Exhibit 10.2
EXECUTION COPY
STOCK PURCHASE
AGREEMENT RE:
KENKEV II F/K/A MARK R. DEAN,
INC. a Maine Corporation.
THIS AGREEMENT is
made on September 14, 2007 , between KEN-KEV INC., a South
Carolina corporation, Ken-KEV, Inc. and the person identified on
the signature pages as “Seller Equityholder”
hereinafter referred to as (the “Seller Equityholder”
and sometimes “Seller”,) and VCG HOLDING CORPORATION, a
Colorado Corporation on behalf of a Maine corporation to be formed
(“Buyer”).
BACKGROUND
A.
Seller owns KEN-KEV, Inc. (“KEN-KEV”) KENKEV II, Inc
(“KenkevII”) a Maine corporation that operates a
business commonly known as “Platinum Plus”, located at
200 Riverside Street, Portland, Maine (the “City”).
KenkevII operates an adult entertainment business which presents
adult entertainment at its business location pursuant to a duly
issued Maine Liquor License, along with a Nude Activity License
from the City (the “Business”).
B.
Seller, KENKEV, Inc. a South Carolina corporation, owns 100% of the
outstanding stock in KENKEV, II Inc.
C.
K & R Properties, Inc., a South Carolina Corporation and an
affiliate of Seller (“Landlord”) is the sole owner of
the real property located at 200 Riverside Street, Portland Maine,
which it leases, on a completely TRIPLE net basis, to KenkevII.
D.
Gregory Kenwood Gaines (“Seller Equityholder”) is the
sole and only shareholder in Seller.
E.
Seller owns all of KenKevII’s issued and outstanding capital
stock.
F.
Buyer desires to purchase from Seller, and Seller desires to sell
to Buyer, all of the issued and outstanding stock in KenKevII (the
“Purchased Equity Interests” or the “Purchased
Shares”) on the terms of and subject to the conditions of
this Agreement.
G.
The Seller Equityholder is Seller’s chief executive officer
and sole shareholder.
H.
VCG Holding Corporation and Buyer, on one hand, and Seller and
Seller Equityholder, on the other, have also agreed to not compete
with each other in certain geographic areas, as provided in
noncompetition agreements in the form
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agreed upon by the
parties on the date of this Agreement (the “Noncompetition
Agreements”).
AGREEMENTS
NOW, THEREFORE, in
consideration of the Background and the terms and conditions set
forth in this Agreement, each of the Seller, Seller Equityholder,
VCG Holding Corporation and Buyer agree as
follows:
1.
Agreement of Purchase and Sale of the Purchased Equity
Interests . On the terms and subject to the conditions set
forth in this Agreement, Seller agrees to sell and deliver to Buyer
on the Closing Date the Purchased Equity Interests, free from all
Encumbrances (as defined in Section 8.4), and Buyer agrees to
purchase the Purchased Equity Interests from Seller.
2.
Purchase Price for Purchased Equity Interests .
2.1
Shares to be Purchased. On the terms and conditions
set forth in this Agreement, the Seller hereby sells, assigns,
transfers, sets over and conveys to the Buyer on the Closing Date
described below, the Purchased Equity Interests.
2.2
Share Purchase Price. On the Closing Date, the Buyer
shall pay the following purchase price in the manner set forth in
Paragraph 2.3 and 2.4 below to Seller against receipt of the
certificates for the Purchased Shares, duly endorsed for transfer
or accompanied by duly executed stock powers as follows:
FOUR MILLION FIVE HUNDRED
THOUSAND ($4,500,000.00) DOLLARS ) for the Purchased Shares, together with a
payment of One Million Dollars ($1,000,000) for the right to
purchase the 100% of the shares of Kenja II, Inc. a Florida
corporation which owns and operates an adult entertainment business
in Hialeah, Florida (the “Florida Business”)
(hereinafter, “Option Payors. The $1 million payment is
non refundable, but shall be applied to the purchase price owed to
Seller by Buyer for the purchase of the Florida Business as long as
Buyer acquires the Florida Business within 90 days of execution of
a definitive agreement relative to the Florida Business, or a
reasonable time thereafter, provided both parties are acting in
good faith towards a closing.
In addition, Seller and
Buyer shall make appropriate adjustment for operating costs that
straddle the Closing Date, such as property taxes, insurance and
utilities (the “Closing Adjustments”)
2.3
Payment of Purchase
Price. On the
Closing Date, the Buyer shall pay to the Seller in cash or by
certified check for the purchase of all of the issued and
outstanding shares in KenKevII, and for the Florida Business
purchase option, the sum of FIVE MILLION FIVE HUNDRED THOUSAND
($5,500,000.00) DOLLARS ) payable as follows:
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a.
$50,000.00 from escrow deposited at the time of the of the
execution of the letter of intent;
b.
$5,450,000.00 in immediately available funds, by wire transfer to
an account designated by Seller.
2.4
The allocation of the purchase price is set forth in Exhibit
24a attached hereto [To be reviewed by Seller’s
accountants and tax lawyer] and incorporated by reference
herein. In addition, Buyer shall pay at closing all pre-paid
items set forth on Exhibit 2.3b . In
addition , Seller shall pay to Buyer, or Buyer shall pay to
Seller, as the case may be, an amount equal to the net Closing
Adjustment as defined in Article 2.2 hereinabove .
2.5
Transfer of License(s) : Seller shall assist Buyer in
acquiring, in Buyer’s own name, all liquor licenses and
permits used in connection with the Business, as well as the Nude
Activity license issued by the City, which shall permit the Buyer
to operate the Business in substantially the same manner it is
presently being operated. In the event that the Buyer is not able
to acquire the liquor license or any City issued license on or
before the Closing Date, then this Agreement shall close in Escrow,
consistent with Exhibit 2.5
2.6
No Liabilities. Prior to the Closing Date, Seller
shall have caused all known liabilities and obligations of Kenkev
to be satisfied, other than with respect to liabilities arising
from the contracts accepted by Buyer (the “Assumed
Contracts”) and set forth on Schedule 8.17, and with
respect to such contracts only for products and services provided
to Kenkev after the Closing Date (the “Future
Liabilities”).
2.7
Asset in Business : As of the Closing Date, the Seller will
insure that Kenkev owns all of the leases presently in existence,
along with all equipment, furniture, and fixtures, and
personal property in substantially the same form as they
existed as of the date this Agreement is executed.
2.8
Excluded Assets
. Buyer is not entitled to, and
Seller may distribute from Kenkev to the “Seller
Equityholder), the following assets of Kenkev, to the extent
existing or arising out of facts occurring before the Closing
Date: cash, cash equivalents, bank accounts, accounts
receivable, credit card processing agreements and other similar
assets relating to amounts earned before the Closing Date but
subject to the “Closing Adjustments.”
3.
Related Agreements.
3.1
Noncompetition Agreements . At the Closing, VCG Holding
Corporation the “Buyer,” and the Seller and the
Seller Equityholder, shall execute and deliver to each other the
Noncompetition Agreements and Confidentiality
Agreement in the form attached hereto as Exhibit 3.1 .
The Non-Compete Agreements shall provide for the Seller
Equityholder not to compete with VCG Holding Corporation, the
Buyer, for a period of 3 years and a radius of 50 miles from
Kenkev’s location and for VCG Holding
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Corporation, the Buyer
not to compete with Seller or Seller Equityholder for a period of
three years in any area within 50 miles of any existing businesses
of Seller or Seller Equityholder or in which Seller Equityholder
has a controlling interest, except for Florida, a listing of all
such business is attached as an addendum to this Agreement, for
which Seller and Seller Equityholder have granted VCG a first right
of refusal on the sale of such businesses as consideration for this
provision In each case, the restrictions shall apply to all
affiliate businesses of Buyer and Seller Equityholder.
It is the intent of the parties that neither Buyer nor Seller will
operate within fifty (50) miles of a present or future location of
the other, large metropolitan areas and Florida excluded, and which
shall include the metropolitan markets with greater then 3 million
persons in terms of overall population, along with all present
locations where either party presently operates.
3.2
Lease. At the time of closing, Buyer and Landlord will enter
into a commercially reasonable lease, to be mutually agreed upon by
the parties for the lease of the Real Property located at 200
Riverside Street, Portland, Maine. The minimum term of the lease
shall be for a period of at least 25 years and the lease shall
provide a right of first refusal to acquire the property should
Landlord desire to sell the property or upon death of all owners of
Landlord, but a sale between the present shareholders of Landlord
to one another or among their respective heirs, will not trigger
the right of first refusal, nor shall any gifts to the heirs of
such owner.
4.
Pre-closing Actions . Before the Closing:
4.1
Conduct of Business . Seller shall cause Kenkev to carry on
and conduct the Business only in the ordinary course consistent
with past practice, without any material change in the policies,
practices, and methods Kenkev pursued before the date of this
Agreement. Seller will use its best efforts and cause Kenkev to use
its best efforts to preserve the Business organization intact; to
preserve the relationships with Kenkev’s customers,
suppliers, and others having business dealings with Kenkev; and to
preserve the services of Kenkev’s employees, agents, and
representatives. Without limitation of the foregoing, (a) Seller
will cause Kenkev not to undertake without Buyer’s prior
written consent (not to be unreasonably withheld or delayed) any
action that, if taken before the date of this Agreement, would be
required to be disclosed on Schedule 8.12, and (b) Seller will
cause Kenkev not to alter the physical contents or character of any
of its inventories in a way that materially affects the nature of
the Business or results in a material change in the total dollar
valuation of the inventories or otherwise take action or refrain
from taking action that would result in any material change in
Kenkev’s assets or liabilities, in each case other than in
the ordinary course of business consistent with past business
practices.
4.2
Access to Buyer . From the date of this Agreement through
the Closing, Seller shall cause Kenkev to permit Buyer and
its representatives to make a full business, financial, accounting,
and legal investigation of Kenkev. Seller shall cause Kenkev to
take all reasonable steps necessary to cooperate with Buyer in
conducting this investigation. No such investigation by Buyer or
its representatives or any knowledge obtained or that could have
been obtained shall affect the representations and warranties of
Seller or Buyer’s reliance on them.
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4.3
UCC Filings. Buyer will conduct a Uniform Commercial Code
search result for the State of Maine, the County of Cumberland, and
in South Carolina showing no security interests or liens naming
KenKev as a debtor, other than those acceptable to the Buyer or
released prior to or at the time of the Closing described
herein.
4.4
Accuracy of Representations and Warranties and Satisfaction of
Conditions . Seller will immediately advise Buyer in writing if
(a) any of the representations or warranties of Seller is untrue or
incorrect in any material respect, or (b) Seller becomes aware of
the occurrence of any event or state of facts that results in any
of the representations and warranties of Seller being untrue or
incorrect as if Seller were then making them. Seller will not take
any action, or omit to take any action, and shall cause Kenkev not
to take any action, or omit to take any action, that would result
in any of Seller’s representations and warranties set forth
in this Agreement to be untrue or incorrect as of the Closing Date.
Seller will use its best efforts to cause all conditions set forth
in Section 5 that are within its control to be satisfied as
promptly as practicable under the circumstances.
5.
Conditions Precedent to Buyer’s Obligations .
Buyer’s
obligation to consummate the transactions contemplated by this
Agreement is subject to the fulfillment (or waiver by Buyer) before
or at the Closing of each of the following conditions:
5.1
Accuracy of Representations and Warranties . The
representations and warranties of Seller in Article 8, hereinafter
and all related documents shall be true and correct on the date of
this Agreement and at and as of the Closing.
5.2
Performance of Covenants . Seller shall have in all respects
performed and complied with all covenants, agreements, and
conditions that this Agreement requires, and with all other related
documents to be performed or complied with before or at the
Closing. The Seller shall have executed and delivered the
Non-competition Agreements, the Waivers, the Forms W-9 referred to
in Section 8.22(e), and the Certificates of Non-foreign Status
referred to in Section 11.3. To the extent that any buy-sell
agreements exist between any parties relative to the shares being
sold in KenkevII, they have been terminated.
5.3
Satisfactory Due Diligence Review . All due diligence by
Buyer has been completed, and Buyer has notified Seller
Equityholder in writing of the successful completion of the Due
Diligence. Seller represents that all materials provided to Buyer
during the course of due diligence are truthful and accurate, to
the best of Seller’s knowledge.
5.4
Permits . Buyer shall have acquired all licenses and permits
that in Buyer’s opinion are necessary to operate the Business
after the Closing. These include, but are not limited to, a Liquor
License issued by the State of Maine and a Nude Activity License
issued by the City of Portland. There shall be no material change
in the ability of the Buyer to conduct business in the manner in
which it is currently being operated.
5.5
No Casualty . Before the Closing Date, Seller shall not have
incurred, or be threatened with, a material liability or casualty
that would materially impair the value of the Business.
5.6
Opinion of Counsel . Buyer shall have received the favorable
opinion of counsel to Seller dated the Closing Date and in form and
substance satisfactory to Buyer’s counsel that the
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Seller is a corporation
in good standing and that Seller is lawfully entitled to sell the
stock in KEN-KEV, Inc and KenkevII, Inc..
5.7
Equity Interest Certificates . Seller shall have delivered
to Buyer stock certificates representing all of the Purchased
Equity Interests registered in the name of the Seller (without any
restrictive legend). The certificates shall be endorsed in blank or
with accompanying signed assignments. Seller shall also deliver to
Buyer such other instruments or documents that shall, in the
reasonable opinion of the Buyer’s counsel, be reasonably
required to vest good title in Buyer to the Purchased Equity
Interests free from all Encumbrances.
5.8
Certificates Regarding Conditions Precedent . The Seller
shall have delivered to Buyer certificates of the Seller
certifying that as of the Closing Date all of the conditions set
forth in Sections 5.1, 5.2, 5.5, 5.7, 5.10, and 5.12 have been
complied with, satisfied or waived by Buyer.
5.10
No Litigation . No proceeding or investigation shall have
been instituted before or by any court or governmental body to
restrain or prevent the carrying out of the transactions
contemplated by this Agreement or that might affect Buyer’s
right to own the Purchased Equity Interests or for Buyer to own,
operate, and control the Business after the Closing Date.
5.11
Lien Search . Buyer shall have obtained UCC lien searches in
form and content satisfactory to Buyer.
5.12
Consents . Seller shall have obtained in writing all
consents necessary or desirable to consummate or facilitate
consummation of this Agreement and any related transactions. The
consents shall be delivered to Buyer before Closing and shall be
reasonably acceptable to Buyer in form and substance.
5.13
Environmental Investigation . Buyer waives the right to
perform a environmental investigation of the property at this time,
however reserve the right to conduct such a investigation at the
time that it exercises its first right of offer to acquire the
property. Nothing shall affect the Seller’s
representations and warranties in Section 8.25 or Buyer’s
reliance on them or Seller’s indemnification obligations
under Section 10 hereinafter.
5.14
Waivers . Seller shall have delivered to Buyer a statement
from each of the Seller and each of KEN-KEV, Inc, and
KenkevII’s officers and directors, in form and substance
acceptable to respective Buyer, that each either waives or has no
claim, as appropriate, against the corporation for unpaid
dividends, bonuses, profit sharing, rights, or other claims of any
kind, nature, or description except salaries and fringe benefits
normally accrued and described in the statement or otherwise
contemplated under this Agreement.
5.15
Resignations . Each director and officer of KEN-KEV, Inc.
and KenkevII shall have delivered to Buyer resignations from their
positions.
5.16
Other Documents and Instruments . Buyer shall have received
any other documents and instruments from Seller as it may
reasonably request.
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5.17
Approvals by Buyer’s Counsel . Buyer’s counsel
shall have reasonably approved all legal matters and the form and
substance of all documents Seller, or Seller Equityholder are
required to deliver at the Closing.
5.18
Payment of all Liabilities . All known liabilities
(including all vendors, personal and real property taxes, and
utilities) of the Sellers incurred prior to the Closing date of the
respective purchase shall have been paid in full by the respective
company or the corporate funds necessary to pay such expenses shall
be escrowed or allocated from the Corporate Operating Account until
such time as satisfactory evidence of the payment of the expense
has been received by the Buyer.
6.
Conditions Precedent to Seller’s Obligations .
Seller’s
obligations to consummate the transactions contemplated by this
Agreement are subject to the fulfillment (or waiver by Seller ) of
each of the following conditions before or at the
Closing:
6.1
Accuracy of Representations and Warranties . Buyer’s
representations and warranties contained in this Agreement and all
related documents shall be true and correct on the date of this
Agreement and at and as of the Closing.
6.2
Performance of Covenants . Buyer shall have in all respects
performed and complied with all covenants, agreements, and
conditions required by this Agreement and all related documents
that must be performed or complied with before or at the
Closing.
7.
Closing Matters .
7.1
Closing . The closing of the transactions contemplated in
this Agreement (the “Closing”) shall take place
at the offices of William C. Knowles, Verrill Dana, LLC, One
Portland Square, Portland, ME 04112 within 14 days of the date that
all license and permits are approved for transferor at another
place and/or on another date that the parties agree on (the
“Closing Date”).
All transactions and
all documents executed and delivered at the time of Closing shall
be deemed to have occurred simultaneously, and no transaction shall
be deemed to have occurred and no document shall be deemed to have
been executed or delivered unless all transactions have occurred
and all documents have been executed and delivered. For the
purposes of this Agreement, the term Business Day means a
day other than a Saturday or Sunday on which banks are generally
open for business in Maine.
7.2
Certain Closing Expenses . Seller shall be liable for and
shall pay all federal, state, and local sales, use, excise, and
documentary stamp taxes and all other similar taxes, duties, or
other like charges properly payable on and in connection with the
conveyance and transfer of the Purchased Equityholder Interests to
Buyer.
7.3
Further Assurances . Seller shall cooperate with and assist
Buyer and take all other reasonable actions to ensure a smooth
transition of the Business to Buyer. From time to time after the
Closing Date, Seller shall, at the request and expense of Buyer,
execute and deliver additional conveyances, transfers, documents,
instruments, assignments,
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applications,
certifications, papers, and other assurances that Buyer requests as
required to effectively carry out this Agreement’s intent in
good faith and to transfer the Purchased Equityholder Interests to
Buyer.
7.4
Title and Liens. At the Closing, title to the assets owned
by KEN-KEV, Inc. and KenkevII shall be free, clear, and
unencumbered, as specifically set forth in this Agreement. To this
end at the closing, the Seller shall cause to be delivered all of
the following:
a.
Lien Search . Buyer at its expense shall have obtained a tax
lien search and financing statement search, both certified to a
date at or near the Closing Date and each showing that no tax,
mechanics, or other liens have been filed against the property.
Seller shall reasonably cooperate with Buyer to conduct such a
search.
b.
Application for Conditional Tax Clearance . Seller shall
provide Buyer a letter from the appropriate Maine authorities
concerning liability of KEN-KEV, Inc. and KenkevII for sales
or withholding taxes, both as of a date near the Closing Date and
each showing that KEN-KEV, Inc. and KenkevII are not in arrears on
payments relating to the above referenced taxes.
7.5
Income Taxes . Buyer and Seller agree that Buyer shall
be responsible for all taxes based on KEN-KEV, Inc. and
KenkevII’s taxable income, to the extent accrued on and after
the Closing Date and that Seller shall be responsible for those
amounts before the Closing Date. In order to effect this
provision, the parties agree that Seller shall cause KEN-KEV, Inc.
and KenkevII to close its books and determine the net taxable
income and federal and state taxes for the pro rated year ending on
the day before the Closing Date and shall include the tax due as a
closing adjustment under Article 2.2 and Exhibit 2.4.
8.
Seller’s Representations and Warranties .
The Seller represents
and warrants to Buyer as follows as of the date of this Agreement
and as of the Closing Date, and acknowledges and confirms, that
Buyer is relying on these representations and warranties in
entering into this Agreement:
8.1
Organization and Standing . KEN-KEV, Inc. and KenkevII are
corporations organized, validly existing, and in good standing
under the laws of the state of incorporation, and have all
requisite corporate power and authority to own its property and
conduct its business as it is now being conducted. The nature of
the business and the character of the properties KEN-KEV, Inc.
and KenkevII own or lease do not make licensing or
qualification of as a foreign entity necessary under the laws of
any other jurisdiction. Except for the use of the name
“Platinum Plus” or otherwise as set forth in Schedule
8.1 (need Schedule). KEN-KEV, Inc. and KenkevII have not in
the last five years used or assumed any other name in connection
with the conduct of its business.
8.2
Articles and Bylaws . Schedule 8.2 contains true and
complete copies of KEN-KEV, Inc. KenkevII’s Articles of
Incorporation and Bylaws.
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8.3
Capitalization . KEN-KEV, Inc. and KenkevII’s
authorized capital stock consists solely of 100,000 shares
of common stock, of which 1,000 shares are issued and
outstanding respectively. All of the issued and outstanding Seller
Equity Interests are owned of record and beneficially by the Seller
. A true and complete list of the certificate numbers and number of
all shares held by the Seller is set forth in Schedule 8.3. There
are no options, calls, subscriptions, warrants, agreements, or
other securities or rights outstanding for the purchase or other
acquisition of Seller’s Equityholders Interests; that are
convertible into, exercisable for, or relate to Seller’s
Equityholder Interests; or that have any voting rights.
Neither Corporation has any outstanding contractual obligations to
repurchase, redeem, or otherwise acquire any outstanding shares of
Seller’s Equityholder Interests. Seller is not a party to any
Buy-Sell Agreement that would affect in any manner any of the
transactions contemplated in this Agreement.
8.4
Seller Equityholder Interests . Seller is the lawful owner
of the Purchased Equity Interests, free from all pledges, liens,
security interests, encumbrances, mortgages, adverse claims,
charges, options, equity interests, proxies, voting agreements or
trusts, leases, tenancies, easements, or other interests
(“Encumbrances”). All shares of the Purchased
Equityholder Interests have been authorized and validly issued and
are fully paid, non-assessable, and free of preemptive rights. On
delivery to Buyer at the Closing of the Purchased Equityholder
Interests, endorsed for transfer, Buyer will be the absolute owner
of the Purchased Equityholder Interests, free from all Encumbrances
arising by or through Seller, KEN-KEV, Inc. or KenkevII, Inc..
8.5
Authorization . Seller has the requisite legal capacity to
execute, deliver, and perform this Agreement and the Noncompetition
Agreements (the “Related Agreements”) to which they are
a party and to consummate any related transactions. Seller
has duly executed and delivered this Agreement. This Agreement is,
and the Related Agreements when executed and delivered by the
parties to them will be, legal, valid, and binding obligations of
Seller, enforceable against Seller in accordance with their
respective terms, except as such enforcement may be limited by
bankruptcy, insolvency, moratorium, or similar laws relating to the
enforcement of creditors’ rights and by general principles of
equity (regardless of whether such enforceability is considered in
a proceeding at law or in equity).
8.6
Existing Agreements and Governmental Approvals .
(a)
Except as set forth in Schedule 8.6, the execution, delivery, and
performance of this Agreement and the Related Agreements by Seller
and the consummation of the transactions contemplated by them
(i) do not and will not violate any provisions of law
applicable to Seller or KEN-KEV, Inc. or KenkevII; (ii) do
not and will not conflict with, result in the breach or termination
of any provision of, or constitute a default under (in each case
whether with or without the giving of notice or the lapse of time,
or both) Seller’s respective Articles of Incorporation or
Bylaws or any indenture, mortgage, lease, deed of trust; other
instrument, contract, or agreement; or any order, judgment,
arbitration award, or decree to which Seller or Seller Equityholder
is a party or by which it or any of its assets and properties are
bound; and (iii) do not and will not result in the creation
of any Encumbrance on any of the properties, assets, or business of
Seller, KEN-KEV, Inc. or KenkevII, Inc..
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(b)
Except as set forth in Schedule 8.6, no approval, authority, or
consent of or filing by Seller, KEN-KEV, Inc. or KenkevII, Inc.
with, or notification to, any federal, state, or local court,
authority, or governmental or regulatory body or agency, or any
other corporation, limited liability company, partnership,
individual, or other entity is necessary to authorize the execution
and delivery of this Agreement or any of the Related Agreements or
the consummation of the transactions contemplated by this Agreement
or any of the Related Agreements.
8.7
No Subsidiaries . KEN-KEV, Inc. does not have any
subsidiaries or directly or indirectly own any interest or have any
investment in any other corporation, partnership, or other entity,
other than a 100% interest in KenkevII, Inc.
8.8
No Insolvency . No insolvency proceeding of any character,
including, without limitation, bankruptcy, receivership,
reorganization, composition, or arrangement with creditors,
voluntary or involuntary, affecting Seller or any of its assets or
properties is pending or, to the Best Knowledge of Seller
Equityholder, threatened. Neither Seller nor KenkevII have taken
any action in contemplation of, or that would constitute the basis
for, the institution of any such insolvency proceedings. For the
purposes of this Agreement, the phrase Best Knowledge of Seller
Equityholders means the knowledge that the Seller Equityholder
has or would have after due inquiry into the matter in
question.
8.9
Permits and Licenses . KEN-KEV, Inc. and KenkevII, Inc. have
all necessary permits, certificates, licenses, approvals, consents,
and other authorizations required to carry on and conduct the
Business and to own, lease, use, and operate its assets at the
place and in the manner in which the Business is presently
conducted. A complete list of all permits, certificates,
licenses, approvals, consents, and other authorizations is included
in Schedule 8.9.
8.10
Financial Statements . [To be reviewed by Seller’s
accountants]Seller has delivered to Buyer the financial statements
for the Corporations listed in Schedule 8.10, and Seller shall
deliver, before the Closing, copies of financial statements for
each full month before the Closing after the periods reflected in
such listed financial statements (the “Financial
Statements”). The Financial Statements fairly and accurately
present the financial position of Kenkev and its affiliates as of
the dates indicated and the results of its operations as of the
dates indicated and for the periods covered thereby, and are and
will be true and correct in all material respects, subject to
year-end adjustments. All inventories reflected in the Financial
Statements have been and will be valued at the lower of cost or
market value, with cost determined using the last-in, first-out
method; adequate provision has been and will be timely made in the
Financial Statements for doubtful accounts or other receivables;
sales are stated in the Financial Statements net of discounts,
returns, and allowances; all Taxes (as defined in Section 8.22) due
or paid are and will be timely reflected in the Financial
Statements; and all Taxes not yet due and payable are and will be
fully accrued or otherwise provided for in the Financial
Statements. Any items of income or expense that are unusual or of a
nonrecurring nature during any such period or at any such balance
sheet date are and will be separately disclosed in the Financial
Statements. Except as otherwise disclosed on Schedule 8.10,
Seller’s books, records, and work papers are complete and
correct and accurately reflect,
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and will accurately
reflect, in all material respects the basis for the financial
condition and the results of KEN-KEV, Inc. and
KenkevII’s operations that are set forth in the Financial
Statements.
8.11
No Undisclosed Liabilities . Except as otherwise disclosed
on Schedule 8.11 or in the Financial Statements, (none of which
have or will have arisen as a result of negligence, gross
negligence, strict liability, tort, toxic tort, environmental
liabilities, violations of law, or default under any Contract or
Commitment attributable to KenkevII or for which KenkevII shall be
responsible), KEN-KEV, Inc. and KenkevII do not have any debts,
liabilities, or obligations or any kind or character whatsoever,
whether accrued, absolute, contingent, matured, not matured, known,
unknown, or otherwise, of a character as would be required to
be reflected in any balance sheet prepared in accordance with
GAAP.
8.12
Conduct of Business . Except as otherwise disclosed on
attached Schedule 8.12, since the date of execution of the Letter
Agreement dated June 7, 2007 (“the Letter Agreement),
KEN-KEV, Inc, and KenkevII have not:
(a)
Issued any capital stock or other securities convertible into or
exchangeable or exercisable for capital stock or having
voting rights; declared or paid any dividend; made any other
payment from capital or surplus or other distribution of any
nature; or directly or indirectly redeemed, purchased, or otherwise
acquired, recapitalized, or reclassified any of its capital
stock.
(b)
Merged with any other entity.
(c)
Altered or amended its Articles of Incorporation or Bylaws.
(d)
Entered into, materially amended, or terminated any contract,
license, lease, commitment or permit, except in the ordinary course
of business consistent with past practices.
(e)
Experienced any labor disturbance.
(f)
Incurred or become subject to any obligation or liability
(absolute, accrued, contingent or otherwise), matured, not matured,
except (i) in the ordinary course of business consistent
with past practices and (ii) in connection with the
performance of this Agreement.
(g)
Discharged or satisfied any Encumbrance or paid or satisfied any
obligation or liability (absolute, accrued, contingent, or
otherwise) other than (i) liabilities shown or reflected in
the respective balance sheet dated August 31, 2007 or (ii)
liabilities incurred since the date of the balance sheet, in each
such case only in the ordinary course of business consistent with
past practices and in accordance with the express terms of such
obligation or liability.
(h)
Mortgaged, pledged, or subjected to any Encumbrance any of its
assets.
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(i)
Sold, transferred, or agreed to sell or transfer any asset or
business; cancelled or agreed to cancel any debt or claim; or
waived any right, except in the ordinary course of business
consistent with past practices.
(j)
Disposed of or permitted to lapse any Intellectual Property.
(k)
Granted any increase in employee rates of pay or any increases in
salary payable or to become payable to any officer, employee,
consultant, or agent, or by means of any bonus or pension plan,
contract, or other commitment increased the compensation of any
officer, director, employee, consultant, or agent, or hired any new
officer, employee, consultant, or agent, except in the ordinary
course of business.
(l)
Made or authorized any capital expenditures for additions to plant
or equipment accounts in excess of $10,000.00.
(m)
Entered into any transaction (including, without limitation, any
contract or other arrangement providing for employment, furnishing
of services, rental of real or personal property, or otherwise
requiring payments) with any shareholder, officer, or director of
KenkevII; any member of their immediate families; or any of their
affiliates.
(n)
Experienced any material damage, destruction, or loss (whether or
not covered by insurance) affecting its properties, assets, or
Business.
(o)
Failed to regularly maintain and repair its assets in the ordinary
course of business consistent with past practices.
(p)
Instituted or settled any litigation, action, or proceeding before
any court or governmental body relating to it or its property.
(q)
Made any change in any method of accounting or any accounting
practice or suffered any deterioration in accounting controls.
(r)
Varied, cancelled, or allowed to expire any insurance coverage,
except as agreed by the parties in writing.
(s)
Made any payment or disbursement of moneys or property or declared
or paid any dividend or other distribution to or on behalf of any
officer, director, or shareholder of KenkevII or any member of the
immediate families of any of the Seller Equityholder, or any
affiliate, other than for payment of compensation or reimbursement
of expenses in accordance with past practices.
(t)
Entered into any other transaction other than in the ordinary
course of business consistent with past practices.
(u)
Agreed or committed to do any of the foregoing.
8.13
No Adverse Changes . Except as otherwise disclosed in
Schedule 8.13, since the date of execution of the Letter Agreement,
there has not been any occurrence, condition, or development that
has adversely affected, or is likely to adversely affect, the
Seller, or its prospects, condition (financial or otherwise),
operations, assets, or the Business.
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8.14
Employees . That except as disclosed on Schedule 8.14
(Schedule) , there is not now, nor has there been at any time
during the past five years, any strike, lockout, grievance filing,
other similar labor dispute against KenkevII or that in any manner
affects KenkevII. KenkevII is and has been, to the best of its
knowledge, in compliance with all rules regulating employee wages
and hours. Buyer acknowledges that Kenkev has not treated the
entertainers as employees and that such treatment is of an
uncertain nature. This acknowledgement pertains to the
entertainer/employee issue every where it is mentioned in this
Agreement. On or before the Closing Date, Kenkev shall have
paid all its accrued obligations relating to employees (whether
arising by operation of law, by contract, or by past service) or
payments to trusts or other funds, to any governmental agency, or
to any individual employee (or his or her legal representatives)
with respect to unemployment compensation benefits, profit sharing,
retirement benefits, or Social Security benefits. Kenkev has, to
the best of its knowledge, complied with all requirements of
the U.S. Immigration and Nationality Act, as amended, including
without limitation all employment verification and
antidiscrimination provisions applicable to current and former
employees of Kenkev.
8.15
Employee Benefit Plans .[Subject to review by Seller’s
accountants.]
(a)
Schedule 8.15 contains a true and complete list of all plans,
contracts, programs, and arrangements (including, but not limited
to, collective bargaining agreements, pensions, bonuses, deferred
compensation, retirement, severance, hospitalization, insurance,
salary continuation, and other benefit plans, programs, or
arrangements) maintained currently or at any time within the
previous five years by Kenkev or under which Kenkev has had any
obligations with respect to an employee, director, or shareholder
of Kenkev (the “Plans”).
(b)
True, correct, and complete copies of the following documents, wit
respect to each of the Plans, if applicable, have been made
available or delivered to the Buyer: (i) any plans and
related trust documents, and amendments thereto; (ii) the
two most recent Forms 5500; (iii) the last IRS determination
letter, if applicable; (iv) the most recent actuarial
report; (v) summary plan descriptions; (vi) the two
most recent Forms PBGC-1, and (vii) with respect to any
Pl
