STOCK PURCHASE AGREEMENT
among
XXX. XXXXXX' ORIGINAL COOKIES, INC.,
as Buyer,
and
THOSE PERSONS LISTED ON THE SIGNATURE PAGE HEREOF,
holders of all outstanding capital stock
of
PRETZELMAKER HOLDINGS, INC.,
as Sellers
November 19, 1998
TABLE OF CONTENTS
1. Definitions.......................................................... 1
2. Purchase and Sale of Company Shares.................................. 8
(a) Basic Transaction................................................ 8
(b) Purchase Price................................................... 9
(c) Purchase Price Payments.......................................... 11
(d) Working Capital Requirement; Purchase Price Adjustment for
Working Capital.................................................. 11
(e) The Closing...................................................... 12
(f) Escrow; Power of Attorney; Agent Sellers; Pledgees' Agent........ 12
(g) Deliveries at Closing............................................ 13
(h) Preparation of Closing Balance Sheet; Payment of Purchase Price
Adjustment for Working Capital................................... 13
3. Representations and Warranties Concerning the Transaction........ 15
(a) Representations and Warranties of the Sellers.................... 15
(i) Authorization of Transaction............................ 15
(ii) Noncontravention........................................ 15
(iii) Brokers' Fees........................................... 16
(iv) Company Shares.......................................... 16
(b) Representations and Warranties of the Buyer...................... 17
(i) Organization of the Buyer............................... 17
(ii) Authorization of Transaction............................ 17
(iii) Non-Contravention....................................... 17
(iv) Brokers' Fees........................................... 17
(v) Investment.............................................. 17
4. Representations and Warranties Concerning the Company................ 18
(a) Organization, Qualification, and Corporate Power................. 18
(b) Capitalization................................................... 19
(c) Non-Contravention................................................ 19
(d) Brokers' Fees.................................................... 20
(e) Title to Assets.................................................. 20
(f) Subsidiaries..................................................... 20
(g) Financial Statements............................................. 21
(h) Events Subsequent to Most Recent Fiscal Year End................. 22
(i) Undisclosed Liabilities.......................................... 24
(j) Legal Compliance................................................. 25
(k) Tax Matters...................................................... 25
i
(l) Real Property................................................... 27
(m) Intellectual Property........................................... 28
(n) Tangible Assets................................................. 30
(o) Inventory....................................................... 30
(p) Contracts....................................................... 31
(q) Notes and Accounts Receivable................................... 32
(r) Powers of Attorney.............................................. 33
(s) Insurance....................................................... 33
(t) Litigation...................................................... 34
(u) Product Warranty................................................ 34
(v) Product Liability............................................... 34
(w) Employees....................................................... 34
(x) Employee Benefit................................................ 35
(y) Guaranties...................................................... 37
(z) Environment, Health, and Safety................................. 37
(aa) Certain Business Relationships with the Company................. 38
(ab) Company Debt; Shareholder Loans; Non-Compete Payments........... 38
(ac) Disclosure...................................................... 38
5. Pre-Closing Covenants................................................. 38
(a) General......................................................... 38
(b) Notices and Consents............................................ 39
(c) Operation of Business........................................... 39
(d) Preservation of Business........................................ 41
(e) Full Access..................................................... 41
(f) Notice of Developments.......................................... 41
(g) Waiver of Refusal Rights........................................ 41
(h) Exclusivity; Encumbrance or Transfer of Shares.................. 41
(i) Conversion of Preferred Shares; Cancellation of Options......... 42
6. Post-Closing Covenants................................................ 42
(a) General......................................................... 42
(b) Litigation Support.............................................. 42
(c) Transition...................................................... 43
(d) Confidentiality................................................. 43
(e) Covenant Not to Compete......................................... 43
(f) Post-Closing Audit and Preparation of Consolidated
Financial Statements............................................ 44
(g) Office Lease; Location of Company Records....................... 45
7. Conditions to Obligation to Close..................................... 45
(a) Conditions to Obligation of the Buyer........................... 45
(b) Conditions to Obligation of the Sellers......................... 47
ii
8. Remedies for Breaches of This Agreement................................ 48
(a) Survival of Representations and Warranties........................ 48
(b) Indemnification................................................... 48
(i) Principal Sellers' Indemnification of Buyer....................... 48
(ii) Buyer's Indemnification of Sellers......................... 49
(iii) Buyers Indemnification of Sellers and Company.............. 49
(iv) Reimbursement of Costs............................................ 50
(c) Matters Involving Third Parties................................... 51
(d) Determination of Adverse Consequences............................. 52
(e) Certain Set-Off Rights............................................ 52
(f) Other Indemnification Provisions.................................. 53
(g) Sellers' Release of Claims........................................ 53
(h) Termination....................................................... 54
(i) Termination of Agreement................................... 54
(ii) Action By Fewer Than All Sellers........................... 54
(iii) Effect of Termination...................................... 54
9. Miscellaneous.......................................................... 55
(a) Press Releases and Public Announcements........................... 55
(b) No Third-Party Beneficiaries...................................... 55
(c) Entire Agreement.................................................. 55
(d) Succession and Assignment......................................... 55
(e) Counterparts...................................................... 55
(f) Headings.......................................................... 55
(g) Notices........................................................... 55
(h) Governing Law..................................................... 56
(i) Amendments and Waivers............................................ 57
(j) Severability...................................................... 57
(k) Expenses.......................................................... 57
(l) Construction...................................................... 57
(m) Incorporation of Exhibits, Annexes, and Schedules................. 57
(n) Dispute Resolution................................................ 58
(o) Submission to Jurisdiction........................................ 60
(p) Attorneys' Fees................................................... 60
iii
EXHIBITS
--------
A LTM EBITDA Adjustments
B Sellers and Company Shares
C Purchase Price Allocation
D Escrow Agreement
E Financial Statements of the Company
F Form of Opinion of the Seller's Counsel
ANNEXES
-------
II Exceptions to Buyer's Representations
DISCLOSURE SCHEDULE
-------------------
1.1 Shareholder Obligations
1.2 Working Capital
3(a)(vii) Sellers' Indebtedness
4(a) Organization
4(c) Non-Contravention
4(e) Security Interests
4(g) Financial Statements on Exhibit E
4(h) Subsequent Events
4(i) Undisclosed Liabilities Balance Sheet
4(k) Tax Returns
4(l)(i) Real Property Owned
4(l)(ii) Real Property Leased or Subleased
4(m)(iii) Intellectual Property
4(m)(iv) Licenses From Third Parties
4(o) Inventory
4(p) Contracts
4(r) Powers of Attorney
4(s) Insurance
4(t) Litigation
4(t)(ii) Threatened Litigation
4(w) Employees
4(x) Employee Benefit Plans
4(y) Guaranties
4(aa) Business Relationships
2(b)(iv) Promissory Notes
iv
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT entered into effective as of November 19,
1998, by and among Xxx. Xxxxxx Original Cookies, Inc., a Delaware corporation
(the "Buyer"), Pretzelmaker Holdings, Inc., a Colorado corporation (the
"Company"), and those persons listed on the signature page hereof (referred to
herein individually as a "Seller" and collectively as the "Sellers"). The Buyer
and the Sellers are referred to collectively herein as "Party" in the singular
and "Parties" in the plural.
The Sellers presently own, or at the Closing will own, one hundred
percent (100%) of the issued and outstanding capital stock of the Company.
This Agreement contemplates a transaction in which the Buyer will
purchase from the Sellers, and the Sellers will sell to the Buyer, all of the
issued and outstanding capital stock of the Company in return for cash and other
consideration set forth herein.
Now, therefore, in consideration of the premises and the mutual promises
herein made, and in consideration of the representations, warranties, and
covenants herein contained, the Parties agree as follows.
1. Definitions.
"Adjusted EBITDA" means the Company's earnings for the twelve month
period ending on August 31, 1998, before interest, taxes, depreciation
and amortization, adjusted for non-recurring expenses as set forth on
Exhibit A.
"Adjustment for Reduction of Company Debt" has the meaning set forth
in (S) 2(b)(i)(B) below.
"Adverse Consequences" means all actions, suits, proceedings,
hearings, investigations, charges, complaints, claims, demands,
injunctions, judgments, orders, decrees, rulings, damages, dues,
penalties, fines, costs, amounts paid in settlement, Liabilities,
obligations, Taxes, liens, losses, expenses, and fees, including court
costs and attorneys' fees and expenses.
"Affiliate" has the meaning set forth in Rule 12b-2 of the
regulations promulgated under the Securities Exchange Act.
"Affiliated Group" means any affiliated group within the meaning of
Code Sec. 1504, or any similar group defined under a similar provision of
state, local or foreign law.
"Agent Sellers" has the meaning set forth in (S) 2(f)(iii).
"Audit" has the meaning set forth in (S) 6(f) below.
"Auditors" has the meaning set forth in (S) 6(f) below.
"Basis" means any past or present fact, situation, circumstance,
status, condition, activity, practice, plan, occurrence, event, incident,
action, failure to act, or transaction that forms or could form the basis
for any specified consequence.
"Bonus Payments" shall mean amounts to be paid to the Bonus
Recipients pursuant to Exhibit C in consideration for service to the
Company.
"Bonus Recipients" shall mean those persons listed on Exhibit C who
are receiving Bonus Payments pursuant to this Agreement.
"Buyer" has the meaning set forth in the preface above.
"Buyer's Deposit" has the meaning set forth in (S) 2(f)(i).
"Closing" has the meaning set forth in (S) 2(e) below.
"Closing Balance Sheet" has the meaning set forth in (S) 2(h)(ii)
below.
"Closing Date" has the meaning set forth in (S) 2(e) below.
"Closing Installment" has the meaning set forth in (S) 2(b)(i)
below.
"Closing Working Capital" has the meaning set forth in (S) 2(d)(i)
below.
"Code" means the Internal Revenue Code of 1986, as amended.
"Common Share" means any share of the common stock, $.001 par value
per share, of the Company.
"Company" has the meaning set forth in the preface above.
"Company Debt" means the unpaid balance at the Closing of the
Company's (i) bank debt, but in no event in an amount in excess of
$486,000, (ii) notes payable to franchisees of the Company, but in no
event in an amount in excess of $49,500, and (iii) capital lease
obligations, but in no event in an amount in excess of $180,200; provided
the aggregate amount of all Company Debt shall
2
not exceed $715,700 at Closing.
"Company Share" means any Common Share, Preferred Share or Conversion
Share of the Company.
"Confidential Information" means any information concerning the
businesses and affairs of the Company that is not generally available to
the public.
"Consolidated Financial Statements" has the meaning set forth in (S)
6(f) below.
"Consulting Payments" shall mean amounts to be paid to the
Consultants pursuant to Exhibit C in consideration for service to the
Company.
"Consultants" shall mean those persons listed on Exhibit C who are
receiving Consulting payments pursuant to this Agreement.
"Conversion Share" means any Common Shares or other securities of
the Company issued in connection with the conversion of the Preferred
Shares by the Preferred Shareholders.
"Deferred Payments" has the meaning set forth in (S) 2(c)(i) below.
"Disclosure Schedule" has the meaning set forth in (S) 4 below.
"Employee Benefit Plan" means any (a) nonqualified deferred
compensation or retirement plan or arrangement which is an Employee
Pension Benefit Plan, (b) qualified defined contribution retirement plan
or arrangement which is an Employee Pension Benefit Plan, (c) qualified
defined benefit retirement plan or arrangement which is an Employee
Pension Benefit Plan (including any Multiemployer Plan), or (d) Employee
Welfare Benefit Plan.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA
Sec. 3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA
Sec. 3(1).
"Environmental, Health, and Safety Laws" means the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, the
Resource Conservation and Recovery Act of 1976, and the Occupational
Safety and Health Act of 1970, each as amended, together with all other
laws (including
3
rules, regulations, codes, plans, injunctions, judgments, orders,
decrees, rulings, and charges thereunder) of federal, state, local, and
foreign governments (and all agencies thereof) concerning pollution or
protection of the environment, public health and safety, or employee
health and safety, including laws relating to emissions, discharges,
releases, or threatened releases of pollutants, contaminants, or
chemical, industrial, hazardous, or toxic materials or wastes into
ambient air, surface water, ground water, or lands or otherwise relating
to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport, or handling of pollutants, contaminants, or
chemical, industrial, hazardous, or toxic materials or wastes.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
"Escrow Account" has the meaning set forth in (S) 2(f) below.
"Escrow Agent" has the meaning set forth in (S) 2(f) below.
"Escrow Agreement" has the meaning set forth in (S) 2(f) below.
"Estimated Closing Working Capital" has the meaning set forth in (S)
2(h)(i) below.
"Extremely Hazardous Substance" has the meaning set forth in Sec.
302 of the Emergency Planning and Community Right-to-Know Act of 1986, as
amended.
"Fiduciary" has the meaning set forth in ERISA Sec. 3(21).
"Financial Statements" has the meaning set forth in (S) 4(g) below.
"GAAP" means United States generally accepted accounting principles
as in effect from time to time.
"Indemnified Party" has the meaning set forth in (S) 8(c) below.
"Indemnifying Party" has the meaning set forth in (S) 8(c) below.
"Intellectual Property" means (a) all inventions (whether patentable
or unpatentable and whether or not reduced to practice), all improvements
thereto, and all patents, patent applications, and patent disclosures,
together with all reissuances, continuations, continuations-in-part,
revisions, extensions,
4
and reexaminations thereof, (b) all trademarks, service marks, trade
dress, logos, trade names, and corporate names, together with all
translations, adaptations, derivations, and combinations thereof and
including all goodwill associated therewith, and all applications,
registrations, and renewals in connection therewith, (c) all
copyrightable works, all copyrights, and all applications, registrations,
and renewals in connection therewith, (d) all mask works and all
applications, registrations, and renewals in connection therewith, (e)
all trade secrets and confidential business information (including ideas,
research and development, know-how, recipes, formulas, production
processes and techniques, technical data, designs, drawings,
specifications, customer and supplier lists, pricing and cost
information, and business and marketing plans and proposals), (f) all
computer software (including data and related documentation), (g) all
other proprietary rights, and (h) all copies and tangible embodiments
thereof (in whatever form or medium).
"Knowledge" means actual knowledge after reasonable investigation.
"Liability" means any liability (whether known or unknown, whether
asserted or unasserted, whether absolute or contingent, whether accrued
or unaccrued, whether liquidated or unliquidated, and whether due or to
become due), including any liability for Taxes.
"Management Letter" has the meaning set forth in (S) 6(f) below.
"Most Recent Balance Sheet" means the balance sheet contained within
the Most Recent Financial Statements.
"Most Recent Financial Statements" has the meaning set forth in (S)
4(g) below.
"Most Recent Fiscal Month End" has the meaning set forth in (S) 4(g)
below.
"Most Recent Fiscal Year End" has the meaning set forth in (S) 4(g)
below.
"Multiemployer Plan" has the meaning set forth in ERISA Sec. 3(37).
"Non-Compete Payments" means the unpaid balance at the Closing of
the Company's covenant not to compete payments owed by the Company to the
Non-Compete Recipients.
"Non-Compete Recipients" means the recipients of the Non-Compete
Payments set forth on Exhibit C.
5
"Notes" shall have the meaning set forth in (S) 2(b)(i). The
principal balance of the Notes in the aggregate after application of the
appropriate portion of the Closing Installment as set out on Exhibit C
shall not exceed Four Million Two Hundred Seventy-Six Thousand Five
Hundred Eighteen Dollars and 78/100 ($4,276,518.78), plus the Adjustment
for Reduction of Company Debt, if any. The Notes shall be held by the
Pledgees' Agents until they are paid in full.
"Objections" has the meaning set forth in (S) 2(h)(iv).
"Option Holders" means the following named Sellers: Xxxx X. Xxxxx,
Xxxxxx X. Xxx, Xx., Xxxxx Xxxxx, Xxxxxxx Xxxxxx, Xxxx Xxxxxx, Xxxx Xxxx
and Xxxx Xxxxxxxxxx.
"Options" means any rights granted by the Company to purchase the
Company Shares.
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to
quantity and frequency).
"Party" has the meaning set forth in the preface above.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Person" means an individual, a partnership, a corporation, limited
liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization, or a governmental entity
(or any department, agency, or political subdivision thereof).
"Pledge Agreement" means Security Agreement-Pledge securing the
obligations of the Buyer to the Sellers under the Notes and the Buyer's
payment of the Bonus Payments, Severance Payments, Consulting Payments,
Shareholder Loans and, subject to the terms of (S) 2(h)(vii) below, the
payment, if any, required by the Buyer to the Sellers pursuant to such
(S) 2(h)(vii). The Pledge Agreement shall not secure any other
obligations of the Buyer, whether under this Agreement or otherwise. The
Pledge Agreement shall be executed by the Pledgees' Agent on behalf of
the Sellers and shall be held by the Pledgees' Agent on behalf of the
Sellers.
"Pledgees' Agent" shall have the meaning set forth in (S) 2(f)(iv).
"Preferred Shares" means any preferred shares, including Series A
6
Preferred Stock and Series B Preferred Stock, of the Company.
"Preferred Shareholders" means all legal or beneficial owners and
holders of Preferred Shares, all of whom are listed on Exhibit B.
"Principal Sellers" means jointly and severally Xxxx X. Xxxxx,
Xxxxxx X. Xxx, Xx. and Xxxxx X. Xxxxx.
"Prohibited Transaction" has the meaning set forth in ERISA Sec. 406
and Code Sec. 4975.
"Purchase Price" has the meaning set forth in (S) 2(b) below.
"Purchase Price Adjustment for Working Capital" has the meaning set
forth in (S) 2(d)(ii) below.
"Reportable Event" has the meaning set forth in ERISA Sec. 4043.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of 1934,
as amended.
"Security Interest" means any mortgage, pledge, lien, encumbrance,
charge, or other security interest, other than (a) mechanic's,
materialmen's, and similar liens, (b) liens for Taxes not yet due and
payable or for Taxes that the taxpayer is contesting in good faith
through appropriate proceedings, (c) purchase money liens and liens
securing rental payments under capital lease arrangements, and (d) other
liens arising in the Ordinary Course of Business and not incurred in
connection with the borrowing of money.
"Seller" and "Sellers" have the meaning set forth in the preface
above.
"Series A Preferred Shares" means any share of the Series A
Preferred Stock, $.001 par value, of the Company.
"Series B Preferred Shares" means any share of the Series B
Preferred Stock, $.001 par value, of the Company.
"Severance Payments" shall mean amounts to be paid to the Severance
Recipients pursuant to Exhibit C in consideration for service to the
Company.
"Severance Recipients" shall mean those persons listed on Exhibit C
who
7
are receiving Severance Payments pursuant to this Agreement.
"Shareholder Loans" means the unpaid balance at the Closing of loans
to the Company from the present and former shareholders listed on
Schedule 1.1 in the amounts set forth thereon, but in no event in an
aggregate amount greater than $540,000.
"Store" or "Stores" has the meaning set forth in (S)4(a) below.
"Store Leases" has the meaning set forth in (S)4(l)(ii) below.
"Subsidiary" means any (A) corporation with respect to which a
specified Person (or a Subsidiary thereof) owns a majority of the common
stock or has the power to vote or direct the voting of sufficient
securities to elect a majority of the directors, (B) limited liability
company of which a specified Person (or a Subsidiary thereof) is a member
or managing member, (C) any other entity in which the Company has any
ownership interest, (D) Pretzelmaker, Inc., a Colorado corporation, one
hundred percent (100%) of the capital stock of which is owned by the
Company, and (E) Pretzelmaker Canada, Inc., one hundred percent (100%) of
the capital stock of which is owned by Pretzelmaker, Inc.
"Tax" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, wind fall profits, environmental (including taxes
under Code Sec. 59A), customs duties, capital stock, franchise, profits,
capital gains, withholding, social security (or similar), unemployment,
disability, real property, personal property, sales, use, transfer,
registration, value added, alternative or add-on minimum, estimated, or
other tax of any kind whatsoever, including any interest, penalty, or
addition thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim for
refund, or information return or statement relating to Taxes, including
any schedule or attachment thereto, and including any amendment thereof.
"Third Party Claim" has the meaning set forth in (S) 8(c) below.
"Working Capital" shall mean the excess of Company's current assets
(consisting of the Company's cash, accounts receivable, notes receivable,
inventories and pre-paid expenses and supplies), less the Company's
current liabilities (consisting of the Company's accounts payables, other
payables, income taxes payable, deferred initial franchise fees and
deferred revenues). For purposes of computing Working Capital, those
current assets and liabilities of the Company listed on Schedule 1.2
shall be treated in the manner set forth
8
thereon.
"Working Capital Requirement" has the meaning set forth in (S) 2(d).
2. Purchase and Sale of Company Shares.
(a) Basic Transaction. On and subject to the terms and conditions
of this Agreement, for the consideration specified below in this (S) 2,
the Buyer agrees to purchase from each of the Sellers, and each of the
Sellers agrees to sell to the Buyer, all of the Company Shares owned by
each such Seller, as described on Exhibit B, in the aggregate
constituting all of the issued and outstanding Company Shares.
(b) Purchase Price. Subject to (S)(S) 2(c), 2(f) and 8(e) below,
the Buyer, in consideration for the Sellers' delivery of the Company
Shares at the Closing, shall deliver to or on behalf of the Sellers at
the Closing aggregate consideration to be allocated among the Sellers,
Consultants, Bonus Recipients, Severance Recipients, and Non-Compete
Recipients in the manner set forth on Exhibit C) (the "Purchase Price"),
as follows.
(i) at the Closing, the Buyer shall deliver promissory notes
(collectively, the "Notes") in the aggregate amount of:
(A) Five Million Six Hundred Thousand Dollars
($5,600,000), plus
(B) the amount (the "Adjustment for Reduction of Company
Debt"), if any, by which the Company Debt as of the Closing is
less than Seven Hundred Fifteen Thousand Seven Hundred Dollars
($715,700), which amount, if any, shall be allocated pro rata
among all of the Notes; less
(C) Bonus Payments, Severance Payments and Consulting
Payments in the aggregate principal amount of Three Hundred
Nineteen Thousand Five Hundred Ninety-Eight Dollars ($319,598).
The Notes shall be payable in four (4) installments, with the first
installment due at the Closing in the amount of One Million Three
Thousand Eight Hundred Eighty-Two and 96/100 Dollars ($1,003,882.96)
(the "Closing Installment"). The Closing Installment shall bear no
interest and shall be applied at the Closing as a principal
reduction of the Notes as set forth in Exhibit C. The three (3)
remaining installments under the
9
Notes, payable on December 15, 1998, December 23, 1998 and January
4, 1999, respectively (the "Payment Dates"), will bear interest at
the rate of ten percent (10%) per annum; and
(ii) on and after the Closing, the Buyer shall pay or cause
the Company to pay the Non-Compete Payments, Consulting Payments,
Severance Payments, Bonus Payments and Shareholder Loans, as
follows:
(A) the Buyer shall pay or cause the Company to pay the
Non-Compete Payments to the Non-Compete Recipients (the
aggregate amount of which shall not exceed $182,300 and shall
bear no interest under this Agreement). The Non-Compete
Payments shall be made in four (4) installments, with the first
installment of Thirty-Five Thousand Four Hundred Ninety-Two and
04/100 Dollars ($35,492.04) to be paid by the Buyer at the
Closing, and with the three (3) remaining installments to be
paid on the Payment Dates in the amounts set forth in Exhibit
C;
(B) the Buyer shall pay or cause the Company to pay the
Consulting Payments to the Consultants the aggregate principal
amount of which shall not exceed $26,800. The Consulting
Payments shall be made in four (4) installments, with the first
installment of Four Thousand Nine Hundred Sixty-five Dollars
($4,965) to be paid by the Buyer at the Closing, and with the
three (3) remaining installments (together with interest
thereon), as specified in Exhibit C, to be paid on the Payment
Dates;
(C) the Buyer shall pay or cause the Company to pay the
Severance Payments to the Severance Recipients the aggregate
principal amount of which shall not exceed $151,200. The
Severance Payments shall be made in four (4) installments, with
the first installment of Twenty-eight Thousand Five Dollars
($28,005) to be paid by the Buyer at the Closing, and with the
three (3) remaining installments (together with interest
thereon), as specified in Exhibit C, to be paid on the Payment
Dates;
(D) the Buyer shall pay or cause the Company to pay the
Bonus Payments to the Bonus Recipients the aggregate principal
amount of which shall not exceed $149,300. The Bonus Payments
shall be made in four (4) installments, with the first
installment of Twenty-Seven Thousand Six Hundred Fifty-five
Dollars ($27,655) to be paid by the Buyer at the Closing, and
with the three (3)
10
remaining installments (together with interest thereon), as
specified in Exhibit C, to be paid on the Payment Dates;
(E) the Buyer shall pay or cause the Company to pay the
Shareholder Loans to the holders thereof, as set forth in
Exhibit C, in a single installment on January 4, 1999 (the
aggregate principal amount of which shall not exceed $540,000).
The Shareholder Loans will bear interest at the rate set forth
in the promissory notes identified in the Company's Note
Register affixed to (S) 1.1 of the Disclosure Schedule)
evidencing the Shareholder Loans; provided however, the
----------------
Shareholder Loans shall bear no interest under this Agreement);
and
(iii) at the Closing, the Company shall retain Company Debt
up to a maximum of Seven Hundred Fifteen Thousand Seven Hundred
Dollars ($715,700) less the amount of the Adjustment For Reduction
of Company Debt;
provided that in no event shall the aggregate amount of the Purchase
Price, excluding any Purchase Price Adjustment for Working Capital or
interest payable under this Agreement, exceed the aggregate amount of
Seven Million Thirty-Eight Thousand Dollars ($7,038,000).
(c) Purchase Price Payments.
(i) The payments of the Purchase Price shall be paid by wire
transfer to the Sellers or delivery of other immediately available
funds to the Agent Sellers on behalf of the Sellers.
(ii) From the final installment payment to be made under the
Notes, the sum of One Hundred Thousand Dollars ($100,000.00) shall
be deducted on a pro rata basis from all of the Notes and deposited
by the Buyer into the Escrow Account, for disbursement to the
Sellers subject to the terms and conditions of (S) 2(f) below and
the Escrow Agreement (collectively, the "Deferred Payments").
Notwithstanding the foregoing, the Sellers may, at or prior to the
Closing, elect to substitute a Letter of Credit for the full amount
of the Deferred Payments, the terms, conditions and issuer of which
shall be acceptable to the Buyer in its sole discretion.
(d) Working Capital Requirement; Purchase Price Adjustment for
Working Capital. Upon and immediately after the Closing:
11
(i) the Company shall have Working Capital ("Closing Working
Capital") in an amount not less than Thirty-One Thousand Nine
Hundred Thirty-Eight Dollars ($31,938) (the "Working Capital
Requirement"), which the Sellers represent and warrant, based on the
Company's historical experience, is an adequate amount of working
capital for the operation of the Company's business after the
Closing in the same manner as presently conducted; and
(ii) to the extent that the amount, if any, by which the
Company's Closing Working Capital is less than the Working Capital
Requirement, the Purchase Price shall be decreased by such amount;
to the extent that the amount, if any, by which the Company's
Closing Working Capital is greater than the Working Capital
Requirement, the Purchase Price shall be increased by such amount.
The adjustment to the Purchase Price based on the Working Capital as
described herein shall be referred to as the "Purchase Price
Adjustment for Working Capital". The Purchase Price Adjustment for
Working Capital shall be determined in accordance with (S) 2(h),
below.
(e) The Closing. Unless otherwise agreed by the Parties, the
closing of the transactions contemplated by this Agreement (the
"Closing") shall take place at the offices of the Company in Denver,
Colorado, commencing at a mutually agreeable time, following the
satisfaction or waiver of all other conditions to the obligations of the
Parties to consummate the transactions contemplated hereby (other than
conditions with respect to actions the respective Parties will take at
the Closing itself) on November 19, 1998, or such other date as the Buyer
and the Agent Sellers may mutually determine (the "Closing Date").
(f) Escrow; Power of Attorney; Agent Sellers; Pledgees' Agent.
(i) The Deferred Payments shall be deposited into an interest
bearing escrow (the "Escrow Account") established by the Parties
prior to the Closing with Centennial Bank (the "Escrow Agent") at
its offices located at 46th and Xxxxxxxx Xxxxxxx, Xxxxx, Xxxx
00000, for disbursement subject to the terms and conditions set
forth in that certain escrow agreement executed by the Parties and
the Escrow Agent on or before the Closing substantially in the form
and substance of Exhibit D hereto (the "Escrow Agreement").
Concurrently with the deposit of the Deferred Payments into the
Escrow Account, the Buyer shall deposit from its own funds the sum
of One Hundred Thousand Dollars ($100,000) (the "Buyer's Deposit")
against which claims may be recouped or set-off by the Buyer
pursuant to (S) 8(e) below for amounts in excess of the Deferred
Payments up to the amount of the Buyer's Deposit. The first
$100,000 of claims shall be recouped or set-off against the Deferred
Payments, and after the release
12
of the balance of the Deferred Payments, directly from the Sellers,
and only after $100,000 has been recovered from the Sellers shall
claims be recouped or set-off against the Buyer's Deposit. Interest
earned on the Escrow Account shall be shared between the Sellers and
the Buyer pro rata according to the relative amounts and duration of
the Deferred Payments and the Buyer's Deposit.
(ii) Subject to the terms and conditions of the Escrow
Agreement, (A) the Deferred Payments, less all amounts that after
Closing may be recouped from or set-off against the Deferred
Payments pursuant to (S) 8(e) below, shall be payable from the
Escrow Account to the Agent Sellers on behalf of the Sellers on the
first anniversary of the Closing Date, and (B) the Buyer's Deposit,
less all amounts that after Closing may be recouped from or set-off
against the Buyer's Deposit pursuant to (S) 8(e) below, shall be
payable from the Escrow Account to the Buyer on the second
anniversary of the Closing Date.
(iii) Each Seller hereby irrevocably appoints the Principal
Sellers to serve as its attorney-in-fact (the "Agent Sellers") for
purposes of the Escrow Agreement, this Agreement, and the
transactions contemplated hereby. This appointment is coupled with
an interest and is irrevocable. The Agent Sellers shall have the
authority, duties and responsibilities granted by the Sellers to the
Agent Sellers under the Escrow Agreement, and this Agreement,
including without limitation the power and authority to resolve
disputes, claims and set-off obligations on behalf of each Seller.
Each Seller hereby authorizes the Agent Sellers to approve and
execute closing and settlement statements on behalf of each Seller.
The Agent Sellers shall only act unanimously when acting on behalf
of the Sellers. Buyer shall be entitled to rely on the
representations and agreements of the Agent Sellers for all purposes
hereunder.
(iv) Each Seller hereby irrevocably appoints each of the
Sellers Xxxx X. Xxxxx and Xxxxxx X. Xxx, Xx. to act jointly as the
Pledgees' Agent (as defined in the Pledge Agreement) for the
Pledgees (as defined in the Pledge Agreement).
(g) Deliveries at Closing. At the Closing, (i) the Sellers will
deliver to the Buyer the various certificates, instruments, and documents
referred to in (S) 7(a) below, (ii) the Buyer will deliver to the Sellers
the various certificates, instruments, and documents referred to in (S)
7(b) below, (iii) the Sellers will deliver to the Buyer the stock
certificates representing all of the issued and outstanding Company
Shares, endorsed in blank or accompanied by duly executed assignment
documents or other appropriate instruments in a form satisfactory to the
Buyer; and (iv) the Buyer will deliver to the Sellers and, as
appropriate, the Consultants, Bonus Recipients, Severance Recipients and
Non-Compete Recipients, the Closing Installment and the Buyer will
deliver to the Seller the Notes, the Pledge Agreement, and the Collateral
(as defined in the Pledge
13
Agreement). All of the documents described herein will be dated as of the
Closing Date.
(h) Preparation of Closing Balance Sheet; Payment of Purchase Price
Adjustment for Working Capital.
(i) Immediately prior to the Closing Date, the Seller shall
prepare and deliver to the Buyer for its review and approval, a
written estimate of the Company's Working Capital on the Closing
Date (the "Estimated Closing Working Capital"), together with
supporting documentation and schedules therefor;
(ii) Within thirty (30) days after the Closing Date, the
Buyer or auditors engaged by the Buyer will prepare and deliver to
the Sellers a balance sheet for the Company and its Subsidiaries as
of the Closing Date (determined on a pro forma basis as though the
Parties had not consummated the transactions contemplated by this
Agreement) (the "Closing Balance Sheet"). The Buyer will prepare the
Closing Balance Sheet in accordance with GAAP except with respect to
those matters specified in Schedule 1.2 applied on a basis
consistent with the preparation of the Financial Statements.
(iii) The Closing Balance Sheet shall set forth (A) the
Closing Working Capital of the Company; and (B) the amount, if any,
of the Purchase Price Adjustment for Working Capital, reflecting the
amount that the Closing Working Capital exceeds (or is less than)
the Working Capital Requirement.
(iv) If the Agent Sellers have any objections to the Closing
Balance Sheet, the Agent Sellers will deliver a detailed written
statement describing their objections ("Objections") to the Buyer
within fifteen (15) days after receiving the Closing Balance Sheet.
The Buyer and the Agent Sellers will use reasonable efforts to
resolve any Objections themselves. If the Parties do not obtain a
final resolution within thirty (30) days after the Buyer has
received the statement of Objections, the Buyer and the Agent
Sellers will select an accounting firm mutually acceptable to them
to resolve any remaining Objections. If they are unable to agree on
the choice of an accounting firm, they will select a nationally-
recognized accounting firm by lot (after excluding their respective,
regular outside accounting firms). The determinations of such
accounting firm regarding the Objections will be set forth in
writing and will be conclusive and binding upon the Parties. The
Buyer will revise the Closing Balance Sheet as appropriate to
reflect the resolution of any objections thereto pursuant to this
(S) 2(h)(iv).
(v) In the event the Buyer and Agent Sellers submit any
unresolved Objections to the accounting firm for determination as
provided for in (S) 2(h)(iv) above, the Buyer and the Sellers will
share equally the fees and expenses of the
14
accounting firm.
(vi) The Buyer will make the work papers and back-up
materials used in preparing the Closing Balance Sheet available to
the Agent Sellers and their accountants and other representatives at
reasonable times and upon reasonable notice at any time during (A)
the preparation by the Buyer of the Closing Balance Sheet, (B) the
review by the Agent Sellers of the Closing Balance Sheet and (C) the
resolution by the Parties of any objections thereto.
(vii) Within three (3) business days after completion of the
Closing Balance Sheet and the resolution of any Objections thereto
pursuant to (S)(S) 2(h)(iv) above, either (A) the Buyer will pay to
the Sellers the amount, if any, by which the Closing Working Capital
exceeds the Working Capital Requirement, or (B) the Escrow Agent
will pay to the Buyer the amount, if any, by which the Closing
Working Capital is less than the Working Capital Requirement up to
the amount of $50,000. To the extent that the Working Capital
Requirement exceeds the Closing Working Capital by more than
$50,000, any such excess amount shall be paid directly to the Buyer
by the Sellers. The Sellers' obligations in this (S) 2(h)(vii) shall
constitute joint and several obligations of all of the Sellers. Any
obligation of Buyer pursuant to this (S) 2(h)(vii) shall be secured
by the Pledge Agreement; provided that Buyer, at its election, may
pay any amount disputed pursuant to (S) 2(h)(iv) into an escrow
account pending resolution of such dispute, whereupon the security
interest under the Pledge Agreement provided for in this (S)
2(h)(vii) shall automatically terminate.
(i) Pledge of Company Shares. At the Closing, the Buyer shall
execute and deliver the Pledge Agreement, from the Buyer to the Sellers,
of the Company Shares.
3. Representations and Warranties Concerning the Transaction.
(a) Representations and Warranties of the Sellers. Each of the
Sellers represents and warrants to the Buyer, jointly and severally with
the other Sellers, that the statements contained in this (S) 3(a) are
correct and complete as of the date of this Agreement and will be correct
and complete as of the Closing Date (as though made then and as though
the Closing Date were substituted for the date of this Agreement
throughout this (S) 3(a)).
(i) Authorization of Transaction. Each of the Sellers has full
power and authority to execute and deliver this Agreement and to
perform his or her obligations hereunder. This Agreement
constitutes the valid and legally binding obligation of each of the
Sellers, enforceable in accordance with its terms and conditions.
The Sellers need not give any notice to, make any filing with, or
obtain any authorization, consent, or approval of any government or
15
governmental agency in order to consummate the transactions
contemplated by this Agreement.
(ii) Noncontravention. Neither the execution and the delivery
of this Agreement, nor the consummation of the transactions
contemplated hereby, will (A) violate any constitution, statute,
regulation, rule, injunction, judgment, order, decree, ruling,
charge, or other restriction of any government, governmental agency
or court to which any Seller is subject, or (B) conflict with,
result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate,
terminate, modify, or cancel, or require any notice under any
agreement, contract, lease, license, instrument or other arrangement
to which any Seller is a party or by which he or it is bound or to
which any of his or its assets is subject.
(iii) Brokers' Fees. The Sellers have no Liability or
obligation to pay any fees or commissions to any broker, finder, or
agent with respect to the transactions contemplated by this
Agreement for which the Buyer could become liable or obligated.
(iv) Company Shares. The Sellers hold of record and own
beneficially the total number of Company Shares set forth next to
his or her or its name in Exhibit B, free and clear of any
restrictions on transfer (other than any restrictions under the
Securities Act and state securities laws), Taxes, Security
Interests, options, warrants, purchase rights, contracts,
commitments, equities, claims and demands. Except as set forth in
(S) 3(a)(v) below:
(A) None of the Sellers is a party to any option,
warrant, purchase right, or other contract or commitment that
could require any Seller to sell, transfer or otherwise dispose
of any capital stock of the Company (other than this
Agreement); and
(B) None of the Sellers is a party to any voting trust,
proxy, or other agreement or understanding with respect to the
voting of any capital stock of the Company.
Upon delivery of the certificates representing the Company Shares,
the Buyer will acquire valid, marketable title thereto, free and
clear of any liens, encumbrances and claims of any other Seller or
any third parties.
(v) Conversion of Preferred Shares. The Sellers and the
Company have irrevocably agreed that, prior to the Closing, each of
the legal or beneficial owners or holders of any Preferred Shares
will convert them into Common Shares of the Company as set forth in
Exhibit B, whereupon there shall be no
16
Preferred Shares of the Company issued or outstanding. Prior to
Closing, the Sellers shall furnish the Buyer with documentation
demonstrating to the Buyer's satisfaction that such conversion of
the Preferred Shares and the issuance of the Common Shares have
occurred.
(vi) Cancellation of Options Before Closing. The Option
Holders and the Company have irrevocably agreed that, prior to the
Closing, the Options shall be cancelled, and the Company shall have
no further obligation or liability under the Options, and no Options
shall be outstanding.
(vii) Absence of Indebtedness and Claims. Except as set forth
on (S) 3(a)(vii) of the Disclosure Schedule attached hereto, none of
the Sellers is indebted to the Company or any of its Affiliates,
other than in the ordinary course of business, and no Seller has any
claims against the Company.
(b) Representations and Warranties of the Buyer. The Buyer
represents and warrants to the Sellers that the statements contained in
this (S) 3(b) are correct and complete as of the date of this Agreement
and will be correct and complete as of the Closing Date (as though made
then and as though the Closing Date were substituted for the date of this
Agreement throughout this (S) 3(b)), except as set forth in Annex II
attached hereto.
(i) Organization of the Buyer. The Buyer is a corporation
duly organized, validly existing, and in good standing under the
laws of the state of its incorporation.
(ii) Authorization of Transaction. The Buyer has full power
and authority (including full corporate power and authority) to
execute and deliver this Agreement and to perform its obligations
hereunder. This Agreement constitutes the valid and legally binding
obligation of the Buyer, enforceable in accordance with its terms
and conditions. The Buyer need not give any notice to, make any
filing with, or obtain any authorization, consent, or approval of
any government or governmental agency in order to consummate the
transactions contemplated by this Agreement.
(iii) Non-Contravention. Neither the execution and the
delivery of this Agreement, nor the consummation of the transactions
contemplated hereby, violate any constitution, statute, regulation,
rule, injunction, judgment, order, decree, ruling, charge or other
restriction of any government, governmental agency or court to which
the Buyer is subject or any provision of its charter or bylaws.
(iv) Brokers' Fees. The Buyer has no Liability or obligation
to pay
17
any fees or commissions to any broker, finder or agent with respect
to the transactions contemplated by this Agreement for which Sellers
could become liable or obligated.
(v) Investment. The Buyer is not acquiring the Company Shares
with a view to or for sale in connection with any distribution
thereof within the meaning of the Securities Act. The Buyer
represents that the Buyer has had access to information regarding
the Company and the Subsidiaries. The Buyer has had an opportunity
to ask questions of and receive answers from the Company's
representatives concerning this investment.
4. Representations and Warranties Concerning the Company. Each of the
Principal Sellers jointly and severally represents and warrants to the Buyer
that the statements contained in this (S) 4 are correct and complete as of the
date of this Agreement and will be correct and complete as of the Closing Date
(as though made then and as though the Closing Date were substituted for the
date of this Agreement throughout this (S) 4), except as set forth in the
disclosure schedule delivered by the Seller to the Buyer on the date hereof (the
"Disclosure Schedule"). Nothing in the Disclosure Schedule shall be deemed
adequate to disclose an exception to a representation or warranty made herein,
however, unless the Disclosure Schedule identifies the exception with reasonable
particularity and describes the relevant facts in reasonable detail. The
Disclosure Schedule will be arranged in paragraphs corresponding to the lettered
and numbered paragraphs contained in this (S) 4.
(a) Organization, Qualification, and Corporate Power. The Company
is a corporation duly organized, validly existing, and in good standing
under the laws of Colorado. The Company is duly authorized to conduct
business and is in good standing under the laws of each jurisdiction
where such qualification is required. The Company has full corporate
power and authority and all licenses, permits, and authorizations
necessary to carry on the businesses in which it is engaged and in which
it presently proposes to engage and to own and use the properties owned,
used, leased or operated by it, including, without limitation, all of its
existing and proposed retail stores (collectively, "Store" in the
singular or "Stores" in the plural), each of which is listed on (S) 4(a)
of the Disclosure Schedule and appropriately designated thereon as a
Company-owned, franchised, master-licensed or licensed Store, or a Store
for which the lease is being negotiated, or a Store that is in the
process of being built out.
(S) 4(a) of the Disclosure Schedule lists the directors and officers
of the Company. The Sellers have delivered or made available to the
Buyer copies of the Company's charter and bylaws (as amended to date).
The Sellers have delivered to the Buyer correct and complete copies of
the Company's minute books (containing the records of meetings of the
stockholders, the board of directors, and any committees of the board of
directors), and, except as disclosed on (S) 4(a) of the Disclosure
Schedule, they are correct and complete in all material respects. The
Sellers have delivered to the Buyer copies of the
18
Company's stock record books, and, except as disclosed on (S) 4(a) of the
Disclosure Schedule, they are correct and complete in all respects and
accurately reflect the record ownership and, to the Knowledge of the
Principal Sellers, the beneficial ownership of all the outstanding
Company Shares. Except as set forth on (S) 4(a) of the Disclosure
Schedule, there are no shareholder, buy/sell, co-sale, option, first-
right-of-refusal or other similar agreements between or among any of the
Sellers and the Company with respect to the capital stock of the Company
or any of the Subsidiaries. The Company is not in default under or in
violation of any provision of its charter or bylaws.
(b) Capitalization. On or before the date of execution of this
Agreement, the entire authorized capital stock of the Company consists
of: (i) 1,000,000 Common Shares, of which 100,000 Common Shares are
issued and outstanding; (ii) 300,000 Series A Preferred Shares, of which
275,942 are issued and outstanding; and (iii) 800 Series B Preferred
Shares, all of which are issued and outstanding. All of the issued and
outstanding Company Shares have been duly authorized, are validly issued,
fully paid, and non-assessable, and are held of record as set forth on
Exhibit B. There are no outstanding or authorized options, warrants,
purchase rights, subscription rights, conversion rights (other than those
associated with the Preferred Shares to be converted immediately before
Closing), exchange rights, or other contracts or commitments that could
require the Company to issue, sell or otherwise cause to become
outstanding any of its capital stock.
Immediately before Closing, but following the conversion of the
Preferred Shares to Common Shares, (i) the entire authorized capital
stock of the Company will consist of (A) 1,000,000 Common Shares, of
which 135,155 shares will be issued and outstanding to the Sellers, (B)
300,000 Series A Preferred Shares, none of which shall be issued or
outstanding, and (C) 800 Series B Preferred Shares, none of which shall
be issued or outstanding; and (ii) there shall be no outstanding or
authorized options, warrants, purchase rights, subscription rights,
conversion rights, exchange rights, or other contracts or commitments
that could require the Company to issue, sell or otherwise cause to
become outstanding any of its capital stock. Notwithstanding any
adjustment at Closing in the number of shares of capital stock, the Buyer
shall acquire at Closing all of the issued and outstanding shares of
Capital Stock of the Company at the Closing.
There are no outstanding or authorized stock appreciation, phantom
stock, profit participation or similar rights with respect to the
Company. There are no voting trusts, proxies, or other agreements or
understandings with respect to the voting of the capital stock of the
Company which shall not have been terminated prior to the Closing.
(c) Non-Contravention. Except as set forth on (S) 4(c) of the
Disclosure Schedule, neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby,
will (i) violate any constitution,
19
statute, regulation, rule, injunction, judgment, order, decree, ruling,
charge, or other restriction of any government, governmental agency, or
court to which the Company or any Subsidiary is subject or any provision
of the charter, bylaws, or other constituent document of the Company or
any subsidiary, (ii) conflict with, result in a breach of, constitute a
default under, result in the acceleration of, create in any party the
right to accelerate, terminate, modify, or cancel, or require any notice
under any agreement (including without limitation, any franchise
agreement), contract, lease or sublease (including without limitation,
any store lease or sublease), license, instrument or other arrangement to
which the Company or any subsidiary is a party or by which it is bound or
to which any of its assets is subject (or result in the imposition of any
Security Interest upon any of its assets). Except as set forth on
Schedule 4(c), neither the Company nor any subsidiary needs to give any
notice to, make any filing with, or obtain any authorization, consent, or
approval of any government or governmental agency in order for the
Parties to consummate the transactions contemplated by this Agreement.
(d) Brokers' Fees. Neither the Company nor any Subsidiary has any
Liability or obligation to pay any fees or commissions to any broker,
finder or agent with respect to the transactions contemplated by this
Agreement.
(e) Title to Assets. The Company and each Subsidiary has good and
marketable title to, or a valid leasehold interest in, the properties and
assets used by it, located on its premises, or shown on the Most Recent
Balance Sheet or acquired after the date thereof, free and clear of all
Security Interests, except for properties and assets disposed of in the
Ordinary Course of Business since the date of the Most Recent Balance
Sheet.
(f) Subsidiaries.
(i) Each Subsidiary is an entity duly organized, validly
existing, and in good standing under the laws of jurisdiction of
incorporation or organization. Each Subsidiary is duly authorized
to conduct business and is in good standing under the laws of each
jurisdiction where such qualification is required. Each Subsidiary
has full corporate power and authority and all licenses, permits,
and authorizations necessary to carry on the businesses in which it
is engaged and in which it presently proposes to engage and to own
and use the properties owned, used, leased or operated by it.
(S) 4(a) of the Disclosure Schedule lists the respective
directors and officers of each of the Subsidiaries. The Sellers
have delivered to the Buyer correct and complete copies of the
charter and bylaws (as amended to date) of each of the Subsidiaries.
With respect to each of the Subsidiaries, the Sellers have delivered
to the Buyer correct and complete copies of the minute books
(containing the records of meetings of the stockholders, the board
of directors,
20
and any committees of the board of directors), and,
except as set forth in (S) 4(a) of the Disclosure Schedule, they are
correct and complete in all material respects. The Sellers have
delivered to the Buyer copies of each Subsidiary's stock record
books and, except as set forth in (S) 4(b) of the Disclosure
Schedule, they are correct and complete in all respects and
accurately reflect the record ownership and, to the knowledge of the
Sellers, the beneficial ownership of all the outstanding capital
stock of each of the Subsidiaries. No Subsidiary is in default under
or in violation of any provision of its charter or bylaws.
(ii) (S) 4(f) of the Disclosure Schedule sets forth for each
Subsidiary of the Company (i) its name, its date and jurisdiction of
incorporation or formation, and each jurisdiction in which the
Subsidiary conducts business, or has conducted business within the
five (5) year period prior to the date of this Agreement, (ii) the
number of shares of authorized capital stock of each class of its
capital stock or other ownership interests, (iii) the number of
issued and outstanding shares of each class of its capital stock (or
other ownership interest), the names of the holders thereof, and the
number of shares (or other interests) held by each such holder, and
(iv) the number of shares of its capital stock (or other interests)
held in treasury. All of the issued and outstanding shares of
capital stock (or other interests) of each Subsidiary have been duly
authorized and are validly issued, fully paid, and non-assessable.
Either the Company or a Subsidiary holds of record and owns
beneficially all of the outstanding shares (or other interests) of
each Subsidiary of the Company, free and clear of any restrictions
on transfer (other than restrictions under the Securities Act and
state securities laws), Taxes, Security Interests, options,
warrants, purchase rights, contracts, commitments, equities, claims,
and demands, as described on (S) 4(f) of the Disclosure Schedule.
There are no outstanding or authorized options, warrants, purchase
rights, conversion rights, exchange rights, or other contracts or
commitments that could require any of the Company or its
Subsidiaries to sell, transfer, or otherwise dispose of any capital
stock (or other interests) of any of its Subsidiaries or that could
require any Subsidiary of the Company to issue, sell, or otherwise
cause to become outstanding any of its own capital stock (or other
interests). There are no outstanding stock appreciation, phantom
stock, profit participation, or similar rights with respect to any
Subsidiary of the Company. There are no voting trusts, proxies, or
other agreements or understandings with respect to the voting of any
capital stock (or other interests) of any Subsidiary of the Company.
None of the Company or its Subsidiaries controls directly or
indirectly or has any direct or indirect equity participation in any
corporation, partnership, limited liability company, trust, or other
business association which is not a Subsidiary of the Company.
(g) Financial Statements. Attached hereto as Exhibit E are the
following financial statements (collectively the "Financial Statements"):
(i) audited consolidated
21
balance sheets and statements of operations, stockholders' equity, and
cash flows as of and for the fiscal years ended December 31, 1996 and
1995 for the Company; (ii) unaudited, consolidating balance sheets and
statements of operations as of and for the fiscal year ended December 31,
1997 and the ten (10) month period ended October 31, 1998 for the
Company; (iii) audited balance sheets, statements of operations,
stockholders equity, and cash flows as of, and for the years ended
December 31, 1997 and 1996 for Pretzelmaker, Inc.; (iv) unaudited balance
sheets and statements of operations as of and for the eight (8) month
period ended August 31, 1998 for Pretzelmaker, Inc. (the balance sheets
set forth in (ii) and (iv) for the ten (10) month periods ended October
31, 1998 collectively referred to as the "Most Recent Balance Sheets",
and the items set forth for the year end December 31, 1997 in items (ii),
(iii) and (iv) collectively referred to as the "Most Recent Financial
Statements"). For purposes of this Agreement, the "Most Recent Fiscal
Year End" shall mean December 31, 1997, and the "Most Recent Fiscal Month
End" shall mean October 31, 1998.
The Financial Statements (including the notes thereto) have been
prepared in accordance with GAAP (except with respect to those matters
specified in Schedule 1.2) applied on a consistent basis throughout the
periods covered thereby, present fairly the financial condition of the
Company and the Subsidiaries as of such dates and the results of
operations of them for such periods, are correct and complete, and are
consistent with their books and records (which books and records are
correct).
The Company's Adjusted EBITDA for the last twelve month period
ending on August 31, 1998, is not less than $1,387,600.
(h) Events Subsequent to Most Recent Fiscal Year End. Since the
Most Recent Fiscal Year End, there has not been any material adverse
change in the business, financial condition, operations, results of
operations or future prospects of the Company. Without limiting the
generality of the foregoing, except as set forth in (S) 4(h) of the
Disclosure Schedule, since that date:
(i) neither the Company nor any Subsidiary has sold, leased,
transferred or assigned any of its assets, tangible or intangible,
other than for a fair consideration in the Ordinary Course of
Business;
(ii) neither the Company nor any Subsidiary has entered into
any agreement, contract, lease or license (or series of related
agreements, contracts, leases and licenses) outside the Ordinary
Course of Business;
(iii) no party (including the Company) has accelerated,
terminated, modified, or canceled any agreement, contract, lease or
license (or series of related agreements, contracts, leases, and
licenses) involving more than $5,000 in any single instance or in
the aggregate to which the Company or any Subsidiary
22
is a party or by which any of them is bound;
(iv) neither the Company nor any Subsidiary has granted any
Security Interest in any of its assets, tangible or intangible;
(v) neither the Company nor any Subsidiary has made any
capital expenditure (or series of related capital expenditures)
either involving more than $25,000 or outside the Ordinary Course of
Business;
(vi) neither the Company nor any Subsidiary has made any
capital investment in, any loan to, or any acquisition of the
securities or assets of, any other Person (or series of related
capital investments, loans and acquisitions) either involving more
than $5,000 or outside the Ordinary Course of Business;
(vii) neither the Company nor any subsidiary has issued any
note, bond or other debt security or created, incurred, assumed or
guaranteed any indebtedness for borrowed money or capitalized lease
obligation either involving more than $5,000 singly or $10,000 in
the aggregate;
(viii) neither the Company nor any Subsidiary has delayed or
postponed the payment of accounts payable and other Liabilities
outside the Ordinary Course of Business;
(ix) neither the Company, nor any Subsidiary, has canceled,
compromised, waived or released any right or claim (or series of
related rights and claims) either involving more than $5,000 or
outside the Ordinary Course of Business;
(x) neither the Company nor any Subsidiary has granted any
license or sublicense of any rights under or with respect to any
Intellectual Property except as set forth in (S)4(m) of the
Disclosure Schedule setting forth each of the Company's master
franchise, franchise, sub-franchise, license, area developer and
other similar documents;
(xi) there has been no change made or authorized in the
charter, bylaws, or other constituent documents of the Company or
any Subsidiary;
(xii) neither the Company nor any Subsidiary has issued, sold,
or otherwise disposed of any of its capital stock, or other
interests, or granted any options, warrants or other rights to
purchase or obtain (including upon conversion, exchange or exercise)
any of its capital stock or other interests;
(xiii) neither the Company nor any Subsidiary has declared,
set aside,
23
or paid any dividend or made any distribution with respect to its
capital stock or other interests (whether in cash or in kind) or
redeemed, purchased or otherwise acquired any of its capital stock
or other interests;
(xiv) neither the Company nor any Subsidiary has experienced
any damage, destruction, or loss (whether or not covered by
insurance) to its property;
(xv) neither the Company nor any Subsidiary has made any
loan to, or entered into any other transaction with, any of its
directors, officers and employees outside the Ordinary Course of
Business;
(xvi) neither the Company nor any Subsidiary has entered into
any employment contract or collective bargaining agreement, written
or oral, or modified the terms of any such existing contract or
agreement;
(xvii) neither the Company nor any Subsidiary has granted any
increase in the base compensation of any of its directors, officers,
or employees outside the Ordinary Course of Business;
(xviii) neither the Company nor any Subsidiary has adopted,
amended, modified or terminated any bonus, profit-sharing,
incentive, severance, or other plan, contract or commitment for the
benefit of any of its directors, officers, and employees (or taken
any such action with respect to any other Employee Benefit Plan);
(xix) neither the Company nor any Subsidiary has made any
other change in employment terms for any of its directors, officers
or employees outside the Ordinary Course of Business;
(xx) neither the Company nor any Subsidiary has made or
pledged to make any charitable or other capital contribution outside
the Ordinary Course of Business; and
(xxi) to the Knowledge of the Principal Sellers, there has
not been any other material occurrence, event, incident, action,
failure to act or transaction outside the Ordinary Course of
Business.
(i) Undisclosed Liabilities. Neither the Company nor any Subsidiary
has any Liability (and, to the Knowledge of the Principal Sellers, there
is no Basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim or demand against any of them
giving rise to any Liability), except for (i) Liabilities set forth on
the face of the Most Recent Balance Sheet, and (ii) Liabilities which
have arisen
24
after the Most Recent Fiscal Month End in the Company's or any
Subsidiary's Ordinary Course of Business (none of which results from,
arises out of, relates to, is in the nature of, or was caused by any
breach of contract, breach of warranty, tort, infringement or violation
of law).
(j) Legal Compliance. The Company and each Subsidiary has
complied, in all material respects, with all applicable laws (including
rules, regulations, codes, plans, injunctions, judgments, orders,
decrees, rulings, and charges thereunder) of federal, state, local, and
foreign governments (and all agencies thereof), and no action, suit,
proceeding, hearing, investigation, charge, complaint, claim, demand, or
notice has been filed or commenced against any of them alleging any
failure so to comply. The Company has made available or will make
available to Buyer copies of all Uniform Franchise Offering Circulars
used by the Company and each Subsidiary, together with copies of all
state and/or Federal Franchise registrations and other filings made by
the Company and each Subsidiary for franchise law compliance purposes.
(k) Tax Matters. Except as disclosed on Schedule 4(k):
(i) The Company and each Subsidiary has filed all Tax Returns
that it was required to file. All such Tax Returns were correct and
complete in all respects. All Taxes owed by the Company and each
Subsidiary (whether or not shown on any Tax Return) have been paid,
or adequate reserves have been made by the Company and the
Subsidiaries for payment as set forth in the Financial Statements.
The Company and each Subsidiary is not currently the beneficiary of
any extension of time within which to file any Tax Return. No claim
has ever been made by an authority in a jurisdiction where the
Company or a Subsidiary does not file Tax Returns that it is or may
be subject to taxation by that jurisdiction. There are no Security
Interests on any of the assets of the Company or any Subsidiary that
arose in connection with any failure (or alleged failure) to pay any
Tax.
(ii) The Company and each Subsidiary has withheld and paid all
Taxes required to have been withheld and paid in connection with
amounts paid or owing to any employee, independent contractor,
creditor, stockholder or other third party.
(iii) No Principal Seller or director or officer (or employee
responsible for Tax matters) of the Company or any Subsidiary
expects any authority to assess any additional Taxes for any period
for which Tax Returns have been filed. There is no dispute or claim
concerning any Tax Liability of the Company or any Subsidiary either
(A) claimed or raised by any authority in writing or (B) as to which
any of the Sellers, the directors and officers (and employees
responsible for Tax matters) of the Company or such Subsidiary has
Knowledge
25
based upon personal contact with any agent of such authority. (S)
4(k) of the Disclosure Schedule lists all federal, state, local, and
foreign income Tax Returns filed with respect to the Company and
each Subsidiary, indicates those Tax Returns that have been audited,
and indicates those Tax Returns that currently are the subject of
audit. The Sellers have has delivered to the Buyer correct and
complete copies of all examination reports, and statements of
deficiencies assessed against or agreed to by the Company or any
Subsidiary, and federal income Tax Returns related thereto.
(iv) Neither the Company nor any Subsidiary has waived any
statute of limitations in respect of Taxes or agreed to any
extension of time with respect to a Tax assessment or deficiency.
(v) Neither the Company nor any Subsidiary has filed a
consent under Code Sec. 341(f) concerning collapsible corporations.
Neither the Company nor any Subsidiary has made any payments, nor is
it obligated to make any payments, nor is either of them a party to
any agreement that under certain circumstances could obligate either
of them to make any payments that will not be deductible under Code
Sec. 280G. Neither the Company nor any Subsidiary has been a United
States real property holding corporation within the meaning of Code
Sec. 897(c)(2) during the applicable period specified in Code See.
897(c)(1)(A)(ii). Neither the Company nor any Subsidiary is a party
to any Tax allocation or sharing agreement. Neither the Company nor
any Subsidiary (A) has been a member of an Affiliated Group filing a
consolidated federal income Tax Return or (B) has any Liability for
the Taxes of any Person (other than the Company or such Subsidiary)
under Treas. Reg. (S) 1.1502-6 (or any similar provision of state,
local, or foreign law), as a transferee or successor, by contract,
or otherwise.
(vi) (S) 4(k) of the Disclosure Schedule sets forth the
following information with respect to the Company and each
Subsidiary as of the most recent practicable date:
(A) the basis of each of them in its assets;
(B) the amount of any net operating loss, net capital
loss, unused investment or other credit, unused foreign tax, or
excess charitable contribution allocable to each of them.
(vii) The unpaid Taxes of the Company and each Subsidiary:
(A) did not, as of the Most Recent Fiscal Month End,
exceed the reserve for Tax Liability (rather than any reserve
for deferred Taxes
26
established to reflect timing differences between book and Tax
income) set forth on the face of the Most Recent Balance Sheet
(rather than in any notes thereto); and
(B) do not exceed that reserve as adjusted for the passage
of time through the Closing Date in accordance with the past
custom and practice of the Company and each Subsidiary in
filing their Tax Returns.
(l) Real Property.
(i) Neither the Company nor any Subsidiary owns any real
property or interests in real property.
(ii) (S) 4(l)(ii) of the Disclosure Schedule lists and
describes briefly all real property (a) leased or subleased to the
Company and each Subsidiary including without limitation, each of
the leases or subleases covering the Company's office at 0000 - 00xx
Xxxxxx, Xxxxx 0000, Xxxxxx, Xxxxxxxx 00000, and covering the
premises of each of the Stores (collectively, the "Store Leases"),
and (b) leased or subleased by the Company and any Subsidiary to
third parties, including the Company's and each Subsidiary's
franchisees and area developers. The Sellers have delivered to the
Buyer correct and complete copies of the leases and the subleases
listed in (S) 4(l)(ii) of the Disclosure Schedule (as amended to
date). With respect to each lease and sublease listed in (S)
4(l)(ii) of the Disclosure Schedule:
(A) to the Knowledge of the Principal Sellers, the lease
or sublease is legal, valid, binding, enforceable, and in full
force and effect;
(B) subject to the receipt of consents set forth in (S)
4(l)(ii) of the Disclosure Schedule, to the Knowledge of the
Principal Sellers, the lease or sublease will continue to be
legal, valid, binding, enforceable, and in full force and
effect on identical terms following the consummation of the
transactions contemplated hereby, which transactions will not
violate the terms thereof;
(C) no party to the lease or sublease is in breach or
default, and no event has occurred which, with notice or lapse
of time, would constitute a breach or default or permit
termination, modification, or acceleration thereunder;
(D) no party to the lease or sublease has repudiated any
provision thereof;
27
(E) there are no disputes, oral agreements, or forbearance
programs in effect as to the lease or sublease;
(F) with respect to each sublease, the representations and
warranties set forth in subsections (A) through (E) above are
true and correct with respect to the underlying lease;
(G) neither the Company nor any Subsidiary has assigned,
transferred, conveyed, mortgaged, deeded in trust or encumbered
any interest in the leasehold or subleasehold;
(H) all facilities leased or subleased thereunder have
received all approvals of governmental authorities (including
licenses and permits) required in connection with the operation
thereof and have been operated and maintained in accordance
with applicable laws, rules and regulations; and
(I) All facilities leased or subleased thereunder are
supplied with utilities and other services necessary for the
operation of said facilities.
(m) Intellectual Property.
(i) The Company and each Subsidiary owns or has the right to
use pursuant to license, sublicense, agreement or permission all
Intellectual Property necessary or desirable for the operation of
the businesses of the Company as presently conducted and as
presently proposed to be conducted. Each item of Intellectual
Property owned or used by the Company and each Subsidiary
immediately prior to the Closing hereunder will be owned or
available for use by the Company on identical terms and conditions
immediately subsequent to the Closing hereunder. (S) 4(m)(i) of the
Disclosure Schedule lists each item of Intellectual Property owned,
licensed by or used by the Company and each Subsidiary and sets
forth whether it is owned by or licensed to them.
(ii) To the Knowledge of the Principal Sellers, neither the
Company nor any Subsidiary has interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any
Intellectual Property rights of third parties. Neither the Company
nor any Subsidiary has ever received any charge, complaint, claim,
demand, or notice alleging any such interference, infringement,
misappropriation, or violation (including any claim that either of
them must license or refrain from using any Intellectual Property
rights of any third party). No third party has interfered with,
infringed upon, misappropriated, or otherwise
28
come into conflict with any Intellectual Property rights of either
of them.
(iii) (S) 4(m)(iii) of the Disclosure Schedule identifies each
patent, trademark, service xxxx, copyright, and other intellectual
property right (together with the registration number) which has
been issued to the Company or any Subsidiary, and any license,
agreement or other permission which either of them has granted to
any third party with respect to any of its Intellectual Property
(together with any exceptions). The Principal Sellers have
delivered or made available to the Buyer correct and complete copies
of all such registrations, applications, licenses, agreements, and
permissions (as amended to date) and has made available to the Buyer
correct and complete copies of all other written documentation
evidencing ownership of each such item. (S) 4(m)(iii) of the
Disclosure Schedule also identifies each trade name or unregistered
trademark used by the Company and each Subsidiary in connection with
any of their businesses. With respect to each item of Intellectual
Property required to be identified in (S) 4(m)(iii) of the
Disclosure Schedule:
(A) the Company or a Subsidiary possesses all right,
title, and interest in and to the item, free and clear of any
Security Interest, license or other restriction;
(B) the item is not subject to any outstanding injunction,
judgment, order, decree, ruling or charge;
(C) no action, suit, proceeding, hearing, investigation,
charge, complaint, claim or demand is pending or is threatened
which challenges the legality, validity, enforceability, use or
ownership of the item;
(D) neither the Company nor any Subsidiary has ever agreed
to indemnify any Person for or against any interference,
infringement, misappropriation or other conflict with respect
to the item.
(iv) (S) 4(m)(iv) of the Disclosure Schedule identifies each
item of Intellectual Property that any third party owns and that the
Company or any Subsidiary uses pursuant to any license, sublicense,
agreement, or permission. The Sellers have delivered or made
available to the Buyer correct and complete copies of all such
licenses, sublicenses, agreements, and permissions (as amended to
date). With respect to each item of Intellectual Property required
to be identified in (S) 4(m)(iv) of the Disclosure Schedule:
(A) the license, sublicense, agreement, or permission
covering the item is legal, valid, binding, enforceable and in
full force and effect;
29
(B) the license, sublicense, agreement, or permission will
continue to be legal, valid, binding, enforceable and in full
force and effect on identical terms following the Closing;
(C) no party to the license, sublicense, agreement or
permission is in breach or default, no event has occurred which
with notice or lapse of time would constitute a breach or
default or permit termination, modification, or acceleration
thereunder;
(D) no party to the license, sublicense, agreement or
permission has repudiated any provision thereof;
(E) to the Knowledge of the Principal Sellers, the
underlying item of Intellectual Property is not subject to any
outstanding injunction, judgment, order, decree, ruling or
charge;
(F) no action, suit, proceeding, hearing, investigation,
charge, complaint, claim or demand is pending or is threatened
which challenges the legality, validity or enforceability of
the underlying item of Intellectual Property; and
(G) neither the Company nor any Subsidiary has granted any
sublicense or similar right with respect to the license,
sublicense, agreement or permission.
(v) To the Knowledge of the Principal Sellers, the Intellectual
Property of the Company and each Subsidiary does not interfere with,
infringe upon, misappropriate or otherwise come into conflict with,
any Intellectual Property rights of third parties as a result of the
continued operation of its business as presently conducted.
(n) Tangible Assets. The Company and each Subsidiary owns or leases
all premises, machinery, equipment, and other tangible assets necessary
for the conduct of its business as presently conducted and as presently
proposed to be conducted. Each such tangible asset is free from defects,
has been maintained in accordance with normal industry practice, is in
good operating condition and repair (subject to normal wear and tear),
and is suitable for the purposes for which it presently is used and
presently is proposed to be used.
(o) Inventory. The inventories and supplies of the Company and each
Subsidiary are merchantable and fit for the purpose for which they were
procured, and none of which is slow-moving, obsolete, damaged or
defective, subject only to the reserve for inventory writedown set forth
on the face of the Most Recent Balance Sheet
30
(rather than in any notes thereto) as adjusted for the passage of time
through the Closing Date in accordance with the past custom and practice
of the Company and each Subsidiary.
(p) Contracts. (S) 4(p) of the Disclosure Schedule lists the
following contracts and other agreements to which the Company and each
Subsidiary is a party:
(i) each contract or agreement of any kind or nature entered
into by any of the Company and Affiliates thereof, with any
franchisee, sub-franchisee or area developer, or any officer,
principal, owner, shareholder or representative of any such
franchisee or area developer;
(ii) any agreement (or group of related agreements) for the
lease of personal property to or from any Person providing for lease
payments in excess of $1,000 per annum;
(iii) any agreement (or group of related agreements) for the
manufacturing, brokering, distributing, delivering, marketing,
supply, purchase or sale of materials, commodities, inventory,
supplies, products or other personal property, or for the furnishing
or receipt of services, the performance of which will extend over a
period of more than one year, result in a material loss to the
Company, or involve consideration in excess of $1,000;
(iv) each contract or agreement of any kind or nature entered
into by any of the Company and Affiliates thereof for the
development, study or testing of products, inventory or supplies;
(v) any agreement concerning a partnership or joint venture;
(vi) any agreement (or group of related agreements) under
which it has created, incurred, assumed, or guaranteed any
indebtedness for borrowed money, or any capitalized lease
obligation, in excess of $1,000 or under which it has imposed a
Security Interest on any of its assets, tangible or intangible;
(vii) any agreement concerning confidentiality or
noncompetition;
(viii) any agreement with any of the Sellers or their
Affiliates (other than the Company);
(ix) any profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance, or other plan or
arrangement for the benefit of its current or former directors,
officers, and employees;
(x) any collective bargaining agreement;
31
(xi) any agreement for the employment of any individual on a
full-time, part-time, consulting, or other basis providing annual
compensation in excess of $15,000 or providing severance benefits;
(xii) any agreement under which it has advanced or loaned any
amount to any of its directors, officers and employees;
(xiii) any agreement with any governmental, regulatory or
administrative office, agency, body, court, tribunal or organization
of any foreign country or foreign or U.S. territory;
(xiv) any agreement under which the consequences of a default
or termination could have a material adverse effect on the business,
financial condition, operations, results of operations, or future
prospects of the Company and each Subsidiary; or
(xv) any other agreement (or group of related agreements) the
performance of which involves consideration in excess of $5,000 in a
single instance or $10,000 in the aggregate.
The Sellers have delivered to the Buyer a correct and complete copy of
each written agreement listed in (S) 4(p) of the Disclosure Schedule (as
amended to date) and a written summary setting forth the terms and
conditions of each oral agreement referred to in (S) 4(p) of the
Disclosure Schedule. With respect to each such agreement: (A) the
agreement is legal, valid, binding, enforceable, and in full force and
effect; (B) the agreement will continue to be legal, valid, binding,
enforceable and in full force and effect on identical terms following the
consummation of the transactions contemplated hereby; (C) no party is in
breach or default, and, to the Knowledge of the Principal Sellers, no
event has occurred which with notice or lapse of time would constitute a
breach or default, or permit termination, modification or acceleration,
under the agreement; and (D) none of the Company, any Subsidiary, or any
other party has repudiated any provision of the agreement.
(q) Notes and Accounts Receivable. All notes and accounts
receivable of the Company and each Subsidiary are reflected properly on
its books and records, are valid receivables, subject to no contractual
setoffs or counterclaims (and there is no Basis for asserting any
contractual setoffs or counterclaims with respect thereto) are current
and collectible, and, to the Knowledge of the Principal Sellers, are
collectible in accordance with their terms at their recorded amounts,
subject only to (i) the reserve for bad debts set forth on the face of
the Most Recent Balance Sheet (rather than in any notes thereto) as
adjusted for the passage of time through the Closing Date in
accordance with the past custom and practice of the Company and each
Subsidiary, and (ii) subject to the
32
limitations of bankruptcy, insolvency, fraudulent conveyance,
reorganization, arrangement, moratorium, or other laws relating to or
generally affecting the rights of creditors and by general principles of
equity.
(r) Powers of Attorney. Except as set forth in (S) 4(r) of the
Disclosure Schedule, there are no outstanding powers of attorney executed
on behalf of the Company.
(s) Insurance. (S) 4(s) of the Disclosure Schedule sets forth the
following information with respect to each insurance policy (including
policies providing property, casualty, liability, and workers'
compensation coverage and bond and surety arrangements) to which the
Company and any Subsidiary has been a party, a named insured, or
otherwise the beneficiary of coverage at any time within the past three
(3) years:
(i) the name, address, and telephone number of the agent;
(ii) the name of the insurer, the name of the policyholder,
and the name of each covered insured;
(iii) the policy number and the period of coverage;
(iv) the scope (including an indication of whether the
coverage was on a claims made, occurrence, or other basis) and
amount of coverage; and
(v) a description of any retroactive premium adjustments or
other loss-sharing arrangements.
With respect to each such insurance policy: (A) the policy is legal,
valid, binding, enforceable, and in full force and effect; (B) the policy
will continue to be legal, valid, binding, enforceable, and in full force
and effect on identical terms through the date of the Closing; (C) none
of the Company, any Subsidiary, nor any other party to the policy is in
breach or default (including with respect to the payment of premiums or
the giving of notices), and, no event has occurred which, with notice or
the lapse of time, would constitute such a breach or default, or permit
termination, modification, or acceleration, under the policy; and (D)
none of the Company, any Subsidiary, or any other party to the policy
repudiated any provision thereof. The Company and each Subsidiary has
been covered during the past three (3) years by insurance in scope and
amount customary and reasonable for the businesses in which it has
engaged during the aforementioned period. (S) 4(s) of the Disclosure
Schedule describes any self-insurance arrangements affecting the Company.
(t) Litigation. (S) 4(t) of the Disclosure Schedule sets forth each
instance in
33
which any of the Sellers, the Company and any Subsidiary (i) is subject
to any outstanding injunction, judgment, order, decree, ruling, or charge
or (ii) is a party or is threatened to be made a party to any action,
suit, proceeding, hearing, or investigation of, in, or before any court
or quasi-judicial or administrative agency of any federal, state, local
or foreign jurisdiction or before any arbitrator. None of the actions,
suits, proceedings, hearings, and investigations set forth in (S) 4(t) of
the Disclosure Schedule could result in any material adverse change in
the business, financial condition, operations, results of operations or
future prospects of the Company. None of the Principal Sellers has any
reason to believe that any such action, suit, proceeding, hearing or
investigation may be brought or threatened against the Company or any
Subsidiary.
(u) Product Warranty. Each product made, sold or delivered by the
Company and each Subsidiary has been in conformity with all applicable
laws, statutes, regulations, retail and other applicable food industry
standards, and, to the Knowledge of the Principal Sellers, neither the
Company nor any Subsidiary has any Liability (and there is no Basis for
any present or future action, suit, proceeding, hearing, investigation,
charge, complaint, claim, or demand against any of them giving rise to
any Liability) for damages in connection therewith.
(v) Product Liability. To the Knowledge of the Principal Sellers,
neither the Company nor any Subsidiary has any Liability and, to the
Knowledge of the Principal Sellers, there is no Basis for any present or
future action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand giving rise to any Liability arising out of
any injury to individuals or property as a result of the possession,
consumption or use of any product made, sold or delivered by any of them.
(w) Employees.
(i) To the Knowledge of the Principal Sellers, no executive,
key employee (including any store manager), or group of employees
has any plans to terminate employment with the Company or any
Subsidiary. To the Knowledge of the Principal Sellers, the Company
has not committed any unfair labor practice. Neither the Company
nor any Subsidiary is bound by any collective bargaining agreement,
nor has any of them experienced any strikes, grievances, claims of
unfair labor practices, or other collective bargaining disputes.
Neither the Company nor any Subsidiary has committed any unfair
labor practice.
None of the Principal Sellers has any Knowledge of any
organizational effort presently being made or threatened by or on
behalf of any labor union with respect to the employees of the
Company or any Subsidiary.
(ii) (S)4(w)(ii) of the Disclosure Schedule sets forth the
accrued vacation and sick and personal leave (if any) of the
employees of the Company
34
and each Subsidiary.
(x) Employee Benefit.
(i) (S) 4(x) of the Disclosure Schedule lists each Employee
Benefit Plan that the Company and each Subsidiary maintains or to
which either contributes.
(A) Each such Employee Benefit Plan (and each related
trust, insurance contract, or fund) complies in form and in
operation in all respects with the applicable requirements of
ERISA, the Code, and other applicable laws.
(B) All required reports and descriptions (including
Form 5500 Annual Reports, Summary Annual Reports, PBGC-1's, and
Summary Plan Descriptions) have been filed or distributed
appropriately with respect to each such Employee Benefit Plan.
The requirements of Part 6 of Subtitle B of Title I of ERISA
and of Code Sec. 4980B have been met with respect to each such
Employee Benefit Plan which is an Employee Welfare Benefit
Plan.
(C) All contributions (including all employer
contributions and employee salary reduction contributions)
which are due have been paid to each such Employee Benefit Plan
which is an Employee Pension Benefit Plan and all contributions
for any period ending on or before the Closing Date which have
been paid to each such Employee Pension Benefit Plan or accrued
in accordance with past custom and practice. All premiums or
other payments for all periods ending on or before the Closing
Date have been paid with respect to each such Employee Benefit
Plan which is an Employee Welfare Benefit Plan.
(D) Each such Employee Benefit Plan which is an Employee
Pension Benefit Plan meets the requirements of a "qualified
plan" under Code Sec. 401(a) and has received, within the last
four years, a favorable determination letter from the Internal
Revenue Service.
(E) The market value of assets under each such Employee
Benefit Plan which is an Employee Pension Benefit Plan equals
or exceeds the present value of all vested and nonvested
Liabilities thereunder determined in accordance with PBGC
methods, factors, and assumptions applicable to an Employee
Pension Benefit Plan terminating on the date for determination.
35
(F) The Principal Sellers have delivered or made
available to the Buyer correct and complete copies of the plan
documents and summary plan descriptions, the most recent
determination letter received from the Internal Revenue
Service, the most recent Form 5500 Annual Report, and all
related trust agreements, insurance contracts, and other
funding agreements which implement each such Employee Benefit
Plan.
(ii) With respect to each Employee Benefit Plan that the
Company or any Subsidiary maintains or ever has maintained or to
which any of them contributes, ever has contributed, or ever has
been required to contribute:
(A) No such Employee Benefit Plan which is an Employee
Pension Benefit Plan has been completely or partially
terminated or been the subject of a Reportable Event as to
which notices would be required to be filed with the PBGC. No
proceeding by the PBGC to terminate any such Employee Pension
Benefit Plan has been instituted or threatened.
(B) There have been no Prohibited Transactions with
respect to any such Employee Benefit Plan. No Fiduciary has
any Liability for breach of fiduciary duty or any other failure
to act or comply in connection with the administration or
investment of the assets of any such Employee Benefit Plan. No
action, suit, proceeding, hearing, or investigation with
respect to the administration or the investment of the assets
of any such Employee Benefit Plan (other than routine claims
for benefits) is pending or threatened. None of the Sellers
nor any of the directors and officers (and employees with
responsibility for employee benefit matters) of the Company or
any Subsidiary has any Knowledge of any Basis for any such
action, suit, proceeding, hearing, or investigation.
(C) Neither the Company nor any Subsidiary has
incurred, and none of the Sellers, directors, or officers (and
employees with responsibility for employee benefits matters) of
the Company or any Subsidiary has any reason to expect that the
Company or any Subsidiary will incur, any Liability to the PBGC
(other than PBGC premium payments) or otherwise under Title IV
of ERISA (including any withdrawal Liability) or under the Code
with respect to any such Employee Benefit Plan which is an
Employee Pension Benefit Plan.
(iii) Neither the Company nor any Subsidiary contributes to,
has contributed to, nor has been required to contribute to, any
Multiemployer Plan or has any Liability (including withdrawal
Liability) under any Multiemployer Plan.
(iv) Neither the Company nor any Subsidiary maintains, has
36
maintained or contributed to, nor has been required to contribute to
any Employee Welfare Benefit Plan providing medical, health, or life
insurance or other welfare-type benefits for current or future
retired or terminated employees, their spouses, or their dependents
(other than in accordance with Code Sec. 4980B).
(y) Guaranties. Neither the Company nor any Subsidiary is a
guarantor or otherwise liable for any Liability or obligation (including
indebtedness) of any other Person.
(z) Environment, Health, and Safety.
(i) To the Knowledge of the Principal Sellers, the Company
and each Subsidiary has complied in all material respects with all
Environmental, Health, and Safety Laws, and no action, suit,
proceeding, hearing, investigation, charge, complaint, claim,
demand, or notice has been filed or commenced against the Company or
any Subsidiary alleging any failure so to comply. Without limiting
the generality of the preceding sentence, the Company and each
Subsidiary, and their respective predecessors and Affiliates, has
obtained and been in compliance with all of the terms and conditions
of all permits, licenses, and other authorizations which are
required under, and has complied with all other limitations,
restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules, and timetables which are contained in, all
Environmental, Health, and Safety Laws.
(ii) Neither the Company nor any Subsidiary has any Liability
(and none of the Company, any Subsidiary, or to the Knowledge of the
Principal Sellers, their predecessors and Affiliates has handled or
disposed of any substance, arranged for the disposal of any
substance, exposed any employee or other individual to any substance
or condition, or owned or operated any property or facility in any
manner that could form the Basis for any present or future action,
suit, proceeding, hearing, investigation, charge, complaint, claim,
or demand against the Company or any Subsidiary giving rise to any
Liability) for damage to any site, location, or body of water
(surface or subsurface), for any illness of or personal injury to
any employee or other individual, or for any reason under any
Environmental, Health, and Safety Law.
(iii) To the Knowledge of the Principal Sellers, all
properties and equipment used in the business of the Company and
each Subsidiary have been free of asbestos, PCB'S, methylene
chloride, trichloroethylene, 1,2-trans dichloroethylene, dioxins,
dibenzofurans, and Extremely Hazardous Substances.
(aa) Certain Business Relationships with the Company. Except as
disclosed
37
in (S) 4(aa) of the Disclosure Schedule, none of the Sellers has been
involved in any business arrangement or relationship with the Company or
any Subsidiary within the past twelve (12) months, and none of the
Sellers owns any asset, tangible or intangible, which is used in the
business of the Company or any Subsidiary.
(bb) Company Debt; Shareholder Loans; Non-Compete Payments.
(i) The aggregate Company Debt is less than or equal to
$715,700 on the date hereof and shall be less than or equal to
$715,700 at the Closing.
(ii) The aggregate Shareholder Loans are less than or equal
to $540,000 on the date hereof, and shall be less than or equal to
$540,000 at the Closing.
(iii) The aggregate Non-Compete Payments are less than or
equal to $182,300 on the date hereof, and shall be less than or
equal to $182,300 at the Closing.
(cc) Disclosure. To the Knowledge of the Principal Sellers, the
representations and warranties contained in this (S) 4 do not contain any
untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements and information contained in
this (S) 4 not misleading.
5. Pre-Closing Covenants. The Parties agree as follows with respect to
the period between the execution of this Agreement and the Closing.
(a) General. Each of the Parties will use his or its best efforts
to take all action and to do all things necessary in order to consummate
and make effective the transactions contemplated by this Agreement
(including satisfaction, but not waiver, of the closing conditions set
forth in (S) 7 below).
(b) Notices and Consents. The Sellers will cause the Company and
each Subsidiary to give any notices to third parties, and will cause each
of them to use its best efforts to obtain any third-party consents, that
the Buyer may request in connection with the matters referred to in (S)
4(c) above. Each of the Parties will (and the Sellers will cause the
Company to) give any notices to, make any filings with, and use its best
efforts to obtain any authorizations, consents, and approvals of
governments and governmental agencies in connection with the matters
referred to in (S) 3(a)(ii), (S) 3(b)(iii), and (S) 4(c) above.
(c) Operation of Business. Except as disclosed on (S) 5(c) of the
Disclosure Schedule, the Sellers will not cause or permit the Company or
any Subsidiary to engage in any practice, take any action or enter into
any transaction outside the Ordinary Course of Business. Without
limiting the generality of the foregoing, except with the written
38
consent of the Buyer, or as disclosed on (S)5(c) of the Disclosure
Schedule, the Sellers will not cause or permit the Company or any
Subsidiary to:
(i) sell, lease, transfer or assign any of its assets,
tangible or intangible, other than the sale of its inventory in the
Ordinary Course of Business;
(ii) enter into, or terminate, modify, accelerate or cancel,
any agreement, contract, lease or license to which any of them is a
party or by which they are bound;
(iii) grant or permit any new Security Interest to be imposed
upon any of their assets, tangible or intangible;
(iv) close, or permit the closure of, any of its Stores or
other premises upon which any of its business operations are
presently conducted; commit to or acquire any new store or new store
sites;
(v) fail to maintain inventories and supplies necessary for
the proper and continuing conduct of operations before and after the
Closing in the manner presently conducted;
(vi) make any capital expenditure (or series of related
capital expenditures) other than in the Ordinary Course of Business;
(vii) make any capital investment in, any loan to, or any
acquisition of the securities or assets of, any other Person (or
series of related capital investments, loans, and acquisitions);
(viii) issue any note, bond or other debt security or create,
incur, assume, or guarantee any indebtedness for borrowed money or
capitalized lease obligation;
(ix) delay or postpone the payment of accounts payable and
other Liabilities outside the Ordinary Course of Business;
(x) cancel, compromise, waive or release any right or claim
(or series of related rights and claims);
(xi) grant any license or sublicense of any rights under or
with respect to any Intellectual Property;
(xii) make or authorize any change in the charter, bylaws, or
39
constituent documents of the Company or any Subsidiary;
(xiii) except as otherwise provided herein with respect to the
conversion of the Preferred Shares, issue, sell or otherwise dispose
of the Company's or any Subsidiary's capital stock or other
interests, or grant any options, warrants, or other rights to
purchase or obtain (including upon conversion, exchange or exercise)
the foregoing;
(xiv) declare, set aside, or pay any dividend or make any
distribution with respect to its capital stock or other interests
(whether in cash or in kind) or redeem, purchase or otherwise
acquire any of its capital stock or other interests;
(xv) make any loan to, or enter into any other transaction
or agreement with, any directors, officers or employees outside the
Ordinary Course of Business;
(xvi) grant any increase in the compensation of any
directors, officers and employees; or adopt, amend, modify or
terminate any bonus, profit-sharing, incentive, severance, or other
plan, contract, or commitment for the benefit of any directors,
officers, or employees (or take any such action with respect to any
other Employee Benefit Plan); or make any other change in employment
terms for any directors, officers, or employees;
(xvii) otherwise take any action or engage in any transaction
outside the Ordinary Course of Business; provided that, subject to
all other terms, limitations and requirements of this Section 5
(including without limitation the Sellers' obligations herein to
preserve the Company's business pursuant to (S) 5(c)), and subject
to the Working Capital Requirement, the Company may pay down Company
Debt prior to the Closing in amounts larger and at times more
frequent than in the Company's Ordinary Course of Business; or
(xviii) otherwise engage in any practice, take any action, or
enter into any transaction of the sort described in (S) 4(h) above.
(d) Preservation of Business. Except as disclosed on (S) 5(d) of
the Disclosure Schedule, the Sellers will cause the Company and each
Subsidiary to keep its business and properties substantially intact,
including its present operations, physical facilities, working
conditions, and relationships with lessors, licensors, suppliers,
customers, and employees.
(e) Full Access. The Sellers will permit, and the Sellers will
cause the Company and each Subsidiary to permit, representatives of the
Buyer to have full access to all premises, properties, personnel, books,
records (including Tax records), contracts
40
and documents of or pertaining to the Company and each Subsidiary at all
reasonable times.
(f) Notice of Developments/Updating the Disclosure Schedule. (i)
Prior to the Closing Date, the Sellers will give prompt written notice to
the Buyer of any adverse development causing a breach of any of the
representations and warranties in (S) 4 above. Prior to the Closing
Date, each Party will give prompt written notice to the other Parties of
any adverse development causing a breach of any of his or its own
representations and warranties in (S) 3 above; and (ii) from and after
the execution of this Agreement, and prior to the Closing Date, the
Sellers shall update and revise the Disclosure Schedule to refine the
qualifications and disclosures set forth thereon, and as may be requested
by the Buyer.
(g) Waiver of Refusal Rights. Each Seller hereby waives any right of
first refusal, co-sale right or other right that it may have to acquire
the Company Shares of any other Seller.
(h) Exclusivity; Encumbrance or Transfer of Shares. Prior to the
earlier of the termination of this Agreement in accordance with (S) 9
below or the Closing Date, the Sellers will not (and the Sellers will not
cause or permit the Company or any Subsidiary to) (i) solicit, initiate,
or encourage the submission of any proposal or offer from any Person
relating to the acquisition of any capital stock or other voting
securities, or any substantial portion of the assets of, the Company or
any Subsidiary (including any acquisition structured as a merger,
consolidation, share exchange) or otherwise; or (ii) participate in any
discussions or negotiations regarding, furnish any information with
respect to, assist or participate in, or facilitate in any other manner
any effort or attempt by any Person to do or seek any of the foregoing;
or (iii) vote their Company Shares in favor of any such acquisition,
whether structured as a merger, consolidation, share exchange or
otherwise; or (iv) offer for sale, sell, hypothecate, pledge, encumber or
transfer, or enter into any agreement or understanding involving the
offering for sale, selling, hypothecating, pledging, encumbering or
transferring, of any of the Company Shares or the stock of any of the
Subsidiaries. The Sellers will promptly notify (and will cause the
Company and each Subsidiary to promptly notify) the Buyer immediately if
any Person makes any proposal, offer, inquiry, or contact with respect to
any of the foregoing.
(i) Conversion of Preferred Shares; Cancellation of Options. The
Sellers, shall cause:
(i) the Preferred Shares to be converted and the Conversion
Shares to be issued in accordance with the requirements of (S)(S)
3(a)(v) and 4(b) above; and
(ii) together with the Company, the Options to be cancelled
prior to
41
the Closing.
6. Post-Closing Covenants. The Parties agree as follows with respect
to the period following the Closing.
(a) General. In case at any time after the Closing any further
action is necessary or desirable to carry out the purposes of this
Agreement, each of the Parties will take such further action (including
the execution and delivery of such further instruments and documents) as
any other Party may reasonably request, all at the sole cost and expense
of the requesting Party (unless the requesting Party is entitled to
indemnification therefor under (S) 8 below). The Sellers acknowledge and
agree that from and after the Closing the Buyer will be entitled to
possession of all documents, books, records (including Tax records),
agreements and financial data of any sort relating to the Company and
each Subsidiary.
(b) Litigation Support. In the event and for so long as any Party
actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand in connection
with (i) any transaction contemplated under this Agreement or (ii) any
fact, situation, circumstance, status, condition, activity, practice,
plan, occurrence, event, incident, action, failure to act, or transaction
on or prior to the Closing Date involving the Company or any Subsidiary,
each of the other Parties will cooperate with him or it and his or its
counsel in the contest or defense, make available their personnel, and
provide such testimony and access to their books and records as shall be
necessary in connection with the contest or defense, all at the sole cost
and expense of the contesting or defending Party (unless the contesting
or defending Party is entitled to indemnification therefor under (S) 8
below).
(c) Transition. The Sellers will not (and will not permit the
Company or any subsidiary to) take any action that is designed or
intended to have the effect of discouraging any lessor, sublessor, sub-
lessee, licensor, licensee, franchisee, customer, supplier, or other
business associate of the Company or any Subsidiary from maintaining the
same business relationships with the Company and each Subsidiary after
the Closing as it maintained prior to the Closing. The Sellers will refer
all customer and vendor inquiries relating to the businesses of the
Company and each Subsidiary to the Buyer from and after the Closing.
After the Closing, the Sellers shall have reasonable access to the
Company's and Subsidiaries' books and records pertaining to the periods
of their operations prior to the Closing. Such access shall be provided
upon reasonable notice to the Buyer and upon terms established by the
Buyer, including without limitation, the execution of confidentiality and
non-disclosure agreements satisfactory to the Buyer.
(d) Confidentiality. Each of the Sellers will treat and hold as
such all of the Confidential Information, refrain from using any of the
Confidential Information except in connection with this Agreement, and
deliver promptly to the Buyer or destroy, at the
42
request and option of the Buyer, all tangible embodiments (and all
copies) of the Confidential Information which are in his or her
possession. In the event that the Seller is requested or required (by
oral question or request for information or documents in any legal
proceeding, interrogatory, subpoena, civil investigative demand, or
similar process) to disclose any Confidential Information, such Seller
will notify the Buyer promptly of the request or requirement so that the
Buyer may seek an appropriate protective order or waive compliance with
the provisions of this (S) 6(d). If, in the absence of a protective order
or the receipt of a waiver hereunder, such Seller is, on the advice of
counsel, compelled to disclose any Confidential Information to any
tribunal, such Seller may disclose the Confidential Information to the
tribunal; provided, however, that the disclosing Seller shall use his or
her best efforts to obtain, at the request of the Buyer, an order or
other assurance that confidential treatment will be accorded to such
portion of the Confidential Information required to be disclosed as the
Buyer shall designate. The foregoing provisions shall not apply to any
Confidential Information which is generally available to the public
immediately prior to the time of disclosure.
(e) Covenant Not to Compete. Each of the Principal Sellers hereby
agrees that he it will not "directly or indirectly compete" with the
Buyer for a period of two (2) years from and after the Closing Date. For
purposes of this Agreement, the phrase "directly or indirectly compete"
shall include: (i) owning, managing, operating, or controlling, or
participating in the ownership, management, operation, or control of, or
being connected with or having any interest in, as a stockholder,
director, officer, employee, agent, consultant, assistant, advisor, sole
proprietor, partner or otherwise, any (A) business, (B) operation, or (C)
single or multiple retail stores, any of the foregoing which singularly
or in the aggregate derive fifteen percent (15%) or more of its sales or
revenues from any retail baked-goods or mall-based, snack foods business
(collectively, a "Competing Business"); and (ii) soliciting or attempting
to solicit the services of any employee of Buyer or any affiliate of
Buyer. Provided however, this paragraph 6(e) shall not apply to any
-------- -------
Principal Seller operating a Competing Business as a franchisee or
licensee of the Buyer.
If the final judgment of a court of competent jurisdiction declares
that any term or provision of this (S) 6(e) is invalid or unenforceable,
the Parties agree that the court making the determination of invalidity
or unenforceability shall have the power to reduce the scope, duration,
or area of the term or provision, to delete specific words or phrases, or
to replace any invalid or unenforceable term or provision with a term or
provision that is valid and enforceable and that comes closest to
expressing the intention of the invalid or unenforceable term or
provision, and this Agreement shall be enforceable as so modified after
the expiration of the time within which the judgment may be appealed.
(f) Post-Closing Audit and Preparation of Consolidated Financial
Statements. The Parties acknowledge that after the Closing, the Buyer
and the Company
43
intend to select, engage and pay an independent accounting firm (the
"Auditors") to conduct an audit (the "Audit") of the books, records and
operations and to prepare (i) audited consolidated balance sheets and
statements of operations, stockholders' equity and cash flows of the
Company as of and for the fiscal year ending December 31, 1997, and (ii)
unaudited consolidated balance sheets and statements of the Company's
operations for the interim period commencing on January 1, 1998, and
ending on a date specified by the Buyer (collectively, the "Consolidated
Financial Statements"). The Principal Seller Xxxx X. Xxxxx agrees to
fully cooperate with and assist the Auditors, the Buyer and the Company
in connection with the Audit and the preparation of Consolidated
Financial Statements, including (i) promptly reviewing, analyzing, and
commenting upon information prepared for, compiled by or furnished to the
Auditors by or on behalf of the Company, (ii) furnishing information
requested by the Auditors, (iii) reviewing and approving Consolidated
Financial Statements (and notes thereto) prepared by the Auditors, and
(iv) executing and delivering to the Auditors a so-called
"Representation" or "Management Letter" (the "Management Letter")
containing statements and representations concerning the Consolidated
Financial Statements and the books, records, assets, liabilities and
operations of the Company prior to the Closing Date. The Management
Letter shall be substantially in the same form as those management
letters, dated February 11, 1997 and February 25, 1998, executed
respectively by the Company and Pretzelmaker, Inc., and Pretzelmaker,
Inc., and delivered to BDO Xxxxxxx, LLP in connection with the Financial
Statements referred to in (S)(S) 4(g)(i) and (iii) above (copies of which
are included as a part of Exhibit E), supplemented in accordance with the
American Institute of Certified Public Accountants' then current
standards and requirements applicable to such Management Letters.
(g) Office Lease; Location of Company Records. Until the later of
January 4, 1999 or the payment in full of the Notes, the Buyer shall (i)
cause the offices of the Company to remain in its current location
(subject to landlord approval), and (ii) to maintain the books and
records of the Company at the current offices of the Company.
7. Conditions to Obligation to Close.
(a) Conditions to Obligation of the Buyer. The obligation of the
Buyer to consummate the transactions to be performed by it in connection
with the Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in (S) 3(a)
and (S) 4 above shall be true and correct in all material respects
at and as of the Closing Date;
(ii) each of the Sellers shall have performed and complied
with all of his or her covenants hereunder in all material respects
through the Closing;
44
(iii) the Company shall have procured all of the third party
consents specified in (S) 5(b) above including, without limitation,
any required consent of the Company's landlords and sublandlords
with respect to each of the Store Leases;
(iv) no action, suit, or proceeding shall be pending or
threatened before any court or quasi-judicial or administrative
agency of any federal, state, local, or foreign jurisdiction or
before any arbitrator wherein an unfavorable injunction, judgment,
order, decree, ruling, or charge would:
(A) prevent consummation of any of the transactions contem
plated by this Agreement;
(B) cause any of the transactions contemplated by this
Agreement to be rescinded following consummation;
(C) affect adversely the right of the Buyer to own the
Company Shares and to control the Company and each Subsidiary;
or
(D) affect adversely the right of the Company and each
Subsidiary to own its assets and to operate its businesses (and
no such injunction, judgment, order, decree, ruling, or charge
shall be in effect);
(v) each of the Sellers shall have delivered to the Buyer a
certificate to the effect that each of the conditions specified
above in (S) 7(a)(i)-(iv) is satisfied in all respects;
(vi) the Parties and the Company shall have received all
other authorizations, consents, and approvals of governments and
governmental agencies referred to in (S) 3(a)(ii), (S) 3(b)(ii), and
(S) 4(c) above;
(vii) the Buyer shall have received from counsel to the
Sellers an opinion substantially in the form set forth in Exhibit F
attached hereto, addressed to the Buyer, and dated as of the Closing
Date;
(viii) at least five (5) business days prior to the Closing,
the Buyer shall have received the resignations, effective as of the
Closing, of each of the Company's and the Subsidiaries' respective
directors and the officers set forth on (S)(S) 4(a) and (b) of the
Disclosure Schedule;
(ix) the Buyer shall have obtained on terms and conditions
satisfactory to it all of the financing it needs in order to
consummate the transactions contemplated hereby;
45
(x) the Buyer's due diligence investigation of the Sellers,
the Company and each Subsidiary shall have been completed to the
Buyer's satisfaction, and the results of such due diligence
investigation shall be acceptable to the Buyer in its sole
discretion;
(xi) the Parties and the Company's creditors shall have
agreed with regard to the payment or assumption of the Company Debt
or any of its components, and the release of encumbrances covering
the assets and/or capital stock of the Company and/or the
Subsidiaries;
(xii) all actions to be taken by the Sellers in connection
with consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents required to
effect the transactions contemplated hereby will be reasonably
satisfactory in form and substance to the Buyer;
(xiii) [intentionally blank];
(xiv) the Buyer shall have determined in its sole discretion
that there is no unacceptable material conflict between the
respective development areas of the Company, the Subsidiaries and
the Buyer;
(xv) all voting trusts, proxies and other agreements or
understandings with respect to the voting of the capital stock of
the Company shall have been terminated before the Closing;
(xvi) the conversion of the Preferred Shares to Common Shares,
as described in (S)(S) 3(a)(v) and 4(b) above, shall have occurred,
and before the Closing there shall be no issued or outstanding
Preferred Shares;
(xvii) the Options shall have been cancelled, and all
obligations of the Company thereunder shall have been forever
terminated.
The Buyer may waive any condition specified in this (S) 7(a) if it
executes a writing so stating at or prior to the Closing.
(b) Conditions to Obligation of the Sellers. The obligation of the
Sellers to consummate the transactions to be performed by them in
connection with the Closing is subject to satisfaction of the following
conditions:
(i) the representations and warranties set forth in (S) 3(b)
above shall be true and correct in all material respects at and as
of the Closing Date;
46
(ii) the Buyer shall have performed and complied with all of
its covenants hereunder in all material respects through the
Closing;
(iii) no action, suit, or proceeding shall be pending or
threatened before any court or quasi-judicial or administrative
agency of any federal, state, local, or foreign jurisdiction or
before any arbitrator wherein an unfavorable injunction, judgment,
order, decree, ruling, or charge would (A) prevent consummation of
any of the transactions contemplated by this Agreement or (B) cause
any of the transactions contemplated by this Agreement to be
rescinded following consummation (and no such injunction, judgment,
order, decree, ruling, or charge shall be in effect);
(iv) the Buyer shall have delivered to the Sellers a
certificate to the effect that each of the conditions specified
above in (S) 7(b)(i)-(iii) is satisfied in all respects;
(v) the Parties and the Company shall have received all other
authorizations, consents, and approvals of governments and
governmental agencies referred to in (S) 3(a)(ii), 3(b)(iii), and
(S) 4(c) above; and
(vi) all actions to be taken by the Buyer in connection with
consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents required to
effect the transactions contemplated hereby will be reasonably
satisfactory in form and substance to the Sellers.
The Sellers, through the Agent Sellers, may waive any condition specified
in this (S) 7(b) if they execute a writing so stating at or prior to the
Closing.
8. Remedies for Breaches of This Agreement.
(a) Survival of Representations and Warranties. All of the
representations and warranties of the Parties contained in this Agreement
shall survive the Closing hereunder (even if the damaged Party knew or
had reason to know of any misrepresentation or breach of warranty at the
time of Closing) and continue in full force and effect for a period of
two (2) years thereafter, except for representations regarding the
Company's Tax Liabilities, which representations will expire and be
terminated on the date of expiration of the statute of limitations for
collection of such Tax Liabilities.
(b) Indemnification.
(i) Principal Sellers' Indemnification of Buyer. The Principal
47
Sellers, jointly and severally, shall indemnify, save and hold
harmless each of the Buyer, its Affiliates and each of its officers,
directors, employees, agents, legal representatives, advisors,
consultants, successors and assigns, up to a maximum of $7,800,000
in the aggregate, from any Adverse Consequences suffered or incurred
by any of them to the extent arising from:
(A) any breach of any of the Sellers' or the Company's
(and any Subsidiary's) representations, warranties and
covenants contained in this Agreement, in the Disclosure
Schedule, or in any certificate, instrument or other document
delivered pursuant hereto or thereto;
(B) any breach of any covenant of the Sellers contained in
this Agreement requiring performance after the Closing Date; or
(C) any Liability of the Company or any Subsidiary for the
unpaid Taxes of any Person (other than the Company) under
Treas. Reg. (S) 1.1502-6 (or any similar provision of state,
local, or foreign law), as a transferee or successor, by
contract, or otherwise;
provided, that the aggregate indemnification obligation, if any, of
the Principal Seller Xxxxx X. Xxxxx under this Section 8(b)(i),
which shall be the only financial obligation of Xxxxx X. Xxxxx under
this Agreement, shall not exceed $1,500,000. The Principal Sellers
expressly acknowledge and agree that the indemnification obligations
of the other Principal Sellers, Xxxx X. Xxxxx and Xxxxxx X. Xxx,
Xx., under this Agreement or otherwise, shall not be affected or
limited in any manner by the limitation set forth in the preceding
sentence concerning the indemnification obligations of the Principal
Seller, Xxxxx X. Xxxxx.
(ii) Buyer's Indemnification of Sellers. The Buyer shall
indemnify, save and hold harmless each of the Sellers, their
Affiliates and each of their respective officers, directors,
employees, partners, members, agents, legal representatives,
advisors, consultants, successors and assigns, from any Adverse
Consequences suffered or incurred by any of them to the extent
arising from:
(A) any breach of any of the Buyer's representations,
warranties and covenants contained in this Agreement, or in any
certificate, instrument or other document delivered by the
Buyer pursuant hereto or thereto;
(B) any breach of any covenant of the Buyer contained in
this Agreement requiring performance after the Closing Date.
48
(iii) Buyers Indemnification of Sellers and Company. The
Buyer shall indemnify, save and hold harmless each of the Sellers
and the Company, and the Affiliates of each of the Sellers and the
Company, and each of their respective officers, directors, partners,
members, employees, agents, legal representatives, advisors,
consultants, successors and assigns, from any Adverse Consequences
suffered or incurred by any of them to the extent arising from any
Third Party Claim brought against the Sellers, the Company (or any
of the Sellers' or the Company's Affiliates or their respective
officers, directors, partners, members, employees, agents, legal
representatives, advisors, consultants, successors or assigns) to
restrict, restrain, prohibit or enjoin the execution of this
Agreement, the execution or delivery of documents or instruments
executed or delivered in connection herewith or the consummation of
the transactions that are the subject of this Agreement or such
related documents or instruments, or to recover damages arising from
Third Party Claims that the execution of this Agreement, the
execution or delivery of documents or instruments executed or
delivered in connection herewith or the consummation of the
transactions that are the subject of this Agreement or such related
documents or instruments, (A) will or has violated any constitution,
statute, regulation, rule, injunction, judgment, order, decree,
ruling, charge, or other restriction of any government, governmental
agency or court to which Buyer or any Affiliate of Buyer is subject
or any provision of the charter or bylaws of Buyer or any Affiliate
of Buyer, or (B) will or has conflicted with, resulted in a breach
of, constituted a default under, resulted in the acceleration of,
created in any party the right to accelerate, terminate, modify, or
cancel, or required any notice be given by Buyer or by any Affiliate
of Buyer (or by their respective officers, directors, partners,
members, employees, agents, legal representatives, advisors,
consultants, successors or assigns) for which notice was not given,
under, any agreement, contract, lease, license, instrument or other
arrangement to which Buyer or any Affiliate of Buyer is a party or
by which Buyer or any Affiliate of Buyer is bound (other than this
Agreement) or to which any of the assets of Buyer or of any
Affiliate of Buyer is subject, or (C) will or does require the
approval or consent of any third party, including but not limited
to, any Affiliate of Buyer, or any officer, director, shareholder,
partner, member, employee, agent, legal representative, advisor or
consultant of Buyer or of any Affiliate of Buyer, and such approval
or consent was not obtained.
(iv) Reimbursement of Costs. In the event Buyer shall fail to
consummate the transactions that are the subject of this Agreement
on the Closing Date due to the parties being restricted, restrained,
prohibited or enjoined from executing this Agreement, executing or
delivering documents or instruments executed or delivered in
connection herewith or consummating the transactions that are the
subject of this Agreement or such related documents or instruments
due to a Third Party Claim for which Buyer is required to indemnify,
49
save and hold harmless the Sellers and the Company in accordance
with Section 8(b)(i) above, in addition to any Adverse Consequences
that may be incurred by the Sellers, the Company, or both as a
result thereof for which the Buyer shall be liable, Buyer shall
reimburse and pay to the Company and the Sellers all costs and
expenses incurred by the Company, the Sellers or both (or any of
their Affiliates or respective officers, directors, shareholders,
partners, members, employees, agents, legal representatives,
advisors, consultants, successors or assigns) as a result of or
associated with this Agreement, the negotiations hereunder or the
preparation for the consummation of the transactions hereunder,
including but not limited to, all travel, lodging and meal costs,
copying costs, telephone costs, postage and other delivery charges,
fees and expenses of non-employee and non-Seller attorneys,
accountants, financial advisers, brokers, engineers and other
professionals, advisors and consultants of the Company or the
Sellers, and all other out of pocket expenses of any kind or nature.
The Buyer shall pay such costs and expenses to the Company or the
Sellers, as the case may be, within fifteen (15) days following
presentation of an invoice and supporting documentation therefor.
(c) Matters Involving Third Parties.
(i) If any third party shall notify any Party (the "Indemnified
Party") with respect to any matter (a "Third Party Claim") which may
give rise to a claim for indemnification against any other Party
(the "Indemnifying Party") under this (S) 8, then the Indemnified
Party shall promptly notify the Indemnifying Party thereof in
writing; provided, however, that no delay on the part of the
Indemnified Party in notifying any Indemnifying Party shall relieve
the Indemnifying Party from any obligation hereunder unless (and
then solely to the extent) the Indemnifying Party thereby is
prejudiced.
(ii) Any Indemnifying Party will have the right to defend the
Indemnified Party against the Third Party Claim with counsel of its
choice reasonably satisfactory to the Indemnified Party so long as:
(A) the Indemnifying Party notifies the Indemnified Party
in writing within 15 days after the Indemnified Party has given
notice of the Third Party Claim that the Indemnifying Party
will indemnify the Indemnified Party from and against the
entirety of any Adverse Consequences the Indemnified Party may
suffer resulting from, arising out of, relating to, in the
nature of, or caused by the Third Party Claim;
(B) the Indemnifying Party provides the Indemnified Party
with evidence acceptable to the Indemnified Party that the
Indemnifying Party will have the financial resources to defend
against the Third Party
50
Claim;
(C) the Third Party Claim involves only money damages and
does not seek an injunction or other equitable relief;
(D) settlement of, or an adverse judgment with respect to,
the Third Party Claim is not, in the good faith judgment of the
Indemnified Party, likely to establish a precedential custom or
practice materially adverse to the continuing business
interests of the Indemnified Party; and
(E) the Indemnifying Party conducts the defense of the
Third Party Claim actively and diligently.
(iii) So long as the Indemnifying Party is conducting the
defense of the Third Party Claim in accordance with (S) 8(c)(ii)
above,
(A) the Indemnified Party may retain separate co-counsel
at its sole cost and expense and participate in the defense of
the Third Party Claim;
(B) the Indemnified Party will not consent to the entry of
any judgment or enter into any settlement with respect to the
Third Party Claim without the prior written consent of the
Indemnifying Party (not to be withheld unreasonably); and
(C) the Indemnifying Party will not consent to the entry
of any judgment or enter into any settlement with respect to
the Third Party Claim without the prior written consent of the
Indemnified Party (not to be withheld unreasonably).
(iv) In the event any of the conditions in (S) 8(c)(ii) above
is or becomes unsatisfied, however,
(A) the Indemnified Party may defend against, and consent
to the entry of any judgment or enter into any settlement with
respect to, the Third Party Claim in any manner it reasonably
may deem appropriate (and the Indemnified Party need not
consult with, or obtain any consent from, any Indemnifying
Party in connection therewith);
(B) the Indemnifying Parties will reimburse the
Indemnified Party promptly and periodically for the costs of
defending against the Third Party Claim (including reasonable
attorneys' fees and expenses); and
51
(C) the Indemnifying Parties will remain responsible for
any Adverse Consequences the Indemnified Party may suffer
resulting from, arising out of, relating to, in the nature of,
or caused by the Third Party Claim to the fullest extent
provided in this (S) 8.
(d) Determination of Adverse Consequences. The Parties shall take
into account the time cost of money in determining Adverse Consequences
for purposes of this (S) 8.
(e) Certain Set-Off Rights. At the Buyer's election, payments, if
any, to be made by any of the Sellers under this (S) 8 shall be made by
reducing, on a dollar-for-dollar basis, any unpaid balance of any of the
Deferred Payments, by the amount of all or any portion of any Adverse
Consequences the Buyer may suffer or incur. All such indemnification
payments under this (S) 8 shall be deemed adjustments to the Purchase
Price. Notwithstanding the foregoing, before any set-off rights may be
exercised, the Buyer shall give written notice to the Agent Sellers of
any claim for indemnification hereunder, specifying in reasonable detail
the grounds for indemnification and the amount of the set-off, and the
Agent Sellers may object to any such set-off by responding in writing
within fifteen (15) days after receipt of the Buyer's notice. If the
Agent Sellers fail to object within the fifteen (15)-day period
specified, the Agent Sellers shall waive any right to object to the
Buyer's right of indemnification hereunder or the amount of the set-off.
If the Agent Sellers dispute either the Buyer's right to indemnification,
or the amount of the set-off, or both, then Escrow Agent shall retain the
amount of the set-off pending resolution of the dispute, and the Parties
shall negotiate in good faith to resolve all issues in dispute. If, after
a period of fifteen (15) days following the date on which the Agent
Sellers give Buyer notice of its objection to Sellers indemnification
hereunder, any such matter remains in dispute, then the Parties shall
employ the dispute resolution procedures set forth in (S) 9 of this
Agreement. Each Party agrees to make available to the other Party and the
attorneys and accountants of the other Party, within a reasonable time
after a request is made, all books and records which are reasonably
required by the requesting Party to evaluate a claim for indemnification
or objection hereunder.
(f) Other Indemnification Provisions. The foregoing indemnification,
set off and recoupment provisions are in addition to, and not in
derogation of, any statutory, equitable, or common law remedy any Buyer
may have for breach of representation, warranty or covenant against any
of the Sellers.
(g) Sellers' Release of Claims. Effective as of the Closing Date,
each of the Sellers (for themselves and their respective officers,
directors, members, shareholders, partners, beneficiaries, employees,
agents, representatives, heirs, successors and assigns) hereby (i)
releases, acquits and forever discharges the Company and each of the
52
Subsidiaries from any and all liabilities, obligations, indebtedness,
claims, demands, actions or causes of action arising from or relating to
any event, occurrence, act, omission or condition occurring or existing
on or prior to the Closing Date, including, without limitation, any claim
for indemnity or contribution from the Company or any of the Subsidiaries
in connection with the obligations or liabilities of the Sellers
hereunder, except for (A) any contractual obligations of the Buyer to the
Sellers set forth in this Agreement, and (B) interests in benefit plans
to which any of the Sellers are entitled; (ii) waives all breaches,
defaults or violations of each agreement, if any, among or between
shareholders applicable to the Company Shares and agrees that any and all
such agreements are terminated as of the Closing Date, and (iii) waives
any and all preemptive or other rights to acquire any shares of stock the
Company or any of the Subsidiaries and releases any and all claims
arising in connection with any prior default, violation or failure to
comply with or satisfy any such preemptive or other rights. In addition,
the Sellers shall obtain and deliver at Closing, in a form acceptable to
the Buyer, releases from all Non-Compete Recipients, Consultants and
holders of Shareholder Loans, who are not Sellers.
(h) Termination.
(i) Termination of Agreement. The Parties may terminate this
Agreement as provided below:
(A) The Buyer and all of the Sellers acting together may
terminate this Agreement by mutual written consent at any time
prior to the Closing;
(B) The Buyer may terminate this Agreement for any or no
reason, including without limitation, based on the results of
its due diligence investigation, by giving written notice to
the Sellers at any time prior to the Closing;
(C) [Intentionally Omitted]; and
(D) Time being of the essence, in the event of either
party's failure to tender full performance of their or its
closing duties set forth hereunder, for any reason whatsoever,
before 5:00 p.m. MST on November 19, 1998 (unless mutually
agreed to the contrary by the Buyers and the Agent Sellers),
this Agreement shall terminate. Whether this Agreement closes
or terminates pursuant to this section, such closing or
termination, as the case may be, shall not prejudice either
party's right to pursue any claim for damages, if any,
resulting from any breach of condition or covenant (whether
pre- or post-closing).
53
(ii) Action By Fewer Than All Sellers. Any action permitted to
be taken under this (S) 8(h) by the Sellers holding a majority of
the Company Shares shall, if so taken, be binding upon and
constitute the act of all of the Sellers.
(iii) Effect of Termination. If any Party terminates this
Agreement pursuant to (S) 8(h)(i) above, all rights and obligations
of the Parties under this Agreement, and any other agreement or
instrument executed in connection herewith shall terminate without
any Liability of any Party to any other Party (except for any
Liability of any Party then in breach).
9. Miscellaneous.
(a) Press Releases and Public Announcements. No Party shall issue
any press release or make any public announcement relating to the subject
matter of this Agreement prior to the Closing without the prior written
approval of the Buyer and the Seller; provided, however, that any Party
may make any public disclosure it believes in good faith is required by
applicable law (in which case the disclosing Party will use its best
efforts to advise the other Parties prior to making the disclosure).
(b) No Third-Party Beneficiaries. This Agreement shall not confer
any rights or remedies upon any Person other than the Parties and their
respective successors and permitted assigns.
(c) Entire Agreement. This Agreement (including the documents
referred to herein) constitutes the entire agreement among the Parties
and supersedes any prior understandings, agreements, or representations
by or among the Parties, written or oral, to the extent they related in
any way to the subject matter hereof.
(d) Succession and Assignment. This Agreement shall be binding upon
and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this
Agreement or any of his, her, or its rights, interests, or obligations
hereunder without the prior written approval of the Buyer and the Seller;
provided, however, that the Buyer may (i) assign any or all of its rights
and interests hereunder to one or more of its Affiliates and (ii)
designate one or more of its Affiliates to perform its obligations
hereunder (in any or all of which cases the Buyer nonetheless shall
remain responsible for the performance of all of its obligations
hereunder).
(e) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(f) Headings. The section headings contained in this Agreement are
inserted
54
for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(g) Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request,
demand, claim, or other communication hereunder shall be deemed duly
given if (and then two business days after) it is sent by registered or
certified mail, return receipt requested, postage prepaid, and addressed
to the intended recipient as set forth below:
If to any Seller,
c/o Agent Sellers: Xxxx X. Xxxxx
c/o 0000 Xxxxx Xxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Xxx Xxx
c/o Juices Wild
0000 Xxxxx Xxxxxxxx Xxxx
Xxx Xxxxx, XX 00000
Xxxxx X. Xxxxx
c/o M&R Enterprises
0000 Xxxxxx Xxxx., #000
Xxxxxx, XX 00000-0000
Copy to: Xxxxx XxXxxxxxxx, P.C.
0000 Xxxxx Xxxxxx Xxxxxx Xxxxx 000
Xxxxxx, XX 00000
If to the Buyer: Xxx. Xxxxxx' Original Cookies, Inc.
ATTN: Legal Department
0000 X. Xxxxxxxxxx Xxxxxxx, Xxxxx 000
Xxxx Xxxx Xxxx, XX 00000
Copy to: Jones, Waldo, Xxxxxxxx & XxXxxxxxx
ATTN: Xxxx X. Xxxxxxx
0000 Xxxxx Xxxxx Xxxxx
000 Xx. Xxxx Xxxxxx
Xxxx Xxxx Xxxx, XX 00000
Any Party may send any notice, request, demand, claim, or other
communication hereunder to the intended recipient at the address set forth
above using any other means (including personal delivery, expedited courier,
messenger service, telecopy, telex, ordinary mail, or electronic mail), but
no such notice, request, demand, claim, or other communication shall
55
be deemed to have been duly given unless and until it actually is received
by the intended recipient. Any Party may change the address to which
notices, requests, demands, claims, and other communications hereunder are
to be delivered by giving the other Parties notice in the manner herein set
forth.
(h) Governing Law. This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of Utah without giving effect
to any choice or conflict of law provision or rule (whether of the State of
Utah or any other jurisdiction) that would cause the application of the laws
of any jurisdiction other than the State of Utah.
(i) Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by
the Buyer and the Seller. No waiver by any Party of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent
such occurrence.
(j) Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or provision
in any other situation or in any other jurisdiction.
(k) Expenses. Each of the Parties will bear his or its own costs and
expenses (including legal fees and expenses) incurred in connection with
this Agreement and the transactions contemplated hereby, provided that the
Company shall pay the costs and expenses of the Sellers in connection with
this Agreement up to the Closing. Nothing in this section shall be
construed to affect the Working Capital Requirement.
(l) Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be
construed as if drafted jointly by the Parties and no presumption or burden
of proof shall arise favoring or disfavoring any Party by virtue of the
authorship of any of the provisions of this Agreement. Any reference to any
federal, state, local, or foreign statute or law shall be deemed also to
refer to all rules and regulations promulgated thereunder, unless the
context requires otherwise. The word "including" shall mean including
without limitation. The Parties intend that each representation, warranty,
and covenant contained herein shall have independent significance. If any
Party has breached any representation, warranty, or covenant contained
herein in any respect, the fact that there exists another representation,
warranty, or covenant relating to the same subject matter (regardless of the
relative levels of specificity) which the Party has not breached shall not
detract from or mitigate the fact that the Party is in breach of the first
representation, warranty, or covenant.
56
(m) Incorporation of Exhibits, Annexes, and Schedules. The Exhibits,
Annexes, and Schedules identified in this Agreement are incorporated herein
by reference and made a part hereof.
(n) Dispute Resolution. Any dispute arising out of or relating to this
Agreement, including, but not limited to, claims for indemnification
pursuant to Section 8 shall be resolved in accordance with the procedures
specified in this Section 9(n), which shall be the sole and exclusive
procedures for the resolution of any such disputes; provided, however, that
-------- -------
this Section 9(n) shall not apply to or govern the Parties' resolution of
any Objections to the Closing Balance Sheets (for which the provisions of
(S) 2(h) constitute the sole and exclusive dispute resolution procedures
therefor).
(i) The Parties shall attempt in good faith to resolve any dispute
arising out of or relating to this Agreement promptly by negotiation
between the Sellers and their appointed representatives and executives of
Buyer who, if possible, are at a higher level of management than the
persons with direct responsibility for administration of this Agreement.
(A) Any Party may give the other Party written notice of any
dispute not resolved in the normal course of business. Within
fifteen (15) days after delivery of the notice, the receiving Party
shall submit to the other a written response. The notice and
response shall include (1) a statement of each Party's position and
a summary of arguments supporting that position, and (2) the name
and title of the executives or representatives who will represent
that Party and of any other person who will accompany the executives
or representatives. Within thirty (30) days after delivery of the
disputing Party's notice, the executives or representatives of the
Parties shall meet at a mutually acceptable time and place, and
thereafter as often as they reasonably deem necessary, to attempt to
resolve the dispute. All reasonable requests for information made by
one Party to the other will be honored.
(B) If the matter has not been resolved by these persons within
sixty (60) days of the disputing Party's notice, or if the parties
fail to meet within thirty (30) days of the disputing Party's
notice, either Party may initiate mediation as provided hereinafter.
(C) All negotiations pursuant to this clause are confidential
and shall be treated as compromise and settlement negotiations for
purposes of the Federal Rules of Evidence and State rules of
evidence.
(ii) If the dispute has not been resolved by negotiation as provided
herein, the Parties shall endeavor to settle the dispute by nonbinding
mediation and to bear equally the costs of the mediation. The Parties
will jointly appoint a mutually acceptable
57
mediator promptly after a request for mediation is made by any Party. The
Parties agree to participate in the mediation and all related
negotiations in good faith.
(iii) If the dispute has not been resolved by non-binding means as
provided herein within ninety (90) days of the initiation of such
procedure, either Party may initiate litigation (upon thirty (30) days'
written notice to the other Party); provided, however, that if one Party
has requested the other to participate in a non-binding procedure and the
other has failed to participate, the requesting Party may initiate
litigation before expiration of the above period.
(iv) The procedures specified in this Section 9(n) shall be the
sole and exclusive procedures for the resolution of disputes between the
Parties arising out of or relating to this Agreement; provided, however,
that a Party, without prejudice to the above procedures, may file a
complaint (for statute of limitations or venue reasons) or to seek
temporary or preliminary injunctive or other provisional judicial relief,
if in its sole judgment such action is necessary to avoid irreparable
damage or to preserve the status quo. Despite such action the Parties
will continue to participate in good faith in the procedures specified in
this Section.
(v) All applicable statues of limitation and defenses based upon
the passage of time shall be tolled while the procedures specified in
this Section are pending. The Parties will take such action, if any,
required to effectuate such tolling.
(vi) Each Party is required to continue to perform its obligations
under this Agreement pending final resolution of any dispute arising out
of or relating to this Agreement.
58
(o) Submission to Jurisdiction. Each of the Parties submits to the
jurisdiction of any state or federal court sitting in Salt Lake City, Utah,
in any action or proceeding arising out of or relating to this Agreement and
agrees that all claims in respect of the action or proceeding may be heard
and determined in any such court. Each Party also agrees not to bring any
action or proceeding arising out of or relating to this Agreement in any
other court. Each of the Parties waives any defense of inconvenient forum
to the maintenance of any action or proceeding so brought and waives any
bond, surety, or other security that might be required of any other Party
with respect thereto. Each Party agrees that a final judgment in any action
or proceeding so brought shall be conclusive and may be enforced by suit on
the judgment or in any other manner provided by law or at equity.
(p) Attorneys' Fees. Should any litigation be commenced with respect to
any matters governed by this Agreement, the Party prevailing shall be
entitled, in addition to such other relief as may be granted, to a
reasonable sum for such Party's attorneys' fees and expenses determined by
the court in such litigation.
[Remainder of page intentionally left blank]
59
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of
the date first above written.
BUYER: XXX. XXXXXX' ORIGINAL COOKIES, INC.
By:
---------------------------------
Its:
--------------------------------
COMPANY: PRETZELMAKER HOLDINGS, INC.
By:
---------------------------------
Its:
--------------------------------
SELLERS:
------------------------------
Xxxx Xxxxx
------------------------------ --------------------------------
Xxxx X. Xxxxx, XXX Xxxxx Xxxxx, XXX
S-1
-------------------------------- ------------------------------------
Xxxxxx X. Xxx, Xx. Xxxxxxx X. Xxxxx
-------------------------------- ------------------------------------
Xxxxx X. Xxxxx Xx. Xxxxxxx X. Xxxxxxx
-------------------------------- ------------------------------------
Xxxx Xxxxxx Xxxxxx Xxxxxx
-------------------------------- ------------------------------------
Xxxx Xxxxxxx Xxxxxxx Xxxxxxx
-------------------------------- ------------------------------------
Xxxxxxx Xxxxx Xxxxx Xxxxx
-------------------------------- ------------------------------------
Xxxx Xxxxxx Xxxxx Xxxxx
-------------------------------- ------------------------------------
Xxxxxxx Xxxxxx Xxxx Xxxx
--------------------------------
Xxxx Xxxxxxxxxx
S-2
JJJJM, LLC NORTHWESTERN TRUST,
FBO C. XXXXX XXXXXX, XXX
By: By:
------------------------ ---------------------------
Its: Its:
----------------------- --------------------------
COLORADO PRETZEL PARTNERSHIP XXXXXXX XXXXXX, IN TRUST FOR
XXXXXXX XXXXXX
By: By:
------------------------ ---------------------------
Its: Its:
----------------------- --------------------------
XXXXXXX XXXXXX, IN TRUST FOR
XXXXX XXXXXX
By:
------------------------
Its:
-----------------------
S-3
EXHIBIT A
Attach LTM EBITDA Adjustment
EXHIBIT B
Attach List of Sellers and Estimated Company Shares Owned
EXHIBIT C
OLD--NEEDS TO BE REVISED!!!
===========================
PURCHASE PRICE ESTIMATED ALLOCATIONS AND DEDUCTIONS
ALLOCATIONS
============================================
SHAREHOLDER NET
PROCEEDS %
--------------------------------------------
Xxxx Xxxxx (Promissory 22.7632%
Note)
--------------------------------------------
Xxxx Xxxxx (Cash)/*/ 11.5695%
--------------------------------------------
Geman IRA's 1.6629%
--------------------------------------------
Xxxxx Xxxxx 9.6440%
--------------------------------------------
Xxxxxxx Xxxxx 9.6440%
--------------------------------------------
JJJJM, LLC 7.7156%
--------------------------------------------
Xxxx & Xxxxxx Xxxxxx 1.9291%
--------------------------------------------
Colorado Pretzel Partnership 1.9291%
--------------------------------------------
XxXxx Xxxxxx XXX 1.9291%
--------------------------------------------
Xxxxxxx & Xxxxx Xxxxx/**/ 4.8000%
--------------------------------------------
Xxxx Xxxxxx, Trustee 1.9291%
--------------------------------------------
Xx. Xxxxxxx X. Xxxxxxx 0.9642%
--------------------------------------------
Xxx Xxx 17.6369%
--------------------------------------------
Xxxx & Xxxxxxx Xxxxxxx 2.8933%
--------------------------------------------
Xxxxx Xxxxx 0.4800%
--------------------------------------------
Xxxxxxx Xxxxxx/*/ 1.3694%
--------------------------------------------
Xxxx Xxxxxx 0.4562%
--------------------------------------------
------------------------
/*/ Tax on option exercise to be withheld from option employees gross proceeds
and remitted to Pretzelmaker, Inc.
/**/Sixteen Thousand Dollars ($16,000.00) to be withheld from Sellers Tripp and
remitted to Pretzelmaker, Inc. in settlement of past royalties and advertising
fees.
===========================================
SHAREHOLDER NET
PROCEEDS%
-------------------------------------------
Xxxx Xxxx/*/ 0.2285%
-------------------------------------------
Xxxx Xxxxxxxxxx/*/ 0.4562%
-------------------------------------------
100.000%
===========================================
EXHIBIT D
Attach Escrow Agreement
EXHIBIT E
Attach Financial Statements of the Company
EXHIBIT F
Attach Form of Sellers' Opinion
ANNEX II
Exceptions to Buyer's Representations
None.
