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EXHIBIT 2.3
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement"), dated October 16,
1996, is by and between the stockholders of THE BREAD SHOP, a California
corporation (the "Company"), as set forth on SCHEDULE 1 hereto (collectively
referred to herein as "Sellers" and each individually as a "Seller"), and TBS
ACQUISITION CORPORATION, a Delaware corporation ("Buyer"). Capitalized terms
used but not otherwise defined herein shall have the meaning set forth in
Article VIII.
R E C I T A L S
A. Sellers collectively own all of the outstanding shares of
capital stock of the Company, consisting of 9,771 shares of Common Stock, par
value $1.00 per share, of the Company (the "Common Stock"), with each Seller
owning the number of shares set forth opposite such Seller's name on SCHEDULE 1
hereto.
X. Xxxxxxx desire to sell to Buyer, and Buyer desires to purchase
from Sellers, all of the Common Stock upon the terms and subject to the
satisfaction of the conditions set forth herein.
A G R E E M E N T
In consideration of the recitals and of the mutual covenants of the
parties hereinafter expressed, it is hereby agreed as follows:
ARTICLE I
PURCHASE AND SALE OF STOCK
1.1. TRANSFER OF STOCK. Upon the terms and subject to the
satisfaction of the conditions set forth herein, at the Closing, Sellers shall
sell, transfer and deliver to Buyer, and Buyer shall purchase from Sellers, all
of the Common Stock and good title thereto, free and clear of all Liens
whatsoever. At the Closing, Sellers shall deliver to Buyer the certificates
representing the Common Stock, duly endorsed or accompanied by stock powers
duly executed, with all necessary stock transfer stamps attached thereto and
canceled.
1.2. CONSIDERATION. Subject to adjustment as provided in Section
1.4 hereof, the purchase price to be paid by Buyer for all the Common Stock
shall be an aggregate amount of $8,650,000 (the "Purchase Price"). On the
Closing Date and subject to the terms and conditions set forth in this
Agreement and in consideration of the sale, assignment, transfer and delivery
of the Common Stock referred to in Section 1.1, Buyer will pay to Sellers (by
wire transfer of immediately available funds to the account or accounts
designated by each Seller) an aggregate
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amount (the "Net Amount") equal to (A) the Purchase Price minus (B) the sum of
(i) the Escrow Amount (as defined in Section 1.3 hereof) and (ii) the aggregate
amount of Company Transaction Costs paid by the Company at or prior to the
Closing, which Net Amount shall be paid pro rata to each Seller based upon such
Seller's proportionate ownership interest in the Common Stock as set forth on
SCHEDULE 1 hereof.
1.3. ESCROW. On the Closing Date, (a) Buyer, Sellers, and a
mutually acceptable escrow agent (the "Escrow Agent"), shall enter into an
Escrow Agreement dated as of the Closing Date substantially in the form
attached hereto as EXHIBIT A (the "Escrow Agreement") and (b) $850,000 of the
Purchase Price (together with any interest and investment earnings thereon, the
"Escrow Amount") shall be delivered to the Escrow Agent. The Escrow Amount
shall be set aside and held by the Escrow Agent and distributed to Sellers or
Buyer at the times, and upon the terms and conditions, set forth in the Escrow
Agreement.
1.4. ADJUSTMENTS TO PURCHASE PRICE. The Purchase Price shall be
subject to adjustment after the Closing as specified in this Section 1.4.
(a) Closing Balance Sheet. As promptly as practicable,
but in any event within one hundred and eighty (180) calendar days following
the Closing Date, Buyer shall deliver to Sellers' Representative a draft
balance sheet of the Company as of the Closing Date (the "Draft Closing Balance
Sheet"). The Draft Closing Balance Sheet shall be prepared in accordance with
GAAP prior to the application of purchase accounting to reflect the acquisition
of the Company pursuant to this Agreement. Buyer shall give Sellers'
Representative access to any nonproprietary notes, workpapers, drafts or other
materials used by the Company or by Buyer's accountants in connection with the
preparation of the Draft Closing Balance Sheet.
(b) Disputes. Sellers' Representative may dispute any
amounts reflected on the Draft Closing Balance Sheet by notifying Buyer in
writing of each disputed item, specifying the amount thereof in dispute and
setting forth, in reasonable detail, the basis for such dispute, within fifteen
(15) Business Days of Buyer's delivery of the Draft Closing Balance Sheet to
Sellers' Representative (the "Dispute Letter"). Items not included in the
Dispute Letter may not be disputed by Sellers' Representative. Only potential
adjustments that satisfy the materiality standards that would be used in an
audit of the Company performed in accordance with generally accepted auditing
standards may be disputed by Sellers' Representative and an adjustment will be
allowed by the Independent Auditor (as hereinafter defined) only if such
adjustment would have been made by such Independent Auditor in an audit of the
Company performed by the Independent Auditor in accordance with generally
accepted auditing standards. In the event of such a dispute, Sellers'
Representative and Buyer shall attempt to reconcile their differences in good
faith, and any resolution by them as to any such remaining disputed amounts
shall be final, binding and conclusive on the parties hereto. Sellers'
Representative shall give Buyer and its representatives access to any
nonproprietary notes, workpapers, drafts or other materials used by Sellers'
Representative or its representatives in connection with the preparation of the
Dispute Letter. If Sellers' Representative and Buyer are unable to reach a
resolution within fifteen (15) Business Days after receipt by Buyer of the
Dispute Letter, Buyer shall submit the items remaining in dispute for
resolution to KPMG Peat Marwick (other than any office of KPMG Peat Marwick
with which any of Buyer, Sellers, or any of their affiliates has a business
relationship) (the "Independent Auditor"), which shall, within thirty (30)
Business Days after
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such submission, determine and report to Sellers' Representative and Buyer upon
such remaining disputed items, and such report shall be final, binding and
conclusive on Sellers and Buyer. The fees and disbursements of the Independent
Auditor shall be allocated to Sellers and Buyer in the same proportion that the
aggregate amount of the items submitted to the Independent Auditor and
unsuccessfully disputed by Sellers' Representative (as finally determined by
the Independent Auditor) bears to the total amount of such disputed items so
submitted and finally determined.
(c) Purchase Price Adjustment. The Draft Closing Balance
Sheet shall be adjusted to reflect the resolution of all disputes pursuant to
Section 1.4(b) (as so adjusted, the "Closing Balance Sheet"). The Closing
Balance Sheet shall be deemed final for the purpose of this Section 1.4(c) upon
the earlier of (i) the failure of Sellers' Representative to notify Buyer of a
dispute within fifteen (15) Business Days of Buyer's delivery of the Draft
Closing Balance Sheet to Sellers' Representative and (ii) the resolution of all
disputes pursuant to the provisions of Section 1.4(b). In the event that
$877,868.43 exceeds Working Capital, then the Purchase Price shall be adjusted
downward in an amount equal to such excess and Sellers shall pay within five
(5) Business Days following the Closing Balance Sheet being deemed final, such
amount to Buyer by wire transfer of immediately available funds to the account
designated by Buyer. As used herein, "Working Capital" means the aggregate net
book value as of the Closing Date of the Company's current assets as reflected
in the Closing Balance Sheet (including, but not limited to, accounts
receivable, inventory and prepaid assets, but expressly excluding, however,
positive cash balances, marketable securities and deferred tax assets), minus
the net book value as of the Closing Date of the Company's current liabilities
as reflected in the Closing Balance Sheet (including, but not limited to, trade
accounts payable, accrued expenses, accrued payroll and taxes and negative cash
balances or other current borrowings, but expressly excluding, however,
accruals or obligations for payments of bonuses or profit sharing payable to or
on behalf of employees of the Company and notes or other indebtedness payable
to shareholders of the Company).
ARTICLE II
CLOSING
2.1. CLOSING. Unless this Agreement shall have been terminated and
the transactions herein contemplated shall have been abandoned pursuant to
Section 7.1, the closing ("Closing") of the transactions provided for herein
shall take place at the offices of Xxxxxxx & Xxxxxx, Three First National
Plaza, Chicago, Illinois, on October 31, 1996, or at such other date and place
as the parties may mutually agree in writing. The date of the Closing is
referred to herein as the "Closing Date."
2.2. BONUS PAYMENTS BY COMPANY.
(a) (i) Buyer acknowledges that the Company is
obligated to pay bonuses to Damon, Xxxxx and Xxxxxxxx, in an aggregate amount
equal to $758,436. On or before the Closing Date, the Company shall pay such
bonuses, less the aggregate amount of all advances paid in respect thereof,
prior to the Closing Date, in accordance with the amounts set forth next to
such person's name on SCHEDULE 2.2(a).
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(ii) Sellers agree that neither Buyer nor the
Company shall have any other liability or obligation to Sellers for Bonuses.
(b) Other Bonus and Profit Sharing Plans. Buyer
acknowledges that the Company maintains (i) a bonus program for non-officer
employees of the Company and (ii) a profit sharing plan for employees of the
Company. Buyer agrees that it will pay bonuses of $159,700, in the aggregate,
under such bonus program and make a contribution of $241,362, in the aggregate,
under such profit sharing plan for the period from October 28, 1995 through the
Closing Date (the "Interim Period") in accordance with the terms of such
program and plan and the past practices of the Company. Such bonuses will be
made to the employees of the Company listed on SCHEDULE 2.2(B)(I), in the
amount set forth next to such employee's name on SCHEDULE 2.2(B)(I); provided,
however, that no employee (other than Xxxxxx Xxxxxxxx) will be paid a bonus
unless such employee remains a full-time employee of the Company through the
Closing. Amounts will not be reallocated to other employees in the event that
any employee listed on SCHEDULE 2.2(B)(I) is not a full-time employee through
the Closing. Such profit sharing contribution shall be allocated in accordance
with the allocation formula set forth in the profit sharing plan of the
Company. At or prior to the Closing, Sellers shall deliver a certificate to
Buyer setting forth the amount of the profit sharing contribution to be
allocated to each employee of the Company. Employees of the Company will not
be entitled to any other bonuses or profit sharing contributions.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1. REPRESENTATIONS AND WARRANTIES OF SELLERS. Each of Sellers
hereby represents and warrants to Buyer as of the date hereof and, except for
changes expressly permitted or contemplated by this Agreement, as of the
Closing Date as follows:
3.1.1. TITLE TO STOCK. Each Seller owns, beneficially and
of record, and has good title to, the number of shares of the Common Stock
shown opposite the name of such Seller on SCHEDULE 1 hereto, free and clear of
any Liens. There are no existing contracts, options, commitments or rights to
acquire such Common Stock from such Seller. Upon the delivery of and payment
for the Common Stock at the Closing as provided for in this Agreement, Buyer
will acquire good and valid title thereto, free and clear of any Liens.
3.1.2. VALID AND BINDING AGREEMENT. Each Seller is
competent and has the authority to execute and deliver this Agreement and the
Escrow Agreement, to perform its obligations hereunder and thereunder and to
consummate the transactions contemplated hereby and thereby. The spouse, if
any, of each Seller has consented to the execution and delivery of this
Agreement and the consummation of the actions contemplated hereby by such
Seller. With respect to each Seller that is a trust, the trustee of such trust
has the authority to execute and deliver this Agreement, and to consummate the
transactions contemplated hereby, on behalf of such Seller. This Agreement
constitutes, and upon execution thereof the Escrow Agreement will constitute,
the valid and legally binding obligation of each Seller, enforceable against
each such Seller in accordance with its terms.
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3.1.3. NO CONFLICTS. The execution and delivery of this
Agreement and the Escrow Agreement by each Seller and the consummation by each
Seller of the transactions contemplated hereby and thereby, (i) does not and
will not violate any provision of law, rule, regulation, order, judgment, or
decree applicable to any Seller or the Company; (ii) does not and will not
require any consent or approval of, or filing with or notice to, any
Governmental Authority under any provision of law, rule or regulation
applicable to any Seller or the Company; (iii) does not and will not violate
any provision of the certificate or articles of incorporation, by-laws, trust
agreement or other organizational documents of any Seller (who is not an
individual) or the Company; (iv) does not and will not require any consent,
approval, or notice under, and will not conflict with, or result in the breach
or permit the termination of, or constitute a default (or an event, which
might, with the passage of time or the giving of notice or both, constitute a
default) under, or result in the acceleration of the performance by any Seller
or the Company under, any indenture, mortgage, deed of trust, lease, license,
franchise, contract, agreement, or other instrument to which any Seller or the
Company is a party or by which any of them, or any of their assets, are bound
or encumbered; (v) does not and will not result in the creation or imposition
of any Lien upon any of the assets of any Seller or the Company; (vi) does not
and will not result in the maturation or acceleration by reason of default or
otherwise of any Indebtedness or any other liability or obligation of Company
(or give others the right to cause such maturation or acceleration); and (vii)
does not and will not result in the termination of or loss of any material
right (or give others the right to cause such a termination or loss) under any
material agreement, contract, or instrument to which the Company is a party or
by which any of its assets or properties may be bound.
3.1.4. Corporate Existence and Qualification. The Company
is a corporation duly organized, validly existing and in good standing under
the laws of the State of California, and has full corporate power to carry on
its business as now conducted and to own or lease and to operate its
properties, as and in the locations where, such business is now conducted and
such properties are now owned, leased or operated. The Company is qualified as
a foreign corporation and is in good standing in each jurisdiction listed on
SCHEDULE 3.1.4, which includes each jurisdiction in which the nature of its
business or the properties owned or leased by it makes such qualification
necessary, except for such jurisdictions where the failure to so qualify could
not reasonably be expected to have a Material Adverse Effect. Sellers have
delivered to Buyer true, complete and correct copies of the certificate or
articles of incorporation, by- laws, and other organizational documents of the
Company. The minute books of the Company, as made available to Buyer and its
representatives, contain accurate and complete records of all meetings of, and
corporate actions taken by (including action taken by written consent) the
stockholders and board of directors (or committees thereof) of the Company. At
the Closing, all of the books and records of the Company, including, but not
limited to its minute books, will be in the possession of the Company.
3.1.5. Capitalization of the Company. The authorized
capital stock of the Company is 25,000 shares. The only issued and outstanding
shares of capital stock of the Company are 9,771 shares of Common Stock, all of
which are duly authorized, validly issued, fully paid and non-assessable.
There are no outstanding preemptive rights, subscriptions, warrants, options,
contracts, commitments, understandings, restrictions or calls or other rights
of any kind with regard to any shares of the Common Stock or any other capital
security of the Company of any kind, and there are no capital appreciation
rights, phantom stock plans,
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securities with profit participation rights or features, or similar obligations
or commitments of the Company except as provided in the Stock Redemption
Agreement, which shall be terminated prior to the Closing.
3.1.6. Subsidiaries of the Company. The Company has no
Subsidiaries. Other than as set forth on SCHEDULE 3.1.6 hereto, the Company
owns no interest of any kind in any other Person and has no agreement or
commitment to purchase or otherwise acquire any such interest.
3.1.7. Financial Statements. Sellers have delivered to
Buyer the Financial Statements. The Financial Statements are derived from the
books and records of the Company, have been prepared in accordance with GAAP
and are true, complete and correct in all material respects, and, except for
changes in accounting policies made to the August 23, 1996 Financial Statements
in order to conform with GAAP, have been prepared on a consistent basis with
previous periods. The August Financial Statements were prepared in accordance
with GAAP. Except for the absence of accruals for chargebacks and buy-backs to
accounts receivable attributable to promotional activities of the Company
("Charge-Backs") with respect to the Financial Statements (other than the
August Financial Statements), the balance sheets included in the Financial
Statements for the Company present fairly the financial position of the Company
as at the indicated dates thereof, and, except for Charge-Backs with respect to
the Financial Statements (other than the August Financial Statements), the
statements of income and statements of cash flows included in the Financial
Statements for the Company present fairly the results of operations and cash
flow of the Company for the respective periods indicated. The books of account
of the Company fairly reflect all transactions relating to the Company and all
items of income, expense, assets, liabilities and accruals of the Company.
3.1.8. Absence of Undisclosed Liabilities. The Company has
no Liabilities or obligations, either direct or indirect, matured or unmatured,
absolute, contingent, or otherwise, except:
(a) those Liabilities or obligations set forth on the
Latest Balance Sheet and not paid or discharged;
(b) the Assumed Obligations;
(c) those Liabilities or obligations incurred, consistent
with past business practice and as permitted hereby, in the ordinary course of
business since the date of the Latest Balance Sheet; and
(d) the Liabilities disclosed on SCHEDULE 3.1.8.
The Company has not paid or incurred any costs or expenses in connection with
the sale of the Company, including, but not limited to, the transactions
contemplated hereby and actions taken in contemplation thereof. For purposes
of this Agreement, the term "Liabilities" includes, without limitation, any
direct or indirect indebtedness, liability, guaranty, endorsement, claim,
dispute, loss, damage, deficiency, cost, expense, obligation, or
responsibility, fixed or unfixed, known or unknown, asserted or unasserted,
liquidated or unliquidated, secured or unsecured, contingent or otherwise.
Since June 21, 1996, the Company has not made payments of principal
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with respect to the notes representing Indebtedness of the Company to any of
Sellers or any person or entity designated by such Sellers (the "Seller Notes")
in excess of the aggregate amount of $560,000 plus interest accrued thereon at
the rate of 8% per annum.
3.1.9. Absence of Material Adverse Change. Since October
28, 1995, except as permitted, required, or specifically contemplated by this
Agreement or as described on SCHEDULE 3.1.9, the business of the Company has
been conducted in the ordinary course consistent with past practice, and there
has not been any event or events that has or have resulted, or could reasonably
be expected to, individually or in the aggregate with all such events, result
in a Material Adverse Effect. Without limiting the generality of the foregoing
sentence and except as permitted, required, or specifically contemplated by
this Agreement or listed on SCHEDULE 3.1.9, since October 28, 1995, there has
not been:
(a) any damage, destruction, or loss to the assets of the
Company outside the ordinary course of business;
(b) any mailing or authorization of any individual
capital expenditure by the Company in excess of $10,000 or the mailing or
authorization of capital expenditures by the Company of more than $100,000 in
the aggregate;
(c) any sale, transfer, or other disposition of assets or
properties, real, personal, tangible or intangible, or mixed, having a value in
excess of $10,000 in the aggregate, by the Company other than inventory sold in
the ordinary course of business;
(d) any material change in or revocation of any tax
election or any agreement or settlement made by the Company with any taxing
authority;
(e) other than pursuant to existing collective bargaining
or other labor agreements or pursuant to regular salary reviews consistent with
past practices, any increase in the compensation payable or to become payable
to any employees or agents of the Company, or any bonus arrangement made with
any thereof; or
(f) any transfer, lease, license, dividend or other
distribution to Sellers or any Associate of Sellers of any assets or rights of
the Company; or
(g) agreement, whether written or oral, by the Company to
do any of the foregoing.
Except as set forth on SCHEDULE 3.1.9, since October 28, 1995, the businesses
of the Company have been operated and Sellers have acted, and have caused the
Company to act, in the manner that would have been required by Section 4.2(f)
had that Section been in effect since such date (rather than the date hereof)
and Sellers have not taken any action, or caused the Company to take any
action, that would have been prohibited by Section 4.2(f) had that Section been
in effect since such date (rather than the date hereof).
3.1.10. Tax Matters. (a) All Tax Returns required to be
filed by or on behalf of the Company have been duly filed on a timely basis and
such Tax Returns are true, accurate,
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and complete. All Taxes due and payable have been paid in full on a timely
basis. The Company has withheld and paid over all Taxes required to have been
withheld and paid over in connection with amounts paid or owing to any
employee, creditor, independent contractor, or other third Person. The
liability for unpaid Taxes of the Company for all periods ended on or prior to
the date of this Agreement does not exceed the liability accruals for Taxes
(excluding reserves for deferred Taxes) reflected for the Company in such
Financial Statements.
(b) Except as disclosed on SCHEDULE 3.1.10, no waiver or
extension of any statute of limitations is in effect with respect to any Taxes
or Tax Returns of the Company, no power of attorney has been executed or filed
by or on behalf of the Company with the IRS or any other taxing authority, no
Tax Return by or on behalf of the Company is under audit by any taxing
authority, there are no disputes with a taxing authority with respect to Taxes
payable by or on behalf of the Company, and no notice of deficiency, proposed
adjustment, or underpayment of Taxes has been received by the Company and the
Company is not subject to any proceedings for the assessment or collection of
Taxes. The Company is not and has not been a member of or included in any
other affiliated, consolidated, combined, or unitary group for purposes of
filing Tax Returns or paying Taxes at any time, the Company has no liability
for Taxes of any Person under Section 1.1502-6 of the U.S. income tax
regulations or as a transferee of such person or under any other provision of
law, and the Company is not a party to or bound by or has any obligation under
any tax sharing or similar agreement or arrangement. SCHEDULE 3.1.10 sets
forth all countries, states, provinces, cities, and other jurisdictions in
which the Company is currently subject to any Tax or in which a jurisdiction
has made a claim that the Company is subject to any Tax. Buyer will not be
required to deduct and withhold any amount pursuant to Section 1445 or other
provision of the Code upon the consummation of the transactions contemplated
hereby (and Sellers will cause the necessary documents to be provided to Buyer
at the Closing to support such non-deduction and non-withholding). None of the
assets of the Company is property which is treated as owned by any other person
under the "safe harbor lease" provisions of section 168(f)(8) of the Internal
Revenue Code of 1954, and no event has occurred that would require
indemnification by the Company of any tax lessor under any such "safe harbor
lease" agreement. The Company has not participated in or cooperated with an
international boycott within the meaning of Section 999 of the Code. The
Company has not filed a consent to have the provisions of Section 341(f) of the
Code apply. There are no foreign income Tax rulings with respect to the
Company that are material to the continuing operations of the Company.
3.1.11. Title to Real and Personal Properties; Liens and
Encumbrances. (a) The Company has good and marketable title to all of its
assets and real and personal properties (tangible, intangible, and mixed)
including those capitalized on or included in the Latest Balance Sheet (except
for properties and assets disposed of since July 26, 1996 in the ordinary
course of business consistent with past practices), free and clear of all Liens
except for (i) Permitted Encumbrances, (ii) Liens which constitute valid leases
or subleases from the Company to third parties, and (iii) Liens listed on
SCHEDULE 3.1.11.
(b) The Company does not own any real property.
(c) SCHEDULE 3.1.11(c) lists all real property leases to
which the Company is a party or by which the Company is bound. The Company has
a valid leasehold estate in each
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such leased property, free and clear of all Liens, except Permitted
Encumbrances. Neither the Company nor, to the Knowledge of Sellers, any other
party to any such real property lease is in default under the terms thereof.
There exists no state of facts which, with the giving of notice or passage of
time or both, would constitute a default thereunder. Each such lease is valid,
binding, and enforceable in accordance with its terms against the Company and,
to the Knowledge of Sellers, each party thereto. Except as specified on
SCHEDULE 3.1.11(C), the Company is in good standing under all such leases, and
the Company has complied with, and is not in default under, and has not
received any written notice of default or any notice of noncompliance with
respect to, applicable state, federal, and local laws and regulations relating
thereto. Neither the Company nor the Leased Real Estate (as hereinafter
defined) is in, and the Company has not received any notice from any government
entity or authority alleging any, violation of any zoning, building, fire,
safety, use restriction, air, water, or other pollution control, environmental
protection, waste disposal, safety, or health codes, ordinances, laws, rules,
or regulations, with respect to the real property leased by the Company
("Leased Real Estate"), or any part thereof, which has not been fully remedied.
The Leased Real Estate is zoned in a manner that will permit the Company to
continue to use such Leased Real Estate for the same purpose and in the same
manner that such Leased Real Estate is currently being used. No proceedings or
claim of any type (including, but not limited to, condemnation or similar
proceedings and denial of access) have been instituted or threatened or, to the
Knowledge of Sellers, are contemplated against the Company or the Leased Real
Estate which would affect the leased Real Estate or the Company's use thereof
in any way. None of the real property leases has been assigned in whole or in
part by the Company and, except as set forth on SCHEDULE 3.1.11(C), no
subleases have been entered into relating to any of the real property leases.
Neither Sellers nor the Company has entered into any brokerage arrangements
with respect to the Leased Real Estate. The Company has not received any
notice from the landlord or any insurance company of any defects or
inadequacies with respect to the Leased Real Estate. There are no presently
pending or contemplated general or special assessments affecting the Leased
Real Estate, or any part thereof. No fact or condition exists which could
result in the termination or material impairment of access to the Leased Real
Estate from adjoining public streets or which could result in the
discontinuance of presently available or otherwise necessary sewer, water,
electric, gas, telephone or other utilities or services, which utilities and
services are adequate to meet the Company's current needs. To the Knowledge of
Sellers, the Leased Real Estate is subject to no private unrecorded easements.
All rent and other amounts owing under the Real Property Leases have been paid.
(d) SCHEDULE 3.1.11(d) lists all of the material fixed
assets owned by the Company and reflected on the Latest Balance Sheet.
(e) The Company does not use any real property, fixtures,
machinery, or equipment in its business which it does not own or lease. All
items of furniture, fixtures, machinery, and equipment used by the Company in
its business are in the possession or under the control of the Company and are,
with the exception of automobiles, trucks, and other highway vehicles in
transit, located at the place of business of the Company.
(f) The Company owns or leases all the assets necessary
to conduct its business as presently conducted by it. All tangible assets
owned or leased by the Company, including, but not limited to, the Lease Real
Estate and all mechanical and other systems and
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equipment located on the Leased Real Estate, are in good operating condition
and repair and are usable in the ordinary course of business consistent with
past practice and conform in all material respects to all applicable laws,
rules, regulations, ordinances and Permits relating to their ownership,
construction, use and operation.
3.1.12. Material Contracts. Except as listed on SCHEDULE
3.1.12, the Company is not a party to or bound by any lease, contract,
agreement, instrument, or commitment of any kind, oral or written, formal or
informal ("agreements"), of the following types ("Material Contracts"):
(a) loan agreement, promissory note, indenture,
guarantee, or other agreement or instrument for or relating to the borrowing of
money or extensions of credit or reimbursement agreement with respect to
letters of credit;
(b) mortgage, pledge agreement, security agreement,
factoring agreement, subordination agreement, indemnification agreement, or
similar agreement;
(c) agreement for the future purchase of materials,
supplies, services, merchandise, or equipment in excess of $5,000 under any one
agreement or series of related agreements;
(d) agreement for the lease of personal property with
rental payments in excess of $5,000 per year under any one lease;
(e) license, royalty, franchise or distributorship
agreement;
(f) agreement limiting or restraining the Company from
engaging or competing in any lines of business with any Person;
(g) agreement or arrangement for the sale of any asset,
other than the sale of inventory in the ordinary course of business, or for the
grant of any preferential right or option to purchase any asset, property, or
right;
(h) agreement which requires the consent, approval or
authorization of, or filings with, any other Person to enter into this
Agreement and consummate the transactions contemplated hereby without causing a
conflict with, resulting in a breach or default (or an event which might, with
the passage of time, the giving of notice or both, constitute a default) under,
giving rise to the termination or a right of termination of, or the
acceleration or a right of acceleration of the Company's obligations under, or
otherwise having an adverse effect on the Company or its rights under, such
agreement;
(i) agreement or commitment for capital expenditures in
excess of $10,000 for any single project;
(j) agreement, arrangement, or understanding with any
Seller or any Associate of any Seller;
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(k) agreement with any governmental agency or any other
Person relating to the assessment or remediation (or payment of costs incurred
for either of the foregoing) of the environmental condition of any property,
including any of the Company's Properties, including any consent orders or
decrees or cost-allocation agreements;
(l) agreement with any present or former employee or
consultant;
(m) collective bargaining agreement or other agreement
with any labor union or other employee representative of a group of employees;
(n) representative or sales agency or advertising
agreement;
(o) agreement for the lease of any asset, whether as
lessor or lessee;
(p) any joint venture, partnership or other agreement
involving a sharing of profits, losses, costs or liabilities by the Company
with any other Person;
(q) agreement involving the payment of consideration in
excess of $10,000; and
(r) agreement otherwise material to the Company or its
business not otherwise described herein.
The Company has delivered to Buyer true, correct and complete copies of all
written Material Contracts and true, correct and complete summaries of all oral
Material Contracts. All Material Contracts are in full force and effect.
Except as set forth on SCHEDULE 3.1.12, the Company and, to the Knowledge of
Sellers, the other parties to such leases, contracts, agreements, instruments,
and other commitments, have complied with the provisions thereof, are not in
default under any of the material terms thereof, and no event has occurred that
with the passage of time or the giving of notice or both would constitute such
a default.
3.1.13. Legal Proceedings. Except as described on SCHEDULE
3.1.13, there is no action, proceeding, or governmental investigation pending,
or, to the Knowledge of Sellers, threatened, against or affecting the Company
(and no reasonable basis for any such action, proceeding or investigation
exists) and there has been no action, proceeding or governmental investigation
pending or threatened against the Company at any time during the last five
years. Except as described on SCHEDULE 3.1.13, (i) the Company is not in
violation of, and has not violated, any term of any judgment, decree,
injunction, or order entered by any court or any Governmental Authority and
outstanding against the Company, and (ii) there are no presently outstanding
judgments, decrees, injunctions, writs, or orders of any court or any
Governmental Authority against or affecting the Company or any of its assets or
business.
3.1.14. Government and Industry Permits and Related
Approvals. SCHEDULE 3.1.14 is a true, correct, and complete list and
description of all Permits, used or required and held by the Company in the
conduct of its business and the use of the Leased Real Estate. SCHEDULE 3.1.14
also is a true, correct, and complete list and description of all approvals,
certifications, and similar matters held by the Company or applicable to its
business or products
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from nongovernmental entities which are reasonably required by the industry in
which the Company operates. Neither the conduct of the Company's business nor
the ownership or use of its assets requires or is dependent on any Permit,
approval or certification written or oral, which the Company does not have in
full force and effect. All such Permits, approvals or certifications are in
full force and effect and the Company has complied and is in compliance with
the terms and conditions thereof. Except as set forth on SCHEDULE 3.1.14, the
execution and delivery of this Agreement, and the consummation of the
transactions contemplated hereby, do not and will not affect any of such
Permits, approvals or certifications. The Company has not received any notice
(nor, to the Knowledge of Sellers, is there any reason to believe) that
revocation is being considered with respect to any of such Permits, approvals
or certifications or that the Company or the Lease Real Estate is in violation
of any such Permit, approval or certification.
3.1.15. Conduct of Business in Compliance with Regulatory
Requirements. The Company has complied, and is in compliance, in all material
respects with each law, rule, regulation, ordinance, and code promulgated by
any Governmental Authority applicable to the operation, conduct or ownership of
the property or business of the Company. No notice, citation, summons, or
order has been issued, no complaint has been filed, no penalty has been
assessed, and no investigation or review is pending, or to the Knowledge of
Sellers, threatened by any governmental or other entity with respect to (i) any
alleged violation by the Company of any law, rule, regulation, judgment, order,
permit, or approval, or (ii) any alleged failure by the Company to have any
license, permit, authorization, or other approval. Without limiting in any way
the generality of the foregoing, the Company has not violated, nor is it in
violation of, the applicable provisions of the Federal Food, Drug and Cosmetics
Act, as amended, the regulations and requirements adopted by the United States
Food and Drug Administration (the "FDA") pursuant to such Act, the regulations
and requirements adopted by the United States Department of Agriculture (the
"USDA"), and the requirements established by state and local authorities
responsible for regulating food products, food product packaging and labeling,
and food-related establishments and facilities (collectively "state food
authorities"), or the terms and conditions imposed in any Permits granted to
the Company by the FDA, USDA or state food authorities. In addition, the
Company is not aware of any facts that would indicate that the FDA, USDA, or
any state food authorities has or will prohibit or materially restrict the
marketing, sale, license or use in the United States of any product currently
produced, marketed, or under development, by the Company ("Product" or
"Products"), or the operation, packaging, labeling or use of any Product, and
the Company is not aware of any product or process which the FDA or the USDA
has prohibited from being marketed or used in the United States which in
function and composition is substantially similar to any Product.
3.1.16. Labor Matters. Except as disclosed on SCHEDULE
3.1.16, (i) there is no unfair labor practice charge, complaint or other
proceeding pending or, to the Knowledge of Sellers, threatened against, the
Company, (ii) there is no labor strike, slow down, or work stoppage actually in
effect or, to the Knowledge of Sellers, threatened against or involving the
Company, (iii) no labor arbitrations are pending against the Company, (iv) the
Company has not in the past five (5) years experienced any material work
stoppage or organizational activity, (v) there has not been any application for
certification of a collective bargaining agent, and (vi) there is no charge,
complaint, lawsuit, or other proceeding pending or, to the Knowledge of
Sellers, threatened against the Company, based upon any employment related law
and there has not been
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any charge, complaint, lawsuit or other proceeding pending or, to the knowledge
of Sellers, threatened against the Company based upon any employment related
law at any time during the last five (5) years. Sellers have delivered to
Buyer a true, correct and complete copy of all employee handbooks used by the
Company at any time during the last five years. No employee of the Company has
relocated his or her residence in connection with his or her employment with
the Company. The Company has no policy with respect to the notice to be given
to an employee prior to the termination of such employee's employment.
3.1.17. Intellectual Property. SCHEDULE 3.1.17 contains a
true, correct, and complete list and description of all patents and patent
applications, trademark registrations and applications therefor, trade secrets
owned by or licensed to the Company (identifying which are owned and which are
licensed), copyright registrations and applications therefor, and all material
unregistered trademarks, tradenames, service marks, and copyrights and computer
software of the Company. The Company owns or possesses adequate and
enforceable licenses or other rights to use all patents, all registered and all
material unregistered trademarks, and all other Intellectual Property,
including all intellectual property listed on SCHEDULE 3.1.17, used in the
business of the Company. Except as set forth on SCHEDULE 3.1.1 7, there are no
existing or, to the Knowledge of Sellers, threatened claims of any third Person
based on the use by the Company, or challenging the ownership, scope, or
validity, of any of the Intellectual Property used in the business of the
Company. Except as set forth on SCHEDULE 3.1.17, the Company's use of the
Intellectual Property does not infringe on the rights of any other Person and,
to the Knowledge of Sellers, there is no use by any Person of the Intellectual
Property used in the business of the Company. No opposition, cancellation,
interference, or refusal to register is pending against the Company in
connection with any patent or patent application or any application for or
registration of any trademark, service xxxx, or copyright and no order,
holding, decision, or judgment has been rendered by any governmental authority,
and no agreement, consent, or stipulation exists, which would prevent the
Company from using any Intellectual Property as currently used in the
businesses of the Company.
3.1.18. Employee Benefit Plans. (a) SCHEDULE 3.1.18
identifies each "employee benefit plan" (as defined in Section 3(3) of ERISA)
maintained or contributed to by the Company covering employees or former
employees of the Company ("Plans"). Except as set forth on SCHEDULE 3.1.18,
the Company is not obligated under or a party to any qualified or non-qualified
profit-sharing, deferred compensation, bonus, stock option, stock ownership,
stock purchase, phantom stock, pension, multiemployer, severance, employment,
consulting, retirement, welfare, cafeteria or incentive plan, agreement or
practice, or any plan or agreement or practice providing for "fringe benefits"
to its employees, including, but not limited to, vacation, sick leave, salary
continuation, service awards, severance pay, welfare, medical, hospitalization,
disability, life insurance, other insurance plans, or related benefits. The
Company has filed all reports required to be filed by it with the IRS and the
PBGC with respect to the Plans under applicable provisions of ERISA and the
Code, and the Plans which are intended to be qualified under Section 401(a) of
the Code are so qualified. The Company has not participated in or been a
member of, and no Plan is or has been, a "multiemployer plan" within the
meaning of Section 3(37) of ERISA or a "multiple employer plan" within the
meaning of Section 413(c) of the Code. The Company has not ever maintained,
contributed to or been required to contribute to any plan or arrangement for
the benefit of current or former non-U.S. employees. The
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Company is the "plan sponsor" of each of the Plans within the meaning of
Section 3(16)(B) of ERISA.
(b) Sellers have delivered or made available to Buyer
copies of the following documents, as they may have been amended to the date
hereof, embodying or relating to the Plans: (i) each of the Plans listed on
SCHEDULE 3.1.18, including all amendments thereto, and any related trust
agreements, group annuity contracts, insurance policies, or other finding
agreements or arrangements; (ii) the most recent determination letter from the
IRS with respect to each Plan intended to be qualified under Section 401(a) of
the Code; (iii) valuations, if applicable, including any actuarial reports, for
the most recent plan year for which such valuations are available; (iv) the
current summary plan descriptions and summaries of material modifications; (v)
the annual return/report on Form 5500 promulgated under ERISA, including all
schedules and attachments thereto, and summary annual reports for each of the
Plans for each of the last five (5) years; and (vi) all information dated since
the date which is two (2) years before the date hereof regarding any plan
funding waiver requests, private letter rulings, requests for technical advice,
or other outstanding issue involving any Plan with the IRS, the Department of
Labor, or the PBGC.
(c) The Company has not ever maintained, contributed to
or been required to contribute to any "pension plan" (within the meaning of
Section 3(2) of ERISA) subject to Title IV of ERISA. No liability under Title
IV of ERISA has been incurred by the Company since the effective date of ERISA
that has not been satisfied in full, and no condition exists that presents a
risk to the Company of incurring a liability under such Title.
(d) Except as set forth on SCHEDULE 3.1.18, the Company
is not in default of any obligation under any Plan and all such Plans conform
to, and their administration is in compliance with, the applicable provisions
of ERISA and the Code, and any other applicable laws, rules and regulations.
There is not, and has never been, any other trade or business (whether or not
incorporated) which together with the Company would be deemed to be part of a
"controlled group" within the meaning of Section 4001 of ERISA, or of an
"affiliated service group" within the meaning of Section 414(m) of the Code.
(e) The Company has made and/or accrued all payments due
from it to any Plan with respect to periods ending on or prior to the date
hereof.
(f) Except as set forth on SCHEDULE 3.1.18, no Plan which
is an "employee welfare benefit plan" within the meaning of Section 3(i) of
ERISA provides medical or death benefits (whether or not insured) with respect
to current or former employees beyond their date of retirement or other
termination of service (other than coverage mandated by Section 601 of ERISA,
the cost of which is paid to the extent permitted by law by the former employee
or his or her dependents).
(g) The consummation of the transactions contemplated by
this Agreement will not obligate the Company to provide any current or former
officer, director or employee of the Company with severance pay, unemployment
compensation or any similar payment, nor accelerate the time of payment or
vesting (except as contemplated by Section 2.2), or increase any compensation
due to any such employee or former employee, under any Plan.
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(h) None of the Plans contains any restrictions,
limitations or similar provisions (nor has any Seller or the Company made any
oral, written or other communications to any current or former employee with
respect to such Plans) which restrict, limit or otherwise adversely affect,
directly or indirectly, the ability of Buyer or the Company to modify or
terminate any such Plan at any time on and after the Closing.
(i) There are no (A) actions, suits, arbitrations, or
claims (other routine claims for benefits), (B) legal, administrative, or other
proceedings or governmental investigations or audits, or (C) complaints to or
by any governmental entity, which are pending or threatened, against any Plan
or their assets, or against any plan sponsor, plan administrator, or plan
fiduciary with respect to the operation of such Plans. No "prohibited
transaction" (as such term is defined in Section 4975 of the Code or Title I of
ERISA) has taken place with respect to any Plan.
(j) Except as disclosed on SCHEDULE 3.1.18, the Company
has no obligation to pay any bonuses or similar compensation to any person who
is or was an employee of the Company. Except as set forth in the documents
delivered pursuant to Section 3.1.18(b) hereof, neither the Company nor any of
its directors, officers, employees or agents has made any statement, whether
written or oral, which obligates the Company to make contributions to any of
the Plans. Except as disclosed on SCHEDULE 3.1.18, the Company has no
obligation to make any employer contributions (other than elective deferrals)
to any 401(k) or other profit sharing plans at any time.
3.1.19. Insurance. SCHEDULE 3.1.19 is a true, complete, and
correct list of all currently effective policies of insurance of which the
Company is the owner or insured or covering any of its property, indicating for
each policy the carrier, risks insured, amounts of coverage, deductible, and
expiration date. Such insurance policies provide insurance coverage (a)
adequate to comply with all applicable laws, rules and regulations and all
contracts, agreements or other instruments to which the Company is a party or
by which it or its assets are bound and (b) in reasonably sufficient amounts
against all risks usually insured against by companies operating similar
businesses or properties in the localities where the Company operates its
businesses and properties and have been issued by insurers of recognized
responsibilities. All such policies are in full force and effect, all premiums
due thereon have been paid, and the Company has complied in all material
respects with the provisions of such policies. There is no default with
respect to any provision contained in any such policy, and there has not been
any failure to give any notice or present any claim under any such policy in a
timely fashion or in the manner or detail required by the policy. Except as
set forth on SCHEDULE 3.1.19 hereto, no notice of cancellation or nonrenewal
with respect to or disallowance of any claim under any such policy has been
received by the Company. All primary layers of products liability insurance
and all primary layers of general liability insurance policies maintained by or
for the benefit of the Company are "occurrence" policies and not "claims made"
policies.
3.1.20. Brokers and Finders. Except as set forth on SCHEDULE
3.1.20, neither Sellers nor the Company has employed, or is subject to any
valid claim of, any broker, finder, consultant, or other intermediary in
connection with the transactions contemplated by this Agreement who might be
entitled to a fee or commission in connection with such transactions.
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3.1.21. Transactions with Associates. Except as set forth on
SCHEDULE 3.1.21, (a) the Company has not engaged in any transaction with any of
Sellers or any Associate of any of Sellers, and (b) the Company is not a party
to any lease, purchase contract, or other agreement with any director, officer,
or employee of the Company or any of Sellers or any Associates of any of
Sellers.
3.1.22. Products Liability. Except as set forth on SCHEDULE
3.1.22, there has not been any product recall requested or mandated nor, to the
Knowledge of Sellers, is any recall threatened, by any governmental agency or
for which notice to any governmental agency was required concerning any
products manufactured, shipped, or sold by the Company. Except as set forth on
SCHEDULE 3.1.22, there has been no claim in excess of $5,000 made against the
Company during the last five years with respect to personal injuries or damages
caused by or arising out of the use of the Company's products.
3.1.23. Environmental Matters. (a) The Company has
complied, and the Company and each of the Company's Properties are in
compliance, with all federal, state and local laws, ordinances, orders, rules,
regulations, and moratoria relating to operation and occupancy of the Company's
Properties and business, including but not limited to, the Clean Air Act, as
amended, the Federal Water Pollution Control Act, as amended, the Safe Drinking
Water Act, as amended, the Resource Conversation and Recovery Act, as amended
("RCRA"), the Toxic Substances Control Act, as amended, the Emergency Planning
and Community Right-To-Know Act of 1986, the Hazardous Material Transportation
Act, as amended, and the Comprehensive Environmental Response, Compensation and
Liability Act, as amended ("CERCLA"). Except as described on SCHEDULE 3.1.23,
neither the Company, nor any of its agents, employees, representatives, or
other Persons for whose conduct the Company may be liable has at any time
received any notice alleging any non-compliance with or potential liability
pursuant to any of such laws, ordinances, orders, rules, regulations, or
moratoria.
(b) No suit, action, or other proceeding (including
enforcement actions, administrative proceedings, arbitrations, or governmental
investigations) relating to operation of the Company's Properties and business
or to the Permits listed on SCHEDULE 3.1.23 is pending or, to the Knowledge of
Sellers, is threatened or contemplated against the Company or the Company's
Properties.
(c) Except as identified on SCHEDULE 3.1.23, neither
Sellers, the Company, nor any of their respective agents, employees or
representatives, nor to the Knowledge of Sellers, any other Person, has
transported, used, generated, handled, stored, released, emitted, leached,
discharged, dumped or disposed of any Hazardous Substances onto, into or from
the Company's Properties (now or previously owned or operated by the Company),
or any part thereof, or from the Company's Properties (now or previously owned
or operated by the Company) onto or into any property adjacent thereto or any
other property in violation of any applicable Environmental Laws. Except as
set forth on SCHEDULE 3.1.23, no Hazardous Substances are currently, or to the
knowledge of Sellers, have been located at, in, on, under or about the
Company's Properties (now or previously owned or operated by the Company) in a
manner which violates any Environmental Laws or which requires response,
cleanup or corrective action of any kind under any Environmental Laws. No
portion of the Company's Properties lies within an area which constitutes a
"wetland" or protected or buffer area subject
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to the jurisdiction of the United States Army Corps of Engineers, the United
States Environmental Protection Agency, the State of California or any other
Governmental Agency under any applicable Environmental Law. No underground
storage tanks are present on the Company's Properties or are operated by the
Company at any location, and, to the Knowledge of Sellers, no such tanks were
previously abandoned or removed from the Company's Properties now or previously
owned or operated by the Company. There is no Hazardous Substance or other
condition or use of the Company's Properties, whether natural or man-made,
which poses a present or potential threat of damage to the health of persons,
to property, to natural resources, or to the environment.
(d) The Company does not have any liability,
responsibility or obligation, whether fixed, unliquidated, absolute, contingent
or otherwise, under any federal, state or local environmental laws or
regulations, including any liability, responsibility, or obligation for fines
or penalties, or for investigation, expense, removal, or remedial action to
effect compliance with or discharge any duty, obligation, or claim under any
such laws or regulations, and, to the Knowledge of Sellers, there is no reason
to believe that any such claims, actions, suits, proceedings, or investigations
under such laws or regulations exist or may be brought or threatened. There
has not been, and is not occurring, at any of the Company's Properties or
businesses now or previously owned, operated, or conducted by or for the
Company, or any location to which the Company or any of its agents, employees,
representatives, or other Persons for whose conduct the Company may be liable
ever sent any materials, any release or threatened release, as those terms are
defined in CERCLA, of any Hazardous Substance, nor do Sellers have any reason
to believe such a release or threatened release is occurring or has occurred at
any time in the past. None of the Company or any of its agents, employees,
representatives, or other Persons for whose conduct the Company may be liable
have applied or disposed, transported, or arranged for the transportation or
disposal of any Hazardous Substance in any manner which may form the basis for
any present or future claim, demand, or action investigation, expense, removal,
remedial action or expense at any facility, site, location or body of water,
surface or subsurface. None of the Company or any of its agents, employees,
representatives, or other persons for whose conduct the Company may be liable
have sent, arranged for disposal or treatment, arranged with a transporter for
transport for disposal or treatment, transported, or accepted for transport any
Hazardous Substance or solid waste to a facility, site or location, which,
pursuant to CERCLA or any similar state or local law, (i) has been placed or is
proposed to be placed, on the National Priorities List or its state equivalent,
or (ii) which is subject to a claim, administrative order, or other request to
take removal or remedial action by any Person.
(e) SCHEDULE 3.1.23 identifies all environmental audits
or assessments or occupational health studies undertaken, prior to the
execution of this Agreement, by or on behalf of the Company, or any third
Person or governmental agencies with respect to the Company's Properties and
business and employees, the results of groundwater and testing, underground
storage tank tests, soil samples, and written communications with federal,
state, or local governments on environmental and OSHA matters relating to the
Company's Properties, business, activities, or employees and Sellers have
provided Buyer with true, correct and copies of all such audits, assessments,
studies, results, tests samples and communications.
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3.1.24. Certain Payments and Relationships. Neither the
Company nor any officer, employee, or agent thereof, or any consultant thereof,
has (a) offered, paid, or agreed to pay, directly or indirectly, any money or
anything of value (other than lawful contributions or payments), to or for the
benefit (i) of any individual who is or was a candidate for domestic public
office, or an official or employee of any domestic governmental or regulatory
body or authority, or (ii) suppliers or customers of the Company or employees
or agents of such suppliers or customers, (b) violated any of the provisions of
Section 30A of the Exchange Act applied as if the Company were an "issuer"
within the meaning of such Section 30A. To the Knowledge of Sellers, none of
the directors or officers of the Company possesses, directly or indirectly, any
financial interest in, or is a director, officer, or employee of, any Person
which is a supplier, customer, lessor, lessee, or competitor or potential
competitor of any of the Company.
3.1.25. Corporate Names. The Company has not used and is not
currently using any corporate, fictitious or assumed name, other than the names
listed on SCHEDULE 3.1.25. To the Knowledge of Sellers, except as specified on
SCHEDULE 3.1.25, the Company is entitled to use its name and any other name
under which it presently conducts business without any liability or obligation
to any other Person wherever the Company conducts business.
3.1.26. Accounts Receivable. All accounts receivable set
forth on the Latest Balance Sheet or arising since the date of the Latest
Balance Sheet (i) have arisen only in the ordinary course of business
consistent with past practice for goods sold and delivered or services
performed and (ii) to the Knowledge of Sellers, are collectible in full at the
recorded amounts thereof in the ordinary course of business, net of any
allowance for accounts reflected on the Latest Balance Sheet, provided that no
representation or warranty is made in this sentence as to the status of
Charge-Backs.
3.1.27. Inventory. The inventory of the Company included on
the Latest Balance Sheet or acquired since the date of the Latest Balance Sheet
was acquired and has been maintained in accordance with the regular business
practices of the Company, consists of new and unused items of a quality and
quantity usable or salable in the ordinary course of the Company's business,
consistent with past practices, and are valued at the lower of cost or market
value determined on a "first in, first out" basis, net of the reserve for
obsolete and slow moving inventory shown on the August Financial Statements.
None of such inventory is obsolete, damaged, slow moving, or unusable or
unsalable in the ordinary course of the Company's business consistent with past
practices.
3.1.28. Bank Accounts. Attached hereto as SCHEDULE 3.1.28 is
a true, correct and complete list of the names and locations of all banks at
which the Company has an account or safe deposit box and the names of all
Persons authorized to draw thereon or to have access thereto.
3.1.29. Prepaid Expenses. All deposits and prepaid items
included in the Latest Balance Sheet are properly reflected as prepaid expenses
on the Latest Balance Sheet.
3.1.30. Business Relationships. No customer of the Company
has indicated that it shall stop, or materially decrease the rate of, buying
products or services from the Company
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and no supplier of the Company has indicated that it shall stop, or materially
decrease the rate of, supplying materials, products or services to the Company.
There is no existing material dispute between the Company and any customer,
supplier, distributor or other contractor of the Company. Except as disclosed
on SCHEDULE 3.1.30, the Company has not granted or agreed to provide any sales,
trade or product promotion allowances, slotting allowances, rebates or similar
product promotions or incentives ("Promotional Commitments") and the Company
has no liability or obligation with respect to any of the foregoing.
3.1.31. ABSENCE OF UNTRUE STATEMENTS. Neither this Agreement
nor any schedule or exhibit hereto, nor any other document, certificate or
statement furnished or to be furnished to Buyer by or on behalf of Sellers or
the Company in connection with the transactions contemplated hereby, taken as a
whole, contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements contained herein and
therein not misleading. To the Knowledge of Sellers, there is no material fact
relating to the condition (financial or otherwise), properties, assets,
operations, prospects, results of operations, business or rights of the
Company, other than general economic or general business conditions or changes
caused by the acquisition by Buyer contemplated hereby, which is reasonably
expected to materially adversely affect such condition, properties, assets,
operations, prospects, results of operations, business or rights which has not
been disclosed to Buyer.
3.2. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer makes the
following representations and warranties to each of Sellers as of the date
hereof and, except for changes expressly permitted or contemplated by this
Agreement, as of the Closing Date:
3.2.1. CORPORATE EXISTENCE AND CORPORATE POWER. Buyer is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware, and has the corporate power to carry on its
business as now conducted. True, complete and correct copies of Buyer's
Certificate of Incorporation By-Laws, as amended to date, have been delivered
to Sellers' Representative.
3.2.2. APPROVAL OF AGREEMENT. The execution and delivery of
this Agreement and the Escrow Agreement has been duly authorized and approved
by the requisite vote of the Board of Directors of Buyer. Pursuant to such
authorization and approval, Buyer has full power and authority to enter into
this Agreement and the Escrow Agreement and to perform its obligations
hereunder and thereunder. This Agreement constitutes, and upon execution
thereof the Escrow Agreement will constitute, a valid and binding agreement of
Buyer, enforceable against Buyer in accordance with its terms.
3.2.3. NO BREACH OF STATUTE, DECREE, ORDER OR CONTRACT.
Buyer is not in default under or in violation of any applicable law, decree,
order, rule, or regulation of any governmental body, any provision of its
certificate of incorporation or by-laws, any promissory note, indenture, lease,
contract, agreement to which it is a party or by which it is bound; and the
execution of this Agreement and the Escrow Agreement and the consummation of
the transactions contemplated hereby and thereby will not constitute or result
in any such default, breach or violation.
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3.3. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties of the parties contained in this Agreement will
survive the Closing Date and will remain in full force and effect thereafter,
notwithstanding any investigation or access to information by or on behalf of
any party, until December 31, 1997, except that (i) the representations and
warranties made by Sellers in Sections 3.1.1, 3.1.2, 3.1.3, and 3.1.5 shall
survive without limitation as to time, (ii) the representations and warranties
contained in Section 3.1.10 shall survive until the expiration of all
applicable statutes of limitations and (iii) the representations and warranties
contained in Sections 3.1.23 shall survive until the tenth anniversary of the
Closing Date; provided, however, that all such representations and warranties
shall survive without time limitation with respect to any inaccuracy therein or
breach thereof notice of which shall have been duly given within such
applicable period to Sellers in accordance with Section 9.6 hereof.
ARTICLE IV
COVENANTS
4.1. ACCESS TO INFORMATION CONCERNING PROPERTIES AND RECORDS;
CONFIDENTIALITY. (a) During the period commencing on the date hereof and ending
on the Closing Date, Sellers shall, and shall cause the Company to, upon
reasonable request, afford to Buyer, its counsel, accountants, and other
authorized representatives (including the representatives of Buyer's financing
sources) reasonable access during normal business hours to the plants,
properties, books and records, Tax Returns, contracts, commitments, officers,
personnel, and accountants of the Company, in order that Buyer may have the
opportunity to make such reasonable investigations as it shall desire to make
of the affairs and properties of the Company, including, but not limited to,
such environmental audits or tests as Buyer or its financing sources may
desire, and to plan for the commencement of its ownership of the Company after
the Closing.
(b) Buyer agrees that it will hold in confidence all data
and information obtained from the Company in connection with this transaction
(other than information which is a matter of general public knowledge or which
has heretofore been or is hereafter published for public distribution or filed
as public information with any governmental authority other than as a result of
a breach of this covenant) except that Buyer may provide such data and
information to its advisors and to potential financing sources and their
advisors which have agreed to keep such information confidential, and will not,
and will use its best efforts to ensure that such other Persons do not (other
than with respect to financial institutions as required by law), disclose such
data and information to others without the prior written consent of Sellers'
Representative; except that Buyer may provide such data and information in
response to legal process or applicable governmental law or regulations.
4.2. CONDUCT OF THE COMPANY'S BUSINESS PRIOR TO THE CLOSING DATE.
Sellers agree that, except as specifically permitted, required, or contemplated
by this Agreement, or as otherwise consented to or approved in writing by
Buyer, during the period commencing on the date hereof and ending on the
Closing Date:
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(a) the business of the Company will be conducted only in
the ordinary course of business consistent with past practices:
(b) the Company will not amend its certificate or
articles of incorporation, by-laws, or other organizational documents;
(c) the Company will not issue or agree to issue any
additional shares of capital stock of any class or series, or any securities
convertible into or exchangeable for shares of capital stock, or issue any
options, warrants, or other rights to acquire any shares of capital stock;
(d) Sellers will use, and will cause the Company to use,
their reasonable efforts to preserve intact the business and organization of
the Company, to keep available the services of its present officers and key
employees, and to preserve the goodwill of those Persons having business
relationships with the Company;
(e) Sellers shall take all necessary action so that the
Company will (i) pay accounts payable and other obligations when they become
due and payable in the ordinary course of business, (ii) comply in all material
respects with all applicable laws, (iii) collect accounts receivable in the
ordinary course of business consistent with past practice, and (iv) maintain
levels of inventory consistent with past practice;
(f) Sellers shall take all necessary action so that the
Company will not (i) dispose of or encumber any of its properties or assets,
other than the sale of inventory in the ordinary course of business consistent
with past practice, (ii) cancel any debts or waive any claims or rights, except
in the ordinary course of business consistent with past practice; (iii) grant
any increase in the compensation (including employee benefits) of officers or
employees, except for increases (A) for non-Seller employees in the ordinary
course of business and consistent with past practice, or (B) required by any
employment or other agreement, or any pension, profit-sharing or other plan
currently in effect; (iv) make any capital expenditure or commitment, other
than pursuant to existing commitments; (v) except with respect to endorsement
of negotiable instruments in the ordinary course of its business, incur,
assume, or guarantee any Indebtedness; (vi) make, change, or revoke any
material tax election or enter into or amend any material agreement or
settlement with any taxing authority; (vii) pay, discharge, or satisfy any
liability or obligation (whether accrued, absolute, contingent, or otherwise),
other than the payment, discharge, or satisfaction in the ordinary course of
business, of liabilities or obligations (A) shown or reflected on the Latest
Balance Sheet, or (B) incurred in the ordinary course of business since the
date of the Latest Balance Sheet; (viii) make any material change in any method
of accounting or keeping of books of account or accounting practices or
principles; (ix) license, dispose of or fail to keep in effect any rights in,
to or for the use of any Intellectual Property; (x) amend or terminate any
Material Contract or enter into any contract, commitment, lease, or agreement
which would constitute a Material Contract; (xi) make any payment, loan, or
advance of any amount to or in respect of the sale, transfer, or lease of any
properties or assets (whether real, personal or mixed, tangible, or intangible)
to, or enter into any agreement, arrangement, or transaction with, any Seller
or any Associate of any Seller; (xii) make any payment, loan, or advance to or
make an investment in or capital contribution to any Person; (xiii) make any
transfer, lease, license, dividend, or distribution to any Seller or any
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Associate of any Seller of any assets or rights; (xiv) merge or consolidate
with, or agree to merge or consolidate with, or purchase substantially all the
assets of, or otherwise acquire any business or any corporation, partnership,
entity, association, or other business organization or division; (xv)
repurchase or redeem or commit to repurchase or redeem, shares of its capital
stock, any options or other rights to acquire such stock or any securities
convertible into or exchangeable for such stock; (xvi) incur any Liability,
except in the ordinary course of business consistent with past practices;
(xvii) pay any bonus, or make any advance with respect to a bonus, to any
Seller or other employee of the Company; (xviii) grant any person or entity a
license or other right to use the name "Bread Shop" or any derivation thereof
or any other name under which the Company previously conducted or presently
conducts business; (xix) permit the Company to pay any Transaction Expenses or
amounts to obtain the consents or approvals required by this Agreement; (xx)
pay any Taxes except in the ordinary course of business; or (xxi) agree,
whether in writing or otherwise, to do any of the foregoing;
(g) Sellers shall use, and shall cause the Company to
use, their reasonable best efforts to administer each and every Plan in
accordance with the provisions of such Plan and all applicable provisions of
the Code and ERISA, and (ii) Sellers have or will file, or caused or will cause
to be filed, all Forms 5500 promulgated under ERISA required to be filed for
any Plan and correct all other deficiencies in the administration of such
Plans;
(h) within three (3) days after its availability to
Sellers, but not later than twenty (20) days after the close of each month
ending prior to the Closing Date, Sellers shall furnish to Buyer an unaudited
statement of income and expense reflecting the operations of the Company for
such month and an unaudited balance sheet reflecting the assets and liabilities
with respect to the Company as at the close of such month (such financial
statements to be delivered pursuant to this Section 4.2 shall be prepared in
accordance with the Company's current accounting policies and shall be true,
correct, and complete);
(i) Sellers shall take all necessary action so that the
Company shall maintain, repair, manage, and operate (and cause to be
maintained, repaired, managed, and operated) the assets owned or leased by the
Company in good condition, normal wear and tear and casualty excepted;
(j) Sellers shall take all necessary action so that the
Company shall comply in all material respects with all applicable statutes,
laws, ordinances, building codes, and regulations of any kind or nature of any
government or any agency, body, or subdivision thereof pertaining to the use,
occupancy, or operation of the Leased Real Estate and shall keep and maintain
the Leased Real Estate insured against such risks and in such amounts as
existed as of the date of this Agreement, and will maintain in effect their
insurance policies, provided, however, that the Company shall be permitted to
modify such insurance coverage if such coverage is not materially reduced or
restricted;
(k) Sellers shall take all necessary action so that the
Company shall have repaid the Indebtedness represented by the Seller Notes in
full and been released or discharged from all obligations thereunder on the
Closing Date;
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(l) Sellers shall use their reasonable best efforts to
satisfy the conditions specified in Sections 5.1 and 5.2 hereof and to
consummate the transactions contemplated by this Agreement; and
(m) Sellers shall have delivered to Buyer a copy of all
environmental audits or assessments or occupational health studies undertaken,
after the execution of this Agreement but prior to the Closing, by or on behalf
of the Company, or any third Person (other than Buyer) or governmental agencies
with respect to the Company's Properties and business and employees.
4.3. NO SHOPPING. Each Seller agrees that, from the date hereof
until the earlier of (a) the Closing, or (b) the termination of this Agreement
in accordance with its terms, he or she shall not, and shall not permit any of
his or her agents or representatives (including, without limitation, investment
bankers, attorneys, and accountants) directly or indirectly, to initiate,
solicit, encourage (including by way of example, furnishing any information
concerning the business, properties, capital stock, or assets of the Company or
engaging in any discussions relating thereto), or entertain any proposals for
the purpose or with the intention or reasonably foreseeable effect of leading
to, or enter into any commitment or agreement concerning, any sale, merger,
consolidation, or other business combination involving the Company or any sale
or disposition of any part of the business or assets of the Company, (other
than the sale of inventory in the ordinary course of business), or any sale,
exchange, or issuance of any stock of the Company, or any similar transaction,
or enter into any agreement or become subject to any commitment providing for
or relating to any such transaction.
4.4. TERMINATION OF AFFILIATE AGREEMENTS. Effective as of the
Closing, all agreements between the Company and any of Sellers or any of their
Associates (the "Affiliate Agreements") shall be terminated and shall
thereafter be of no further force or effect.
4.5. NOTICE OF DEVELOPMENTS. Each party hereto shall give prompt
notice to the others of any development causing an inaccuracy of any of the
representations or a breach of any of the warranties of that party contained in
Section 3.1 or 3.2 hereof or constituting a breach of such party's obligations
hereunder.
ARTICLE V
CONDITIONS PRECEDENT
5.1. CONDITIONS PRECEDENT TO OBLIGATIONS OF PARTIES. The
respective obligations of Buyer and Sellers hereunder are subject to the
satisfaction, at or prior to the Closing Date, of each of the following
conditions:
(a) No Injunction. At the Closing Date, there shall be
no action, proceeding, injunction, order, or decree of any nature of any court
or governmental agency or body of competent jurisdiction that is pending or in
effect that challenges, restrains, or prohibits the consummation of the
purchase by Buyer of the Common Stock.
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(b) Regulatory Authorizations. All consents, approvals,
authorizations, and orders of Governmental Authorities shall have been obtained
(A) which are necessary to consummate the transactions contemplated by this
Agreement, (B) which if not obtained would be reasonably likely to subject
Buyer and Sellers, the Company, or any officer, director, or agent of any such
Person to civil or criminal liability or could render the purchase by Buyer of
the Common Stock void or voidable.
5.2. CONDITIONS PRECEDENT TO OBLIGATION OF BUYER. The obligation
of Buyer to consummate the transactions contemplated by this Agreement is
subject to the satisfaction at or prior to the Closing Date of each of the
following additional conditions:
(a) Accuracy of Representations and Warranties. The
representations and warranties of Sellers contained herein shall be true and
correct in all material respects.
(b) Performance of Agreement. Each Seller shall have
performed, in all material respects, all obligations and agreements, and
complied, in all material respects, with all covenants and conditions,
contained in this Agreement to be performed or complied with by it or them
prior to or at the Closing Date.
(c) Sellers' Closing Certificate. Buyer shall have
received a certificate (which shall state that it may be relied upon by the
Persons providing financing to Buyer) of Sellers, dated the Closing Date,
executed by Sellers to the effect that the conditions specified in paragraphs
(a), (b), (d), (f), (g), (h), and (j) of this Section 5.2 have been fulfilled.
(d) Purchase of all Common Stock. Simultaneously with
the Closing, Sellers shall have transferred to Buyer all the Common Stock and
good title thereto, free and clear of any Lien.
(e) Opinion of Counsel. Buyer shall have received from
Wilson, Sonsini, Xxxxxxxx & Xxxxxx, counsel to Sellers, opinions (which shall
state that they may be relied upon by the Persons providing financing to Buyer)
dated the Closing Date in the form attached hereto as EXHIBIT B.
(f) Release of Liens. None of the assets of the Company
shall be subject to any Liens other than Permitted Encumbrances.
(g) Third Party Consents. Sellers shall have obtained
all requisite consents, approvals and authorizations of, and made all requisite
filings with, all third Persons which are necessary to be obtained or made to
consummate the transactions contemplated by this Agreement without causing a
conflict with, resulting in a breach or default (or an event which might, with
the passage of time, the giving of notice or both, constitute a default) under,
giving rise to the termination or right of termination of or acceleration or
right of acceleration of the Company's obligations under or otherwise having an
adverse effect on the Company or its rights under, any Material contract,
including, but not limited to, the leases for the Leased Real Estate. Each of
the foregoing must be free from restrictions on the Company, its business and
its assets not applicable to the Company, its business and its assets prior to
the date hereof.
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(h) Permits. Sellers shall have taken all action
necessary to insure that the Permits listed in SCHEDULE 3.1.14 shall remain in
full force and effect following the Closing on the same terms and conditions
that were applicable to such Permits prior to the Closing.
(i) Good Standing and Other Certificates and Documents.
Sellers shall have delivered to Buyer (i) copies of the charter of the Company
including all amendments thereto, in each case certified by the Secretary of
State of the State of California within ten (10) days of the Closing Date, (ii)
a certificate from the Secretary of State of the State of California to the
effect that the Company is in good standing or subsisting in such jurisdiction
and listing all documents filed by the Company, (iii) a certificate from the
Secretary of State or other appropriate official in each state in which the
Company is qualified to do business to the effect that the Company is in good
standing in such state, (iv) a copy of the by-laws of the Company, certified by
the Secretary of the Company as being true and correct and in effect on the
Closing Date, (v) releases and other documents evidencing the payment,
satisfaction, or discharge of the Indebtedness other than Assumed Obligations,
and (vi) such other closing documents as may be reasonably requested by Buyer.
(j) No Material Adverse Change. No change in the
business, operations, results of operations, condition (financial or
otherwise), properties (including intangible properties), market value, assets
(including intangible assets), prospects, rights, or liabilities of the Company
shall have occurred since the date hereof which individually or collectively
with other changes relating to the Company shall result in, or be reasonably
expected to result in, a Material Adverse Effect.
(k) Environmental Audits. Buyer and the Company shall
have received such environmental reports regarding the properties and
operations of the Company as it or its financing sources shall have required,
and the results of such reports shall be satisfactory to Buyer and its
financing sources in their sole discretion. Satisfaction of this closing
condition shall not constitute a waiver of any breach of any representation or
warranty contained herein.
(l) Escrow Agreement. Buyer, Sellers, and the Escrow
Agent shall have executed and delivered the Escrow Agreement.
(m) Spousal Waivers. Each Seller shall have delivered to
Buyer a written waiver from such Seller's spouse waiving all of his or her
rights in the Common Stock owned by such Seller (i) that is a natural person,
in the form attached hereto as EXHIBIT C-1, and (ii) that is a trust, in the
form attached hereto as EXHIBIT C-2.
(n) FIRPTA Certificates. Each Seller shall have
delivered to Buyer a written certification in accordance with Section 1445 of
the Code certifying that such Seller is not a person subject to withholding
under Section 1445 of the Code.
(o) Noncompetition Agreements. Each Seller shall have
executed and delivered a Noncompetition Agreement, in the form attached hereto
as EXHIBIT D.
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(p) Financing. Buyer shall have obtained all debt and
equity financing necessary to consummate the purchase of the Common Stock, on
terms and in amounts satisfactory to the Buyer.
(q) Resignations. Sellers shall have delivered to
Purchaser (i) the written resignations of all of the directors of the Company
and all plan fiduciaries of the Plans and (ii) the written resignation as an
officer or employee of each Seller that is an officer or employee of the
Company.
(r) Releases. Each of Sellers shall have executed and
delivered to Buyer and the Company a Release in the form attached hereto as
EXHIBIT E.
(s) Honey Dealer Release. Sellers shall have delivered
to Buyer a release from Xxx Xxxxxxxxx (the "Honey Dealer"), in form and
substance acceptable to Buyer, releasing all claims that the Honey Dealer may
have against the Company as of the Closing Date other than the accounts payable
shown on the books of the Company as of the Closing Date.
(t) Representation Letters. Sellers shall have delivered
to Buyer such representation letters from Sellers and the Company's outside
accountants as Deloitte & Touche may reasonably request.
(u) Proceedings. All corporate and other proceedings of
Sellers that are required in connection with the transactions contemplated by
this Agreement, and all documents and instruments incident to such proceedings,
shall be reasonably satisfactory in substance and form to Buyer and its
counsel, and Buyer and its counsel shall have received all documents and
instruments, or copies thereof, certified if requested, as may be reasonably
requested.
(v) Promotional Commitments. Sellers shall have
delivered to Buyer a schedule of all written and verbal Promotional Commitments
entered into or granted by the Company between the date of this Agreement and
the Closing Date, certified by an officer of the Company.
5.3. CONDITIONS PRECEDENT TO THE OBLIGATION OF SELLERS. The
obligation of Sellers to consummate the transactions contemplated by this
Agreement is subject to the satisfaction at or prior to the Closing Date of
each of the following additional conditions:
(a) Accuracy of Representations and Warranties. The
representations and warranties of Buyer contained herein shall be true and
correct in all material respects.
(b) Performance of Agreements. Buyer shall have
performed, in all material respects, all obligations and agreements, and
complied, in all material respects, with all covenants and conditions,
contained in this Agreement to be performed or complied with by it prior to or
at the Closing Date.
(c) Buyer's Closing Certificate. Sellers shall have
received a certificate of Buyer, dated the Closing Date, executed on behalf of
Buyer by its President or any Vice
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President, to the effect that the conditions specified in paragraphs (a) and
(b) above have been fulfilled.
(d) Purchase Price. Buyer shall have paid the Purchase
Price as provided by this Agreement.
(e) Escrow Agreement. Buyer, Sellers and the Escrow
Agent shall have executed and delivered the Escrow Agreement.
(f) Good Standing and Other Certificates and Documents.
Buyer shall have delivered to Sellers Representative (i) copies of the charter
of Buyer, including all amendments thereto, certified by the Secretary of State
of the State of Delaware within ten (10) days of the Closing Date, (ii) a
certificate from the Secretary of State of the State of Delaware to the effect
that Buyer is in good standing in such jurisdiction and (iii) a copy of the
by-laws of Buyer, certified by the Secretary of Buyer as being true and correct
and in effect on the Closing Date.
(g) Opinion of Counsel. Sellers shall have received from
counsel to Buyer an opinion dated the Closing Date in the form attached hereto
as EXHIBIT F.
(h) Proceedings. All corporate and other proceedings of
Buyer that are required in connection with the transactions contemplated by
this Agreement, and all documents and instruments incident to such proceedings,
shall be reasonably satisfactory in substance and form to Sellers and their
counsel, and Sellers and their counsel shall have received all documents and
instruments, or copies thereof, certified if requested, as may be reasonably
requested.
ARTICLE VI
INDEMNIFICATION
6.1. INDEMNIFICATION. (a) Buyer hereby agrees to indemnify,
defend, and hold Sellers, its officers, directors and shareholders harmless
from and against and in respect of any and all Damages that any of them
suffers, sustains, incurs or becomes subject to arising out of or due to any
breach of any representation or warranty, or breach of covenant on the part of
Buyer contained in this Agreement.
(b) Subject to the limitations and other provisions set
forth in Section 6.2, Sellers agree to indemnify, defend and hold Buyer, its
officers, directors and shareholders harmless from all Damages that any of them
suffers, sustains, incurs or becomes subject to arising out of or due to:
(i) any inaccuracy of any representation or the
breach of any warranty, covenant, undertaking, or other agreement of
Sellers contained in this Agreement or in any certificate, agreement
or representation letter delivered or executed by Sellers in
connection herewith;
(ii) any Indebtedness of the Company, other than
Assumed Obligations;
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(iii) Taxes due from the Company, or with respect
to assets owned or used by the Company, applicable to or arising from
any period on or prior to the Closing Date, including, but not limited
to, any fiscal year of the Company that commenced prior to the Closing
Date and ends on or after the Closing Date (the "Straddle Year"), but,
with respect to the Straddle Year, only to the extent that the amount
of such Taxes for the Straddle Year exceeds the amount of Taxes
accrued or reserved for on the Latest Balance Sheet plus the amount of
taxes accrued or reserved for by the Company after the date of the
Latest Balance Sheet and through the Closing Date, consistent with the
past practices of the Company; and
(iv) (A) the presence, disposal, spillage,
discharge, transportation, emission, leakage, release or threatened
release ("Presence or Release"), on or prior to the Closing Date, of
any Hazardous Substances which is at, in, on, under, about, from or
affecting any property owned or leased by the Company on the Closing
Date or at any time prior thereto or in which the Company has or had
an interest, regardless of when the Presence or Release is discovered,
(B) the offsite treatment, storage or disposal of any such Hazardous
Substance, (C) any personal injury (including wrongful death) or
property damage (real or personal) arising out of or related to any
such Presence or Release, (D) any lawsuit brought or threatened,
settlement reached, or order or directive of or by any Governmental
Authority relating to such Presence or Release, or (E) any violation
or alleged violation of any Environmental Law by the Company at any
time on or prior to the Closing Date.
6.2. LIMITATIONS ON LIABILITY.
(a) Sellers shall be obligated to indemnify Buyer for all
Damages resulting from inaccuracies of the representations or breaches of the
warranties set forth in Section 3.1 (other than Sections 3.1.1, 3.1.2, 3.1.3,
3.1.5, and 3.1.20) to the extent that the aggregate amount of Damages therefor
exceeds $50,000, provided, that in the event that the aggregate amount of such
Damages resulting from such breaches shall exceed such amount, Sellers shall be
obligated to indemnify Buyer to the full extent of such Damages.
(b) Sellers shall be obligated to indemnify Buyer for
Damages resulting from inaccuracies of the representations and breaches of the
warranties set forth in Sections 3.1.1, 3.1.2, 3.1.3, 3.1.5, and 3.1.20 without
regard to any threshold amount. Except as limited by paragraphs (c) and (e)
below, with respect to indemnification claims under this Agreement, Buyer may,
at its election, proceed against the funds held by the Escrow Agent under the
Escrow Agreement or directly against Sellers.
(c) Notwithstanding anything to the contrary contained
herein, (i) any indemnification claims of Buyer for Damages arising out of a
breach of the representations and warranties contained in Section 3.1 or in any
certificate, agreement or representation letter delivered or executed by
Sellers in connection herewith (other than Sections 3.1.1, 3.1.2, 3.1.3, 3.1.5,
3.1.10, 3.1.20 and 3.1.23 of this Agreement or any similar provisions contained
in any such certificate, agreement or representation letter), (ii) any
indemnification claims of Buyer for Damages arising under Section 6.1(b) (iii)
or as a result of a breach of the representation in Section 3.1.10, in each
case resulting from the disallowance or proposed disallowance of any
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deductions taken by the Company, for federal income tax purposes, on the
grounds that such deductions were not ordinary and necessary business expenses
or that the amounts of such deductions were not reasonable and (iii) any
indemnification claims of Buyer arising out of a breach of the covenants of
Sellers contained in Article IV (other than Section 4.4), shall be satisfied
exclusively from the funds held by the Escrow Agent under the Escrow Agreement,
other than, in each of (i), (ii) and (iii) above, Damages for such
indemnification claims arising from a willful breach of this Agreement or
actual fraud by any Seller.
(d) Buyer's indemnification claims for expenses incurred
in defending any assessments for additional federal income Taxes against the
Company resulting from the disallowance or proposed disallowance of any
deduction taken by the Company, for federal income tax purposes, on the grounds
that such deductions were not ordinary and necessary business expenses or that
the amounts of such deductions were not reasonable (but not indemnification
claims for such assessment, or interest or penalties with respect thereto)
shall be limited to fifty percent (50%) of such expenses, up to a maximum
amount of indemnification claims with respect to such expenses of $100,000.
(e) Notice of indemnification claims of Buyer with
respect to the matters specifically identified below may not be given by Buyer
to Sellers' Representative after the following dates or times:
(i) December 31, 1997 with respect to claims for
breaches of the representations and warranties set forth in Section
3.1 (other than Sections 3.1.1, 3.1.2, 3.1.3, 3.1.5, 3. 1. 1 0 and
3.1.23) or breaches of the covenants contained in Article IV (other
than Section 4.4);
(ii) December 31, 1997 with respect to claims
under Section 6.1(b)(ii);
(iii) the expiration of all applicable statutes of
limitations with respect to (A) claims for breaches of the
representations and warranties set forth in Section 3.1.10 or (B)
claims under Section 6.1(b)(iii); and
(iv) the tenth anniversary of the Closing Date
with respect to (A) claims for breaches of the representations and
warranties set forth in Section 3.1.23 or (B) claims under Section
6.1(b)(iv);
provided, however, that notwithstanding the foregoing, Buyer may pursue an
indemnification claim referred to above if notice of such claim or potential
claim was given to Sellers' Representative prior to such applicable date or
time. Other claims for indemnification may be given by Buyer at any time.
(f) The liability of each Seller hereunder, except for
Xxxxx, Xxxxx and Xxxxxxxx, shall be limited to an amount equal to the Purchase
Price received by such Seller, except that the liability of Xxxxxxx hereunder
shall be limited to an amount equal to the Purchase Price received by the
Xxxxxxx Trust, and the aggregate liability of the Sellers hereunder shall be
limited to an amount equal to the Purchase Price.
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(g) Except for indemnification claims arising from a
willful breach of this Agreement or actual fraud by any Seller, each Seller's
liability with respect to any indemnification claim under Section 6.1 shall be
limited to his or her pro rata share of any Damages with respect to such
indemnification claim. Each Seller's pro rata share of such Damages shall be
equal to the aggregate amount of such Damages multiplied by a fraction, the
numerator of which the number of shares of Common Stock owned by such Seller
immediately prior to the Closing and the denominator, of which is the aggregate
number of shares of Common Stock owned by all Sellers immediately prior to the
Closing. For purposes of calculating the pro rata share of Xxxxx, Xxxxx,
Xxxxxxxx and Xxxxxxx pursuant to the foregoing, shares of Common Stock owned by
the Xxxxx Trust, the Damon Trust, the Xxxxxxxx Trust and the Xxxxxxx Trust
shall be deemed to be owned by Xxxxx, Xxxxx, Xxxxxxxx and Xxxxxxx,
respectively. Each Seller shall be jointly and severally liable for
indemnification claims arising from any willful breach of this Agreement or
actual fraud by any Seller.
6.3 PROCEDURES FOR DEFENDING CLAIMS. (a) Upon receipt by a party
(the "Indemnified Party") of notice of any action, suit, proceeding, claim,
demand, or assessment from a third Person (an "Action") which may give rise to
a claim for indemnification from the other party (the "Indemnifying Party"),
the Indemnified Party shall give prompt, written notice thereof to the
Indemnifying Party indicating the nature of such claims and the basis therefor,
provided that the failure to give such notice shall not be a condition to the
indemnification obligations hereunder except to the extent that such failure
has substantially prejudiced the Indemnifying Party. The Indemnifying Party
shall be entitled, at its own expense, to participate in the defense of any
such action or claim. If the Indemnifying Party acknowledges in writing its
obligation to indemnify fully the Indemnified Party (without regard to any
limitations on liability provided for herein) and such Action involves claims
solely for monetary damages, the Indemnifying Party shall be entitled to assume
and control such defense at its expense with such counsel as such party may
reasonably choose. The Indemnified Party shall be entitled to participate
therein at its own expense after such assumption. Upon assuming such defense,
the Indemnifying Party shall agree to be fully responsible for (without regard
to any limitations on liability provided for herein), and to pay, the entire
amount of any monetary judgment or settlement, and shall have full rights to
enter into any compromise or settlement which is dispositive of the matters
involved. The Indemnifying Party shall not, without the prior written consent
of the Indemnified Party, enter into any compromise or settlement which commits
the Indemnified Party or the Company to take, or to forbear to take, any action
other than payment of money or compromise the ability of the Indemnified Party
or the Company to take any action in the future.
(b) With respect to claims or actions to which (i) the
Indemnifying Party does not have the right to assume the defense, or (ii) it
shall not have exercised such right within twenty-eight (28) days after notice,
the Indemnified Party shall assume and control the defense of and contest such
action with such counsel as the Indemnified Party may reasonably choose. In
such event, the Indemnified Party shall have the rights to indemnification set
forth herein. The Indemnified Party shall have full rights to dispose of such
Action and enter into any compromise or settlement, provided that such
compromise or settlement shall not be entered into in bad faith.
(c) Both the Indemnified Party and the Indemnifying Party
shall cooperate with one another in good faith in connection with the defense,
compromise, or settlement of any
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Action or other claim. Neither the Indemnified Party nor the Indemnifying
Party shall dispose, compromise, or settle any Action or other claim in bad
faith.
(d) The Indemnifying Party shall not, except with the
consent of the Indemnified Party, (i) enter into any settlement that does not
include as an unconditional term thereof the giving by the Person or Persons
asserting such claim to all Indemnified Parties and the Company which are the
subject of such claim an unconditional release from all liability with respect
to such claim, or (ii) consent to entry of any judgment.
(e) Buyer will afford, and cause the Company to afford,
to Sellers, their counsel, and their accountants, during normal business hours,
reasonable access to the books, records, and other data of the Company with
respect to periods prior to the Closing, to the extent that such access may be
reasonably required by Sellers to facilitate the investigation, litigation, and
final disposition of any claims for indemnity or otherwise which may have been
or may be made against Sellers in connection with the transactions contemplated
hereby or with the Company, and each Seller will afford, and cause its
Affiliates to afford, to Buyer, its counsel, and its accountants, during normal
business hours, reasonable access to the books, records, and other data of such
Seller and Affiliates of Sellers with respect to periods prior to the Closing,
to the extent that such access may be reasonably required by Buyer to
facilitate the investigation, litigation, and final disposition of any claims
for indemnity or otherwise which may have been or may be made against Buyer or
the Company.
ARTICLE VII
TERMINATION
7.1 TERMINATION. This Agreement may be terminated at any time
prior to the Closing Date:
(a) By the written agreement of Sellers and Buyer;
(b) by Sellers' Representative in the event the Closing
has not occurred on or prior to October 31, 1996, unless the failure of such
consummation shall be due to Sellers' material breach of a representation or
warranty contained herein or the failure of Sellers to comply in all material
respects with the agreements and covenants contained herein to be performed by
Sellers on or before October 31, 1996;
(c) by Buyer in the event the Closing has not occurred on
or prior to October 31, 1996, unless the failure of such consummation shall be
due to Buyer's material breach of a representation or warranty contained herein
or the failure of Buyer to comply in all material respects with the agreements
and covenants contained herein to be performed by such party on or before
October 31, 1996; or
(d) By either Buyer or Sellers' Representative if (i) the
representations and warranties of Sellers or Buyer, respectively, shall not
have been true and correct in all respects (in the case of any representation
or warranty containing any materiality qualification) or in all
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material respects (in the case of any representation or warranty without any
materiality qualification) as of the date when made, (ii) Sellers or Buyer,
respectively, shall have failed to perform and comply with, in all material
respects, all agreements and covenants required by this Agreement to have been
performed or complied with by such parties prior to the time of such
termination and such failure to perform or comply shall be incurable or shall
not have been cured within a reasonable period of time but not less than ten
(10) days in duration following notice of such failure, provided that the
terminating party shall have performed and complied with, in all material
respects, all agreements and covenants required by this Agreement to have been
performed or complied with by such terminating party prior to such time, or
(iii) any event shall have occurred or any fact or condition shall exist that
shall have made it impossible to satisfy a condition precedent to the
terminating party's obligations to consummate the transactions contemplated by
this Agreement, unless the occurrence of such event or existence of such fact
or condition shall be due to the failure of the party seeking to terminate this
Agreement or any of its Affiliates to perform or comply with any of the
covenants, agreements, or conditions hereof to be performed or complied with by
such party or any of its Affiliates prior to the Closing.
7.2 EFFECT OF TERMINATION. In the event of the termination of
this Agreement pursuant to the provisions of Section 7.1, this Agreement shall
become void and have no effect, without any liability on the part of any party
hereto, or any of its directors, officers, employees, agents, consultants,
representatives, advisers, stockholders, or Affiliates, except as specified in
Section 9.2. Notwithstanding this Article VII and Section 9.14, any
confidentiality and nondisclosure agreements entered into by the parties to
this Agreement prior to the Closing shall survive the termination of this
Agreement.
ARTICLE VIII
DEFINITIONS
The terms defined in this Article VIII, whenever used in this
Agreement (including the Schedules) shall have the respective meanings
indicated below for all purposes of this Agreement.
"Affiliate" of a Person means a Person that directly or
indirectly through one or more intermediaries, controls, is controlled
by, or is under common control with, the first Person, including but
not limited to, a Subsidiary of the first Person, a Person of which
the first Person is a Subsidiary, or another Subsidiary of a Person of
which the first Person is also a Subsidiary.
"Affiliate Agreements" has the meaning set forth in Section
4.4.
"Agreement" means this Stock Purchase Agreement, including the
Schedules and Exhibits.
"Associate" of a Person means (i) an Affiliate of such Person,
(ii) a relative or spouse of such Person, or a relative of such
spouse, or (iii) any trust or other estate in
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which such Person (or any relative or spouse of such Person, or a
relative of such spouse) has a substantial beneficial interest or as
to which such Person (or any relative or spouse of such Person, or a
relative of such spouse) serves as trustee or in a similar fiduciary
capacity.
"Assumed Obligations" means (i) Liabilities under that certain
Real Estate Lease dated as of April 1, 1995 between the Company and
Xxxxx X. Xxxxx and Xxxxxx X. Xxxxx, as amended, and (ii) Liabilities
arising under the Material Contracts listed on SCHEDULE 3.1.12 and any
contracts or agreements of the Company that are not listed on SCHEDULE
3.1.12 because such contract or agreement is not described in Section
3.1.12, in each case, except to the extent such Liabilities arise
prior to the Closing Date as a result of a breach or violation of any
such agreements.
"August Financial Statements" has the meaning set forth in
"Financial Statements."
"Bonuses" has the meaning set forth in Section 2.2.
"Business Day" means any calendar day which is not a Saturday,
Sunday or public holiday on which banks are closed under the laws of
California.
"Buyer" has the meaning set forth in the lead-in to this
Agreement.
"CERCLA" has the meaning set forth in Section 3.1.23.
"Charge-Backs" has the meaning set forth in Section 3.1.7.
"Closing" has the meaning set forth in Section 2.1.
"Closing Balance Sheet" has the meaning set forth in Section
1.4
"Closing Date" has the meaning set forth in Section 2.1.
"Closing Income Statement" means the statement of income of
the Company for the Interim period prepared by Buyer in accordance
with GAAP.
"COBRA" means the Comprehensive Omnibus Budget Reconciliation
Act of 1987, as amended.
"Code" means the Internal Revenue Code of 1986, as amended,
and the rules and regulations promulgated thereunder.
"Common Stock" has the meaning set forth in the Recitals to
this Agreement.
"Company" means The Bread Shop, a California corporation.
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"Company's Properties" means all real or personal property,
including fixtures, presently or previously owned or leased or
otherwise occupied or operated by the Company, including, but not
limited to, the Leased Real Estate.
"Company Transaction Costs" has the meaning set forth in
Section 9.2.
"Control" (including the terms "controlled by" and "under
common control with") means the possession, directly or indirectly, of
the power to direct or cause the direction of the management policies
of a Person, whether through the ownership of voting securities, by
contract or credit arrangement, as trustee or executor, or otherwise.
"Damages" means any and all claims, liabilities, losses,
fines, damages, costs, deficiencies, amounts paid in settlement and
expenses (including, but not limited to, expenses of investigation,
attorney's fees, witness fees, court costs and disbursements of
counsel and other professionals, interest and penalties).
"Damon" means Xxx Xxxxx.
"Damon Trust" mean the Damon Charitable Remainder Trust.
"Defaulting Party" has the meaning set forth in Section 9.2.
"Dispute Letter" has the meaning set forth in Section 1.4.
"Draft Closing Balance Sheet" has the meaning set forth in
Section 1.4.
"Environmental Laws" means all laws, statutes, rules,
regulations and court decisions relating to environmental, safety, or
health matters, including, but not limited to, those relating to the
release or threatened release of Hazardous Substances and the
generation, use, storage, transportation, or disposal of Hazardous
Substances in any manner applicable to the Company or its assets.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and the rules and regulations promulgated
thereunder.
"Escrow Agent" has the meaning set forth in Section 1.3.
"Escrow Agreement" has the meaning set forth in Section 1.3.
"Escrow Amount" has the meaning set forth in Section 1.3.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"FDA" has the meaning set forth in Section 3.1.15.
"Financial Statements" means the balance sheets of the Company
as of October 28, 1994 and October 27, 1995 and the related statements
of income, shareholders'
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equity and cash flow (and the footnotes thereto) of the Company for
the years ending October 28, 1994 and October 27, 1995 (collectively,
the "Year-End Financial Statements") and the balance sheet of the
Company as of August 23, 1996 and the related statements of income,
shareholders' equity and cash flow of the Company for the period from
October 28, 1995 through August 23, 1996 (the "August Financial
Statements").
"GAAP" means United States generally accepted accounting
principles, consistently applied.
"Xxxxxxx" means Xxxxxxx Xxxxxxx.
"Xxxxxxx Trust" means the Xxxxxxx Charitable Remainder Trust.
"Governmental Authorities" means all federal, state and local
governmental departments, offices, agencies and authorities.
"Hazardous Substances" means (a) any chemical, material or
substance defined as or included in the definition of "hazardous
substances," "hazardous wastes," "hazardous materials," "extremely
hazardous waste," "restricted hazardous waste," "medical waste,"
"toxic pollutants," "contaminants," "toxic substances," or words of
similar import under any applicable Environmental Law, (b) any oil,
petroleum, petroleum product or petroleum derived substance, any
flammable substances or explosives, or any radioactive materials, (c)
asbestos and asbestos-containing materials in any form which is or
could become friable, (d) radon gas, urea, formaldehyde, foam
insulation, dielectric fluid, and polychlorinated biphenyls, and (e)
any other chemical, material or substance which is prohibited,
limited, or regulated by any Governmental Authority.
"Indebtedness" means (i) all obligations of any of the Company
for borrowed money, whether current or funded, secured or unsecured,
(ii) all obligations of the Company for the deferred purchase price of
any property or services, (iii) all obligations of the Company created
or arising under any conditional sale or other title retention
agreement with respect to property acquired by the Company (even
though the rights and remedies of the seller or lender under such
agreement in the event of a default may be limited to repossession or
sale of such property), (iv) all obligations of the Company secured by
a purchase money mortgage or other lien to secure all or part of the
purchase price of property subject to such mortgage or lien, (v) all
obligations under leases which shall have been or should be, in
accordance with GAAP, recorded as capital leases in respect of which
the Company is liable as lessee, (vi) any obligation of the Company in
respect of bankers' acceptances or letters of credit, (vii) any
obligations secured by liens on property acquired by the Company,
whether or not such obligations were assumed by the Company at the
time of acquisition of such property, (viii) all obligations of a type
referred to in clause (i), (ii), (iii), (iv), (v), (vi), or (vii)
above which is directly or indirectly guaranteed by the Company or
which any of them has agreed (contingently or otherwise) to purchase
or otherwise acquire or in respect of which it has otherwise assured a
credit against loss, (ix) any accrued and unpaid interest or other
charges on any of the foregoing obligations, (x) present, future, or
contingent payment obligations under
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(A) any phantom stock or similar appreciation rights, plan, or
agreement, (B) any consulting, deferred pay-out, compensation or other
similar arrangement with any former or present employee or stockholder
(or any Associate of such employee or stockholder) of the Company, or
(C) any non-competition agreement, (xi) deferred taxes, and (xii) all
other forms of obligations except trade accounts payable and accrued
expenses incurred in the ordinary course of business of the Company.
"Indemnified Party" has the meaning set forth in Section 6.4.
"Indemnifying Party" has the meaning set forth in Section 6.4.
"Independent Auditor" has the meaning set forth in Section 1.4.
"Intellectual Property" means trademarks, service marks, trade
names, trade dress, copyrights, and similar rights, including
registrations and applications to register or renew the registration
of any of the foregoing, patents and patent applications, and
inventions, processes, designs, formulae, trade secrets, know- how,
confidential information, and all similar intellectual property
rights, and licenses of any of the foregoing.
"Interim Period" has the meaning set forth in Section 2.2.
"IRS" means the Internal Revenue Service.
"Knowledge of Sellers" means and assumes that (a) Sellers have
made due and diligent inquiry as to the matters that are the subject
of such representation and warranty, and (b) knowledge of Damon,
Goodell, Xxxxx and Xxxxxxxx of the Company is imputed to all Sellers.
"Latest Balance Sheet" means the unaudited balance sheet of
the Company at August 23, 1996.
"Leased Real Estate" has the meaning set forth in Section
3.1.11.
"Lien" means any mortgage, trust deed, pledge, security
interest, encumbrance, lien, claim, charge or encumbrance of any kind.
"Liabilities" has the meaning set forth in Section 3.1.8.
"Material Adverse Effect" means any individual event,
occurrence, fact, condition, change, or effect, or group thereof, that
is or are materially adverse to the business, operations, results of
operations, condition (financial or otherwise), properties (including
intangible properties), market value, prospects, or liabilities of the
Company, taken as a whole.
"Material Contracts" has the meaning set forth in Section
3.1.12.
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"Xxxxx" means Xxxx Xxxxx.
"Xxxxx Trust" means the Xxxxx Charitable Remainder Trust.
"Net Amount" has the meaning set forth in Section 1.2.
"Non-Defaulting Party" has the meaning set forth in Section
9.2.
"PBGC" means the Pension Benefit Guaranty Corporation or any
entity succeeding to any or all of its functions under ERISA.
"Permits" means all permits, licenses, orders, approvals,
exemptions, certificates, registrations, variances and other
authorizations from all Governmental Authorities.
"Permitted Encumbrances" means (a) Liens securing real estate
taxes, special assessments, or the claims or demands of materialmen,
mechanics, carriers, warehousemen and landlords, provided that the
payment thereof is not past due or delinquent; (b) Liens incurred or
deposits made in the ordinary course of business in connection with
worker's compensation, unemployment insurance, social security, and
other similar laws; and (c) building and zoning ordinances and
regulations, provided that the Company and its assets are in
substantial compliance therewith.
"Person" means any individual, business corporation, municipal
or not-for profit corporation, limited liability company or
partnership, trust, general or limited partnership, joint venture,
unincorporated association, joint stock company, or other entity or
organization of any kind, and any governmental entity, including an
agency or political subdivision thereof.
"Plan" has the meaning set forth in Section 3.1.18.
"Presence or Release" has the meaning set forth in Section 6.1.
"Products" has the meaning set forth in Section 3.1.15.
"Promotional Commitments" has the meaning set forth in Section
3.1.30.
"Purchase Price" has the meaning set forth in Section 1.2.
"RCRA" has the meaning set forth in Section 3.1.23.
"Securities Act" means the Securities Act of 1933, as amended.
"Seller Notes" has the meaning set forth in Section 3.1.8.
"Sellers" has the meaning set forth in the lead-in to this
Agreement.
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"Sellers' Representative" means Xxxx Xxxxx, acting hereunder
on behalf of all Sellers.
"Stock Redemption Agreement" means that certain Stock
Redemption Agreement dated on or about February 13, 1991 by and
between Damon, Myers, Williams, Xxxxxxx Xxxxxxx and the Company, as
amended.
"Straddle Year" has the meaning set forth in Section 6.1.
"Subsidiaries" means each corporation or other Person in which
a Person owns or controls, directly or indirectly, capital stock or
other equity interests representing more than 50% of the outstanding
voting stock or other equity interests of such corporation or other
Person.
"Tax Returns" shall mean all returns, amended returns,
declarations, reports, statements, information statements,
declarations of estimated tax, backup withholding returns or reports,
and other documents required to be filed in respect of Taxes.
"Taxes" shall mean all U.S. federal, U.S. state, U.S. local,
and foreign taxes, customs, duties, fees, levies, assessments or
charges of any kind whatever, including, without limitation, income,
alternative minimum income, franchise, profits, windfall profits,
gross receipts, excise, sales, use, license, lease, service, service
use, transaction, occupation, severance, stamp, premiums, energy,
environmental, withholding, payroll, employment, unemployment, Social
Security, worker's compensation, ad valorem, real or personal
property, and capital taxes, and any interest, penalties, additions to
tax or other additional amounts with respect thereto.
"Transaction Expenses" has the meaning set forth in Section
9.2.
"USDA" has the meaning set forth in Section 3.1.15.
"Xxxxxxxx" means Xxxxx Xxxxxxxx.
"Xxxxxxxx Trust" means the Xxxxxxxx Charitable Remainder
Trust.
"Working Capital" has the meaning set forth in Section 1.4.
"Year-End Financial Statements" has the meaning set forth in
"Financial Statements."
ARTICLE IX
MISCELLANEOUS PROVISIONS
9.1 PARTIES IN INTEREST. Except for Indemnified Parties for
purposes of Article VI hereof, this Agreement is not made for the benefit of
any Person other than Sellers and Buyer (and their respective successors and
assigns), and no Person (other than Sellers and Buyer and
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their respective successors and assigns) shall acquire or have any right under
or by virtue of this Agreement. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto without the prior written consent of the other parties. The rights and
obligations of the parties hereto shall be binding upon and inure to the
benefit of their respective successors and assigns.
9.2 EXPENSES. (a) Except as set forth below in this Section 9.2,
Sellers, on the one hand, and Buyer, on the other hand, shall bear their
respective expenses, costs, and fees (including attorneys', auditors', and
financing commitment fees) in connection with the transactions contemplated
hereby, including the preparation, execution, and delivery of this Agreement,
and compliance herewith (the "Transaction Expenses"), whether or not the
transactions contemplated hereby shall be consummated, provided that in the
event of termination of this Agreement pursuant to Section 7.1 by one party
(the "Non-Defaulting Party") by reason of the breaches of the other party (the
"Defaulting Party"), the Defaulting Party shall pay the Non-Defaulting Party
all reasonable Transaction Expenses incurred by such Non-Defaulting Party and
such payment shall constitute the Non-Defaulting Party's exclusive remedy for
such breaches by the Defaulting Party. In addition, Sellers shall bear the
costs and expenses of the Company incurred prior to the Closing in connection
with the sale of the Company, including but not limited to the transactions
contemplated hereby and actions taken in contemplation thereof ("Company
Transaction Costs"); provided, however, that the Company may pay Company
Transaction Costs at or prior to the Closing if the Company delivers to Buyer a
copy of the invoices with respect to such Company Transaction costs at or prior
to the Closing and the aggregate amount to be paid to Sellers at the Closing is
reduced by the aggregate amount of such Company Transaction Costs.
(b) Sellers shall be responsible for the payment of any
federal, state or local transfer taxes which may become payable as a result of
the transactions contemplated in this Agreement even if such taxes are levied
against Buyer or the Company.
9.3 Governing Law. This Agreement shall be governed in all
respects, including as to validity, interpretation, and effect, by the internal
laws of the State of California, without giving effect to the conflict of laws
rules thereof.
9.4 WAIVER. At any time prior to the Closing Date, Sellers and
Buyer may extend the time for the performance of or waive compliance with any
of the obligations or other acts of any other party hereto contained herein or
waive any inaccuracies in the representations or warranties of any other party
hereto contained herein or in any document delivered pursuant hereto. Any such
extension or waiver shall be valid only if set forth in an instrument in
writing signed by Sellers' Representative and Buyer. Except as otherwise
expressly provided herein, the provisions of this Agreement may be amended by
the written agreement of Sellers' Representative and Buyer. Any waiver,
permit, consent, or approval of any kind or character on the part of any party
hereto with respect to any provisions or conditions of this Agreement must be
made in writing and shall be effective only to the extent specifically set
forth in such instrument.
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9.5 HEADINGS. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of any provision of this Agreement.
9.6 NOTICES. All communications provided for hereunder or desired
to be given hereunder shall be in writing and shall be deemed to be given (a)
when delivered in person, (b) three (3) Business Days after deposit in the
United States mail, first class, registered or certified, return receipt
requested, with proper postage prepaid, (c) one business day after deposit with
a reputable overnight courier service, with proper charges prepaid, or (d) when
both telecopied to such person and deposited in the United States mail, first
class, with proper postage paid:
(a) if to Sellers, addressed to the addresses set forth
on Schedule 1 to this Agreement; and
(b) if to Buyer, addressed to:
TBS Acquisition Corporation
c/o Intrepid Food Holdings, Inc.
000 Xxxxx XxXxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxxx X. Xxxx
or at such other place or places or to such other Person or Persons as shall be
designated in writing by any party hereto in a notice to the others given in
the manner hereinabove provided.
9.7 RELEASE. Each Seller hereby irrevocably waives and releases
any and all rights to indemnification (whether by law, contract, charter,
bylaws or otherwise) by the Company relating to actions or omissions on or
prior to the Closing Date.
9.8 FURTHER COOPERATION. At any time and from time to time, each
party shall promptly execute and deliver all such documents and instruments,
and do all such acts and things, as any other party may reasonably request in
order to further effect the purposes of this Agreement.
9.9 SELLERS' REPRESENTATIVE. Each of Sellers agrees that actions
(including, but not limited to, waivers and consents to amendments) or
omissions to act hereunder by Sellers' Representative, whether before or after
the Closing, shall be binding upon and enforceable against each of Sellers.
9.10 KNOWLEDGE. (a) Buyer's knowledge prior to the Closing of any
inaccuracy or breach of any representation, warranty or covenant made or to be
performed by Sellers set forth in this Agreement (i) shall not in any way limit
or affect any of Buyer's rights or remedies under this Agreement, (ii) shall
not in any way limit or affect Buyer's right to recover under Section 6.1
hereof and (iii) shall not be deemed a waiver of any condition contained in
Section 5.2 hereof.
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(b) Sellers' knowledge prior to the Closing of any
inaccuracy or breach of any representation, warranty or covenant made or to be
performed by Buyer set forth in this Agreement (i) shall not in any way limit
or affect any of Sellers' rights or remedies under this Agreement, (ii) shall
not in any way limit or affect Sellers' right to recover under Section 6.1
hereof and (iii) shall not be deemed a waiver of any condition contained in
Section 5.3 hereof.
9.11 CONFIDENTIALITY OF COMPANY INFORMATION. It is understood that
Sellers may have confidential information concerning the Company which, if
known to competitors thereof, may damage the Company. Sellers agree that from
and after the Closing Date, Sellers will not divulge to any third party any
confidential information possessed or obtained by Sellers concerning the
Company.
9.12 REPRESENTATION LETTERS. Upon the request of Buyer after the
Closing, Sellers shall deliver, and shall cause the Company's outside
accountants prior to the Closing to deliver, all such representation letters,
certificates, acknowledgments, consents and other documents and information
that are customarily given to or used by independent accountants in the course
of the preparation of audited official statements, as Buyer or Buyers'
accountant may request.
9.13 ENTIRE AGREEMENT. This Agreement, the Escrow Agreement, and
the other documents and writings referred to herein or therein or delivered
pursuant to this Agreement and the Escrow Agreement contain the entire
understanding of the parties with respect to the subject matter. This
Agreement supercedes all prior agreements and understandings, both written and
oral, between the parties with respect to the subject matter hereof.
9.14 AMENDMENTS AND MODIFICATIONS. This Agreement may not be
amended, altered or modified except through a written instrument signed by all
of the parties that sets forth the terms of such amendment, alteration or
modification.
9.15 SEVERABILITY. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement is held to be
prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of
this Agreement.
9.16 RULES OF CONSTRUCTION. The following provisions shall be
applied wherever appropriate herein:
(a) "herein," "hereby," "hereunder," "hereof," and other
equivalent words shall refer to this Agreement as an entirety and not
solely to the particular portion of this Agreement in which any such
word is used;
(b) all definitions set forth herein shall be deemed
applicable whether the words defined are used herein in the singular
or the plural;
(c) wherever used herein, any pronoun or pronouns shall
be deemed to include both the singular and plural and to cover all
genders;
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(d) unless otherwise provided herein, any determinations
or reports hereunder which require the application of accounting
concepts or principles shall be made or prepared in accordance with
GAAP;
(e) all accounting terms not specifically defined herein,
shall be construed in accordance with GAAP;
(f) neither this Agreement nor any other agreement,
document, or instrument referred to herein or executed and delivered
in connection herewith shall be construed against any party as the
principal draftsperson hereof or thereof;
(g) all references or citations in this Agreement to
statutes or regulations or statutory or regulatory provisions shall be
considered citations to such statutes, regulations, or provisions as
in effect from time to time, including any successor statutes,
regulations, or provisions directly or indirectly superseding such
statutes, regulations, or provisions;
(h) any references herein to a particular Section,
Article, Exhibit, or Schedule means a Section or Article of, or an
Exhibit or Schedule to, this Agreement unless another agreement is
specified; and
(i) the Exhibits and Schedules attached hereto are
incorporated herein by reference and shall be considered part of this
Agreement.
9.17 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same agreement.
9.18 TELECOPY EXECUTION AND DELIVERY. A facsimile, telecopy or
other reproduction of this Agreement may be executed by one or more parties
hereto, and an executed copy of this Agreement may be delivered by one or more
parties hereto by facsimile or similar electronic transmission device pursuant
to which the signature of or on behalf of such party can be seen, and such
execution and delivery shall be considered valid, binding and effective for all
purposes. At the request of any party hereto, all parties hereto agree to
execute an original of this Agreement as well as any facsimile, telecopy or
other reproduction hereof.
* * * * * * *
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The parties hereto have caused this Agreement to be executed on the
day and year first above written.
TBS ACQUISITION CORPORATION
By: /S/ Xxxxxxx X. Xxxx
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President
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/S/ Xxxx Xxxxx
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XXXX XXXXX
/S/ Xxx Xxxxx
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XXX XXXXX
/S/ Xxxxx Xxxxxxxx
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XXXXX XXXXXXXX
/S/ Xxxxxxx Xxxxxxx
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XXXXXXX XXXXXXX
/S/ Xxxxxxx Xxxxx
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XXXXXXX XXXXX
/S/ Xxxxxx Xxxxxxx
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XXXXXX XXXXXXX AND XXXXXXX XXXXXXX, AS
JOINT TENANTS
/S/ Xxxxxxx Xxxxxxx
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/S/ Xxxxx X. Xxxxxxx
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XXXXX X. XXXXXXX, AS TRUSTEE OF THE XXXXX
CHARITABLE REMAINDER TRUST
/S/ Xxxxx X. Xxxxxxx
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XXXXX X. XXXXXXX, AS TRUSTEE OF THE DAMON
CHARITABLE REMAINDER TRUST
/S/ Xxxxx X. Xxxxxxx
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XXXXX X. XXXXXXX, AS TRUSTEE OF THE XXXXXXXX
CHARITABLE REMAINDER TRUST
/S/ Xxxxx X. Xxxxxxx
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XXXXX X. XXXXXXX, AS TRUSTEE OF THE XXXXXXX
CHARITABLE REMAINDER TRUST
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