<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): SEPTEMBER 13, 1996
BENTLEY INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
MISSOURI 0-19503 43-1325291
(State or other (Commission File (IRS Employer
jurisdiction of Number) Identification
organization) Number)
1353 NORTH WARSON ROAD
ST. LOUIS, MISSOURI 63132
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (314) 432-4252
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On September 13, 1996, Bentley International, Inc., a Missouri
corporation (the "Company"), transferred assets of its Megacards division
consisting of inventory and equipment used in the production, design,
repackaging, distribution and sale of sports and entertainment picture cards
to Legends, LP, a newly-organized New York limited partnership ("Legends").
Such transfer was partly a sale and partly a contribution to capital. In
consideration for such transfer, the Company received a 30% Limited Partner
interest and a note in principal amount of $432,000. The note payable to
the Company is subject to adjustment as set forth in the definitive agreements,
and is subject to substantial discount of the underlying obligation if paid
prior to maturity.
The General Partners of Legends, which own in the aggregate a 70%
investment in such limited partnership, are Quality Baseball Cards, Inc., a
New York corporation ("Quality"), and Excell Recycling, Inc., a New York
corporation ("Excell"). Quality and Excell acquired such interests in
consideration of their transfer of assets consisting of accounts receivable,
inventory and equipment used in the production, design, repackaging,
distribution and sale of sports and entertainment picture cards. Such
transfer was partly a sale and partly a contribution to capital. In
connection with the transaction, Legends also assumed Quality's indebtedness
and delivered an $80,000 promissory note to Quality, which is subject to
adjustment as set forth in the definitive agreements, to Fuad Khuri, Ronald
Ruotolo and Carolyn Ruotolo, shareholders of Quality, in the aggregate
principal amount of $300,000.
The terms of the transaction were negotiated on an arms-length
basis by non-affiliated parties. Concurrently with the establishment of
Legends, Legends entered into leases of the real properties formerly used by
the Company's Megacards division in St. Louis, Missouri, on the one hand,
and Quality in Rochester, New York, on the other hand.
The Company also entered into an amendment of its credit
agreement with its bank. Legends and Fuad Khuri, the principal shareholder of
the General Partners, have agreed to guarantee repayment of amounts
outstanding under the Company's credit agreement as of February 1997. In
addition, the Company's subsidiaries, Windsor Art, Inc., and Janco Designs,
Inc., have agreed to guarantee up to $200,000 of such obligation in the
aggregate. Robert L. Wolfson, Chairman of the Board of the Company, has agreed
to guarantee up to $50,000 of such obligation, under certain conditions.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements of businesses acquired. Not applicable.
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(b) Pro forma financial information. Not applicable.
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(c) Exhibits. See Exhibit Index.
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<PAGE> 3
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 thereunto duly authorized.
Dated: September 26, 1996
BENTLEY INTERNATIONAL, INC.
By /s/ Lloyd R. Abrams
-------------------------------------
Lloyd R. Abrams,
President and Chief Executive Officer
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<PAGE> 4
<TABLE>
EXHIBIT INDEX
<CAPTION>
<S> <C>
Exhibit
Number Description
- ------- -----------
2.1 Agreement to Form Joint Venture dated September 13, 1996, by and
among Excell Recycling, Inc.; Quality Baseball Cards, Inc. and
Bentley International, Inc.
2.2 Limited Partnership Agreement Legends, LP dated September 12, 1996,
by and among Excell Recycling, Inc.; Quality Baseball Cards,
Inc. and Bentley International, Inc.
</TABLE>
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<PAGE> 1
AGREEMENT TO FORM JOINT VENTURE
This Agreement made this 13th day of September, 1996, by and among
Excell Recycling, Inc., a New York corporation with a business address at 23
Linden Park, Rochester, New York 14625 ("Excell"); Quality Baseball Cards,
Inc., a New York corporation with a business address at 23 Linden Park,
Rochester, New York 14625 ("QBC") (together, Excell and QBC are referred to
herein as "Quality"); and Bentley International, Inc. d/b/a Megacards, a
Missouri corporation with an address 1353 North Warson Street, St. Louis,
Missouri 63132 ("Bentley").
RECITALS:
--------
WHEREAS, Quality is in the business of the production, design,
repackaging, distribution and sale of sports and entertainment picture
cards; and
WHEREAS, Bentley operates a business division known as Megacards which
is in the business of the production, design, repackaging, marketing and
sale of sports and entertainment picture cards and the marketing of sports
picture card accessories; and
WHEREAS, the parties have developed a common vision regarding the
establishment of a sports and entertainment picture card joint venture to
exploit certain market segments and to pursue related opportunities; and
WHEREAS, in furtherance of the objectives of foregoing objectives, the
parties wish to enter into this Agreement.
NOW, THEREFORE, in consideration of the premises and the
representations, warranties and covenants contained herein, and for other
good invaluable consideration, the receipt in sufficiency of which are
hereby acknowledged, the parties hereby agree as follows:
ARTICLE 1
THE JOINT VENTURE
1.1 Purpose. The parties agree to establish a joint venture to
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design, produce, repackage, market, distribute and sell sports and
entertainment picture cards and collectible memorabilia and publications
incidental thereto.
1.2 Structure. The joint venture shall be formed as a New York
---------
Limited Partnership ("Joint Venture Limited Partnership") to be formed and
operated pursuant to the Limited Partnership Agreement attached hereto as
Exhibit 1.2 ("Limited Partnership Agreement"). QBC and Excell shall be the
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only general partners and Bentley shall be the sole limited partner of the
Joint Venture Limited Partnership.
<PAGE> 2
1.3 Scope. The scope of the joint venture shall be limited to the
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purposes stated in Section 1.1. Each party agrees that it shall not offer
or sell any goods or services that compete with the joint venture, or invest
or participate in any entity that offers or sells competing goods or
services so long as the Limited Partnership Agreement remains in effect.
Notwithstanding the preceding sentence, the parties acknowledge and agree
that the activities of Bentley's subsidiaries, Windsor Art & Mirror Co. and
Janco Designs, Inc., as presently conducted, shall not be deemed to compete
with the activities of the Joint Venture Limited Partnership.
1.4 Name. The name of the Joint Venture Limited Partnership shall
----
be Legends, LP. Each party hereby agrees that the Joint Venture Limited
Partnership shall have the exclusive right to use the "Quality Baseball
Cards" and "Megacards" marks after the Closing Date (as defined in Article
7), except that Quality may use Quality Baseball Cards, Inc. solely with
reference to its legal corporate name and except for the rights granted by
Bentley to Jeanandy, Inc. under a License Agreement dated October ---, 1995.
ARTICLE 2
CONTRIBUTIONS TO JOINT VENTURE;
ASSUMED LIABILITIES; ADJUSTMENTS
2.1 Initial Capital Contributions.
-----------------------------
(a) Quality agrees to contribute the assets set forth on
Schedule 2.1(a) collectively having the agreed fair value set forth thereon
- ---------------
to the Joint Venture Limited Partnership on the Closing Date for a 70%
interest as the general partner and a promissory note from the Joint Venture
Limited Partnership in the principal sum of $67,100 (the "Quality Note").
The Quality Note shall bear interest at the rate of 8% per annum and will be
payable in monthly payments of interest only with a balloon payment of
principal and interest due five years after the Closing Date. The assets
shall only include those accounts receivable which are 60 days or less past
due. The Quality Note and Security Agreement shall be in forms reasonably
satisfactory to Quality and Bentley.
(b) Bentley agrees to contribute the assets set forth on
Schedule 2.1(b) collectively having the agreed fair value set forth thereon
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to the Joint Venture Limited Partnership on the Closing Date for a 30%
interest as the limited partner and a promissory note from the Joint Venture
Limited Partnership in the principal sum of $432,000 (the "Bentley Note").
The Bentley Note shall bear interest at the rate of 8% per annum and will be
payable in monthly payments of interest only with a balloon payment of
principal and interest due five years after the Closing Date. The Bentley
Note shall be secured by a security interest in the assets of the Joint
Venture Limited Partnership with a first priority security interest in the
assets contributed by Bentley under this Section 2.1(b). The Bentley Note
shall be personally guaranteed by Dr. Fuad Khuri, M.D. The Bentley Note
shall be discounted if prepaid in full as follows:
2
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<TABLE>
<CAPTION>
Amount of
Prepayment Date Principal Discount
--------------- ------------------
<S> <C>
Prior to 2/1/97 $200,000
2/1/97 to 8/1/97 $150,000
8/2/97 to 2/1/98 $100,000
2/2/98 to 8/1/99 $50,000
</TABLE>
The Bentley Note shall be accelerated if Bentley fails to pay or
cause to be paid, on or before February 1, 1997, the full amount of all
indebtedness of Bentley to Mark Twain Bank, St. Louis, Missouri outstanding
as of the Closing Date. The Bentley Note, Guaranty and Security Agreement
shall be in forms reasonably satisfactory to Quality and Bentley.
(c) Each of the parties agrees to execute such assignments or
other documents necessary to effect the transfer of the assets contributed
to the Joint Venture Limited Partnership pursuant to this Section 2.1 on the
Closing Date.
(d) No other contributions of capital to the Joint Venture
Limited Partnership shall be required by any party hereto.
2.2 Assumption of Liabilities.
-------------------------
(a) The Joint Venture Limited Partnership shall assume the
liabilities of Quality as set forth in Schedule 2.2(a) on the Closing Date.
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Neither the Joint Venture Limited Partnership nor Bentley is assuming,
becoming liable for, agreeing to discharge or in any manner becoming
responsible for any liabilities of Quality other than as set forth on
Schedule 2.2(a). The shareholders/officers' notes of QBC assumed hereunder
- ---------------
shall be secured by a security interest in the assets of the Joint Venture
Limited Partnership with a first priority security interest in the assets
contributed by Quality under Section 2.1(a).
(b) The Joint Venture Limited Partnership shall assume the
liabilities of Bentley as set forth in Schedule 2.2(b) on the Closing Date.
---------------
In addition, the Joint Venture Limited Partnership shall pay directly to
Bentley an amount equal to the following "accrued expenses" on the
respective payment dates set forth below:
<TABLE>
<CAPTION>
Accrued Expense Amount Payment Date
--------------- ------ ------------
<S> <C> <C>
1995 PA Franchise Tax $ 5,900 12/31/96
1995 Deloitte & Touche Fees $23,000 Closing Date
1996 Accrued Deloitte & Touche Fees $10,100 March 31, 1997
1996 Ken Griffey Royalty $15,000 October 31, 1996
1996 Make a Wish $10,000 September 30, 1996
</TABLE>
Neither the Joint Limited Partnership nor Quality is assuming, becoming
liable for, agreeing to discharge or in any manner becoming responsible for
any liabilities of Bentley other than as set forth on Schedule 2.2(a).
---------------
3
<PAGE> 4
(c) Each party agrees to indemnify, defend and hold the other
harmless from and against any liabilities not expressly agreed to be paid by
the Joint Venture Limited Partnership pursuant to this Agreement.
Furthermore, if a party requests the Joint Venture Limited Partnership not
to pay an account payable or elects to otherwise assume the obligation to
pay the liability, then the Joint Venture Limited Partnership shall
indemnify, defend and hold harmless that party, but only to the extent of
the amount of the account in question as set forth on Schedule 2.2(a) or
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2.2(b), as the case may be. If an account payable is discounted by the
- ------
payee, then the Joint Venture Limited Partnership shall retain any benefit
derived therefrom.
2.3 Adjustments.
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(a) The parties agree that the amount of the Quality Note set
forth in Section 2.1(a) is based on Quality's net worth of $1,000,920 and
that the amount of the Bentley Note set forth in Section 2.1(b) is based on
Bentley's adjusted net worth of $523,000. The principal under the Bentley
Note as of July 31, 1996 was agreed by the parties to be $449,000. If the
actual net worth of Quality as of the Closing Date is greater than
$1,000,920, then the principal of the Quality Note shall be increased by the
excess amount. If the adjusted net worth of Bentley as of the Closing Date
is greater than $449,000, then the principal of the Bentley Note shall be
increased by the excess amount. If the actual net worth of Quality as of
the Closing Date is less, then the Quality Note shall be reduced
accordingly. If the adjusted net worth of Bentley as of the Closing Date is
less, then the Bentley Note shall be reduced accordingly. The net worth of
Quality shall be determined by taking the sum of Quality's cash, accounts
receivable, inventory at cost and $140,000 as of the Closing Date, and
reducing that amount by accounts payable, accrued payroll, outstanding line
of credit and shareholder loans as of the Closing Date. The adjusted net
worth of Bentley shall be determined by taking the sum of Bentley's
inventory at cost on the Closing Date which is agreed to be $825,000 plus
the value of its plant, property and equipment, which is agreed to be
$111,000, and reducing that amount by (i) accrued commissions, (ii) accounts
payable and (iii) accrued expenses of $64,000 as of the Closing Date.
(b) If there is a dispute concerning any account receivable
contributed to the Joint Venture Limited Partnership, then the Joint Venture
Limited Partnership shall have the right to assign the account back to the
party who contributed it. If an account receivable is not collected, or if
an account is assigned back to the party who contributed it, then the party
who contributed that account receivable shall pay to the Joint Venture
Limited Partnership the amount of that account within 30 days of the date
the account is assigned back or determined by the Joint Venture Limited
Partnership to be uncollectible, as the case may be, except that if the
party owing funds to the Joint Venture Limited Partnership is Bentley, the
obligation to pay the Joint Venture Limited Partnership shall be satisfied
by reducing the principal sum due under the Note.
2.4 Accounts Receivable. The Joint Venture Limited Partnership
-------------------
shall use its best efforts to collect any account receivable contributed
pursuant to Section 2.1(a) or (b).
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<PAGE> 5
Furthermore, Bentley agrees to use its best efforts to collect its accounts
receivable and to apply such collected amounts to reduce its outstanding
indebtedness to Mark Twain Bank.
2.5 Transactions With Mark Twain Bank and Right of Offset. On the
-----------------------------------------------------
Closing Date, Bentley shall simultaneously close the Tenth Amendment to
Revolving Credit Loan Agreement ("Bank Loan") pursuant to which Dr. Fuad
Khuri, M.D. shall be required to guaranty the Bank Loan. The parties agree
that if Dr. Khuri is required to pay any principal of the outstanding
indebtedness under the Bank Loan, then the principal due under the Bentley
Note shall be reduced by such amount, and Dr. Khuri shall be reimbursed by
the Joint Venture Limited Partnership.
2.6 Additional Assignment of Assets. When Bentley has fully
-------------------------------
satisfied all outstanding obligations owed to Mark Twain Bank, St. Louis,
Missouri as of the Closing Date, Bentley shall transfer to the Joint Venture
Limited Partnership all accounts receivable which are then 60 days or less
past due and all Toys 'R Us accounts which are 120 days or less past due.
Upon transfer of those accounts receivable to the Joint Venture Limited
Partnership, principal under the Bentley Note described in Section 2.1(b)
shall be increased by on amount equal to the fair value of the transferred
accounts receivable as agreed by the parties hereto.
ARTICLE 3
FACILITIES
3.1 St. Louis Facility. The Joint Venture Limited Partnership shall
------------------
enter into a sublease for use of the space at 1353 North Warson Road, St.
Louis, Missouri, as currently used by Megacards. The sublease shall be in
the form attached hereto as Exhibit 3.1.
-----------
3.2 Rochester Facility. The Joint Venture Limited Partnership shall
------------------
enter into a lease for the Quality production facility located at 23 Linden
Park, Rochester, New York. The lease shall be in the form attached hereto
as Exhibit 3.2.
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ARTICLE 4
REPRESENTATIONS AND WARRANTIES
4.1 Representations and Warranties of Bentley. Bentley represents
-----------------------------------------
and warrants to Quality that the statements contained in this Section 4.1
are correct and complete as of the date of this Agreement, except as stated
herein or on Schedule 4.1.
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(a) Bentley is a corporation duly organized, validly existing,
and in good standing under the laws of the jurisdiction of its
incorporation.
(b) Bentley has full power and authority (including full
corporate power and authority) to execute and deliver this Agreement and to
perform its obligations hereunder. This Agreement constitutes the valid and
legally binding obligation of Bentley, enforceable in accordance with its
terms and conditions.
5
<PAGE> 6
(c) Neither the execution and the delivery of this Agreement,
nor the consummation of the transactions contemplated hereby (including the
assignments and assumptions referred to in Article 2 above), will (i)
violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which Bentley is subject or any provision
of the charter or bylaws of Bentley or (ii) conflict with, result in a
breach of, constitute a default under, result in the acceleration of, create
in any party the right to accelerate, terminate, modify, or cancel, or
require any notice under any agreement, contract, lease, license,
instrument, or other arrangement to which Bentley is a party or by which it
is bound or to which any of its assets is subject (or result in the
imposition of any lien upon any of its assets); and Bentley is not required
to give any notice to, make any filing with, or obtain any authorization,
consent, or approval of any government or governmental agency in order for
the parties to consummate the transactions contemplated by this Agreement,
other than the lease for the facility at 1353 North Warson Street, St.
Louis, Missouri, and certain bank financing documents with Mark Twain Bank.
(d) Bentley has no liability or obligation to pay any fees or
commissions to any broker, finder, or agent with respect to the transactions
contemplated by this Agreement for which the Joint Venture Limited
Partnership could become liable or obligated.
(e) Bentley has marketable title to, or a valid leasehold
interest in, the assets set forth on Schedule 2.1(b), free and clear of all
---------------
liens and encumbrances, except for the license granted to Jeanandy, Inc. to
use the Megacards mark.
(f) Bentley has full corporate power and authority and all
licenses, permits, and authorizations necessary to carry on the businesses
in which it is engaged and to own and use the properties owned and used by
it, except where the lack of same would not have a material adverse effect
on the Joint Venture Limited Partnership. Bentley has delivered to Quality
correct and complete copies of its charter and bylaws (as amended to date).
(g) Bentley has provided to Quality (i) its consolidated
financial statements for the years ended December 31, 1994 and December 31,
1995, as audited by Bentley's independent auditors Deloitte & Touche LLP, as
contained in Bentley's annual report on Form 10-K dated March 31, 1996, (ii)
its unaudited financial statements for the six months ended June 30, 1996,
and (iii) balance sheet as of July 31, 1996 (collectively the "Bentley
Financial Statements"). To the best of Bentley's knowledge, the Bentley
Financial Statements fairly present the financial condition of Bentley as of
their respective dates, and have been prepared in accordance with generally
accepted accounting principles consistently applied.
(h) Since the December 31, 1995 Bentley Financial Statements,
there has not been any material adverse change in the business, financial
condition, operations, or future prospects of Bentley, except as reflected
in the Bentley Financial Statements referred to in Section 4.1(g).
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<PAGE> 7
(i) Bentley has no liability (and there is no basis for any
present or future action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand against it giving rise to any liability), except
for (i) liabilities set forth in the Bentley Financial Statements and (ii)
liabilities which have arisen after the Bentley Financial Statements in the
ordinary course of business (none of which results from, arises out of,
relates to, is in the nature of, or was caused by any breach of contract,
breach of warranty, tort, infringement, or violation of law).
(j) Bentley has complied with all applicable laws (including
rules, regulations, codes, plans, injunctions, judgments, orders, decrees,
rulings, and charges thereunder) of federal, state, local, and foreign
governments (and all agencies thereof), and no action, suit, proceeding,
hearing, investigation, charge, compliant, claim, demand, or notice has been
filed or commenced against it alleging any failure so to comply.
(k) Bentley has filed all tax returns that it was required to
file. All such tax returns were correct and complete in all respects. All
taxes owed by Bentley have been duly paid.
(l) Bentley owns or has the right to use pursuant to license,
sublicense, agreement, or permission all intellectual property necessary for
the sale of Megacards inventory to be contributed to the Joint Venture
Limited Partnership. Except as set forth on Schedule 4.1, each item of
------------
intellectual property owned or used by Bentley for Megacards immediately
prior to the Closing hereunder will be owned or available for use by the
Joint Venture Limited Partnership on identical terms and conditions
immediately subsequent to the Closing hereunder. To the knowledge of
Bentley, it presently is not, and has received no notice that it is,
interfering with, infringing upon, misappropriating, or is otherwise in
conflict with, any intellectual property rights of third parties.
(m) The fixed assets transferred by Bentley hereunder, taken
as a whole, have been maintained in accordance with normal industry
practice, are in good operating condition and repair (subject to normal wear
and tear), and are suitable for the purposes for which they presently are
used.
(n) The inventory of Bentley consists of raw materials and
supplies, manufactured and purchased parts, goods in process, and finished
goods, which, taken as a whole, is saleable at not less than the aggregate
carrying value thereof (net of all reserves, if any, reflected on Bentley's
books and records).
(o) Schedule 4.1 sets forth each instance in which Bentley
------------
(i) is subject to any outstanding injunction, judgment, order, decree, ruling,
or charge or (ii) is a party or, to the knowledge of Bentley, is threatened
to be made a party to any action, suit, proceedings, hearing, or
investigation of, in, or before any court or quasi-judicial or
administrative agency of any federal, state, local, or foreign jurisdiction
or before any arbitrator. None of the actions, suits, proceedings,
hearings, and investigations set forth in Schedule 4.1 could result in any
------------
material adverse change in the business, financial condition, operations,
results of operations, or assets of the Megacards division of Bentley.
7
<PAGE> 8
(p) The representations and warranties contained in this
Section 4.1 do not contain any untrue statement of a material fact or omit
to state any material fact necessary in order to make the statements and
information contained in this Section 4.1 not misleading.
(q) Bentley (i) acknowledges and understands that the Note has
not been, and will not be, registered under the Securities Act, or under any
state securities laws, and is being offered and sold in reliance upon
federal and state exemptions for transactions not involving any public
offering, (ii) is acquiring the Note solely for its own account for
investment purposes, and not with a view to the distribution thereof, (iii)
is a sophisticated investor with knowledge and experience in business and
financial matters, (iv) has received certain information concerning Quality
and the Joint Venture Limited Partnership and has had the opportunity to
obtain additional information as desired in order to evaluate the merits and
the risks inherent in holding the Note, (v) is able to bear the economic
risk and lack of liquidity inherent in holding the Note, and (vi) is an
accredited investor as that term is defined in Regulation D promulgated
under the Securities Act of 1993.
(r) Bentley has no written or oral agreements of employment
with employees of the Megacards division which are not terminable at will
and without penalty.
4.2 Representations and Warranties of Quality. Quality represents
-----------------------------------------
and warrants to Bentley that the statements contained in this Section 4.2
are correct and complete as of the date of this Agreement, except as set
forth herein or on Schedule 4.2.
------------
(a) Quality is a corporation duly organized, validly existing,
and in good standing under the laws of the jurisdiction of its
incorporation.
(b) Quality has full power and authority (including full
corporate power and authority) to execute and deliver this Agreement and to
perform its obligations hereunder. This Agreement constitutes the valid and
legally binding obligation of Quality, enforceable in accordance with its
terms and conditions.
(c) Neither the execution and the delivery of this Agreement,
nor the consummation of the transactions contemplated hereby (including the
assignments and assumptions referred in Article 2 above), will (i) violate
any constitution, statute, regulation, rule, injunction, judgment, order,
decree, ruling, charge, or other restriction of any government, governmental
agency, or court to which Quality is subject or any provision of their
charter or by-laws or (ii) conflict with, result in a breach of, constitute
a default under, result in the acceleration of, create in any party the
right to accelerate, terminate, modify, or cancel, or require any notice
under any agreement, contract, lease, license, instrument, or other
arrangement to which the Quality is a party or by which it is bound or to
which any of their assets is subject. Quality is not required to give any
notice to, make any filing with, or obtain any authorization, consent, or
approval of any government or governmental agency in order for the parties
to consummate the transactions contemplated by this Agreement.
8
<PAGE> 9
(d) Quality has no liability or obligation to pay any fees or
commissions to any broker, finder, or agent with respect to the transactions
contemplated by this Agreement for which Bentley could become liable or
obligated.
(e) Quality has marketable title to, or a valid leasehold
interest in, the assets set forth on Schedule 2.1(a), free and clear of all
---------------
liens and encumbrances.
(f) Quality has full corporate power and authority and all
licenses, permits, and authorizations necessary to carry on the businesses
in which it is engaged and to own and use the properties owned and used by
it, except where the lack of same would not have a material adverse affect
on the Joint Venture Limited Partnership. QBC and Excell each have
delivered to Bentley correct and complete copies of its charter and bylaws
(as amended to date).
(g) Attached as Schedule 4.2(g) are Quality's (i) unaudited
---------------
consolidated financial statements for the years ended December 31, 1993,
December 31, 1994 and December 31, 1995, and (ii) unaudited financial
statements for the period ended July 31, 1996 (collectively the "Quality
Financial Statements"). To the best knowledge of Quality, the Quality
Financial Statements fairly present the financial condition of the Quality
as of their respective dates, and have been prepared in accordance with
generally accepted accounting principles consistently applied.
(h) Since the July 31, 1996 Quality Financial Statements,
there has not been any material adverse change in the business, financial
condition, operations, or future prospects of Quality.
(i) Quality does not have any liability (and there is no basis
for any present or future action, suit, proceeding, hearing, investigation,
charge, complaint, claim, or demand against any of them giving rise to any
liability), except for (i) liabilities set forth in the Quality Financial
Statements and (ii) liabilities which have arisen after the Quality
Financial Statements in the ordinary course of business (none of which
results from, arises out of, relates to, is in the nature of, or was caused
by any breach of contract, breach of warranty, tort, infringement, or
violation of law).
(j) Quality has complied with all applicable laws (including
rules, regulations, codes, plans, injunctions, judgments, orders, decrees,
rulings, and charges thereunder) of federal, state, local, and foreign
governments (and all agencies thereof), and no action, suit, proceeding,
hearing, investigation, charge, compliant, claim, demand, or notice has been
filed or commenced against it alleging any failure so to comply.
(k) Quality has filed all tax returns that they were required
to file. All such tax returns were correct and complete in all respects.
All taxes owed by Quality have been duly paid.
(l) Quality owns or has the right to use pursuant to license,
sublicense, agreement, or permission all intellectual property necessary for
the sale of its inventory to be
9
<PAGE> 10
contributed to the Joint Venture Limited Partnership. Except as set forth on
Schedule 4.2, each item of intellectual property owned or used by Quality
- ------------
immediately prior to the Closing hereunder will be owned or available for use
by the Joint Venture Limited Partnership on identical terms and conditions
immediately subsequent to the Closing hereunder. To the knowledge of Quality,
it presently is not, and has received no notice that it is, interfering with,
infringing upon, misappropriating, or is otherwise in conflict with, any
intellectual property rights of third parties.
(m) The fixed assets transferred by Quality hereunder, taken
as a whole, have been maintained in accordance with normal industry
practice, are in good operating condition and repair (subject to normal wear
and tear), and are suitable for the purposes for which they presently are
used.
(n) The inventory of Quality consists of raw materials and
supplies, manufactured and purchased parts, goods in process, and finished
goods, which, taken as a whole, is saleable at not less than the aggregate
carrying value thereof (net of all reserves, if any, reflected on Quality's
books and records).
(o) Schedule 4.2 sets forth each instance in which Quality
------------
(i) is subject to any outstanding injunction, judgment, order, decree, ruling,
or charge or (ii) is a party or, to the knowledge of Quality, is threatened
to be made a party to any action, suit, proceedings, hearing, or
investigation of, in, or before any court or quasi-judicial or
administrative agency of any federal, state, local, or foreign jurisdiction
or before any arbitrator. None of the actions, suits, proceedings,
hearings, and investigations set forth in Schedule 4.2 could result in any
------------
material adverse change in the business, financial condition, operations,
results of operations, or assets of Quality.
(p) The representations and warranties contained in this
Section 4.2 do not contain any untrue statement of a material fact or omit
to state any material fact necessary in order to make the statements and
information contained in this Section 4.2 not misleading.
(q) Quality has no written or oral agreement of employment
with employees which are not terminable at will and without penalty.
ARTICLE 5
PRE AND POST CLOSING COVENANTS
5.1 Pre-Closing Covenants. The parties agree as follows with
---------------------
respect to the period between the execution of this Agreement and the
Closing (as defined in Article 7):
(a) Each of the parties will use its reasonable best efforts
to take all action and to do all things necessary, proper, or advisable in
order to consummate and make effective the transactions contemplated by this
Agreement and to cause its representations and warranties to be true and
correct as of the Closing Date.
10
<PAGE> 11
(b) Each of the parties will give any notices to, obtain the
consent of, make any filings with, and use its reasonable best efforts to
obtain any authorizations, consents, and approvals of third parties and
governments and governmental agencies in connection with the transaction
contemplated hereby.
(c) Each party agrees not to engage in any practice, take any
action, or enter into any transaction outside the ordinary course of
business and to keep its business and properties substantially intact,
including its present operations, physical facilities, working conditions,
and relationships with lessors, licensor, suppliers, customers, and
employees.
(d) Each party will permit representatives of the other to
have full access at all reasonable times, and in a manner so as not to
interfere with normal business operations to all premises, properties,
personnel, books, records (including tax records), contracts, and documents
of or pertaining to the assets and liabilities to be transferred to and
assumed by the Joint Venture Limited Partnership.
(e) Each party will give prompt written notice to the other
party of any material adverse development causing a breach of any of its own
representations and warranties in Article 4.
(f) Neither party will (i) solicit, initiate, or encourage the
submission of any proposal or offer from any person relating to the
acquisition of its capital stock or other voting securities, or any
substantial portion of its assets, (including any acquisition structured as
a merger, consolidation, or share exchange) or (ii) participate in any
discussions or negotiations regarding, furnish any information with respect
to, assist or participate in, or facilitate in any other manner any effort
or attempt by any person to do or seek any of the foregoing.
5.2 Post-Closing Covenants. The parties agree as follows with
----------------------
respect to the period following the Closing:
(a) In case at any time after the Closing any further action
is necessary to carry out the purposes of this Agreement, each of the
parties will take such further action (including the execution and delivery
of such further instruments and documents) as the other party reasonably may
request, at the sole cost and expense of the requesting party (unless the
requesting party is entitled to indemnification therefor under Article 8
below). Such action shall include, without limitation, the following:
(i) Bentley agrees to execute and file such instruments
as are necessary to assign the trademarks set forth in
Schedule 5.2(a)(i) to the Joint Venture Limited
------------------
Partnership.
(ii) The parties agree to deliver such information as is
necessary to make the adjustments, if any, to the Quality
Note and the Bentley Note pursuant to Section 2.3.
11
<PAGE> 12
(iii) The parties agree to allocate the purchase price
paid by the Joint Venture Limited Partnership for the
portion of the assets acquired from Quality and Bentley
for the Quality Note and Bentley Note in accordance with
Section 1060 of the Internal Revenue Code. The parties
further agree that they will prepare and file Internal
Revenue Service Form 8594 in accordance with this
allocation.
(iv) Bentley agrees to obtain a certificate of waiver of
subrogation from its insurance carrier insuring the
premises under the St. Louis, Missouri Lease.
(v) Bentley agrees to obtain the consent of the landlord
of the St. Louis facility to the sublease of that facility
to the Joint Venture Limited Partnership.
(b) In the event and for so long as any party actively is
contesting or defending against any action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand in connection with (i)
any transaction contemplated under this Agreement or (ii) any fact,
situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or transaction on or
prior to the Closing Date involving a party, the other party will cooperate
with the contesting or defending party and its counsel in the contest or
defense, make available its personnel, and provide such testimony and access
to its books and records as shall be necessary in connection with the
contest or defense, all at the sole cost and expense of the contesting or
defending party (unless the contesting or defending party is entitled to
indemnification therefor under Article 8 below).
(c) Neither party shall take any action that is designed or
intended to have the effect of discouraging any lessor, licensor, customer,
supplier, or other business associate of any of that party from maintaining
the same business relationships with the Joint Venture Limited Partnership
after the Closing as it maintained prior to the Closing, except to the
extent the parties determine by mutual agreement that such action is in the
best interest of the Joint Venture Limited Partnership. Both parties will
refer all customer inquires relating to their businesses to the Joint
Venture Limited Partnership from and after the Closing.
(d) After the Closing Date, the Joint Venture Limited
Partnership shall pay to Mark Twain Bank all interest owed on Bentley's
indebtedness to the bank as of the Closing Date until such time as that
indebtedness is paid in full.
ARTICLE 6
CONDITIONS TO CLOSING
6.1 Conditions to Obligation of Quality. The obligation of Quality
-----------------------------------
to consummate the transactions to be performed by it in connection with the
Closing is subject to satisfaction of the following conditions:
12
<PAGE> 13
(a) The representations and warranties set forth in Section
4.1 above shall be true and correct in all material respects at and as of
the Closing Date;
(b) Bentley shall have performed and complied with all of its
covenants hereunder in all material respects through the Closing Date;
(c) Bentley shall have procured all of the third party
consents and approvals required to consummate this transaction including
consents from Mark Twain Bank and the landlord of Bentley's St. Louis
facility;
(d) No material adverse effect shall have taken place in the
business condition, operations or prospects of Bentley or the Megacards
division or the assets to be acquired therefrom by the Joint Venture Limited
Partnership;
(e) Bentley shall have delivered to Quality a certificate to
the effect that each of the conditions specified above in Sections 6.1 (a) -
(d) is satisfied in all respects;
(f) Quality shall have received from counsel to Bentley an
opinion dated as of the Closing Date as to the matters set forth in Sections
4.1 (a), (b), and (c);
(g) All actions to be taken by Bentley in connection with
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the
transactions contemplated hereby will be satisfactory in form and substance
to Quality;
(h) Quality shall have completed to its satisfaction, its due
diligence review in connection with the transaction contemplated under this
Agreement;
(i) Bentley shall have executed the form of Limited
Partnership Agreement attached hereto as Exhibit 1.2;
Quality may waive any condition specified in this Section 6.1(a) if it
executes a writing so stating at or prior to the Closing.
6.2 Conditions to Obligation of Bentley. The obligation of Bentley
-----------------------------------
to consummate the transactions to be performed by it in connection with the
Closing is subject to satisfaction of the following conditions:
(a) The representations and warranties set forth in Section
4.2 above shall be true and correct in all material respects at and as of
the Closing Date;
(b) Quality shall have performed and complied with all of its
covenants hereunder in all material respects at and as of the Closing Date;
13
<PAGE> 14
(c) No material adverse effect shall have taken place in the
business condition, operations or prospects of Quality or Excell or the
assets to be acquired therefrom by the Joint Venture Limited Partnership;
(d) Quality shall have delivered to Bentley a certificate to
the effect that each of the conditions specified above in Sections 6.2 (a) -
(c) is satisfied in all respects;
(e) Bentley shall have received from counsel to Quality an
opinion dated as of the Closing Date as to the matters set forth in Sections
4.2(a), (b) and (c);
(f) All actions to be taken by Quality in connecting with
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the
transactions contemplated hereby will be reasonably satisfactory in form and
substance to Bentley.
(g) Quality shall have executed the form of Limited
Partnership Agreement attached hereto as Exhibit 1.2.
Bentley may waive any condition specified in this Section 6.2(b) if it
executes a writing so stating at or prior to the Closing.
ARTICLE 7
CLOSING
7.1 Closing Date. The closing of the transactions contemplated by
------------
this Agreement (the "Closing") shall take place at the principal offices of
Bentley in St. Louis, MO commencing on September 13, 1996, or on such other
date as the parties may mutually determine (the "Closing Date").
7.2 Deliveries at Closing. At the Closing, each of the parties
---------------------
shall deliver such certificates, instruments, and documents referred to
herein or as otherwise reasonable requested by the other party.
ARTICLE 8
INDEMNIFICATION
8.1 Mutual Indemnification. Each of the parties agrees to defend,
----------------------
indemnify and hold harmless the other party from and against claims, suits,
damages, loss or expense incurred by such other parties (including
reasonable attorneys' fees) ("Damages") on account of any material
misrepresentation, material breach of warranty or material breach or
non-fulfillment of any obligation on the part of the indemnifying party
under this Agreement where "material" shall mean resulting in liabilities
exceeding $ 20,000.
8.2 Indemnification by Bentley. Bentley agrees to indemnify, save
--------------------------
and hold harmless Quality, its affiliates (including the Joint Venture
Limited Partnership), and its and their respective officers, directors,
employees and agents. Damages incurred in connection
14
<PAGE> 15
with or arising out of or resulting from (i) any claim, suit, action or
proceeding arising out of or resulting from Bentley's conduct of the Megacards
business prior to the Closing Date (other than matters expressly assumed as
liabilities under Section 2.2(b)) or its businesses other than Megacards at
any time, and/or (ii) any and all liabilities of Bentley other than the
liabilities assumed under Section 2.2(b).
8.3 Indemnification by Quality. Quality shall indemnify, save and
--------------------------
hold harmless Bentley and its officers, directors, employees and agents from
and against any and all Damages incurred in connection with or arising out
of or resulting from (i) any claim, suit, action or proceeding arising out
of or resulting from Quality's conduct of the Quality and Excell businesses
prior to the Closing Date (other than matters expressed assumed as
liabilities under Section 2.2(a)); and/or (ii) any and all liabilities of
Quality and Excell other than those expressly assumed under Section 2.2(a).
8.4 Defense of Third-Party Claims. If any lawsuit or enforcement
-----------------------------
action is filed against any party entitled to the benefit of indemnification
hereunder, written notice thereof shall be given to the indemnifying party
as promptly as practicable. After such notice, if the indemnifying party
shall acknowledge in writing to the indemnified party that the indemnifying
party shall be obligated under the terms of its indemnity hereunder in
connection with such lawsuit or action, then the indemnifying party shall be
entitled, if such party so elects, to take control of the defense and
investigation of such lawsuit or action and to employ and engage attorneys
of its own choice to handle and defend the same, at the indemnifying party's
cost, risk and expense; provided that the indemnifying party and its counsel
shall proceed with diligence and in good faith with respect thereto. The
indemnified party shall cooperate in all reasonable respects with the
indemnifying party and such attorneys in the investigation, trial and
defense of such lawsuit or action and any appeal arising therefrom;
provided, however, that the indemnified party may, at its own cost,
participate in the investigation, trial and defense of such lawsuit or
action and any appeal arising therefrom.
8.5 Direct Claims for Indemnification. If a party believes in good
---------------------------------
faith that it is entitled to indemnification under this Article 8, the party
claiming to be entitled to indemnification shall deliver to the other a
notice (a "Claim Notice") setting forth the basis of such party's rights to
indemnification and the amount claimed in respect thereof. Unless within
thirty (30) days of the date of the Claim Notice, the party receiving such
notice delivers to the other a notice (the "Contest Notice") stating that
such party intends to contest the claim(s) set forth in the Claim Notice
and, if applicable, bring claims of its or his own against such other party,
the party receiving the Claim Notice shall be deemed to have waived any and
all right to contest such claim(s). In the event that the party who
received the Claim Notice timely delivers to the other party the Contest
Notice, the parties shall attempt in good faith to agree upon their
respective rights with respect to the claim(s) set forth in the Claim Notice
and, if applicable, the Contest Notice. If no such agreement can be reached
within thirty (30) days after the date of the Contest Notice each party may
take whatever action it deems necessary and appropriate.
15
<PAGE> 16
ARTICLE 9
MISCELLANEOUS
9.1 Survival of Representations and Warranties. All of the
------------------------------------------
covenants, agreements, representations and warranties of the parties
contained in this Agreement shall survive the Closing hereunder.
9.2 Entire Agreement. This Agreement and the Limited Partnership
----------------
Agreement (including the documents referred to herein and therein)
constitute the entire agreement between the parties and supersede any prior
understandings, agreements, or representations by or between the parties,
written or oral, related to the subject matter hereof.
9.3 Succession and Assignment. This Agreement shall be binding upon
-------------------------
and inure to the benefit of the parties named herein and their respective
successors and permitted assigns. No party may assign either this Agreement
or any of its rights, interests, or obligations hereunder without the prior
written approval of the other party.
9.4 Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
9.5 Headings. The section headings contained in this Agreement are
--------
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
9.6 Notices. All notices, requests, demands, claims, and other
-------
communications hereunder will be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given if (and
then two business days after) it is sent by registered or certified mail,
return receipt requested, postage prepaid, and addressed to the intended
recipient as set forth below:
IF TO BENTLEY: COPY TO:
Bentley International, Inc. Thomas A. Litz
135 N. Warson Street Thompson Coburn
St. Louis, MO 63132 One Mercantile Center
Attn: Lloyd Abrams St. Louis, MO 63101-1693
IF TO QUALITY OR EXCELL: COPY TO:
Quality Baseball Cards, Inc. Beryl Nusbaum
23 Linden Park Woods, Oviatt, Gilman,
Rochester, NY 14625 Sturman & Clarke, LAP
Attn: Fuad Khuri 44 Exchange Street
Rochester, NY 14614
16
<PAGE> 17
Any party may send any notice, request, demand, claim, or other
communication hereunder to the intended recipient at the address set forth
above using any other means (including personal delivery, expedited courier,
messenger service, telecopy, telex, ordinary mail, or electronic mail), but
no such notice, request, demand, claim, or other communication shall be
deemed to have been duly given unless and until it actually is received by
the intended recipient. Any party may change the address to which notices,
requests, demands, claims, and other communications hereunder are to be
delivered by giving the other party notice in the manner herein set forth.
9.7 Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the domestic laws of the State of New York
without giving effect to any choice or conflict of law provision or rule
(whether of the State of New York or any other jurisdiction) that would
cause the application of the laws of any jurisdiction other than the State
of New York.
9.8 Amendments and Waivers. No amendment of any provision of
----------------------
this Agreement shall be valid unless the same shall be in writing and signed
by the parties. No waiver by any party of any default, misrepresentation,
or breach of warranty or covenant hereunder, whether intentional or not,
shall be deemed to extend to any prior or subsequent default,
misrepresentation, or breach of warranty or covenant hereunder or affect in
any way any rights arising by virtue of any prior or subsequent such
occurrence.
9.9 Severability. Any term or provision of this Agreement that
------------
is invalid or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or provision
in any other situation or in any other jurisdiction.
9.10 Expenses. The Joint Venture Limited Partnership will bear
--------
the reasonable costs and expenses (including legal fees and expenses)
incurred by the parties in connection with the negotiation of this Agreement
and the transactions contemplated hereby.
9.11 Incorporation of Exhibits and Schedules. The Exhibits and
---------------------------------------
Schedules identified in this Agreement are incorporated herein by reference
and made a part hereof.
9.12 Specific Performance. Each of the parties acknowledges and
--------------------
agrees that the other party would be damaged irreparably in the event any of
the provisions of this Agreement are not performed in accordance with their
specific terms or otherwise are breached. Accordingly, each of the parties
agrees that the other party shall be entitled to an injunction or
injunctions to prevent breaches of the provisions of this Agreement and to
enforce specifically this Agreement and the terms and provisions hereof in
any action instituted in any court of the United States or any state thereof
having jurisdiction over the parties and the matter (subject to the
provisions set forth in Section 9.13 below), in addition to any other remedy
to which it may be entitled, at law or in equity.
9.13 Submission to Jurisdiction. Each of the parties irrevocably
--------------------------
submits to the jurisdiction of any state or federal court sitting in Monroe
County, New York in any action
17
<PAGE> 18
or proceeding arising out of or relating to this Agreement and agrees that all
claims in respect of the action or proceeding may be heard and determined in
any such court. Each party also agrees not to bring any action or proceeding
arising out of or relating to this Agreement in any other court. Each of the
parties waives any defense of inconvenient forum to the maintenance of any
action or proceeding so brought and waives any bond, surety, or other security
that might be required of any other party with respect thereto.
IN WITNESS WHEREOF, the Parties hereto have executed this
Agreement as of the date first above written.
BENTLEY INTERNATIONAL, INC.
By:---------------------------------
Its: -------------------------------
QUALITY BASEBALL CARDS, INC.
By:---------------------------------
Its: -------------------------------
EXCELL RECYCLING, INC.
By:---------------------------------
Its: -------------------------------
18
<PAGE> 1
LIMITED
PARTNERSHIP AGREEMENT
LEGENDS, LP
THIS AGREEMENT is made and executed this 12th day of September, 1996, by
and among Excell Recycling, Inc., a New York corporation with a business
address at 23 Linden Park, Rochester, New York 14625 ("Excell"); Quality
Baseball Cards, Inc., a New York corporation with a business address at 23
Linden Park, Rochester, New York 14625 ("QBC") (together, Excell and QBC are
referred to herein as "Quality"); and Bentley International, Inc. d/b/a
Megacards, a Missouri corporation with an address at 1353 North Warson
Street, St. Louis, Missouri 63132 ("Bentley") (individually, "Partner" and
collectively, "Partners").
R E C I T A L S:
A. The Partners wish to form a New York limited partnership to
conduct business under the name Legends, LP for the purposes specified in
Article II of this Agreement, pursuant to an Agreement to Form a Joint
Venture by and among the parties of even date herewith ("Joint Venture
Agreement").
B. Excell and QBC wish to serve as the only general partners and
Bentley wishes to serve as the sole limited partner.
P R O V I S I O N S:
NOW, THEREFORE, in consideration of the mutual promises of the
parties hereto, and intending to be legally bound, the parties being
severally sworn do hereby certify and agree as follows:
ARTICLE I
FORMATION OF PARTNERSHIP;
NAME;
PRINCIPAL PLACE OF BUSINESS
1.01 Formation of Partnership; Name; Principal Place of Business.
------------------------------------------------------------
The parties hereby form a New York Limited Partnership pursuant to the
provisions of the New York Revised Uniform
<PAGE> 2
Limited Partnership Act ("Act"). The Partners shall execute and cause to be
filed a Certificate of Limited Partnership under the name Legends, LP and any
additional documents as may be necessary or appropriate to form a limited
partnership pursuant to the laws of the State of New York and to cause the
Partnership to be qualified to do business in the States of New York and
Missouri.
1.02 The Partners.
-------------
QBC and Excell shall be the general partners ("General Partners") and
Bentley shall be the limited partner ("Limited Partner") of the Partnership.
1.03 Name.
-----
The Partnership shall operate under the name of Legends, LP (the
"Partnership").
1.04 Principal Place of Business.
----------------------------
The principal place of business of the Partnership shall be at 23
Linden Park, Rochester, New York 14625. The business of the Partnership may
also be conducted at such other or additional place or places as may be
designated by the General Partners.
1.05 Percentage Interests.
---------------------
The initial "percentage interest" of the General Partners shall be 70%
in the aggregate and the initial "percentage interest" of the Limited
Partner shall be 30%.
ARTICLE II
PURPOSES OF PARTNERSHIP
The Partnership shall engage in the business of designing, producing,
repackaging, marketing, distributing and selling sports and entertainment
picture cards, posters, prints, lithographs, serigraphs and other
collectible memorabilia and publications incidental thereto. It shall
engage in any and all general business activities related or incidental
thereto.
ARTICLE III
TERM OF THE PARTNERSHIP
The Partnership shall commence on the date its Certificate of Limited
Partnership is filed with the Department of State of the State of New York
and shall terminate on December 31, 2060, unless the Partnership is sooner
dissolved in accordance with the provisions of this Agreement or by
operation of law.
2
<PAGE> 3
ARTICLE IV
CAPITAL CONTRIBUTIONS
4.01 Initial Capital Contributions and Assumption of Liabilities.
------------------------------------------------------------
(a) The initial capital contributions to the Partnership by
the Partners for their partnership interests shall be as follows:
(i) In exchange, collectively, for a 70% general
partnership interest and a note in the principal sum of $67,100 ("Quality
Note"), Quality shall contribute the assets set forth in Schedule A attached
----------
hereto. The Quality Note shall be subject to adjustment as set forth in the
Joint Venture Agreement.
(ii) In exchange, collectively, for its 30% limited
partnership interest and a note in the principal sum of $432,000 ("Bentley
Note"), Bentley shall contribute the assets set forth in Schedule B attached
----------
hereto. The Bentley Note shall be subject to adjustment, and reduction if
prepaid in full, as set forth in the Joint Venture Agreement.
(b) The Partnership shall assume and be bound by and perform
the following obligations as of the date of this Agreement:
(i) The liabilities of Quality set forth in Schedule C
----------
attached hereto.
(ii) The liabilities of Bentley set forth in Schedule D
----------
attached hereto.
4.02 Loans or Refinancing.
---------------------
Subject to the conditions and restrictions contained in this
Agreement, the General Partners may cause the Partnership to borrow money
and to pledge, hypothecate or refinance the assets of the Partnership in
connection with these borrowings.
4.03 Additional Capital Contributions.
---------------------------------
The Partners shall not be required to make any additional capital
contributions to the Partnership in excess of the amounts set forth in
Section 4.01. Unless required by this Agreement, the General Partners may
not make additional capital contributions to the Partnership without the
prior written consent of the Limited Partner; provided, however, that the
General Partners may provide funding in the form of loans at commercially
reasonable rates and terms.
3
<PAGE> 4
4.04 Withdrawal of Capital Contributions.
-----------------------------------
No Partner shall be entitled to withdraw any part of its capital
contributions to the Partnership, other than as provided herein.
ARTICLE V
PROFITS AND LOSSES
5.01 Determination.
--------------
The net profits or net losses of the Partnership shall be determined
in accordance with tax accounting principles consistently applied. Each
Partner's distributive share of depreciation, amortization and gain or loss,
as computed for tax purposes, shall take into account the variation between
the basis of property contributed to the Partnership and its fair market
value at the time of contribution as required by IRC Section 704(c) and its
accompanying Treasury Regulations. In determining net profits or net
losses, a deduction shall be allowed for any salaries or management fees of
the General Partners paid in accordance with this Agreement.
5.02 Profits and Losses.
-------------------
Except as otherwise provided on this Agreement, the net losses and net
profits of the Partnership, if any, shall be allocated among the Partners in
accordance with their respective partnership percentage interests. At the
close of the each tax year of the Partnership, the Partners' percentage
interests shall be adjusted to take into account any additional
contributions to the Partnership made by the Partners. Such adjustments
shall be effective as of the date(s) such contributions are made.
5.03 Qualified Income Offset.
------------------------
(a) If in a taxable year of the Partnership a Partner
unexpectedly receives an adjustment, allocation or distribution described in
Treas. Reg. Section 1.704-1(b)(2)(ii)(d)(4), (5) or (6), which adjustment,
allocation or distribution creates or increases a deficit balance in that
Partner's capital account, the Partner will be allocated items of income and
gain in an amount and manner sufficient to eliminate the deficit balance in
the Partner's capital account as quickly as possible.
(b) Allocations under Section 5.03(a), above, shall be comprised
of a pro rata share of each item of partnership income (including gross income)
and gain for the year; however, items of income and gain allocated under
Section 5.04, below, shall be excluded from the operation of Section 5.03(a).
4
<PAGE> 5
(c) The Partners intend that the provision set forth in
Section 5.03(a), above, will constitute a "qualified income offset" as defined
in Section 1.704-1(b)(2)(ii)(d) of the Treasury Regulations. These regulations
shall control in the case of any conflict between them and this Agreement.
5.04 Minimum Gain Charge Back.
-------------------------
In the event there is a net decrease in partnership minimum gain for
the Partnership's taxable year (as defined in Section 1.704-2[d] of the Treasury
Regulations), all Partners with deficit capital accounts at the end of the
year shall be allocated items of partnership income and gain for that year
(and, if necessary, for subsequent years) in the amounts required by
Section 1.704-2(f) and 2(g)(2) of the Treasury Regulations. The Partners intend
that this provision constitute a "minimum gain charge back" as described in
Section 1.704-2(f) of the Treasury Regulations. The regulations shall control
in the case of any conflict between those regulations and the provisions of
this Agreement.
5.05 Partner Nonrecourse Deductions and Partner Nonrecourse Debt
-----------------------------------------------------------
Minimum Gain Charge Back.
-------------------------
(a) Each Partner nonrecourse deduction, as defined in Treasury
Regulation Section 1.704-2(i)(2), shall be allocated in accordance with that
section.
(b) If there is a net decrease in Partner nonrecourse debt
minimum gain during any taxable year of the Partnership, each partner who
has a share of the Partner nonrecourse debt minimum gain (as determined in
accordance with Treasury Regulation Section 1.704-2(i)) shall be allocated items
of income and gain for such year (and, if necessary, for subsequent years)
in the amounts required by that section.
ARTICLE VI
CASH FLOW
6.01 Definition of Cash Flow.
------------------------
Cash flow shall be the net profit or net loss of the Partnership
determined in accordance with tax accounting principles adjusted as follows:
(a) Depreciation of buildings, improvements and personal
property of any type shall not be considered a deduction.
(b) Principal payments on all loans, deeds of trust,
mortgages, conditional sales contracts and other indebtedness shall be
considered a deduction.
5
<PAGE> 6
(c) The Partnership shall deduct the amounts as the General
Partners determine is needed as a reasonable reserve required to conduct the
Partnership business or to pay anticipated capital expenditures to be
incurred within six months.
(d) Any other cash expenditures which have not been deducted
in determining net profits or net losses shall be considered a deduction.
(e) There shall be added other cash receipts of the
Partnership which have not been taken into account in determining net
profits or net losses including, but not limited to, proceeds from any
refinancing of Partnership loans.
6.02 Distributions of Cash Flow.
---------------------------
The General Partners (as set forth in Section 8.01 of this Agreement)
may distribute, in their sole and absolute discretion, cash flow of the
Partnership to the Partners in the ratio in which they share net profits or
net losses during the period in which the Partnership realized the cash flow
to be distributed.
6.03 Mandatory Distributions.
------------------------
Notwithstanding Section 6.02, the General Partners shall distribute to
the Partners, on or before March 1 of each year, an aggregate amount equal
to 45% of the Partnership's taxable income.
6.04 Distributions to Bentley.
-------------------------
Notwithstanding any provision to the contrary set forth herein,
Bentley shall be entitled to a draw of $20,000.00 each month against its
share of distributable income payable within 15 days after the end of each
month. If, after the first six months of the date of this Agreement, the
cash flow of the Partnership as defined in Section 6.01 is less than
$40,000.00 in any month, then the amount to be paid to Bentley currently
with respect to that month shall be reduced in proportion to the amount that
the cash flow is less than $40,000.00, and the amount of the shortfall shall
be deferred. Any deferral of draw distributions as a result of the
preceding sentence shall be paid to Bentley in subsequent months when cash
flow exceeds $40,000.00, in amounts equal to 50% of the excess over
$40,000.00 per month until the full amount of all deferrals have been paid.
Any sums distributed to Bentley hereunder shall be deemed a credit against
amounts required to be distributed under Section 6.03 or distributable under
Section 6.02.
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ARTICLE VII
CAPITAL ACCOUNTS
An individual capital account shall be maintained for each Partner.
In general, the capital account of a Partner shall consist of the original
contribution of capital increased by (1) any additional contributions to
capital, and (2) the Partner's share of Partnership profits, and decreased
by (1) distributions to the Partner in reduction of Partnership capital and
(2) the Partner's share of Partnership losses. Capital accounts shall be
maintained in accordance with the capital accounting principles of Treasury
Regulation Section l.704-l(b)(2)(IV). The Treasury Regulations shall control
in the case of any conflict between those regulations and the provisions of
this Agreement.
ARTICLE VIII
ADMINISTRATIVE PROVISIONS
8.01 Management.
-----------
The General Partners agree to assume and perform the exclusive
management and control of the day to day operations of the Partnership. All
of the business of the Partnership, including, but not limited to, decisions
on all tax elections, shall be under the exclusive management of the General
Partners. The Limited Partners shall not participate in the management of
the business of the Partnership. The General Partners are authorized to do
any and all acts and things necessary or proper in furtherance of the
Partnership business. The General Partners may taken all action on behalf
of the Partnership without the consent of the Limited Partner, except that
the following action shall require the prior written consent of the Limited
Partner:
(a) Sell, exchange, encumber, lease or otherwise dispose of
all or substantially all of the Partnership's property;
(b) Make any assignment for the benefit of creditors on behalf
of the Partnership;
(c) Confess any judgment in excess of $10,000.00 on behalf of
the Partnership;
(d) Do any act in contravention of this Agreement;
(e) Do any act which would make it impossible to carry on any
purpose of the Partnership or which would change the Partnership's business
in any material respect;
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<PAGE> 8
(f) Commingle the Partnership funds with those of any other
person or employ or permit another to employ such funds or assets of the
Partnership in any manner except for the exclusive benefit of the
Partnership;
(g) Acquire from any Partner, an affiliate of any Partner, or
a family member of such affiliate, any asset in which a Partner or such
affiliate or family member has an interest or lease from any other person in
which a Partner or such affiliate or family member has an interest, on terms
less favorable to the Partnership than those otherwise reasonably available;
(h) Pay or contract for the payment of any consulting,
management, advisory or other fees to the General Partners or any affiliate
thereof or family member of such affiliates, exceeding the greater of (i)
$30,000.00 per year, or (ii) 1.5% of the Partnership's net profit (before
deduction of such fee) in any calendar year;
(i) Modify any contract the execution of which would require
the approval of all of the Partners;
(j) Dissolve the Partnership;
(k) Admit a new Partner other than as permitted by this
Agreement;
(l) Cause the Partnership to effect its initial public
offering;
(m) Cause the Partnership in incur borrowings aggregating more
than $1,000,000.00, including the Bentley Note, outstanding at any one time
for any Partnership purpose, or to issue notes, debentures, or other debt
securities in excess of such amount; or hypothecate, pledge, mortgage or
grant security interests in any or all of the assets of the Partnership to
secure repayment of any borrowed sums in excess of such amount;
(n) Make loans of Partnership funds, other than routine
employee advances in the ordinary course of business, or place Partnership
funds in investments of any kind, except insured bank accounts;
(o) Make any distributions to one or more Partners in a form
other than cash; or
(p) Decline an opportunity offered to the Partnership pursuant
to Section 8.08 of this Agreement.
(q) Modify the lease for 23 Linden Park, Rochester, New York
in any respect, other than in connection with an extension of the lease on
reasonable terms comparable to those
8
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that would be obtained in a transaction between unaffiliated parties
negotiating at arms length.
8.02 Time Devoted by General Partners.
---------------------------------
The parties understand that the General Partners have other business
activities which over the year take the major part of their respective total
time devoted to business matters. Accordingly, the General Partners are
required to devote to the business of the Partnership only the time and
attention as they reasonably determine is appropriate for the efficient
conduct of the Partnership's business.
8.03 Compensation To General Partners.
---------------------------------
Subject to the provisions of Section 8.01, the General Partners shall
be entitled to reasonable compensation for their services rendered to or on
behalf of the Partnership.
8.04 Vote of General Partners.
-------------------------
All actions taken by the General Partners shall require the consent of
a majority of the General Partner percentage interests held by the General
Partners.
8.05 Limitation on Liability and Indemnification of General Partners.
----------------------------------------------------------------
(a) The General Partners shall have no liability,
responsibility or accountability in damages or otherwise to any other
Partner or the Partnership for any liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, proceedings, costs, expenses
and disbursements of any kind or nature whatsoever which may be imposed on,
incurred by, or asserted against the General Partners or the Partnership.
The Partnership agrees to indemnify, pay, protect, and hold harmless the
General Partners (on the demand of and to the satisfaction of the General
Partners) from and against any and all of the above liabilities, including
without limitation all costs and expenses of defense, appeal and settlement
of any and all suits, actions, or proceedings instituted against the General
Partners or the Partnership and all costs of investigation in connection
therewith, in any way relating to or arising out of, or alleged to relate to
or arise out of, any action or inaction on the part of the Partnership or on
the part of such General Partners of the Partnership in their capacities as
such. However, the General Partners shall be liable, responsible and
accountable, and the Partnership shall not be liable to the General
Partners, for any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, proceedings, costs, expenses or
disbursements resulting from either General Partner's
9
<PAGE> 10
own negligence, misconduct or other breach of fiduciary duty to the
Partnership or any Partner.
(b) If any action, suit or proceeding shall be pending or
threatened against the Partnership or the General Partners relating to or
arising, or alleged to relate to or arise, out of any action or non-action,
the General Partners shall have the right to employ, at the expense of the
Partnership, a single legal counsel to represent both General Partners (or
if such counsel reasonably concludes that a conflict of interest exists, and
such General Partners reasonably determine that a waiver of the conflict of
interest would present a material risk of prejudice, then each General
Partner may retain its own counsel) in such action, suit or proceeding. The
satisfaction of the obligations of the Partnership under this Section 8.05
shall be from and limited to the assets of the Partnership and no Partner
shall have any personal liability on account thereof. The General Partners
shall have the right to bill the Partnership for, or otherwise request the
Partnership to pay, at any time and from time to time after either General
Partner has become obligated to make payment therefor, any and all amounts
for which either General Partners believes in good faith that such General
Partners are entitled to indemnification under this Section. The
Partnership shall pay any and all such bills and honor any and all such
requests for payments within 60 days after such bill or request is received
by the General Partner. In the event that a final determination is made
that the Partnership is not so obligated in respect of any amount paid by it
to a particular General Partner, such General Partner shall refund such
amounts within 60 days of such final determination.
8.06 Limited Liability of Limited Partners.
--------------------------------------
The Limited Partner shall not be liable for the debts, liabilities,
contracts or any other obligations of the Partnership. Even if this
Partnership is determined or construed to be a general Partnership, the
Limited Partner shall not be liable for the debts, liabilities, contracts or
other obligations of the Partnership. The Limited Partner shall be liable
only to make its original capital contribution and shall not be required to
lend any funds to the Partnership or, after the original capital
contribution shall have been paid, to make any further contributions in
excess of the original capital contribution to the Partnership. No General
Partner shall have any personal liability for the repayment of the capital
contribution of the Limited Partner. The Limited Partner shall not take
part in, or interfere in any manner with, the conduct or control of the
business of the Partnership and shall have no right or authority to act for
or bind the Partnership, other than as set forth herein.
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8.07 Voting Rights of Limited Partners.
----------------------------------
If the Partnership at any time has more than one Limited Partner,
matters upon which the Limited Partners may vote or have the right to give
consent shall require the consent of the holders of a majority of the
"percentage interests" then held by the Limited Partners, except as
otherwise expressly provided in this Agreement or by any provisions of the
Act which are not modified or superseded by this Agreement.
8.08 Competing Business Opportunities.
---------------------------------
If any Partner or its affiliate has the opportunity to engage in any
other competing business or to purchase or invest in any other competing
business, it shall promptly offer a right of first refusal to the
Partnership to invest in or engage in any such business on an equal basis
and on equal terms. The Partnership shall have thirty (30) days within
which to reject such offer in writing, and if not so rejected, such
opportunity shall be deemed accepted.
8.09 Covenant Not to Compete.
------------------------
Each Partner agrees not to engage in any activity which competes with
the business or purpose of the Partnership during the term of this
Agreement. Notwithstanding the preceding sentence, the parties acknowledge
and agree that the activities of Bentley's subsidiaries, Windsor Art &
Mirror Co. and Janco Designs, Inc., as presently conducted, shall not be
deemed to compete with the activities of the Partnership.
8.10 Confidential Information.
-------------------------
Each Partner shall, at all times during the term of this Agreement and
thereafter, use its best efforts and take all appropriate steps to safeguard
the secrecy and confidentiality of the Partnership's marketing plans,
customer and supplier lists, pricing information, data bases and other
confidential information regarding the Partnership. The Partnership shall
cause Dr. Fuad Khuri, Lloyd Abrams, Dale Isaak and Karl Becker to enter into
a trade secret and noncompetition agreement consistent with the provisions
of this Agreement.
8.11 Equitable Relief.
-----------------
The Partners acknowledge that the Partnership and the Partners will be
severely damaged by any breach or violation of Sections 8.08, 8.09 and 8.10,
and that monetary damages are not adequate compensation. Therefore, each
Partner and the Partnership shall be entitled to equitable relief against
such breach or violation, in addition to other available remedies.
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ARTICLE IX
ACCOUNTING FOR THE PARTNERSHIP
9.01 Annual Statements.
------------------
The Partnership shall cause annual financial statements of the
operation of the Partnership to be prepared and distributed to the Partners.
The financial statements need not be audited or reviewed.
9.02 Access To Accounting Records.
-----------------------------
Any Partner and its duly authorized representatives shall have
reasonable access to the accounting records of the Partnership during
regular business hours of the Partnership.
9.03 Income Tax Information.
-----------------------
The Partnership shall provide each Partner with information on the
Partnership's taxable income or loss and each item of income, gain, loss,
deduction or credit that is relevant to reporting Partnership income. The
information shall also show each Partner's distributive share of each item
of income, gain, loss, deduction or credit. This information shall be
furnished to the Partners within 60 days of the close of the Partnership's
taxable year.
9.04 Partnership Tax Examination.
----------------------------
One or more of the General Partners shall be designated as tax notice
and matters partner in accordance with Treasury Department regulations. The
tax matters partner will negotiate and otherwise deal with the Internal
Revenue Service in the event of an examination of Partnership tax returns.
9.05 Tax Elections.
--------------
No election will be made to exclude the Partnership from the
application of the provisions of Subchapter K of the Internal Revenue Code
of 1986, or from any similar provisions of state tax laws. If an interest
in the Partnership is transferred, a Partner dies, or Partnership assets are
distributed to a Partner, the General Partners may, in their sole and
absolute discretion, cause the Partnership to elect to cause the basis of
the Partnership's assets to be adjusted for federal income tax purposes,
under Sections 734, 743 and 754 of the Internal Revenue Code of 1986.
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ARTICLE X
WITHDRAWAL OR REMOVAL OF A PARTNER
10.01 Withdrawal of a Partner.
------------------------
(a) A General Partner may not voluntarily withdraw from the
Partnership without the consent of the Limited Partners holding a majority
of the Limited Partner Percentage Interests and after giving written notice
to each Limited Partner at least ninety (90) days prior to withdrawal.
(b) Except as otherwise provided in this Agreement, a Limited
Partner may not withdraw from the Partnership or assign a Partnership
interest prior to the dissolution and winding up of the Partnership.
10.02 Removal of General Partner.
---------------------------
A General Partner may be removed by action of the Limited Partner(s)
upon the occurrence of any of the following:
(a) If a General Partner shall become insolvent, shall make any
assignment for the benefit of creditors, or commence any proceeding under
any bankruptcy or insolvency act or acts for the relief of debtors;
(b) If any of the business or property of a General Partner
shall come into the possession of creditors or any governmental agency or of
a receiver;
(c) If any proceedings under any bankruptcy or insolvency act
or acts for the relief of debtors shall be commenced against a General
Partner and the same shall not have been dismissed or stayed within thirty
(30) days;
(d) If any proceedings supplementary to judgment shall be
commenced against a General Partner not fully bonded shall remain unpaid, in
whole or in part, for at least thirty (30) days after the entry thereof; or
(e) A material breach by such General Partner of its
obligations under this Agreement, as determined by a court of competent
jurisdiction.
10.03 Appointment of Successor General Partner.
-----------------------------------------
A withdrawn or removed General Partner may be replaced with by the
remaining General Partner(s). In the event that the withdrawn or removed
General Partner is the sole remaining General Partner of the Partnership,
then within one hundred eighty (180) days after the event of withdrawal, the
Limited
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<PAGE> 14
Partners may elect a successor General Partner, by holders of at least
two-thirds of the interests of all Limited Partners. Failure of the
Limited Partners to appoint a successor General Partner within the time
specified or the failure of the successor General Partner who is appointed
to execute a written acceptance and agreement to be bound by this Agreement
within ten (10) days thereafter shall cause the Partnership to be dissolved
and its business terminated as provided in Article XII of this Agreement.
10.04 Effect of Withdrawal, Removal or Admission of a General Partner.
----------------------------------------------------------------
The withdrawal, bankruptcy, removal or admission of a General Partner
shall not dissolve the Partnership except as set forth in Section 10.02 of
this Agreement.
ARTICLE XI
TRANSFER OF A PARTNERSHIP INTEREST
11.01 Transfer of a Partnership Interest.
-----------------------------------
No Partner shall, voluntarily or involuntarily, assign, encumber,
pledge, sell, transfer or otherwise dispose of his interest in the
Partnership except pursuant to the terms of this Agreement or with the
unanimous written consent of the Partners.
11.02 Conditions on Transfers of a Partnership Interest and
-----------------------------------------------------
Substitution of a Partner.
--------------------------
(a) Except as provided elsewhere in this Agreement, no
assignee of the whole or any portion of a Partner's interest in the
Partnership shall have the right to become a substituted Partner in place of
the assignor unless:
(i) the assignor shall designate this intention in the
instrument of assignment;
(ii) except as otherwise provided herein, the written
consent of the General Partners to this substitution shall be obtained,
which consent may be withheld in their sole and absolute discretion;
(iii) the instrument of assignment shall be in a form and
substance reasonably satisfactory to the General Partners;
(iv) the assignor and assignee named therein shall
execute and acknowledge any other instrument or instruments as the General
Partners may deem necessary or desirable to effectuate the admission;
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<PAGE> 15
(v) the assignee shall accept, adopt and approve in
writing all of the terms and provisions of this Agreement as the same may
have been amended;
(vi) the assignee shall pay or, at the election of the
General Partners, assume the obligation to pay all reasonable expenses
connected with admission; and
(vii) by the transfer, the assignor does not violate the
registration provisions of the Securities Act of 1933, as amended, or would
not be in violation of any state securities law.
(b) No Partner shall make any transfer or assignment of all or
any part of its interest in this Partnership if the transfer or assignment
would, when considered with all other transfers during the same applicable
twelve-month period, cause a termination of this Partnership resulting in
adverse federal or state income tax consequences or cause the Partnership to
be treated or taxed as a corporation for federal or state tax purposes.
(c) The General Partners may require an assignor to get an
opinion of counsel reasonably satisfactory to the General Partners that the
transfer of the interest will not cause the dissolution of the Partnership,
or violate any state or federal securities laws.
11.03 Right of First Refusal.
-----------------------
If a Partner receives, and intends to accept, a bona fide offer to
dispose of all or any part of its Partnership interest then prior to
accepting the offer:
(a) The selling or assigning Partner ("transferor") shall
deliver written notice to the Partnership and to the other Partners. The
notice to the Partnership and to the other Partners shall state the name of
the prospective transferee and the price and terms of the transfer
("Offer"). The notice delivered to the Partnership and the other Partners
shall be deemed an offer to sell that portion of the transferor's
Partnership interest to be transferred to the prospective transferee on the
terms of the Offer subject to the following:
(i) The remaining General Partners shall have the right
to purchase all but not less than all of the transferor's Partnership
interest subject to the Offer on a pro rata basis. The General Partners
must exercise their option within thirty (30) days of receipt of the Offer.
(ii) If the General Partners do not exercise their option,
then the Partnership shall have an option to
15
<PAGE> 16
purchase all but not less than all of the Partnership interest subject to the
Offer. The Partnership must exercise its option within forty-five (45) days
of receipt of the Offer.
(iii) If the Partnership does not exercise its option, then
the remaining Limited Partners shall have an option to purchase all but not
less than all of the Partnership interest subject to the Offer. The Limited
Partners must exercise their option within sixty (60) days of receipt of the
Offer.
(iv) The purchase price for any Partnership interest
purchased under this Section 11.03 shall be an amount equal to the purchase
price stated in the Offer (valuing any deferred payments and noncash
consideration in the Offer at present fair market value).
(v) If neither the General Partners, Partnership nor the
Limited Partners exercise their options, then the interest may be
transferred to the proposed transferee provided that (a) the transfer is
made in strict accordance with the terms of the Offer, and (b) an interest
of a General Partner will be converted to a Limited Partner interest upon
transfer to a third party hereunder. If the transfer to the third party is
not consummated within sixty (60) days of the expiration of the option
period in (i) above, then the Partnership interest shall once again be
subject to the restrictions hereunder.
(vi) Any transfer under this Section 11.03(b) shall be on
the terms set forth in the Offer and shall close within thirty (30) days
after the option is exercised.
(vii) Any option shall be exercised by delivery of written
notice to the transferor.
11.04 Involuntary Transfers of Interests.
-----------------------------------
If (a) voluntary proceedings by or involuntary proceedings against any
Partner are commenced under any provision of any federal or state act
relating to bankruptcy or insolvency (and in the case of an involuntary
proceeding, where the same has not been dismissed or stayed within thirty
(30) days), or (b) any interest of any Partner is attached or garnished, or
(c) any judgment is obtained in any legal or equitable proceeding against
any Partner and the transfer of any of its interest is ordered under legal
process as a result of such judgment, or (d) any execution process is issued
against any Partner or against its interest in the Partnership, or (e) any
other form of legal proceeding or process is commenced by which the interest
of any Partner may be required to be transferred either voluntarily or
involuntarily, then the Partner involved shall give to the Partnership and
to each of the other Partners written notice that an event contemplated by
this Section 11.04 has occurred,
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<PAGE> 17
specifying the nature of the event. The General Partners, the Partnership and
the Limited Partners shall have options to purchase the interest owned by the
Partner involved in such event on the same terms and conditions as are
provided under Section 11.03 except that the purchase price and payment terms
shall be determined under Section 11.05.
11.05 Purchase Price and Payment Terms.
---------------------------------
(a) The purchase price of any interest in the Partnership to
be purchased under Section 11.04 shall be the adjusted fair market value of
the Partnership interest to be purchased. For this purpose, the adjusted
fair market value of the interest to be purchased shall be the fair market
value of the interest as of the date of the event giving rise to the
purchase as determined by an appraiser selected jointly by an agreement
among the transferor and purchaser. If they cannot agree on an appraiser,
the transferor shall select one appraiser and the purchaser shall select
another appraiser. The two appraisers shall then select a third appraiser,
and the value determined by the third appraiser shall be binding upon the
Partnership and the Partners. No value shall be attributed to the
Partnership's goodwill, if any, in the appraisal made under this Section.
The Partnership shall bear the cost of the appraisal.
(b) The closing of the purchase shall take place within thirty
(30) days of the date of the event giving rise to the purchase. The
purchase price for a Partner's interest will be paid in sixty (60) equal
monthly installments of principal and interest. Interest shall accrue at
the applicable federal rate as published by the United States Treasury
Department for the month prior to the closing, unless otherwise agreed to by
the transferor and purchaser. The obligation of the purchaser shall be
evidenced by a negotiable promissory note in the form attached as Exhibit A
---------
secured by a security interest in the purchaser's assets subordinate to any
existing security interests.
(c) Notwithstanding the provisions of Section 10.01, if a
Limited Partner who withdraws from the Partnership in contravention of this
Agreement is held to be entitled to the fair value of his Partnership
interest as of the date of withdrawal under Section 121-604 of the Act, the
fair value of that Partner's interest shall be determined in accordance with
Section 11.05(a).
11.06 Violative Transfers. Any sale or transfer or purported sale or
--------------------
transfer of any Partnership interest shall be null and void unless made
strictly in accordance with the provisions of this Article XI.
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11.07 Permitted Transfers. Notwithstanding any provision to the
--------------------
contrary set forth in this Agreement, any Partner may transfer its interest
in the Partnership to another Partner or to any of its affiliates. As used
in this Agreement, an "affiliate" means an entity controlling, controlled by
or under common control with a Partner, where "control" means the ownership,
directly or indirectly, of securities possessing more than 50% of the voting
power for the election of directors or the power to designate a majority of
the persons constituting the board of directors or exercising authority
similar to that of a corporate board of directors.
ARTICLE XII
DISSOLUTION AND TERMINATION OF THE PARTNERSHIP
12.01 Right to Dissolve the Partnership.
----------------------------------
Except as provided in Article X, no Partner shall have the right to
cause dissolution of the Partnership before the expiration of the term set
forth in Article III. The Partnership shall be dissolved before the
expiration of its term by the unanimous vote of the General Partners
(provided there is more than one General Partner), subject to the provisions
of Section 8.01, or by the vote of Partners holding in the aggregate at
least two-thirds (2/3) of the "percentage interests" held by all the
Partners if there is only one General Partner.
12.02 Winding Up the Partnership.
---------------------------
In the event of a sale or disposition of substantially all of the
assets of the Partnership, or the dissolution of the Partnership, the
Partnership shall immediately commence to wind up its affairs. The General
Partners shall be responsible for the winding up and liquidation. The
Partners shall continue to share profits or losses during liquidation in the
same proportion as before dissolution. After the allocation of gains and
losses as provided for in Section 12.03, the proceeds from liquidation of
the Partnership assets shall be applied as follows:
(a) Payment to creditors of the Partnership, other than
Partners, in the order of priority provided by law.
(b) Payment to Partners for loans, if any, made by them to the
Partnership.
(c) To each Partner with a positive balance in his capital
account (determined after taking into account all capital account
adjustments for the partnership taxable year during which the liquidating
distribution occurs in accordance with Reg. Section 1.704-1[b][2][ii][b][2] of
the Treasury Regulations), in an amount equal to the balance of his capital
account, provided that
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<PAGE> 19
if the total account to be distributed under this step is less than the total
of the positive balance on all capital accounts, then to each Partner with a
positive balance in his capital account in the proportion that his capital
account balance bears to the total of the positive balances in all capital
accounts.
(d) Any balance to the Partners in accordance with the ratio
in which they share net profits and net losses.
(e) Distributions under Sections 12.02(c) and (d) of this
Agreement shall be made no later than the end of the Partnership's taxable
year (or, if later, within ninety (90) days after the date of the
liquidation of the Partnership).
(f) Distributions of assets under Sections 12.02(c) and (d)
shall be made to the Partners so as to provide each Partner as nearly as
possible with the same or similar assets contributed by that Partner to the
Partnership under Article IV.
12.03 Allocation of Gains or Losses Upon Sale or Dissolution.
-------------------------------------------------------
Gains and losses recognized by the Partnership from the sale, exchange
or other distribution of its assets shall be allocated in the same manner as
net profits and net losses.
12.04 Waiver of Right to Decree of Dissolution.
-----------------------------------------
The parties hereby agree that irreparable damage would be done to the
Partnership and remaining Partners if any Partner should cause dissolution
of the Partnership in breach of this Agreement. Care has been taken in this
Agreement to provide what the parties feel is fair and just payment in
liquidation of the interest of all Partners. Accordingly, each party hereby
waives and renounces its right to dissolve the Partnership, by a court
decree of dissolution or to seek the appointment by the court of a
liquidator for the Partnership.
ARTICLE XIII
AMENDMENTS
This Partnership Agreement may be amended only by the unanimous
written consent of the General Partners, provided, however, that the consent
of the holders of a majority of the "percentage interests" then held by the
Limited Partners shall also be required for any amendment that may add to,
detract from, or otherwise modify the purpose of the Partnership, enlarge
the obligations of any Partner under this Agreement or convert the interest
of any Limited Partner into an interest of a General Partner or modify the
limited liability of any Limited Partner, or modify the method of
determining, allocating, or distributing
19
<PAGE> 20
profits, losses and cash flow. Notwithstanding the foregoing, any amendment to
Sections 10.01 of this Agreement as to the prohibition against the withdrawal
of a Partner shall require the unanimous consent of all the Partners.
ARTICLE XIV
POWER OF ATTORNEY
14.01 Power of Attorney.
------------------
Each Limited Partner hereby irrevocably makes, constitutes and
appoints the General Partners (and each and every General Partner), or any
of the officers and directors of any General Partner, and any and all
additional or successor General Partners hereinafter admitted, with full
power of substitution, its true and lawful attorney, for it and in its name,
place and stead to take, execute, sign, acknowledge, file for recording at
the appropriate public offices and publish such documents as may be
necessary to carry out the provisions of the Partnership Agreement
including:
(a) A Statement of Fictitious Business Name for the
Partnership, a Certificate of Limited Partnership for the Partnership,
applications for authority to do business as a foreign limited partnership
in such jurisdictions as the General Partners may determine, and
Certificates of Amendment to the Certificate of Limited Partnership, the
Statement of Fictitious Business Name, and the applications to do business
as a foreign limited partnership whenever any of the same are required or
permitted under the Partnership Agreement or by law.
(b) The Limited Partnership Agreement and all authorized
amendments thereto.
(c) Any other instrument which may be required to be filed by
the Partnership under the laws of any state or any governmental agency, of
which a General Partner deeds advisable to file.
The foregoing grant of authority:
(i) Is a Special Power of Attorney coupled with an
interest, is irrevocable, and shall survive the bankruptcy or insolvency of
any Limited Partner;
(ii) May be exercised by the General Partners (and each
General Partner) for each and all of the Partners by a facsimile signature
of the General Partner, or by listing all of the Limited partners executing
any instrument with the signature of the General Partner acting as
Attorney-in-Fact for all of them.
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<PAGE> 21
(iii) Shall survive the delivery of an assignment by a
Limited Partner of the whole or any portion of its interest; except that
where the assignee thereof has been approved by the General Partner for
admission to the Partnership as a Substitute Limited Partner, the Power of
Attorney shall survive the delivery of such assignment for the sole purpose
of enabling the General Partners to execute, acknowledge and file any
instrument necessary to effect such substitution.
The Limited Partners agree to be bound by all
representations of any General Partner as their Attorney-in-Fact and waive
any and all defenses which may be available to them to contest, negate or
disaffirm the actions of the General Partners (and each General Partner) or
their successors under this Power of Attorney, and hereby ratify and confirm
all acts which the Attorney-in-Fact performed hereunder in all respects as
though performed by the Limited Partners.
(d) The above Section 14.01 notwithstanding, the Limited
Partners may vote on matters specifically set forth in acts which require
the vote of Limited Partners.
ARTICLE XV
MISCELLANEOUS
15.01 Entire Agreement.
-----------------
This Agreement and the Joint Venture Agreement (including the
documents referred to herein and therein) constitute the entire agreement
among the Partners and supersede any prior understandings, agreements, or
representations by or between the parties, written or oral, related to the
subject matter hereof.
15.02 Succession and Assignment.
--------------------------
This Agreement shall be binding upon and inure to the benefit of the
parties named herein and their respective successors and permitted assigns.
No Partner may assign either this Agreement or any of its rights, interests,
or obligations hereunder except as provided herein.
15.03 Counterparts.
-------------
This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original but all of which together will constitute
one and the same instrument.
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15.04 Headings.
---------
The section headings contained in this Agreement are inserted for
convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
15.05 Notices.
--------
All notices, requests, demands, claims, and other communications
hereunder will be in writing. Any notice, request, demand, claim, or other
communication hereunder shall be deemed duly given if (and then two business
days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set
forth below:
IF TO BENTLEY: COPY TO:
Bentley International, Inc. Thomas A. Litz
135 N. Warson Street Thompson Coburn
St. Louis, MO 63132 One Mercantile Center
Attn: Lloyd Abrams St. Louis, MO 63101-1693
IF TO QUALITY OR EXCELL: COPY TO:
Quality Baseball Cards, Inc. Beryl Nusbaum
23 Linden Park Woods, Oviatt, Gilman,
Rochester, NY 14625 Sturman & Clarke, LLP
Attn: Fuad Khuri 44 Exchange Street
Rochester, NY 14614
Any Partner may send any notice, request, demand, claim, or other
communication hereunder to the intended recipient at the address set forth
above using any other means (including personal delivery, expedited courier,
messenger service, telecopy, telex, ordinary mail, or electronic mail), but
no such notice, request, demand, claim, or other communication shall be
deemed to have been duly given unless and until it actually is received by
the intended recipient. Any Partner may change the address to which notices,
requests, demands, claims, and other communications hereunder are to be
delivered by giving the other Partners and the Partnership notice in the
manner herein set forth.
15.06 Governing Law.
--------------
This Agreement shall be governed by and construed in accordance with
the domestic laws of the State of New York without giving effect to any
choice or conflict of law provision or rule (whether of the State of New
York or any other jurisdiction) that would cause the application of the laws
of any jurisdiction other than the State of New York.
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15.07 Waivers.
--------
No waiver by any Partner of any default, misrepresentation, or breach
of warranty or covenant hereunder, whether intentional or not, shall be
deemed to extend to any prior or subsequent default, misrepresentation, or
breach of warranty or covenant hereunder or affect in any way any rights
arising by virtue of any prior or subsequent such occurrence.
15.08 Severability.
-------------
Any term or provision of this Agreement that is invalid or
unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any
other situation or in any other jurisdiction.
15.09 Expenses.
---------
The Partnership will bear all reasonable costs and expenses (including
legal fees and expenses) incurred in connection with the negotiation of this
Agreement and the transactions contemplated hereby, except as otherwise
provided herein.
15.10 Incorporation of Exhibits and Schedules.
----------------------------------------
The Exhibits and Schedules identified in this Agreement are
incorporated herein by reference and made a part hereof.
15.11 Specific Performance.
---------------------
Each of the Partners acknowledges and agrees that the other Partners
and the Partnership would be damaged irreparably in the event any of the
provisions of this Agreement are not performed in accordance with their
specific terms or otherwise are breached. Accordingly, each of the Partners
agrees that the other Partners and the Partnership shall be entitled to an
injunction or injunctions to prevent breaches of the provisions of this
Agreement and to enforce specifically this Agreement and the terms and
provisions hereof in any action instituted in any court of the United States
or any state thereof having jurisdiction over the parties and the matter
(subject to the provisions set forth in Section 15.12 below), in addition to
any other remedy to which it may be entitled, at law or in equity.
15.12 Submission to Jurisdiction.
---------------------------
Each of the Partners irrevocably submits to the jurisdiction of any
state or federal court sitting in Monroe County, New York in any action or
proceeding arising out of or relating to this Agreement and agrees that all
claims in respect of the action or
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proceeding may be heard and determined in any such court. Each Partner also
agrees not to bring any action or proceeding arising out of or relating to
this Agreement in any other court. Each of the Partners waives any defense of
inconvenient forum to the maintenance of any action or proceeding so brought
and waives any bond, surety, or other security that might be required of any
other party with respect thereto.
IN WITNESS WHEREOF, the parties hereto have executed this
Partnership Agreement on the day and year first above written.
GENERAL PARTNERS
QUALITY BASEBALL CARDS, INC.
BY: ------------------------------
ITS: -----------------------------
EXCELL RECYCLING, INC.
BY: ------------------------------
ITS: -----------------------------
LIMITED PARTNER
BENTLEY INTERNATIONAL, INC.
BY: ------------------------------
ITS: -----------------------------
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