EXHIBIT 2.1
AGREEMENT FOR PURCHASE AND SALE OF ASSETS
THIS AGREEMENT FOR PURCHASE AND SALE OF ASSETS ("Agreement"),
dated as of March 12, 1999 (the "Effective Date"), is entered into by
and between Monterey Pasta Company, a Delaware corporation
("Purchaser"), Frescala Foods, Inc., an Oregon corporation ("Seller"),
Xxxxxx X. Xxxx ("Xxxx") and Xxxxxx X. Xxxxxxx ("Gistaro", and together
with Ness, collectively the "Founders").
RECITALS
A. Seller is the owner of certain assets described in more
detail on Exhibit A attached hereto, and using such assets, produces and
distributes refrigerated gourmet pasta, sauces and cheese (the
"Business").
B. Purchaser wishes to purchase from Seller, and Seller wishes
to sell to Purchaser, the Purchased Assets (as defined below) on the
terms and subject to the conditions set forth in this Agreement.
C. As a condition and inducement to Purchaser's willingness to
enter into this Agreement, upon execution and delivery of this Agreement,
the Founders and Xxxxxx Xxxxxxxx ("Xxxxxxxx") are entering into and
delivering Consulting Agreements in the form attached hereto as
Exhibit B.
D. As a condition and inducement to Purchaser's willingness to
enter into this Agreement, upon execution and delivery of this Agreement,
Xxx Xxxxxxxxxx ("Pitkethley") is entering into and delivering a Broker
Agreement in the form attached hereto as Exhibit C.
AGREEMENT
NOW, THEREFORE, in consideration of the representations, warranties
and agreements herein contained, the parties agree as follows:
1. DEFINITIONS. For purposes of this Agreement, the following
terms have the meanings set forth in this Section 1.
1.1 Closing. "Closing" means the closing of the sale and
transfer of the Purchased Assets from Seller to Purchaser.
1.2 Closing Date. "Closing Date" means the date set
forth in Section 8.1, or such other date as Purchaser and Seller may
agree upon in writing.
1.3 Excluded Assets. "Excluded Assets" means accounts
receivable, cash on hand, recipes of Cucina, recipes of products
manufactured for Tex-A-France and any prepaid property taxes, insurance
and utilities where the prepayment period pertains to periods after the
Closing Date.
1.4 Existing Business. "Existing Business" means the
Business with the customers (each an "Existing Business Customer")
identified on Exhibit D.
1.5 Existing Business Earnout Amount. "Existing Business
Earnout Amount" is an amount equal to the product of (i) the amount by
which Existing Business Gross Sales exceed $2,200,000 multiplied by
(ii) 1.5 multiplied by (iii) .25; provided that, if Existing Business
Gross Sales do not exceed $2,200,000, the Existing Business Earnout
Amount shall be zero.
1.6 Existing Business Gross Sales. "Existing Business
Gross Sales" is an amount equal to the quotient of (i) Gross Sales
Revenue generated by the Business from Existing Business during the
period from the Closing Date to October 31, 1999 (the "Existing Business
Earnout Period") divided by (ii) the quotient of (x) the number of days
in the Existing Business Earnout Period divided by (y) 365;
1.7 Gross Sales Revenue. "Gross Sales Revenue" is the
price, before any reduction, promotions or allowances, at which products
are sold to customers; provided that, a "sale" shall be deemed to have
occurred when products are shipped.
1.8 Knowledge. Seller shall be deemed to have
"Knowledge" of a particular fact or other matter if any of the
following individuals is actually aware of such fact or other matter:
the Founders, any officer or director of Seller and Xxxxxxxx; provided
that, Seller shall make reasonable inquiry of employees that Seller
engages in a management capacity.
1.9 New Business. "New Business" means the customers
(each a "New Business Customer") identified on Exhibit E that have been
approved by Purchaser, who shall have the right to decline, in its sole
discretion, any New Business Customer; provided that, once Purchaser has
declined a New Business Customer, Purchaser shall have no right to accept
orders from that New Business Customer for a period of six (6) months
following the Closing Date or any such orders accepted after a previous
decline by Purchaser shall thereafter be included as New Business.
1.10 New Business Earnout Amount. "New Business Earnout
Amount" is an amount equal to the product of (i) New Business Gross
Sales multiplied by (ii) .75 multiplied by (iii) .25.
1.11 New Business Gross Sales. "New Business Gross Sales"
is an amount equal to the product of (i) the sum of the first three (3)
consecutive months of Gross Sales Revenue generated by the Business from
a New Business Customer (calculated on a customer-by-customer basis)
during the ten (10) months following the Closing Date (the "New Business
Earnout Period") multiplied by (ii) four (4); provided that, the first
of the three (3) consecutive months of sales required from a New Business
Customer must be attributable to a firm commitment from the New Business
Customer generated during the four (4) months following the Closing Date,
or the Gross Sales Revenue generated by such New Business Customer shall
not be included in New Business Gross Sales; provided further that,
Purchaser reserves the right to decline, in its sole discretion, any
order from a New Business Customer. Any period in this Agreement
measured in months following the Closing Date shall be deemed to commence
on the Closing Date and end the specified number of months later on the
same day of the month on which the Closing Date occurred.
1.12 Plant Closing Date. "Plant Closing Date" means the
date mutually agreed upon by the parties by which Purchaser shall have
vacated the plant located at 00000 Xxxxx Xxxxx, Xxx Xxxxxxx, XX 00000
(the "Plant"), but in no event shall such date be more than six (6)
months after the Closing Date.
1.13 Purchased Assets. "Purchased Assets" means the
tangible and intangible assets related to the Business as described on
Exhibit A. Purchased Assets shall not include Excluded Assets.
1.14 Useable Inventory. "Useable Inventory" means
inventory useable in the normal course of business by Seller on Seller's
equipment as shown on the books and records of Seller and agreed to by
Xxxxxx Xxxxxxxx (or other individual identified by Seller in writing to
Purchaser, as Seller's representative) and Xxxx Xxxxx as of the date
immediately preceding the Closing Date, excluding any items mutually
agreed upon by Purchaser and Seller.
1.15 Useable Inventory Amount. "Useable Inventory Amount"
means the cash value of the Usable Inventory as measured by Xxxxx
Xxxxxxxx using the cost of acquisition method, and subject to mutual
agreement by Purchaser and Seller in accordance with Seller's historical
practices at the actual cost for raw materials and packaging, and at
Seller's standard cost for finished goods, where standard cost is
determined without allocating plant overhead but otherwise in accordance
with Generally Accepted Accounting Principles ("GAAP").
2. PURCHASE AND SALE.
2.1 Transfer of Purchased Assets. Upon the terms and
subject to the conditions set forth in this Agreement, on the Closing
Date, Seller shall sell, convey, assign, and transfer to Purchaser, and
Purchaser shall purchase, acquire and accept, all rights, title, and
interests in and to the Purchased Assets, together with the goodwill of
the business symbolized by any and all trademarks, trade names or service
marks included in the Purchased Assets and any registrations thereof,
free and clear of any liens, encumbrances, claims, restrictions, or
reversionary rights.
2.2 Consideration for the Purchased Assets. As full
consideration for the Purchased Assets, Purchaser shall deliver and pay
Seller the following consideration (the "Purchase Price"):
2.2.1 $1,175,000 at Closing; provided that, if Cucina
and Purchaser have not entered into an agreement to replace the agreement
dated September 7, 1995 between Cucina and Seller, then $45,000 of this
payment shall be delayed and not delivered unless on or before
termination of the New Business Earnout Period such an agreement is
reached between Purchaser and Cucina.
2.2.2 The Useable Inventory Amount at Closing;
2.2.3 Existing Business Earnout Amount to be paid no
later than ten (10) days following termination of the Existing Business
Earnout Period; and
2.2.4 New Business Earnout Amount to be paid no later
than ten (10) days following the termination of the New Business Earnout
Period.
2.2.5 300,000 options ("Options") in the form
attached hereto as Exhibit F exercisable into common stock of Purchaser
with an exercise price set at the average closing bid price on the NASDAQ
National Market System for the ten (10) trading days preceding the
Effective Date. Ness, Gistaro and Xxxxxxxx shall receive 165,411,
119,589 and 15,000 Options, respectively.
2.2.6 Up to $50,000 Plant Closing Payment to be paid
immediately prior to the Plant Closing Date as provided in Section 6.3.2.
2.3 No Assumption of Liabilities. Purchaser hereby does
not assume nor does it agree to perform or discharge any liabilities,
obligations or commitments of any nature of Seller, whether known or
unknown, contingent or fixed or otherwise, including without limitation,
all liabilities related to the employment and/or termination of
personnel, any brokers' or finders' fees relating to the transactions
contemplated hereby, all taxes due and all income, sales, use,
withholding and payroll taxes accrued through the Closing; provided that,
Purchaser hereby does assume Seller's liabilities with respect to
purchase orders with existing suppliers/vendors as of the Closing Date
and material contracts included in the Purchased Assets.
2.4 Sales and Other Taxes.
2.4.1 Seller shall pay and discharge promptly when due
any sales, use, transfer, excise, and other like taxes imposed or levied
by the State of Texas and/or any other state or governmental agency by
reason of the sale and transfer of the Purchased Assets (the "Seller
Transfer Taxes"). Seller and Purchaser shall cooperate with each other
to the extent reasonably requested and legally permitted to minimize the
Seller Transfer Taxes.
2.4.2 Following the Closing, Seller shall remain
responsible for preparing and filing any state and federal income tax
forms relating to the operation of the Business up to and including the
Closing Date, and shall pay and discharge promptly when due any state or
federal income tax payments and any other taxes related to the Business
up to and including the Closing Date.
2.5 Purchase Price Allocation. The Purchase Price shall be
allocated to the Purchased Assets as follows: (i) $200,000 for the Plant
Equipment identified on Exhibit A-4, (ii) $975,000 for goodwill,
(iii) the Useable Inventory Amount for inventory and (iv) the value of
the Options for the Consulting Agreements and Broker Agreement. The
Existing Business Earnout Amount and the New Business Earnout Amount,
once calculated and paid, will be allocated to goodwill. Purchaser and
Seller each agree to use such allocation in filing Internal Revenue Code
Form 8594.
3. REPRESENTATIONS AND WARRANTIES OF SELLER AND FOUNDERS.
Seller and Founders hereby jointly and severally represent and warrant to
Purchaser that except as set forth on the Disclosure Schedule attached to
this Agreement the following statements are true and correct as of the
Effective Date:
3.1 Organization, Standing and Corporate Power. Seller is
a duly organized corporation, validly existing and in good standing under
the laws of the State of Oregon, and has all requisite corporate power
and authority to own or lease and operate its respective properties and
to carry on the Business related to the Purchased Assets as now
conducted; and is duly qualified to do business as a foreign corporation
and is in good standing under the laws of each jurisdiction which
requires such qualification, except where failure to qualify would not
have a material adverse effect on the Business.
3.2 Due Authorization and Binding Effect. Seller has all
requisite corporate power and full legal right to enter into this
Agreement and to perform all of its agreements and obligations under this
Agreement. This Agreement has been, and as of the Closing Date will be,
duly authorized, executed, and delivered by Seller and, assuming due
authorization, execution, and delivery by Purchaser, constitutes the
legal, valid, and binding obligations of Seller enforceable against it in
accordance with its terms except as the enforceability thereof may be
limited by the application of bankruptcy, insolvency, moratorium, or
similar laws affecting the rights of creditors generally or judicial
limits on the right of specific performance or other equitable
principles.
3.3 Title; Absence of Liens. Seller has good and
marketable title to the Purchased Assets, owns all of the Purchased
Assets free and clear of all claims, liens, security interests,
restrictions or other encumbrances, and has the right to transfer such
title to the Purchased Assets to Purchaser. The Purchased Assets
constitute all the assets necessary to operate the Business as conducted
by Seller. At the Closing, Seller will sell and transfer the Purchased
Assets to Purchaser and Purchaser will acquire complete right, title, and
ownership in and to the Purchased Assets, free and clear of any liens,
encumbrances, claims, restrictions, or reversionary rights, created by
Seller.
3.4 No Conflicts; Consents. The execution and the delivery
of this Agreement by Seller does not, and the consummation of the
transactions contemplated hereby will not result in a breach of,
constitute a default (with or without notice or lapse of time, or both)
under or violation of, or result in the creation of any lien, charge or
encumbrance, or require consent pursuant to any provision of the Articles
of Incorporation or Bylaws of Seller, or any provision (including, but
not limited to, financial or other covenants) of any Material Contract
(as hereafter defined) to which Seller is a party or by which Seller or
any of its respective properties or assets (including the Purchased
Assets) are bound or affected, nor will such actions give to any other
person or entity any interests or rights of any kind, including rights of
termination, acceleration or cancellation, in or with respect to any of
the Purchased Assets.
3.5 Litigation. There is no action, suit, proceeding or
investigation in progress or pending before any court or governmental
agency, against or relating to the Business or the Purchased Assets, nor,
to the best Knowledge of the Founders and Seller, any threat thereof or
any basis therefor. Seller is not a party to any decree, order or
arbitration award (or agreement entered into in any administrative,
judicial or arbitration proceeding with any governmental authority) with
respect to the Purchased Assets.
3.6 Compliance with Laws and Regulations; Governmental
Licenses, Etc. To the best of the Knowledge of the Founders and Seller,
Seller is in compliance in all material respects with all statutes, laws,
rules and regulations with respect to or affecting Purchaser's use and
enjoyment of the Purchased Assets, including, without limitation, laws,
rules and regulations relating to occupational health and safety, equal
employment opportunities, fair employment practices, and sex, race,
religious and age discrimination. To the best of the Knowledge of the
Founders and Seller, Seller has received no notice to the contrary that,
(i) Seller is not subject to any order, injunction or decree issued by
any governmental body, agency, authority or court which could impair the
ability of Seller to consummate the transactions contemplated hereby or
which could materially adversely affect Purchaser's use and enjoyment of
the Purchased Assets, and (ii) Seller possesses all licenses, permits and
governmental or other regulatory approvals and authorizations which are
required in order for Seller to operate the Business as presently
conducted, and is in compliance in all material respects with all such
licenses, permits, approvals and authorizations.
3.7 Taxes. Seller has timely filed within the time period
for filing or any extension granted with respect thereto all Federal,
state, local and other returns and reports relating to any and all taxes
or any other governmental charges, obligations or fees for taxes and any
related interest or penalties ("Tax" or "Taxes") required to be filed
by it with respect to its business and the Purchased Assets and Seller in
good faith, after reasonable investigation, represents that such returns
and reports are true and correct. To the best Knowledge of Seller,
Seller has paid all Taxes, if any, shown to be due and payable on said
returns and reports and has withheld with respect to employees all
Federal and state income Taxes, FICA, FUTA and other Taxes required to be
withheld and has timely paid all sales, use and similar Taxes. No
income, sales, use or similar Tax return or report of Seller has been
examined or audited by the Internal Revenue Service or any state taxing
authority. There are no pending or, to the best of Seller's officers'
and directors' Knowledge, threatened audits, examinations, assessments,
asserted deficiencies or claims for additional Taxes. To the best of
Seller's officers' and directors' Knowledge, there are no liens or
similar encumbrances relating to or attributable to Taxes on the
Purchased Assets.
3.8 Environmental Compliance. To the best of the Knowledge
of the Founders and Seller, and no notice has been received to the
contrary, (i) in connection with the operation of Seller's business,
Seller is not in violation of, or delinquent in respect to, any material
decree, order or arbitration award or law, statute, or regulation of or
agreement with, or any license or permit from, any governmental authority
to which it or its properties, assets, personnel or business are subject
(or to which it is itself subject) and which relates to the environment
(including, without limitation, laws, statutes, rules and regulations and
the common law relating to environmental matters and contamination of any
type whatsoever ("Environmental Laws")), and (ii) Seller has obtained
all permits, licenses and other authorizations required under
Environmental Laws, where the failure to obtain any such permit, license
or authorization would have a material adverse effect on Seller's
business.
3.9 Accuracy of Material Facts; Copies of Materials. No
representation, warranty or covenant of the Founders or Seller contained
in this Agreement contains any untrue statement of a material fact known
by Seller to be untrue or fails to state material facts known by Seller
to be necessary in order to make the statement contained therein not
misleading. With respect to all materials and financial information
relating to the Business and Purchased Assets prepared by or at the
direction of Seller and delivered to Purchaser, the Seller has acted in
good faith and exercised good faith efforts to prepare such information
and materials so that they do not contain any untrue statement of
material fact or omit a statement of material fact which is necessary to
make the statements contained therein not misleading. Seller has
delivered true, complete and accurate copies of each contract, agreement,
license, lease and similar document (or summaries of same) referred to in
any Exhibit or Schedule hereunder or included in the Purchased Assets to
the extent required by this Agreement.
3.10 Financial Statements. Seller's (i) unaudited statement
of income (loss), statement of shareholders' equity (deficit), and
statement of cash flows for its fiscal year ended June 30, 1998 and
(ii) unaudited balance sheet at November 30, 1998 previously provided to
Purchaser are each true and complete, have been prepared in accordance
with GAAP (except as described in Section 1.15 above), applied on a
consistent basis through the periods indicated, and fairly present the
financial position of Seller and its results of operations as of the
respective dates and for the respective periods indicated.
3.11 Guarantees. Seller has not guaranteed any obligations
of other persons or made any agreements to acquire or guarantee any
obligations of other persons.
3.12 Material Contracts. Schedule 3.12 lists and contains a
description of all material contracts, agreements and instruments
relating to the Business to which Seller or any subsidiary of Seller is a
party ("Material Contracts"). All Material Contracts are valid,
binding, in full force and effect, and enforceable by Seller in
accordance with their respective terms. No Material Contract contains
any material liquidated-damages, penalty or similar provision. To the
best of the Knowledge of the Founders and Seller, no party intends to
cancel, withdraw, modify or amend any such Material Contract.
3.13 Defaults. To the best Knowledge of the Founders and
Seller, Seller is not in default under or in breach or violation of any
written contract, commitment or restriction to which Seller is a party or
to which Seller or any of its properties are bound, where such defaults,
breaches, or violations would, in the aggregate, have a material adverse
effect on the operations, assets, financial condition or prospects of the
Business. To the best of the Knowledge of the Founders and Seller, no
other party is in default under or in breach or violation of, nor is
there any valid basis for any claim of default by any other party under
or any breach or violation by any other party of, any material contract,
commitment, or restriction relating to the Business and to which Seller
are bound or by which any of the Purchased Assets are bound, where such
defaults, breaches, or violations would, in the aggregate, have a
material adverse effect on the operations, assets, financial condition or
prospects of the Business.
3.14 Customers. Seller has, in good faith, provided
Purchaser with a list which includes all of the customers from which
Seller has solicited business relating to the Business ("Business
Customers"), after exercising good faith efforts to prepare such list.
The Business Customers lists are attached hereto as Exhibit D and Exhibit
E. Seller is not aware of any event, happening or fact which would lead
it to believe that any of the Existing Business Customers listed on
Exhibit D will discontinue its purchases after the Closing.
3.15 Trademarks and Trade Names. All trademarks or trade
names, copyrights, service marks or other proprietary rights that are
necessary to the conduct of the Business are useable by Seller and will
not be impaired or restricted as a result of the consummation of the
transactions contemplated hereby. To the best of the Knowledge of the
Founders and Seller, the conduct of the Business conducted by Seller or
the use and ownership of the Purchased Assets does not infringe any
trademark, trade name, service xxxx, copyright or other proprietary right
of any other person. No litigation is pending or has been threatened
against Seller, to the best of the Knowledge of the Founders and Seller,
for the infringement of any trademarks or trade names of any other party
or for the misuse or misappropriation of any other proprietary right
owned by any other party; nor, to the best of the Knowledge of the
Founders and Seller, does any basis exist for any such litigation.
4. REPRESENTATIONS AND WARRANTIES OF PURCHASER. Purchaser
hereby represents and warrants to Seller that the following statements
are true and correct as of the Effective Date and as of the Closing Date.
4.1 Organization, Standing and Corporate Power. Purchaser
is a duly organized corporation, validly existing and in good standing
under the laws of the State of Delaware, and has all requisite corporate
power and authority to own or lease and operate its properties and to
carry on the business related to the Purchased Assets as proposed to be
conducted.
4.2 Due Authorization and Binding Effect. Purchaser has
all requisite corporate power and full legal right to enter into this
Agreement and to perform all of its agreements and obligations under this
Agreement. This Agreement has been, and as of the Effective Date will
be, executed and delivered by Purchaser and, assuming execution and
delivery by Seller, constitutes the legal, valid, and binding obligation
of Purchaser enforceable against Purchaser in accordance with its terms
except as the enforceability thereof may be limited by the application of
bankruptcy, insolvency, moratorium, or similar laws affecting the rights
of creditors generally or judicial limits on the right of specific
performance or other equitable principles.
4.3 Effect of Agreement; Consents. The execution and
delivery of this Agreement by Purchaser does not, and the consummation of
the transactions contemplated hereby and compliance with the provisions
hereof will not, conflict with, result in a breach of, constitute a
default (with or without notice or lapse of time, or both) under or
violation of, or result in the creation of any lien, charge or
encumbrance pursuant to any order, rule, law or regulation of any court
or governmental authority, foreign or domestic, or any provision of any
material agreement, instrument, understanding, order, judgment or decree
to which Purchaser is a party or by which Purchaser is bound. No consent
of any third party or any governmental authority is required to be
obtained on the part of Purchaser to permit the consummation of the
transactions contemplated by this Agreement.
5. COVENANTS OF SELLER.
5.1 Access to Documents. If, on or before the Closing
Date, Purchaser wishes to be furnished with additional information or
documents relating to the Purchased Assets, for the purposes of
Purchaser's due diligence, and if such information or documents are in
the possession of Seller and can reasonably be furnished to Purchaser,
Seller shall, upon written request therefor, promptly furnish such
information or documents to Purchaser.
5.2 Operation of Business Prior to Closing.
5.2.1 During the period from the Effective Date through
the Closing Date ("Pre-Closing Period"), Seller shall use all
reasonable efforts to operate the business as heretofore conducted and to
ensure that it preserves intact its current business organization, keeps
available the services of its current officers and other employees and
maintains its relations and goodwill with all suppliers, customers,
landlords, creditors, licensors, licensees, employees and other persons
having business relationships with Seller.
5.2.2 During the Pre-Closing Period, Seller shall not
enter into or become bound by, or permit any of the Purchased Assets to
become bound by, any contract without the express written consent of
Purchaser, except for the acceptance of customer orders and the placement
of orders with vendors executed in the normal course of business and in
accordance with past practice; and Seller shall keep in full force or
renew all insurance policies.
5.3 Operation of Plant After Closing.
5.3.1 During the period from the Closing Date through
the Plant Closing Date (the "Transition Period"), Seller shall allow
Purchaser to take possession of the Plant and to continue to operate the
Business from the Plant while Purchaser is integrating the Business with
its business operations.
5.3.2 During the Transition Period, Purchaser shall
comply with all obligations of Seller under the lease (the "Plant
Lease") with ProLogis Trust (f.k.a. Security Capital Industrial Trust,
"Lessor"), except that Seller shall continue to make timely payments of
all rent and additional rent required by the terms of the Plant Lease;
provided that, pursuant to Section 6.3.2 of this Agreement, Purchaser
shall reimburse Seller for all such rent and additional rent related to
the Plant Lease incurred by Seller during the Transition Period.
5.3.3 On or before the Closing Date, Seller shall
deliver to Purchaser all required documentation reasonably requested by
Purchaser to evidence Lessor's consent to Purchaser's occupation of the
Plant and operation of the Business from the Plant during the Transition
Period.
5.4 Plant Closing. Seller shall pay (i) all costs and
expenses associated with closing the Plant and returning possession of
the Plant to Lessor in acceptable condition and (ii) any early
termination, lease buyout or similar payment required by the Plant Lease
upon returning possession to the Lessor.
5.5 Employment Offers After Closing. Seller acknowledges
that (i) Seller's employees identified on Exhibit G (the "Employees")
shall be offered employment with Purchaser after the Closing and (ii) in
connection therewith, in accordance with a mutual agreement among
Purchaser and the Employees, the Employees will provide services to
Purchaser in connection with Purchaser's operation of the Business.
5.6 Employment Liability. Seller shall comply with and be
responsible for all obligations to its employees with respect to the
termination of such employees following the Closing Date or the Plant
Closing Date.
5.7 Cooperation. Seller will take all reasonable actions
necessary to comply promptly with all legal requirements which may be
imposed with respect to the consummation of the transactions contemplated
by this Agreement and will promptly cooperate with and furnish
information to Purchaser in connection with any such requirements imposed
upon Purchaser in connection with the consummation of the transactions
contemplated by this Agreement. Seller will take all reasonable actions
necessary to obtain (and will cooperate with Purchaser in obtaining) any
consent, approval, order or authorization of, or any registration,
declaration or filing with, any governmental entity, domestic or foreign,
or other person, required to be obtained or made by Seller (or by
Purchaser) in connection with the taking of any action contemplated by
this Agreement.
5.8 Covenant Not to Compete with Purchaser. Each of Seller
and Founders agrees that, effective as of the Closing Date and for a
period of three (3) years thereafter, it shall not, without the written
consent of Purchaser, directly or indirectly provide any service that
competes with the Business purchased by Purchaser from Seller, including
the production and/or distribution of pastas and/or sauces, or any like
or similar activities in the geographic markets where Purchaser operates
its business; provided that, the freight activities of Koolpac shall not
be deemed a violation of this Section 5.8 of this Agreement. Whenever
possible, each provision of this Section 5.8 shall be interpreted in such
manner as to be effective and valid under applicable law but if any
provision of this Section shall be prohibited by or invalid under
applicable law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such
provision. If any provision of this Section 5.8 shall, for any reason,
be judged by any court of competent jurisdiction to be invalid or
unenforceable, such judgment shall not affect, impair or invalidate the
remainder of this Section 5.8 but shall be confined in its operation to
the provision of this Section 5.8 directly involved in the controversy in
which such judgment shall have been rendered. In the event that the
provisions of this Section 5.8 should ever be deemed to exceed the time
or geographic limitations permitted by applicable laws, then such
provision shall be reformed to the maximum time or geographic limitations
permitted by applicable law.
5.9 Public Announcements. Purchaser and Seller shall
attempt in good faith to consult with each other prior to either party
issuing any press release or otherwise making any public statement with
respect to this Agreement, or the other transactions contemplated hereby,
shall provide to such other party for review a copy of any such press
release or statement, and shall not issue any such press release or make
any such public statement prior to attempting in good faith such
consultation and review, unless required by applicable law.
6. COVENANTS OF PURCHASER.
6.1 Access to Documents. If, after the Closing Date,
(i) in order to properly prepare its tax returns or other documents or
reports required to be filed with governmental authorities or its
financial statements; (ii) in connection with any threatened or pending
litigation or claim which involves or may involve the Business or sale of
the Business; or (iii) for any other reasonable purpose, it is necessary
that Seller be furnished with additional information or documents
relating to the Purchased Assets and such information or documents are in
Purchaser's possession, and can reasonably be furnished to Seller,
Purchaser shall, upon written request thereof, promptly furnish such
information or documents to Seller. Seller shall reimburse Purchaser for
the cost of copying or shipping any requested documents.
6.2 Cooperation. Prior to and following the Closing Date,
Purchaser will take all reasonable actions necessary to comply promptly
with all legal requirements which may be imposed with respect to the
consummation of the transactions contemplated by this Agreement and will
promptly cooperate with and furnish information to Seller in connection
with any such requirements imposed upon Seller in connection with the
consummation of the transactions contemplated by this Agreement. Prior
to and following the Closing Date, Purchaser will take all reasonable
actions necessary to obtain (and will cooperate with Seller in obtaining)
any consent, approval, order or authorization of, or any registration,
declaration or filing with, any governmental entity, domestic or foreign,
or other person, required to be obtained or made by Purchaser (or by
Seller) in connection with the taking of any action contemplated by this
Agreement.
6.3 Plant Closing.
6.3.1 Purchaser shall give Seller prompt notice of its
intention to close the Plant, but in no event shall such notice be less
than sixty (60) days prior to the date on which Purchaser intends to
close and vacate the Plant; provided that, if Purchaser gives less than
sixty (60) days notice, Purchaser shall pay any pro rata portion of any
fee incurred by Seller under the Plant Lease as a result of Purchaser
giving less than sixty (60) days notice of its intention to close and
vacate the Plant.
6.3.2 Prior to the Plant Closing Date, Purchaser shall
(i) pay Seller a sum equal to $50,000, less any Extraordinary Costs
(defined below) that Purchaser demonstrates it incurred in vacating the
Plant, less any bonus (the "Continuation of Employment Bonus") paid to
Employees as set forth in Exhibit H and previously approved by Seller,
plus an amount equal to all sums paid by Seller to Lessor or any third
party under and pursuant to the Plant Lease and not previously reimbursed
(the "Rent Reimbursements") during the Transition Period (the "Plant
Closing Payment") to help Seller cover expenses incurred pursuant to
Section 5.4 above, (ii) remove all property and equipment from the Plant,
and (iii) clean the Plant so that the condition of the Plant satisfies
requirements of the Plant Lease. "Extraordinary Expenses" mean the
reasonable and necessary costs incurred by Purchaser to repair damages to
the premises occasioned by its removal of trade fixtures that were
affixed to the Plant, provided that Purchaser has previously notified
Seller and received Seller's approval to effect such removal, but
Extraordinary Expenses do not include the usual and ordinary expenses of
moving, including the reasonable and necessary costs to leave the Plant
broom clean.
6.4 Earnout. Within five (5) days following the
termination of the Existing Business Earnout Period and the New Business
Earnout period, respectively, Purchaser shall prepare and deliver an
accounting of the Existing Business Earnout Amount and the New Business
Earnout Amount and shall provide Seller access to Purchaser's books and
records used to prepare the accounting.
6.5 Operation of Business by Purchaser After Closing Date.
From and after the Closing Date, until the Existing Business Earnout
Amount and the New Business Earnout Amount have been calculated,
Purchaser shall use reasonable efforts to operate the Business
substantially as the Business had been conducted prior to the Closing
Date to maintain and grow existing accounts.
7. CONDITIONS PRECEDENT TO CLOSING.
7.1 Conditions to Obligations of Purchaser. Except as
otherwise provided in this Agreement, all obligations of Purchaser under
this Agreement are subject to the satisfaction, on or prior to the
Closing Date, of each of the following conditions, any one or more of
which may be waived in writing by Purchaser:
7.1.1 Representations and Warranties. The
representations and warranties of Seller contained in this Agreement
shall be true and correct when made and shall be true and correct in all
material respects on the Closing Date with the same force and effect as
if they had been made on and as of the Closing Date.
7.1.2 Performance of Obligations. Seller shall have
performed, satisfied and complied with all covenants required by this
Agreement to be performed and complied with or satisfied by it on or
before the Closing Date.
7.1.3 Corporate Proceedings of Seller. All corporate
and other proceedings required to authorize the execution, delivery, and
performance of this Agreement by Seller shall have been conducted.
7.1.4 Approval of Documentation. The form and
substance of all certificates, instruments, schedules, and other
documents delivered by Seller to Purchaser under this Agreement shall be
reasonably satisfactory to Purchaser and its counsel.
7.1.5 Legal Opinion. Purchaser will have received an
opinion from Seller's counsel satisfactory to Purchaser substantially in
the form attached hereto as Exhibit I.
7.1.6 Certificate of Good Standing. Purchaser will
have received from Seller certificates from the State of Oregon and the
State of Texas dated as close to the Closing as possible certifying that
the Seller is existing or in good standing, as applicable, with each
state's Secretary of State.
7.1.7 Consents. All Consents (including consents
relating to the assignment of a Material Contract) required to be
obtained in connection with the sale of the Purchased Assets and the
other transactions contemplated by this Agreement shall have been
obtained and shall be in full force and effect, except where the failure
to obtain such Consents would not reasonably be expected to have a
material adverse effect on the Business.
7.2 Conditions to Obligations of Seller. Except as
otherwise provided in this Agreement, all obligations of Seller under
this Agreement are subject to the satisfaction, on or prior to the
Closing Date, of each of the following conditions, any one or more of
which may be waived in writing by Seller.
7.2.1 Representations and Warranties. The
representations and warranties of Purchaser contained in this Agreement
shall be true and correct when made and shall be true and correct in all
material respects on the Closing Date with the same force and effect as
if they had been made on and as of the Closing Date.
7.2.2 Performance of Obligations. Purchaser shall have
performed, satisfied and complied with all covenants required by this
Agreement to be performed and complied with or satisfied by it on or
before the Closing Date.
7.2.3 Authorization Proceedings of Purchaser. All
proceedings required to authorize the execution, delivery and performance
of this Agreement by Purchaser shall have been conducted.
7.2.4 Approval of Documentation. The form and
substance of all instruments, schedules, and other documents delivered by
Purchaser to Seller under this Agreement shall be reasonably satisfactory
to Seller.
8. THE CLOSING.
8.1 Time and Place. The Closing shall take place at the
offices of Xxxx Xxxx Xxxx & Freidenrich LLP, 000 Xxxxxxxx Xxxxxx, Xxxx
Xxxx, Xxxxxxxxxx 00000-0000, or at such other place as Purchaser and
Seller may agree, at 1:00 p.m., local time, on the Effective Date, March
12, 1999 or such later date as Purchaser and Seller may agree (the
"Closing Date").
8.2 Seller's Actions at the Closing. At the Closing,
Seller will deliver to Purchaser the following instruments and documents:
8.2.1 bills of sale and assignment conveying, in the
aggregate, ownership of all of the Purchased Assets to Purchaser;
8.2.2 an opinion from Seller's counsel satisfactory to
Purchaser substantially in the form attached hereto as Exhibit I;
8.2.3 such additional duly executed documents of
assignment or transfer of title as may be necessary to transfer and
assign to Purchaser the Purchased Assets and to permit Purchaser to
register ownership of any of the Purchased Assets in its own name;
8.2.4 a good standing certificate from the Secretary of
State of the State of Texas and a certificate of existence from the
Secretary of State of the State of Oregon for Seller as of a date not
earlier than five (5) business days before the Closing;
8.2.5 purchaser shall have been provided with a
certificate executed on behalf of Seller by the President and Chief
Financial Officer of Seller and the Founders to the effect that as of the
Closing Date:
(i) all representations and warranties made by
Seller under this Agreement are true and complete in all material
respects; and
(ii) all covenants and conditions of this
Agreement to be performed by Seller on or before such date have been so
performed in all material respects.
8.2.6 termination statements for all outstanding UCC
financing statements, if any, relating to the Purchased Assets;
8.2.7 all third party consents (including without
limitation from Material Contract parties and governmental authorities)
necessary for consummation of the transactions contemplated hereby,
except that a consent from Cucina to the transactions contemplated by
this Agreement shall not be required to be received by Seller and
delivered to Purchaser prior to the Closing;
8.2.8 all documents relating to the Intellectual
Property identified on Exhibit A-1; and
8.2.9 such other documents and instruments as shall be
reasonably requested by Purchaser to effect the transactions contemplated
hereby.
8.3 Purchaser Actions at the Closing. At the Closing,
Purchaser will deliver to Seller (a) by wire transfer to an account
specified by Seller the amount required by Section 2.2.1 above and (b)
executed option agreements covering the Options to Messrs. Ness, Gistaro
and Xxxxxxxx.
9. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION.
9.1 Survival of Representations. The representations and
warranties made by the parties in Sections 3 and 4 of this Agreement
shall survive the Closing until termination of the New Business Earnout
Period and shall in no manner be limited by any investigation of the
subject matter thereof made by or on behalf of any of the parties hereto
or by the satisfaction of any condition to the Closing.
9.2 Indemnification by Seller and Founders. Provided the
Closing occurs, Seller and Founders shall indemnify and save harmless
Purchaser, its directors, officers and agents from and against any and
all losses, liabilities, expenses (including, without limitation, fees
and disbursements of counsel and expenses of investigation), claims,
liens or other obligations whatsoever (hereinafter individually a
"Claim" or collectively "Claims") that Purchaser or any such
indemnified party may be required to pay by virtue of or as a result from
(i) the breach of any representation, warranty or covenant made by the
Founders or Seller in this Agreement or otherwise made in writing, by an
officer of Seller, and delivered by Seller to Purchaser in connection
with the transactions contemplated hereby; and (ii) any failure of Seller
to perform or comply with any of its covenants and agreements set forth
herein or in any other document executed in connection with the
transactions contemplated hereby.
9.3 Indemnification by Purchaser. Provided the Closing
occurs, Purchaser shall indemnify and save harmless Seller, its
directors, officers and agents and the Founders against any Claim that
Seller or any such indemnified party may be required to pay by virtue of
or as a result from (i) the breach of any representation, warranty, or
covenant made by Purchaser in this Agreement or otherwise made in
writing, by an officer of Purchaser, and delivered by Purchaser to Seller
in connection with the transactions contemplated hereby; and (ii) the
operation of the Business following the Closing.
9.4 Conditions Precedent to Liability. The following are
conditions precedent to any liability of the Founders or Seller under
paragraph 9.2 or Purchaser under paragraph 9.3:
9.4.1 Purchaser or Seller shall give the other party
prompt written notice of any event or assertion of which it has knowledge
concerning any Claims and as to which it may request indemnification and
such notice must be received within twelve (12) months from the Closing
Date, or such claims shall be barred.
9.4.2 Purchaser and Seller shall cooperate with and
assist each other in defending or settling the Claims.
9.4.3 Each Party shall permit the defending party to
control the defense or settlement of the Claims, including selection of
counsel, provided that such counsel shall be reasonably satisfactory to
the other party. Either party may maintain separate counsel at its own
cost and expense in connection with any Claim.
9.4.4 In no event shall either party settle a Claim
without the prior written approval of other party, which approval shall
not be unreasonably withheld.
9.5 Survival of Indemnification Obligations. The
indemnification obligations of the parties under Section 9.2 and Section
9.3 shall continue in full force and effect as to any Claim as to which
notice has been given pursuant to Section 9.4.1 above until such Claim
has been settled either by mutual agreement of the parties concerned, by
arbitration in accordance with the provisions of this Agreement or, in
the event of a Claim resulting from legal action by a third party, by the
final order, decree or judgment of a court of competent jurisdiction in
the United States of America (the time for appeal having expired with no
appeal having been taken).
9.6 Resolution of Disputes. Any dispute over an indemnity
claim under Section 9.2 or 9.3 above (a "Contested Claim") shall be
settled by arbitration in Monterey County, California and, except as
herein specifically stated, in accordance with Section 11.11 below.
Purchaser and Seller agree that any of the parties may elect to postpone
the arbitration of all Contested Claims until one (1) year from the
Closing in order to consolidate the arbitration of all Contested Claims.
9.7 Holdback. As security for Seller's and Founders'
indemnification obligations under Section 9.2 of this Agreement, Seller
and Founders agree that if a Claim is asserted prior to the termination
of either the Existing Business Earnout Period or the New Business
Earnout Period, then Purchaser shall, subject to Section 9.5 of this
Agreement, be entitled to delay any payments due under Sections 2.2.3 or
2.2.4 of this Agreement until resolution of the Claim and Purchaser shall
be entitled to deduct any payment required to settle or otherwise resolve
a Claim that is not a Contested Claim, or to settle or resolve a
Contested Claim concerning which final arbitration has been rendered,
from any amount due to Seller under Sections 2.2.3 or 2.2.4 of this
Agreement. Such holdback shall be Purchaser's exclusive remedy for any
Claim timely asserted pursuant to Section 9 of this Agreement.
10. TERMINATION.
10.1 Mutual Agreement. This Agreement may be terminated and
abandoned at any time prior to the Closing Date by the written consent of
all parties hereto, in which case the parties shall not have any
obligation whatsoever to each other with respect to this Agreement, the
transactions provided for in this Agreement, or expenses incurred in
connection with or in contemplation of such transactions; provided that,
the Confidentiality Agreement executed by Seller and Purchaser on March
19, 1998 shall remain in full force and effect and survive any
termination of this Agreement.
10.2 Termination by Purchaser. This Agreement may be
terminated by Purchaser in the event that any one or more of the
conditions set forth in Section 7.1 (Conditions to Obligations of
Purchaser) are not satisfied on or before the Closing Date, unless
Purchaser waives any such condition upon such terms, if any, that
Purchaser deems appropriate.
10.3 Termination by Seller. This Agreement may be
terminated by Seller in the event that any one or more of the conditions
set forth in Section 7.2 (Conditions to Obligations of Seller) are not
satisfied on or before the Closing Date, unless Seller waives any such
condition upon such terms, if any, that Seller deems appropriate.
11. GENERAL PROVISIONS.
11.1 Assignment. Neither this Agreement nor any right of
any party under it may be assigned by any party without the prior written
consent of the other parties, which consent shall not be unreasonably
withheld; except, Purchaser may assign this Agreement to any parent,
subsidiary, or affiliate or to any third party which succeeds by
operation of law to, or purchases or otherwise acquires substantially all
of the assets of Purchaser and which assumes Purchaser's obligation
hereunder.
11.2 Expenses. The parties will each be responsible for
their own legal and accounting fees and expenses and any other expenses
in connection with the transactions contemplated hereby.
11.3 Notices and Representatives. Any notice or other
communication required or permitted to be given under this Agreement
shall be in writing and will be deemed effective when delivered in
person, when sent by confirmed facsimile, if promptly confirmed in
writing, on the third day after the day on which mailed by first class
mail from within the United States of America, or the day following
delivery to a national or international overnight courier service to the
following addresses or to such other address as either party may specify
in writing to the other party:
To Seller at:
Frescala Foods, Inc.
0000 Xxxxx Xxxxxx Xxxxxx
Xxxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxx
Facsimile: (000) 000-0000
with a copy to:
Xxxxxx & Xxxxxx, X.X.
Xxxxx 000
Xxx Xxxxxx Xxxxxxxx
0000 X.X. Xxxxxxxx
Portland, OR 97205
Attention: Xxxxx Xxxxxx
Facsimile: (000) 000-0000
To Xx. Xxxx:
c/o Frescala Foods, Inc.
0000 Xxxxx Xxxxxx Xxxxxx
Xxxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxx
Facsimile: (000) 000-0000
To Xx. Xxxxxxx:
Xxxxxx Xxxxxxx
2 Xxxxx
Xxx Xxxxxxx, XX 00000
Facsimile: (000) 000-0000
To Purchaser at:
Monterey Pasta Company
0000 Xxxxxxx Xxxxxx
Xxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxxx
Facsimile: (000) 000-0000
with copy to:
Xxxx Xxxx Xxxx & Freidenrich LLP
000 Xxxxxxxx Xxxxxx
Xxxx Xxxx, XX 00000
Attention: Xxxx Xxxx
Facsimile: (000) 000-0000
11.4 Entire Agreement and Modification. This Agreement
(including its Exhibits and Schedules) constitutes the entire agreement
of Purchaser and Seller relating to the purchase and sale of the
Purchased Assets and supersedes any and all prior and contemporaneous
negotiations, correspondence, understandings, letters of intent and
agreements in principle between them, whether written or oral, relating
to that subject matter. This Agreement (including its Exhibits and
Schedules) may only be amended by a written instrument signed by
Purchaser and Seller.
11.5 Governing Law. This Agreement will be governed by, and
construed under, the laws of the State of California without giving
effect to its conflict of law provisions. The parties hereto agree to
submit to the personal, but not exclusive, jurisdiction of the state and
federal courts in California with respect to the enforcement or
interpretation of this Agreement or the parties' obligations hereunder.
11.6 Waiver. Delay or failure to exercise any right or
remedy under this Agreement shall not impair such right or remedy or be
construed as a waiver thereof or as acquiescence in a default. Waiver of
any breach or failure of any term or condition of this Agreement shall
not be construed as a waiver of any subsequent breach or failure of the
same term or condition or a waiver of any other term or condition of this
Agreement.
11.7 Further Instruments. Each party shall execute and
deliver such further instruments and documents, and take such further
actions, as may be reasonably requested by the other after the Closing to
carry out the purposes of this Agreement.
11.8 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
11.9 Titles and Subtitles. The titles of the sections and
subsections of this Agreement are for convenience of reference only and
are not to be considered in construing this Agreement.
11.10 Separability. In case any provision of this Agreement
shall be declared invalid, illegal or unenforceable, the validity,
legality and enforceability of then remaining provisions shall not in any
way be affected or impaired thereby.
11.11 Arbitration. Any disputes between Purchaser and Seller
with respect to this Agreement shall be settled by binding, final
arbitration in Monterey County, California and in accordance with the
commercial arbitration rules of the American Arbitration Association then
in effect ("AAA Rules"). However, in all events, the following
arbitration provisions shall govern over any conflicting rules which may
now or hereafter be contained in the AAA Rules. Any judgment upon the
award rendered by the arbitrator may be entered in any court having
jurisdiction over the subject matter thereof. The arbitrator shall have
the authority to grant any equitable and legal remedies that would be
available.
11.11.1 Any such arbitration shall be conducted
before a single arbitrator who shall be compensated for his or her
services at a rate to be determined by the parties or by the American
Arbitration Association, but based upon reasonable hourly or daily
consulting rates for the arbitrator in the event the parties are not able
to agree upon his or her rate of compensation.
11.11.2 The AAA Rules for the selection of the
arbitrator shall be followed.
11.11.3 Purchaser and Seller, as applicable, shall
share equally in the initial compensation to be paid to the arbitrator in
any such arbitration and the costs of transcripts and other normal and
regular expenses of the arbitration proceedings; provided, however, that
the arbitrator shall have the discretion to grant to the prevailing party
in any arbitration an award of attorneys' fees and costs, and all costs
of arbitration.
11.11.4 The parties shall be entitled to conduct
discovery proceedings in accordance with the provisions of the Federal
Rules of Civil Procedure, subject to any limitation imposed by the
arbitrator.
11.11.5 For any claim submitted to arbitration,
the burden of proof shall be as it would be if the claim were litigated
in a judicial proceedings.
11.11.6 Upon the conclusion of any arbitration
proceedings hereunder, the arbitrator shall render findings of fact and
conclusions of law and a written opinion setting forth the basis and
reasons for any decision reached by him or her and shall deliver such
documents to each party to this Agreement along with a signed copy of the
award.
11.11.7 Except with respect to Section 5.8 hereof,
the arbitrator chosen in accordance with these provisions shall not have
the power to alter, amend or otherwise affect the terms of these
arbitration provisions or the provisions of this Agreement, the
Consulting Agreements or the Broker Agreement.
11.11.8 Arbitration shall be the sole and
exclusive remedy of the parties.
11.11.9 The parties acknowledge that no other
action need be taken by Purchaser or Seller before proceeding directly in
accordance with the provisions of this Agreement.
[The remainder of this page intentionally left blank]
IN WITNESS WHEREOF, the signatories warrant that they have the
authority to sign on behalf of their respective companies and hereby have
executed this Agreement on behalf of their respective companies as of the
date first above written.
MONTEREY PASTA COMPANY FRESCALA FOODS, INC.
By:\s\ R. Xxxxx Xxxxxx By: \s\ Xxxxxx X. Xxxx
---------------------------- ------------------------------
Signature Signature
R. Xxxxx Xxxxxx Xxxxxx X. Xxxx
---------------------------- ------------------------------
Printed Name Printed Name
Title: President and CEO Title: President
By:\s\ Xxxxxxx X. Xxxxxxxx By: Xxxxx X. Xxxxxx
---------------------------- ------------------------------
Signature Signature
Xxxxxxx X. Xxxxxxxx Xxxxx X. Xxxxxx
---------------------------- ------------------------------
Printed Name Printed Name
Title: Chief Financial Officer Title: Secretary Treasurer
FOUNDERS
By: \s\ Xxxxxx X. Xxxx
------------------------------
Signature
Xxxxxx X. Xxxx
------------------------------
Printed Name
By: \s\ Xxxxxx X. Xxxxxxx
------------------------------
Signature
Xxxxxx X. Xxxxxxx
------------------------------
Printed Name
EXHIBIT INDEX
Exhibit A
Purchased Assets
Exhibit B
Form of Consulting Agreement
Exhibit C
Broker Agreement
Exhibit D
Existing Business Customers
Exhibit E
New Business Customers
Exhibit F
Form of Option
Exhibit G
Employees
Exhibit H
Continuation of Employment, Bonus
Exhibit I
Legal Opinion
