1
ASSET PURCHASE AND SALE AGREEMENT
BETWEEN AND AMONG
BIKERS DREAM, INC.,
ULTRA ACQUISITION CORP.
AND
▇▇▇▇ ACRES INVESTMENTS, INC.
January 30, 1997
2
TABLE OF CONTENTS
ARTICLE I PURCHASE AND SALE OF ASSETS.....................................1
Section 1.1 Sale of Assets............................... 1
Section 1.2 Excluded Liabilities..........................2
Section 1.3 Purchase Price and Payment....................2
ARTICLE II CLOSING ..............................................3
Section 2.1 Time and Place of Closing.....................3
Section 2.2 Transfer of Subject Assets....................3
Section 2.3 Allocation of Purchase Price..................4
Section 2.4 Sales and Transfer Taxes......................4
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER........................4
Section 3.1 Organization and Good Standing................4
Section 3.2 Licenses and Permits..........................4
Section 3.3 Authority of Seller; No Breach................4
Section 3.4 Title.........................................5
Section 3.5 Absence of Undisclosed Liabilities............5
Section 3.6 Loss Contracts................................5
Section 3.7 Accounts Receivable...........................5
Section 3.8 Real Property.................................6
Section 3.9 Environmental Matters.........................6
Section 3.10 Intangible Personal Property..................6
Section 3.11 Labor and Employment Agreements...............6
Section 3.12 Employee Benefit Plans; ERISA.................7
Section 3.13 Material Contracts and Relationships..........7
Section 3.14 Inventory.....................................7
Section 3.15 Absence of Certain Business Practices.........7
Section 3.16 Transactions with Related Parties.............8
Section 3.17 Compliance with Laws..........................8
Section 3.18 Litigation....................................8
Section 3.19 Taxes.........................................8
Section 3.20 Insurance.....................................9
Section 3.21 No Powers of Attorney or Suretyships..........9
Section 3.22 Brokerage Fees................................9
Section 3.23 Machinery, Equipment and Other Personal
Property......................................9
Section 3.24 Product Warranty and Liability................9
Section 3.25 Consents and Approvals.......................10
Section 3.26 Disclosure...................................10
i
3
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER........................10
Section 4.1 Organization.................................10
Section 4.2 Authority of Buyer...........................10
Section 4.3 Brokerage Fees...............................11
Section 4.4 Disclosure...................................11
ARTICLE V CERTAIN AGREEMENTS AND UNDERSTANDINGS..........................11
Section 5.1 Agreement Not to Compete.....................11
Section 5.2 Product Warranty Matters.....................12
Section 5.3 Employment Agreements........................12
Section 5.4 Ultra Bikers.................................12
ARTICLE VI INDEMNIFICATION................................................13
Section 6.1 Indemnification by Seller....................13
Section 6.2 Indemnification by Buyer.....................14
Section 6.3 Claims for Indemnification...................14
Section 6.4 Defense Claims...............................14
Section 6.5 Interest.....................................15
Section 6.6 Manner of Indemnification....................15
ARTICLE VII MISCELLANEOUS..................................................16
Section 7.1 Bulk Sales Law...............................16
Section 7.2 Fees and Expenses............................16
Section 7.3 Notices......................................16
Section 7.4 Assignability and Parties in Interest........17
Section 7.5 Governing Law................................17
Section 7.6 Counterparts.................................17
Section 7.7 Complete Agreement...........................17
Section 7.8 Modifications, Amendments and Waivers........17
Section 7.9 Limit on Interest............................17
Section 7.10 Attorneys' Fees and Costs....................17
Section 7.11 Further Assurances...........................17
Section 7.12 Contract Interpretation; Construction of
Agreement....................................18
Section 7.13 Arbitration..................................18
Section 7.14 Certain Definitions..........................18
Section 7.15 Guarantee....................................20
ii
4
ASSET PURCHASE AND SALE AGREEMENT
THIS ASSET PURCHASE AND SALE AGREEMENT (this "Agreement") is made and
entered into as of January 30, 1997 between and among Bikers Dream, Inc., a
California corporation ("Bikers Dream"), Ultra Acquisition Corp., a Nevada
corporation and a wholly owned subsidiary of Bikers Dream ("Buyer"), and ▇▇▇▇
Acres Investments, Inc., a California corporation ("Seller").
RECITALS
WHEREAS, Seller and Bikers Dream previously entered into an operating
agreement dated September 13, 1996 (the "Operating Agreement") providing for the
establishment of a joint venture known as Ultra Bikers, LLC ("Ultra Bikers");
and
WHEREAS, pursuant to Section 11.2 of the Operating Agreement and subject
to certain conditions Bikers Dream has the right to acquire the motorcycle
manufacturing business of Seller; and
WHEREAS, subject to the remaining terms and provisions of the Operating
Agreement, Bikers Dream and Seller wish to amend and restate Section 11.2 of the
Operating Agreement as provided in this Agreement; and
WHEREAS, subject to the terms and conditions of this Agreement, Seller
now desires to sell, and Buyer now desires to buy, all of the properties and
assets owned or used by Seller relating to or used in connection with the
manufacture, distribution and sale of motorcycles and motorcycle parts and
accessories by Seller or Ultra Bikers, including any and all businesses
conducted through Seller's Ultra Kustom Cycles and Ultra Kustom Parts divisions
(the "Business"); and
WHEREAS, subject to the terms and conditions hereof, Buyer desires to
purchase said properties and assets of Seller for the consideration specified
herein.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and the provisions set
forth below, and subject to the terms and conditions set forth herein, the
parties agree as follows:
ARTICLE I
PURCHASE AND SALE OF ASSETS
SECTION 1.1 SALE OF ASSETS. Subject to the provisions of this Agreement,
Seller agrees to sell and Buyer agrees to purchase, at the Closing, all of the
properties and assets owned or used by Seller, directly or indirectly, relating
to or used in connection with the Business, of every kind and description,
tangible and intangible, real, personal or mixed, and wherever located,
including, without limitation:
1
5
(a) All tangible assets, including without limitation the tangible
assets listed in Schedule 1.1(a) (collectively, "Equipment");
(b) All inventory (the "Inventory");
(c) All of the contracts and agreements with customers or suppliers,
if any, to which Seller is a party (the "Contracts");
(d) All goodwill and the right to use the names "Ultra Kustom
Cycles," "UKC," "Ultra Kustom Parts," "UKP," or any derivative or variant
thereof and any related ▇▇▇▇ or logo;
(e) Any accounts and other receivables (the "Accounts Receivable")
(Buyer acknowledging Seller's representation that after cancellation of the
promissory notes referred to in Sections 1.5(b)(i) and (ii) of the Operating
Agreement (the "Ultra Bikers Notes") there will be none);
(f) All of Seller's interest in Ultra Bikers (the "Shares");
(g) An assignment of the lease of the Seller's facilities at 11631
and 11800 (Suites I and J) Sterling Avenue, Riverside, California 92503 (the
"Leases");
(h) All licenses, trade secrets, data, designs, drawings,
specifications and other documents, know-how and information and all files,
books and records with respect thereto; and
(i) All books and records, data and other information, in whatever
format, whether on paper or computer disk or otherwise, in the possession of
Seller relating to 1996.
The assets, property and business of Seller to be sold to and
purchased by Buyer under this Agreement are hereinafter collectively referred to
as the "Subject Assets."
SECTION 1.2 EXCLUDED LIABILITIES. Buyer shall not assume or have any
liability with respect to (i) any obligation or liability of Seller, whether
absolute, accrued, contingent or otherwise, and whether due or to become due,
(ii) any Losses (defined below) related to the Harley-Davidson Lawsuit (defined
below) or (iii) any product warranty claims for product sold by Seller prior to
September 13, 1996 (collectively, the "Excluded Liabilities").
SECTION 1.3 PURCHASE PRICE AND PAYMENT. In consideration of the sale
by Seller to Buyer of the Subject Assets, Buyer agrees that at the Closing it
will deliver to Seller $3,800,000 (the "Purchase Price"), payable in the form of
cash in the amount of $1,100,000 and a senior secured subordinated promissory
note (the "Note") in the principal amount of $2,700,000, in the form of Exhibit
A hereto (subject to the proviso that repayment of principal and interest is
contingent on receipt of the manufacturer's license presently being applied for
("Manufacturer's License"), and subject to setoff as provided in Section
6.6(a)).
2
6
ARTICLE II
CLOSING
SECTION 2.1 TIME AND PLACE OF CLOSING.
(a) The closing of the purchase and sale provided for in this Agreement
(herein called the "Closing") shall be held at the offices of Buyer in Santa
Ana, California on the date hereof, at 10:00 a.m., or at such other place or
earlier or later date or time as may be fixed by mutual agreement of Buyer and
Seller (the "Closing Date").
(b) At the Closing Buyer shall deliver to Seller:
(i) the Note;
(ii) the Ultra Bikers Notes, marked "cancelled;" and
(iii) a security agreement executed by Bikers Dream in the form of
Exhibit B hereto (the "Security Agreement").
(c) At Closing Seller shall deliver or cause to be delivered to Buyer:
(i) the Note, countersigned;
(ii) the Security Agreement, countersigned;
(iii) a ▇▇▇▇ of sale in the form of Exhibit C hereto;
(iv) an assignment of intangibles in the form of Exhibit D hereto;
(v) a non-competition agreement in the form of Exhibit E hereto
executed by ▇▇▇▇▇▇▇ ▇▇▇▇▇▇;
(vi) assignments of the Leases; and
(vii) a Manufacturer's License.
SECTION 2.2 TRANSFER OF SUBJECT ASSETS.
(a) At the Closing, Seller shall deliver or cause to be delivered to Buyer
such other good and sufficient instruments of transfer as Buyer may reasonably
request transferring to Buyer title to all the Subject Assets, and shall take
all requisite steps to put Buyer in actual possession and operating control of
the Subject Assets. Seller from time to time after the Closing at the request of
3
7
Buyer and without further consideration shall execute and deliver further
instruments of transfer and assignment and take such other action as Buyer may
reasonably require to more effectively transfer
and assign to, and vest in, Buyer each of the Subject Assets.
(b) If an attempted assignment of rights or benefits to be assigned to
Buyer (the "Rights") would be ineffective without the consent of any other
person, and such consent has not been obtained, Seller and Buyer shall use
reasonable efforts to obtain, as soon as practicable, such consent, and will
cooperate in any reasonable arrangement designed to provide for the assumption
by Buyer of the benefits and burdens of any such Rights.
SECTION 2.3 ALLOCATION OF PURCHASE PRICE. At or prior to the Closing, Buyer
and Seller shall mutually agree to an allocation of the purchase price (and all
other capitalized costs) among the Subject Assets as set forth in Schedule 2.3.
Such allocation shall be made in accordance with the provisions of Section 1060
of the Code, and shall be binding upon Buyer and Seller for all federal and
state income tax purposes. Buyer and Seller also each agree to file IRS Form
8594 consistently with the foregoing and in accordance with Section 1060 of the
Code.
SECTION 2.4 SALES AND TRANSFER TAXES. Notwithstanding any other provision
of this Agreement, all sales and transfer taxes, fees and duties under
applicable law incurred in connection with this Agreement or the Transactions
contemplated thereby will be borne and paid by Seller, and Seller shall promptly
reimburse Buyer for the payment of any such tax, fee or duty which it is
required to make under applicable law.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Buyer that, except as set forth on
schedules hereto:
SECTION 3.1. ORGANIZATION AND GOOD STANDING. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
California with full corporate power and authority to own or lease its
properties and to conduct its business in the manner and in the places where
such properties are owned or leased or such business is currently conducted.
Seller is qualified to do business and is in good standing in the State of
California.
SECTION 3.2 LICENSES AND PERMITS. Schedule 3.2 lists all permits,
registrations, licenses, franchises, certifications and other approvals required
from federal, state or local authorities in order for Seller to conduct and
operate the Business.
SECTION 3.3 AUTHORITY OF SELLER; NO BREACH.
(a) Seller has all necessary authority and power to enter into this
Agreement and to carry out the Transactions contemplated hereby. The
execution, delivery and performance by Seller of this
4
8
Agreement and the consummation by Seller of the Transactions contemplated hereby
have been duly authorized by all necessary corporate action of Seller, and no
other action on the part of Seller is required in connection therewith. This
Agreement constitutes the valid and binding obligation of Seller, enforceable
against Seller in accordance with its terms.
(b) The execution, delivery and performance by Seller of this Agreement do
not, and the performance by Seller of the transactions contemplated hereby, will
not:
(i) violate any provision of the Articles of Incorporation or by-laws
of Seller;
(ii) violate any laws of the United States, or any state or other
jurisdiction applicable to Seller or require Seller to obtain any approval,
consent or waiver of, or make any filing with, any person or entity
(governmental or otherwise) that has not been obtained or made;
(iii) result in a violation or any breach of, constitute a default (or
an event which with notice or lapse of time or both would become a default)
under, change any other rights or obligations pursuant to, or conflict with, any
material note, contract, lease, license or other agreement or other instrument
or obligation to which Seller is a party or by which it or its properties is
bound; or
(iv) result in the creation or imposition of any lien, charge,
encumbrance or restriction upon any of the Subject Assets.
SECTION 3.4 TITLE.
(a) Seller has good title to the Subject Assets and on the Closing Date
will transfer and convey good and valid title to the Subject Assets to Buyer,
free and clear of any liens, encumbrances, pledges, security interests, claims
or rights of others of any kind or nature whatsoever, except as otherwise
created by Buyer.
(b) Seller is the owner of the Shares free and clear of any liens,
restrictions, options or rights in others, encumbrances or other claims, rights
or offers of first refusal, or voting agreements; and Seller has full legal
right, power and authority to transfer and deliver valid title to the Shares
hereunder.
SECTION 3.5 ABSENCE OF UNDISCLOSED LIABILITIES. There are no liabilities of
Seller relating to or arising in connection with the Business or of Ultra
Bikers, whether absolute, accrued, contingent or otherwise, and whether due or
to become due.
SECTION 3.6 LOSS CONTRACTS. Seller does not have any Contracts.
SECTION 3.7 ACCOUNTS RECEIVABLE. Upon cancellation of the Ultra Bikers
Notes Seller will have no accounts receivables.
5
9
SECTION 3.8 REAL PROPERTY. Seller does not own any real property. The
Leases are valid, binding, enforceable and in full force and effect. No default
or breach has occurred under the Leases, and no event has occurred which would
constitute a breach or default thereunder or would cause the creation of a lien
upon any asset of Seller. To the best of Seller's knowledge, all of the
buildings, fixtures and other improvements located on the real property leased
to Seller (the "Real Property") are in good operating condition and repair, and
the operation thereof as presently conducted does not violate any applicable
code, zoning ordinance or other applicable law or regulation.
SECTION 3.9 ENVIRONMENTAL MATTERS.
(a) Seller has complied and is in compliance with all applicable
Environmental Protection Laws. No violation by Seller is being alleged of any
applicable Environmental Protection Law relating to any of the properties and
assets at which the Business has ever been conducted. Seller has received no
notices of alleged violations of Environmental Protection Laws from any
governmental agency since January 1, 1996.
(b) Neither Seller nor, to Seller's knowledge, any other Person has caused
or taken any action that will result in any material liability or obligation on
the part of Seller or any of its Affiliates, relating to (x) the environmental
conditions on, under, or about the Real Property or (y) the past or present use,
management or release of any Regulated Substance.
SECTION 3.10 INTANGIBLE PERSONAL PROPERTY.
(a) There have been no actions or other judicial or adversary proceedings
involving Seller concerning any item of intangible personal property
constituting part of the Subject Assets ("Intangible Personal Property"), and,
to the knowledge of Seller, no such action or proceeding is threatened and no
claim or other demand has been made by any Person relating to any item of
Intangible Personal Property.
(b) Seller has the right and authority to use each item of Intangible
Personal Property in connection with the conduct of its businesses in the manner
presently conducted and to convey such right and authority, and such use does
not conflict with, infringe upon or violate any patent, copyright, trademark or
registration of any other person or entity.
(c) All officers and employees of Seller have assigned to Seller all
rights in and to any intellectual property used by Seller in connection with the
operations of the Business.
SECTION 3.11 LABOR AND EMPLOYMENT AGREEMENTS. Seller has not been a party
to or bound by any collective bargaining agreement and there have been no labor
unions or other organizations representing, purporting to represent or
attempting to represent any employees employed in the operation of the Business.
There are no union or collective bargaining labor disputes currently subject to
any grievance procedure, arbitration or litigation and there is no union
6
10
or collective bargaining representation petition pending, or to the best
knowledge of Seller after due inquiry, threatened with respect to any employee
employed in the operation of Business.
SECTION 3.12 EMPLOYEE BENEFIT PLANS; ERISA. Except as set forth on Schedule
3.12, Seller does not maintain or contribute to (i) any employee pension benefit
plan as defined in Section 3(2) of ERISA, (ii) any employee welfare benefit plan
as defined in Section 3(a) of ERISA, (iii) any profit sharing, pension, deferred
compensation, bonus, stock option, stock purchase, severance or incentive plan
or agreement, (iv) any plan or policy providing for "fringe benefits" to its
employees, including but not limited to vacation, paid holidays, personal leave,
employee discount, educational benefit or similar programs, or (v) any
employment agreement. Seller has not made contributions to, has never been a
member of a controlled group which has contributed to and has never been under
common control with an employer that contributed to any multiemployer plan as
defined in Section 3(37) of ERISA.
SECTION 3.13 MATERIAL CONTRACTS AND RELATIONSHIPS.
(a) Schedule 3.13(a) sets forth a complete and correct list of all
agreements to which Seller is a party or by which it is bound that are or may be
material to the assets, liabilities (whether absolute, accrued, contingent or
otherwise), condition (financial or otherwise), results of operations, business
or prospects of the Business. As used in this Section 3.13, the word "agreement"
includes both oral and written contracts, leases, understandings, arrangements
and all other agreements. The term "Material Contracts" means the agreements of
Seller required to be disclosed or Schedule 3.13(a).
(b) All of the Material Contracts are in full force and effect, are valid
and binding and are enforceable in accordance with their terms in favor of
Seller except for bankruptcy and similar laws affecting the enforcement of
creditors' rights generally. There are no liabilities of any party to any
Material Contract arising from any breach or default of any provision thereof
and no event has occurred that, with the passage of time or the giving of notice
or both, would constitute a breach or default by any party thereto.
(c) Seller has maintained and continues to maintain good relations with
its customers, and agents of, and suppliers to the Business, and Seller has no
reason to believe that such relations will in the foreseeable future deteriorate
or suffer any changes adverse to Seller.
SECTION 3.14 INVENTORY. The Inventory is good and merchantable material, of
a quantity and quality saleable in the ordinary course of business of the
Business. The quantities of all Inventory are reasonable and justified in the
present circumstances.
SECTION 3.15 ABSENCE OF CERTAIN BUSINESS PRACTICES. Neither Seller nor any
person acting on Seller's behalf has given or agreed to give any gift or similar
benefit to any customer, supplier, competitor or governmental employee or
official (domestic or foreign) relating in any way to the
7
11
Business (i) that would subject Seller to any damage or penalty in any civil,
criminal or governmental litigation or proceeding, or (ii) that would have an
adverse effect on the Business.
SECTION 3.16 TRANSACTIONS WITH RELATED PARTIES. There have been no
transactions by Seller with any Related Party and there are no agreements or
understandings now in effect between Seller and any Related Party, in either
case that relates to or is connected in any way with the Business or its
operations, business or prospects. In addition, none of the transactions with
any Seller or Related Parties has provided to Seller assets, income, financing
or business on a basis significantly more or less favorable than that available
from unaffiliated persons.
SECTION 3.17 COMPLIANCE WITH LAWS. The operation, conduct and ownership of
the property or business of the Business are being, and at all times have been,
conducted, in all material respects, in full compliance with all federal, state,
local and other (domestic and foreign) laws, rules, regulations and ordinances
and all judgments and orders of any court, arbitrator or governmental authority
applicable to it.
SECTION 3.18 LITIGATION. Other than the Harley-Davidson Lawsuit, there is
no legal, administrative, arbitration or other proceeding, or any governmental
investigation, pending or, to the knowledge of Seller, threatened against or
otherwise affecting Seller, or any of its assets, and Seller is not aware of any
fact that might reasonably be expected to form the basis for any such proceeding
or investigation relating in any way to the Business.
SECTION 3.19 TAXES.
(a) Seller has timely filed all Tax returns and reports required to have
been filed by it for all taxable periods ending on or prior to the date hereof,
and has paid all Taxes due to any taxing authority with respect to all taxable
periods ending on or prior to the date hereof, or otherwise attributable to all
periods prior to the date hereof. The Tax returns and reports filed are true and
correct in all material respects.
(b) Seller has not received notice that the IRS or any other taxing
authority has asserted against Seller any deficiency or claim for additional
Taxes in connection therewith. Further, no state of facts exists or has existed
which would constitute grounds for the assessment of any liability for Taxes
with respect to periods which have not been examined by the IRS or any other
taxing authority.
(c) There is no pending or, to the knowledge of Seller, threatened action,
audit, proceeding, or investigation with respect to (i) the assessment or
collection of Taxes or (ii) a claim for refund made by Seller with respect to
Taxes previously paid.
(d) All amounts that are required to be collected or withheld by Seller,
or with respect to Taxes of Seller, have been duly collected or withheld; all
such amounts that are required to be remitted to any taxing authority have been
duly remitted.
8
12
(e) Neither the IRS nor any state, foreign or local taxing authority has
examined any income tax return of Seller.
(f) Seller has not taken any action not in accordance with past practice
that would have the effect of deferring any Tax liability of Seller from any
taxable period ending on or before the date hereof to any taxable period ending
after such date.
(g) There are no liens for Taxes due and payable upon any Subject Assets
and there are no past due Tax deficiencies with respect to periods prior to the
Closing Date that could result in the imposition of a lien on the Subject
Assets..
SECTION 3.20 INSURANCE. Schedule 3.20 sets forth a complete and correct
list of all insurance policies and of all claims made by Seller on any liability
or other insurance policies (or to the extent Seller is self insured that would
have been made on such policies) (other than workers' compensation claims)
relating to or in connection with the Business. Schedule 3.20 is a complete and
correct list of all insurance currently in place (or, to the extent Seller is
self-insured, would have been in place and is reserved for or otherwise formally
or informally provided for) relating to the Business.
SECTION 3.21 NO POWERS OF ATTORNEY OR SURETYSHIPS. With respect to the
Business, (i) Seller has not granted any general or special powers of attorney
and (ii) Seller does not have any obligation or liability (whether actual,
contingent or otherwise) as guarantor, surety, co-signer, endorser, co-maker,
indemnitor, obligor on an asset or income maintenance agreement or otherwise in
respect of the obligation of any person, corporation, partnership, joint
venture, association, organization or other entity.
SECTION 3.22 BROKERAGE FEES. No Person is entitled to any brokerage or
finder's fee or other commission from Seller in respect of this Agreement or the
Transactions.
SECTION 3.23 MACHINERY, EQUIPMENT AND OTHER PERSONAL PROPERTY. Seller owns
all of the Equipment used in connection with or relating to the Business. All
such Equipment is in good operating condition and sufficient to carry on the
business of the Business in the normal course as it is presently conducted and
is free from defects, whether patent or latent. The Subject Assets constitute
all of the assets used by Seller and/or any and all of its Affiliates in
connection with the manufacture, distribution and sale of motorcycles and
motorcycle parts.
SECTION 3.24 PRODUCT WARRANTY AND LIABILITY. Each product of the Business
designed, used, manufactured, sold or leased by Seller and all services
performed by Seller relating to or in connection with the Business have been in
conformity with all applicable contractual commitments and all express and
implied warranties, and Seller has no liability and there is no basis for any
present or future action, suit or proceeding giving rise to any liability, for
replacement or repair thereof or other damages in connection therewith. Seller
does not have any liability, and there is no basis for any present or future
action, suit or proceeding giving rise to any liability, arising out of any
injury to persons or property as a result of any products of the Business
designed, used, manufactured, sold
9
13
or leased or any services relating to or in connection with the Business. Seller
has not received any notice that an action, suit or proceeding has been, or in
the future may be, made alleging that products of the Business or services
relating to or in connection with the Business are or were defective in any way.
SECTION 3.25 CONSENTS AND APPROVALS. The execution and delivery of this
Agreement by Seller do not, and the performance of the Transactions contemplated
by this Agreement by Seller will not, require any filing with or notification
to, or any consent, approval, authorization or permit from, any governmental or
regulatory authority or any other Person, except with respect to the Leases.
SECTION 3.26 DISCLOSURE. The information provided by Seller in connection
with this Agreement, including, without limitation, the schedules hereto, and in
any other writing pursuant hereto does not and will not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated herein or therein or necessary to make the statements and facts contained
herein or therein, in light of the circumstances under which they are made, not
false or misleading. Copies of all documents heretofore or hereafter delivered
or made available by Seller to Buyer pursuant hereto were or will be complete
and accurate records of such documents.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Seller that:
SECTION 4.1 ORGANIZATION. Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of Nevada with full
corporate power and authority to own or lease its properties and to conduct its
business in the manner and in the places where such properties are owned or
leased or such business is currently conducted.
SECTION 4.2 AUTHORITY OF BUYER.
(a) Buyer has all necessary authority and power to enter into this
Agreement and to carry out the Transactions contemplated hereby. The execution,
delivery and performance by Buyer of this Agreement and the consummation of the
Transactions contemplated hereby have been duly authorized by all necessary
corporate action of Buyer and no other action on the part of Buyer is required
in connection therewith. This Agreement constitutes the valid and binding
obligation of Buyer, enforceable in accordance with its terms.
(b) The execution, delivery and performance by Buyer of this Agreement do
not, and the performance by Buyer of the Transactions contemplated hereby will
not:
(i) violate any provision of the Articles of Incorporation or the
by-laws of Buyer;
10
14
(ii) violate any laws of the United States, or any state or other
jurisdiction applicable to Buyer or require Buyer to obtain any approval,
consent or waiver of, or make any filing with, any person or entity
(governmental or otherwise) that has not been obtained or made; or
(iii) result in a violation or any breach of, constitute a default (or
an event which with notice or lapse of time or both would become a default)
under, change any other rights or obligations pursuant to, or conflict with, any
material note, contract, lease, license or other agreement or other instrument
or obligation to which Buyer is a party or by which it or its properties is
bound.
SECTION 4.3 BROKERAGE FEES. No Person is entitled to any brokerage or
finder's fee or other commission from Buyer in respect of this Agreement or the
Transactions.
SECTION 4.4 DISCLOSURE. The information provided by Buyer in this
Agreement and in any other writing furnished pursuant hereto does not and will
not contain an untrue statement of a material fact or omit to state a material
fact required to be stated herein or therein or necessary to make the statements
and facts contained herein or therein, in light of the circumstances under which
they are made, not false or misleading. Copies of all documents heretofore or
hereafter delivered or made available by Buyer to Seller pursuant hereto were or
will be complete and accurate records of such documents.
ARTICLE V
CERTAIN AGREEMENTS AND UNDERSTANDINGS
SECTION 5.1 AGREEMENT NOT TO COMPETE.
(a) From the Closing Date to and including the fifth anniversary of
the Closing Date, Seller hereby agrees that Seller and its Affiliates shall not,
directly or indirectly, engage or be interested in any business that competes
with, and shall not, directly or indirectly, have any interest in, own, manage,
operate, control, be connected with as a stockholder (other than as a
stockholder of less than five percent (5%) of the issued and outstanding stock
of a publicly held corporation), joint venturer, or otherwise engage or invest
or participate in, any business that competes with the Business or the
manufacture, distribution or sale of motorcycles or motorcycle parts business in
any county or any other political subdivision of any state of the United States
of America. All of the parties agree that the duration and area for which the
covenant not to compete set forth in this Section 5.1 is to be effective are
reasonable. In the event that any court determines that the time period or the
geographical areas provided for in this Section 5.1, or both of them, are
unreasonable and that such covenant is to that extent unenforceable, such
covenant shall remain in full force and effect for the greatest time period and
in the greatest geographical area that would not render it unenforceable. The
parties intend that this covenant shall be deemed to be a series of separate
covenants, one for each and every county of each and every state of the United
States of America and
11
15
for any other country in the world where this covenant is intended to be
effective with each of the Officers. Seller and its Affiliates will present to
Buyer as a corporate opportunity any business venture in which they might intend
to participate during the term set forth in the first sentence of this paragraph
that relates to motorcycles, and Buyer shall have 60 days to agree to pursue
such opportunity on its own behalf, following which time the Officers shall be
free to pursue such opportunity only to the extent it does not otherwise
constitute a breach of this Section 5.1.
(b) The parties agree that damages would be an inadequate remedy for Buyer
in the event of a breach or threatened breach of this Agreement and thus, in any
such event, Buyer may, either with or without pursuing any potential damage
remedies, immediately obtain and enforce an injunction prohibiting any of Seller
or its Affiliates from violating this Agreement.
SECTION 5.2 PRODUCT WARRANTY MATTERS. After the Closing Date, Buyer shall
provide warranty service, in accordance with Seller's normal practice, with
respect to all warranties on products of the Business sold by Seller prior to
the Closing Date (the "Pre-Closing Warranties"). Seller shall reimburse Buyer
for all of Buyer's costs of labor and materials (including overhead allocated to
the cost of such labor and materials in accordance with Seller's normal
practice) with respect to Buyer's performance in accordance with the Pre-Closing
Warranties for products sold prior to September 13, 1996. Buyer may at Buyer's
option require an advance payment from Seller in the amount of Buyer's
reasonable estimate of such costs and expenses hereunder before commencing any
service hereunder.
SECTION 5.3 EMPLOYMENT AGREEMENTS. Buyer may offer to hire the employees of
Seller listed on Schedule 5.3, and Seller covenants that it will not interfere
with or otherwise impede Buyer's reasonable efforts to recruit such persons on
terms acceptable to Buyer in Buyer's sole discretion.
SECTION 5.4 ULTRA BIKERS.
(a) In selling its Shares in Ultra Bikers pursuant to this Agreement,
Seller hereby relieves Buyer of any and all obligations Buyer or Bikers Dream
may have pursuant to the Ultra Bikers operating agreement, including without
limitation any obligation to loan funds to Ultra Bikers, and Buyer shall acquire
an undivided interest in all of the assets of Ultra Bikers as of the date
hereof. Seller shall at Closing restore to Ultra Bikers such funds as were
originally contributed by Bikers Dream to Ultra Bikers for use in manufacturing
motorcycles and which were not in fact so used. The 2,500,000 Options defined in
the Operating Agreement shall be amended after the Closing to provide that
360,000 of such Options shall be transferred to ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and 40,000 of
such Options shall be transferred to ▇▇▇▇▇ ▇▇▇▇, and that all such Options shall
be deemed immediately vested, with an expiration date of December 31, 1999.
(b) Bikers Dream shall arrange for the dissolution of Ultra Bikers
reasonably promptly after Closing.
12
16
ARTICLE VI
INDEMNIFICATION
SECTION 6.1 INDEMNIFICATION BY SELLER. Seller shall indemnify and hold
harmless Buyer and each of its Affiliates, directors, officers, employees,
attorneys, agents, representatives, successors and assigns, including Bikers
Dream (collectively, the "Affiliated Parties") in respect of any and all claims,
losses, damages, liabilities, declines in value, penalties, interest, costs and
expenses (including, without limitation, any attorneys', accountants' and
consultants' fees and other expenses, including any such expenses incurred in
connection with investigating, defending against or settling any such claims)
(collectively, "Losses") reasonably incurred by Buyer or its Affiliated Parties,
in connection with, or resulting from, each and all of the following:
(a) Any breach of any representation or warranty made by Seller in this
Agreement or pursuant hereto or in any document or instrument delivered by
Seller pursuant hereto;
(b) Any misrepresentation contained in any written statement or
certificate furnished by any Seller pursuant to this Agreement or in connection
with the Transactions;
(c) Any breach of any covenant, agreement or obligation of Seller
contained in this Agreement or any other document or instrument contemplated by
this Agreement or delivered pursuant hereto;
(d) Any failure by Seller to perform and discharge any of the Excluded
Liabilities;
(e) (i) Any violation by Seller of any Environmental Protection Laws (as
amended or supplemented from time to time) prior to the Closing Date, (ii) any
liabilities arising under Environmental Protection Laws (as amended or
supplemented from time to time) as a result of the conduct of the business of
Seller prior to the Closing Date, (iii) any contamination of soil, groundwater
or other environmental media by or with any Regulated Substance on, in or under
the Real Property or, as a result of the operation of Seller's business, about
the Real Property existing prior to the Closing Date; and (iv) any matters
described in Section 3.9 or Schedule 3.9, whether or not Seller had knowledge of
such matters;
(f) (i) Any Taxes of Seller or its Affiliates, whether relating to periods
before or after the Closing Date, (ii) any Taxes arising in connection with the
Transactions, and (iii) any liability of Seller for Taxes of any other Person,
as a transferee or successor, by contract or otherwise;
(g) Any injury to persons, or death, or property damage resulting from, or
contributed to, by any products designed, manufactured, sold or leased by
Seller, or any services performed, or actions taken, by Seller prior to the
Closing Date;
13
17
(h) Noncompliance with bulk sales laws;
(i) Any liability to any employee, former employee or beneficiary of any
of them arising under the provisions of the Consolidated Omnibus Budget
Reconsolidation Act of 1985, as amended, with respect to any qualifying event,
as defined in Section 4980B of the Code, occurring through the Closing Date;
(j) The pending lawsuit filed by H-D Michigan, Inc. et. al. in the United
States District Court, District of California, Case No. CV-SACV97-29 LHM (ANX)
or any related or similar action, including any action based on similar facts
and circumstances (the "Harley-Davidson Lawsuit"); and
(k) The actions of Seller or its Affiliates, including any such actions
relating to the operations of Ultra Bikers.
SECTION 6.2 INDEMNIFICATION BY BUYER. Buyer shall indemnify and hold
harmless Seller in respect of any and all Losses reasonably incurred by Seller,
in connection with, or resulting from, each and all of the following:
(a) Any breach of any representation or warranty made by Buyer in this
Agreement or pursuant hereto or in any document or instrument delivered by
Seller; or
(b) Any misrepresentation contained in any written statement or
certificate furnished by Buyer pursuant to this Agreement or in connection with
the Transactions; or
(c) Any breach of any covenant, agreement or obligation of Buyer contained
in this Agreement or any other document or instrument contemplated by this
Agreement or delivered pursuant hereto.
SECTION 6.3 CLAIMS FOR INDEMNIFICATION. Whenever any claim shall arise for
indemnification hereunder, the party entitled to indemnification (the
"indemnified party") shall promptly notify the party obligated to provide
indemnification (the "indemnifying party") of the claim and, when known, the
facts constituting the basis for such claim; provided, however, that the failure
to so notify the indemnifying party shall not relieve the indemnifying party of
its obligation hereunder to the extent such failure does not materially
prejudiced the indemnifying party. In the event of any claim for indemnification
hereunder resulting from or in connection with any claim or legal proceedings by
a third party, the notice to the indemnifying party shall specify, if known, the
amount or an estimate of the amount of the liability arising therefrom.
SECTION 6.4 DEFENSE OF CLAIMS. In connection with any claim giving rise to
indemnity hereunder resulting from or arising out of any claim or legal
proceeding by a person who is not a party to this Agreement (including the
Harley-Davidson Lawsuit), the indemnifying party at its sole cost and expense
and with counsel reasonably satisfactory to the indemnified party may, upon
written notice to the indemnified party, assume the defense of any such claim or
legal proceeding if (a) the
14
18
indemnifying party acknowledges to the indemnified party in writing, within
fifteen (15) days after receipt of notice from the indemnified party, its
obligations to indemnify the indemnified party with respect to all elements of
such claim, (b) the indemnifying party provides the indemnified party with
evidence reasonably acceptable to the indemnified party that the indemnifying
party will have the financial resources to defend against such third-party claim
and fulfill its indemnification obligations hereunder, (c) the third-party claim
involves only money damages and does not seek an injunction or other equitable
relief, and (d) settlement or an adverse judgment of the third-party claim is
not in the good faith judgment of the indemnified party, likely to establish a
pattern or practice adverse to the continuing business interests of the
indemnified party. The indemnified party shall be entitled to participate in
(but not control) the defense of any such action, with its counsel and at its
own expense; provided, however, that if there are one or more legal defenses
available to the indemnified party that conflict with those available to the
indemnifying party, or if the indemnifying party fails to take reasonable steps
necessary to defend diligently the claim after receiving notice from the
indemnified party that it believes the indemnifying party has failed to do so,
the indemnified party may assume the defense of such claim; provided, further,
that the indemnified party may not settle such claim without the prior written
consent of the indemnifying party, which consent may not be unreasonably
withheld. If the indemnified party assumes the defense of the claim, the
indemnifying party shall reimburse the indemnified party for the reasonable fees
and expenses of counsel retained by the indemnified party and the indemnifying
party shall be entitled to participate in (but not control) the defense of such
claim, with its counsel and at its own expense. If the indemnifying party
thereafter seeks to question the manner in which the indemnified party defended
such third party claim or the amount or nature of any such settlement, the
indemnifying party shall have the burden to prove by a preponderance of the
evidence that the indemnified party did not defend or settle such third party
claim in a reasonably prudent manner. The parties agree to render, without
compensation, to each other such assistance as they may reasonably require of
each other in order to insure the proper and adequate defense of any action,
suit or proceeding, whether or not subject to indemnification hereunder.
SECTION 6.5 INTEREST. Any amount of money owed by an indemnifying party to
an indemnified party hereunder shall be paid with interest, at an annual rate
equal to the Prime Rate then in effect, from the date that the loss or damage
was sustained or cash disbursement made by the indemnified party until such
amount is paid by the indemnifying party.
SECTION 6.6 MANNER OF INDEMNIFICATION.
(a) All indemnification payments hereunder shall be effected by payment of
cash or delivery of a certified or official bank check in the amount of the
indemnification liability or, in the case of indemnification by Seller of Buyer
or Bikers Dream, and at Buyer's option, in the form of an offset against the
Note.
(b) In the event that it shall become commercially impractical for Buyer
to manufacture motorcycles in substantially the form and at substantially the
cost at which motorcycles were manufactured by Seller prior to Closing, as a
result of a failure to obtain required licenses or consents or as a result of
any disposition, judgment or ruling in the Harley-Davidson Lawsuit, whether
15
19
permanent, temporary, preliminary, appealable or non-appealable, or otherwise,
then, actual damages being difficult or impossible to ascertain, the parties
agree that, as liquidated damages, and in addition to any other remedies Buyer
or Bikers Dream may have at law or in equity, Seller shall repay any amount
previously paid by Bikers Dream, including any amount paid, whether as principal
or interest or otherwise, on the Note, and will cancel the Note.
ARTICLE VII
MISCELLANEOUS
SECTION 7.1 BULK SALES LAW. Buyer waives compliance by Seller with the
provisions of any applicable bulk sales law in connection with the transfer of
the Subject Assets under this Agreement.
SECTION 7.2 FEES AND EXPENSES.
(a) Seller, on the one hand, and Buyer, on the other hand, will bear their
own expenses in connection with the negotiation and the consummation of the
Transactions contemplated by this Agreement, including, without limitation, any
broker's commission or finder's fee incurred by such party.
(b) Seller will pay all costs incurred, whether at or subsequent to the
Closing, in connection with the transfer of the Subject Assets to Buyer as
contemplated by this Agreement, including without limitation, all sales, use,
excise, real property and other transfer taxes and charges applicable to such
transfer and all costs of obtaining or transferring permits, registrations,
applications and other tangible and intangible properties, including the
transfer and removal of all assets applicable to the limousine business owned by
Seller.
SECTION 7.3 NOTICES. All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed given if
delivered personally or by facsimile transmission (with subsequent letter
confirmation by mail) or three days after being mailed by certified or
registered mail, postage prepaid, return receipt requested, to the parties,
their successors in interest or their assignees at the following addresses, or
at such other addresses as the parties may designate by written notice in the
manner aforesaid:
If to Buyer: Ultra Acquisition Corp.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: President
16
20
If to Seller ▇▇▇▇ Acres Investments, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇
SECTION 7.4 ASSIGNABILITY AND PARTIES IN INTEREST. This Agreement shall not
be assignable by any of the parties, except that Buyer may assign its rights
hereunder to, and have its obligations hereunder assumed by, a wholly owned
subsidiary of Buyer; provided, however, that no such assignment shall release
Buyer from its obligations under this Agreement. This Agreement shall inure to
the benefit of and be binding upon the parties and their respective permitted
successors and assigns.
SECTION 7.5 GOVERNING LAW. This Agreement shall be governed by, and
construed and enforced in accordance with, the internal law, and not the law
pertaining to conflicts or choice of law, of the State of California.
SECTION 7.6 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same instrument.
SECTION 7.7 COMPLETE AGREEMENT. This Agreement, the Exhibits and Schedules
and the documents delivered or to be delivered pursuant to this Agreement
contain or will contain the entire agreement among the parties with respect to
the Transactions and shall supersede all previous oral and written and all
contemporaneous oral negotiations, commitments and understandings.
SECTION 7.8 MODIFICATIONS, AMENDMENTS AND WAIVERS. This Agreement may be
modified, amended or otherwise supplemented only by a writing signed by all of
the parties. No waiver of any right or power hereunder shall be deemed effective
unless and until a writing waiving such right or power is executed by the party
waiving such right or power.
SECTION 7.9 LIMIT ON INTEREST. Notwithstanding anything in this Agreement
to the contrary, no party shall be obligated to pay interest at a rate higher
than the maximum rate permitted by applicable law. In the event that an interest
rate provided in this Agreement exceeds the maximum rate permitted by applicable
law, such interest rate shall be deemed to be reduced to such maximum
permissible rate.
SECTION 7.10 ATTORNEYS' FEES AND COSTS. Should any party institute any
action or proceeding in any court to enforce any provision of this Agreement,
the prevailing party shall be entitled to receive from the losing party
reasonable attorneys' fees and costs incurred in such action or proceeding,
whether or not such action or proceeding is prosecuted to judgment.
SECTION 7.11 FURTHER ASSURANCES. Each party shall execute and deliver such
further instruments and take such further actions as any other party may
reasonably request in order to carry out the intent of this Agreement and to
consummate the Transactions.
17
21
SECTION 7.12 CONTRACT INTERPRETATION; CONSTRUCTION OF AGREEMENT.
(a) The headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Article, section, exhibit, schedule, preamble, recital and party
references are to this Agreement unless otherwise stated.
(b) No party, nor its respective counsel, shall be deemed the drafter of
this Agreement for purposes of construing the provisions of this Agreement, and
all language in all parts of this Agreement shall be construed in accordance
with its fair meaning, and not strictly for or against any party.
SECTION 7.13 ARBITRATION.
(a) Any controversy, dispute or claim arising under this Agreement shall
be settled by arbitration conducted in Orange County, California in accordance
with the then existing Commercial Arbitration Rules of the American Arbitration
Association, and judgment upon any award rendered by the arbitrator may be
entered by any federal or state court having jurisdiction thereof. The parties
expressly provide that the provisions of Section 1283.05 of the California Code
of Civil Procedure are incorporated into, and made a part of, this Section 7.13.
The decision of the arbitrator shall be final and binding upon the parties. The
arbitrator shall be authorized to award any relief, whether legal or equitable,
to the party so entitled to such relief.
(b) In respect of any action, suit or other proceeding relating to the
enforcement of the award rendered by the arbitrator pursuant to this Section
7.13, each party hereby irrevocably submits to the non-exclusive jurisdiction of
any state or federal court located in the County of Los Angeles, State of
California. EACH PARTY HEREBY WAIVES ANY RIGHT EACH MAY HAVE TO ASSERT THE
DOCTRINE OF FORUM NON CONVENIENS, TO ASSERT THAT IT IS NOT SUBJECT TO THE
JURISDICTION OF THE AFORESAID COURTS, OR TO OBJECT TO VENUE TO THE EXTENT THAT
ANY ACTION, SUIT OR OTHER PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION
7.13.
SECTION 7.14 CERTAIN DEFINITIONS. As used in this Agreement, in addition to
such other terms as are defined from time to time herein, the following terms
shall have the meanings indicated below:
"Affiliate" shall mean, in respect of any specified Person, any other
Person, whether or not a separate legal entity, that, directly or indirectly,
controls, is controlled by, or is under common control with, such specified
Person or if such specified Person bears a familial relationship with such other
Person, and such meaning shall include without limitation divisions,
departments, product lines or products.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
18
22
"Environmental Protection Laws" shall mean all federal, state, local and
foreign laws, statutes, regulations having the force and effect of law, permits,
court decrees, judgments, injunctions and written orders concerning (i) public
health and safety relating to toxic or hazardous substances or (ii) pollution or
protection of the environment or natural resources.
"EPA" shall mean the United States Environmental Protection Agency, or any
successor United States governmental agency.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
the same may be amended from time to time.
"ERISA Affiliate" of Seller shall mean any other Person that, together with
Seller as of the relevant measuring date under ERISA, was or is required to be
treated as a single employer under Section 414 of the Code.
"IRS" shall mean the Internal Revenue Service.
"PCBs" shall have the meaning set forth in the definition of "Regulated
Substance."
"Person" shall mean any natural person or any corporation, partnership,
joint venture or other entity, whether or not a legal entity.
"RCRA" shall have the meaning set forth within the definition of "Regulated
Substance."
"Regulated Substance" shall mean any chemical or substance subject to or
regulated under any Environmental Protection Law including, without limitation,
any "pollutant or contaminant" or "hazardous substance" as those terms are
defined in the Comprehensive Environmental Response, Compensation and Liability
Act ("CERCLA"), any "hazardous waste" as that term is defined in RCRA, and any
other hazardous or toxic wastes, substances, or materials, petroleum (including
crude oil and refined and unrefined fractions thereof), polychlorinated
biphenyls ("PCBs"), infectious waste, special waste, pesticides, fungicides,
solvents, herbicides, flammables, explosives, asbestos and asbestos-containing
material, and radioactive materials, whether injurious by themselves or in
combination with other materials.
"Tax" or "Taxes" shall mean any and all taxes imposed or required to be
collected by any federal, state or local taxing authority in the United States,
or by any foreign taxing authority under any statute or regulation, including,
without limitation, all income, gross receipts, sales, use, personal property,
use and occupancy, business occupation, mercantile, ad valorem, transfer,
license, withholding, payroll, employment, excise, real estate, environmental,
capital stock, franchise, alternative or add-on minimum, estimated or other tax
of any kind whatsoever, including any interest, penalties and other additions
thereto.
19
23
"Transactions" shall mean, in respect of any party, all transactions
contemplated by this Agreement that involve, relate to or affect such party.
SECTION 7.15 GUARANTEE. Bikers Dream hereby guarantees the obligations of
Buyer pursuant to the Note.
IN WITNESS WHEREOF, each of the parties has executed this Agreement as of
the date first above written.
BIKERS DREAM, INC.,
a California corporation
By:__________________________
Name:
Title:
ULTRA ACQUISITION CORP., a Nevada
corporation
By:__________________________
Name:
Title:
▇▇▇▇ ACRES INVESTMENTS, INC., a
California corporation
By:__________________________
Name:
Title:
20
24
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: February 13, 1997 BIKERS DREAM, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Co-Chief Executive
Officer and Chief Financial Officer
21
