MERGER AGREEMENT
Agreement made the _____ day of January, 1999, among Sterling Partners
Inc., a Delaware corporation (the "Company"), XxxxxxxXxxxxx.Xxx, a California
corporation ("Gourmet"), and Marblehead Capital Group, Inc., a Massachusetts
corporation ("Marblehead").
RECITALS
WHEREAS, the Company and Gourmet propose to merge pursuant to this
Merger Agreement, which provides for the conversion of all of the outstanding
capital stock of Gourmet into shares of the Company and the merger of Gourmet
with and into the Company, with the Company as the surviving corporation
pursuant to the applicable laws of Delaware and California; and
WHEREAS, the parties have agreed that Marblehead has performed certain
services for Gourmet and the Company in connection with the Merger (as defined
in Section 3.1) and will perform certain services for the Company after closing
of the Merger.
NOW, THEREFORE, in consideration of the foregoing and the
representations, warranties and agreements herein contained, the parties hereto
agree as follows:
ARTICLE I
INCORPORATION OF RECITALS
All of the recitals set forth above are incorporated herein by
reference.
ARTICLE II
DEFINITIONS
The following terms, as used herein, have the following meanings:
"Affiliate" of a Person means a Person, who directly or indirectly
through one or more intermediaries, controls or is controlled by, or is under
common control with, such person.
"Agreement" has the meaning set forth in the introductory paragraph.
"Closing" has the meaning set forth in Section 3.9.
"Closing Date" has the meaning set forth in Section 3.9.
"CGCL" means the California General Corporation Law.
"Common Stock" means the voting common stock of the Company.
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"Company" means Sterling Partners Inc.
"DGCL" means the Delaware General Corporation Law, as amended.
"Effective Time" means the time indicated in the Articles of Merger
when the merger pursuant hereto shall become effective for corporate law
purposes.
"Environmental Permits" means federal, state and local governmental
liens, permits and other authorizations and approvals, whether foreign or
domestic, which relate to the business of a Person as it may be affected by the
environment or to public health and safety or worker health and safety as they
may be affected by the environment.
"ERISA" means the Employment Retirement Income Security Act of 1974, as
amended.
"Evaluation Material" has the meaning set forth in Section 7.3.
"Financial Statements" has the meaning set forth in Section 4.10.
"Handling Hazardous Substances" has the meaning set forth in Section
4.5.
"Hazardous Emissions" has the meaning set forth in Section 4.5.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended.
"Intellectual Property" has the meaning set forth in Section 4.16.
"Inventory" has the meaning set forth in Section 4.6.
"Leases" and "Lease" have the meanings set forth in Section 4.15.
"Licenses and Permits" has the meaning set forth in Section 4.8.
"Material Contract" means each contract, agreement or commitment of a
Person other than Leases:
(a) upon which any substantial part of such Person's business
is dependent or which, if breached, could reasonably be expected to affect,
materially and adversely, the earnings, assets, financial condition or
operations of the business of such Person;
(b) which provides for aggregate future payments of more than
$10,000, except for purchase orders or sale orders arising in the ordinary and
usual course of business, in which case they are listed only if any party
thereto is obligated to make payments pursuant thereto aggregating more than
$20,000;
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(c) which extends for more than one year from the date hereof
and is not cancelable by either party on 30 days' notice;
(d) which provides for the sale, after the date hereof and
other than in the ordinary course of business, of any of its assets;
(e) which relates to the employment, retirement or termination
of the services of any officer of former officer; or
(f) which contains covenants pursuant to which any other
Person has agreed not to compete with any business conducted by such Person or
not to disclose to other information concerning such Person.
Collectively, the material contracts of such Person are referred to as
"Material Contracts."
"Pension Plans" means all employee benefit plans and programs
including, without limitation, all retirement, savings and other pension plans.
"Person" means an individual, a corporation, a partnership, an
association, a trust or any other entity or organization, including a
governmental or political subdivision or an agency of instrumentality thereof.
"Real Property" means all of the real property, together with the
fixtures and other improvements located thereon and the appurtenances thereto,
owned by a Person.
"Securities Act" means the Securities Act of 1933, as amended.
"Tax" or "Taxes" means any federal, state, local, or foreign income,
gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental (including taxes under
Internal Revenue Code section 59A), customs duties, capital stock, franchise
profits, withholding, social security (or similar), unemployment, disability,
real property, personal property, sales, use, transfer, registration, value
added, alterative or add-on minimum, estimated, or other tax of any kind
whatsoever, including any interest, penalty, or addition thereto, whether
disputed or not.
"Tax Return" means any return, declaration, report, claim for refund,
or information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"Welfare Plans" means all health, severance, insurance, disability and
other employee welfare plans.
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ARTICLE III
MERGER
3.1 Merger. On the terms and subject to the conditions contained in
this Agreement, and pursuant to the Plan of Merger attached hereto as Exhibit
3.1 (the "Merger Plan"), on the Closing Date and at the Effective Time Gourmet
shall be merged with and into the Company and the separate corporate existence
of Gourmet shall thereupon cease. Said merger is referred to herein as the
"Merger." The Company shall be the surviving corporation in the Merger and shall
be governed by the DGCL. The separate corporate existence of the Company with
all its rights, privileges, powers and franchises shall continue unaffected by
the Merger. The Merger shall have the effects specified in the DGCL and the
CGCL. From and after the Effective Time, the Company is sometimes referred to
herein as the "Surviving Corporation."
3.2 Articles of Merger. On the Closing Date, the parties hereto shall
cause Articles of Merger (the "Articles of Merger"), meeting the requirements of
Section 252 of the DGCL and Section 1100 of the CGCL, to be properly executed
and filed in accordance with the DGCL and the CGCL. The Merger shall be
effective, for corporate law purposes, at the Effective Time. The Articles of
Merger shall provide for the change of the Company's name to "XxxxxxxXxxxxx.Xxx,
Inc." or such other name as the Company may determine.
3.3 Articles of Incorporation; Bylaws. The Articles of Incorporation of
the Company in effect immediately prior to the Effective Time shall be the
Articles of Incorporation of the Surviving Corporation. The Bylaws of the
Company in effect immediately prior to the Effective Time shall be the Bylaws of
the Surviving Corporation.
3.4 Officers. The officers of the Company at the Effective Time shall
be as follows:
President - Xxxxxx Xxxxxxxxx
Chief Financial Officer/Treasurer - Xxxx Xxx
Secretary - Xxxx Xxxxxxx
Such persons will hold office until their successors are duly elected
or appointed and qualify in the manner provided in the Articles of Incorporation
or Bylaws of the Surviving Corporation or as otherwise provided by law, or until
their earlier death, resignation or removal.
3.5 Directors. The directors of the Company at the Effective Time shall
be as follows:
Xxxxxx Xxxxxxxxx
Xxxx Xxx
Xxxx Xxxxxx
C. Xxxxxxxx Xxxxxxxx
and one additional person to be nominated by Gourmet or its now
existing shareholders at or after the Effective Time.
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The directors of the Surviving Corporation will serve until their
successors are duly elected or appointed and qualify in the manner provided in
the Articles of Incorporation or Bylaws of the Surviving Corporation or as
otherwise provided by law, or until their earlier death, resignation or removal.
The parties agree that the Board of Directors of the Company, immediately after
the Closing, shall be a maximum of five (5) directors and that of those
directors the now existing shareholders of Gourmet shall have the right to elect
three directors ("Gourmet Directors") and Marblehead shall have the right to
elect two directors; provided, however, that if the projections to be agreed
upon by the parties are not met, then Marblehead shall have the right to replace
one of the Gourmet Directors with a director designated by Marblehead, to
replace management of the Surviving Company as Marblehead deems appropriate, and
to otherwise exercise control over the business and affairs of the Surviving
Company until such projections have been met.
3.6 Conversion of Shares and Options. At Closing there shall be 763,500
shares of common stock of Gourmet issued and outstanding and 8,280,000 shares of
the Company's Common Stock issued and outstanding of which 6,030,000 shares
shall have been issued to Marblehead at Closing. At the Effective Time, the
issued and outstanding shares of Common Stock of Gourmet shall be converted into
7,421,220 shares of Common Stock of the Company, so that each issued and
outstanding share of Gourmet shall be converted into 9.72 shares of the
Company's Common Stock. Further, at the Closing there shall be outstanding
options for the purchase of 236,500 shares of the common stock of Gourmet and,
at Closing, the Company shall grant the holders thereof options for the purchase
of 2,298,780 shares of the Company's Common Stock, or 9.72 shares of common
stock of the Company for each share of common stock of Gourmet underlying
Gourmet's outstanding options, and the existing Gourmet options shall terminate.
At Closing the Company shall grant to each of Xxxxxx Xxxxxxxxx and Rainmaker
Capital, LLC, an option to acquire 900,000 shares of the Company's Common Stock
(the "Management Options") at an exercise price per share equal to the fair
market value of the common stock at Closing. The Management Options shall be
exercisable for a period of ten (10) years after their date of grant and shall
vest over three (3) years. Vesting shall be contingent upon the Company's
meeting certain performance criteria as shall be determined by Gourmet and
Marblehead.
3.7 Shares Restricted. The Shares of Common Stock to be issued to
holders of Gourmet Common Stock and the holders of options for the purchase of
Gourmet Common Stock shall be "restricted" shares within the meaning of
Securities and Exchange Commission Rule 144 promulgated under the Securities Act
of 1933, as amended (the "Act"), and accordingly the certificate or certificates
representing such shares shall bear a restrictive legend in accordance with the
requirements of Rule 144.
3.8 No Representation of Value. Gourmet, for itself and its security
holders, hereby confirms that neither the Company, nor Marblehead, nor any
officer, director or shareholder of the Company or Marblehead, or any agent of
or professional employed by either of them, has made any representation to
Gourmet or any of its shareholders or optionholders as to the present or future
value of the Company's common stock or any other securities of the Company, nor
has the Company or Marblehead or any such person made any representation with
respect to the ability of Gourmet's shareholders to sell all or any part of the
shares of common stock of the
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Company at any price, nor that an active or liquid trading market in the
Company's common stock will develop or continue in the future. Further, Gourmet,
for itself and its securities holders, hereby confirms its understanding that
the future bid or asking price of the Company's common stock may not bear any
relationship to the net tangible book value of the Company's common stock and,
further, may be unrelated to any other generally accepted method of valuation of
the Company's shares.
3.9 Closing. The closing of the purchase and sale contemplated herein
(the "Closing") shall take place at the offices of the Company, 0000 Xxxxxx
Xxxx, Xxxxx 000, Xxxx Xxxxx, Xxxxxxx 00000, on or about January 15, 1999 (the
"Closing Date"), or at another time or location mutually agreeable to the
parties.
3.10 Deliveries at Closing by Gourmet. At Closing, Gourmet, as
appropriate, shall deliver to the Company (i) the stock books, stock ledgers,
minute books and seals of Gourmet; (ii) a current certificate of good standing
for Gourmet issued by the California Secretary of State; (iii) a. balance sheet
(including schedules of cash on hand and accounts receivable and payable) dated
as of Closing in a form satisfactory to the Company; (iv) consents to the
assumption of Gourmet's real estate lease and other material contracts; (v)
originals of all material contracts; and (vi) all other items required to be
delivered by Gourmet or Gourmet shareholders to the Company at or prior to
Closing under this Agreement, including, without limitation, a legal opinion or
opinions reasonably satisfactory to the Company containing limitations and
qualifications typically associated with opinion letters delivered in
transactions of the nature described in this Agreement, to the effect that:
(a) Gourmet is duly incorporated and a validly existing
corporation in good standing under the laws of the State of California, and is
duly qualified to carry on its business and is in good standing in any state in
which it does business;
(b) Gourmet has the requisite capacity, power and authority to
execute and deliver this Agreement and the other documents and the transactions
contemplated herein.
(c) The execution and delivery by Gourmet of this Agreement,
the performance by Gourmet of its obligations hereunder, and the consummation of
the transactions contemplated herein will not result in the breach of or violate
any term or provision of the articles or by-laws of Gourmet, or to the knowledge
of Gourmet's counsel, any contract, agreement, judgment, order, decree, award,
law, rule or regulation to which Gourmet is subject.
(d) The outstanding shares have been duly issued to its
shareholders are fully paid and non-assessable.
(e) The options outstanding for the purchase of Gourmet common
stock have been duly issued and at Closing will be canceled in exchange for
options to be issued by the Company under Section 3.6.
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(f) The Agreement has been duly executed and delivered by
Gourmet; and the Agreement and all documents delivered pursuant to the terms
hereof are valid and binding on Gourmet and are enforceable in accordance with
their respective terms, subject to any applicable bankruptcy, insolvency,
reorganization or other laws of general application affecting the enforcement of
creditors' rights generally and general principles of equity.
(g) To the knowledge of Gourmet's counsel, no consent of any
party other than a majority of Gourmet's shareholders, and, to the knowledge of
Gourmet's counsel, no consent, license, approval or authorization of, or
registration or declaration with, any governmental bureau or agency is required
in connection with the execution, delivery, performance, validity and
enforceability of this Agreement.
(h) The California state wine distributor license and all
other licenses requisite to Gourmet's carrying on the advertising and sale of
wine are assumable by the Company without any material interruption in the
Company's ability to lawfully carry on Gourmet's wine or other business.
(i) The Material Contracts are valid and binding contracts
effective to transfer, and which did transfer, to Gourmet the tangible and
intangible property to be transferred thereby.
(j) Such other matters as are customary in connection with
transactions of this kind.
3.11 Deliveries at Closing by the Company.
At Closing, the Company shall deliver to Gourmet or its
shareholders as appropriate:
a. The Company's certificate or certificates for shares of the
Company's common stock issued in the names of Gourmet's shareholders
individually, allocated in proportion to their respective holdings of issued and
outstanding common stock of Gourmet.
b. Options for the purchase of the Company's common stock
issued and allocated in accordance with Section 3.6.
c. An opinion of counsel to the Company, reasonably
satisfactory to Gourmet, to the effect that:
(1) The Company is a duly incorporated and validly
existing corporation in good standing with the laws of the State of Delaware,
and is duly qualified to carry on its business and is in good standing in any
state in which it does business and is required to qualify;
(2) The Company has the requisite power and authority
to execute and deliver, and has taken all necessary corporate action to
authorize the execution and delivery of, this Agreement and the other documents
and the transactions contemplated herein;
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(3) The execution and delivery by the Company of this
Agreement, the performance by the Company of its obligations hereunder, and the
consummation of the transactions contemplated herein will not result in the
breach of or violate any term of provision of the articles or by-laws of the
Company nor, to the best knowledge of counsel, any contract, agreement, law,
rule, regulation, judgment, order, decree or award to which the Company is
subject;
(4) When issued to Gourmet's shareholders, the
Company's Common Stock shall be duly issued, full-paid and non-assessable;
(5) The Agreement has been duly executed and
delivered by the Company;
(6) The Agreement and all documents delivered
pursuant to the terms hereof are valid and binding on the Company and are
enforceable in accordance with their respective terms, subject to any applicable
bankruptcy, insolvency, reorganization or other laws of general application
affecting the enforcement of creditors' rights generally and general principles
of equity. To the best knowledge of counsel, no consent of any party other than
the Company, and no consent, license, approval or authorization of, registration
or declaration with, any governmental bureau or agency is required in connection
with the execution, delivery, performance, validity and enforceability of this
Agreement.
(7) The Company's issuance and delivery of Common
Stock to Gourmet shareholders shall vest in them good and valid title to the
shares which, to the best knowledge of counsel, shall be free and clear of any
lien, encumbrance or adverse claim; and
(8) Such other matters that are customary in
connection with transactions of this kind.
The opinion of the Company's counsel shall
contain such limitations and qualifications as are typically associated with
opinion letters delivered in transactions of the nature described in this
Agreement.
d. An employment agreement for Xxxxxx Xxxxxxxxx in a form to
which Xx. Xxxxxxxxx and the Company shall agree.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF GOURMET
Gourmet represents and warrants the following:
4.1 Organization, Qualification. Gourmet is a corporation duly
organized, validly existing and in good standing under the laws of California
and has corporate power and authority to own all of its properties and assets
and to carry on its business as it is presently being conducted. Gourmet is duly
qualified and in good standing to do business in each jurisdiction in
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which the property owned, leased or operated by it or the nature of the business
conducted by it makes such qualification necessary except in those jurisdictions
where the failure to be duly qualified and in good standing would not have a
material adverse effect on Gourmet or the business conducted by it. Gourmet has
heretofore delivered to the Company complete and correct copies of the Articles
of Incorporation and Bylaws of Gourmet, as currently in effect.
4.2 Capitalization of Gourmet. The authorized capital stock of Gourmet
consists only of 1,000,000 shares of common stock, the par value of which is not
stated, of which, as of the date hereof, 763,500 shares are validly issued and
outstanding, fully paid and nonassessable, and were not issued in violation of
any preemptive rights. Gourmet has no commitment to issue or sell any shares of
its capital stock or any securities or obligations convertible into or
exchangeable for, or giving any person the right to acquire from it, any shares
of its capital stock and no such securities or obligations are issued or
outstanding other than options for 236,500 shares as set forth in Schedule 4.2.
4.3 Consents and Approvals. Except as set forth in Schedule 4.3 there
is no requirement applicable for Gourmet to make any filing with, or to obtain
any permit, authorization, consent or approval of, any public body as a
condition to the consummation of the Merger. Except as set forth in Schedule 4.3
there is no requirement that any party to any Material Contract of Gourmet, or
any license or permit for the use of Intellectual Property of Gourmet or loan
agreement to which Gourmet is a party or by which it is or was bound, consent to
the execution of this Agreement by Gourmet or to the consummation of the Merger.
4.4 Non-Contravention. Except as set forth in Schedule 4.4, the
execution and delivery by Gourmet of this Agreement do not, and the consummation
of the Merger will not, (i) violate or result in a breach of any provision of
the Articles of Incorporation or Bylaws of Gourmet, (ii) result in a default (or
give rise to any right of termination, cancellation or acceleration) under the
terms, conditions or provisions of any note, bond, mortgage, indenture, license,
agreement, lease or other instrument or obligation to which Gourmet is a party
or by which the Company or the business conducted by it may be bound, or (iii)
violate any order, writ, injunction, decree, statute, rule or regulation
applicable to Gourmet or to the business conducted by Gourmet, excluding from
the foregoing clauses (ii) and (iii) such defaults and violations as would not
have a material adverse effect on Gourmet.
4.5 Environmental Matters. Except as set forth in Schedule 4.5, Gourmet
has obtained all Environmental Permits required to conduct its business as it is
presently being conducted including, without limitation, those relating to (i)
emissions, discharges or threatened discharges of pollutants, contaminants,
hazardous or toxic substances or petroleum into the air, surface water, ground
water or the ocean, or on or into the land, and (ii) the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of pollutants, contaminants, hazardous or toxic substances or
petroleum. Gourmet has not received notice of, or is otherwise aware of, any
facts, events or conditions which (x) interfere with, prevent, or, with the
passage of time, could interfere with continued substantial compliance with any
of the aforementioned environmental laws, regulations, policies, guidelines,
orders, judgments or decrees, (y) may give rise to any liability (whether based
in contract, tort, implied or express
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warranty, criminal or civil stature or otherwise) under any law, regulation,
policy or guideline relating to hazardous emissions or handling hazardous
substances, or (z) obligate Gourmet or, with the passage of time, could cause
Gourmet to be obligated to clean up, remedy or otherwise restore to a former
condition, by itself or jointly with others, any contaminated surface water,
ground water, soil or any natural resource associated therewith.
4.6 Inventory. Gourmet has no inventory except as provided in Schedule
4.6 hereto.
4.7 Accounts Receivable. Gourmet has no material accounts receivable.
4.8 Licenses and Permits. The term "Licenses and Permits" as used
herein means federal, state and local governmental licenses, permits, approvals
and authorizations, whether foreign or domestic, other than Environmental
Permits. Gourmet has all of the Licenses and Permits required to conduct its
business as it is presently being conducted, all of which are in full force and
effect. No written notice of a violation of any such License or Permit has been
received by Gourmet, or, to the knowledge of Gourmet, threatened, and no
proceeding is pending or, to the knowledge of Gourmet, threatened, to revoke or
limit any of them. Gourmet has no reason to believe that any of its Licenses and
Permits in effect on the date hereof will not be renewed or can not be assumed
by the Company at or after Closing without material interruption in the
Company's ability to lawfully carry on the business of Gourmet after Closing.
4.9 Compliance with Laws. In addition to the representations and
warranties contained in Section 4.5 relating to environmental matters and in
Section 4.8 relating to Licenses and Permits, to the best of Gourmet's knowledge
Gourmet has operated its business in compliance with all laws, regulations,
orders, policies, guidelines, judgments or decrees of any federal, state, local
or foreign court or governmental authority applicable to it or its business
including, without limitation, those related to antitrust and trade matters,
civil rights, zoning and building codes, public health and safety, worker health
and safety and labor and nondiscrimination, the failure to comply with which
could reasonably be expected to affect, materially and adversely, the earnings,
assets, financial condition or operations of Gourmet. Except as is disclosed in
Schedule 4.9, Gourmet has not received any notice alleging non-compliance with
any of the aforementioned laws, regulations, policies, guidelines, orders,
judgments or decrees.
4.10 Financial Statements. Gourmet has previously furnished to the
Company true and complete copies of: (a) Gourmet's federal income tax return for
the calendar year ended December 31, 1997; (b) unaudited financial statements of
Gourmet for the ten and eleven months ended October 31, and November 30, 1998
(which tax return and stub-period statements are herein called the "Financial
Statements"). The Financial Statements fairly represent the financial position
of Gourmet as of such dates and the results of its operations and changes in
financial position for such periods. Gourmet has also furnished to the Company a
statement of cash on hand, accounts receivable and accounts payable dated no
earlier than January 15, 1999, which statement shall be a true and complete
accounting of the matters to which it pertains.
4.11 Litigation. Except as set forth in Schedule 4.11, there are no
actions, suits, claims, investigations or proceedings (legal, administrative or
arbitrative) pending or, to the
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knowledge of Gourmet, threatened, against Gourmet, whether at law or in equity
and whether civil or criminal in nature, before any federal, state, municipal or
other court, arbitrator, governmental department, commission, agency or
instrumentality, domestic or foreign, nor are there any judgments, decrees or
orders of any such court, arbitrator, governmental department, commission,
agency or instrumentality outstanding against Gourmet which have, or if
adversely determined could reasonably be expected to have, a material adverse
effect on the earnings, assets, financial condition or operations of the
business conducted by Gourmet, or which seek specifically to prevent, restrict
or delay consummation of the Merger or fulfillment of any of the other
conditions of this Agreement.
4.12 Absence of Changes. Except as set forth in Schedule 4.12, since
November 30, 1998, there has not been:
a. any damage, destruction or loss (whether or not covered by
insurance) which to the knowledge of Gourmet can reasonably be expected to
affect, materially and adversely, the earnings, assets, financial condition or
operations of the business of Gourmet;
b. any obligation or liability involving more than $20,000
(whether matured, absolute, accrued, contingent, or otherwise) incurred by
Gourmet;
c. any general uniform increase in the compensation of the
employees of Gourmet (including, without limitation, any increase pursuant to
any bonus, pension, profit sharing or other plan);
d. any increase (other than normal increases consistent with
past practices and those required by law or collective bargaining agreements) in
the compensation payable to any employee (including officers) of Gourmet;
e. any amendment to any employment agreement to which any
employee of Gourmet is a party;
f. any sale of assets by Gourmet other than in the ordinary
course of business;
g. any material deterioration of relations between Gourmet and
its suppliers, financial institutions, or customers;
h. any direct or indirect redemption, purchase or other
acquisition of any shares of the capital stock of Gourmet;
i. any declaration, setting aside or payment of any dividend
(whether in cash, capital stock or property) with respect to Gourmet's common
stock; or
j. any issuance by Gourmet of any shares of its capital stock,
or any securities or obligations convertible into or exchangeable for, or giving
any person the right to acquire from it, any shares of its capital stock.
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Since November 30, 1998, except as set forth in Schedule 4.12,
Gourmet has not operated its business other than in the ordinary and usual
course and in a manner consistent with past practices.
4.13 No Undisclosed Liabilities. Except as set forth in Schedule 4.13,
Gourmet does not have any material liabilities or obligations, whether absolute,
accrued, contingent or otherwise, including, without limitation, any uninsured
liabilities which were not accrued or reserved against in the Financial
Statements other than those incurred after November 30, 1998, in the ordinary
course of business or which in the aggregate do not or cannot reasonably be
expected to have a material adverse effect upon the earnings, assets, financial
condition or operations of Gourmet.
4.14 Title to Properties. Gourmet does not own any Real Property.
Gourmet has good title to all of the personal property, tangible and intangible,
owned by it, free and clear of any liens, charges, pledges, security interest of
other encumbrances other than those reflected in Schedule 4.14.
4.15 Leases. Schedule 4.15 sets forth a complete and correct list of
each agreement to lease into which Gourmet has entered, whether as a lessor or
lessee, which relates to either real or personal property, other than monthly
leases of personal property which may be canceled upon not more than 60 days
notice or require the payment of not more than $100 per month. The agreements
listed in Schedule 4.15 are referred to herein as the "Leases" (each a "Lease").
Except as set forth in Schedule 4.15, Gourmet has not breached any such Lease
and in no event has occurred which, with the giving of notice or the passage of
time or both, would cause a default under, or permit the termination,
modification or acceleration of any such Lease by any party thereto. Complete
copies of all of the Leases have been delivered to the Company.
4.16 Intellectual Property. Schedule 4.16 sets forth a schedule of
Gourmet's Intellectual Property. The term "Intellectual Property" as used herein
means the rights of the owner thereof in all trade names, trademarks and service
marks, patents, patent rights, copyrights, whether domestic or foreign, (as well
as applications, registrations or certificates for any of the foregoing),
inventions, trade secrets, proprietary processes, software and other industrial
and intellectual property rights. Gourmet owns or is licensed or otherwise has
the right to use all of the Intellectual Property which is being used in its
business as it is presently being conducted. There is no claim, suit, action or
proceeding, pending or, to the knowledge of Gourmet, threatened, against Gourmet
asserting that its use of any Intellectual Property infringes the rights of any
third party or otherwise contesting Gourmet's rights with respect to any
Intellectual Property, and no third party is known to Gourmet to be infringing
upon the rights of Gourmet in the Intellectual Property of Gourmet. Furthermore,
no party is infringing upon the rights of Gourmet in Gourmet's Intellectual
Property. All letters, patents, registrations and certificates issued by any
governmental agency relating to the Intellectual Property of Gourmet are valid
and subsisting and have been properly maintained.
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4.17 Material Contracts.
a. Schedule 4.17 sets forth a complete and correct list of
each Material Contract of Gourmet. Except as set forth in Schedule 4.17 and as
provided in the next paragraph, all of the Material Contracts of Gourmet are in
full force and effect and to the knowledge of Gourmet there has not occurred,
with respect to any such Material Contract, any default or event of default,
which, with or without due notice of with the lapse of time, or both, would
constitute a default or event of default on the part of Gourmet or, to the
knowledge of Gourmet, any other party thereto. Complete copies of all the
Material Contracts of Gourmet have been delivered to the Company.
b. The September 1998 contract with Arome, Ltd. ("Arome"),
will be revised at or before the Closing to provide that in lieu of the payments
to Arome set forth therein Arome will be paid an aggregate of $340,000 payable
$40,000 at Closing and the balance by payment of ten percent (10%) of the gross
amount of the Company's proceeds from any debt or equity financing which it
completes after the Closing, provided that no amount shall be payable to Arome
from the proceeds of any financing until the Company has received at least
$1,500,000 of post-Closing financing, at which time the Company will pay Arome
$150,000 plus ten percent (10%) of financing proceeds in excess of $1,500,000
until Arome has been paid the full $300,000 amount.
c. In addition to any other requirement for the provision of
documents at Closing, Gourmet will deliver to the Company at Closing an amended
agreement executed by Arome consenting to the assignment of the subject contract
to the Company and the amendment of the payment provisions in accordance with
the preceding sentence.
4.18 Condition of Tangible Assets. The tangible personal property which
belongs to Gourmet shall be operable on the Closing Date. In all other respects,
such property shall be accepted by the Company in "as is, where is" condition.
4.19 Insurance. Gourmet has insurance contracts in force for such
coverages and amounts as are set forth in Schedule 4.19.
4.20 Labor Matters. There are no collective bargaining agreement
covering employees of Gourmet. There are no controversies pending or, to the
knowledge of Gourmet, threatened between Gourmet and any of its employees which
affect, or can reasonably be expected to affect, materially and adversely, its
earnings, assets, financial condition or operations of the business conducted by
Gourmet, or relate to any specific effort to prevent, restrict or delay
consummation of the Merger.
4.21 Employee Benefit Plans.
a. Gourmet has never had, does not now have, and will not have
at Closing Pension Plans, Welfare Plans or other employee benefit plans, nor
incentive, vacation and other
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similar plans that are maintained by Gourmet with respect to its employees or to
which Gourmet has contributed or is now contributing on behalf of its employees.
b. Gourmet has not incurred any material liability to the PBGC
under Section 4001, et seq. of ERISA and no condition exists that could
reasonably be expected to cause Gourmet to incur any such liability. Any premium
payable to the PBGC has been paid when due.
4.22 Tax Matters.
a. The provisions made for taxes in the Financial Statements
are sufficient for the payment of all Taxes of Gourmet, whether or not disputed,
which are properly accruable. There are no agreements by Gourmet for the
extension of time, or waiver of any statute of limitations, for the assessment
of any taxes, and all taxes due and payable by Gourmet on or before the date of
this Agreement have been paid or provided for, and are not delinquent, except as
otherwise provided in Schedule 4.22.
b. Gourmet has filed all Tax Returns that it was required to
file. All such Tax Returns were correct and complete in all respects. No claim
has ever been made by an authority in a jurisdiction where Gourmet does not file
Tax Returns that it is or may be subject to taxation by that jurisdiction. There
are no liens on any of the assets of Gourmet that arose in connection with any
failure (or alleged failure) to pay any Tax.
c. Gourmet has withheld and paid all Taxes required to have
been withheld and paid through January 15, 1999, in connection with the amounts
paid or owing to any employee, independent contractor, creditor, stockholder or
other third party.
d. Gourmet does not expect any authority to assess any
additional Taxes for any period for which Tax Returns have been filed. Except as
set forth in Schedule 4.22, there is no dispute or claim concerning any Tax
liability of Gourmet either claimed or raised by any authority in writing.
Gourmet has delivered to the Company correct and complete copies of all federal
income Tax Returns, examination reports, and statements of deficiencies assessed
against or agreed to by Gourmet since December 31, 1997.
4.23 Finders. No broker, finder or investment banker is entitled to any
fee or commission from Gourmet for services rendered on behalf of Gourmet in
connection with the transactions contemplated by this Agreement, except as
otherwise provided in Schedule 4.23 or Section 7.6 relating to compensation
payable to Marblehead. Schedule 4.23 sets forth the name and address of any
broker, finder or investment broker entitled to a fee or commission and the
terms of payment.
4.24 Full Disclosure. None of the representations and warranties of
Gourmet which are made in Article IV of this Agreement contains an untrue
statement of a material fact or omits to state a material fact necessary to make
the statements therein, in the light of the circumstances under which they were
made, not misleading.
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4.25 Insider Interests. Except as listed in Schedule 4.25 no Affiliate
of Gourmet (i) competes with or is involved in or has a direct or indirect
interest in any business entity which competes with the business conducted by
Gourmet, (ii) has any agreement with Gourmet, or (iii) has any interest, direct
or indirect, in any property, real or personal, tangible or intangible,
including, without limitation, Intellectual Property, used in or pertaining to
the business of Gourmet, except as a stockholder or employee of Gourmet.
4.26 Insider Transactions. Schedule 4.26 sets forth a correct and
complete statement of (a) the amounts and other essential terms of indebtedness
or other obligations, liabilities or commitments (contingent or otherwise) of
Gourmet to or from any past or present officer, director, employee, partner or
stockholder thereof or any person related to, controlled by or under common
control of any of the foregoing and (b) all transactions, together with their
essential terms, between such persons and Gourmet during the past two years.
4.27 No Interest in Competitors, Etc. Except as set forth in Schedule
4.27, no officer or director of Gourmet, nor any Affiliate of any of the
foregoing, directly or indirectly owns any interest in or controls or is an
employee, agent, member, principal, officer, director, or partner of, or
participant in, or consultant to any corporation, partnership, limited liability
company, sole proprietorship, limited partnership, joint venture, association,
or other entity which is a competitor, supplier or customer, of Gourmet.
4.28 Purchase and Sale Obligations. All unfilled purchase and sale
orders and other commitments for purchases and sales made by Gourmet were made
in the usual and ordinary course of its business. None of such orders or
commitments call for deliveries thereunder beyond a period of 90 days from the
Closing Date with the exception of normal outstanding maintenance and service
contracts.
4.29 Books and Records. The books of account and other financial and
corporate records of Gourmet are in all material respects complete and correct,
are maintained in accordance with good business practices, and are accurately
reflected in the Financial Statements. The minute books of Gourmet as previously
made or to be made available to the Company contained accurate records of all
meetings.
4.30 Bank and Safe Deposit Arrangements. Schedule 4.30 sets forth a
correct and complete list of each bank account and safe deposit box maintained
by Gourmet, and the names of all persons authorized to deal with such accounts
and safe deposit boxes.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants as of the date of execution of this
Agreement and as of Closing as follows:
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5.1 Organization, Qualification. The Company is a corporation duly
organized, validly existing and in good standing under the laws of Delaware and
has corporate power and authority to own all of its properties and assets and to
carry on its business as it is presently being conducted. The Company is duly
qualified and in good standing to do business in each jurisdiction in which the
property owned, leased or operated by it or the nature of the business conducted
by it makes such qualification necessary except in those jurisdictions where the
failure to be duly qualified and in good standing would not have a material
adverse effect on the Company or the business conducted by it. The Company has
delivered to Gourmet complete and correct copies of its articles of
incorporation and bylaws as currently in effect.
5.2 Capitalization of the Company.
(a) The authorized capital stock of the Company consists only
of (i) 25,000,000 shares of common stock, $.001 par value, of which there will
be issued and outstanding (a) as of the date hereof, 1,250,000 shares and (b)
prior to the Effective Time, 2,250,000 shares, all of which will be validly
issued and outstanding, fully paid and nonassessable, and which were not or will
not be issued in violation of preemptive rights, and (ii) 100,000 shares of
preferred stock $.001 par value, none of which are issued or outstanding. No
options, warrants, convertible debt or other rights to acquire any equity
interest in the Company, whether upon exchange for or conversion of other
securities or otherwise, are outstanding or will be granted prior to the
Effective Time.
(b) At the Effective Time, the ownership of the common stock
of the Surviving Company shall be as follows. The total number of issued and
outstanding shares of common stock shall be 18,000,000 shares (which number
includes, for purposes of this narrative description, the shares of common stock
underlying the options to be granted to existing Gourmet optionholders) and no
shares of preferred stock shall be issued or outstanding. The 18,000,000 shares
of common stock to be issued and outstanding shall be held as follows:
(i) 7,421,220 shares shall be held by the existing
shareholders of Gourmet;
(ii) 1,000,000 shares shall be held by investors in
the Company's Rule 504 offering;
(iii) 1,250,000 shares shall be held by the Company's
existing shareholders;
(iv) 6,030,000 shares shall be held by Marblehead;
and
(v) 2,298,780 shares (which are deemed to be issued
and outstanding only for purposes of this narrative) shall be issuable to
existing holders of options for the purchase of Gourmet common stock.
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(c) The 6,030,000 shares of common stock to be issued to
Marblehead are "restricted" securities within the meaning of Securities and
Exchange Commission Rule 144.
5.3 Consents and Approvals. There is no requirement applicable for the
Company to make any filing with, or to obtain any permit, authorization, consent
or approval of, any public body as a condition to the consummation of the
Merger, nor is there any requirement that any party to any Material Contract of
the Company, or any license or permit for the use of Intellectual Property of
the Company or loan agreement to which the Company is a party, or by which it is
bound, consent to the execution of this Agreement by the Company or the
consummation of the Merger.
5.4 Non-Contravention. The execution and delivery by the Company of
this Agreement does not, and the consummation of the Merger will not, (i)
violate or result in a breach of any provision of the articles of incorporation
or bylaws of the Company, (ii) result in a default (or give rise to any right of
termination, cancellation or acceleration) under the terms, conditions or
provisions of any note, bond, mortgage, indenture, license, agreement, lease or
other instrument or obligation to which the Company is a party or by which the
Company or the business conducted by it may be bound, or (iii) violate any
order, writ, injunction, decree, statute, rule or regulation applicable to the
Company or to the business conducted by the Company, excluding from the
foregoing clauses (ii) and (iii) such defaults and violations as would not have
a material adverse effect on the Company.
5.5 Corporate Authority and Resolutions. The Board of Directors of the
Company and the Company's shareholders have adopted resolutions authorizing the
execution of this Agreement by the Company as of the date hereof and shall adopt
such additional resolutions as may be necessary authorizing the execution of
documents and closing by the Company as contemplated by this Agreement.
5.6 Validity of Shares to be Issued. The Company's shares to be issued
to the Gourmet shareholders as a result of the Merger have been duly authorized
as required under all applicable laws and, upon delivery thereof pursuant to the
provisions of this Agreement, will be validly issued, fully paid and
non-assessable, and not subject to any preemptive rights.
5.7 Current Information. The Company has previously delivered to
Gourmet (a) a true and complete copy of the Company's audited financial
statements sheet dated December 31, 1996, and 1997, and unaudited financial
statements for the six months ended June 30, 1998; (b) the private placement
memorandum described in Section 6.1; and (c) certain other non-public
information relating to the business and affairs of the Company, and will
continue to furnish such information to Gourmet until the Closing. The financial
information with respect to the Company included in the aforementioned documents
fairly represents the financial condition of the Company and the results of its
operations and changes in financial position for the periods for which they were
prepared but does not represent the financial condition of the Company at any
time after June 30, 1998, nor does such financial information reflect certain
material events affecting the Company which occurred after June 30, 1998,
substantially all of which are set forth in the private placement memorandum
described in Section 6.1.
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5.8 Authorization of Transactions; Securities Compliance. By the
Closing Date, the shares to be issued to Gourmet's shareholders on the
consummation of the transactions contemplated hereunder will be exempt from
registration under the Securities Act pursuant to Section 4(2) thereof, and
shall have been exempt or registered or qualified under the securities or blue
sky laws of California for issuance upon the Closing Date. Such shares, when
issued in accordance with the terms of this Agreement, will be fully paid and
non-assessable.
5.9 No Registration Rights. There is no agreement granting or providing
for registration rights with respect to the shares to be delivered to Gourmet
shareholders pursuant to this Agreement except as provided in Section 7.7.
5.10 No Brokers or Commissions. The Company has not engaged any broker,
finder or similar individual in connection with this transaction except
Marblehead.
5.11 Binding Agreement. The execution, delivery and performance of this
Agreement and the other instruments contemplated by this Agreement by the
Company have been duly authorized by all necessary corporate action of the
Company. This Agreement has been duly executed and delivered to Gourmet by the
Company and constitutes the legal, valid and binding agreement of the Company,
enforceable in accordance with its terms.
5.12 No Violation. The execution, delivery and performance of this
Agreement by the Company and the consummation of the transactions contemplated
hereby will not, with or without the giving of notice or the lapse of time or
both, violate, contravene or conflict with or result in a breach of or
constitute a default under (i) any writ, order, judgment or decree of any court
arbitrator or governmental agency applicable to the Company, (ii) the articles
of incorporation or bylaws of the Company; (iii) any contract, lease or other
agreement to which the Company is a party or by which the Company is bound; or
(iv) to the best knowledge of the Company, any law, rule or regulation
applicable to the Company.
5.13 Litigation. There are no actions, suits, claims, investigations or
proceedings (legal, administrative or arbitrative) pending or, to the knowledge
of the Company, threatened, against the Company, whether at law or in equity and
whether civil or criminal in nature, before any federal, state, municipal or
other court, arbitrator, governmental department, commission, agency or
instrumentality, domestic or foreign, nor are there any judgments, decrees or
orders of any such court, arbitrator, governmental department, commission,
agency or instrumentality outstanding against the Company which have, or if
adversely determined could reasonably be expected to have, a material adverse
effect on the earnings, assets, financial condition or operations of the
business conducted by the Company, or which seek specifically to prevent,
restrict or delay consummation of the sale of the Merger or fulfillment of any
of the other conditions of this Agreement.
5.14 Compliance with Laws; Regulatory Matters. The Company is in
compliance in all material respects with all laws, rules and regulations, all
orders, directives and supervisory letters of, and all agreements, memoranda of
understanding or similar arrangements with, regulatory authorities and all other
legal requirements applicable to the Company or the
- 18 -
Company's businesses; and the Company is not subject to any order, directive or
supervisory letter of, or agreement, memorandum or understanding or similar
arrangement (including board resolutions adopted at the request of regulatory
authority) with, any regulatory authority restricting its operations or,
restricting it from taking any action or requiring that certain actions be
taken, and the Company has no knowledge that any such order, directive,
supervisory letter, agreement, memorandum or understanding or similar
arrangement is threatened, contemplated or under consideration by any regulatory
authority.
ARTICLE VI
INVESTMENT REPRESENTATIONS
Gourmet hereby represents, warrants, acknowledges and covenants to the
Company, as follows:
6.1 Opportunity to Examine. Gourmet and its shareholders have examined
or have had an opportunity to examine, and to ask questions of the management of
the Company about, all applicable documents and such applicable information as
are relevant to the transactions described herein, including the delivery by the
Company of its shares and about the Company and its business. Among the
documents made available to Gourmet and its shareholders are the Company's
private placement memorandum dated December 31, 1998, and the financial
statements described in Section 5.4.
6.2 No Representations as to Profit or Loss. No representation or
warranty of any kind has been made to the Gourmet or its shareholders with
respect to the percentage of profit and/or amount or type of consideration,
profit or loss that are to be realized, if any, as a result of the Merger and
the acquisition of common stock in the Company and that in entering into this
transaction Gourmet and its shareholders are not relying upon any information
other than that derived from the results of their own independent investigation,
or the investigation of their counsel and other professional advisors, or from
information furnished in writing by the Company to them.
6.3 Shares Not Registered. Gourmet and its shareholders understand that
the shares to be issued to Gourmet's shareholders have not been registered under
the Act nor under the securities laws of any state in reliance on exemptions
therefrom for non-public offerings, and further understand that the shares have
not been approved or disapproved by the Securities and Exchange Commission nor
has any state securities administrator or agency passed on the accuracy or
adequacy of any written information provided by the Company.
6.4 Investment Intent. The Gourmet shareholders are acquiring the
shares in the Company for their own account for investment purposes only and not
with a view to the sale or other distribution thereof, in whole or in part.
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ARTICLE VII
ADDITIONAL AGREEMENTS
7.1 Conduct of Business by Gourmet and the Company.
a. Gourmet warrants and represents that from the date hereof
until the Closing, Gourmet will (a) conduct its business only in the ordinary
and usual course and in a manner consistent with past practices, (b) maintain in
good repair, at its expense, all of its properties, and (c) use its best efforts
to preserve its relationship with suppliers, customers, dealers and others
having business relationships with Gourmet. Gourmet will notify the Company of
any emergency or material change in the normal conduct of the business or
operations of Gourmet, the threat of or initiation of any material litigation
against Gourmet, and the initiation of any investigation of Gourmet by any
party, whether private or governmental.
b. The Company warrants and represents that from the date
hereof until the Closing, the Company will (a) conduct its business only in the
ordinary and usual course and in a manner consistent with past practices, (b)
maintain in good repair, at its expense, all of its properties, and (c) use its
best efforts to preserve its relationship with suppliers, customers, dealers and
others having business relationships with the Company. The Company will notify
Gourmet of any emergency or material change in the normal conduct of the
business or operations of the Company, the threat or initiation of any material
litigation against the Company, and the initiation of any investigation of the
Company by any party, whether private or governmental.
7.2 Investigation of Business and Properties; Additional Data. From the
date hereof until the Closing, Gourmet and the Company shall each afford the
other and their attorneys, accountants, financial advisors and other
representatives complete access at all reasonable times to their offices, and to
their officers, employees, properties, contracts, and books and records. In
addition, Gourmet and the Company shall furnish to each other such financial,
operating and additional data as they may reasonably request concerning the
business, operations, properties and personnel of either of them.
7.3 Efforts to Consummate. Subject to the terms and conditions herein
provided, each of the parties hereto agrees to use its reasonable best efforts
to take, or cause to be taken, all action and to do, or cause to be done, all
things necessary, proper or advisable to consummate, as promptly as practicable,
the transactions contemplated hereby, including, but not limited to, the
obtaining of all necessary consents, waivers, authorizations, orders and
approvals of third parties, whether private or governmental, required of it to
enable it to comply with the conditions precedent to consummating the
transactions contemplated by this Agreement. Each party agrees to cooperate
fully with the other party in assisting it to comply with this Section.
Notwithstanding the foregoing, neither party shall be required to initiate any
litigation, make any substantial payment or incur any material economic burden,
except for a payment otherwise required of it, to obtain any consent, waiver,
authorization, order or approval, and if, despite such efforts, either party is
unable to obtain any consent, wavier, authorization, order of approval the other
party may terminate this Agreement and shall have no liability therefor.
- 20 -
7.4 Further Assurances. The parties will use reasonable efforts to
implement the provisions of this Agreement, and for such purpose, the parties
will, at the request of any other party, at or after the closing, without
further consideration, promptly execute and deliver, or cause to be executed and
delivered, such additional documents as any other party may reasonably deem
necessary or desirable to implement any provision of this Agreement.
7.5 Expenses. Whether or not the Merger is consummated all expenses
incurred in connection with this Agreement and the transactions contemplated
hereby will be paid by the party incurring such expenses.
7.6 Agreements with Respect to Marblehead. The parties shall enter into
an investment banking and consulting agreement with Marblehead in the form of
Exhibit 7.6 hereto. The parties hereby ratify and confirm the agreement between
Gourmet and Marblehead dated December 1998, including the compensation payable
to Marblehead, which compensation obligations are hereby assumed by the Company.
7.7 Registration Rights.
a. If the Company shall determine to register any of its
securities for the account of a securityholder or holders other than in a
registration relating solely to employee benefit plans, a registration relating
solely to a Rule 145 transaction, or a registration on any registration form
that does not permit secondary sales, the Company will (i) promptly give to each
person who is a holder of its common stock at the effective date and (ii) use
its best efforts to include in such registration (and any related qualification
under blue sky laws or other compliance), and in any underwriting involved
therein, all the Registerable Securities of such securityholders made by any
holder and received by the Company within twenty (20) days after the Company
delivers written notice of any proposed registration to such holder by mail or
other form of delivery, which notice shall commence on the date of mailing or
delivery, as appropriate to the method of notice. Such written request may
specify all or part of the holders Registerable Securities. As used in this
Section 7.7, the term Registerable Securities shall mean shares of the Company's
common stock issued or issuable to a holder as of Closing and any common stock
issued as a dividend or other distribution with respect to or in exchange for or
in replacement of the shares referenced in this Section, except that
Registerable Securities shall not include any shares of common stock previously
registered or which have been sold to the public pursuant to a registration
statement or an offering under Section 3(b) of the Securities Act of 1933, as
amended, or which may be sold under Rule 144(k).
b. At the time of registration, the Company and a registering
securities holder shall enter into mutual indemnification agreements of the kind
normally provided in an underwriting.
c. If any securities held by selling shareholders cannot be
included in a registration as a result of limitations of the aggregate number of
shares of Registerable Securities that may be so included, the number of shares
of Registerable Securities that may be included shall be allocated among the
holders requesting inclusion of shares pro rata on the basis of the number
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of shares of Registerable Securities, provided that such allocation shall not
operate to reduce the aggregate number of Registerable Securities that may be
included in such registration if any holder does not request inclusion of the
maximum number of shares of Registerable Shares allocated to him pursuant to the
procedure described in this Section, and the remaining portion of his allocation
shall be reallocated among those requesting holders whose allocations did not
satisfy the request pro rata on the basis of the number of shares of
Registerable Securities which will be held by such holders and selling
shareholders.
d. Notwithstanding the obligations of the Company to register
shares, the Company shall have no such obligation to any shareholder in the
event that it is advised by its underwriter or other selling agent that the
underwriter is not willing to register shares held by any proposed selling
shareholder by reason of market conditions or any other reason relating to the
primary obligation of such underwriter or agent to sell the shares of the
Company, its being the intention of the parties that the Company's ability to
sell all of the shares that it wishes to sell pursuant to any registration
statement shall be paramount to, and shall supersede, the rights of any
shareholder provided in this Section 7.7.
7.8 Matters Subject to Marblehead Approval. The Company shall not,
without the approval of Marblehead:
a. Declare or pay any dividends, or return any capital, to its
stockholders or authorize or make any distribution, payment or delivery of
property or cash to its stockholders, as such, or redeem, retire, purchase, or
otherwise acquire, directly or indirectly, for consideration, any shares or any
interest in its capital stock now or hereafter outstanding.
b. Lend money, credit or make advances to any person, or
purchase any stock, obligations or securities of, or any other interest in, or
make any capital contribution to, any other person, unless to a customer or a
supplier in the ordinary course of business.
c. Amend, modify or change its articles of incorporation or
bylaws, or any agreement entered into by it, with respect to its capital stock.
d. Enter into any agreement to employ or discharge any
employee whose proposed or actual salary is greater than $30,000 per annum.
e. Enter into any Material Contract, which for purposes of
this Section 7.8 shall include any agreement for the loan by or to the
corporation of an amount greater than $10,000 or the purchase of any equipment
or other capital asset in excess of $10,000 for any one purchase or $50,000 in
the aggregate per calendar year.
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ARTICLE VIII
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY
The following are certain conditions precedent to the obligation of the
Company to consummate the Merger, which conditions must be fulfilled (or waived
in writing by the Company) on or before the Closing Date.
8.1 Accuracy of Representations and Warranties. The representations and
warranties of Gourmet herein contained shall be true on and as of Closing with
the same force and effect as though made on and as of Closing, except as
affected by transactions contemplated hereby and except to the extent that such
representations and warranties were made as of a specified date and as to such
representations and warranties the same shall have been true as of the specified
date.
8.2 Absence of Default. No condition or event which constitutes an
event of default hereunder by Gourmet or which, after notice and lapse of time,
or both, would constitute an event of default hereunder by Gourmet shall have
occurred and be continuing.
8.3 Absence of Material Damage to or Expropriation of Property. Between
the date of this Agreement and the Closing, there shall not have occurred (1)
any material casualty to any facility, property, equipment or inventory owned by
Gourmet, or (2) any material condemnation, seizure, expropriation or liquidation
by any governmental authority or any officer or instrumentality thereof of
facilities, property, equipment or inventory owned by Gourmet.
8.4 Absence of Liens. There will have been no liens recorded after the
execution of this Agreement but prior to Closing with respect to any personal,
real or mixed property owned by Gourmet.
8.5 Actions, Proceedings, Etc. All actions, proceedings, instruments
and documents required to carry out the transactions contemplated by this
Agreement or incidental thereto and all other related legal matters shall have
been satisfactory to and approved by counsel for the Company in the exercise of
reasonable discretion, and such counsel shall have been furnished with such
certified copies of actions and proceedings and such other instruments and
documents as they shall have reasonably requested.
8.6 Legal Opinion. The Company shall have received the legal opinion of
Gourmet's counsel in accordance with Section 3.10(a) hereto.
8.7 Satisfaction with Respect to Financial Condition and Performance.
The Company must be satisfied that each and every representation made by Gourmet
regarding the Financial Statements and the financial condition of Gourmet shall
be true, complete and accurate in all material respects as of Closing. Without
limiting the foregoing, the Company must be satisfied that: (i) the Financial
Statements shall have been prepared on an accrual basis of accounting,
consistent with prior years; and (ii) except as specifically disclosed in the
Financial
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Statements, there has been no distribution to shareholders or others or bonuses
made to employees.
8.8 Continuity of Business Relationships. The Company shall be
satisfied that Gourmet's customer, vendor, financial institution(s), insurance
carrier and employee relations are satisfactory as at the Closing Date.
ARTICLE IX
CONDITIONS PRECEDENT TO GOURMET'S OBLIGATIONS
The following are certain conditions precedent to Gourmet's obligation
to consummate the Merger, which conditions must be fulfilled (or waived in
writing by Gourmet) on or before the Closing Date.
9.1 Accuracy of Representations and Warranties. The representations and
warranties of the Company herein contained shall be true on and as of Closing
with the same force and effect as though made on and as of Closing, except as
affected by transactions contemplated hereby and except to the extent that such
representations and warranties were made as of a specified date and as to such
representations and warranties the same shall have been true as of the specified
date.
9.2 Absence of Default. No condition or event which constitutes an
event of default hereunder by the Company or which, after notice and lapse of
time, or both, would constitute an event of default hereunder by the Company
shall have occurred and be continuing.
9.3 Absence of Material Damage to or Expropriation of Property. Between
the date of this Agreement and the Closing, there shall not have occurred (1)
any material casualty to any facility, property, equipment or inventory owned by
the Company, or (2) any material condemnation, seizure, expropriation or
liquidation by any governmental authority or any officer or instrumentality
thereof of facilities, property, equipment or inventory owned by the Company.
9.4 Actions, Proceedings, Etc. All actions, proceedings, instruments
and documents required to carry out the transactions contemplated by this
Agreement or incidental thereto and all other related legal matters shall have
been satisfactory to and approved by counsel for Gourmet, and such counsel shall
have been furnished with such certified copies of actions and proceedings and
such other instruments and documents as they shall have reasonably requested.
9.5 Legal Opinion. Gourmet shall have received the legal opinion of the
Company's counsel in accordance with Section 3.11(b) hereto.
9.6 Satisfaction with Respect to Financial Condition and Performance.
Gourmet must be satisfied that each and every representation made by the Company
regarding the financial condition of the Company shall be true, complete and
accurate in all material respects as of Closing.
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9.7 Continuity of Business Relationships. Gourmet shall be satisfied
that the Company's customer, vendor, financial institution(s), insurance carrier
and employee relations are satisfactory as at the Closing Date.
9.8 Private Placement. The Company shall have received $1,000,000 of
gross proceeds from an offering of its common stock made pursuant to the private
placement memorandum described in Section 6.1 or otherwise.
ARTICLE X
INDEMNIFICATION
10.1 The Company's Right to Indemnification. Gourmet undertakes and
agrees to hold the Company harmless against any and all losses, costs,
liabilities, claims, obligations and expenses, including reasonable attorneys'
fees, incurred or suffered by the Company arising from (i) the breach,
misrepresentation or other violation of any covenants, warranty or
representation of or by Gourmet contained in this Agreement, and (ii) all
liabilities of Gourmet not disclosed in writing to the Company prior to the
execution of this Agreement. This indemnity provision shall survive Closing for
a period of one (1) year.
10.2 Gourmet's Right to Indemnification. The Company undertakes and
agrees to hold Gourmet harmless against any and all losses, costs, liabilities,
claims, obligations and expenses, including reasonable attorneys' fees incurred
or suffered by Gourmet arising from the breach, misrepresentation or other
violation of any covenants, warranty or representation by the Company contained
in this Agreement. This indemnity provision shall survive Closing for a period
of one (1) year.
10.3 Procedure. If any claim or proceeding covered by the foregoing
agreements to indemnify and hold harmless shall arise, the party who seeks
indemnification (the "Indemnified Party") shall given written notice thereof to
the other party (the "Indemnitor") promptly (but in no event more than ten (10)
days) after it learns of the existence of such claim or proceeding. Any claim
for indemnification hereunder shall be accompanied by evidence demonstrating the
Indemnified Party's right or possible right to indemnification, including a copy
of all supporting documents relevant thereto. The Indemnitor shall have the
right to employ counsel reasonably acceptable to the Indemnified Party to defend
against any such claim or proceeding, or to compromise, settle or otherwise
dispose of the same; provided, however, that no settlement or compromise shall
be effected without the consent of the Indemnified Party, which consent shall
not be unreasonably withheld, and provided further that in the event the
Indemnified Party does not consent to a bona fide offer of settlement made by a
third party and the settlement involves only the payment of money, then the
Indemnitor may, in lieu of payment of such settlement to such third party, pay
such amount to the Indemnified Party. After the payment to the Indemnified
Party, the Indemnitor shall have no further liability with respect to such claim
or proceeding and the Indemnified Party shall assume full responsibility to
defend the same. After notice from the Indemnitor to the Indemnified Party of
its election to assume the defense of such claim or proceeding, the Indemnitor
shall not be liable to the Indemnified Party under this paragraph for any legal
or other expenses subsequently incurred by the Indemnified Party in connection
with the
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defense thereof; provided, however, that the Indemnified Party shall have the
right to employ counsel to represent it if, in the Indemnified Party's
reasonable judgment, it is advisable for the Indemnified Party to be represented
by separate counsel, and in that event the fees and expenses of such separate
counsel shall be paid by the Indemnified Party. The parties will fully cooperate
in any such action, making available to each other books or records for the
defense of any such claim or proceeding. If the Indemnitor fails to acknowledge
in writing its obligation to defend against or settle such claim or proceeding
within ten (10) days after receiving notice of the claim or proceeding from the
Indemnified Party (or such shorter time specified in the notice as the
circumstances of the matter may dictate), the Indemnified Party shall be free to
dispose of the matter, at the expense of the Indemnitor (but subject to the
Indemnitor's right subsequently to contest through appropriate proceedings its
obligation to provide indemnification), in any way which the Indemnified Party
deems in its best interest.
10.4 Limitations on Indemnification Rights. Indemnification shall be
due only to the extent of the loss or damage actually suffered (i.e., reduced by
any offsetting or related asset or service received and by any recovery from any
third party, such as an insurer), net after the amount equal to any reduction in
federal, state or local income, franchise or other taxes occasioned by such loss
or damage (even though the tax return by which such reduction would have been
realized is not yet due), but including an amount equal to any increase in
federal, state and local income, franchise or other taxes occasioned by the
indemnification payment and then only to the extent of the excess over the
Agreed De Minimis Amount (hereinafter defined). The Indemnitor shall be
subrogated to all rights of the Indemnified Party against any third party with
respect to any claim for which indemnification is paid. Notwithstanding the
foregoing, the Indemnitor shall not be liable to the Indemnified Party for any
individual misrepresentation, breach of warranty or violation of covenant where
the otherwise indemnifiable amount does not exceed $5,000 and, as regards all
such indemnifiable misrepresentations or breaches of warranty that do not exceed
$5,000, the Indemnitor shall not be liable except to the extent that the
aggregate amount thereof exceeds $5,000 (such sum being herein referred to as
the "Agreed De Minimis Amount").
ARTICLE XI
GENERAL PROVISIONS
11.1 Expenses. Each party shall pay its own expenses incident to the
negotiation and preparation of this Agreement and the transactions contemplated
hereby. All other recording costs for bills of sale and other instruments of
transfer, and all stamp, sales, use and transfer taxes in connection with the
purchase and sale of shares shall be paid by the transferring party.
11.2 Notices. All notices, requests, demands and other communications
pertaining to this Agreement shall be in writing and shall be deemed duly given
when delivered personally with a receipt, when delivered by an overnight courier
service or mailed by certified mail, return receipt requested, postage prepaid,
addressed as follows:
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(a) To the Company: Sterling Partners Inc.
0000 Xxxxxx Xxxx, Xxxxx 000
Xxxx Xxxxx, Xxxxxxx 00000
Attn: Mr. C. Xxxxxxxx Xxxxxxxx
With a copy to: Siegel, Lipman, Xxxxx & Xxxxxxx, LLP
0000 Xxxx Xxxxxx Xxxx, Xxxxx 000
Xxxx Xxxxx, XX 00000
Attn: Xxxxxxxx X. Xxxxxxx, Esquire
(b) To Gourmet: XxxxxxxXxxxxx.Xxx
000 Xxxxxx Xxxxxx, Xxxxx 000
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Attn: Xx. Xxxxxx Xxxxxxxxx
(c) To Marblehead: Marblehead Capital Group, Inc.
000 Xxxxxx Xxxxxx, Xxxxx 0-X
Xxxxxxxxx, XX 00000
Attn: Xx. Xxxx Xxxxxxx
With a copy to: Xxxxxxx Xxxxxxx, Esquire
000 Xxxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxx, XX 00000
Either party may change its address for notices by written notice to the other
given pursuant to this paragraph.
11.3 Certain Breaches. Neither party shall have any liability to the
other party with respect to a breach by a party of which the other party has
received written notice at or prior to Closing.
11.4 Prior Negotiations. This Agreement supersedes in all respects all
prior and contemporaneous oral and written negotiations, understandings and
agreements between the parties with respect to the subject matter hereof. All of
said prior and contemporaneous negotiations, understandings and agreements are
merged herein and superseded hereby.
11.5 Entire Agreement; Amendment. This Agreement and the Exhibits to
this Agreement set forth the entire understanding between the parties in
connection with the transaction contemplated herein, there being no terms,
conditions, warranties or representations other than those contained herein,
referenced herein or provided for herein. Neither this Agreement nor any term or
provision hereof may be altered or amended in any manner except as an instrument
in writing signed by the party against whom the enforcement of any such change
is sought.
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11.6 Exhibits. The Exhibits attached hereto or referred to herein are a
material part of this Agreement, as if set forth in full herein.
11.7 Severability. If any term of this Agreement is illegal or
enforceable at law or in equity, the validity, legality and enforceability of
the remaining provisions contained herein shall not in any way be affected or
impaired thereby. Any illegal or unenforceable term shall be deemed to be void
and of no force and effect only to the minimum extent necessary to bring such
term within the provisions of any applicable law or laws and such term, as so
modified, and the balance of this Agreement shall then be fully enforceable.
11.8 Survival of Representations and Warranties. Unless otherwise
specifically noted herein, the several representations, warranties and covenants
of the parties contained herein shall survive the closing for a period of three
(3) years from the Closing date. Thereafter neither party shall have any
liability to the other based upon any of the representations, warranties and
covenants set forth herein.
11.9 Waiver. Unless otherwise specifically agreed in writing to the
contrary: (i) the failure of any party at any time to require performance by
another party of any provision of this Agreement shall not affect such party's
right thereafter to enforce the same, (ii) no waiver by either party of any
default by the other shall be taken or held to be a waiver by such party of any
other preceding or subsequent default, and (iii) no extension of time granted by
any party for the performance of any obligation or act by the another party
shall be deemed to be an extension of time for the performance of any other
obligation or act hereunder.
11.10 Number and Gender. Whenever the context so requires, words used
in the singular shall be construed to mean or include the plural and vice versa,
and pronouns of any gender shall be construed to mean or include any other
gender or genders.
11.11 Headings and Cross-References. The headings of this Agreement are
included for convenience of reference only, and shall in no way limit or affect
the meaning or interpretation of the specific provisions hereof. All
cross-references to paragraphs herein shall mean the paragraphs of this
Agreement unless otherwise stated or clearly required by the context. All
references to Exhibits herein shall mean the Exhibits to this Agreement. Words
such as "herein" and "hereof" shall be deemed to refer to this Agreement as a
whole and not to any particular provision of this Agreement unless otherwise
stated or clearly required by the context.
11.12 Choice of Laws. This Agreement is to be construed and governed by
the laws of the State of Florida, except for the choice of law rules utilized in
that jurisdiction.
11.13 Arbitration. Any dispute arising under or related to this
Agreement that the parties are unable to resolve by themselves shall be settled
by arbitration in Fort Lauderdale, Florida, by a panel of three arbitrators. The
parties shall each designate one disinterested arbitrator and the two
arbitrators so designated shall select the third arbitrator. The persons
selected as arbitrators need not be professional arbitrators, and persons such
as accountants, appraisers and bankers shall be acceptable. Before undertaking
to resolve the dispute, each arbitrator shall be duly sworn
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faithfully and fairly to hear and examine the matters in controversy and to make
a just award according to the best of his or her understanding. The arbitration
hearing shall be conducted in accordance with the rules of the American
Arbitration Association. The written decision of a majority of the arbitrators
shall be final and binding on the parties. Costs and expenses of the arbitration
proceeding shall be assessed between the parties in a manner to be decided by a
majority of the arbitrators, and the assessment shall be set forth in the
decision and award of the arbitrators. No action at law or suit in equity based
upon any claim arising out of or relating to this Agreement shall be instituted
in any court by a party against another except an action to compel arbitration
pursuant to this paragraph, an action to enforce the award of the arbitration
panel rendered in accordance with this paragraph, or a suit for specific
performance as may be specifically provided herein.
11.14 Successors. This Agreement shall be binding upon and inure to the
benefit of and be enforceable by the parties hereto and their respective
successors and assigns.
11.15 Third Parties. Nothing in this Agreement, whether expressed or
implied, is intended to (i) confer any rights or remedies on any person other
than the parties and their respective successors and assigns, (ii) relieve or
discharge the obligation or liability of any third party, or (iii) or give any
third party any right of subrogation or action against any party hereto.
11.16 Counterparts. This Agreement may be signed in counterparts with
the same effect as if the signature on each counterpart were on the same
instrument. Each of the counterparts, when signed, shall be deemed to be an
original, and all of the signed counterparts together shall be deemed to be one
and the same instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the date and year first above written.
WITNESS/ATTEST: STERLING PARTNERS INC., a Delaware
corporation
By: /s/ Xxxx X. Xxxx, Xx.
----------------------------- ----------------------------------------
Xxxx X. Xxxx, Xx., President
XXXXXXXXXXXXX.XXX, a California corporation
By: /s/ Xxxxxx Xxxxxxxxx
----------------------------- ----------------------------------------
Xxxxxx Xxxxxxxxx, President
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MARBLEHEAD CAPITAL GROUP, INC., a
Massachusetts corporation
By:
----------------------------- ----------------------------------------
___________________, President
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EXHIBITS TO MERGER AGREEMENT
3.1 Plan of Merger
4.2 Options for 236,500 shares of Gourmet stock
4.3 Consents and Approvals
4.4 Non-Contravention
4.5 Environmental Matters
4.6 Inventory
4.9 Compliance with Laws
4.11 Litigation
4.12 Absence of Changes
4.13 Liabilities
4.14 Title to Properties
4.15 Leases
4.16 Intellectual Property
4.17 Material Contracts
4.19 Insurance
4.22 Tax Matters
4.23 Finders
4.25 Insider Interests
4.26 Insider Transactions
4.27 No Interest in Competitors
4.30 Bank and Safe Deposit Arrangements
7.6 Investment Banking and Consulting Agreements
Exhibits are available by request.
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