STOCK PURCHASE AGREEMENT
AMONG
XXX. XXXXXX' ORIGINAL COOKIES, INC.,
as Buyer,
AND
XXXX XXXXXXXXX
of
CHOCOLATE CHIP COOKIES OF TEXAS, INC.
as Seller
EFFECTIVE FOR ACCOUNTING PURPOSES AS OF
June 30, 1998
TABLE OF CONTENTS
PAGE
1. Definitions......................................................... 1
2. Purchase and Sale of Company Shares................................. 6
(a) Basic Transaction.......................................... 6
(b) Purchase Price............................................. 6
(c) Credits At Closing......................................... 7
(d) The Closing................................................ 7
(e) The Escrow................................................. 7
(f) Deliveries at the Closing.................................. 8
(g) Post Closing Adjustment.................................... 8
3. Representations and Warranties Concerning the Transaction........... 10
(a) Representations and Warranties of the Seller............... 10
(i) Authorization of Transaction...................... 10
(ii) Noncontravention.................................. 10
(iii) Brokers' Fees..................................... 10
(iv) Company Shares.................................... 10
(v) Absence of Indebtedness and Claims................ 11
(b) Representations and Warranties of the Buyer................ 11
(i) Organization of the Buyer......................... 11
(ii) Authorization of Transaction...................... 11
(iii) Non-Contravention................................. 11
(iv) Brokers' Fees..................................... 11
(v) Investment........................................ 12
4. Representations and Warranties Concerning the Company............... 12
(a) Organization, Qualification, and Corporate Power........... 12
(b) Capitalization............................................. 13
(c) Non-Contravention.......................................... 13
(d) Brokers' Fees.............................................. 13
(e) Title to Assets............................................ 13
(f) Financial Statements; Working Capital...................... 13
(g) Events Subsequent to Most Recent Fiscal Year End........... 14
(h) Undisclosed Liabilities.................................... 16
(i) Legal Compliance........................................... 17
(j) Tax Matters................................................ 17
(k) Real Property.............................................. 19
(l) Intellectual Property...................................... 20
(m) Tangible Assets............................................ 23
(n) Inventory.................................................. 23
(o) Contracts.................................................. 23
(p) Notes and Accounts Receivable.............................. 24
(q) Powers of Attorney......................................... 24
(r) Insurance.................................................. 25
(s) Litigation................................................. 25
(t) Product Warranty........................................... 26
(u) Product Liability.......................................... 26
(v) Employees.................................................. 26
(w) Employee Benefit........................................... 26
(x) Guaranties................................................. 28
(y) Environment, Health, and Safety............................ 29
(z) Certain Business Relationships with the Company............ 29
(aa) Disclosure................................................. 29
5. Pre-Closing Covenants............................................... 30
(a) General.................................................... 30
(b) Notices and Consents....................................... 30
(c) Operation of Business...................................... 30
(d) Preservation of Business................................... 32
(e) Full Access................................................ 32
(f) Notice of Developments..................................... 32
(g) Exclusivity................................................ 32
6. Post-Closing Covenants.............................................. 32
(a) General.................................................... 32
(b) Litigation Support......................................... 33
(c) Transition................................................. 33
(d) Confidentiality............................................ 33
(e) Covenant Not to Compete.................................... 34
(f) Employees.................................................. 35
(g) Franchise and License Fees................................. 36
7. Conditions to Obligation to Close................................... 36
(a) Conditions to Obligation of the Buyer...................... 36
(b) Conditions to Obligation of the Seller..................... 38
8. Remedies for Breaches of This Agreement............................. 39
(a) Survival of Representations and Warranties................. 39
(b) Indemnification Provisions for Benefit of the Buyer........ 39
(c) Indemnification Provisions for Benefit of the Seller....... 39
(d) Matters Involving Third Parties............................ 40
(e) Determination of Adverse Consequences...................... 41
(f) Certain Set-Off Rights..................................... 41
(g) Other Indemnification Provisions........................... 42
9. Termination......................................................... 42
(a) Termination of Agreement................................... 42
(b) Effect of Termination...................................... 43
10. Miscellaneous....................................................... 43
(a) Press Releases and Public Announcements.................... 43
(b) No Third-Party Beneficiaries............................... 44
(c) Entire Agreement........................................... 44
(d) Succession and Assignment.................................. 44
(e) Counterparts............................................... 44
(f) Headings................................................... 44
(g) Notices.................................................... 44
(h) Governing Law.............................................. 45
(i) Amendments and Waivers..................................... 45
(j) Severability............................................... 45
(k) Expenses................................................... 46
(l) Construction............................................... 46
(m) Incorporation of Exhibits, Annexes, and Schedules.......... 46
(n) Specific Performance....................................... 46
(o) Dispute Resolution......................................... 46
(p) Submission to Jurisdiction................................. 48
(q) Attorneys' Fees............................................ 48
(r) Joinder of Spouse.......................................... 48
EXHIBITS
A List of Related Transactions
B Escrow Agreement
C Financial Statements of the Company
D Form of Opinion of the Seller?s Counsel
ANNEXES
I Exceptions to Seller's Representations
II Exceptions to Buyer's Representations
DISCLOSURE SCHEDULE
2(c) Credits at Closing
4(a) List of Present and Proposed Retail Store Sites;
List of Directors and Officers
4(b) Company Shares
4(g)(xiii) Permitted Company Distributions
4(j)(iii) Tax Returns
4(j)(vii) Bases in Assets, Losses, Credits
4(k)(ii) Real Property Leased or Subleased
4(l)(iii) Intellectual Property
4(l)(iv) Licenses From Third Parties
4(o) Contracts
4(p) Notes and Accounts Receivable
4(r) Insurance
4(s) Litigation
4(w) Employee Benefit Plans
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT entered into effective for
accounting purposes as of June 30, 1998 (the "Effective Date"), and for all
other purposes, on the Closing Date (defined herein) by and between Xxx. Xxxxxx'
Original Cookies, Inc. a Delaware corporation (the "Buyer"), and Xxxx Xxxxxxxxx
(the "Seller"). The Buyer and the Seller are referred to collectively herein as
"Party" in the singular and "Parties" in the plural.
The Seller owns one hundred percent (100%) of the issued
outstanding capital stock of Chocolate Chip Cookies of Texas, Inc., a Texas
corporation (the "Company").
This Agreement contemplates a transaction in which the Buyer will
purchase from the Seller, and the Seller 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.
"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.
"Arbitrator" has the meaning set forth in 2(g)(ii).
"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.
"Buyer" has the meaning set forth in the preface above.
"Buyer Indemnified Parties" has the meaning set forth in
8(b) below.
"Closing" has the meaning set forth in 2(d) below.
"Closing Date" has the meaning set forth in 2(d) below.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" has the meaning set forth in the preface above.
"Company Share" means any share of the Common Stock, par
value $1.00 per share, of the Company.
"Confidential Information" means any information
concerning the businesses and affairs of the Company that is not
already generally available to the public.
"Controlled Group of Corporations" has the meaning set forth
in Code Sec. 1563.
"Deferred Payments" has the meaning set forth in 2(b)(ii)
below.
"Disclosure Schedule" has the meaning set forth in 4 below.
"Effective Date" has the meaning set forth in the preface
above.
"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 or
"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 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 2(e) below.
"Escrow Agent" has the meaning set forth in 2(e) below.
"Escrow Agreement" has the meaning set forth in 2(e) below.
"Escrowed Buyer Documents" has the meaning set forth in
2(d)(i) below.
"Escrowed Seller Documents" has the meaning set forth in
2(d)(i) below.
"Excess Loss Account" has the meaning set forth in Treas.
Reg. 1.1502-19.
"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 4(f)
below.
"Franchisee Litigation" refers to any pending or
threatened claims, liabilities or litigation asserted against the
Buyer by or on behalf of the Seller, the Company, Great American
Cookie Company or any area developer, franchisee, licensee or agent
thereof, including without limitation, all of the claims asserted,
or that could be asserted, in that certain action styled Xxxxxx and
Xxxxxx Xxxxxxxx vs. Great American Cookie Company and Xxx. Xxxxxx'
Original Cookies, Inc., et al., Case No. MER-L-3502-97, pending in
Superior Court of New Jersey, Law Division, Xxxxxx County.
"GAAP" means United States generally accepted accounting
principles as in effect from time to time.
"GACC" means any person or entity, including without
limitation, Great American Cookie Company or its parent or
affiliated entities, that has entered into any franchise or related
agreements with Seller.
"Indemnified Party" has the meaning set forth in 8(d) below.
"Indemnifying Party" has the meaning set forth in 8(d)
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, 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.
"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 4(f) below.
"Most Recent Fiscal Month End" has the meaning set forth in
4(f) below.
"Most Recent Fiscal Year End" has the meaning set forth in
4(f) below.
"Multiemployer Plan" has the meaning set forth in ERISA Sec.
3(37).
"Notice of Disagreement" has the meaning set forth in
2(g)(ii)
"Ordinary Course of Business" means the ordinary course of
business consistent with past custom and practice (including
with respect to quantity and frequency).
"Party" or "Parties" 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).
"Pre-Closing" has the meaning set forth in 2(d)(i) below.
"Pre-Closing Date" has the meaning set forth in 2(d)(i)
below.
"Pre-Closing Escrow" has the meaning set forth in 2(d)(i)
below.
"Prohibited Transaction" has the meaning set forth in ERISA
Sec. 406 and Code Sec. 4975.
"Purchase Price" has the meaning set forth in 2(b) below.
"Related Transactions" means the transactions described on
Exhibit A to be entered into among the Buyer and any other
Persons and closed concurrently or in conjunction with the
transactions that are the subject of this Agreement.
"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" has the meaning set forth in the preface above.
"Store" or "Stores" has the meaning set forth in 4(a) below.
"Store Leases" has the meaning set forth in 4(k)(ii)(a)
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, or (B) limited liability company of which a
specified Person (or a Subsidiary thereof) is a member or
managing member, or (C) any other entity in which the
Company has any ownership interest.
"Tax" means any federal, state, local, or foreign income,
gross receipts, license, payroll, employment, excise,
severance, stamp, occupation, premium, windfall profits,
environmental (including taxes under Code Sec. 59A), customs
duties, capital stock, franchise, profits, 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 8(d) below.
"Working Capital" means the Company's current assets
(comprised of the Company's cash, inventory, and other
current assets set forth on the Most Recent Balance Sheet),
less the Company's (i) current liabilities (comprised of
accounts payable, notes payable and other current
liabilities set forth on the Most Recent Balance Sheet), and
(ii) long-term debt, as of the date indicated.
"Working Capital Amount" has the meaning set forth in
2(g)(i).
"Working Capital Requirement" has the meaning set forth in
2(f)(iii).
"Working Capital Statement" has the meaning set forth in
2(g)(i).
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 2, the Buyer agrees to purchase from
the Seller, and the Seller agrees to sell to the Buyer, 250
Company Shares, representing all of the issued and
outstanding Company Shares.
(b) Purchase Price. The purchase price to be paid by the Buyer
to the Seller for the Company Shares shall be Three Million
Nine Hundred Sixty-Five Thousand Dollars ($3,965,000.00)
(the "Purchase Price"), payable by wire transfer or delivery
of other immediately available funds, of which:
(i) Three Million Five Hundred Sixty-Five Thousand
Dollars ($3,565,000.00) shall be paid by the Buyer to the
Seller at the Closing, less the amount of any credits to
be applied against the Purchase Price at Closing pursuant
to 2(c) below; and
(ii) Four Hundred Thousand Dollars ($400,000.00)
shall be deposited into the Escrow Account (the "Deferred
Payments") for disbursement to the Seller subject to the
terms and conditions of 2(e) below and the Escrow
Agreement.
The Purchase Price shall be subject to adjustment pursuant to 2(g)
below. In addition, the Parties agree that $10,000 of the Purchase
Price shall be allocated to the non-compete agreement of the Seller
set forth in Section 6(e), below.
. The following credit shall be applied against the portion of the
Purchase Price payable at Closing pursuant to 2 (b) above:
(i) the costs, if any, that the Company will incur
after Closing to complete the construction of, and obtain
a certificate of occupancy for, a store that the Company
intends to construct and open for business prior to the
Closing at Xxxxx Lake, Louisiana, provided that such
credit shall not exceed $100,000. The amount of the credit
shall be equal to the difference between the total
budgeted construction costs as of the date of the Closing
as set forth on Schedule 2(c), less the amount thereof
actually paid by the Company as of the date of the
Closing. Such amounts as are paid by the Company prior to
the Closing shall be subject to verification during the
Post Closing Adjustment process described in ?2(g), below,
and to the extent that the actual costs paid by the
Company prior to Closing are less than or greater than the
amount claimed to be paid at the Closing, then Buyer or
Seller, as applicable, shall pay such amount to the other
Party in accordance with the final sentence of 2(g)(i),
below. Notwithstanding the previous sentence the amount
paid to Buyer shall not cause the Seller to pay an amount
that, together with the credit described in the first
sentence of this 2(c)(i), exceeds $100,000.
. (d) The Pre-Closing and the Closing
(i) The Pre-Closing.
Upon the terms and subject to the
satisfaction of the conditions contained in this
Agreement, the pre-closing of the transactions
contemplated by this Agreement (the "Pre-Closing")
will take place at the offices Jones, Waldo,
Xxxxxxxx & XxXxxxxxx ("Buyer's Counsel"), 000
Xxxxx Xxxx Xx., Xxxxx 0000 Xxxx Xxxx Xxxx, XX at
10:00 A.M. (local time) on or about July 10, 1998,
or at such other place or time as the parties may
agree. At the Pre-Closing, the Parties will
deliver into an escrow (the "Pre-Closing Escrow")
the various documents to be delivered by Seller,
the Company, or Buyer (which documents will be
executed as required and undated), to be held by
Buyer's Counsel. The date and time at which the
Pre-Closing actually occurs is hereinafter
referred to as the "Pre-Closing Date".
The Seller hereby authorizes Buyer's
Counsel to cause to be delivered into the
Pre-Closing Escrow the documents and items in
respect of the Seller described in Section 7(a)
(the "Escrowed Seller Documents"). At the
Pre-Closing, Buyer will deliver to the Pre-Closing
Escrow such documents, instruments and writings as
are required to be delivered at the Closing by
Buyer at or prior to the Closing Date pursuant to
Section 7(b) or otherwise required in connection
herewith (the "Escrowed Buyer Documents").
(ii) The Closing.
Upon delivery of all of the Escrowed
Seller Documents and Escrowed Buyer Documents, and
the Closing of the Related Transactions, then the
closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the
offices of Buyer's Counsel on the date of the
closing of the Related Transactions, or such other
date as the Buyer and the Seller may mutually
determine (the "Closing Date"). The deliveries to
be made at Closing are described in Section 2(f)
below.
(e) The Escrow/The Escrow Agreement. At the Closing, the
Deferred Payment shall be deposited into escrow (the
"Escrow Account") established by the Buyer and the Seller
prior to the Closing with Centennial Bank (the "Escrow
Agent") at its offices located at 00xx Xxxxxxxx Xxxxxx,
Xxxxx, Xxxx 00000, for disbursement subject to the terms
and conditions set forth in and 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 B hereto (the "Escrow Agreement").
Subject to the terms and conditions of this Agreement and
the Escrow Agreement, the Deferred Payments, less all
amounts that after Closing may be paid or recouped from or
set-off against the Deferred Payments pursuant to ? 8(f)
below, shall be paid from the Escrow Account in two (2)
equal installments on or before the first and the second
annual anniversary, respectively, of the Closing Date. The
Closing Date shall be set forth in the Escrow Agreement.
(f) Deliveries at the Closing. At the Closing, (i) the
Buyer's Counsel will deliver to the Buyer the various
certificates, instruments, and documents referred to in
7(a) below, including the Escrowed Seller Documents
being held in the Pre-Closing Escrow, (ii) the Buyer's
Counsel will deliver to the Seller the various
certificates, instruments, and documents referred to in
7(b) below, including the Escrowed Buyer Documents
being held in the Pre-Closing Escrow, and (iii) the
Buyer will deliver to the Seller the Purchase Price
specified in 2(b)(i) above and will deliver to the
Escrow Agent the Deferred Payments specified in
2(b)(ii) above. All of the documents described in (i)
and (ii) will be dated by Buyer's Counsel as of the
Closing Date.
(g) Post Closing Adjustment. The Purchase Price shall be
subject to adjustment after the Closing as follows:
(i) Within thirty (30) days after the Closing
Date, the Buyer shall prepare and deliver to the Seller a
statement (the "Working Capital Statement") prepared by
the Buyer's independent auditors showing the amount of the
Seller's Working Capital (the "Working Capital Amount") as
of the close of business on the Closing Date. If the
Working Capital Amount is less than the Working Capital
Requirement, the Purchase Price shall be decreased through
a reduction in the portion of the Purchase Price payable
at the Closing pursuant to 2(b)(i) above to the extent
that the Working Capital Amount is less than the Working
Capital Requirement. Conversely, if the Working Capital
Amount is greater than the Working Capital Requirement,
the Purchase Price shall be increased by an increase in
the portion of the Purchase Price payable at the Closing
pursuant to 2(b)(i) above to the extent that the Working
Capital Amount is greater than the Working Capital
Requirement. The Working Capital Amount shall be subject
to verification of the value of assets included in the
Working Capital Statement (e.g., inventory, equipment and
spare parts shall be reduced for damage or obsolescence,
and accounts receivable shall be reduced for bad debts).
The Buyer shall pay to the Seller any such increase in the
Purchase Price, and the Seller shall repay to the Buyer
any such decrease in the Purchase Price, within five
business days following the determination of the amount of
such adjustment pursuant to this 2(g).
(ii) The Seller shall assist the Buyer and its
independent auditors in the preparation of the Working
Capital Statement, and the Buyer shall provide the Seller
and its independent auditors access at all reasonable
times to the personnel, properties, books and records of
the Acquired Business for such purpose. The Seller's
independent auditors may participate in the preparation of
the Working Capital Statement; provided, however, that the
Seller acknowledges that the Buyer shall have the primary
responsibility and authority for preparing the Working
Capital Statement and the Buyer's independent auditors
shall have the primary responsibility and authority for
certifying the Working Capital Statement. During the
five-day period following the Seller's receipt of the
Working Capital Statement, the Seller and its independent
auditors will be permitted to review the working papers of
the Buyer's independent auditors relating to the Working
Capital Statement. The Working Capital Statement shall
become final and binding upon the parties on the fifth day
following receipt thereof by the Seller unless the Seller
gives written notice of its disagreement (a "Notice of
Disagreement") with respect to the Working Capital
Statement to the Buyer prior to such date. Any Notice of
Disagreement shall specify in reasonable detail the nature
of any disagreement so asserted and shall be accompanied
by a letter from the Seller's independent auditors
indicating that they concur with each of the positions
taken by the Seller in the Notice of Disagreement. If a
Notice of Disagreement is received by the Buyer in a
timely manner, then the Working Capital Statement (as
revised in accordance with clause (A) or (B) below) shall
become final and binding upon the parties on the earlier
of (A) the date the parties hereto resolve in writing any
differences they have with respect to any matter specified
in the Notice of Disagreement or (B) the date any disputed
matters are finally resolved in writing by the Arbitrator
(as defined below). During the five-day period following
the delivery of a Notice of Disagreement, the Seller and
the Buyer shall seek in good faith to resolve in writing
any differences which they may have with respect to any
matter specified in the Notice of Disagreement. At the end
of such five-day period, the Seller and the Buyer shall
submit to an arbitrator (the "Arbitrator") for review and
resolution any and all matters that remain in dispute. The
Arbitrator shall be such nationally recognized independent
public accounting firm as shall be agreed upon by the
parties hereto in writing. The Seller and the Buyer shall
jointly request that the arbitration be conducted in Salt
Lake City, Utah in accordance with the procedures of the
American Arbitration Association. The Arbitrator shall
render a decision resolving the matters submitted to the
Arbitrator within 25 days following submission thereto.
The cost of any arbitration (including the fees of the
Arbitrator) pursuant to this Section 2(g)(ii) shall be
borne 50% by the Buyer and 50% by the Seller, except that
each party shall bear all fees and expenses attributable
to any expert witness retained by such party but not the
other party. The fees and disbursements of the Buyer's
independent auditors incurred in connection with their
certification of the adjusted Working Capital Statement
shall be borne by the Buyer, and the fees and
disbursements of the Seller's independent auditors
incurred in connection with their review of the Working
Capital Statement or certification of any Notice of
Disagreement shall be borne by the Seller.3.
Representations and Warranties Concerning the Transaction.
(a) Representations ans Warranties Concerning the
Transaction. The Seller represents and warrants to the
Buyer that the statements contained in this 3(a) are
correct and complete as of the date of execution of
this Agreement and will be correct and complete as of
the Effective Date and as of the Closing Date, except
as set forth in Annex I attached hereto.
(i) Authorization of Transaction. The Seller has full
power and authority to execute and deliver this Agreement
and to perform his obligations hereunder. This Agreement
constitutes the valid and legally binding obligation of the
Seller, enforceable in accordance with its terms and
conditions. The Seller 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.
(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 the 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 the Seller is a
party or by which he is bound or to which any of his assets
is subject.
(iii) Broker's Fees. The Seller has no Liability or
obligation to pay any fees or commissions to any broker,
finder, or agent with respect to the transactions
contemplated by this Agreement for which the Buyer could
become liable or obligated.
(iv) Company Shares. The Seller holds of record and
owns beneficially the number of Company Shares set forth in
4(b) of the Disclosure Schedule, 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. The
Seller is not a party to any option, warrant, purchase
right, or other contract or commitment that could require
the Seller to sell, transfer or otherwise dispose of any
capital stock of the Company (other than this Agreement).
The Seller is not 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, Buyer will
acquire valid, marketable title thereto, free and clear of
any liens, encumbrances and claims of third parties.
(v) Absence of Indebtedness and Claims. Seller is not
indebted to Company or any of its affiliates, and is not
indebted to Seller or any of his affiliates, if any, and the
Seller has no claims against the Company.
(b) Representations and Warranties of the Buyer. The Buyer
represents and warrants to the Seller that the
statements contained in this 3(b) are correct and
complete as of the date of execution of this Agreement
and will be correct and complete as of the Effective
Date and as of the Closing Date, 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 jurisdiction of its
incorporation.
(ii) Authorization of the 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) 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 the
Buyer is subject or any provision of its charter or bylaws
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 the
Buyer is a party or by which it is bound or to which any of
its assets is subject.
(iv) Broker's Fees. The Buyer has no Liability or
obligation to pay any fees or commissions to any broker,
finder or agent with respect to the transactions
contemplated by this Agreement for which Seller 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.
(4) Representations and Warranties Concerning the Company. The Seller
represents and warrants to the Buyer that the statements contained in this 4 are
correct and complete as of the date of execution of this Agreement and will be
correct and complete as of the Effective Date and as of the Closing Date, except
as set forth in the disclosure schedule delivered by the Seller to the Buyer on
the date hereof and initialed by the Parties (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. Without limiting the
generality of the foregoing, the mere listing (or inclusion of a copy) of a
document or other item shall not be deemed adequate to disclose an exception to
a representation or warranty made herein (unless the representation or warranty
has to do with the existence of the document or other item itself). The
Disclosure Schedule will be arranged in paragraphs corresponding to the lettered
and numbered paragraphs contained in this 4.
(a) Organization, Qualification, and Corporate Power.
The Company is a corporation duly organized, validly
existing, and in good standing under the laws of the
jurisdiction of its incorporation. 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 and "Stores"
in the plural), each of which is listed on 4(a) of the
Disclosure Schedule and appropriately designated thereon as
an existing or proposed Store location. Schedule 4(a) also
lists each retail store or location at which the Company has
ceased operating the Acquired Business during the three (3)
year period prior to the Most Recent Fiscal Month End.
Schedule 4(a) of the Disclosure Schedule lists the
directors and officers of the Company. The Seller has delivered to
the Buyer correct and complete copies of the charter and bylaws of
the Company (as amended to date). The minute books (containing the
records of meetings of the stockholders, the board of directors,
and any committees of the board of directors), the stock
certificate books, and the stock record books of the Company are
correct and complete. The Company is not in default under or in
violation of any provision of its charter or bylaws.
There are no, nor have there ever been any, Subsidiaries of the
Company.
(b) Capitalization. The entire authorized capital stock of the Company
consists of 1,000,000 Company Shares, of which 250 Company Shares are
issued and outstanding, and none of which is held in treasury. 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 in 4(b) of the Disclosure Schedule. There are 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. 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.
(c) Non-Contravention. Neither the execution nor the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby,
will (i) violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of any
government, governmental agency, or court to which the Company is subject
or any provision of the charter or bylaws of the Company or (ii) conflict
with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate,
modify, or cancel, or require any notice under any agreement, franchise
agreement, contract, lease, sublease, license, instrument or other
arrangement to which the Company 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). The Company does not need 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) Broker's Fees. The Company has no Liability or obligation to pay
any fees or commissions to any broker, finder or agent with respect to the
transactions contemplated by this Agreement.
(e) Title to Assets. The Company 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) Financial Statements; Working Capital Requirement
(i) Attached hereto as Exhibit C are the following
financial statements (collectively the "Financial
Statements"): (i) unaudited balance sheets and statements
of income, changes in stockholders' equity, and cash flow
as of and for the fiscal years ended September 30, 1995,
September 30, 1996, and September 30, 1997 (the "Most
Recent Fiscal Year End") for the Company; and (ii)
unaudited balance sheets and statements of income, changes
in stockholders' equity, and cash flow (the "Most Recent
Financial Statements") as of and for the six (6) months
ended March 31, 1998 (the "Most Recent Fiscal Month End")
for the Company.
(ii) The Financial Statements (including the notes
thereto) have been prepared in accordance with GAAP
applied on a consistent basis throughout the periods
covered thereby, present fairly the financial condition of
the Company as of such dates and the results of operations
of the Company for such periods, are correct and complete,
and are consistent with the books and records of the
Company (which books and records are correct and
complete); provided, however, that the Most Recent
Financial Statements are subject to normal year-end
adjustments (which will not be material individually or in
the aggregate) and lack footnotes and other presentation
items.
(iii) As of the Closing Date, the Company shall
have Working Capital in an amount not less than $25,000
(the "Working Capital Requirement"). The Seller represents
and warrants that working capital in the amount of the
Working Capital Requirement is adequate for the operation
of the Company's business after the Closing in the same
manner as presently conducted.
(g) 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, since that date:
(i) the Company has not sold, leased, transferred or
assigned any of its assets, tangible or intangible, other
than for a fair consideration in the Company's Ordinary
Course of Business;
(ii) the Company has not entered into any agreement,
contract, lease or license (or series of related agreements,
contracts, leases and licenses) outside the Company's
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 $1,000
to which the Company is a party or by which any of them is
bound;
(iv) the Company has not granted any Security Interest
in any of its assets, tangible or intangible;
(v) the Company has not made any capital expenditure
(or series of related capital expenditures), other than for
the build-out of the Xxxxx Lake Store that will not exceed
$100,000, either involving more than $1,000 or outside the
Company's Ordinary Course of Business;
(vi) the Company has not 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 $1,000 or outside the Company's Ordinary Course of
Business;
(vii) the Company has not 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
$1,000 singly or $5,000 in the aggregate;
(viii) the Company has not delayed or postponed the
payment of accounts payable and other Liabilities outside
the Company's Ordinary Course of Business;
(ix) the Company has not canceled, compromised, waived
or released any right or claim (or series of related rights
and claims) either involving more than $1,000 or outside the
Company's Ordinary Course of Business;
(x) the Company has not granted any license or
sublicense of any rights under or with respect to any
Intellectual Property except as set forth in ? 4(o) of the
Disclosure Schedule setting forth each of the Company's
franchise, sub-franchise, area developer and other similar
documents.
(xi) there has been no change made or authorized in the
charter or bylaws of the Company;
(xii) the Company has not issued, sold, or otherwise
disposed of any of its capital stock, or granted any
options, warrants or other rights to purchase or obtain
(including upon conversion, exchange or exercise) any of its
capital stock;
(xiii) except as set forth in Schedule 4(g)(xiii) with
respect to distributions permitted by the Company to Seller
before Closing, subject to the Working Capital Requirement
set forth in 4(f) above, the Company has not declared, set
aside, or paid any dividend or made any distribution with
respect to its capital stock (whether in cash or in kind) or
redeemed, purchased or otherwise acquired any of its capital
stock;
(xiv) the Company has not experienced any damage,
destruction, or loss (whether or not covered by insurance)
to its property;
(xv) the Company has not made any loan to, or
entered into any other transaction with, any of its
directors, officers and employees outside the Company's
Ordinary Course of Business;
(xvi) the Company has not entered into any employment
contract or collective bargaining agreement, written or
oral, or modified the terms of any existing such contract or
agreement;
(xvii) the Company has not granted any increase in
the base compensation of any of its directors, officers,
and employees outside the Company's Ordinary Course of
Business;
(xviii) except as set forth in Schedule 4(g)(xiii) with
respect to distributions permitted by the Company to Seller
before Closing, subject to the Working Capital Requirement
set forth in 4(f) above, the Company has not 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) the Company has not made any other change in
employment terms for any of its directors, officers or
employees outside the Company's Ordinary Course of Business;
(xx) the Company has not made or pledged to make any
charitable or other capital contribution outside the
Company's Ordinary Course of Business;
(xxi) there has not been any other material occurrence,
event, incident, action, failure to act or transaction
outside the Company's Ordinary Course of Business; and
(xxii) the Company has not committed to any of the
foregoing.
(h) Undisclosed Liabilities. The Company has no Liability (and, to the
Knowledge of the Seller, 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 after the Most Recent Fiscal Month End
in the Company'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).
(i) Legal Compliance. To the Knowledge of the Seller, each of the
Company and its respective predecessors and Affiliates has complied with
all applicable laws (including rules, regulations, codes, plans,
injunctions, judgments, orders, decrees, rulings, and charges thereunder)
of federal, state, local, and foreign governments (and all agencies
thereof), and no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, demand, or notice has been filed or commenced against any
of them alleging any failure so to comply.
(j) Tax Matters
(i) The Company 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 (whether or not shown on any Tax Return)
have been paid. The Company 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
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 that arose in connection with any failure (or
alleged failure) to pay any Tax.
(ii) The Company 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) None of the Seller, nor any director, or officer (or
employee responsible for Tax matters) of the Company 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 either (A) claimed or raised by any
authority in writing or (B) as to which any of the Seller, the
directors and officers (and employees responsible for Tax matters) of
the Company has Knowledge based upon personal contact with any agent
of such authority. 4(j)(iii) of the Disclosure Schedule lists all
federal, state, local, and foreign income Tax Returns filed with
respect to the Company, indicates those Tax Returns that have been
audited, and indicates those Tax Returns that currently are the
subject of audit. The Seller has delivered to the Buyer correct and
complete copies of all federal income Tax Returns, examination
reports, and statements of deficiencies assessed against or agreed to
by the Company.
(iv) The Company has not 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) The Company has not filed a consent under Code Sec. 341(f)
concerning collapsible corporations. The Company has not made any
payments, nor is it obligated to make any payments, nor is it a party
to any agreement that under certain circumstances could obligate it to
make any payments that will not be deductible under Code Sec. 280G.
The Company has not been a United States real property holding
corporation within the meaning of Code Sec. 897(c)(2) during the
applicable period specified in Code Sec. 897(c)(1)(A)(ii). The Company
is not a party to any Tax allocation or sharing agreement. The Company
(A) has not been a member of an Affiliated Group filing a consolidated
federal income Tax Return or (B) has no Liability for the Taxes of any
Person (other than the Company) under Treas. Reg. 1.1502-6 (or any
similar provision of state, local, or foreign law), as a transferee or
successor, by contract, or otherwise.
(vi) 4(j) of the Disclosure Schedule sets forth the following
information with respect to the Company as of the most recent
practicable date (as well as on an estimated pro forma basis as of the
Closing giving effect to the consummation of the transactions
contemplated hereby):
(A) the basis of the Company in its assets;
(B) the amount of any net operating loss, net capital loss,
unused investment or other credit, or excess charitable
contribution allocable to the Company.
(vii) The unpaid Taxes of the Company
(A) did not, as of the Most Recent Fiscal Month End, exceed
the reserve for Tax Liability (rather than any reserve for
deferred Taxes established to reflect timing differences
between book and Tax income) set forth on the face of the
Most Recent Balance Sheet; 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 in filing its Tax
Returns.
(k) Real Property
(i) The Company does not own any real property or interests in
real property.
(ii) 4(k)(ii) of the Disclosure Schedule lists and describes
briefly all real property
(a) leased or subleased to the Company, including without
limitation, each of the leases or subleases covering the premises of
each of the Stores (the "Store Leases"), or
(b) leased or subleased by the Company to third parties,
including the Company's franchisees and area developers. The Seller
has delivered to the Buyer correct and complete copies of the leases
and the subleases listed in 4(k)(ii) of the Disclosure Schedule (as
amended to date). With respect to each lease and sublease listed in
4(k)(ii) of the Disclosure Schedule;
(A) 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
4(k)(ii) of the Disclosure Schedule, to the Knowledge of the
Seller, 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) neither the Seller, the landlord, nor, to the
Knowledge of the Seller, any other 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) neither the Seller, the landlord, nor, to the
Knowledge of the Seller, any other party to the lease or
sublease, has repudiated any provision thereof;
(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) the Company has not assigned, transferred,
conveyed, mortgaged, deeded in trust or encumbered any
interest in the leasehold or subleasehold; and
(H) to the Knowledge of the Seller, 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.
(iii) all facilities leased or subleased thereunder are supplied with
utilities and other services necessary for the operation of said
facilities.
(l) Intellectual Property
(i) The Company 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 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. The Company has taken all necessary and desirable action to
maintain and protect each item of Intellectual Property that it owns or
uses.
(ii) To the Knowledge of the Seller, the Company has not interfered
with, infringed upon, misappropriated, or otherwise come into conflict with
any Intellectual Property rights of third parties, and none of the Seller,
the directors, or officers (and employees with responsibility for
Intellectual Property matters) of the Company has ever received any charge,
complaint, claim, demand, or notice alleging any such interference,
infringement, misappropriation, or violation (including any claim that the
Company must license or refrain from using any Intellectual Property rights
of any third party). To the Knowledge of any of the Seller and the
directors and officers (and employees with responsibility for Intellectual
Property matters) of the Company, no third party has interfered with,
infringed upon, misappropriated, or otherwise come into conflict with any
Intellectual Property rights of the Company.
(iii) 4(l)(iii) of the Disclosure Schedule identifies each patent or
registration which has been issued to the Company with respect to any of
its Intellectual Property, identifies each pending patent application or
application for registration which the Company has made with respect to its
Intellectual Property, and identifies each license, agreement, or other
permission which the Company has granted to any third party with respect to
any of its Intellectual Property (together with any exceptions). The Seller
has delivered to the Buyer correct and complete copies of all such patents,
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 and
prosecution (if applicable) of each such item. 4(l)(iii) of the Disclosure
Schedule also identifies each trade name or unregistered trademark used by
the Company in connection with any of its businesses. With respect to each
item of Intellectual Property required to be identified in 4(l)(iii) of the
Disclosure Schedule:
(A) the Company 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 to the Knowledge of any of the
Seller and the directors and officers (and
employees with responsibility for Intellectual
Property matters) of the Company, is threatened
which challenges the legality, validity,
enforceability, use or ownership of the item; and
(D) the Company has never agreed to indemnify any
Person for or against any interference, infringement,
misappropriation or other conflict with respect to the item.
(iv) 4(l)(iv) of the Disclosure Schedule identifies each item of
Intellectual Property that any third party owns and that the Company
uses pursuant to any license, sublicense, agreement (including without
limitation, each franchise agreement to which the Company is a party)
or permission. The Seller has delivered 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 4(l)(iv) of the
Disclosure Schedule:
(A) to the Knowledge of the Seller, the license,
sublicense, agreement, or permission covering the item is
legal, valid, binding, enforceable and in full force and
effect;
(B) to the Knowledge of the Seller, 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) the Seller and, to the Knowledge of the Seller, no
other party to the license, sublicense, agreement or
permission 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) neither the Seller nor, to the Knowledge of the
Seller, any other party to the license, sublicense,
agreement or permission has repudiated any provision
thereof;
(E) with respect to each sublicense, the
representations and warranties set forth in subsections (A)
through (D) above are true and correct with respect to the
underlying license;
(F) to the Knowledge of the Seller, the underlying item
of Intellectual Property is not subject to any outstanding
injunction, judgment, order, decree, ruling or charge;
(G) no action, suit, proceeding, hearing,
investigation, charge, complaint, claim or demand is pending
or, to the Knowledge of the Seller, is threatened, which
challenges the legality, validity or enforceability of the
underlying item of Intellectual Property; and
(H) the Company has not granted any sublicense or
similar right with respect to the license, sublicense,
agreement or permission.
(v) To the Knowledge of any of the Seller and the directors
and officers (and employees with responsibility for Intellectual
Property matters) of the Company, the Intellectual Property of
the Company will 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 and as
presently proposed to be conducted.
(m) Tangible Assets. The Company 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. To the Knowledge of the Seller, 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.
(n) Inventory. The inventories and supplies of the Company 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 (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.
(o) Contracts. 4(o) of the Disclosure Schedule lists the following
contracts and other agreements to which the Company 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,
subfranchisee, or area developer of the Company 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
purchase or sale of materials, commodities, 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) any agreement concerning a partnership or joint venture;
(v) 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; (vi) any agreement concerning
confidentiality or noncompetition;
(vii) any agreement with any of the Seller and their Affiliates
(other than the Company);
(viii) 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;
(ix) any collective bargaining agreement;
(x) 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;
(xi) any agreement under which it has advanced or loaned any
amount to any of its directors, officers, or employees;
(xii) 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; or
(xiii) any other agreement (or group of related agreements) the
performance of which involves consideration in excess of $1,000.
The Seller has delivered to the Buyer a correct and complete copy of each
written agreement listed in 4(o) 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 4(o) 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 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) no party has repudiated any provision of the agreement.
(p) Notes and Accounts Receivable. Except as disclosed in 4(p) of the
Disclosure Schedule, the Company has no notes or accounts receivable.
(q) Powers of Attorney. There are no outstanding powers of attorney
executed on behalf of the Company.
(r) Insurance. 4(r) 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 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
(including a description of how deductibles and ceilings are
calculated and operate) 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) neither the
Company nor, to the Knowledge of the Seller, 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) no
party to the policy has repudiated any provision thereof. The Company 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. 4(r) of the Disclosure Schedule describes
any self-insurance arrangements affecting the Company.
(s) Litigation. 4(s) of the Disclosure Schedule sets forth each
instance in which any of the Seller and the Company (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 4(s) 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 Seller and the directors and officers
(and employees with responsibility for litigation matters) of the Company
has any reason to believe that any such action, suit, proceeding, hearing
or investigation may be brought or threatened against the Company.
(t) Product Warranty. Each product made, sold or delivered by the
Company has been in conformity with all applicable laws, statutes,
regulations, retail food industry standards and all express and implied
warranties, and the Company has no Liability (and, to the Knowledge of the
Seller, 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, subject only to the reserve for product warranty claims set
forth on the face of the Most Recent Balance Sheet as adjusted for the
passage of time through the Closing Date in accordance with the past custom
and practice of the Company.
(u) Product Liability. The Company has no Liability (and, to the
Knowledge of the Seller, there is no Basis for any present or future
action, suit, proceeding, hearing, investigation, charge, complaint, claim,
or demand against the Company 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 the Company.
(v) Employees
(i) To the Knowledge of any of Seller and the directors and
officers (and employees with responsibility for employment matters) of
the Company, no executive, key employee (including any store manager),
or group of employees has any plans to terminate employment with the
Company. The Company has not committed any unfair labor practice.
(ii) 4(v)(ii) sets forth the accrued vacation and sick and
personal leave (if any) of each of the Company's employees.
(w) Employee Benefits
(i) 4(w) of the Disclosure Schedule lists each Employee Benefit
Plan that the Company maintains or to which the Company 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 are not yet due have been paid to each such
Employee Pension Benefit Plan or accrued in accordance with
the past custom and practice of the Company. 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.
(F) The Seller has delivered 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
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 Seller and the directors and
officers (and employees with responsibility for employee
benefits matters) of the Company has any Knowledge of any
Basis for any such action, suit, proceeding, hearing, or
investigation.
(C) The Company has not incurred, and none of the
Seller and the directors and officers (and employees with
responsibility for employee benefits matters) of the Company
has any reason to expect that the Company 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) The Company does not contribute to, never has
contributed to, and never has been required to contribute to, any
Multiemployer Plan or has any Liability (including withdrawal
Liability) under any Multiemployer Plan.
(iv) The Company does not maintain, never has maintained or
contributed to, and never 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).
(x) Guaranties. The Company is not a guarantor or otherwise liable for
any Liability or obligation (including indebtedness) of any other Person.
(y) Environment, Health, and Safety
(i) To the Knowledge of the Seller, each of the Company and its
predecessors and Affiliates has complied 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 alleging any failure so to
comply. Without limiting the generality of the preceding sentence,
each of the Company and, to the Knowledge of the Seller, each of the
Company's 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) To the Knowledge of the Seller, the Company has no Liability
(and none of the Company and its 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 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 Seller, all properties and
equipment used in the business of the Company and its predecessors and
Affiliates have been free of asbestos, PCB'S, methylene chloride,
trichloroethylene, 1,2-transdichloroethylene, dioxins, dibenzofurans,
and Extremely Hazardous Substances.
(z) Certain Business Relationships with the Company. None of the
Seller or his Affiliates has been involved in any business arrangement or
relationship with the Company within the past 12 months, and none of the
Seller or his Affiliates owns any asset, tangible or intangible, which is
used in the business of the Company.
(aa) Disclosure. The representations and warranties contained in this
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 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 7
below).
(b) Notices and Consents. The Seller will cause the Company to give
any notices to third parties, and will cause the Company to use its best
efforts to obtain any third-party consents, that the Buyer may request in
connection with the matters referred to in ? 4(c) above. Each of the
Parties will (and the Seller 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 3(a)(ii), 3(b)(iii),
and 4(c) above.
(c) Operation of Business. The Seller will not cause or permit the
Company to engage in any practice, take any action or enter into any
transaction outside the Company's Ordinary Course of Business. Without
limiting the generality of the foregoing, except with the written consent
of the Buyer, the Seller will not cause or permit the Company to:
(i) sell, lease, transfer or assign any of its assets, tangible
or intangible, other than the sale of its inventory in the Company's
Ordinary Course of Business;
(ii) enter into, or terminate, modify, accelerate or cancel, any
agreement, contract, lease or license to which the Company is a party
or by which it is bound;
(iii) grant or permit any new Security Interest to be placed upon
any of its 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 the Company's operations before and
after the Closing in the manner in which it is presently conducted;
(vi) make any capital expenditure (or series of related capital
expenditures) other than in the Company's 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 Company's 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 or bylaws of
the Company;
(xiii) issue, sell or otherwise dispose of the Company's capital
stock, or grant any options, warrants, or other rights to purchase or
obtain (including upon conversion, exchange or exercise) the Company's
capital stock;
(xiv) declare, set aside, or pay any dividend or make any
distribution with respect to its capital stock (whether in cash or in
kind) or redeem, purchase or otherwise acquire any of its capital
stock;
(xv) make any loan to, or enter into any other transaction or
agreement with, any of its directors, officers and employees outside
the Company's Ordinary Course of Business;
(xvi) make any distributions other than in the ordinary course of
business for payroll expenditures;
(xvii) grant any increase in the compensation of any of its
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 of its directors,
officers, and employees (or take any such action with respect to any
other Employee Benefit Plan); or make any other change in employment
terms for any of its directors, officers, and employees;
(xviii) otherwise take any action or engage in any transaction
outside the Company's Ordinary Course of Business; or
(xix) otherwise engage in any practice, take any action, or enter
into any transaction of the sort described in 4(g) above.
(d) Preservation of Business. The Seller will cause the Company 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 Seller will permit, and the Seller will cause the
Company to permit, representatives of the Buyer to have full access to all
premises, properties, personnel, books, records (including Tax records),
contracts and documents of or pertaining to the Company.
(f) Notice of Developments. The Seller will give (or will cause to be
given) prompt written notice to the Buyer of any material adverse
development causing a breach of any of the representations and warranties
in 4 above. Each Party will give prompt written notice to the other of any
material adverse development causing a breach of any of his or its own
representations and warranties in 3 above. No disclosure by any Party
pursuant to this 5(f), however, shall be deemed to amend or supplement
Annex I, Annex II, or the Disclosure Schedule or to prevent or cure any
misrepresentation, breach of warranty, or breach of covenant.
(g) Exclusivity. The Seller will not (and the Seller will not cause or
permit the Company 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 (including any acquisition structured as a merger,
consolidation, or share exchange) or (ii) participate in any discussions or
negotiations regarding, furnish any information with respect to, assist or
participate in, or facilitate in any other manner any effort or attempt by
any Person to do or seek any of the foregoing. The Seller will not vote his
Company Shares in favor of any such acquisition, whether structured as a
merger, consolidation, or share exchange. The Seller will notify the Buyer
immediately if any Person makes any proposal, offer, inquiry, or contact
with respect to any of the foregoing.
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
request, all at the sole cost and expense of the requesting Party (unless
the requesting Party is entitled to indemnification therefor under 8
below). The Seller acknowledges and agrees 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.
(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, 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 8 below).
(c) Transition. The Seller will not take (and will not permit the
Company 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
from maintaining the same business relationships with the Company after the
Closing as it maintained with the Company prior to the Closing. The Seller
will refer all customer and vendor inquiries relating to the businesses of
the Company to the Buyer from and after the Closing.
(d) Confidentiality. The Seller 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 request and option of the Buyer, all
tangible embodiments (and all copies) of the Confidential Information which
are in his 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, the 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 6(d). If, in the absence of a protective order or the
receipt of a waiver hereunder, the Seller is, on the advice of counsel,
compelled to disclose any Confidential Information to any tribunal, the
Seller may disclose the Confidential Information to the tribunal; provided,
however, that the Seller shall use his 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
(i) The Seller will not "directly or indirectly compete" with the
Buyer for a period of four (4) years from and after the Closing Date.
(ii) For purposes of this Agreement, the phrase "directly or
indirectly compete" shall include:
(A) 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
retail baked goods business, or any shopping-mall-based food
business (including as a franchisee or franchisor, and other than
any existing business of the Seller not acquired hereunder or) at
present or in the future, or any affiliate of the Buyer; and
(B) soliciting or attempting to solicit the services of any
employees of Buyer or any affiliate of Buyer; provided, however,
that no owner of less than 1% of the outstanding stock of any
publicly traded corporation shall be deemed to engage solely by
reason thereof in any of its businesses.
(iii) Notwithstanding the foregoing subsections (i) and (ii),
"directly or indirectly compete" shall not include that certain
existing retail bakery business and related operations (the "Bakery")
presently owned and operated by Xxxxxx X. Xxxxxx as Rao's Bakery at
0000 Xxxxxx, Xxxxxxxx, Xxxxx:
(A) in which the Seller directly acquires and owns a
controlling interest (whether by reason of an asset or stock
acquisition, by merger or otherwise);
(B) that is operated by or on behalf of the Seller as and at
a single retail location (and not as a franchisor), either at its
present site or at a single alternate site that is not within a
one (1) mile radius of any existing or future retail cookie
concept store of the Buyer or its Affiliates; provided that the
Seller shall not be required to close the Bakery if the Buyer or
its Affiliates open any such store within a one (1) mile radius
of the bakery; and
(C) which does not make, distribute, sell or offer for sale
any cookie, cookie-like or decorated cookie products, or pretzels
of any type or form, other than those made, distributed, offered
for sale or sold pursuant to a franchise or license agreement
with the Buyer or one of its Affiliates. Notwithstanding the
restrictions set forth in this clause (C), the Seller shall be
entitled to sell non-branded cookie, cookie-like or decorated
cookie products, provided that: (1) the Seller shall be a
franchisee or licensee of the Buyer or one of its Affiliates; and
(2) the Seller shall pay a three percent (3%) royalty to the
Buyer or its Affiliates on all sales of non-branded cookie,
cookie-like or decorated cookie products sold by the Bakery;
provided further that such right to sell non-branded cookie,
cookie-like or decorated cookie products shall terminate within
on the six (6) month anniversary of the Closing Date.
(iv) If the final judgment of a court of competent jurisdiction
declares that any term or provision of this 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. The Seller agrees not to
assert any defense based on a lack of or inadequacy of consideration
with respect to the enforcement of the Seller's covenants in this
6(e).
(f) Employees. Effective upon the Closing, the Buyer agrees to cause
the Company to offer continuing employment to the Company's store-level
employees (including store managers), upon the same terms and conditions as
their at-will employment prior to the Closing. Nothing set forth in this
Agreement is intended to obligate the Company, or to create any agreement
between the Company or the Buyer and any employee of the Company, for
continuing employment of any such employee, or to limit the Company's right
to terminate of any such employee for any reason at any time after the
Closing. The Seller or an Affiliate of the Seller shall be entitled to
offer employment to any executive or management-level employee of the
Company whose employment the Buyer determines not to continue after the
Closing Date (each such person being a "Discontinued Employee"); provided
however, that the Seller shall pay, or reimburse the Company for its
payment of, all severance benefits paid or payable by the Company to the
Discontinued Employee; provided further that, neither the Seller nor an
Affiliate of the Seller shall employ or solicit the employment of any such
employee of the Company until the Buyer has notified the Seller in writing
that such person is or will become a Discontinued Employee.
(g) Franchise and License Fees. The Buyer agrees not to charge (or
permit any of the Buyer's Affiliates) to charge the Seller customary
charges imposed by the Buyer (or the Buyer's Affiliates) for the granting
of any franchise or license agreement described in 6(e)(iii)(D) above that
the Buyer or Buyer's Affiliates in their sole discretion may grant after
the Closing to the Seller (or an entity directly owned or controlled by the
Seller).
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 3(a) and 4
above shall be true and correct in all material respects at and as of
the Closing Date;
(ii) the Seller shall have performed and complied with all of his
covenants hereunder in all material respects through the Closing;
(iii) the Company shall have procured all of the third party
consents specified in 5(b) above, including without limitation, the
consent of Company's landlords with respect to each of the Store
Leases, and GACC, and the Store Leases (including those listed on
Schedule 4(k)(ii)), agreements and other rights to use and occupy real
property shall be satisfactory to the Buyer, including, without
limitations, the Store located at Victoria Mall;
(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
contemplated 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 ; or
(D) affect adversely the right of the Company to own its
assets and to operate its businesses (and no such injunction,
judgment, order, decree, ruling, or charge shall be in effect);
(v) the Seller shall have delivered to the Buyer a certificate to
the effect that each of the conditions specified above in 7(a)(i)-(iv)
above is satisfied in all respects;
(vi) the Parties and the Company shall have received all
authorizations, consents, and approvals of governments and
governmental agencies referred to in 3(a)(ii), 3(b)(iii), and 4(c)
above;
(vii) the Buyer shall have received from counsel to the Seller an
opinion in form and substance as set forth in Exhibit D 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 the Company's officers and directors;
(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 and the Related
Transactions;
(x) the closing of each of the Related Transactions shall have
occurred, or each of the conditions for the closing of the Related
Transactions concurrently with the Closing of the transactions
contemplated by this Agreement, shall have been satisfied or waived to
the Buyer's satisfaction;
(xi) the Franchisee Litigation shall have been settled on terms
and pursuant to documents satisfactory to the Buyer and the Seller;
(xii) the Buyer's due diligence investigation of the Seller and
the Company shall have been completed to the Buyer's satisfaction;
(xiii) the Seller shall deliver to the Buyer stock certificates
representing all of the issued and outstanding Company shares,
endorsed in blank or accompanied by duly executed assignment
instruments;
(xiv) all voting trusts, proxies and other agreements or
understandings with respect to the voting of capital stock of the
Company shall have been terminated before the Closing;
(xv) the Company and the Seller shall deliver the stock book,
stock ledger, minute book, and corporate seal of the Company; and
(xvi) all actions to be taken by the Seller in connection with
consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents required to
effect the transactions contemplated hereby will be satisfactory in
form and substance to the Buyer.
The Buyer may waive any condition specified in this 7(a) if he executes a
writing so stating at or prior to the Closing.
(b) Conditions to Obligation of the Seller. The obligation of the
Seller to consummate the transactions to be performed by him in connection
with the Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in 3(b) above
shall be true and correct in all material respects at and as of the
Closing Date;
(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 for 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 Seller a certificate
to the effect that each of the conditions specified above in
7(b)(i)-(iii) above is satisfied in all respects;
(v) the Parties and the Company shall have received all
authorizations, consents, and approvals of governments and
governmental agencies referred to in 3(a)(ii), 3(b)(iii), and 4(c)
above;
(vi) the closing of each of the Related Transactions shall have
occurred, or each of the conditions for the closing of the Related
Transaction concurrently with the closing of the transactions
contemplated by this Agreement shall have been satisfied or waived to
the Seller's satisfaction;
(vii) the condition set forth in 7(a)(xi) shall have been
satisfied; and
(viii) 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 Seller.
The Seller may waive any condition specified in this 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 thereafter in full force and effect for a period
of two (2) years, except those representations and warranties relating to
Taxes, which shall continue in full force and effect thereafter subject to
any applicable statutes of limitations.
(b) Indemnification Provision for Benefit of the Buyer. The Seller
agrees to indemnify the Buyer, its Affiliates and each of its officers,
directors, employees and agents (collectively, the "Buyer Indemnified
Parties") and hold them harmless from any Adverse Consequences suffered or
incurred by any of them to the extent arising from:
(i) any breach (or in the event any third party alleges facts
that, if true, would mean the Seller has breached) of any of its
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;
(ii) any breach of any covenant of the Seller contained in this
Agreement requiring performance after the Closing Date;
(iii) any Liability of the Company for the unpaid Taxes of any
Person (other than the Company) under Treas. Reg. 1.1502-6 (or any
similar provision of state, local, or foreign law), as a transferee or
successor, by contract, or otherwise.
(c) Indemnification Provisions for Benefit of the Seller. The Buyer
agrees to indemnify the Seller, its Affiliates and each of its officers,
directors, employees and agents and hold them harmless from any Adverse
Consequences suffered or incurred by any of them to the extent arising
from:
(i) any breach (or in the event any third party alleges facts
that, if true, would mean the Buyer has breached) of any of its
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; and
(ii)any breach of any covenant of the Buyer contained in this
Agreement requiring performance after the Closing Date.
(d) 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 ? 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 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 Claim and fulfill its indemnification
obligations hereunder;
(C) the Third Party Claim involves only money damages and
does not seek an injunction or other equitable relief;
(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 8(d)(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 8(d)(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
(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 8.
(e) Determination of Adverse Consequences. The Parties shall take into
account the time cost of money (using the Applicable Rate as the discount
rate) in determining Adverse Consequences for purposes of this 8. In
addition, the Parties shall take into account the benefits of a Tax to a
Party alleging Adverse Consequences.
(f) Certain Set-Off Rights. At the Buyer's election, payments, if any,
to be made by the Seller under this 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 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 of any claim for indemnification hereunder, specifying in reasonable
detail the grounds for indemnification and the amount of the set-off, and
the Seller may object to any such set-off by responding in writing within
fifteen (15) days after receipt of the Buyer's notice. If the Seller fails
to object within the fifteen (15) day period specified, the Seller shall
waive any right to object to the Buyer's right of indemnification hereunder
or the amount of the set-off. If Seller disputes 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 Buyer and Seller shall negotiate in good faith to resolve all
issues in dispute. If, after a period of fifteen (15) days following the
date on which Seller gives Buyer notice of its objection to Seller's
indemnification hereunder, any such matter remains in dispute, then parties
shall employ the dispute resolution procedures set forth in 10 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.
(g) 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 a
breach of representation, warranty or covenant. The Seller hereby agrees
that he will not make any claim for indemnification against the Company by
reason of the fact that he was a director, officer, employee, or agent of
any such entity or was serving at the request of any such entity as a
partner, trustee, director, officer, employee, or agent of another entity
(whether such claim is for judgments, damages, penalties, fines, costs,
amounts paid in settlement, losses, expenses, or otherwise and whether such
claim is pursuant to any statute, charter document, bylaw, agreement, or
otherwise) with respect to any action, suit, proceeding, complaint, claim,
or demand brought by the Buyer against such Seller (whether such action,
suit, proceeding, complaint, claim, or demand is pursuant to this
Agreement, applicable law, or otherwise).
(h) Indemnification Limitations. Notwithstanding the foregoing to the
contrary, the Seller shall not be required to indemnify the Buyer
Indemnified Parties from any Adverse Consequences pursuant to 8(b) until
the Buyer Indemnified Parties have individually or collectively suffered
Adverse Consequences in excess of a $38,000 aggregate threshold. If the
$38,000 threshold is met, then Seller shall indemnify the Buyer Indemnified
Parties for the initial $38,000 together with any amounts required to be
paid in excess thereof, on a dollar-for dollar basis.
9. Termination
(a) Termination of Agreement. The Parties may terminate this Agreement
as provided below:
(i) The Buyer and the Seller may terminate this Agreement by
mutual written consent at any time prior to the Closing;
(ii) The Buyer may terminate this Agreement at any time prior to
July 10, 1998 by giving written notice to the Seller if the Buyer is
not satisfied in its sole discretion with the results of its
continuing business, legal and accounting due diligence investigation
regarding the Company;
(iii) The Buyer may terminate this Agreement by giving written
notice to the Seller at any time prior to the Closing (A) in the event
the Seller has breached any material representation, warranty, or
covenant contained in this Agreement in any material respect, the
Buyer has notified the Seller of the breach, and the breach has
continued without cure for a period of fifteen (15) days after the
notice of breach; or (B) if the Closing shall not have occurred on or
before September 30, 1998, by reason of the failure of any condition
precedent under 7(a) hereof (unless the failure results primarily from
the Buyer itself breaching any representation, warranty, or covenant
contained in this Agreement);
(iv) The Buyer may terminate this Agreement by giving written
notice to the Seller at any time prior to the Closing in the event
that any of the Related Transactions shall be terminated or fail to
close for any reason, including without limitation, any cause, action
or reason attributable to the Buyer; and
(v) The Seller may terminate this Agreement by giving written
notice to the Buyer at any time prior to the Closing (A) in the event
the Buyer has breached any material representation, warranty, or
covenant contained in this Agreement in any material respect, the
Seller has notified the Buyer of the breach, and the breach has
continued without cure for a period of fifteen (15) days after the
notice of breach; or (B) if the Closing shall not have occurred on or
before September 30, 1998, by reason of the failure of any condition
precedent under 7(b) hereof (unless the failure results primarily from
the Seller themselves breaching any representation, warranty, or
covenant contained in this Agreement).
(b) Effect of Termination. If any Party terminates this Agreement
pursuant to 9(a) above, all rights and obligations of the Parties under
this Agreement and the Escrow Agreement shall terminate without any
Liability of any Party to any other Party (except for any Liability of any
Party then in breach).
10. 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 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 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 the Seller:Chocolate Chip Cookies of Texas, Inc.
ATTN: Xxxx Xxxxxxxxx
000-X Xxxxxxxx Xxxx
Xxxxxxxx, XX 00000
Copy to: Xxxxxxx & Xxxxx
Attn: Xxxx X. Xxxxxxxxx
0000 Xxxxxx Xxxxxx
X.X. Xxx 00
Xxxxxxxx, XX 00000
If to the Buyer: Xxx. Xxxxxx' Original Cookies, Inc.
ATTN: Legal Department
0000 Xxxx Xxxxxxxxxx Xxxxxxx, Xxxxx 000
Xxxx Xxxx Xxxx, XX 00000-0000
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 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. The Seller agrees that the Company has not borne nor will it
bear any of the Seller?s costs and expenses (including any of his
legal fees and expenses) in connection with this Agreement or any of
the transactions contemplated hereby.
(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.
(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) Specific Performance. Each of the Parties acknowledges and
agrees that the other Parties would be damaged irreparably in the
event any of the provisions of this Agreement are not performed in
accordance with their specific terms or otherwise are breached.
Accordingly, each of the Parties agrees that the other Parties shall
be entitled to an injunction or injunctions to prevent breaches of the
provisions of this Agreement and to enforce specifically this
Agreement and the terms and provisions hereof in any action instituted
in any court of the United States or any state thereof having
jurisdiction over the Parties and the matter in addition to any other
remedy to which they may be entitled, at law or in equity.
(o) 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 10, which shall be sole
and exclusive procedures for the resolution of any such disputes.
(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 Seller and his 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 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 executive who will represent that Party and of
any other person who will accompany the executive. Within 30
days after delivery of the disputing Party's notice, the
executives of both 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
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 90 days of the initiation of such
procedure, either Party may initiate litigation (upon 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 (o) 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.
(p) Submission to Juridiction. Each of the Parties submits to the
jurisdiction of any state or federal court sitting in the jurisdiction
of the defendant in such proceeding, in any action or proceeding
arising out of or relating to this Agreement or the Escrow 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 or the Escrow 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.
(q) Attorney's Fees. Should any litigation be commenced with
respect to any matters governed by this Agreement or the Escrow
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.
(r) Joinder of Spouse. The spouse of certain of the Seller is
executing this Agreement to acknowledge its fairness and that it is in
her best interest to bind her community property interest, if any, to
the terms of this Agreement.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as
of the date first above written.
BUYER: XXX. XXXXXX' ORIGINAL COOKIES, INC.
By:/s/Xxxxxxx X. Xxxx
Its:VP
SELLER:
/s/Xxxx Xxxxxxxxx
Xxxx Xxxxxxxxx
/s/Xxxx Xxxxxxxxx
[Spouse]
