dollars ($244,000)
then and in that event the shares of CEC Common Stock delivered or to be
delivered to ABELL hereunder shall be reduced by a percentage determined as
follows:
Projected revenues: $244,000
59% of ABELL's compensation: 47,200
Payment pursuant to Sec.1.2(b): 14,750
---------
$61,950
=========
Assume as an example that annual revenues are $200,000 then the following
calculations shall take place:
Projected revenues: $244,000
Actual annual revenues: (200,000)
---------
44,000
200,000 / 244,000 = .82
---------
61,950
x .82
---------
50,799
61,950 - 50,799 / $3.00
= 3,717 shares
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Accordingly, the number of shares delivered or to be delivered would be
reduced by 3,717. "Net Revenues" means net revenues received by CLASSIC
after all expenses of CLASSIC, including taxes and payments pursuant to
Section 1.2(b) hereinabove and a pro rated portion (59%) of compensation
paid to ABELL pursuant to his employment agreement with CLASSIC.
Notwithstanding the foregoing, no deductions against revenues shall be made
for any expenses incurred by CLASSIC in connection with its obtaining of
additional business opportunities so long as such expenses are approved by
the Boards of Directors of CLASSIC and PURCHASER.
(c) PB shall provide his personal guaranty of the cash payments due
pursuant to this Agreement in the form of Schedule 1.4 attached.
Article 3.
REPRESENTATIONS AND WARRANTIES OF ABELL
ABELL hereby represents and warrants to PURCHASER as follows:
3.1 AUTHORITY. ABELL has full right, power and authority to enter into
and perform this Agreement and this Agreement is the legal, valid and
binding agreement of ABELL, enforceable in accordance with its terms.
Neither the execution and delivery of this Agreement, consummation of the
transactions contemplated hereby nor compliance with any of the provisions
hereof will (i) conflict with or result in a breach or default under any of
the terms, conditions or provisions of any note, bond, mortgage, indenture,
agreement or other instrument or obligation to which ABELL or CLASSIC is a
party or by which either of them or any of their property or assets may be
bound, or (ii) violate any order, writ, injunction, decree, statute, rule or
regulation applicable to any of their respective property or assets.
3.2 GOOD TITLE. CLASSIC has good, valid and marketable title to its
assets, free and clear of all liens, security interests, pledges,
agreements, claims, charges, options or encumbrances of any nature
whatsoever, except as set forth in Schedule 2.2 attached hereto.
3.3 ORGANIZATION. Good Standing. Qualification and Power of the
CLASSIC. CLASSIC is a corporation duly incorporated, validly existing and
in good standing under the laws of the State of Georgia, has all requisite
corporate power and authority to own, lease and operate its properties, to
carry on its business as now being conducted and to make and carry out this
Agreement, and is duly qualified and in good standing to do business in all
of the jurisdictions in which the failure to be so qualified would have a
Material Adverse Effect.
3.4 ARTICLES OF INCORPORATION AND BYLAWS: RECORD.
(a) CLASSIC has delivered to CEC accurate and complete copies of:
(i) CLASSIC's articles of incorporation and bylaws, including
all amendments thereto;
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(ii) the stock records of CLASSIC; and
(iii) the minutes and other records of the meetings and other
proceedings (including any actions taken by written consent or otherwise
without a meeting) of the stockholders of CLASSIC, the board of directors of
CLASSIC and all committees of the board of directors of CLASSIC.
There have been no meetings or other proceedings of the stockholders of
CLASSIC, the board of directors of CLASSIC or any committee of the board of
directors of CLASSIC that are not fully reflected in such minutes or other
records.
(b) There has not been any violation of any of the provisions of
CLASSIC's articles of incorporation or bylaws or of any resolution adopted
by CLASSIC's stockholders, CLASSIC's board of directors or any committee of
CLASSIC's board of directors; and no event has occurred, and no condition or
circumstance exists, that might (with or without notice or lapse of time)
constitute or result directly or indirectly in such a violation.
(c) The books of account, stock records, minute books and other
records of CLASSIC are accurate, up-to-date and complete, and have been
maintained in accordance with sound and prudent business practices. All of
the records of CLASSIC are in the actual possession and direct control of
CLASSIC. CLASSIC has in place an adequate and appropriate system of
internal controls which is at least as comprehensive and effective as the
systems of internal controls customarily maintained by Comparable Entities.
(d) CLASSIC has never conducted any business under or otherwise used,
for any purpose or in any jurisdiction, any fictitious name, assumed name,
trade name or other name, other than the name "Hydroturf", "Golf 101" and
"Classic Golf Management, Inc."
(e) CLASSIC is not required to be qualified, authorized, registered
or licensed to do business as a foreign corporation in any jurisdiction
other than the jurisdictions identified in Schedule 2.4. CLASSIC is in good
standing as a foreign corporation in each of the jurisdictions identified in
Schedule 2.4.
(f) Schedule 2.4 accurately sets forth (i) the names of the members
of CLASSIC's board of directors, (ii) the names of the members of each
committee of CLASSIC's board of directors, and (iii) the names and titles of
CLASSIC's officers.
(g) Neither CLASSIC nor any of its stockholders has ever approved, or
commenced any proceeding or made any election contemplating, the dissolution
or liquidation of CLASSIC or the winding up or cessation of CLASSIC's
business or affairs.
3.5 INVESTMENTS. Except as set forth in Schedule 2.5 attached, CLASSIC
does not own, directly or indirectly, any capital stock or other equity
interest, or maintain an investment, in any corporation, joint venture,
partnership or other entity other than CLASSIC.
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3.6 CAPITAL STOCK. The authorized, issued and outstanding capital
stock of CLASSIC as of the date hereof and as of the Closing Date is set
forth in Schedule 2.6 attached. Also set forth in Schedule 2.6 attached are
(a) the record and beneficial owners of the issued and outstanding capital
stock and equivalent equity interests of CLASSIC as of the date hereof. The
issued and outstanding capital stock or equivalent equity interests of
CLASSIC (w) are validly issued and outstanding, (x) was issued in compliance
with all applicable state and federal securities laws, (y) except as set
forth in Schedule 2.6, are owned by the record and beneficial owners thereof
free and clear of all Liens or adverse claims of any nature whatsoever, and
(z) with respect to the capital stock, is fully-paid and non-assessable.
Except as otherwise set forth in Schedule 2.6 (i) no Person has any
preemptive right, right of first refusal or similar right to purchase or
subscribe for any shares of capital stock or other equity interest of
CLASSIC, (ii) there are no existing contracts, options, warrants, calls or
similar commitments of any kind granted or issued by CLASSIC relating to the
issuance of such capital stock or other equity interest, and (iii)there are
no agreements restricting or otherwise affecting voting, transfer or other
rights of such capital stock or other equity interests to which CLASSIC is a
party. Except as described in Schedule 2.6, CLASSIC is not subject to any
obligation to repurchase or acquire or otherwise retire any of its capital
stock or any equity interest of any third party.
3.7 AUTHORITY. The execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby and
thereby have been duly and validly authorized by all necessary action on the
part of ABELL, and this Agreement is a valid and binding obligation of
ABELL, enforceable against ABELL in accordance with its terms, except as
such enforcement may be subject to (a) bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or other similar laws now
or hereafter in effect relating to creditors rights generally and (b)
general principles of equity (regardless of whether such enforcement is
considered in a proceeding at law or in equity). Except as set forth in
Schedule 2.7 attached, neither the execution, delivery and performance of
this Agreement, nor the consummation of the transactions contemplated
hereby, nor compliance with any provision hereof or thereof, will (w)
conflict with or result in a breach of any provision of CLASSIC's Articles
of Incorporation or By-Laws, (x) cause a breach or default (or give rise to
any right of termination, cancellation or acceleration) under, or conflict
with any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, license, permit, franchise, lease, sublease or other instrument,
contract or agreement binding upon CLASSIC which would have a Material
Adverse Effect; (y) violate any provision of law, statute, rule or
regulation or order, writ, judgment, injunction or decree applicable to
CLASSIC which would have a Material Adverse Effect or require notice to or
registration with, or the consent or approval of, any governmental body or
other regulatory authority; or (z) result in the creation or imposition of
(or the obligation to create or impose) any Lien on any assets of CLASSIC.
3.8 FINANCIAL STATEMENTS.
(a) CLASSIC Financial Statements and the CLASSIC Balance Sheet as of
the year ended December 31, 1996, and the interim period ended July,
31,1997, (i) were prepared in accordance with the books of account and other
financial records of CLASSIC, (ii) present fairly the financial condition
and results of the operations of CLASSIC as of the dates thereof or for the
periods covered thereby, (iii) have been prepared on a basis consistent with
past practices of CLASSIC and (iv) include all adjustments that are
necessary for a fair presentation of the financial condition of CLASSIC and
the results of operations of CLASSIC as of the date thereof or for the
periods covered thereby, subject to, with respect to the CLASSIC Balance
Sheet, year end adjustments which are not material in nature. The CLASSIC
Financial Statements have been prepared in accordance with generally
accepted accounting principles.
(b) The books of account and other financial records of CLASSIC (i)
reflect all items of income and expense and all assets and liabilities
required to be reflected therein applied on a basis consistent with the past
practices of CLASSIC, (ii) are in all material respects complete and
correct, and do not contain or reflect any material inaccuracies or
discrepancies and (iii) have been maintained in accordance with good
business and accounting practices.
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(c) The financial statements show that for the last fiscal year
CLASSIC had Net Income from operations from City Club Marietta of $80,000,
Sugar Creek Golf & Tennis Club of $100,000 and Heritage Hills Golf Center of
$24,000.
3.9 ABSENCE OF UNDISCLOSED LIABILITIES. Except for matters disclosed
in this Agreement and except as set forth in Schedule 2.9 attached as of the
date of the CLASSIC Balance Sheet, CLASSIC did not have any liabilities of
any nature (matured or unmatured, fixed or contingent) which were not
adequately provided for, reflected or disclosed in the CLASSIC Financial
Statements (whether or not required to be provided for, reflected or
disclosed in accordance with generally accepted accounting principles
consistently applied on the CLASSIC Balance Sheet or in the notes thereto).
3.10 ABSENCE OF CHANGES. Except as set forth in Schedule 2.10 attached
or expressly contemplated or permitted by this Agreement, since the CLASSIC
Balance Sheet dated July 31, 1997, CLASSIC has conducted its business and
operations in the Ordinary Course consistent with past practice. In
amplification and not in limitation of the foregoing, except as disclosed in
Schedule 2.10 since July 31, 1997, there has not been any change in the
financial condition, assets, liabilities, results of operations, business or
prospects of CLASSIC which would have a Material Adverse Effect, including
but not limited to:
(a) Any contractual commitment to any third party for aggregate
payments in excess of $5,000 per annum or for property or services having a
value in excess of $5,000 per annum, other than arising In the Ordinary
Course of the business and not inconsistent with prior practice;
(b) Any outstanding indebtedness for borrowed money, deferred
purchase price of property, capitalized lease obligations; represented by
promissory notes; and guarantees of any of the foregoing; in excess of
$5,000 in principal amount for any one transaction. or $10,000 in the
aggregate;
(c) Any original issuance of capital stock or other equity interest
by CLASSIC;
(d) Any transaction other than at arms' length and In the Ordinary
Course of business between CLASSIC and any Affiliates;
(e) Any damage, destruction, loss or forfeiture in excess of $5,000
whether or not such damage is covered by insurance;
(f) Any transfer, assignment or termination (other than by expiration
at the end of its stated term) of any agreement having a value in excess of
$5,000 per annum;
(g) Any mortgage, pledge or encumbrance for an amount in excess of
$5,000 on any single property or assets or in excess of $10,000 in the
aggregate on any properties or assets (whether tangible or intangible);
(h) Except In the Ordinary Course of business consistent, any general
increase in the wages, salaries, compensation, pension or other benefits
payable to employees, or any specific increase in the wages, salaries,
compensation, pension or other benefits payable to any employee, officer or
director;
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(i) Except In the Ordinary Course of business consistent with past
practice and except for sales or other dispositions of assets or
expenditures which in the aggregate are not valued in excess of $5,000, any
sale, assignment, transfer, lease or other disposition of or agreement to
sell, assign, transfer, lease or otherwise dispose of any of its fixed
assets, contracts or leases (other than by a renewal of an existing lease)
of any fixed assets, or any capital expenditures or commitment to make any
such expenditures;
(j) Any material change in any accounting procedures or practices by
CLASSIC which would have a Material Adverse Effect;
(k) Any request from governmental authorities and legislatures for
testimony, documentation or information with respect to any change or
proposed change in any law, statute, rule or regulation (other than tax and
other laws, statutes, rules and regulations applicable to businesses
generally) which could be reasonably expected to have a Material Adverse
Effect on the business of CLASSIC; or to the knowledge of CLASSIC any
proposed or new such law, statute, rule or regulation (other than tax and
other laws applicable to businesses generally) which has been introduced in
or passed by any part of any legislative body or adopted as a proposed or
temporary rule or regulation by any administrative body after January 1,
1997;
(l) Any labor controversy or the threatening of any strike, work
stoppage, slowdown or similar action affecting the business or assets of
CLASSIC or which could reasonably be expected to have a Material Adverse
Effect;
(m) Any material changes in the customary methods of operations of
CLASSIC, including, without limitation, practices and policies relating to
providing services, purchasing, marketing, selling and pricing;
(n) Any agreements, arrangements or transactions of CLASSIC with any
of such entities, officers, directors, employees or equity holders (or with
any relative, beneficiary. spouse or Affiliate of such Person);
(o) Any express or deemed election or settlement or compromise of any
liability, with respect to Taxes of CLASSIC; or
(p) Any agreement, whether in writing or otherwise, to take any
actions specified in this Section 2.10 or granted options to purchase,
rights of first refusal, rights of first offer or any other similar rights
or commitments with respect to any of the actions specified in this Section
2.10, except as expressly contemplated by this Agreement.
3.11 PROPERTIES.
(a) Except as set forth in Schedule 2.11 attached hereto, CLASSIC has
good and marketable title to all properties and assets reflected on the
CLASSIC Balance Sheet and Schedule, reflecting the property inventory and
depreciation list (except properties and assets sold or otherwise disposed
of In the Ordinary Course after the date of such CLASSIC Balance Sheet),
free and clear of all Liens, except (i) such Liens as are disclosed in
Schedule 2.11, (ii) Liens for taxes not yet due and payable, (iii) Liens of
landlords, vendors, warehousemen and mechanics and (iv) such imperfections
of title, easements and encumbrances, if any, as are not material in
character, amount or expense or do not materially detract from the value or
interfere with the present use of the property subject thereto or affected
thereby. To the best of ABELL's knowledge, all properties of CLASSIC
(whether owned, leased or contracted for management) are in compliance with
all applicable laws, statutes, rules and regulations (including, without
limitation, building, zoning and environmental laws) and all covenants,
conditions, restrictions or easements affecting the property or its use or
occupancy, and no notices of any violations thereof have been received.
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(b) Except as set forth in Schedule 2.11, each of the leases or
contracts for management of property (collectively, the "Leases") under
which the material properties of CLASSIC are leased (the "Leased Property")
is unmodified and in full force and effect (in the form made available to
CEC and attached and scheduled in Section 2.14 hereof), and, there are no
other agreements, written or oral, between CLASSIC and any third parties
claiming an interest in CLASSIC's interest in the Leased Property or
otherwise affecting its management, use and occupancy thereof. Except as set
forth m Schedule 2.11, is not in default under the Leases, and no defaults
(whether or not subsequently cured) by CLASSIC have been alleged thereunder
which, in either case, could be reasonably expected to have a Material
Adverse Effect. Each lessor named in any of the Leases is not in default
thereunder, and no defaults (whether or not subsequently cured) by such
lessor have been alleged thereunder.
3.12 COMPLIANCE WITH LAW. Except as set forth in Schedule 2.12
attached hereto, CLASSIC is not in default under, or in violation of, any
applicable law, statute, rule or regulation or order, writ, judgment,
injunction or decree applicable to it which could be reasonably expected to
have a Material Adverse Effect.
3.13 LICENSES, PERMITS AND AUTHORIZATIONS. CLASSIC has obtained all
licenses, permits, certifications and other authorizations from all federal,
state, local and foreign authorities as are necessary for the conduct of its
business, each of which is in full force and effect other than such
licenses, permits, certifications and other authorizations which failure to
so obtain could not be reasonably expected to have a Material Adverse
Effect. CLASSIC has made all filings and registrations which are necessary
or proper to conduct its business.
3.14 DOCUMENT PRODUCTION. Set forth in Schedule 2.14 attached hereto
are lists of the items described other than those items which are
specifically noted in this Section 2.14 as having been made available, as of
the date of this Agreement, of the following:
(a) Articles of Incorporation and Bylaws of CLASSIC;
(b) Each joint venture or similar agreement to which CLASSIC is a
party;
(c) Each deed, contract for management or lease of real property (and
agreements to manage, purchase or lease real property) to which CLASSIC is a
party and which involves an amount in excess of, or annual rents in excess
of, $5,000;
(d) Each category of personal property managed, owned or leased by
CLASSIC and each asset within any such category which has a book value or
current market value in excess of $5,000 or group of related such items
valued in excess of $10,000 or which is leased under an agreement providing
for annual lease payments in respect thereof in an amount in excess of
$5,000;
(e) Each registration, certificate or application with respect to the
Intellectual Property and all licenses of Intellectual Property by CLASSIC
from or to any third party and all other agreements to which CLASSIC is a
party regarding Intellectual Property excluding, however those relating to
commercially available ("canned") software;
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(f) Each policy of fire, liability, title, errors and omissions and
other forms of insurance held by CLASSIC and of all claims in excess of
$5,000 pending thereunder;
(g) Each Officer and Director of CLASSIC;
(h) Each general partnership, limited partnership, limited liability
company, corporation or joint venture to which CLASSIC is a party;
(i) Each agreement respecting or other instrument evidencing
indebtedness for borrowed money, the deferred purchase price of personal
property or a capitalized lease for an amount in excess of $5,000 pursuant
to which CLASSIC is an obligor or a guarantor thereunder or an asset owned
by CLASSIC is subject to a Lien;
(j) Each employment agreement, consulting agreement providing for
payments over $5,000 per annum to which CLASSIC is a party;
(k) Each indemnification agreement, confidentiality agreement and
non-competition and non-disclosure agreement to which CLASSIC is a party;
(l) Each agreement to which ABELL or CLASSIC is a party restricting
or otherwise affecting voting or other rights with respect to the Shares or
any securities of CLASSIC, including voting trusts, voting agreements,
irrevocable proxies, preemptive rights, shareholders' agreements, redemption
agreements, buy-sell agreements and registration rights agreements;
(m) Each material agreement, permit, license or certificate between
CLASSIC and any governmental entity (federal, state, local or foreign) or
other regulatory authority;
(n) Each collective bargaining agreement and union contract to which
CLASSIC or any properties which it manages is a party;
(o) Each agreement made In the Ordinary Course requiring the
expenditure of more than $5,000 per year, other than those agreements listed
in other subsections of this Section 2.14;
(p) Each agreement between or among CLASSIC on the one hand and an
Affiliate of CLASSIC on the other;
(q) Each management contract and contract with independent
contractors or consultants (or similar arrangements) including exclusive
rights or requiring payments in excess of $5,000 individually or $10,000 in
the aggregate to which CLASSIC is a party;
(r) Each contract or agreement providing for benefits under any
Benefit Plan;
(s) Each material contract or agreement with a governmental authority
to which CLASSIC is a party; and
(t) Each material agreement of CLASSIC not made In the Ordinary
Course that is to be performed on or after the date of this Agreement.
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3.15 VALIDITY. Except as set forth in Schedule 2.15 attached, (a) all
of the agreements described in Section 2.14 are valid and binding upon
CLASSIC, and to the best knowledge of ABELL, are valid and binding on the
other parties thereto, and CLASSIC has taken all action required to be taken
by it prior to the date hereof under all such agreements to the extent that
the failure to take any such action could be reasonably expected to have a
Material Adverse Effect, (b) no breach or default (or event which, with
notice or lapse of time or both, would constitute any such breach or
default) by CLASSIC exists with respect to any of the instruments described
in Section 2.14 which breach or default could be reasonably expected to have
a Material Adverse Effect, (c) to the best knowledge of ABELL, no other
party to such instruments is in breach or default thereunder in any material
respect, (d) no defaults (not subsequently cured) by CLASSIC have been
alleged under any such instruments nor, to the best knowledge of ABELL, is
there any reasonable basis for any claim of default by CLASSIC or any other
party thereto now or in the future and (e) neither the execution of this
Agreement nor consummation of the transactions contemplated hereby gives any
party to any of such instruments any rights or gives rise (assuming CLASSIC
is performing its other obligations thereunder) to any event which with the
passage of time or giving of notice, results in any right to terminate or
modify their respective rights or obligations thereunder, or constitutes or
is grounds for a breach or default under any such instruments which breach
or default could reasonably be expected to have a Material Adverse Effect.
To the best knowledge of CLASSIC, it has not waived any material right under
any instruments described in Section 2.14, except as set forth in Schedule
2.15 attached hereto.
3.16 LITIGATION. Except as set forth in Schedule 2.16, there is no
suit, claim, investigation, action or proceeding now pending or, to the best
knowledge of ABELL, threatened before any court, arbitration panel,
administrative or regulatory body or governmental agency against CLASSIC,
nor to the best knowledge of ABELL is there any reasonable basis for any
such suit, claim, investigation, action or proceeding, the adverse
determination of which could prevent or interfere with the consummation of
any of the transactions contemplated hereby. CLASSIC is not in default with
respect to any order, writ, injunction, decree or demand of any court or
other governmental, regulatory or administrative authority which default
could reasonably be expected to have a Material Adverse Effect.
3.17 EMPLOYEE RELATIONS. Except as set forth in Schedule 2.17 or for
matters which individually or in the aggregate are immaterial in amount, (a)
CLASSIC is in substantial compliance with all material federal, state and
local laws and regulations respecting labor, employment and employment
practices, terms and conditions of employment and wages and hours except
where noncompliance would not result in a Material Adverse Effect; (b)
CLASSIC is not delinquent in payments to any of its employees for any wages,
salaries, commissions, bonuses or other direct compensation for any services
performed by the employee to the date hereof or for amounts required to be
reimbursed to any of its employees; (c) there is no pending or to the best
knowledge of CLASSIC, threatened litigation by any employee or potential
employee with respect to CLASSIC which if adversely determined could
reasonably be expected to have a Material Adverse Effect; (d) there are no
pending or to the best knowledge of CLASSIC, threatened litigation or
administrative actions or claims by employees or former employees with
respect to CLASSIC, including, without limitation, discrimination (whether
for sex, age, race, religion, national origin or any other reason), or
sexual harassment; (e) upon termination of the employment of any employee,
CLASSIC will not be liable to any such terminated employee for "severance
pay" or any other payments except in the ordinary course of business by
reason of anything that occurred prior to the Effective Time; (f) there is
no unfair labor practice complaint against CLASSIC pending before the
National Labor Relations Board or any comparable state, local or foreign
agency; (g) there is no labor strike, dispute, slowdown or stoppage actually
pending or threatened against or involving CLASSIC; (h) no representation
question exists respecting the employees of CLASSIC; (i) no grievance nor
any arbitration proceeding arising out of or under any collective bargaining
agreement is pending which might result in a required payment by CLASSIC in
excess of $5,000 and no claim therefore has been asserted; (j) no collective
bargaining agreement is currently being negotiated by CLASSIC; (k) to the
best knowledge of CLASSIC it is in compliance with the requirements of the
Americans with Disabilities Act; (l) CLASSIC is in compliance with the
Workers Adjustment and Retaining Notification Act; and (m) ABELL has no
knowledge of any basis for the assertion of any of the foregoing against
CLASSIC.
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3.18 EMPLOYEE BENEFIT MATTERS.
(a) Set forth in Schedule 2.18 attached hereto is a list of all
Benefit Plans for CLASSIC. Each Benefit Plan has been administered in
material compliance with its terms and all filing, reporting, disclosure,
funding and other applicable requirements of ERISA and the Code. CLASSIC has
furnished, or concurrently, with the execution of this Agreement will
furnish, CEC with true and correct copies of all Benefit Plans and, where
applicable, (i) the most recent summary plan description and summary of
material modification thereto, (ii) the most recently filed IRS Form 5500,
and (iii) the most recently received determination letter.
(b) None of the Benefit Plans is a Pension Plan or a Multiemployer
Plan.
(c) Each of the Welfare Plans has at all times been in material
compliance with the provisions of Section 4980B of the Code: None of the
Welfare Plans provides or promises post-retirement health or life benefits
to current employees or retirees of CLASSIC.
(d) Neither CLASSIC, nor any Controlled Group Member has incurred any
liability under Title IV of ERISA in connection with the termination or
reorganization of any Pension Plan subject to Title IV of ERISA, or
withdrawal from any Multiemployer Plan which would have a Material Adverse
Effect, and to the best knowledge of ABELL, no fact or event exists which
could give rise to any such liability. Neither CLASSIC nor any Controlled
Group Member has incurred any liability for any penalty or tax under
Sections 4971, 4972, 4975, 4976, 4977, 4979, 4980 or 4980B of the Code or
Section 502 of ERISA which would have a Material Adverse Effect. All
contributions, premiums or payments required to be made with respect to any
Benefit Plan have been made on or before their due date.
(e) No claims are pending or, to the best knowledge of CLASSIC,
threatened against any Benefit Plan which would have the effect of creating
liability material to the financial position of CLASSIC.
(f) CLASSIC has, in each Welfare Plan and in each Summary Plan
description thereof, reserved its rights to amend or terminate the plan.
CLASSIC has not made any written representation that any health or medical
insurance benefit is available to any employee after such employee's
separation from service with CLASSIC, except as provided in any disability
plan or as required by law.
(g) Except as set forth in Schedule 2.18, the transactions
contemplated hereunder will not directly or indirectly result in any
"parachute payments" under section 280G of the Code to any current or former
director, officer, employee, or consultant of CLASSIC which would have a
Material Adverse Effect.
(h) CLASSIC has no obligation to pay compensation under any
agreement, Benefit Plan, or otherwise which in the aggregate would not be
deductible under Code Section 162(m) if CLASSIC were a "publicly held
corporation" within the meaning of Section 162(m).
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3.19 TAXES.
(a) PAYMENT OF TAXES. CLASSIC has duly and timely filed, or will
duly and in a timely manner file, all tax returns and other filings in
respect of Taxes required to be filed with respect to CLASSIC on or prior to
the Effective Time, and all such tax returns and filings are, or when filed
will be, complete, accurate and in accordance with applicable law in all
material respects. CLASSIC has in a timely manner paid, and will in a timely
manner pay, all Taxes shown to be due on those returns and other filings
with respect to CLASSIC on or prior to the Effective Time, except for those
amounts accrued on CLASSIC Balance Sheet, which amounts include all unpaid
interest and penalties. CLASSIC has adequately reserved on CLASSIC Financial
Statements for all deferred taxes which may be owed by it. Except as set
forth in Schedule 2.19 attached hereto, there are no (and have been no) tax
sharing or other agreements regarding the allocation of liability for Taxes
(or any item of deduction, income or credit), to which CLASSIC is a party.
(b) WITHHOLDINGS. Except as disclosed in Schedule 2.19, CLASSIC has
withheld amounts from its employees and has filed all federal, foreign,
state, and local returns and reports with respect to employee income tax
withholding and social security and payroll and unemployment Taxes for all
periods (or portions thereof) ending on or before the Effective Time, in
compliance with the provisions of the Code, and other applicable federal,
foreign, state, and local laws.
(c) PENDING CLAIMS. Except as set forth in Schedule 2.19, (i) there
are no claims, investigations, actions or proceedings pending or (to the
best knowledge of CLASSIC) threatened against CLASSIC by any taxing
authority for any past due Taxes with respect to which CLASSIC would be
liable; (ii) there are no matters under discussion with any taxing authority
which might reasonably result in the assessment of additional amounts
against or relating to CLASSIC; (iii) there are no Liens for Taxes upon the
assets of CLASSIC except for taxes not yet due or which may hereafter be
paid without penalty; and (iv) there has been no waiver of any applicable
statute of limitations nor any consent for the extension of the time for the
assessment of any Tax against CLASSIC Any Taxes that have been claimed as a
result of any examinations of any tax return involving CLASSIC by any
governmental authority are being contested in good faith and have been
disclosed in writing to CEC.
(d) SECTION 341(f) ELECTION. CLASSIC has not made, signed, or filed,
nor will it make, sign, or file any consent under Section 341(f) of the
Code, or comparable provisions of state or local law, with respect to any
taxable period including or ending on or before the Effective Time .
(e) PARTNERSHIPS. CLASSIC is not subject to any joint venture,
partnership or other arrangement or contract which is treated as a
partnership for federal income tax purposes.
3.20 CONSENTS AND APPROVALS. Except as set forth in Schedule 2.20
attached hereto, no consent, approval or other action by, or notice to, or
registration or filing with any governmental or administrative agency or
authority or any other Person is required or necessary in connection with
the execution of this Agreement or the consummation of the transactions
contemplated hereby by ABELL.
3.21 INTELLECTUAL PROPERTY.
(a) Set forth in Schedule 2.21 attached hereto, is a list of all
patents, copyrights, mask works, and trade and service marks and names,
whether registered, applied for, pending under ABELL's or CLASSIC's name
relating to the business of CLASSIC (exclusively or jointly with any other
Person) or licensed or assigned to it (exclusively or jointly) as of the
date hereof (but excluding commercially available, standard ("canned")
software acquired and used by or as an incidental part of its business),
along with the registration numbers, dates of issuance and names of the
inventors or authors or classes of such patents, mask works and copyrights.
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(b) Except as set forth in Schedule 2.21 and as excepted pursuant to
Section 2.21(a) hereof, CLASSIC is the sole and exclusive owner of all
right, title and interest in and to the Intellectual Property, and such
intellectual Property is (i) subject to no Liens that could reasonably be
expected to have a Material Adverse Effect; (ii) adequate and sufficient to
permit CLASSIC to conduct its business as it is presently conducted; (iii)
valid and subsisting; (iv) either freely transferable or assignable to CEC;
and (v) will not be rendered invalid or affected in any way by virtue of
the execution, delivery and performance of this Agreement. Except as set
forth in Schedule 2.21, CLASSIC holds all required licenses to use the
hardware and software used in connection with business and, to the best
knowledge of CLASSIC, neither the business of CLASSIC nor the intellectual
Property infringes on, conflicts with, violates or misappropriates any
United States or foreign patent, copyright, trade name, service mark, mask
work, trade secret or other intellectual property right of any person. There
is no actual or alleged conflict or claim against CLASSIC with respect to
any intellectual property right of any person, or relating to any of the
Intellectual Property or the business of ABELL, or asserting any Lien
against any of the Intellectual Property that could reasonably be expected
to have a Material Adverse Effect; and, to the best knowledge of CLASSIC,
there is no reasonable basis for any such claim.
3.22 BROKERS AND FINDERS. Except as otherwise specifically stated in
this Agreement or as set forth in Schedule 2.22 attached hereto; each party
represents that it has not engaged, consented to or authorized any broker,
investment banker or other third party to act on its behalf, directly or
indirectly, as a broker or finder in connection with the transactions
contemplated by this Agreement, except for Nick Belanis. Mr. Belanis shall
be the sole responsibility of CEC. Except as to Mr. Belanis, who is the
sole responsibility of CEC, CEC and ABELL will indemnify and hold one
another harmless against any loss, liability, damage, cost, claim, or
expense incurred by reason of any brokerage, commission, or finder's fee
alleged to be payable because of any act, omission, or statement of the
indemnifying party.
3.23 ENVIRONMENTAL LAWS. CLASSIC is in compliance with all federal,
state and local laws, codes, ordinances, rules and regulations pertaining to
air and water quality, Hazardous Materials and other applicable state laws,
waste disposal, air emissions, water discharges, and other environmental and
health and safety matters, with respect to its business or the use or
occupation of its properties ("Hazardous Materials Laws") the failure to
comply with which could reasonably be expected to have a Material Adverse
Effect. CLASSIC (a) has not received notice of, or knows or has reason to
know of, any facts or circumstances which might give rise to or constitute
violations of any Hazardous Materials Laws pertaining to the properties or
business of CLASSIC which could reasonably be expected to have a Material
Adverse Effect, (b) knows or has reason to know any facts or circumstances
which might give rise to liability in excess of $1,000 on the part of
CLASSIC for exposure to Hazardous Materials, and (c) there has been no
emission, spill, release or discharge, whether on, under or about the
properties of CLASSIC, adjacent sites or at any other location or disposal
site, into or upon (i) the air, (ii) soils or improvements, (iii) surface
water or groundwater, or (iv) the sewer, septic system or waste treatment,
storage or disposal system servicing such properties, of any Hazardous
Materials used, stored, generated, treated or disposed at or from such
properties.
3.24 ACCOUNTANTS INDEPENDENT: BOOKS AND RECORDS. The accountants who
examined the audited CLASSIC Financial Statements are independent public
accountants with respect to CLASSIC. The books and records maintained by
CLASSIC and upon which CLASSIC Financial Statements are based are true and
complete in all material respects and accurately reflect its business.
CLASSIC maintains a system of internal accounting control sufficient to
provide reasonable assurances that (a) transactions are executed in
accordance with management's general or specific authorization; (b)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and
to maintain accountability for assets; (c) access to assets is permitted
only in accordance with management's general or specific authorization; and
(d) the recorded accountability for assets is compared with the existing
assets at reasonable intervals and appropriate action is taken with respect
to any differences.
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3.25 INSURANCE CLASSIC has in full force and effect the policies of
fire, liability, title, errors and omissions and other forms of insurance in
such amounts as are customary with companies of the same or similar size in
the same or similar business and all such policies are listed in Schedule
2.14. Furthermore, (a) CLASSIC is not in default under any such policies
which default could reasonably be expected to have a Material Adverse Effect
and there is no material inaccuracy in any application for such policies,
(b) CLASSIC's activities and operations have been conducted in a manner so
as to conform in all material respects to the applicable provisions of such
policies, (c) CLASSIC has not received a notice of cancellation or non-
renewal with respect to any such policy and (d) timely notice has been given
of any and all claims under all such policies.
3.26 DISCLOSURE. This Agreement (including the Schedules and Exhibits
hereto) and any other documents or certificates furnished or to be furnished
to CEC by or on behalf of ABELL or CLASSIC pursuant to the express
provisions hereof or in connection with the transactions contemplated hereby
as of their respective dates did not, and unless specifically corrected in
a written document delivered to CEC as of the date hereof, do not (a)
contain any untrue statement of a material fact, or (b) omit to state a
material fact necessary in order to make the statements contained herein and
therein not misleading.
3.27 ILLEGAL PAYMENTS. Neither CLASSIC nor any of its officers,
directors, employees, or agents has made any payment of funds of CLASSIC or
received or retained any funds in violation of any law, rule or regulation.
3.28 POWER; CAPACITY. CLASSIC has full legal power and capacity to
execute, deliver and perform this Agreement.
3.29 NO CONFLICTS. Except as set forth in Schedule 2.29 attached
hereto, neither the execution, delivery and performance of this Agreement,
nor the consummation of the transactions contemplated hereby, nor compliance
with any provision hereof, will (a) cause a breach or default (or give rise
to any right of termination, cancellation or acceleration) under, or
conflict with any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, license, permit, franchise, lease, sublease or other
instrument, contract or agreement binding upon CLASSIC; (b) violate any
provision of law, statute, rule or regulation or order, writ, judgment,
injunction or decree applicable to CLASSIC or require notice to or
registration with, or the consent or approval of, any governmental body or
other regulatory authority; or (c)result in the creation or imposition of
(or the obligation to create or impose) any Lien on any assets of CLASSIC.
3.30 CONSENTS AND APPROVALS. Except as set forth in Schedule 2.30
attached hereto, no consent. approval or other action by, or notice to, or
registration or filing with any governmental or administrative agency or
authority or any other Person is required or necessary in connection with
the execution of this Agreement or the consummation of the transactions
contemplated hereby by CLASSIC.
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3.31 INVESTMENT. ABELL has reviewed the CEC filings with the
Securities and Exchange Commission ("SEC"), is an accredited investor as
defined by the SEC and agrees that any CEC shares which he receives are
taken by him for investment and not for resale. He understands and agrees
that such shares will carry a restrictive legend indicating they are held
for investment purposes and can only be resold pursuant to applicable
securities laws. He further understands and agrees that any transfer or
assignment of the shares shall be to a person(s) who is capable of and will
make the same representations to CEC. Further, any such person(s) shall
hold his shares and be subject to the provisions of Section 1.4(b)
hereinabove.
Article 40
REPRESENTATIONS AND WARRANTIES OF CEC
CEC represents and warrants to ABELL as follows:
4.1 DUE ORGANIZATION. CEC is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware with
all requisite corporate power and authority to carry on the business which
it is now conducting and to own, operate and lease the assets, properties
and business now owned, operated or leased by it.
4.2 DUE AUTHORIZATION. CEC has the corporate power and authority to
enter into and perform this Agreement. The execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by the Board of Directors of
CEC. This Agreement is a legal, valid and binding agreement of CEC,
enforceable in accordance with its terms.
4.3 NO CONFLICT. Neither the execution and delivery of this Agreement
by CEC, and consummation by CEC of the transactions contemplated hereby nor
compliance by CEC with any of the provisions hereof will (i) conflict with
or result in a breach or default under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, agreement or other
instrument or obligation (including, without limitation, its Certificate of
Incorporation and Bylaws) to which it is a party or by which it or any of
its properties or assets may be bound, or (ii) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to CEC or any of
its properties or assets.
4.4 CAPITALIZATION. All the issued and outstanding shares of CEC are
duly authorized, validly issued, fully paid and nonassessable, and there are
no unsatisfied preemptive rights in respect of CEC capital stock.
Article 50
UNDERSTANDINGS AND AGREEMENTS
OF CLASSIC AND CEC
5.1 CONDUCT OF CLASSIC PENDING CLOSING DATE. From the date hereof to
the Closing Date, except as otherwise agreed to in writing by CEC or
contemplated or permitted by this Agreement, ABELL shall insure that CLASSIC
shall not (i) take any action inconsistent with the terms and intent of this
Agreement, (ii) take or omit to take any action, the effect of which renders
inaccurate any of the representations or warranties of CLASSIC contained
herein or (iii) conduct its business other than in the ordinary course
consistent with past practice. In addition, CLASSIC shall use its reasonable
best efforts to preserve the existing goodwill and relationships which exist
between CLASSIC and its employees, customers, suppliers and other parties
with whom CLASSIC has relationships. Other than in the Ordinary Course of
Business consistent with past practices or as specifically contemplated by
this Agreement, CLASSIC will not enter into or terminate any material
contracts or other agreements prior to the Closing Date without notifying
CEC thereof in writing prior to the execution or termination of any such
contract or agreement.
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5.2 EFFORTS TO CONSUMMATE. Subject to the terms and conditions herein
provided, each of the parties hereto shall use its reasonable efforts to
take or cause to be taken all actions and to do or cause to be done all
things necessary, proper or advisable under applicable laws and regulations
or otherwise to consummate and make effective, as soon as reasonably
practical, the transactions contemplated hereby, and each of the parties
hereto shall cooperate with the other in all of the foregoing.
5.3 PAYMENT OF CLASSIC BONUSES. CLASSIC has not authorized a payment
of a special bonus to any executives or key employees of CLASSIC.
5.4 ACCESS AND INFORMATION. CLASSIC shall afford to CEC and its
accountants, counsel and other representatives full access during normal
business hours throughout the period prior to the Closing Date to all of its
properties, books, contracts, commitments and records (including, but not
limited to, tax returns) and, during such period, CLASSIC shall furnish
promptly to CEC (i) a copy of each report, schedule and other document filed
or received by it pursuant to the requirements of Federal or State
securities laws and (ii) all other information concerning its business,
properties and personnel as CEC may reasonably request; provided, however,
that no investigation pursuant to this Section 4.4 shall affect any
representations or warranties or the conditions to the obligations of CEC or
ABELL to consummate the transaction.
5.5 NOTICE OF ACTIONS AND PROCEEDINGS. ABELL shall promptly notify CEC
of any actions, suits, claims, investigations or proceedings commenced or,
to the best of either of his or its knowledge, threatened relating to or
involving or otherwise affecting CLASSIC which, if pending on the date
hereof, would have been required to have been disclosed in writing pursuant
to Section 2.16 hereof or which relate to the consummation of the
transaction.
5.6 NOTIFICATION OF CERTAIN OTHER MATTERS. ABELL and CEC shall
promptly notify each other of:
(a) any notice of, or other communication relating to, a default or
event which, with notice or lapse of time or both, would become a default if
received by such Person subsequent to the date of this Agreement and prior
to the Closing Date under any material agreement to which such Person is a
party or to which it or any of its properties or assets may be subject or
bound;
(b) any notice or other communication from any third party alleging
that the consent of such third party is or may be required in connection
with the transactions contemplated by this Agreement;
(c) any notice or other communication from any governmental or
regulatory agency or authority in connection with the transactions
contemplated hereby; and
(d) any Material Adverse Effect or the occurrence of an event or
development which, so far as reasonably can be foreseen at the time of its
occurrence, could result in any such change or effect.
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5.7 SUPPLEMENTAL DISCLOSURE: FULL AND COMPLETE PRESENTATION. Each of
ABELL and CEC shall have the continuing obligation to promptly supplement or
amend their respective Schedules, in regard to any matter hereafter arising
or discovered which, if existing or known at the date hereof, would have
been required to be set forth or described therein; provided. however, that
for the purpose of the rights and obligations of the parties hereunder any
such supplemental or amended disclosure shall not be deemed to have been
disclosed as of the date hereof unless so agreed to in writing by the party
receiving such information. With regard to all agreements and other
instruments referred to in any section included in the Schedules, ABELL or
CEC, as the respective case may be, has provided to the other or will, to
the extent supplemental disclosure is required, provide to the other
promptly, true and complete copies of all of such instruments and
agreements.
5.8 FEDERAL INCOME TAX TREATMENT. The parties acknowledge and agree
that no representations or warranties have been made herein or otherwise
with respect to any of the tax consequences arising from or any of the
transactions consummated in connection herewith.
5.9 CONFIDENTIALITY. Each of ABELL and CEC agree to hold in
confidence, unless compelled to disclose by judicial or administrative
process or, in the opinion of its counsel, by other requirements of law,
information furnished by CEC, on the one hand, to ABELL and information
furnished by ABELL, on the other hand, to CEC in connection with the
transactions contemplated by this Agreement, and each of such Persons agree
that they shall not release or disclose such information to any other
Person, except their respective officers, directors, employees, auditors,
attorneys, financial advisors and other consultants, advisors and
representatives who have been informed of the confidential nature of such
information and have been directed to treat such information as
confidential. The foregoing provisions of this Section 4.9 shall not apply
to any such information which (i) becomes generally available to the public
other than as a result of a disclosure by any Person bound hereunder, (ii)
was available to a Person bound hereunder on a non-confidential basis prior
to its disclosure hereunder, or (iii) becomes available to any Person bound
hereunder on a non-confidential basis by virtue of the disclosure thereof
from a source other than the party providing such information in reliance
upon the protection of confidentiality reposed hereby.
5.10 CONDUCT OF CLASSIC'S BUSINESS. From the date hereof until the
Closing, ABELL will cause CLASSIC to conduct its business in the same manner
and under the same business policies as was the case prior to the date
hereof. ABELL covenants and agrees that, except as contemplated hereby,
CLASSIC shall not, without the prior written consent of CEC (i) dispose of
any of CLASSIC's assets or properties reflected on the Balance Sheet or
acquired by CLASSIC subsequent to the date of the Balance Sheet or incur any
obligation, commitment or liability binding upon CLASSIC other than in the
usual and ordinary course of business consistent with business practices
heretofore followed by CLASSIC; (ii) take or suffer any action which
adversely affects the goodwill or the normal conduct of CLASSIC's business;
(iii) mortgage, pledge or subject to lien, charge, security interest or any
other encumbrance or restriction any of CLASSIC's property, business or
assets; (iv) cancel or compromise any debt or claim of CLASSIC or waive or
release any right of substantial value; (v) make any change in CLASSIC's
Articles of Incorporation or Bylaws; (vi) cause CLASSIC to declare or pay
any dividend or make any other distribution or payment of any kind with
respect to the capital stock of CLASSIC or redeem or purchase or otherwise
reacquire any of such stock; and (vii) amend or terminate any contract,
agreement or license of CLASSIC.
5.11 Covenants of ABELL. From the date hereof until the Closing, ABELL
shall not, except as contemplated hereby, sell, assign, transfer or dispose
of any shares of the CLASSIC Stock or create, assume or permit to exist any
lien, security interest, pledge, agreement, claim, charge, option or
encumbrance of any nature whatsoever on any shares of the CLASSIC Stock.
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5.12 Required Filings. ABELL and CEC shall take all steps necessary or
desirable, utilize their best efforts and cooperate with each other in every
reasonable way to make the filings and obtain the consents, approvals or
authorizations referred to in this Agreement, which filings shall comply as
to form with the requirements applicable thereto and the information
included therein shall be true, complete and correct in all material
respects.
5.13 Abandonment of Business. In the event CEC determines to abandon
the business of CLASSIC then and in that event CEC shall promptly so notify
ABELL in writing whereupon ABELL shall have the option of acquiring the
shares at their then current fair market value. Should ABELL elect to
exercise the option granted herein then ABELL shall notify CEC within thirty
(30) days of his receipt of CEC's notice. ABELL shall include with said
notification his estimate of the fair market value. In the event CEC and
ABELL are unable to agree on the fair market value within twenty (20) days
of the receipt of ABELL's estimate then they shall, within twenty (30) days
each select an appraiser, who in turn shall together select a third
appraiser, who shall each appraise the value of CLASSIC. The appraisal
which is neither the highest nor the lowest shall be utilized as the fair
market value. Each party shall pay the costs of its own appraiser and shall
divide equally the costs of the third appraiser. ABELL shall pay the amount
of the fair market value to CEC within fifteen (15) days of its
determination whereupon CEC shall deliver to ABELL the Shares. In
delivering payment ABELL may deliver to CEC shares of CEC Common Stock which
shall be credited against the payment amount at the rate of three dollars
($3.00) per share. Notwithstanding the foregoing (i) in no event shall the
fair market value determination be in excess of six hundred fifty thousand
dollars ($650,000) and (ii) this Section 4.13 shall only be operative in the
event CEC determines to abandon the business of CLASSIC and shall in no way
be operative in the event CEC shall elect to reorganize, merge or affiliate
with another entity.
5.14 FURTHER ASSURANCES: BEST EFFORTS. ABELL and CEC agree to execute
and deliver such instruments and take such action as may reasonably be
required in order to effect the transactions contemplated hereby and to use
their best efforts to perform or cause to be satisfied each covenant or
condition to be performed or satisfied by them.
Article 60
CONDITIONS PRECEDENT TO
THE OBLIGATIONS OF ABELL
The obligation of ABELL under this Agreement to proceed with the Closing is
subject to and conditioned upon the satisfaction or waiver, on or prior to
the Closing, of each of the following conditions:
6.1 REPRESENTATIONS AND WARRANTIES: PERFORMANCE: OFFICERS' CERTIFICATE.
Each of the representations and warranties of CEC set forth in this
Agreement shall be true and correct in all material respects as of the date
hereof and as of the Closing Date; CEC shall have performed or satisfied in
all material respects each covenant, agreement and condition set forth in
this Agreement to be performed or satisfied by CEC on or prior to the
Closing Date; and ABELL shall have received a certificate of appropriate
officers of CEC dated the Closing Date, reasonably satisfactory to ABELL, to
such effect.
6.2 NO RESTRAINT. No restraining order or injunction shall be in effect
which restrains or prohibits the consummation of the transactions
contemplated by this Agreement.
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6.3 CONSENTS. The consents, approvals and authorizations identified in
the schedules delivered to ABELL shall have been obtained and shall be in
full force and effect on the Closing Date.
6.4 PROCEEDINGS AND INSTRUMENTS SATISFACTORY. All proceedings,
corporate or otherwise, to be taken by ABELL or CLASSIC in connection with
the transactions contemplated by this Agreement, and all documents incident
thereto, shall be reasonably satisfactory in form and substance to ABELL.
6.5 NO ADVERSE CHANGE. Except for matters expressly contemplated or
permitted by this Agreement, there shall have been no Material Adverse
Effect with respect to CEC.
6.6 NO LITIGATION. At the Closing Date, there shall not be any action,
claim, arbitration, litigation, order of any court or governmental
investigation or inquiry pending or, to the best knowledge of ABELL,
threatened, challenging or seeking to make illegal or to restrain or
prohibit any of the transactions contemplated by this Agreement, or seeking
to obtain material damages from ABELL or any of his affiliates in connection
with any of the transactions contemplated by this Agreement.
6.7 NO LIABILITIES. ABELL shall have received a certificate from CEC
dated as of the Closing Date that represents and warrants to ABELL that CEC
has no liabilities, known, contingent or unknown.
6.8 ORGANIZATIONAL DOCUMENTS. ABELL shall have received a copy of (i)
the Certificate of Incorporation, as amended (or similar organizational
documents), of CEC, certified by the Secretary of State, as of a date not
earlier than 20 days prior to the Closing Date and accompanied by a
certificate of the Secretary or Assistant Secretary of each such entity,
dated as of the Closing Date, stating that no amendments have been made to
such documents since such date, (ii) the Bylaws, as amended, (or similar
organizational documents) of CEC, certified by the Secretary or Assistant
Secretary of CEC.
6.9 GOOD STANDING: QUALIFICATION TO DO BUSINESS. ABELL shall have
received a good standing (or equivalent) certificate for CEC from the
Secretary of State of Delaware and any jurisdiction in which CEC is
qualified to do business as a foreign corporation, in each case dated as of
a date not earlier than 20 days prior to the Closing Date and accompanied by
bring-down telegrams, if customarily provided by the jurisdiction in
question dated the Closing Date.
6.10 EMPLOYMENT AGREEMENT. CLASSIC shall have entered into a five year
employment agreement with ABELL in the form attached hereto as Schedule 6.10
providing for aggregate annual compensation of no less than Eighty Thousand
Dollars ($80,000) per year from CLASSIC and certain related entities.
6.11 GUARANTY. PB shall have executed the Personal Guaranty in the
form of Schedule 1.4 attached hereto.
Article 70
Conditions Precedent to the Obligation of CEC
The obligation of CEC under this Agreement to proceed with the Closing is
subject to and conditioned upon the satisfaction or waiver, on or prior to
the Closing, of each of the following conditions:
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<PAGE>
7.1 REPRESENTATIONS AND WARRANTIES: PERFORMANCE: ABELL'S CERTIFICATE.
Each of the representations and warranties of ABELL set forth in this
Agreement shall be true and correct in all material respects as of the date
hereof and as of the Closing Date except as otherwise contemplated hereby;
ABELL shall have performed or satisfied in all material respects each
covenant, agreement and condition set forth in this Agreement to be
performed or satisfied by ABELL on or prior to the Closing Date; and CEC
shall have received a certificate of ABELL dated the Closing Date,
reasonably satisfactory to CEC, to such effect.
7.2 NO RESTRAINT. No restraining order or injunction shall be in
effect which restrains or prohibits the consummation of the transactions
contemplated by this Agreement.
7.3 CONSENTS. The consents, approvals and authorizations identified in
the schedules delivered to CEC shall have been obtained and shall be in full
force and effect on the Closing Date
7.4 PROCEEDINGS AND INSTRUMENTS SATISFACTORY. All proceedings,
corporate or otherwise, to be taken by ABELL or CLASSIC in connection with
the transactions contemplated by this Agreement, and all documents incident
thereto, shall be reasonably satisfactory in form and substance to CEC.
7.5 NO ADVERSE CHANGE. Except for matters expressly contemplated or
permitted by this Agreement, there shall have been no Material Adverse
Effect with respect to CLASSIC since December 31, 1996.
7.6 NO LITIGATION. At the Closing Date, there shall not be any action,
claim, arbitration, litigation, order of any court or governmental
investigation or inquiry pending or, to the best knowledge of CEC,
threatened, challenging or seeking to make illegal or to restrain or
prohibit any of the transactions contemplated by this Agreement, or seeking
to obtain material damages from CEC or any of its affiliates in connection
with any of the transactions contemplated by this Agreement.
7.7 NO LIABILITIES. CEC shall have received a certificate from ABELL
dated as of the Closing Date that represents and warrants to CEC that
CLASSIC has no liabilities, known, contingent or unknown.
7.8 ORGANIZATIONAL DOCUMENTS. CEC shall have received a copy of (i)
the Articles of Incorporation, as amended (or similar organizational
documents), of CLASSIC, certified by the Secretary of State, as of a date
not earlier than 20 days prior to the Closing Date and accompanied by a
certificate of the Secretary or Assistant Secretary of each such entity,
dated as of the Closing Date, stating that no amendments have been made to
such documents since such date, (ii) the Bylaws, as amended, (or similar
organizational documents) of CLASSIC, certified by the Secretary or
Assistant Secretary of CLASSIC.
7.9 GOOD STANDING: QUALIFICATION TO DO BUSINESS. CEC shall have
received a good standing (or equivalent) certificate for CLASSIC from the
Secretary of State of Georgia and any jurisdiction in which CLASSIC is
qualified to do business as a foreign corporation, in each case dated as of
a date not earlier than 20 days prior to the Closing Date and accompanied by
bring-down telegrams, if customarily provided by the jurisdiction in
question dated the Closing Date.
7.10 EMPLOYMENT AGREEMENT. CLASSIC shall have entered into a five year
employment agreement with ABELL in the form attached hereto as Schedule 6.10
providing for aggregate annual compensation of no less than Eighty Thousand
Dollars ($80,000) per year from CLASSIC and certain related entities.
23
<PAGE>
7.11 STOCK RESTRICTION. ABELL (and any other ABELL identified
recipients) shall have entered into a Stock Restriction Agreement in the
form of Schedule 6.11 attached hereto with regard to the shares of CEC
common stock to be issued hereunder indicating he is receiving such shares
for investment purposes, without intent to resell and will hold said shares
for no less than two years and otherwise in accordance with applicable
securities rules and regulations.
Article 80
INDEMNIFICATION
8.1 INDEMNIFICATION BY ABELL. ABELL shall indemnify CEC and hold it
harmless against and in respect of any and all damage, loss, deficiency,
liability. cost or expense resulting from, or occasioned by, any
misrepresentation, breach of warranty or nonfulfillment of any obligation on
the part of ABELL or CLASSIC under this Agreement or from any
misrepresentation in or omission from any certificate or other document
furnished or to be furnished to CEC under this Agreement, and any and all
actions, suits, proceedings, demands, assessments, judgments, costs and
legal and other expenses incident thereto.
8.2 INDEMNIFICATION BY CEC. CEC shall indemnify ABELL and hold him
harmless against and in respect of any and all damage, loss, deficiency,
liability, cost or expense resulting from, or occasioned by, any
misrepresentation, breach of warranty or nonfulfillment of any obligation on
the part of CEC under this Agreement or from any misrepresentation in or
omission from any certificate or other document furnished or to be furnished
to ABELL under this Agreement, and any and all actions, suits, proceedings,
demands, assessments, judgments, costs and legal and other expenses incident
thereto.
8.3 PROCEDURE FOR INDEMNIFICATION WITH RESPECT TO THIRD PARTY CLAIMS.
Within thirty (30) days after receipt by a party seeking indemnification
hereunder (the "Indemnitee") of written notice of the commencement of any
action or the assertion of any claim, liability or obligation by a third
party (whether by legal process or otherwise), against which claim,
liability or obligation another party to this Agreement (the "Indemnitor")
is, or may be, required under this Agreement to indemnify such Indemnitee,
the Indemnitee will, if a claim thereon is to be, or may be, made against
the Indemnitor, notify the Indemnitor in writing of the commencement or
assertion thereof and give the Indemnitor a copy of such claim, process and
all legal pleadings. The Indemnitor shall have the right to conduct the
defense of any such action with counsel reasonably satisfactory to the
Indemnitee. If the Indemnitor either neglects to defend, or assumes the
defense of, such action, a recovery against the Indemnitee shall be
conclusive evidence of the Indemnitee's right of Indemnification against the
Indemnitor hereunder. If the Indemnitor does not receive notice of the
action or claim as provided herein, a judgment against the Indemnitee shall
be only presumptive evidence of the Indemnitee's right of indemnification
against the Indemnitor hereunder. If the Indemnitee shall be required by
judgment or a settlement agreement to pay any amount in respect of any
obligation or liability against which the Indemnitor has agreed to indemnify
the Indemnitee under this Agreement, the Indemnitor will, subject to the
foregoing, promptly reimburse the Indemnitee in an amount equal to the
amount of such payment plus all reasonable expenses incurred by such
Indemnitee in connection with such obligation or liability.
Prior to paying or settling any claim against which an Indemnitor is, or may
be, obligated under this Agreement to indemnify an Indemnitee, the
Indemnitee must first supply the Indemnitor with a copy of a final court
judgment or decree holding the Indemnitee liable on such claim or in the
absence of a judgment or decree, must first receive the written approval of
the terms and conditions of such settlement from the Indemnitor. An
Indemnitee shall have the right to settle any claim against it, subject to
the prior written approval of the Indemnitor, which approval shall not be
unreasonably withheld.
24
<PAGE>
Article 90
TERMINATION
9.1 TERMINATION. This Agreement may be terminated at any time prior to
the Closing Date, whether before or after approval of the transaction
contemplated by this Agreement by ABELL and CEC:
(a) by mutual consent of ABELL and the Board of Directors of CEC;
(b) by either CEC or ABELL if the transaction shall not have been
consummated on or before Jan 1, 1998; provided, however, that the right to
terminate this Agreement under this Section 8.1(b) shall not be available to
any party whose willful failure to fulfill any obligation under this
Agreement shall have been the cause of, or shall have resulted in, the
failure of the transaction to occur on or prior to such date;
(c) by either CEC or ABELL if there shall have occurred any event,
change or development which has had or could reasonably be expected to have
a Material Adverse Effect with respect to CEC or CLASSIC; or
(d) by either CEC or CLASSIC in the event that any governmental
authority shall have issued an order, decree or ruling or taken any other
action restraining, enjoining or otherwise prohibiting the transactions
contemplated by this Agreement and such order, decree, ruling or other
action shall have become final and nonappealable.
9.2 EFFECT OF TERMINATION. In the event of the termination of this
Agreement by either CEC or ABELL, as provided above, this Agreement shall
thereafter become void and there shall be no liability on the part of any
party hereto or their respective directors, officers, stockholders or
agents, except as provided in Section 10.3 hereof and except that any such
termination shall be without prejudice to the rights of any party hereto
arising out of the willful breach by any other party of any covenant or
agreement contained in this Agreement. The provisions of Section 4.9 shall
survive any termination of this Agreement.
Article 100
DEFINITIONS
The following terms shall have the indicated meanings when used in this
Agreement, unless the context requires otherwise:
10.1 "AFFILIATE" shall mean any Person which, directly or indirectly,
through one or more intermediaries, controls, or is controlled by, or is
under common control with, a specified Person. The term "control" shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of voting stock or other securities, by contract or otherwise.
25
<PAGE>
10.2 "BENEFIT PLAN" shall mean each Pension Plan, Welfare Plan, bonus
pay, stock option, restricted stock, deferred and incentive compensation,
supplemental retirement, stock purchase, severance, vacation pay, sick pay
or other plan, program or arrangement, to which CLASSIC contributes, has an
obligation to contribute, maintains or sponsors.
10.3 "CLASSIC'S ACCOUNTANTS" shall mean_____________, independent
accountants of CLASSIC.
10.4 "CODE" shall mean the Internal Revenue Code of 1986, as amended.
10.5 "CLASSIC BALANCE SHEET" shall mean the unaudited balance sheets of
the CLASSIC (and each subsidiary of the case of consolidating balance
sheets) and statements as at ______________ July 31, 1997, and the related
consolidated and consolidating statements of income, retained earnings,
stockholders' (or partners') equity and cash flows of the CLASSIC (and each
subsidiary in the case of consolidating statements), together with all
related notes and schedules thereto, certified by the chief financial
officer of CLASSIC.
10.6 "CLASSIC SCHEDULES" shall mean the CLASSIC Schedules prepared by
the CLASSIC attached hereto, dated as of the date hereof, and forming a part
of this Agreement. The disclosure of any information in any Section of the
CLASSIC Schedules shall be deemed to constitute the disclosure of such
information required in other Sections thereof applicable to such
information whether or not set forth in such other Sections.
10.7 "CLASSIC FINANCIAL STATEMENTS" shall mean (i) the audited
consolidated balance sheet of CLASSIC for the fiscal year ended as of
December 31, 1996 and the related statements of income, retained earnings,
stockholders' (or partners') equity and cash flows of the CLASSIC, together
with all related notes and schedules thereto, accompanied by the reports
thereon of the CLASSIC's Accountants.
10.8 "CONTROLLED GROUP MEMBER" shall mean each entity, corporation,
firm or other enterprise which is required to be treated as a member of a
controlled group of corporations along with CLASSIC or CEC, as the case may
be, under Sections 414(b), (c) or (m) of the Code.
10.9 "EFFECTIVE TIME" shall mean the Closing Date.
10.10 "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
10.11 "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended, and all rules and regulations promulgated thereunder.
10.12 "INTELLECTUAL PROPERTY" shall mean, to the extent it pertains to
or is or has been used in the business of CLASSIC, any and all of CLASSIC's
right, title and interest in and to United States and foreign patents,
copyrights, mask works, trade and service names and marks, whether or not
registered, pending, issued or applied for; technical knowledge; works,
processes and designs; hardware; software (in source code and object code
form, including all related annotations and listings); inventions; trade
secrets and other intellectual property rights; all things authored,
discovered, developed, designed or acquired by CLASSIC, or, to the extent
that CLASSIC has any right, title, or interest thereto, any of their agents,
contractors and employees in any stage of development, regardless of whether
any or all of the foregoing constitutes copyrightable or patentable subject
matter or is m tangible or intangible form; and all embodiments,
expressions, representations, fruits and products of any of the foregoing.
26
<PAGE>
10.13 "IRS" shall mean the internal Revenue Service.
10.14 "LEASED PROPERTY" shall have the meaning specified in Section
2.11.
10.15 "LEASES" shall have the meaning specified in Section 2.11.
10.16 "LIENS" shall mean any security interest, pledge, mortgage, lien
(including, without limitation, environmental and tax liens), charge,
encumbrance, adverse claim, preferential arrangement or restriction of any
kind, including, without limitation, any restrictions of the use, voting,
transfer, receipt of income or other exercise of any attributes of
ownership.
10.17 "MATERIAL ADVERSE EFFECT" shall mean (i) with respect to CLASSIC,
any circumstance, change in, or effect on the business, of CLASSIC that,
individually or in the aggregate with any other circumstances, changes in,
or effects on the business, of CLASSIC is, or could reasonably be expected
to be, materially adverse to the business, operations, assets or
liabilities, prospects, results of operations or the condition (financial or
otherwise) of CLASSIC taken as a whole or (ii) with respect to CEC, any
circumstance, change in, or effect on the business of CEC that, individually
or in the aggregate, with any other circumstances, changes in, or effects
on, the business of CEC is or could reasonably be expected to be, materially
adverse to the business, operations, assets or liabilities, prospects,
results of operations or the condition (financial or otherwise) of CEC taken
as a whole.
10.18 "MULTIEMPLOYER PLAN" shall mean a Multiemployer plan as defined
in Section 3 (37) of ERISA.
10.19 "PENSION PLAN" shall mean an employee pension benefit plan as
defined in Section 3(2) of ERISA.
10.20 "PERSON" shall mean any individual, partnership, firm,
corporation, limited liability company, association, trust, unincorporated
organization or other entity, as well as any syndicate or group that would
be deemed to be a person under Section 13(d)(3) of the Exchange Act.
10.21 "SEC" shall mean the Securities and Exchange Commission and any
successor agency.
10.22 "SECURITIES ACT" shall mean the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder.
10.23 "SHAREHOLDERS" shall mean all of the holders of equity securities
of CLASSIC at the date hereof, and all Persons who, prior to the Closing
Date, have rights to acquire, whether pursuant to options, warrants or
otherwise equity securities in CLASSIC.
10.24 "TAX" OR "TAXES" shall mean any and all taxes, fees, levies,
duties, tariffs, imposts and other charges of any kind (together with any
and all interest, penalties, additions to tax and additional amounts imposed
with respect thereto) imposed by any foreign or domestic (federal, state or
local) government or taxing authority.
27
<PAGE>
10.25 "TO THE BEST KNOWLEDGE OF ABELL" shall mean the actual knowledge,
after due inquiry. "Due inquiry" shall mean making a good faith effort under
the circumstances to ascertain the truth or correctness of the matter at
issue.
10.26 "TO THE BEST KNOWLEDGE OF CEC" shall mean the actual knowledge,
after due inquiry. "Due Inquiry" shall mean making a good faith effort under
the circumstances to ascertain the truth or correctness of the matter at
issue.
10.27 "WELFARE PLAN" means an employee welfare benefit plan as defined
in Section 3(1) of ERISA.
Article 11.
MISCELLANEOUS
11.1 SURVIVAL OF REPRESENTATIONS. WARRANTIES AND AGREEMENTS. The
representations, warranties and agreements in this Agreement shall survive
the Closing Date.
11.2 CLOSING. The Closing shall take place at the offices of CEC (or
at such other place as the parties shall agree) as promptly as practicable
after the satisfaction or waiver (if permissible) of the conditions set
forth in Articles 5 and 6 hereof. (The "Closing Date.")
11.3 EXPENSES. Except as otherwise set forth herein, whether or not
the transaction contemplated by this Agreement is consummated, all costs and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such costs or
expenses.
11.4 NOTICES. All notices and other communications hereunder shall be
in writing and shall be deemed to have been duly given if hand delivered,
transmitted by telegram, telex follows:
(a If to CEC, to:
C.E.C. Properties, Inc.
1500 West Balboa Boulevard
Suite 201 Newport Beach, California 92663
Fax No.: (714) 673 4286
Attention: Paul Balalis, President
(b If to ABELL, to:
Milton Abell
510 Powder Spring Street
Marietta, Georgia 30064
______________________________________
______________________________________
______________________________________
28
<PAGE>
or to such other address as the Person to whom notice is given may have
previously furnished to the other parties in writing in accordance herewith,
except that notices of change of address shall be effective only upon
receipt.
11.5 AMENDMENTS. This Agreement may not be amended, modified or
supplemented except by written agreement of the parties hereto.
11.6 WAIVER. At any time prior to the Closing Date, the parties hereto
may (i) extend the time for the performance of any of the obligations or
other acts of the other parties hereto, (ii) waive any inaccuracies in the
representations and warranties contained herein or on any document delivered
pursuant hereto and (iii) waive compliance with any of the agreements or
conditions contained herein to the extent permitted by law. Any agreement on
the part of a party hereto to any such extension or waiver shall be valid
only if set forth in an instrument in writing signed on behalf of such
party.
11.7 PUBLICITY. Except as required by law, no party to this Agreement
shall make or cause to be made, any press release or public announcement in
respect of this Agreement or the transactions contemplated hereby or
otherwise communicate with any news media without the prior written consent
of the other party. The parties shall cooperate as to the timing and
contents of any such press release or public announcement.
11.8 HEADINGS. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
11.9 NONASSIGNABILITY. This Agreement shall not be assigned by
operation of law or otherwise, except that the rights and obligations of CEC
may be assigned to any other wholly owned, newly formed subsidiary of CEC,
however, CEC shall not be released of any liability as a result of such
assignment.
11.10 PARTIES IN INTEREST. This Agreement shall be binding upon and
inure solely to the benefit of the parties hereto and their permitted
assigns, and nothing in this Agreement, expressed or implied, is intended to
confer upon any other Person any rights or remedies of any nature under or
by reason of this Agreement.
11.11 COUNTERPARTS. This Agreement may be executed in one or more
counterparts each of which shall be deemed to constitute an original and
shall become effective when one or more counterparts have been signed by
each of the parties hereto and delivered to the other parties
11.12 GOVERNING LAW. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of California, without
regard to its conflict of law rules.
11.13 ENTIRE AGREEMENT. This Agreement and all Exhibits and Schedules
attached hereto and thereto (including the CEC Disclosure Schedule and the
ABELL Disclosure Schedule) constitute the entire agreement of the parties
hereto with respect to the subject matter hereof and thereof and supersede
all prior agreements and undertakings, both written and oral, among the
parties hereto with respect to the subject matter hereof and thereof.
11.14 ATTORNEYS' FEES. If any legal action or other proceeding is
brought for the enforcement of this Agreement, or because of an alleged
dispute, breach, default or misrepresentation in connection with any of the
provisions of this Agreement, the prevailing party shall be entitled to
recover reasonable attorneys' fees and other costs incurred in that action
or proceeding, in addition to any other relief to which it may be entitled.
29
<PAGE>
11.15 FURTHER ACTION. Each of the parties hereto shall use all
reasonable efforts to take, or cause to be taken, all appropriate action, do
or cause to be done all things reasonably necessary. proper or advisable
under applicable law. and execute and deliver such documents and other
papers. as may be required to carry out the provisions of this Agreement and
consummate and make effective the transactions contemplated by this
Agreement.
11.16 SEVERABILITY. If any terms or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any law or public
policy, all other terms and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance
of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term of
other provision is invalid, illegal or incapable of being enforced, the
parties hereto shall negotiate in good faith to modify this Agreement so as
to effect the original intent of the parties as closely as possible in an
acceptable manner in order that the transactions contemplated hereby are
consummated as originally contemplated to the greatest extent possible.
30
<PAGE>
11.17 SPECIFIC PERFORMANCE. The parties hereto agree that irreparable
damage would occur in the event any provision of this Agreement was not
performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any
other remedy at law or equity.
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered
by ABELL and the duly authorized officers of CEC and CLASSIC on the date
first above written.
C.E.C. PROPERTIES, INC.
By:
------------------------------------------------------------------------
Paul Balalis, President Milton Abell
<PAGE>
EXHIBIT 2B
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT ("Agreement") is made and entered into as
of ________________, 1997 ("Execution Date") by and among MILTON ABELL, an
individual resident in the State of Georgia ("ABELL") doing business as
Classic Golf Shops," "Hydroturf" and "Golf 101" (except where the context
requires otherwise, collectively referred to herein as the ("Companies")
Classic Golf Management, Inc., a Georgia corporation ("Buyer") and CEC
PROPERTIES, INC., a Delaware corporation ("CEC").
R E C I T A L S
(l ABELL owns of record and beneficially all right, title and interest
in and to the Companies.
(m Buyer is a wholly-owned subsidiary of CEC
(n ABELL desires to sell the assets (as that term is defined in
Section 1) to the Buyer, and the Buyer desires to purchase the Assets from
ABELL, upon the terms and subject to the conditions contained in this
Agreement.
TERMS AND CONDITIONS
NOW, THEREFORE, in consideration of the foregoing recitals and premises,
and the mutual promises, agreements, representations and warranties herein
contained, the parties hereto agree as follows:
(i) CERTAIN DEFINITIONS. For the purposes of this Agreement, the
following terms shall have the meaning indicated unless the context requires
otherwise.
"Assets" means and includes all assets of the Companies, whether tangible
or intangible, including without limitation, all trademarks; tradenames;
service marks; inventory; fixed assets; fixtures, furnishings and equipment;
packaging materials and supplies' prepaid items; customer lists;
transferable licenses, permits and registrations; and all work-orders and
contract rights. An inventory of such items set out by each of the entities
which comprise the Companies is attached hereto as Exhibit 1. "Assets" do
not include cash or accounts receivable.
"Balance Sheet" means the individual balance sheets of each of the
entities which comprise the Companies.
"Closing" refers to the closing of the Asset purchase transaction and the
exchange and delivery of all of the documents and consideration generally
described in this Agreement.
"Closing Date" means _____________, 1997 or such earlier date as provided
in Section 10 below.
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<PAGE>
"Execution Date" refers to the date all parties have agreed to have
signed this Agreement, which date is set forth above.
"Interim Period" refers to the period from the Execution Date to and
including the Closing Date.
(ii) AGREEMENT TO SELL AND TRANSFER THE ASSETS. Upon the terms and
subject to all of the conditions contained herein and upon the performance
by the parties hereto of their obligations hereunder, ABELL hereby agrees to
sell, assign, transfer and deliver to the Buyer, on and as of the Closing
Date, all of the Assets, by delivering to the Buyer at the Closing
appropriate assignments, conveyances and bills of sale validly transferring
the Assets to the Buyer as required by the terms of this Agreement.
(iii) PURCHASE PRICE FOR THE ASSETS.
PURCHASE PRICE AND ADJUSTMENT. As a consideration for the Buyer's
purchase of the Assets, and upon and subject to all of the terms and
conditions contained herein and upon the performance by each of the parties
hereto of their obligations hereunder, the Buyer agrees to pay to ABELL the
following ("Purchase Price"):
Subject to the hereinafter described conditions Buyer shall pay to ABELL
the following payments and shall deliver to ABELL shares of CEC Common
Stock, $.10 par value in the following amounts at the following times:
<TABLE>
<CAPTION>
On The 13th Month Anniversary On the 25th Month
Date Of Closing Anniversary
Consideration At Closing --------------- Date of Closing
- ------------- ---------- ---------------
<S> <C> <C> <C>
Cash $71,750 $10,250 $10,250
Shares of CEC Common Stock 20,500 10,250 10,250
</TABLE>
In the event the "Net Revenues" to Buyer as a result of the acquisition
of the Companies for each of the two full fiscal years of Buyer subsequent
to the Closing Date commencing with the fiscal year ending October 31, 1998,
shall not aggregately equal at least one hundred thousand dollars ($100,000)
per year (the "Target Income") then and in that event the number of shares
to be delivered to ABELL pursuant to subparagraph 3.1.1. hereinabove shall
be reduced by a percentage determined as follows:
Projected revenues: $100,000
41% of ABELL's annual compensation: 32,800
Payment pursuant to Sec. 3.11: 10,250
--------
$43,050
========
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<PAGE>
Assume as an example that annual revenues are $90,000 then the following
calculations shall take place:
Projected annual revenues: $100,000
Actual annual revenues: ( 90,000)
---------
10,000
90,000 / 100,000 = .9
---------
43,050
x .9
---------
38,745
43,050 - 38,745 / $3.00
= 1,435 shares
Accordingly, the number of shares delivered or to be delivered would be
reduced by 1,435. In the event the number of shares to be delivered is
insufficient to meet the shortfall then ABELL shall return a sufficient
number of shares from the shares already received as is necessary so as to
meet the difference. "Net Revenues" shall mean the net income from
Companies revenues received after all expenses of the Companies, including a
prorata portion (41%) of the compensation to be paid to ABELL pursuant to
his Employment Contract with Classic Golf Management, Inc. Notwithstanding
the foregoing, no deductions against revenues shall be made for any expenses
incurred by CLASSIC in connection with its obtaining of additional business
opportunities so long as such expenses are approved by the Boards of
Directors of CLASSIC and PURCHASER.
If the average bid and asked price of the CEC common stock as traded in
the public market in which such stock trades shall for ten (10) days
preceding the twenty-fourth (24th) month anniversary date of the Closing
Date (the "Average Price") be less than three dollars ($3.00) per share then
CEC shall, within forty-five (45) days, pay ABELL the difference between the
Average Price and $3.00 per share in cash, subject to any pro rata reduction
as a result of the effect of Section 3.1.2 hereinabove on the aggregate
shares then held by ABELL.
Paul Balalis shall provide his personal guaranty of the payments required
pursuant to this Section 3.1 in the form of Schedule 3.1 attached.
CLOSING DELIVERY. At the Closing Date, the Buyer will delivery the
required shares to ABELL to be held pursuant to the terms of this Agreement.
ALLOCATION OF PURCHASE PRICE. The Purchase Price shall be allocated to
the Assets on the basis set forth in the attached Schedule 3.3. All parties
to this Agreement agree to utilize that allocation for tax and accounting
purposes.
NO LIABILITIES ASSUMED. The Buyer has not assumed, voluntarily or
otherwise, or agreed to perform, discharge, satisfy or be responsible for,
any indebtedness, obligation or liability of ABELL of any nature whatsoever,
whether known or unknown, suspected or unsuspected, and whether or not
accrued, contingent or otherwise.
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(iv) REPRESENTATIONS AND WARRANTIES OF ABELL. The following
representations and warranties of ABELL are true and correct as of the
Execution Date and will be true and correct as of the Closing Date:
VALIDITY AND ENFORCEABILITY OF AGREEMENT. All proceedings or actions
required to be taken by ABELL relating to the execution and delivery of this
Agreement and the consummation of the transactions contemplated herein have
been properly taken. This Agreement has been duly executed, and is a valid
and binding obligation of ABELL enforceable in accordance with its terms
(except as enforcement may be affected by (i) laws of general application
relating to the enforcement of creditors' rights or (ii) the availability of
equitable remedies which are subject to the discretion of the court before
which any proceeding therefor may be brought.)
EXECUTION, DELIVERY AND PERFORMANCE OF AGREEMENT. Neither the execution,
delivery nor performance of this Agreement by ABELL will, with or without
the giving of notice or the passage of time, or both, conflict with, result
in a default, right to accelerate or loss of rights, under, or result in the
creation of any lien, charge or encumbrance pursuant to, any provision of
any of the Companies's organizational provisions, or any franchise,
mortgage, deed of trust, lease, license, agreement, understanding, law,
ordinance, rule or regulation or any order, judgment or decree to which
ABELL or any of the Companies is a party or by which it or they may be bound
or affected which effects the Assets.
ORGANIZATION, GOOD STANDING AND QUALIFICATION. Each of the entities
which comprise the Companies is owned entirely by ABELL. ABELL has all
requisite power and authority and is entitled to carry on the Companies's
business as now being conducted.
BALANCE SHEETS. The Balance Sheets: (i) was/will be prepared from the
books and records of the Companies; (ii) was/will be prepared on a basis
consistent with all previous statements; (iii) sets forth fairly the
financial position of the Companies as at the respective dates of the
Balance Sheets; and (iv) contains and reflects all necessary adjustments
(which consist only of normal recurring accruals) for a fair presentation of
the Companies's financial positions as at the respective dates of the
Balance Sheets. The Balance Sheets show no liabilities. ABELL represents
and warrants that the Net Revenues for the last fiscal year for each of the
Companies was no less than:
Classic Golf Shops $70,000
Hydroturf $35,000
Golf 101 $35,000
TAXES AND TAX RETURNS. All taxes, duties, fees and imposts (collectively
"Taxes"), imposed, levied or assessed by the United States or by any state,
municipality, subdivision or instrumentality of the United States, or by any
other taxing authority, which are due and payable by the Companies and which
affect the Assets, and all interest and penalties thereon, whether disputed
or not, have been paid in full; all tax returns and other information,
certificates and declarations required to be filed in connection therewith
and which affect the Assets have been accurately prepared and duly and
timely filed; and all deposits required by law to be made by the Companies
with respect to any Taxes and which affect the Assets, or ABELL's ability to
convey the Assets, have been duly and timely made.
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TITLE TO THE ASSETS. ABELL has good and marketable title to all of the
Assets. ABELL will disclose to Buyer, in writing, at or prior to the
Closing, any of the Assets not in the Companies's possession. None of the
Assets is subject to any mortgage, pledge, lien, charge, security interest,
purchase money or otherwise (perfected or unperfected), encumbrance,
restriction, lease, license, easement, liability or adverse claim of any
nature whatsoever, direct or indirect, whether accrued, absolute, contingent
or otherwise. To the best of ABELL's knowledge, all of the Assets are in
good operating condition and repair, ordinary wear and tear excepted, are in
all material respects suitable for the purposes used, and are in all
material respects capable of utilization by the Companies and the Buyer
after the Closing Date for the purposes for which they are now being
utilized.
TRADE NAMES, TRADEMARKS AND COPYRIGHTS. The Schedule of Trade Names
attached hereto as Schedule 4.7 contains a complete and accurate list of all
trademarks, service marks, trade names, copyrights, trademark registrations
or applications or copyright registrations or applications owned or utilized
by ABELL with respect to the Companies. To the best of ABELL's knowledge,
none of the trademarks, service marks, trade names, copyrights, trademark
registrations or applications or copyright registrations or applications
described on the Schedule of Trade Names violate or infringe upon the
trademark, copyright or other proprietary right of any other corporation,
entity or individual, or have been abandoned or are the subject of any
cancellation petition or proceeding and ABELL has not received any notice of
such alleged violation or infringement.
CUSTOMERS. To the best of ABELL's knowledge, the Schedule of Customers
attached as Schedule 4.8 contains an accurate and complete list of the
current customers of each of the Companies, by entity. ABELL has no
information, nor is he aware of any facts, indicating that any of its
current customers intends to cease doing business with the Companies or to
materially lower the amount of the business that each such customer is
presently doing with the Companies.
CONTRACTS AND AGREEMENTS. To the best of ABELL's knowledge, the Schedule
of Contracts attached as Schedule 4.9 contains an accurate and complete list
setting forth a description of each material indenture, agreement, contract,
royalty agreement, license agreement, work-order, marketing agreement or any
other services purchased or sales contract, agreement or arrangement,
whether written or oral, or other material obligation, if any, to which each
of the Companies by entity or ABELL is a party, or by which they are bound
as of the date hereof relating to the Assets to be sold. To the best of
ABELL's knowledge, each of the contracts, agreements or arrangements
described on the Schedule of Contracts is a valid and binding obligation of
the parties thereto and to the best of ABELL's knowledge no party to any
such contract, agreement or arrangement is in material default with respect
to any material term or condition thereof, nor has any event occurred which,
through the passage of time or the giving of notice or both, would
constitute a material default thereunder or would cause the acceleration of
any material obligation of any party thereto, or the creation of a lien or
encumbrance upon any of the Assets. The consummation of this Agreement will
not constitute a default under or otherwise materially adversely affect the
rights of the Companies under any contract, agreement or arrangement
described on the Schedule of Contracts or require the consent of any party
thereto. True and complete copies of all contracts, agreements or
arrangements described on the Schedule of Contracts have been attached as
exhibits or made available to the Buyer.
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INSURANCE COVERAGE. To the best of the ABELL's knowledge, the Schedule of
Insurance set forth at Schedule 4.10 attached contains a complete and
accurate description of each insurance policy maintained by ABELL affecting,
relating to or covering the Assets. To the best of ABELL's knowledge, each
such insurance policy described on the Schedule of Insurance is a valid and
binding obligation of the insurer, and neither ABELL nor the insurer is in
material default with respect to any material term or condition thereof, nor
has any event occurred which, through the passage of time or the giving of
notice or both, would constitute a material default thereunder or give rise
to a right to cancel such policy. The insurance policies of the Companies
are in amounts deemed to be sufficient in view of the business of the
Companies.
INVENTORY. The inventories of goods ("Inventories") shown on the Balance
Sheets consist of items of a quality and quantity useable and saleable in
the ordinary course of business by the Companies, except for obsolete and
slow-moving items and items below standard quality, all of which have been
written down on the respective books of the Companies, to net realizable
market value or have been provided for by adequate reserves. All items
included in the inventories are the property of the Companies, except for
sales made in the ordinary course of business since the date of the Balance
Sheets; for each of these sales either the purchaser has made full payment
or the purchaser's liability to make payment is reflected in the respective
books of the Companies. No items included in the Inventories have been
pledged as collateral or are held by the Companies on consignment from
others. The inventories shown on all Balance Sheets are based on quantities
determined by physical count or measurement, taken within the preceding 12
months, and are valued at the lower of cost (determined on a first-in,
first-out basis) or market value and on a basis consistent with that of
prior years.
OTHER TANGIBLE PERSONAL PROPERTY. Schedule 4.12 to this Agreement is a
complete and accurate schedule describing and specifying the location of,
all vehicles, machinery, equipment, furniture, supplies, tools, molds,
patterns, drawings, and all other tangible personal property owned by, in
the possession of, or used by the Companies in connection with their
respective businesses, except Inventories. The property listed in Schedule
4.12 constitutes all tangible personal property necessary for the conduct by
the Companies of their respective businesses as now conducted. All of the
vehicles listed in Schedule 4.12 are in good condition and repair and have
current smog certifications.
Excepted as stated in Schedule 4.12, no personal property used by the
Companies in connection with its business is held under any lease, security
agreement, conditional sales contract, or other title retention or security
arrangement, or is located other than in the possession of ABELL.
TRADE SECRETS. Schedule 4.13 to this Agreement is a true and complete
list, without extensive or revealing descriptions, of the Companies's trade
secrets, including all customer lists, processes, know-how and other
technical data. The specific location of each trade secret's documentation,
including its complete description, specifications, charts, procedures, and
other material relating to it, is also set forth with it in that Schedule.
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 by Buyer without reliance on the special knowledge or memory of
others.
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ABELL is the sole owner of each of these trade secrets, free and clear of
any liens, encumbrances, restrictions, or legal or equitable claims of
others, except as specifically stated in Schedule 4.13. ABELL has taken all
reasonable security measures to protect the secrecy, confidentiality, and
value of these trade secrets; any of its employees and any other persons
who, either alone or in concert with others, developed, invented,
discovered, derived, programmed, or designed these secrets, or who have
knowledge of or access to information relating to them, have been put on
notice and, if appropriate, have entered into agreements that these secrets
are proprietary to ABELL and not to be divulged or misused.
All these trade secrets are presently valid and protectible, and are not
part of the public knowledge or literature, nor to ABELL's knowledge have
they been used, divulged, or appropriated for the benefit of any past or
present employees or other persons, or to the detriment of ABELL or the
Companies.
EXISTING EMPLOYMENT CONTRACTS. Schedule 4.14 to this Agreement is a list
of all employment contracts and collective bargaining agreements, and all
pension, bonus, profit-sharing, stock option, or other agreements or
arrangements providing for employee remuneration or benefits to which ABELL
or the Companies is a party or by which ABELL or the Companies is bound; all
these contracts and arrangements are in full force and effect, and neither
ABELL or the Companies, nor any other party is in default under them. There
have been no claims of defaults and, to the best knowledge of ABELL, there
are no facts or conditions which if continued, or on notice, will result in
a default under these contracts or arrangements. There is no pending or, to
ABELL's knowledge, threatened labor dispute, strike, or work stoppage
affecting the Companies' business.
INTEREST IN CUSTOMERS, SUPPLIERS AND COMPETITORS. Except as set forth in
Schedule 4.15 neither ABELL nor any employee of the Companies, nor any
spouse or child of any of them has any direct or indirect interest in any
competitor, supplier, or customer of the Companies or in any person from
whom or to whom the Companies are doing business.
PERSONNEL IDENTIFICATION AND COMPENSATION. Schedule 4.16 is a list of
the names and addresses of all employees, agents, and manufacturer's
representatives of the Companies, stating the rates of compensation payable
to each. At the Closing there shall be no obligation of any kind owed to or
related to the employees or their employment.
COMPLIANCE WITH LAWS AND OTHER INSTRUMENTS. To the best of ABELL's
knowledge, ABELL and the Companies have complied in all material respects
with all existing laws, rules, regulations, ordinances, orders, judgments
and decrees now applicable to their respective businesses, properties or
operations as presently conducted which affect the Assets or the Companies'
ability to convey the Assets to Buyer hereunder. To the best of ABELL's
knowledge neither the ownership nor use of the Assets nor the conduct of the
Companies' businesses conflicts in any material respect with the legal
rights of any other person, firm or corporation.
BROKERAGE AND FINDER'S FEES. Buyer has not incurred any liability to any
broker, finder or agent for any brokerage fees, finder's fees or commissions
with respect to the transactions contemplated by this Agreement.
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LITIGATION. There are no known claims, legal actions, suits,
arbitrations, or to best of ABELL's knowledge governmental investigations or
other legal or administrative proceedings or orders, decrees or judgments in
progress, pending or in effect, or, to the best knowledge of ABELL's
knowledge threatened against or relating to ABELL or the Companies, the
Assets or the transactions contemplated by this Agreement.
CONSENTS TO ASSIGNMENT Except as otherwise set forth in this Agreement
no written consents to assignment of any lease, contract or agreement to
which the Companies is presently a party or by which they are bound is
required in connection with the transactions contemplated by this Agreement.
INVESTMENT. ABELL has reviewed the CEC filings with the Securities and
Exchange Commission ("SEC"), is an accredited investor as defined by the SEC
and agrees that any CEC shares which he receives pursuant to this Agreement
are taken by him for investment and not for resale. He understands and
agrees that such shares will carry a restrictive legend indicating they are
held for investment purposes and can only be resold pursuant to applicable
securities laws.
BENEFIT PLANS; ERISA.
None of the Companies has ever established, adopted, maintained,
sponsored, contributed to, participated in or incurred any liability with
respect to any Employee Benefit Plan.
The Companies have not advised any of its employees (in writing or
otherwise) that it intends or expects to establish or sponsor any Employee
Benefit Plan or to provide or make available any fringe benefit or other
benefit of any nature in the future.
ENVIRONMENTAL MATTERS.
Neither ABELL nor the Companies are liable or potentially liable for any
response cost or natural resource damages under Section 107(a) of CERCLA, or
under any other so-called "superfund" or "superlien" law or similar legal
requirement, at or with respect to any site.
ABELL has never received any notice or other communication (in writing or
otherwise) from any governmental body or other person regarding any actual,
alleged, possible or potential liability arising from or relating to the
presence, generation, manufacture, production, transportation, importation,
use, treatment, refinement, processing, handling, storage, discharge,
release, emission or disposal of any Hazardous Material. No person has ever
commenced or threatened to commence any contribution action or other
proceedings against the Companies in connection with any such actual,
alleged, possible or potential liability; and no event has occurred, and no
condition or circumstance exists, that may directly or indirectly give rise
to, or result in the Companies becoming subject to, any such liability.
The Companies have never generated, manufactured, produced, transported,
imported, used, treated, refined, processed, handled, stored, discharged,
released or disposed of any Hazardous Material (whether lawfully or
unlawfully). The Companies have never permitted (knowingly or otherwise)
any Hazardous Material to be generated, manufactured, produced, used,
treated, refined, processed, handled, stored, discharged, released or
disposed of (whether lawfully or unlawfully):
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(i) on or beneath the surface of any real property that is, or
that has at any time been, owned by, leased to, controlled by or used by any
of the Companies;
(ii) in or into any surface water, groundwater, soil or air
associated with or adjacent to any such real property; or
(iii) in or into any well, pit, pond, lagoon, impoundment,
ditch, landfill, building, structure, facility, improvement, installation,
equipment, pipe, pipeline, vehicle or storage container that is or was
located on or beneath the surface of any such real property or that is or
has at any time been owned by, leased to, controlled by or used by any of
the Companies.
MATERIAL MISSTATEMENTS OR OMISSIONS. None of the representations or
warranties set forth in this Section 4 are false or misleading in any
material respect, or omits to state any fact required to be stated therein
or necessary in order to make any of the statements therein not misleading
in any material respect in light of the circumstances under which they are
made.
(v) CERTAIN COVENANTS AND AGREEMENTS OF ABELL.
CONDUCT OF BUSINESS BEFORE THE CLOSING. Prior to the Closing (a) ABELL
shall cause the Companies to conduct their businesses diligently, in good
faith and in the ordinary and usual course, consistent with past practices;
and (b) none of the Assets will be sold, assigned, conveyed, transferred,
encumbered, pledged or subjected to any lien, right or security interest of
any third party.
ACCESS AND INFORMATION. Prior to the Closing ABELL will afford the
Buyer, its counsel, accountants and other representatives, reasonable access
to all of the properties, books, contracts and records of the Companies and
any records concerning the Companies maintained and accumulated by the
counsel and/or accountants to the Companies pertaining to the Assets, and
will furnish such persons and entities with all information, including
copies of books, contracts and records, concerning the affairs of the
Companies as they relate to the Assets which the Buyer or its
representatives may reasonably request.
NON-COMPETITION. For a period of three (3) years from and after the
Closing Date ABELL agrees that he will not engage in the same business as
the Companies within the State of Georgia. In the event the covenants,
conditions or limitations of this provision are invalid or unenforceable in
part by reason of being too broad in scope, too long in duration or
applicable to too wide a geographic area, such covenants, conditions and
limitations shall not totally fail but shall be deemed and construed in all
respects to be limited to the maximum scope, duration and area permitted by
law, and in such manner to be specifically enforceable to carry out the
intent of the parties.
SALES AND USE TAXES. Any sales or use taxes imposed on or as a result of
the transfer of the Assets from the Companies to the Buyer shall be the sole
responsibility of, and shall be paid by ABELL and ABELL shall indemnify and
hold Buyer harmless on account thereof.
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(vi) REPRESENTATIONS AND WARRANTIES OF THE BUYER. The following
representations and warranties of the Buyer are true and correct as of the
Execution Date and will be true and correct as of the Closing Date:
VALIDITY AND ENFORCEABILITY OF AGREEMENT. All proceedings or corporate
actions required to be taken by the Buyer relative to the execution and
delivery of this Agreement and the consummation of the transactions
contemplated herein have been or will shortly be properly taken. This
Agreement has been duly executed on behalf of the Buyer and is a valid and
binding obligation of the Buyer, enforceable in accordance with its terms,
except as such enforcement may be affected by (i) laws of general
application relating to the enforcement of creditors' rights, or (ii) the
availability of equitable remedies which are subject to the discretion of
the court before which any proceedings therefor may be brought.
EXECUTION, DELIVERY AND PERFORMANCE OF AGREEMENT. Neither the execution,
delivery nor performance of this Agreement by the Buyer will, with or
without the giving of notice or the passage of time, or both, conflict with,
result in a default, right to accelerate or loss of rights under, or result
in the creation of any lien, charge or encumbrance pursuant to, any
provision of the Buyer's Articles of Incorporation or Bylaws, or any fran-
chise, mortgage, deed of trust, lease, license, agreement, understanding,
law, ordinance, rule or regulation or any order, judgment or decree to which
the Buyer is a party or by which it may be bound or affected.
ORGANIZATION AND GOOD STANDING. The Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Georgia. To the best of Buyer's knowledge, the Buyer has all requisite
corporate power and authority and is entitled to carry on its business as
now being conducted. Buyer is a wholly-owned subsidiary of CEC.
BROKERAGE AND FINDER'S FEES. The Buyer has not incurred any liability to
any broker, finder or agent for any brokerage fees, finder's fees or
commissions with respect to the transactions contemplated by this Agreement.
MATERIAL MISSTATEMENTS OR OMISSIONS. None of the representations or
warranties set forth in this Section 6 is false or misleading in any
material respect, or omits to state any fact required to be stated therein
or necessary in order to make any of the statements therein not misleading
in any material respect in light of the circumstances under which they are
made.
(vii) COVENANTS OF THE BUYER.
Prior to the Closing Date, the Buyer agrees not to divulge, communicate,
use to the detriment of the Companies or for the benefit of any other
corporation, entity or individual, or misuse in any way, any confidential
information or trade secrets of the Companies; provided, however, such
obligation shall terminate upon the occurrence of any of the following: (i)
where such information now or hereafter becomes part of the public domain,
and the Buyer has not obtained or learned such information as the result of
"misappropriation" or "improper means," as those terms are defined in
California Civil Code, Section 3426.1; (ii) such information is already in
the possession of the Buyer at the time of the disclosures so long as it was
acquired from other than the Companies or otherwise than by misappropriation
or improper means; (iii) such information hereafter comes into the
possession of the Buyer from a third party without breach of this contract;
or (iv) such information is independently developed by the Buyer.
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In the event Buyer determines to abandon the business of ABELL acquired
hereunder then and in that even Buyer shall promptly so notify ABELL in
writing whereupon ABELL shall have the option of acquiring the shares of
Buyer at their then current fair market value. Should ABELL elect to
exercise the option granted herein then ABELL shall notify Buyer within
thirty (30) days of his receipt of Buyer's notice. ABELL shall include with
said notification his estimate of the fair market value. In the event Buyer
and ABELL are unable to agree on the fair market value within twenty (20)
days of he receipt of Buyer's estimate then they shall, within twenty (20)
days each select an appraiser, who in turn shall together select a third
appraiser, who shall each appraise the value of the shares of Buyer. The
appraisal which is neither the highest nor the lowest shall be utilized as
the fair market value. Each party shall pay the costs of its own appraiser
and shall divide equally the costs of the third appraiser. ABELL shall pay
the amount of the fair market value to CEC within fifteen (15) days of its
determination whereupon CEC shall deliver to ABELL the shares of Buyer. In
delivering payment ABELL may deliver to CEC shares of CEC Common Stock which
shall be credited against the payment amount at the rate of three dollars
($3.00) per share. Notwithstanding the foregoing (i) in no event shall the
fair market value determination be in excess of six hundred fifty thousand
dollars ($650,000) and (ii) this Section 7.2 shall only be operative in the
event CEC determines to abandon the business of Buyer and shall in no way be
operative in the event CEC shall elect to reorganize, merge or affiliate
with another entity.
(viii) BULK TRANSFER LAW COMPLIANCE. Buyer shall have given notice, if
required, in compliance with the Georgia provisions of the Commercial Code
("Bulk Transfer Law"), of the intended sale of the Assets contemplated by
this Agreement. Compliance with the Bulk Transfer Law shall be a condition
precedent to the Buyer's obligations hereunder. ABELL shall furnish the
Buyer with information necessary for the Buyer to prepare the bulk transfer
notice, including all names and business addresses used by the Companies
within the past three years. To the extent any valid claims of creditors
are delivered prior to the Closing Date, such claims shall be paid by ABELL.
In the event ABELL elects not to pay any claim ABELL shall deposit the
amount withheld with Buyer to be held in an interest earning account pending
resolution of the claim.
(ix) CLOSING DATE. The Closing Date of the transactions contemplated by
this Agreement, and the exchange of the consideration and the other
documents described herein, shall take place at 10:00 a.m. on October __,
1997 ("Closing Date") at Talley & Darden, P.C., 271 Roswell Street,
Marietta, Georgia 30061, or at such other time, on such other date and/or at
such other place and date as the parties hereto may agree.
(x) CONDITIONS PRECEDENT TO CLOSING.
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE BUYER. The Closing shall not
take place unless all of the following conditions have been fulfilled and
satisfied or have been waived in writing by the Buyer (such conditions are
solely for the benefit of the Buyer):
ABELL shall have delivered the assignments, conveyances and bills of
sales as required by Section 2 hereof.
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ABELL shall have obtained all consents, approvals, orders and/or
clearances, if any, required of them in order to consummate the transactions
contemplated by this Agreement, including, without limitation, the
termination of any security interest in or covering any of the Assets,
except for those which may exist with respect to the assumed liabilities.
There shall not have been discovered any material inaccuracy with respect
to any representation or warranty of ABELL contained in this Agreement.
ABELL shall deliver to the Buyer at the Closing a certificate certifying the
foregoing.
There shall be no material covenant or agreement of ABELL contained in
this Agreement and required to be performed before the Closing which has
been breached in any material respect. ABELL shall deliver to the Buyer at
the Closing a certificate certifying the foregoing.
All required time periods under the applicable Bulk Transfer Law shall
have expired and there shall have been full compliance with all of the
provisions and requirements of the Bulk Transfer Law.
ABELL shall have executed the investment representation letter in the
form of Schedule 11 attached and shall have agreed to hold the shares for no
less than two years and for investment purposes only.
The Stock Purchase Agreement of even date herewith by and between ABELL
and CEC shall have closed.
CONDITIONS PRECEDENT TO OBLIGATIONS OF ABELL. The Closing shall not take
place unless all of the following conditions have been fulfilled, satisfied,
or have been waived in writing by ABELL (such conditions are solely for the
benefit of ABELL):
There shall not have been discovered any material inaccuracy with respect
to any representation or warranty of the Buyer contained in this Agreement.
The Buyer shall deliver to ABELL at the Closing a certificate certifying the
foregoing.
There shall be no material covenant or agreement of the Buyer contained
in this Agreement and required to be performed before the Closing which has
been breached in any material respect. The Buyer shall deliver to ABELL at
the Closing a certificate certifying the foregoing.
The Buyer shall have delivered to ABELL the Purchase Price required to be
delivered at the Closing.
All required time periods under the applicable Bulk Transfer Law shall
have expired and there shall have been full compliance with all of the
provisions and requirements of the Bulk Transfer Law.
The Stock Purchase Agreement of even date herewith by and between ABELL
and CEC shall have closed.
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Paul Balalis shall have executed the Guaranty as required by Section 3.1.4
hereinabove.
(xi) INDEMNIFICATION.
ABELL shall indemnify, defend, protect and hold the Buyer, and/or its
officers, directors, shareholders, agents, successors and assigns ("Buyer
Indemnified Parties"), harmless from, against and in respect of any and all
claims, demands, losses, costs, expenses, obligations, liabilities,
judgments, damages, recoveries and deficiencies, including interest,
penalties and attorneys' fees, that the Buyer Indemnified Parties shall
incur or suffer, which claims or liabilities are threatened against the
Buyer Indemnified Parties, which arise or result from, or relate to or are
in any way connected with any Buyer Event of Indemnity (as defined below).
For purposes hereof, the term Buyer Event of Indemnity means and includes
any of the followings:
(i) Any material incorrectness in any representation or warranty
of ABELL as set forth in this Agreement or in any schedule, certificate or
other document delivered in connection herewith.
(ii) Any material failure by ABELL to perform his respective
covenants or agreements pursuant to this Agreement.
(iii) Any indebtedness, obligation or liability of the Companies
not expressly assumed by the Buyer pursuant to Section 3.4 of the Agreement.
The Buyer shall indemnify, defend, protect and hold ABELL, and/or his
agents, successors and assigns ("ABELL Indemnified Parties"), harmless from,
against and in respect of any and all claims, demands, losses, costs,
expenses, obligations, liabilities, judgments, damages, recoveries and
deficiencies, including interest, penalties and attorneys' fees, that ABELL
Indemnified Parties shall incur or suffer, which claims or liabilities are
threatened against ABELL Indemnified Parties, which arise or result from, or
relate to or are in any way connected with any ABELL Event of Indemnity (as
defined below). For purposes hereof, the term ABELL Event of Indemnity
means and includes any of the following:
(i) Any material incorrectness in any representation or warranty
of the Buyer as set forth in this Agreement or in any schedule, certificate
or other document delivered in connection herewith.
(ii) Any material failure by the Buyer to perform its covenants
or agreements pursuant to this Agreement.
(xii) ARBITRATION AND ALTERNATIVE DISPUTE RESOLUTION.
OBLIGATION TO ARBITRATE. Any dispute between the parties relating to the
interpretation and enforcement of their rights and obligations under this
agreement shall be resolved solely by arbitration in accordance with the
provisions of this section.
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BINDING ARBITRATION. Any dispute between the parties that is to be
resolved by arbitration shall be settled and decided by arbitration
conducted by the American Arbitration Association in accordance with the
Commercial Arbitration Rules of the American Arbitration Association, as
then in effect, except as provided below. Any such arbitration shall be
held and conducted in Orange County, California before one arbitrator who
shall be selected by mutual agreement of the parties; if agreement is not
reached on the selection of an arbitrator within thirty (30) days, then such
arbitrator shall be appointed by the presiding judge of the superior court
of the county in which the arbitration is to be conducted.
ARBITRATION RULES AND PROCEDURES. The provisions of the Commercial
Arbitration Rules of the American Arbitration Association shall apply and
govern such arbitration, subject, however, to the following:
Any demand for arbitration shall be in writing and must be made within a
reasonable time after the claim, dispute or other matter in question has
arisen. In no event shall the demand for arbitration be made after the date
that institution of legal or equitable proceedings based on such claim,
dispute, or other matter would be barred by the applicable statute of
limitations or by agreement of the parties, whichever is applicable.
The arbitrator or arbitrators appointed must be former or retired judges
or "attorneys" with at least ten (10) years experience in business and
business acquisition matters, or nonattorneys with like experience in the
area of dispute.
All proceedings involving the parties shall be reported by a certified
shorthand court reporter and written transcripts of the proceedings shall be
prepared and made available to the parties.
The arbitrator or arbitrators shall prepare in writing and provide to the
parties factual findings and the reasons on which the decision of the
arbitrator or arbitrators is based.
Final decision by the arbitrator or arbitrators must be made within
ninety (90) days from the date the arbitration proceedings are initiated.
The prevailing party shall be awarded reasonable attorneys' fees, expert
and nonexpert witness costs and expenses, and other costs and expenses
incurred in connection with the arbitration, unless the arbitrator or
arbitrators for good cause determine otherwise.
Costs and fees of the arbitrator or arbitrators shall be borne by the
non-prevailing party, unless the arbitrator or arbitrators for good cause
determine otherwise.
The award or decision of the arbitrator or arbitrators, which may include
equitable relief, shall be final and judgment may be entered on it in
accordance with applicable law in any court having jurisdiction over the
matter.
The provisions of Title 9 of Part 3 of the California Code of Civil
Procedure, including Section 1283.05, and successor statutes, permitting
expanded discovery proceedings shall be applicable to all disputes which are
arbitrated pursuant to this Section.
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(xiii) EXPENSES. Each party shall pay its own expenses (including the
fees and expenses of its legal counsel, accountants and any other advisors,
consultants or experts) in connection with the transactions contemplated
hereunder.
(xiv) NOTICES. All notices, requests, demands and other communications
required or contemplated hereunder shall be in writing, shall be personally
delivered or sent by registered or certified mail, postage prepaid, return
receipt requested, and shall be deemed to have been given upon the earlier
of (a) the date of personal delivery to the person to receive such notice at
the address indicated below or (b) if mailed to the person to receive such
notice at the address indicated below, four (4) business days after the date
of posting by the United States Post Office as evidenced by the execution of
the return receipt. The parties' addresses, for all purposes hereof, are as
follows:
ABELL: Milton Abell
510 Powder Spring Street
Marietta, Georgia 30064
Buyer: Classic Golf Management, Inc.
c/o CEC Properties, Inc.
1500 W. Balboa Boulevard
Suite 201
Newport Beach, California 92663
Attention: Paul Balalis, President
Notice of change of address shall be given by written notice but shall not
be deemed effective until it has been given in the manner detailed in this
Section.
(xv) APPLICABLE LAW. This Agreement shall be governed by, interpreted
under, and construed and enforced in accordance with the internal laws, and
not the laws pertaining to conflicts or choice of laws, of the State of
California applicable to agreements made and to be performed wholly within
the State of California.
(xvi) ATTORNEYS' FEES AND LITIGATION COSTS. If any suit, legal
proceeding, arbitration or other action is brought for the enforcement of
this Agreement, or because of an alleged dispute, breach, default or
misrepresentation in connection with any of the provisions of this
Agreement, the successful or prevailing party shall be entitled to recover
its reasonable attorneys' fees and other costs incurred in such proceedings
or action, in addition to any other relief to which it may be entitled.
(xvii) NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
statements, representations, warranties, indemnities, covenants and
agreement made by each of the parties hereto shall survive the Closing Date.
(xviii) WAIVERS. No waiver of any breach or default hereunder, or of
any condition precedent to the performance of any obligation hereunder,
shall be considered valid unless in writing and signed by the parties giving
such waiver or against whom such waiver is to be enforced, and no such
waiver shall be deemed a waiver of any subsequent breach or default of the
same or similar nature.
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(xix) INTERPRETATION. The parties hereto acknowledge and agree that
each has been given the opportunity to independently review this Agreement
with legal counsel, and has the requisite experience and sophistication to
understand, interpret and agree to the particular language of the provisions
hereof. In the event of any ambiguity in or dispute regarding the
interpretation of this Agreement, or any provision hereof, the
interpretation of this Agreement shall not be resolved by any rule
providing for interpretation against the party who causes the uncertainty to
exist or against the party who is the draftsman of this Agreement.
(xx) PARTIAL INVALIDITY AND SEVERABILITY. If any provision of this
Agreement shall be held or deemed to be, or shall, in any fact, be
inoperative or unenforceable as applied in any particular case because it
conflicts with any other provision or provisions hereof or any constitution
or statute or rule of public policy or for any other reason, such
circumstances shall not have the effect of rendering the provision in
question inoperative or unenforceable in any other case or circumstance, or
of rendering any other provision or provisions herein contained invalid,
inoperative or unenforceable to any extent whatsoever. The invalidity of
any one or more phrases, sentences, clauses, sections or subsections of this
Agreement shall not affect the remaining portion thereof.
(xxi) SECTION HEADINGS. The section headings in this Agreement are
included for convenience only, are not a part of this Agreement and shall
not be used in construing it.
(xxii) REFERENCE TO SECTIONS. All references to sections are deemed to
include references to the sections' subsidiary to the section referred to
when the context so requires. The term "this Section" refers to the Section
of the Agreement in which the reference is made and all other Sections
subsidiary to the Section referred.
(xxiii) SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and inure to the benefit of each corporate party hereto, their respective
successors and permitted assigns, and each individual party hereto and his
or her heirs, personal representatives, estates, successors and permitted
assigns.
(xxiv) FURTHER ASSURANCES. Each party hereto agrees to execute and
deliver such other instruments, in form and substance mutually agreeable to
the parties, as any other party may reasonably require in order to carry out
the terms of this Agreement or to implement, complete or further the
transactions contemplated by this Agreement.
(xxv) COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
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(xxvi) ENTIRE AGREEMENT; AMENDMENT. This Agreement, any all
certificates, schedules and exhibits incorporated herein, and all other
agreements, documents or writings required to be delivered in connection
herewith contain the entire understanding among the parties hereto with
respect to the subject matter among the parties hereof and supersedes any
and all prior or contemporaneous written or oral negotiations and agreements
between them regarding the subject matter hereof. No addition, modification
or amendment of or to any term or provision of this Agreement, or to this
Agreement as a whole, shall be effective unless set forth in writing and
signed by all of the parties hereto.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first above mentioned.
CLASSIC GOLF MANAGEMENT, INC.
/s/ Milton Abell By: /s/ Paul Balalis
- ------------------------------ -------------------------------
Milton Abell Paul Balalis, President
CEC PROPERTIES, INC.
By: /s/ Paul Balalis
-------------------------------
Paul Balalis, President
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