ASSET PURCHASE AGREEMENT
Dated as of August 7, 1996
among
XXX. XXXXXX INC.
AND OTHER SELLERS
IDENTIFIED HEREIN
XXX. XXXXXX' ORIGINAL COOKIES, INC.,
and
CAPRICORN INVESTORS II, L.P.
ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT dated as of August 7, 1996, among
XXX. XXXXXX INC., a Delaware corporation ("MFI" or a "Seller"), XXX. XXXXXX
DEVELOPMENT CORPORATION, a Delaware corporation and a wholly-owned subsidiary of
MFI ("MFD"), XXX. XXXXXX COOKIES, a California corporation and a wholly-owned
subsidiary of MFD (together with MFD, the "Other Sellers" and the Other Sellers
together with MFI, the "Sellers"), XXX. XXXXXX' ORIGINAL COOKIES, INC., a
Delaware corporation (the "Buyer"), and CAPRICORN INVESTORS II, L.P., a Delaware
limited partnership and currently the sole stockholder of the Buyer
("Capricorn").
WHEREAS, the parties desire that the Buyer purchase from the Sellers,
and that the Sellers sell to the Buyer, the Acquired Assets (as defined in
Section 1(a)), and that the Buyer assume the Assumed Liabilities (as defined in
Section 1(c)), upon the terms and subject to the conditions set forth in this
Agreement;
NOW, THEREFORE, in consideration of the premises and of the respective
representations, warranties, covenants, agreements and conditions contained
herein, the parties hereto hereby agree as follows:
(a) Purchase, Sale and Assumption. Purchase and Sale. On the
terms and subject to the conditions of this Agreement, the Sellers agree to
sell, transfer, assign and deliver to the Buyer, and the Buyer agrees to, and
Capricorn agrees to cause the Buyer to, accept and purchase from the Sellers, at
the Closing (as defined in Section 2(a)) all the business and operations of any
of the Sellers (such business and operations being herein called, collectively,
the "Acquired Business") and all the assets and properties of any of the Sellers
of every kind and description used or held for use in connection with the
Acquired Business (such assets being herein called, collectively, the "Acquired
Assets"), other than the Excluded Assets (as defined in Section 1(b)). The
Acquired Assets shall include without limitation (i) the outstanding capital
stock of Xxx. Xxxxxx Cookies (Canada) Ltd., an Ontario corporation ("MF
Canada"), Xxx. Xxxxxx Cookies Australia, a Utah corporation ("MF Australia"),
Xxx. Xxxxxx Limited, a United Kingdom corporation ("MFUK"), Fairfield Foods
Inc., a New Jersey corporation ("Fairfield"), and, unless previously disposed of
by the Sellers, Xxx. Xxxxxx Cookies Far East Limited, a Hong Kong corporation
("MFHK"), held by the Sellers (MF Canada, MF Australia, MFUK, Fairfield and MFHK
being herein called, collectively, the "Subsidiaries"), (ii) an undivided
interest with The Xxx. Xxxxxx' Brand, Inc. in all recipes, techniques,
processes, methods of production and commercialization, training methods and
know-how owned by the Sellers (the "Trade Secrets") and (iii) a Closing Cash
Amount (as defined in Section 2(c)(i)) of not less than the Required Corporate
Cash Amount (as defined in Section 2(c)(i)), all of the cash in the store
accounts (the "Store Cash") and cash held in trust accounts for settlement of
future workers compensation insurance claims (the "Trust Cash") in accordance
with the Sellers' workers' compensation insurance policies.
(b) Excluded Assets. The term "Excluded Assets" means,
collectively, the following:
(i) all cash in the corporate bank accounts other than the cash
included in the Closing Cash Amount;
(ii) all rights and claims (including, without
limitation, refunds and claims thereto) of any Seller or of
any Subsidiary with respect to the Excluded Liabilities (as
defined in Section 1(d));
(iii) the capital stock of any subsidiary of any of the Sellers other
than the Subsidiaries;
(iv) the "Xxx. Xxxxxx" trade name and related
trademarks and the licensing assets, contract rights and
general intangibles specified or generally described on
Schedule 1(b) (the "Licensing Assets"); and
(v) any and all minute books, stock transfer records and records of
Taxes (as defined in Section 4(f)(iii)) of any Seller or any of its Subsidiaries
(c) Assumed Liabilities. On the terms and subject to the conditions of this
Agreement, the Buyer agrees to assume, at and effective from the Closing, the
Assumed Liabilities, other than the Excluded Liabilities. The term "Assumed
Liabilities" means, collectively, all liabilities and obligations of any Seller
and the Subsidiaries including, but not limited to, liabilities and obligations
that:
(i) constitute the working capital liabilities as of the
Closing Date of a kind reflected on Schedule 1(c) as
"Accounts payable trade" and "Accrued expenses";
(ii) arise out of or relate to any contract, agreement or
lease in the Acquired Business;
(iii) arise out of or relate to any event occurring
after the Closing or the operation of the Acquired Business or the use
or ownership of any of the Acquired Assets after the Closing;
(iv) arise out of or relate to MFI's obligations under the
Senior Management Value Creation Plan, dated December
1994 (the "Value Creation Plan");
(v) arise out of store closing costs, including those
for which reserves have been or prior to the Closing are established on
the Sellers' financial statements;
(vi) arise out of unpaid workers' compensation insurance
claims arising prior to the Closing, including without
limitation those relating to the Trust Cash; and
(vii)arise out of severance claims by employees of the
Sellers following the Closing by reason of the
transactions contemplated by this Agreement.
(d) Excluded Liabilities. The term "Excluded Liabilities" means, collectively,
the following:
(i) any liability in respect of any Excluded Assets;
(ii) any obligation or liability with respect to the
issuance, sale and retirement of the Series A Notes of
MFI in the original principal amount of $15,000,000
(the "Series A Notes");
(iii)any obligation or liability with respect to the
issuance, sale and retirement of all outstanding shares
of Preferred Stock, $.001 par value per share, of MFI
(the "MFI Preferred Stock");
(iv) any obligation or liability with respect to the
issuance, sale and retirement of all outstanding shares
of Preferred Stock, $.001 par value per share, of MFD
(the "MFD Preferred Stock");
(v) any obligation or liability under the contracts
relating to the Licensing Assets;
(vi) any obligation or liability to the equity security
holders of MFI including in connection with the
transactions contemplated by this Agreement or the
liquidation or dissolution of MFI;
(vii)the Sellers' liability for any Taxes (as defined in
Section 4(f)(iii)) attributable to taxable years or
periods ending at the time of or prior to the Closing,
or, in the case of any Straddle Period (as defined in
Section 11(a)(i)), the portion of such Straddle Period
(as determined in Section 11(a)(i)) ending at the time
of the Closing, except to the extent such liabilities
constitute "Accrued expenses" for purposes of
determining the Working Capital Amount (as defined in
Section 2(c));
(viii) the obligations and liabilities of any Seller or of
any Subsidiary with respect to any contract, agreement,
arrangement or understanding (including without
limitation any payables) with any of their respective
stockholders, creditors or affiliates (in each case,
other than the Sellers and the Subsidiaries) identified
on Schedule 1(d)(viii);
(ix) the Sellers' and/or the Subsidiaries' liabilities under
the Riverview Financial Corporation Profit Sharing Plan
and the Xxx. Xxxxxx Inc. 401(k) Retirement Savings
Plan; and
(x) the obligations and liabilities of any Seller or any
Subsidiary with respect to the payment of expenses
pursuant to Section 16, including any indemnification
or other obligations under any related engagement
agreements or arrangements.
(e) Purchase Price. The purchase price for the Acquired Assets
(the "Purchase Price") shall be the aggregate cash and note amounts payable by
the Buyer pursuant to, and as set forth in, Section 2(b)(ii). The Purchase Price
shall be subject to adjustment as provided in Section 2(c). No separate amount
shall be payable by any Seller in respect of the assumption by the Buyer of the
Assumed Liabilities and no such assumption shall reduce the Purchase Price
payable hereunder.
(f) Allocation of Purchase Price. Prior to the Closing Date,
the Buyer and the Sellers shall negotiate, draft and execute a schedule (the
"Allocation Schedule") allocating the Purchase Price (including, for purposes of
this Section 1(f), any other consideration paid to the Sellers, including the
Assumed Liabilities) among the Acquired Assets. Promptly following the making of
the Purchase Price adjustments contemplated by Section 2(c), the Buyer and the
Sellers shall in good faith negotiate adjustments to the Allocation Schedule to
reflect any differences between the Purchase Price and the Adjusted Purchase
Price (as defined in Section 2(c)), and execute a revised Allocation Schedule.
The Allocation Schedule shall be reasonable and shall be prepared in accordance
with Section 1060 of the Internal Revenue Code of 1986, as amended (the "Code"),
and the regulations thereunder. Each of the Sellers and the Buyer agrees that
promptly upon receiving the Allocation Schedule it shall return an executed copy
thereof to the other parties. Each of the Sellers and the Buyer agrees to file
Internal Revenue Service Form 8594, and all federal, state, local and foreign
Tax Returns (as defined in Section 4(f)), in accordance with the Allocation
Schedule. Each of the Sellers and the Buyer agrees to provide the others
promptly with any other information required to complete Form 8594.
(i) Nonassignable Assets. To the extent that any lease,
contract, permit, license or other asset included in the Acquired Assets is not
capable of being assigned, transferred, subleased or sublicensed without the
consent or waiver of a third party (whether or not a governmental authority), or
if such assignment, transfer, sublease or sublicense would constitute a breach
thereof or a violation of applicable law, this Agreement (and any related
documents delivered at the Closing) shall not constitute an actual or attempted
assignment, transfer, sublease or sublicense thereof unless and until such
consent or waiver of such third party has been duly obtained or such assignment,
transfer, sublease or sublicense has otherwise become lawful (any lease,
contract, permit, license or other asset not assigned, transferred, subleased or
sublicensed as a result of this Section 1(g)(i) is hereinafter referred to as an
"Unassigned Asset").
(ii) To the extent that the consents and waivers referred to
in Section 1(g)(i) are not obtained prior to the Closing, or until the
impracticalities of transfer referred to therein are resolved, and in each case
subject to Section 8(a), (x) each Seller shall, subject to Section 8(a), use its
best efforts to (A) provide or cause to be provided to the Buyer the benefits of
any Unassigned Asset, (B) cooperate in any arrangement, reasonable and lawful as
to both the Sellers and the Buyer, designed to provide such benefits to the
Buyer and (C) enforce for the account and at the expense of the Buyer any rights
of the Sellers arising from such Unassigned Asset, including the right to elect
to terminate in accordance with the terms thereof on the advice of the Buyer,
and (y) the Buyer shall use its best efforts to perform the obligations of the
Sellers arising under such Unassigned Asset or shall promptly reimburse the
Sellers for the expense thereof.
(g) Closing; Transactions to be Effected; Purchase Price
Adjustment. Closing. The closing (the "Closing") of the purchase and sale of the
Acquired Assets and the assumption by the Buyer of the Assumed Liabilities shall
be held at the offices of Skadden, Arps, Slate, Xxxxxxx & Xxxx, 000 Xxxxx
Xxxxxx, Xxx Xxxx, Xxx Xxxx, at 10:00 a.m. on September 4, 1996, or if the
conditions to Closing set forth in Section 3 of this Agreement shall not have
been satisfied by such date, as soon as practicable after such conditions shall
have been satisfied. The date on which the Closing shall occur is hereinafter
referred to as the "Closing Date".
(h) Transactions to be Effected. At the Closing, on the terms
and subject to the conditions of this Agreement:
(i) the Sellers shall deliver to the Buyer (A) such
appropriately executed and authenticated instruments of sale,
assignment, transfer and conveyance to the Buyer of the Acquired Assets
as the Buyer or its counsel may reasonably request, such instruments to
be reasonably satisfactory in form to the Buyer and its counsel, (B) a
certificate or certificates representing all the outstanding shares of
capital stock (the "Subsidiary Shares") of the Subsidiaries owned by
the Sellers, duly endorsed in blank in proper form for transfer, with
appropriate transfer stamps, if any, affixed, and (C) the documents to
be delivered by the Sellers pursuant to Section 3(a); and
(ii) the Buyer shall deliver to the Sellers (A) by
wire transfer to one or more bank accounts designated in writing by MFI
on behalf of the Sellers at least two business days prior to the
Closing Date, immediately available funds in an amount equal to
$5,357,000, (B) notes of the Buyer (the "Buyer Notes"), registered in
the name of MFI or its designees, which Buyer Notes shall consist of
three series of senior secured notes (with respective aggregate
principal amounts equal to $2,000,000 (the "MFI Series 1 Notes"),
$3,000,000 (the "MFI Series 2 Notes") and $10,000,000 (the "MFI Series
3 Notes")), and one series of senior subordinated notes (with an
aggregate principal amount of $4,643,000 (the "MFI Series 4 Notes")),
all of which notes shall have the terms set forth in the form of Note
Agreement (the "Buyer Note Agreement") attached hereto as Exhibit A,
(C) such instruments of assumption with respect to the Assumed
Liabilities, appropriately executed and authenticated by the Buyer, as
the Sellers or their counsel may reasonably request, such instruments
to be reasonably satisfactory in form to the Sellers and their counsel,
and (D) the documents to be delivered by the Buyer pursuant to Section
3(b).
(iii) Purchase Price Adjustments. W/C Adjustment. Within 45
days after the Closing Date, the Sellers shall prepare and deliver to the Buyer
a statement (the "W/C Statement"), which has been reviewed and reported on by
the Sellers' independent auditors in accordance with procedures to be
established by MFI and the Buyer without exception or qualification, setting
forth the Closing Cash Amount (as defined below) and the Working Capital Amount
(as defined below).
(iv) The Purchase Price shall be increased, solely through an
increase in the cash portion of the Purchase Price, by the amount, if any, by
which the Closing Cash Amount exceeds the Required Corporate Cash Amount and the
Purchase Price shall be decreased, solely through a decrease in the cash portion
of the Purchase Price, by the amount, if any, by which the Required Corporate
Cash Amount exceeds the Closing Cash Amount. The Purchase Price shall also be
increased, solely through an increase in the cash portion of the Purchase Price,
by the amount, if any, by which the Working Capital Amount exceeds by more than
$100,000 the Working Capital Base Amount (as defined below), and the Purchase
Price shall be decreased, solely through a decrease in the cash portion of the
Purchase Price, by the amount, if any, by which the Working Capital Base Amount
exceeds by more than $100,000 the Working Capital Amount. Should there be both
an increase and a decrease, only the net amount will be paid. The Buyer shall
pay any such increase in the Purchase Price, and the Sellers shall repay to the
Buyer any such decrease in the Purchase Price within 5 business days following
the determination of the amount pursuant to this Section 2(c).
(v) "Closing Cash Amount" means the amount of cash (other than
the Store Cash, the Trust Cash and the aggregate amount of all checks written by
any Seller but not cleared as of the Closing Date) included in the Acquired
Assets determined in accordance with generally accepted accounting principles
consistent with past practice.
(vi) "Required Corporate Cash Amount" means the sum of (i)
$1,600,000 plus (ii) in the event that as of the Closing Date the Sellers shall
not have paid all amounts due in respect of the settlement of the dispute
relating to the London store lease of MFUK, the aggregate amount remaining to be
so paid up to $200,000 (less any such amounts paid by the Sellers following
August 8, 1996 and prior to the Closing Date).
(vii) "Working Capital Amount" means the ordinary working
capital of the Acquired Business as of the close of business on the Closing
Date, excluding the Closing Cash Amount, calculated on the same basis as
reflected in line items on Schedule 1(c), which the parties agree lists the line
items of current assets and current liabilities that constitute ordinary working
capital for purposes of this Agreement, and that any items on Schedule 1(c) that
are based upon errors of fact or that are not in accordance with generally
accepted accounting principles consistent with past practice shall be retained
for purposes of calculating the Working Capital Amount. In addition, reserves
with respect to items on Schedule 1(c) shall continue to be established and
accounted for in a manner consistent with past practice.
(viii) "Working Capital Base Amount" means $(173,541).
(ix) Preparation of W/C Statement; Resolution of
Disagreements. The Buyer shall assist the Sellers and their independent auditors
in the preparation of the W/C Statement, and shall provide the Sellers and their
independent auditors access at all reasonable times to the personnel,
properties, books and records of the Acquired Business for such purpose. The
Buyer's independent auditors may participate in the preparation of the W/C
Statement; provided, however, that the Buyer acknowledges that the Sellers shall
have the primary responsibility and authority for preparing the W/C Statement
and the Sellers' independent auditors shall have the primary responsibility and
authority for certifying the W/C Statement. During the five-day period following
the Buyer's receipt of the W/C Statement, the Buyer and its independent auditors
will be permitted to review the working papers of the Sellers' independent
auditors relating to such Statement. The W/C Statement shall become final and
binding upon the parties on the fifth day following receipt thereof by the Buyer
unless the Buyer gives written notice of its disagreement (a "Notice of
Disagreement") with respect to the W/C Statement to the Sellers prior to such
date. Any Notice of Disagreement shall specify in reasonable detail the nature
of any disagreement so asserted and shall be accompanied by a letter from the
Buyer's independent auditors indicating that they concur with each of the
positions taken by the Buyer in the Notice of Disagreement. If a Notice of
Disagreement is received by the Sellers in a timely manner, then the W/C
Statement (as revised in accordance with clause (i) or (ii) below) shall become
final and binding upon the parties on the earlier of (i) the date the parties
hereto resolve in writing any differences they have with respect to any matter
specified in the Notice of Disagreement or (ii) the date any disputed matters
are finally resolved in writing by the Arbitrator (as defined below). During the
five-day period following the delivery of a Notice of Disagreement, the Sellers
and the Buyer shall seek in good faith to resolve in writing any differences
which they may have with respect to any matter specified in the Notice of
Disagreement. At the end of such five-day period, the Sellers and the Buyer
shall submit to an arbitrator (the "Arbitrator") for review and resolution any
and all matters that remain in dispute. The Arbitrator shall be such nationally
recognized independent public accounting firm as shall be agreed upon by the
parties hereto in writing. The Sellers and the Buyer shall jointly request that
the arbitration be conducted in New York City in accordance with the procedures
of the American Arbitration Association. The Arbitrator shall render a decision
resolving the matters submitted to the Arbitrator within 25 days following
submission thereto. The cost of any arbitration (including the fees of the
Arbitrator) pursuant to this Section 2(c)(ii) shall be borne 50% by the Buyer
and 50% by the Sellers, except that each party shall bear all fees and expenses
attributable to any expert witness retained by such party but not the other
party. The fees and disbursements of the Sellers' independent auditors incurred
in connection with their certification of the Adjusted W/C Statement shall be
borne by the Sellers, and the fees and disbursements of the Buyer's independent
auditors incurred in connection with their review of the W/C Statement or
certification of any Notice of Disagreement shall be borne by the Buyer.
(i) Post-Closing Activities. After the Closing, one or more of
the Sellers or their Subsidiaries may be liquidated, dissolved and wound-up in
accordance with the applicable corporate law, and will effect such state and
federal regulatory and tax filings as are reasonably required. The Buyer agrees
to make its personnel, and applicable books and records, available to MFI in
order to enable MFI to file all Tax Returns (as defined in Section 4(f) of this
Agreement) required to be filed by MFI or any of its subsidiaries, including in
connection with a liquidation of the Sellers or their subsidiaries and in
connection with the Excluded Assets, the Excluded Liabilities and any indemnity
claims hereunder provided that the Buyer's personnel will be so available only
to the extent that the performance of such actions does not interfere with the
performance of such personnel's duties for or on behalf of the Buyer. MFI
understands and agrees that MFI will be solely responsible for paying or
providing for the payment of, and the Buyer will not be required to pay, any
out-of-pocket expenses incurred in connection with such actions.
(j) Conditions to Closing. Buyer's Obligation. The obligation
of the Buyer to, and of Capricorn to cause the Buyer to, purchase the Acquired
Assets is subject to the satisfaction (or waiver by the Buyer) as of the Closing
of the following conditions:
(i) The representations and warranties of the Sellers
made in this Agreement qualified as to materiality shall be true and
correct and those not so qualified shall be true and correct in all
material respects as of the date hereof and on and as of the Closing,
as though made on and as of the Closing Date, and the Sellers shall
have performed or complied in all material respects with all
obligations and covenants required by this Agreement to be performed or
complied with by the Sellers by the time of the Closing; and the
Sellers shall have delivered to the Buyer a certificate dated the
Closing Date and signed by an authorized officer of each Seller
confirming the foregoing.
(ii) The Buyer shall have received an opinion dated
the Closing Date of Stoel Rives, counsel to the Sellers, to the effect
set forth in Exhibit B.
(iii) No injunction or order of any court or
administrative agency of competent jurisdiction shall be in effect, and
no statute, rule or regulation of any governmental authority of
competent jurisdiction shall have been promulgated or enacted, as of
the Closing which restrains or prohibits the purchase and sale of the
Acquired Assets.
(iv) The waiting period under the Xxxx-Xxxxx-Xxxxxx
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), shall
have expired or been terminated.
(v) The conditions to the Buyer's obligations set
forth in the Asset Purchase Agreement (the "OCC/HSC Agreement") among
the Buyer, Chocamerican, Inc., a Delaware corporation ("Chocamerican"),
The Original Cookie Company, Incorporated, a California corporation
("OCC"), and Hot Xxx Companies, Inc., a Delaware corporation ("HSC"),
and Capricorn, an executed form of which is attached as Exhibit C,
shall have been satisfied or waived by the Buyer.
(vi) The conditions to the obligations of the License
Buyer (as defined below) set forth in the Licensing Assets Purchase
Agreement (the "License Purchase Agreement") among MFD, The Xxx. Xxxxxx
Brand, Inc., a Delaware corporation (the "License Buyer"), and
Capricorn, an executed form of which is attached as Exhibit D, shall
have been satisfied or waived by the Buyer.
(vii) The Sellers and the Buyer shall have obtained
consents, in form reasonably satisfactory to the Sellers and the Buyer,
to the transactions contemplated hereby from the persons whose consent
is required for the transfer or assignment to the Buyer of any of the
Acquired Assets, or no such consent shall be required, (A) under each
of the agreements identified on Schedule 3(a)(vii) and (B) under store
leases with respect to at least 50% of the stores of the Acquired
Business.
(viii) The Sellers shall have demonstrated to the
reasonable satisfaction of the Buyer that the Closing Cash Amount shall
be not less than the Required Corporate Cash Amount and that the
working capital position of MFI as of the Closing Date shall be
consistent with the operation of MFI from the date of the Balance Sheet
through the Closing Date in the ordinary course of business consistent
with past practice and otherwise in accordance with this Agreement.
(ix) The other parties thereto shall have executed
and delivered to the Buyer the Buyer Note Agreement and the Other
Agreements (as defined in Section 3(b)(vi)).
(k) Sellers' Obligation. The obligation of the Sellers to
sell, assign, transfer and deliver the Acquired Assets to the Buyer is subject
to the satisfaction (or waiver by the Sellers) as of the Closing of the
following conditions:
(i) The representations and warranties of the Buyer
and Capricorn made in this Agreement qualified as to materiality shall
be true and correct and those not so qualified shall be true and
correct in all material respects as of the date hereof and on and as of
the Closing, as though made on and as of the Closing Date, and the
Buyer shall have performed or complied in all material respects with
all obligations and covenants required by this Agreement to be
performed or complied with by the Buyer by the time of the Closing; and
the Buyer shall have delivered to the Sellers a certificate dated the
Closing Date and signed by an authorized officer of the Buyer
confirming the foregoing.
(ii) The Sellers shall have received an opinion dated
the Closing Date of Skadden, Arps, Slate, Xxxxxxx & Xxxx, counsel to
the Buyer, to the effect set forth in Exhibit E.
(iii) The indebtedness to be incurred by the Buyer in
connection with the Closing and the OCC/HSC Agreement (other than the
Buyer Notes and the indebtedness identified as the "Buyer Notes" under
the OCC/HSC Agreement) shall have terms and documentation reasonably
satisfactory to the Sellers and their counsel.
(iv) The Closing (as defined in the OCC/HSC
Agreement) shall have occurred and the conditions precedent thereunder
shall have been satisfied or waived with MFI's consent as contemplated
by Section 6(f).
(v) The Closing (as defined in the License Purchase
Agreement) shall have occurred.
(vi) The Buyer shall have executed and delivered to
the designees of MFI the Buyer Note Agreement and the Buyer Notes and
all other documents required to be executed and delivered by the Buyer
in connection therewith, including without limitation the Collateral
Documents (as such term is defined in the Buyer Note Agreement) and the
Buyer shall have executed and delivered to the License Buyer the
License Agreement (the "License Agreement") in the form attached hereto
as Exhibit F and all other documents required to be executed and
delivered by the Buyer in connection therewith (the License Agreement
together with the Buyer Note Agreement and such other documents, the
"Other Agreements") and shall have executed and delivered to the
appropriate Persons any and all documents in connection with the
transactions contemplated by the Other Agreements.
(vii) Capricorn and/or its designees shall have
acquired from the designees of MFI the MFI Series 4 Notes and paid to
such designees an aggregate of $4,643,000 in cash.
(viii) Each of the executives of MFI who are
participants in the Value Creation Plan shall have been offered
employment by the Buyer on terms and conditions which are comparable to
his existing terms and conditions of employment except for
participation in the Value Creation Plan.
(ix) The conditions contemplated by Sections
3(a)(iii), 3(a)(iv) and 3(a)(vii) shall have been satisfied.
(x)
(l) Waiver of Closing Conditions. The parties hereto
acknowledge and agree that if the Buyer or the Sellers shall have received prior
to the Closing written notice from the Sellers or the Buyer, respectively,
providing specific information as to the failure of any condition set forth in
paragraph (a) or (b) above, respectively, and such party or parties determine to
proceed with the Closing, such party or parties will be deemed to have waived
such condition and shall not be entitled to be indemnified pursuant to Section
11 for any losses arising from any matters relating to such conditions;
provided, that no such waiver shall affect the calculation of any adjustment to
the Purchase Price under Section 2(c).
5. Representations and Warranties of the Sellers. The Sellers
hereby jointly and severally represent and warrant to the Buyer as follows:
(a) Organization and Standing of the Sellers. Each of the
Sellers and the Subsidiaries is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation.
Each of the Sellers and the Subsidiaries has full corporate power and authority
and possesses all governmental franchises, licenses, permits, authorizations and
approvals necessary to enable it to use its corporate name and to own, lease or
otherwise hold its properties and assets and to carry on its business as
presently conducted other than such franchises, licenses, permits,
authorizations and approvals the lack of which, individually or in the
aggregate, would not have a material adverse effect on the assets, financial
condition or results of operations of the Acquired Business. Each of the Sellers
and the Subsidiaries is duly qualified and in good standing to do business in
each jurisdiction in which the nature of its business or the ownership, leasing
or holding of its properties makes such qualification necessary, except such
jurisdictions where the failure so to qualify would not have a material adverse
effect on the assets, financial condition or results of operations of the
Acquired Business. The Sellers have made available to the Buyer true and
complete copies of the Certificate of Incorporation, as amended to date, and the
By-laws, as in effect on the date hereof, of the Subsidiaries.
(b) Authority; No Conflict. Each of the Sellers has all
requisite corporate power and authority to enter into this Agreement and to
consummate the transactions contemplated hereby. All corporate acts and other
proceedings required to be taken by each of the Sellers (including without
limitation any and all stockholder or debtholder approvals) to authorize the
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby have been duly and properly taken. This
Agreement has been duly executed and delivered by each of the Sellers and
constitutes a valid and binding obligation of each of the Sellers, enforceable
against each of the Sellers in accordance with its terms. MFI gave valid notice
to Xxxxxxx X. Xxxxxx and Xxxxx X. Xxxxxx (collectively, the "Founders") under
the Stock Option Agreement dated as of January 1, 1993 (as supplemented by the
letter of waiver dated June 30, 1994 signed by the Founders) (collectively, the
"Founders Agreement") among MFI, the Founders, The Prudential Insurance Company
of America, Principal Mutual Life Insurance Company, Pruco Life Insurance
Company, Zions First National Bank and IDS Certificate Company in respect of the
proposed transactions contemplated by this Agreement and the License Purchase
Agreement and the transactions contemplated hereby and thereby on or about May
17, 1996 and the Closing will be in compliance with the Founders Agreement. The
execution and delivery of this Agreement and the Buyer Note Agreement do not,
and the consummation of the transactions contemplated hereby and thereby and
compliance with the terms hereof and thereof will not, conflict with, or result
in any violation of or default (with or without notice or lapse of time, or
both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation, or result in the creation of any Lien (as
defined in Section 4(g)) upon any of the Acquired Assets under, any provision of
(i) any relevant corporation law statute, (ii) the Certificate or Articles of
Incorporation or By-laws of any of the Sellers or the Subsidiaries, (iii) except
as disclosed on the Schedules hereto, any material note, bond, mortgage,
indenture, deed of trust, license, lease, contract, commitment, or agreement to
which any of the Sellers or the Subsidiaries is a party or by which any of the
Acquired Assets is bound or (iv) any judgment, order or decree, or material
statute, law, ordinance, rule or regulation applicable to any of the Sellers or
the Subsidiaries or any of the Acquired Assets, other than, in the case of
clause (iii) above, any such conflicts, violations, defaults, rights or liens,
claims, encumbrances, security interests, options, charges or restrictions that
individually or in the aggregate would not have a material adverse effect on the
assets, financial condition or results of operations of the Acquired Business.
No material consent, approval, license, permit, order or authorization of, or
registration, declaration or filing with, any court, administrative agency or
commission or other governmental authority or instrumentality, domestic or
foreign, is required to be obtained or made by or with respect to any of the
Sellers or the Subsidiaries or their respective affiliates in connection with
the execution and delivery of this Agreement or the consummation by the Sellers
of the transactions contemplated hereby, other than (A) compliance with and
filings under the HSR Act and (B) those that may be required solely by reason of
the Buyer's (as opposed to any other third party's) participation in the
transactions contemplated hereby.
(c) Capital Stock of the Subsidiaries. The authorized capital
stock of MF Canada consists of 100 shares of Common Stock, without par value
(the "MF Canada Shares"), all of which are validly issued and outstanding, fully
paid and nonassessable and held beneficially and of record by MFI. The
authorized capital stock of MF Australia consists of 50,000 shares of Common
Stock, par value $1.00 per share (the "MF Australia Shares"), all of which are
validly issued and outstanding, fully paid and non-assessable and held
beneficially and of record by MFI. The authorized capital stock of MFUK consists
of 20,000 shares of Common Stock, par value (pound)1 per share (the "MFUK
Shares"), 1,000 of which are validly issued and outstanding, fully paid and
nonassessable and held beneficially and of record by MFI. The authorized capital
stock of Fairfield consists of 2,500 shares of Common Stock, par value $1.00 per
share (the "Fairfield Shares"), 50 shares of which are validly issued and
outstanding, fully paid and non-assessable and held beneficially of record by
MFI. The authorized capital stock of MFHK consists of 3,000,000 shares of Common
Stock, par value $1.00 per share (the "MFHK Shares"), all of which are validly
issued and outstanding, fully paid and nonassessable and held beneficially and
of record by MFI. None of the Subsidiary Shares has been issued in violation of,
and none of the Subsidiary Shares is subject to, any preemptive or subscription
rights. Except as set forth above, there are no shares of capital stock or other
equity securities of the Subsidiaries outstanding. There are no outstanding
warrants, options, agreements, convertible or exchangeable securities or other
commitments (other than this Agreement) pursuant to which the Subsidiaries are
or may become obligated to issue, sell, purchase, return or redeem any shares of
capital stock or other securities of the Subsidiaries, and there are not any
equity securities of the Subsidiaries reserved for issuance for any purpose.
Except as disclosed on Schedule 4(c), MFI directly or through one or more wholly
owned subsidiaries has good and valid title to the Subsidiary Shares, free and
clear of any Liens. Assuming the Buyer has the requisite power and authority to
be the lawful owner of the Subsidiary Shares, upon delivery to the Buyer at the
Closing of one or more certificates representing the Subsidiary Shares, duly
endorsed by MFI for transfer to the Buyer, and upon MFI's receipt of its
respective share of the Purchase Price, good and valid title to the Subsidiary
Shares will pass to the Buyer, free and clear of any Liens other than those
arising from acts of the Buyer or its affiliates. Other than this Agreement, and
except as disclosed on Schedule 4(c), the Subsidiary Shares are not subject to
any voting trust agreement or other contract, agreement, arrangement, commitment
or understanding, including any such agreement, arrangement, commitment or
understanding restricting or otherwise relating to the voting, dividend rights
or disposition of the Subsidiary Shares.
(d) Equity Interests. Except as disclosed on Schedule 4(d),
none of the Sellers directly or indirectly owns any capital stock of or other
equity interests in any corporation, partnership or other entity.
(i) Financial Statements; Undisclosed Liabilities. Schedule
4(e)(i) sets forth the audited consolidated balance sheets of MFI and its
subsidiaries as of December 31, 1993, 1994 and 1995 and the audited consolidated
statements of income, stockholders' equity and cash flows of MFI for the fiscal
years then ended, together with the notes to such financial statements
(collectively, the "Financial Statements"). The Financial Statements have been
prepared in conformity with generally accepted accounting principles
consistently applied (except in each case as described in the notes thereto) and
on the basis described in such notes fairly present the financial condition and
the results of operations of MFI, as the case may be, as of and for the periods
indicated. The Acquired Assets constitute, with the exception of any Excluded
Assets, all the assets, properties, rights and interests reflected on the
audited balance sheet of MFI as of December 31, 1995 (the "Balance Sheet")
(other than those assets, properties, rights and interests sold or disposed of
in the ordinary course of the Acquired Business, consistent with past practice,
since the date of the Balance Sheet).
(ii) Except as set forth on Schedule 4(e)(ii), to the
knowledge of the Sellers, all of the Assumed Liabilities arise out of or relate
to the Acquired Business and none of the Sellers or the Subsidiaries has any
material liabilities or obligations of any nature (whether accrued, absolute,
contingent, unasserted or otherwise), except (1) as disclosed, reflected,
reserved against or contemplated in the Balance Sheet and the notes thereto, (2)
for items disclosed in the Schedules hereto, (3) for liabilities and obligations
incurred in the ordinary course of business consistent with past practice since
the date of the Balance Sheet other than in violation of this Agreement, (4) for
Taxes or (5) for Excluded Liabilities.
(e) Taxes. (i) Except as set forth on Schedule 4(f), the
Sellers have, in respect of the Acquired Business, filed all material Tax
Returns which are required to be filed (all such returns being true, correct and
complete in all material respects) and have paid all Taxes shown to be due on
such Tax Returns, and all monies required to be withheld by the Sellers from
employees of the Acquired Business for income Taxes and social security and
other payroll Taxes have been collected or withheld, and either paid to the
respective taxing authorities, set aside in accounts for such purpose, or
accrued, reserved against and entered upon the books of the Acquired Business.
(f) (ii) The reserve for Taxes reflected in the Balance Sheet
is adequate for the payment of all liabilities for Taxes with respect to or
imposed upon the Acquired Business or the Acquired Assets through the date of
such Balance Sheet. Any Taxes in respect of the period since the date of such
Balance Sheet have arisen in the ordinary course of business. Except as set
forth on Schedule 4(f), there are no ongoing audits or examinations of any of
the Tax Returns of any of the Sellers or the Subsidiaries and none of the
Sellers or the Subsidiaries has been notified by any governmental authority that
any such audit is contemplated or pending. Except as set forth on Schedule 4(f),
no governmental authority is now asserting or threatening to assert against any
of the Sellers or the Subsidiaries any deficiency or claim for additional Taxes.
Except as set forth on Schedule 4(f), no extension of time with respect to any
date on which a Tax Return was or is to be filed by any of the Sellers or the
Subsidiaries is in force, and no waiver agreement by any of the Sellers or the
Subsidiaries is in force for the extension of time for the assessment or payment
of any Taxes. There are no liens for Taxes upon any of the Acquired Assets other
than Liens for Taxes not yet due or payable.
(g) (iii) For purposes of this Agreement, "Taxes" shall mean
federal, state, local or foreign income, gross receipts, property, sales, use,
license, excise, franchise, employment, payroll, withholding, alternative or
add-on minimum, ad valorem, transfer or excise tax, or any other tax, custom,
duty, governmental fee or other like assessment or charge of any kind
whatsoever, together with any interest or penalty, imposed by any governmental
authority. For purposes of this Agreement, "Tax Returns" shall mean all federal,
state, local and foreign tax returns, declarations, statements, reports,
schedules, forms and information returns and any amended Tax Returns relating to
Taxes.
(h) Title to Acquired Assets. The Sellers have good and
marketable title to the Acquired Assets, free and clear of all mortgages, liens,
claims, security interests, easements, rights of way, pledges, restrictions,
charges or encumbrances of any nature whatsoever (collectively, "Liens"), except
(i) such as are disclosed on the Schedules hereto and (ii) mechanics',
carriers', workmen's, repairmen's or other like Liens arising or incurred in the
ordinary course of business, Liens arising under original purchase price
conditional sales contracts and equipment leases with third parties entered into
in the ordinary course of business, Liens for Taxes which are not due and
payable or which may thereafter be paid without penalty and other Liens, if any,
which do not, individually or in the aggregate, materially impair the continued
use and operation, consistent with past practice, of the Acquired Asset to which
they relate (the Liens described in clauses (i) and (ii) above are hereinafter
referred to collectively as "Permitted Liens"). Subject to Section 1(g), at the
Closing, the Buyer shall acquire the Acquired Assets free and clear of all Liens
other than Permitted Liens.
(i) Condition of Assets. Except as disclosed on Schedule
4(h),(i) the tangible personal assets included in the Acquired Assets have been
maintained in all material respects in accordance with generally accepted
industry practice, (ii) the tangible personal assets included in the Acquired
Assets are in all material respects in good operating condition and repair,
ordinary wear and tear excepted, and (iii) the leased personal property included
in the Acquired Assets is in all material respects in the condition required of
such property by the terms of the leases applicable thereto.
(j) Trademarks, etc. Schedule 4(i) sets forth a true and
complete list of all material patents, trademarks (registered or unregistered),
trade names (registered or unregistered), service marks (registered or
unregistered), registered copyrights and material unregistered copyrights and
computer software applications, other than off-the-shelf applications, together
with all applications therefor, owned or used by or licensed to the Sellers and
the Subsidiaries and all license agreements related thereto that are not
Excluded Assets to which any Seller or any Subsidiary is a party (collectively
"Intellectual Property") and with respect to trademarks, contains a list of all
jurisdictions in which such trademarks are registered or applied for and all
registration and application numbers. Except as disclosed on Schedule 4(i) or as
set forth in the License Agreement, a Seller or a Subsidiary owns or has the
valid right to use, without payment to any other party, the Intellectual
Property used in or necessary for the conduct of their businesses and the
consummation of the transactions contemplated hereby will not alter or impair
any such rights. All material Intellectual Property owned by the Sellers or a
Subsidiary is valid and all registrations related thereto have been duly
maintained. Except as disclosed on Schedule 4(i), all Intellectual Property
owned by a Seller or a Subsidiary is free and clear of all Liens. Except as
disclosed on Schedule 4(i), to the Sellers' knowledge, no claims or other
proceedings are pending or threatened by any person or entity with respect to
the ownership, validity, enforceability or use of any Intellectual Property. To
the Sellers' knowledge (i) the conduct of their businesses does not infringe
upon the rights of any third party, (ii) no third party is infringing upon any
Intellectual Property owned by the Sellers or a Subsidiary except as set forth
in Schedule 4(i) and (iii) the Intellectual Property identified on Schedule
4(i), together with the Licensing Assets being acquired by the License Buyer
under the License Purchase Agreement, is all of the Intellectual Property
necessary to conduct the Acquired Business as presently conducted.
(k) Contracts. Except as described in Schedule 4(j) and except
for contracts or agreements exclusively relating to the Excluded Assets, none of
the Sellers or any of the Subsidiaries is a party to or bound by any:
(i) employment agreement or employment contract for any
employee whose aggregate annual compensation is in
excess of $60,000;
(ii) employee collective bargaining agreement or other
contract with any labor union;
(iii)covenant not to compete (other than pursuant to any
radius restriction contained in any lease, reciprocal
easement or development, construction, operating or
similar agreement);
(iv) agreement or contract with any other Seller (or any
affiliate of any such other Seller) or any officer,
director or employee of any Seller or any affiliates of
any Seller (other than employment agreements covered by
clause (i) above);
(v) lease or similar agreement under which a Seller or a
Subsidiary is a lessor or sublessor of, or makes
available for use by any third party, any real property
owned or leased by such Seller or Subsidiary or any
portion of premises otherwise occupied by such Seller
or Subsidiary;
(vi) lease or similar agreement under which (A) a Seller or
a Subsidiary is lessee of, or holds or uses, any
machinery, equipment, vehicle or other tangible
personal property owned by a third party or (B) a
Seller or Subsidiary is a lessor or sublessor of, or
makes available for use by any third party, any
tangible personal property owned or leased by such
Seller or Subsidiary, in any such case which has an
annual rental obligation in excess of $10,000;
(vii)(A) continuing contract for the future purchase of
materials, supplies or equipment (other than purchase
contracts and orders for inventory in the ordinary
course of business consistent with past practice), (B)
management, service, consulting or other similar type
of contract or (C) advertising agreement or
arrangement, in any such case which has an annual
obligation in excess of $10,000;
(viii) material license or other agreement relating in whole or in part to
patents, trademarks, trade names, service marks or copyrights
(including any license or other agreement under which a Seller or a
Subsidiary has the right to use any of the same owned or held by a
third party);
(ix) agreement or contract under which a Seller or a Subsidiary has
borrowed or loaned any money or issued any note, bond, indenture or
other evidence of indebtedness or directly or indirectly guaranteed
(including, without limitation, through so-called take-or-pay or
keepwell agreements) indebtedness, liabilities or obligations of
others (other than endorsements for the purpose of collection in the
ordinary course of business), or any other note, bond, indenture or
other evidence of indebtedness;
(x) agreement or contract under which any other person has directly or
indirectly guaranteed indebtedness, liabilities or obligations of a
Seller or a Subsidiary (other than endorsements for the purpose of
collection in the ordinary course of business);
(xi) mortgage, pledge, security agreement, deed of trust or other document
granting a Lien (including, but not limited to, Liens upon any
properties acquired under conditional sales, capital leases or other
title retention or security devices other than any original purchase
price conditional sales contracts or equipment leases entered into in
the ordinary course of business);
(xii)any agreement or contract providing for the sale or purchase of
assets in excess of $25,000, not in the ordinary course of business
consistent with past practice;
(xiii) any agreement, arrangement or understanding (including without
limitation any payables) between any Seller or Subsidiary and any of
their respective stockholders, creditors which are Lenders (as defined
in the Buyer Note Agreement) or affiliates (in each case, other than
the Sellers and the Subsidiaries); and
(xiv)other agreement, contract, lease, license, commitment or instrument
pursuant to which after the Closing the Buyer will have an aggregate
annual liability in excess of $10,000.
Except as disclosed on Schedule 4(j), each agreement,
contract, lease, license, commitment or instrument of the Sellers and the
Subsidiaries described on Schedule 4(j) and the other Schedules hereto
(collectively, the "Contracts") is valid, binding and in full force and effect.
Except as disclosed in Schedule 4(h) or Schedule 4(j), a Seller or a Subsidiary
has performed all material obligations required to be performed by it to date
under the Contracts and it is not (with or without the lapse of time or the
giving of notice, or both) in breach or default in any material respect
thereunder and, to the Sellers' knowledge, no other party to any of the
Contracts is (with or without the lapse of time or the giving of notice, or
both) in breach or default in any material respect thereunder.
(a) Litigation; Decrees. Schedule 4(k) sets forth a list of
all lawsuits, claims, proceedings or investigations pending, or, to the Sellers'
knowledge, threatened, as of the date of this Agreement, by or against or
affecting a Seller or a Subsidiary or any of the Acquired Assets, which (i)
relate to or involve more than $25,000 (other than claims which are, or would be
but for retentions, deductibles, the nonpayment of premiums or other defenses by
carriers relating to alleged acts or omissions of the insureds, covered by the
insurance policies set forth on Schedule 4(l)), (ii) seek any injunctive relief,
or (iii) relate to the transactions contemplated by this Agreement. Except as
disclosed on Schedule 4(k), none of the Sellers or the Subsidiaries is in
default under any material judgment, order or decree of any court,
administrative agency or commission or other governmental authority or
instrumentality, domestic or foreign, applicable to it or any of the Acquired
Assets.
(b) Insurance. The insurance policies currently maintained
with respect to each Seller and each Subsidiary and the Acquired Assets are
listed on Schedule 4(l). All such policies are in full force and effect. The
Sellers have heretofore made available to the Buyer true and complete copies of
all such policies.
(i) Benefit Plans. Schedule 4(m)(i) contains a list of all
"employee pension benefit plans" (as defined in section 3(2) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")) (sometimes
referred to herein as "Pension Plans"), "employee welfare benefit plans" (as
defined in Section 3(k) of ERISA), bonus, stock option, stock purchase, deferred
compensation plans or arrangements, and other employee fringe benefit plans (all
the foregoing being herein called "Benefit Plans") maintained, or contributed
to, by any Seller or Subsidiary for the benefit of any employees of any Seller
or Subsidiary who are employed primarily in the Acquired Business. The Sellers
have delivered to the Buyer true, complete and correct copies of (1) each
Benefit Plan (or, in the case of any unwritten Benefit Plans, descriptions
thereof), (2) the most recent annual report on Form 5500 filed with the Internal
Revenue Service with respect to each Benefit Plan (if any such report was
required), (3) the most recent summary plan description for each Benefit Plan
for which such a summary plan description is required and (4) each trust
agreement and group annuity contract relating to any Benefit Plan.
(ii) Each Benefit Plan has been administered in all material
respects in accordance with its terms and the applicable provisions of ERISA and
the Code. Except as disclosed in Schedule 4(m)(ii)-l, all material reports,
returns and similar documents with respect to the Benefit Plans required to be
filed with any governmental agency or distributed to any Benefit Plan
participant have been duly and timely filed or distributed. Except as disclosed
in Schedule 4(m)(ii)-2, there are no investigations by any governmental agency,
termination proceedings or other claims (except claims for benefits payable in
the normal operation of the Benefit Plans), suits or proceedings against or
involving any Benefit Plan or asserting any rights or claims to benefits under
any Benefit Plan that could reasonably give rise to any material liability, and,
to the Sellers' knowledge, there are no facts that could reasonably give rise to
any material liability in the event of any such investigation, claim, suit or
proceeding.
(iii) Except as disclosed in Schedule 4(m)(iii), all
contributions to, and payments from, the Benefit Plans that may have been
required to be made in accordance with the Benefit Plans have been timely made.
(iv) No "prohibited transaction" (as defined in Section 4975
of the Code or Section 406 of ERISA) has occurred that involves the assets of
any Benefit Plan and that could subject the Acquired Business or any of its
employees, or, to the Sellers' knowledge, a trustee, administrator or other
fiduciary of any trusts created under any Benefit Plan, to any material tax or
penalty on prohibited transactions imposed by Section 4975 of ERISA or the
sanctions imposed under Title I of ERISA. None of the Sellers nor any trustee,
administrator or other fiduciary of any Benefit Plan nor any agent of any of the
foregoing has engaged in any transaction or acted or failed to act in a manner
that could subject the Acquired Business to any material liability for breach of
fiduciary duty under ERISA or any other applicable law. No liability under Title
IV of ERISA has been incurred by the Sellers, the Subsidiaries or their
affiliates within six years prior to the date hereof that has not been satisfied
in full and no condition exists that presents a material risk of incurring such
liability.
(v) Except as disclosed in Schedule 4(m)(v), at no time within
the five years preceding the Closing Date has any Seller or Subsidiary been
required to contribute to any "multiemployer plan" (as defined in Section
4001(a)(3) of ERISA) or incurred any withdrawal liability, within the meaning of
Section 4201 of ERISA, which liability has not been fully paid as of the date
hereof, or announced an intention to withdraw, but not yet completed such
withdrawal, from any multiemployer plan.
(vi) None of the Sellers maintains or contributes to a Pension
Plan which is subject to Section 302 of ERISA or Section 412 of the Code.
(vii) With respect to any Benefit Plan that is an employee
welfare benefit plan, except as disclosed in Schedule 4(m)(vii), (1) no such
Benefit Plan is funded through a welfare benefits fund, as such term is defined
in Section 419(e) of the Code and (2) each such Benefit Plan that is a group
health plan, as such term is defined in Section 5000(b)(1) of the Code, complies
with the applicable requirements of Section 498OB(f) of the Code.
(c) Absence of Changes or Events. Except as disclosed on
Schedule 4(n), since the date of the Balance Sheet, there has not been any
material adverse change in the assets, financial condition or results of
operations of the Acquired Business other than changes relating to the economy
in general or the Acquired Business's industry in general and not specifically
related to the Acquired Business. Since the date of the Balance Sheet, each
Seller has conducted its portion of the Acquired Business in the ordinary course
and in substantially the same manner as presently conducted and has made all
reasonable efforts consistent with past practice to preserve its relationships
with customers, suppliers and others with whom it deals, and none of the Sellers
has taken any action that, if taken after the date hereof, would constitute a
material breach of any of the covenants set forth in Section 5(b).
(i) Compliance with Applicable Laws; Environmental Matters.
Except as set forth in Schedule 4(o), to the knowledge of the Sellers, each
Seller and each Subsidiary is in compliance with all applicable statutes, laws,
ordinances, rules, orders and regulations of any governmental authority or
instrumentality, domestic or foreign, except where noncompliance would not have
a material adverse effect on the assets, financial condition or results of
operations of the Acquired Business. Except as set forth in Schedule 4(o), no
Seller has received any written communication from a governmental authority that
alleges that any Seller or Subsidiary is not in compliance, in respect of the
Acquired Business, in all material respects, with material federal, state, local
or foreign laws, ordinances, rules and regulations.
(ii) Except as set forth in Schedule 4(o), to the knowledge of
the Sellers, none of the operations or properties of the Sellers and the
Subsidiaries is the subject of any federal, state or foreign investigation, in
respect of the Acquired Business, evaluating whether any remedial action is
needed to respond to a release of any Hazardous Substance (as defined below)
into the environment, and none of the Sellers or the Subsidiaries has received
any written communication from a governmental authority that alleges that any
Seller or a Subsidiary is not in compliance, and the Sellers and the
Subsidiaries are in compliance, in all material respects, with all federal,
state, local or foreign laws, ordinances, codes, rules and regulations relating
to the environment ("Environmental Laws") in respect of the Acquired Business,
except where noncompliance would not have a material adverse effect on the
assets, financial condition or results of operations of the Acquired Business.
The Sellers and the Subsidiaries have filed all material notices required in
respect of the Acquired Business to be filed by them under any Environmental Law
indicating past or present treatment, storage or disposal of a Hazardous
Substance or reporting a spill or release of a Hazardous Substance into the
environment. None of the Sellers or any of the Subsidiaries has any material
contingent liabilities in respect of the Acquired Business in connection with
any Hazardous Substance that individually or in the aggregate would have a
material adverse effect on the assets, financial condition or results of
operations of the Acquired Business. "Hazardous Substance" includes: (i) any
hazardous, toxic or dangerous waste, substance or material defined as such in
(or for the purposes of) the Comprehensive Environmental Response, Compensation
and Liability Act, as amended, and any so-called superfund or superlien law, or
any other Environmental Law, including Environmental Laws relating to or
imposing liability or standards of conduct concerning any hazardous or toxic
waste, substance or material in effect on the date of this Agreement, (ii)
asbestos or polychlorinated biphenyls, and (iii) any other chemical, material or
substance, exposure to which is prohibited, limited or regulated by any federal,
state, foreign or local governmental authority pursuant to any Environmental Law
or any health and safety or similar law, code, ordinance, rule or regulation,
order or decree, and which could reasonably pose a hazard to the health and
safety of workers at or users of any properties included in the Acquired Assets
or cause damage to the environment.
(d) Employee and Labor Relations. Except as set forth on
Schedule 4(p), (i) there is no labor strike, dispute, or work stoppage or
lockout actually pending, or, to the Sellers' knowledge, threatened, against or
affecting the Acquired Business and during the past two years there has not been
any such action; (ii) to the Sellers' knowledge, no union organizational
campaign is in progress with respect to the employees of the Acquired Business
and no question concerning representation exists respecting such employees;
(iii) each Seller and each Subsidiary is in compliance in all material respects
with all laws applicable to the Acquired Business respecting employment and
employment practices, terms and conditions of employment and wages and hours,
and is not engaged in any unfair labor practice; (iv) there is no unfair labor
practice charge or complaint against any Seller or any Subsidiary in connection
with the Acquired Business pending, or, to the Sellers' knowledge, threatened,
before the National Labor Relations Board; (v) there is no pending, or, to the
Sellers' knowledge, threatened, grievance that, if adversely decided, would have
a material adverse effect on the assets, financial condition or results of
operations of the Acquired Business; and (vi) no charges with respect to or
relating to the Acquired Business are pending before the Equal Employment
Opportunity Commission or any state or local agency responsible for the
prevention of unlawful employment practices that, if adversely decided, would
have a material adverse affect on the assets, financial condition or results of
operations of the Acquired Business.
(e) Licenses; Permits. Except as disclosed on Schedule 4(q),
all material licenses, permits or authorizations issued or granted to the
Sellers by local, state or federal governmental authorities or agencies and
applicable to the Acquired Business are validly held by a Seller or a
Subsidiary, the Sellers and the Subsidiaries have complied with all requirements
in connection therewith and the same will not be subject to suspension,
modification or revocation as a result of this Agreement or the consummation of
the transactions contemplated hereby.
(f) Inventory. Except as set forth in Schedule 4(r), all
inventory of the Acquired Business is of a quality usable and salable in the
ordinary course of business, except for items of obsolete materials and
materials of below-standard quality (all of which have been written down in the
Balance Sheet to realizable market value or for which adequate reserves have
been provided therein, in each case to the extent required by generally accepted
accounting principles as applied by the Sellers (including methods and
practices) in the preparation of the Balance Sheet), or which have become
obsolete in the ordinary course of business since the date of the Balance Sheet.
(g) Securities Act of 1933. The Buyer Notes being acquired by
MFI pursuant to this Agreement are being acquired for investment only and not
with a view to any public distribution thereof, and MFI will not offer to sell
or otherwise dispose of the Buyer Notes so acquired by it in violation of any of
the registration requirements of the Securities Act of 1933.
5. Covenants of the Sellers. The Sellers jointly and severally covenant and
------------------------ agree as follows: (a) Access. Prior to the Closing the
Sellers will give the Buyer and its representatives, employees, counsel and
accountants reasonable access, during normal business hours and upon reasonable
notice, to the personnel, properties, books and records of the Sellers and the
Subsidiaries; provided, however, that such access does not unreasonably disrupt
the normal operations of any Seller or any Subsidiary. (b) Conduct of the
Sellers. Except with the prior written consent of the Buyer or as otherwise
expressly permitted by this Agreement, the Sellers shall not take any action, at
any time on or after the date hereof and at or prior to the Closing, that would,
or that could reasonably be expected to, result in (i) any of the
representations and warranties of the Sellers set forth in this Agreement that
are qualified as to materiality becoming untrue, (ii) any of such
representations and warranties that are not so qualified becoming untrue in any
material respect or (iii) any of the conditions to the purchase and sale of the
Acquired Assets set forth in Section 3 not being satisfied. (c) Preservation of
the Acquired Business. Each Seller will carry on the Acquired Business
diligently and in the ordinary course, substantially in the same manner as
heretofore conducted, and keep its retail operations substantially intact,
including its present relationships with suppliers and customers and others
having business relations with it; provided, however, that the Sellers may
remove cash from the Acquired Business in any manner and to any extent on or
prior to the Closing Date consistent with the Sellers' obligation to include in
the Acquired Assets the Closing Cash Amount, the Store Cash and the Trust Cash.
The Sellers will maintain, at all times prior to the Closing Date, in inventory
quantities of raw materials and other supplies and materials sufficient to allow
the Buyer to continue and operate the Acquired Business, after the Closing Date,
free from any shortage of such items (assuming the Buyer causes the Acquired
Business to continue to purchase such items after the Closing Date in the
ordinary course consistent with past practice). Except with the written consent
of the Buyer, the Sellers shall not amend in any material respect or terminate
any of the agreements identified in Schedule 3(a)(vii) or enter into any new
agreement (other than any supply agreement or contract, with respect to which
the Sellers have consulted with the Buyer) relating to the Acquired Business
which, if existing as of the date hereof, would be required to be disclosed on
any of the Schedules to the representations and warranties of the Sellers in
Section 4 of this Agreement. (d) Confidentiality. The Sellers will keep
confidential, and cause their affiliates and instruct their and their
affiliates' officers, directors, employees and advisors to keep confidential,
all information concerning the transactions contemplated by this Agreement
(including as to the parties hereto) and all nonpublic information relating to
the Acquired Business, except as required by law or administrative process and
except for information which becomes public other than as a result of a breach
of this Section 5(d). Notwithstanding the foregoing, affiliates of MFI who
became parties to the Buyer Note Agreement and holders of Buyer Notes shall be
deemed to have complied with this Section 5(d) if they comply with Section 13.12
of the Buyer Note Agreement. (e) Insurance. The Sellers shall keep, or cause to
be kept, all insurance policies set forth on Schedule 4(l), or replacements
therefor with reputable firms and providing no lesser coverage (in amount or
scope), in full force and effect through the close of business on the Closing
Date. (f) Other Transactions. Prior to the Closing, none of the Sellers, the
Subsidiaries nor any other affiliate of the Sellers shall, directly or
indirectly, encourage, solicit, initiate or participate in discussions or
negotiations with any corporation, partnership, person, or other entity or group
(other than the Buyer and its representatives) concerning any merger, sale of
securities, sale of substantial assets or similar transaction involving the
Sellers and the Subsidiaries. In the event that any Seller or any Subsidiary
receives an offer relating to any such transaction, the Sellers will promptly
notify the Buyer of such proposal.
6. Representations and Warranties of the
Buyer and Capricorn. The Buyer and Capricorn jointly and severally hereby
represent and warrant to the Sellers as follows: (a) Authority. The Buyer is a
corporation and Capricorn is a limited partnership, duly organized, validly
existing and in good standing under the laws of the State of Delaware. The Buyer
has all requisite corporate, and Capricorn has all requisite partnership, power
and authority to enter into this Agreement and the Other Agreements and to
consummate the transactions contemplated hereby and thereby. All corporate or
partnership acts and other proceedings required to be taken by the Buyer or
Capricorn to authorize the execution, delivery and performance of this Agreement
and the Other Agreements and the consummation of the transactions contemplated
hereby and thereby have been duly and properly taken. This Agreement has been
duly executed and delivered by the Buyer and Capricorn and constitutes a valid
and binding obligation of the Buyer and Capricorn, enforceable against the Buyer
and Capricorn in accordance with its terms. When executed and delivered at the
Closing, the Other Agreements will be duly executed and delivered by the Buyer
and will constitute its valid and binding obligation, enforceable against it in
accordance with their terms. The execution and delivery of this Agreement and
the Other Agreements do not, and the consummation of the transactions
contemplated hereby and thereby and compliance with the terms hereof and thereof
will not, conflict with, or result in any violation of or default (with or
without notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation, or result in the
creation of any Lien upon any of the properties or assets of the Buyer or
Capricorn under, any provision of (i) the General Corporation Law or the Revised
Uniform Limited Partnership Act of the State of Delaware, (ii) the Certificate
of Incorporation or By-laws of the Buyer or the Partnership Agreement of
Capricorn, (iii) any material note, bond, mortgage, indenture, deed of trust,
license, lease, contract, commitment or agreement to which the Buyer or
Capricorn is a party or by which any of its properties are bound, or (iv) any
judgment, order, or decree, or material statute, law, ordinance, rule or
regulation applicable to the Buyer or Capricorn or their respective properties
or assets, other than, in the case of clause (iii) above, any such conflicts,
violations, defaults, rights or Liens that individually or in the aggregate
would not have a material adverse effect on the assets, financial condition or
results of operations of the Buyer or Capricorn. No material consent, approval,
license, permit, order or authorization of, or registration, declaration or
filing with, any court, administrative agency or commission or other
governmental authority or instrumentality, domestic or foreign, is required to
be obtained or made by or with respect to the Buyer or Capricorn in connection
with the execution and delivery of this Agreement and the Other Agreements or
the consummation by the Buyer or Capricorn of the transactions contemplated
hereby and thereby, other than compliance with and filings under the HSR Act.
(b) Actions and Proceedings, etc. There are no (i) outstanding judgments,
orders, writs, injunctions or decrees of any court, governmental agency or
arbitration tribunal against the Buyer or Capricorn which have a material
adverse effect on the ability of the Buyer or Capricorn to consummate the
transactions contemplated hereby or (ii) actions, suits, claims or legal,
administrative or arbitration proceedings or investigations pending or, to the
best knowledge of the Buyer or Capricorn, threatened against the Buyer or
Capricorn, which are likely to have a material adverse effect on the ability of
the Buyer or Capricorn to consummate the transactions contemplated hereby. (c)
Securities Act of 1933. The Subsidiary Shares being purchased by the Buyer
pursuant to this Agreement are being acquired for investment only and not with a
view to any public distribution thereof, and the Buyer will not offer to sell or
otherwise dispose of the Subsidiary Shares so acquired by it in violation of any
of the registration requirements of the Securities Act of 1933 and applicable
state securities or "blue sky" laws. (d) Availability of Funds. The Buyer and
Capricorn have no current reason to believe that the financing necessary to
consummate the transactions contemplated by this Agreement, the License Purchase
Agreement and the OCC/HSC Agreement will not be available on a timely basis for
the transactions contemplated by this Agreement. The Buyer estimates that it
will require approximately $15,000,000 in financing for purposes of payment by
the Buyer of the cash portion of the Purchase Price and the cash portion of the
purchase price to be payable under the OCC/HSC Agreement. Capricorn hereby
commits to provide or obtain all such financing within 30 days following the
execution and delivery of this Agreement. (e) Status of Buyer. The Buyer was
incorporated on February 13, 1996. The Buyer has engaged in no business other
than in connection with its organization and the negotiation of this Agreement,
the OCC/HSC Agreement and the Other Agreements (collectively, the "Transaction
Documents") and has no material liabilities or obligations of any nature
(whether accrued, absolute, contingent, unasserted or otherwise), except those
set forth in the Transaction Documents and obligations to pay fees and expenses
incurred in connection therewith which as of the date of this Agreement are
estimated to not exceed $1,900,000. True and correct copies of the Buyer's
Certificate of Incorporation and By-laws, in the form they will be in effect on
the Closing Date, have been furnished to MFI. (f) OCC/HSC Agreement. The OCC/HSC
Agreement includes, or incorporates by reference, all of the agreements of the
parties thereto with respect to the transactions referred to therein. The Buyer
will not waive or amend any provision of the OCC/HSC Agreement without the prior
written consent of MFI, which consent shall not be unreasonably withheld. (g)
Management Incentives. The Buyer will offer existing MFI management employment
agreements and up to 15% of the equity of the Buyer, such equity to be offered
in the form of options with 5% vesting over time with no performance minimums,
5% vesting over time with performance criteria based on the "management case",
and up to 5% for value obtained in excess of the "management case." All of the
management options will be subject to customary antidilution adjustment
provisions. (h) Pro Forma Balance Sheet of Buyer. Attached as Schedule 6(h)
hereto is an unaudited pro forma balance sheet of the Buyer which has been
presented as if the transactions contemplated by this Agreement and the OCC/HSC
Agreement are consummated as of August 31, 1996 based on the assumptions that
(i) various actual and estimated information received from MFI and Chocamerican
accurately reflects the assets and liabilities to be transferred to the Buyer at
the closings under this Agreement and the OCC/HSC Agreement and (ii) transaction
costs payable by the Buyer in connection with such transactions equal
$1,900,000.
7. Covenants of the Buyer and Capricorn. The Buyer and Capricorn
jointly and severally covenant and agree as follows: (a) Covenants and
Agreements of the Buyer in the OCC/HSC Agreement. The Buyer will observe or
perform each term, covenant, condition and agreement on its part to be observed
or performed contained in the OCC/HSC Agreement. (b) No Additional
Representations. The Buyer and Capricorn acknowledge that none of the Sellers,
the Subsidiaries or any other person has made any representation or warranty,
expressed or implied, as to the accuracy or completeness of any information
regarding any Seller, the Subsidiaries, the Acquired Business, the Acquired
Assets or Assumed Liabilities, except as expressly set forth in this Agreement,
the Schedules hereto or any certificate delivered by the Sellers at the Closing,
and none of the Sellers, the Subsidiaries or any other person will have or be
subject to any liability to the Buyer or any other person resulting from the
distribution to the Buyer, or the Buyer's use of, any such information, except
as expressly set forth in this Agreement. (c) Confidentiality. Except as
contemplated by this Agreement, the Buyer and Capricorn will keep confidential,
and cause its affiliates and instruct its and its affiliates' officers,
directors, employees and advisors to keep confidential, all nonpublic
information relating to the Sellers, the Subsidiaries or the Acquired Business,
except as required by law or administrative process and except for information
which becomes public other than as a result of a breach of this Section 7(c);
provided, however, that the obligations of the Buyer and Capricorn under this
Section 7(c) shall terminate, with respect to information concerning the
Acquired Business (but not with respect to other information) upon any
occurrence of the Closing. (d) Conduct of the Buyer. Except with the prior
written consent of the Sellers, the Buyer shall not take any action, at any time
on or after the date hereof and at or prior to the Closing, that would, or that
could reasonably be expected to, result in (i) any of the representations and
warranties of the Buyer set forth in this Agreement that are qualified as to
materiality becoming untrue, (ii) any of such representations and warranties
that are not so qualified becoming untrue in any material respect or (iii) any
of the conditions to the purchase and sale of the Acquired Assets set forth in
Section 3 not being satisfied. 8. Mutual Covenants. Each of the Sellers, the
Buyer and Capricorn covenants and agrees as follows: (a) Best Efforts. Subject
to the terms and conditions of this Agreement, each party will use its best
efforts to cause the Closing to occur. The Buyer acknowledges that certain
consents to the transactions contemplated by this Agreement may be required from
third parties and that such consents have not been obtained. Except with respect
to liabilities which constitute Excluded Liabilities, the Buyer agrees that the
Sellers shall not have any liability whatsoever to the Buyer arising out of or
relating to the failure to obtain any consents that may be required in
connection with the transactions contemplated by this Agreement or because of
the termination of any contract as a result thereof. The Buyer further agrees
that no representation, warranty or covenant of the Sellers contained herein
shall be breached or deemed breached as a result of (i) the failure to obtain
any such consent or as a result of any such termination or (ii) any lawsuit,
action, claim, proceeding or investigation commenced or threatened by or on
behalf of any persons arising out of or relating to the failure to obtain any
such consent or any such termination. The Sellers and the Buyer shall use their
best efforts to, and shall cooperate with each other to obtain as soon as
practicable, the consent, approval or waiver, in form reasonably satisfactory to
the Sellers and the Buyer, from any person whose consent, approval or waiver is
necessary to assign or transfer any Acquired Asset to the Buyer or otherwise to
satisfy the conditions set forth in Sections 3(a)(vii) and 3(b)(vii), and to
remove the Sellers and their affiliates as primary obligors or guarantors under
the leases of the stores included in the Acquired Assets (the "Acquired
Leases"). It is understood and agreed that such best efforts and cooperation
shall not include any requirement of the Sellers or the Buyer or any of their
respective affiliates to expend money, commence or defend any litigation or
offer or grant any accommodation (financial or otherwise) to any third party
(except to the extent the payment of a fee to or the reimbursement of the
expenses of any landlord under any Acquired Lease is specifically contemplated
by such Acquired Lease or, if not so contemplated, is reasonably comparable to
those so contemplated, in which cases the Buyer shall pay all such amounts). The
covenants contained in this Section 8(a) shall continue after the Closing Date.
(b) Cooperation. The Buyer and MFI shall cooperate with each other for a period
of 90 days after the Closing to ensure the orderly transition of the Acquired
Assets from the Sellers to the Buyer and to minimize any disruption to the
respective businesses of the Sellers and the Buyer that might result from the
transactions contemplated hereby. (c) Publicity. MFI and the Buyer agree that,
from the date hereof through the Closing Date, no public release or announcement
concerning the transactions contemplated hereby shall be issued by either party
without the prior consent of the other party, and, to the extent practical, of
each person named therein (which consent shall not be unreasonably withheld),
except as such release or announcement may be required by any franchising or
other law or the rules or regulations of any United States or foreign securities
exchange, in which case the party required to make the release or announcement
shall allow the other party reasonable time to comment on such release or
announcement in advance of such issuance. (d) Antitrust Notification. Each of
the Sellers and the Buyer (and their respective ultimate parent entities) will
as promptly as practicable, but in no event later than five business days
following the execution and delivery of this Agreement, file with the United
States Federal Trade Commission (the "FTC") and the United States Department of
Justice (the "DOJ") the notification and report form, if any, required for the
transactions contemplated hereby and any supplemental information requested in
connection therewith pursuant to the HSR Act. Any such notification and report
form and supplemental information will be in substantial compliance with the
requirements of the HSR Act. Each of the Sellers, the Buyer and Capricorn shall
furnish to the other such necessary information and reasonable assistance as the
other may request in connection with its preparation of any filing or submission
which is necessary under the HSR Act. The Sellers and the Buyer shall keep each
other apprised of the status of any communications with, and inquiries or
requests for additional information from, the FTC and the DOJ and shall comply
promptly with any such inquiry or request. Each of the Sellers, the Buyer and
Capricorn will use its best efforts to obtain any clearance required under the
HSR Act for the purchase and sale of the Acquired Assets; provided, however,
that such best efforts obligation shall not require the Buyer to restructure any
of the transactions contemplated by, or to divest any of the assets to be
acquired pursuant to, either this Agreement, the License Purchase Agreement or
the OCC/HSC Agreement. (i) Records. On the Closing Date, the Sellers shall
deliver or cause to be delivered to the Buyer all original agreements,
documents, books, records and files (collectively, "Records"), in the possession
of the Sellers relating to the Acquired Business of the Sellers and the
Subsidiaries, subject to the following exceptions: (A) The Buyer recognizes that
certain Records may contain incidental information relating to the Sellers and
the Subsidiaries or may relate primarily to Excluded Assets and/or Excluded
Liabilities, and that the Sellers may retain such Records and shall provide
copies of the relevant portions thereof to the Buyer; (B) The Sellers may retain
all Records relating to the sale of the Acquired Assets, including bids received
from other parties and analyses relating to the Acquired Business; (C) The
Sellers may retain any Tax Returns. The Buyer shall be provided with copies of
such Tax Returns only to the extent that they relate to the Acquired Business or
the Acquired Assets or the Buyer's obligations under this Agreement. The Sellers
shall not dispose of or destroy such records without first offering to turn over
possession thereof to the Buyer (at the Buyer's expense) by written notice to
the Buyer at least 30 days prior to the proposed date of such disposition or
destruction; and (D) the Sellers shall retain their respective corporate record
books and stock records containing their certificates of incorporation, bylaws,
minutes of the meetings of the board(s) of directors and stockholders, and
similar corporate governance documents. (ii) After the Closing, upon reasonable
written notice, the Buyer and the Sellers agree to furnish or cause to be
furnished to each other and their representatives, employees, counsel and
accountants access, during normal business hours, access to such information
(including Records pertinent to the Acquired Business) and assistance relating
to the Acquired Business as is reasonably necessary for financial reporting and
accounting matters, the preparation and filing of any Tax Returns or the defense
of any Tax claim or assessment; provided, however, that such access does not
unreasonably disrupt the normal operations of the Sellers, the Buyer or the
Acquired Business. (e) Supplemental Disclosure. Prior to the Closing, each party
shall supplement or amend its Schedules provided in connection with its
representations and warranties in this Agreement to include any information
hereafter obtained which would have been required to be set forth or described
in any such Schedule had it been existing or known as of the date of this
Agreement or which is necessary to complete or correct such Schedule.
Notwithstanding the foregoing, for purposes of determining the accuracy of such
representations and warranties for purposes of (x) Sections 3(a)(i) and 3(b)(i)
or (y) Sections 11(b)(i) and 11(c)(i), such Schedules shall be deemed to
include, respectively, (x) only that information contained therein on the date
of this Agreement or (y) all information contained in such Schedules as so
supplemented or amended. (f) 338 Elections.With respect to the purchase by the
Buyer of all of the Subsidiary Shares held by the Sellers, (i) if the Buyer
requests, the Sellers agree to join with the Buyer in making elections under
either or both of Sections 338(g) and 338(h)(10) of the Code (and any comparable
election under state or local tax law) for any of the Subsidiaries (the
"Election"), (ii) the Sellers and the Buyer shall, as promptly as practicable
following the Closing, cooperate with each other to take all actions necessary
and appropriate (including filing such forms, returns, elections, schedules and
other documents as may be required) to effect and preserve timely Elections in
accordance with the provisions of the Treasury Regulation or any comparable
provision of state or local tax law) or any successor provisions, and (iii) the
Sellers and the Buyer shall report the purchase by the Buyer of stock of any of
the Subsidiaries consistent with the Election (and any comparable elections
under state or local tax law) and shall take no position to the contrary thereto
in any Tax Return, any proceeding before any taxing authority or otherwise. In
connection with an Election, the Buyer shall determine the Aggregate Deemed
Sales Price (as defined under applicable Treasury Regulations) and the
allocation of such Aggregate Deemed Sales Price among the assets of the
Subsidiaries, as the case may be. Such allocation of the Aggregate Deemed Sales
Price shall be made in accordance with Section 338(b) of the Code and any
applicable Treasury Regulations. The Sellers and the Buyer (i) shall be bound by
such allocation for purposes of determining any Taxes, (ii) shall prepare and
file all Tax Returns to be filed with any taxing authority in a manner
consistent with such allocation, and (iii) shall take no position inconsistent
with such allocation in any Tax Return, any proceeding before any taxing
authority or otherwise. In the event that such allocation is disputed by any
taxing authority, the party receiving notice of such dispute shall promptly
notify the other party concerning resolution of such dispute. To the extent that
the Purchase Price is adjusted by reason of any payment under this Agreement or
otherwise, (i) the Aggregate Deemed Sales Price shall be adjusted to reflect
such change, (ii) the provisions of this Section 8(g) shall be followed in
redetermining the allocation of the Aggregate Deemed Sales Price, and (iii) the
parties to this Agreement will, to the extent required by law, file amended Tax
Returns consistent with such revised allocation. Notwithstanding the foregoing,
any such Election shall be made in a manner consistent with the Allocation
Schedule as provided for in Section 1(f).
9. Employee and Related Matters. (a)
Employment Offers. The Buyer and the Sellers agree that all employees of the
Sellers employed on the Closing Date (collectively, the "Employees") shall be
offered employment with the Buyer on terms consistent with the Sellers'
compensation and employee benefits standards as in effect at the Closing Date
and giving such employees service credit for their terms of employment with the
Sellers (all such employees who accept such employment offers are hereinafter
referred to as "Continued Employees"). The Buyer agrees that each employment
offer to an Employee shall be conditioned upon the waiver in writing by each
such employee of any right of such employee to severance payments from any of
the Sellers or their affiliates and after the Closing the Buyer shall indemnify
and hold harmless the Sellers and their affiliates from any claims by any such
employee with respect thereto. Notwithstanding the foregoing, it is understood
that nothing in this Agreement shall prohibit or restrict the Buyer from
terminating Continued Employees, changing compensation levels or other terms and
conditions of employment (other than service credit for past employment with the
Sellers) subsequent to the Closing Date. (b) Employee Withholding and Reporting.
The Sellers shall transfer to the Buyer any records (including, but not limited
to, Forms W-4 and Employee Withholding Allowance Certificates) relating to
withholding and payment of income and employment taxes (federal, state and
local) and FICA taxes with respect to wages paid by the Sellers during the 1996
calendar year to any employees retained by the Buyer. The Buyer shall, to the
extent permitted by applicable law, provide such employees with Forms W-2, Wage
and Tax Statements for the 1996 calendar year setting forth the wages and taxes
withheld with respect to such employees for the 1996 calendar year by the
Sellers and the Buyer as predecessor and successor employers, respectively. The
Buyer and the Sellers shall also comply with the filing requirements set forth
in Revenue Procedure 84-77, 1984-2 C.B. 753, to implement this Section 9(b). (c)
Nothing in this Section 9, express or implied, is intended to confer or shall
confer upon any of the Sellers' employees, former employees or any Continued
Employee any rights or remedies of any nature or kind whatsoever under or by
reason of this Agreement, including, without limitation, any rights of
employment.
10. Further Assurances. From time to time, as and when requested by
either party hereto, the other party shall execute and deliver, or cause to be
executed and delivered, all such documents and instruments and shall take, or
cause to be taken all such further or other actions, as such other party may
reasonably deem necessary or desirable to consummate the transactions
contemplated by this Agreement. (i) Indemnification. Tax Indemnification. MFI
agrees to indemnify the Buyer, its affiliates and each of their respective
officers, directors, employees and agents and hold them harmless from any loss,
liability, claim, damage or expense (including reasonable legal fees and
expenses) (collectively, "Loss") suffered or incurred by any such indemnified
party arising from Taxes applicable to the Acquired Business or the Acquired
Assets, in each case attributable to taxable years or periods ending at the time
of or prior to the Closing and, with respect to any Straddle Period, the portion
of such Straddle Period ending at the time of the Closing, except to the extent
that such Taxes constitute "Accrued expenses" for purposes of determining the
Working Capital Amount. In addition, MFI agrees to indemnify the Buyer, its
affiliates and each of their respective officers, directors, employees and
agents and hold them harmless from any Loss for Taxes arising from any
Subsidiary's membership in an "affiliated group" (as defined in Section 1504 of
the Code) prior to the Closing Date under Treasury Regulations Section 1.1502-6
(or similar provisions of state, local or foreign law) as a transferee or
successor, by contract or law. The Buyer shall be liable for and shall pay and
shall indemnify the Sellers, their affiliates and each of their respective
officers, directors, employees and agents for all Taxes applicable to the
Acquired Business or the Acquired Assets that (x) are attributable to taxable
years or periods beginning immediately after the Closing or, with respect to any
Straddle Period, the portion of such Straddle Period beginning immediately after
the Closing, or (y) which constitute "Accrued expenses" for purposes of
determining the Working Capital Amount. For purposes of this Section 11(a), any
Straddle Period shall be treated on a "closing of the books" basis as two
partial periods, one ending at the time of the Closing and the other beginning
immediately after the Closing; provided, however, that Taxes (such as property
Taxes) imposed on a periodic basis shall be allocated pro rata on a daily basis
in accordance with the principles under Section 164(d) of the Code. "Straddle
Period" means any taxable year or period beginning before and ending after the
Closing. (ii) Notwithstanding paragraph (i), any sales Tax, use Tax, real
property transfer or gains Tax, documentary stamp Tax or similar Tax
attributable to the sale or transfer of the Acquired Business or the Acquired
Assets shall be paid by MFI. The Buyer and the Sellers agree timely to sign and
deliver such certificates or forms as may be necessary or appropriate to
establish an exemption from (or otherwise reduce), or file Tax Returns with
respect to, such Taxes. (iii) MFI or the Buyer, as the case may be, shall
provide prompt reimbursement for any Tax paid by one party all or a portion of
which is the responsibility of the other party in accordance with the terms of
this Section 11(a); provided, however, that any claim for reimbursement asserted
against MFI shall be limited to an offset of the unpaid portions, if any, of the
MFI Series 2 Notes as provided in Section 11(g). Within a reasonable time prior
to the payment of any said Tax, the party paying such Tax shall give notice to
the other party of the Tax payable and the portion which is the liability of
each party, although failure to do so will not relieve the other party from its
liability hereunder except to the extent the indemnifying party is materially
adversely affected thereby. (iv) The Buyer (or MFI, as the case may be) shall
promptly notify MFI (or the Buyer, as the case may be) in writing, upon receipt
by the Buyer (or MFI, as the case may be) or any of its (or their) affiliates of
notice of any pending or threatened federal, state, local or foreign Tax audits,
examinations or assessments which may affect the Tax liabilities for which MFI
(or the Buyer, as the case may be) would be required to indemnify the Buyer (or
MFI, as the case may be) pursuant to paragraph (i) of this Section 11(a),
although failure to do so will not relieve MFI (or the Buyer, as the case may
be) from its liability hereunder, except to the extent MFI (or the Buyer, as the
case may be) is materially adversely affected thereby. MFI shall have the right
to control any Tax audit or administrative or court proceeding relating to
taxable periods ending at the time of or before the Closing, and to employ
counsel of their choice at their expense; provided, however, that the Buyer
shall be entitled to participate at its own expense in (but shall have no right
to control) any Tax Audit or administrative or court proceeding relating to
taxable periods ending at the time of or before the Closing to the extent that
its interest could be materially adversely affected. In the case of the Straddle
Period, MFI shall be entitled to participate at its expense in (but, except as
provided below, shall have no right to control) any Tax audit or administrative
or court proceeding relating in whole or in part to Taxes attributable to the
portion of such Straddle Period ending at the time of the Closing and, with the
written consent of the Buyer, and at MFI's sole expense, may assume the entire
control of such audit or proceeding. Neither the Buyer nor any of its affiliates
may settle any Tax claim for any taxable year or period ending at or before the
time of the Closing or for any Straddle Period which may be the subject of
indemnification by MFI under paragraph (i) of this Section 11(a) without the
prior written consent of MFI, which consent may not be unreasonably withheld.
(v) After the Closing, each of MFI and the Buyer shall (and shall cause their
respective affiliates to): (1) assist the other party in preparing any Tax
Returns which such other party is responsible for preparing and filing; (2)
cooperate fully in preparing for any audits of, or disputes with taxing
authorities regarding, any Tax Returns relating to the Acquired Business or the
Acquired Assets; (3) make available to the other and to any taxing authority as
reasonably requested all information, records, and documents relating to Taxes
relating to the Acquired Business or the Acquired Assets; (4) provide timely
notice to the other in writing of any pending or threatened Tax audits or
assessments relating to the Acquired Business or the Acquired Assets for taxable
periods for which the other may have a liability under this Section 11(a); and
(5) furnish the other with copies of all correspondence received from any taxing
authority in connection with any Tax audit or information request with respect
to any such taxable period. (i) MFI shall have no right of contribution against
the Subsidiaries in respect of any indemnification obligation under this Section
11(a). (b) Other Indemnification by MFI. MFI agrees to indemnify the Buyer, its
affiliates and each of their respective officers, directors, employees and
agents and hold them harmless from any Loss suffered or incurred by any such
indemnified party (other than any relating to Taxes for which the exclusive
indemnification provisions are set forth in Section 11(a)) to the extent arising
from: (i) any breach of any representation or warranty of the Sellers contained
in this Agreement or in any Schedule, certificate, instrument or other document
delivered pursuant hereto or thereto (respectively, the "Related Documents")
(regardless of whether such breach is related to any Assumed Liability);
provided that, for purposes of determining the occurrence of a breach of any
representation or warranty of the Sellers in connection with any claim made for
indemnification under this Section 11(b), as well as for determining the amount
of any Losses arising therefrom, (A) the "material adverse change" and the
"material adverse effect" qualifiers shall be disregarded except in the third
line of Section 4(n) and the sixth line of Section 4(o)(i) and (B) the
"material" qualifier shall be disregarded in Section 4(e)(ii), in the 15th line
of Section 4(g), in the seventh, 11th and 14th lines of the last paragraph of
Section 4(j), in the 15th line of Section 4(n), in the 12th line of Section
4(o)(i) (immediately preceding the word "federal"), and in the 24th line of
Section 4(o)(ii); (ii) any breach of any covenant of the Sellers contained in
this Agreement requiring performance after the Closing Date; (iii) any payment
made by the Buyer or any subsidiary thereof on or after the Closing Date under
the Agreement between MFI and Xxxxxxxx Franchise Finance, Inc. dated July 10,
1991 and the schedules and exhibits thereto (the "Xxxxxxxx Agreement"); or (iv)
any Excluded Liabilities; provided, however, that MFI shall not have any
liability to the Buyer under clauses (i) and (ii) above unless the aggregate of
all Losses relating thereto for which MFI would, but for this proviso, be liable
exceeds on a cumulative basis an amount equal to $66,667, and then only to the
extent of any such excess; provided further, however, that MFI shall not have
any liability under clauses (i) and (ii) above for any individual items where
the Loss relating thereto is less than $6,000, but individual items where the
Loss relating thereto is less than $6,000 and more than $1,000 shall be
aggregated solely for purposes of the first proviso to this Section 11(b);
provided further, however, that MFI shall not have any liability under clause
(i) above for any breach of a representation or warranty of the Sellers
contained in this Agreement or in any of the Related Documents delivered
pursuant hereto or thereto if the Buyer or Capricorn had actual knowledge of
such breach at the time of the Closing (it being agreed that the burden of proof
of such actual knowledge shall be on MFI); provided further, however, that MFI
shall not have any liability under Section 11(b)(i), (ii) or (iv) to the extent
the liability or obligation arises as a result of any action taken or omitted to
be taken by the Buyer or any of its affiliates; and provided further, however,
that the aggregate amount required to be paid by MFI pursuant to (x) Section
11(b)(i), (ii) or (iii) (other than due to a breach of the Sellers' covenant
with respect to confidentiality set forth in Section 5(d)) shall not exceed
$2,000,000 or (y) Section 11(b)(iii) shall not exceed $200,000, it being agreed
and understood that the limitation to apply to amounts required to be paid under
Section 11(b)(iv) or under Section 11(b)(ii) due to a breach of the aforesaid
confidentiality covenant shall be the maximum purchase price received by the
Sellers pursuant to this Agreement. (a) Indemnification by the Buyer. The Buyer
shall indemnify MFI, its affiliates and each of their respective officers,
directors, employees and agents against and hold them harmless from any Loss
suffered or incurred by any such indemnified party (other than any relating to
Taxes for which the exclusive indemnification provisions are set forth in
paragraph (a) of this Section 11) to the extent arising from: (i) any breach of
any representation or warranty of the Buyer or Capricorn contained in this
Agreement or in any Related Document delivered pursuant hereto or thereto or in
connection herewith; (ii) any breach of any covenant of the Buyer contained in
this Agreement requiring performance after the Closing Date; or (iii) any
Assumed Liabilities or any guarantees of any Assumed Liabilities; provided,
however, that the indemnification baskets and cap from Section 11(b) shall apply
to the Buyer's indemnification obligations under Section 11(c)(i) or (ii) and
the Buyer shall not have any liability under clause (i) above for any breach of
a representation or warranty of the Buyer contained in this Agreement or in any
Related Document delivered pursuant hereto or thereto if the Sellers had actual
knowledge of such breach at the time of the Closing (it being agreed that the
burden of proof of such actual knowledge shall be on the Buyer). (a) Losses Net
of Insurance, etc. The amount of any loss, liability, claim, damage, expense or
Tax for which indemnification is provided under this Section 11 (other than
Section 11(b)(iii)) shall be net of any amounts recovered or recoverable by the
indemnified party under insurance policies with respect to such loss, liability,
claim, damage, expense or Tax and shall be (i) increased to take account of any
net Tax cost incurred by the indemnified party arising from the receipt of
indemnity payments hereunder (grossed up for such increase) and (ii) reduced to
take account of any net Tax benefit realized by the indemnified party arising
from the incurrence or payment of any such loss, liability, claim, damage,
expense or Tax. In computing the amount of any such Tax cost or Tax benefit, the
indemnified party shall be deemed to recognize all other items of income, gain,
loss, deduction or credit before recognizing any item arising from the receipt
of any indemnity payment hereunder or the incurrence or payment of any
indemnified loss, liability, claim, damage, expense or Tax. Any indemnity
payment under this Agreement shall be treated as an adjustment to the Adjusted
Purchase Price, for Tax purposes, unless a final determination (which shall
include the execution of a Form 870-AD or successor form) with respect to the
indemnified party or any of its affiliates causes any such payment not to be
treated as an adjustment to the Adjusted Purchase Price, for United States
federal income Tax purposes. (b) Termination of Indemnification. The obligations
to indemnify and hold harmless a party hereto, (i) pursuant to Section 11(a),
shall terminate at the time the applicable statutes of limitations with respect
to the Tax liabilities in question expire (giving effect to any extension
thereof); (ii) pursuant to Sections 11(b)(i) and (ii) and 11(c)(i) and (ii),
shall terminate on the date that is 18 months after the Closing Date; (iii)
pursuant to Section 11(b)(iii), shall terminate on the earlier to occur of the
scheduled maturity of the MFI Series 1 Notes and such time, if ever, as the
Buyer or a subsidiary shall have received an aggregate amount of payments
pursuant to Section 11(b)(iii) equal to $200,000; and (iv) pursuant to Sections
11(b)(iv) and 11(c)(iii) shall survive indefinitely; provided, however, that
such obligations to indemnify and hold harmless shall not terminate with respect
to any item as to which the person to be indemnified or the related party hereto
shall have, before the expiration of the applicable period, previously made a
claim by delivering a notice to the indemnifying party stating in reasonable
detail the basis of such claim and, in the case of a claim arising from a third
party claim, suit, action or proceeding, stating that the claim has actually
been asserted and including a copy of such claim if in writing or the pleadings
relating to such suit, action or proceeding. (c) Procedures Relating to
Indemnification (Other than under Section 11(a). In order for a party (the
"indemnified party") to be entitled to any indemnification provided for under
this Agreement (other than under Section 11(a) in respect of, arising out of or
involving a claim or demand made by any person, firm, governmental authority or
corporation against the indemnified party (a "Third Party Claim"), such
indemnified party must notify the indemnifying party in writing, and in
reasonable detail, of the Third Party Claim within 10 business days after
receipt by such indemnified party of written notice of the Third Party Claim;
provided, however, that failure to give such notification shall not affect the
indemnification provided hereunder except to the extent the indemnifying party
shall have been actually prejudiced as a result of such failure. Thereafter, the
indemnified party shall deliver to the indemnifying party, within five business
days after the indemnified party's receipt thereof, copies of all notices and
documents (including court papers) received by the indemnified party relating to
the Third Party Claim. (d) If a Third Party Claim is made against an indemnified
party, the indemnifying party will be entitled to participate in the defense
thereof and, if it so chooses, to assume the defense thereof with counsel
selected by the indemnifying party and reasonably satisfactory to the
indemnified party. Should the indemnifying party so elect to assume the defense
of a Third Party Claim, the indemnifying party will not be liable to the
indemnified party for legal expenses subsequently incurred by the indemnified
party in connection with the defense thereof. If the indemnifying party assumes
such defense, the indemnified party shall have the right to participate in the
defense thereof and to employ counsel, at its own expense, separate from the
counsel employed by the indemnifying party, it being understood that the
indemnifying party shall control such defense. The indemnifying party shall be
liable for the fees and expenses of counsel employed by the indemnified party
for any period during which the indemnifying party has not assumed the defense
thereof (other than during any period in which the indemnified party shall have
failed to give notice of the Third Party Claim as provided above). If the
indemnifying party chooses to defend or prosecute any Third Party Claim, all the
parties hereto shall cooperate in the defense or prosecution thereof. Such
cooperation shall include the retention and (upon the indemnifying party's
request) the provision to the indemnifying party of records and information
which are reasonably relevant to such Third Party Claim, and making employees
available on a mutually convenient basis to provide additional information and
explanation of any material provided hereunder. Whether or not the indemnifying
party shall have assumed the defense of a Third Party Claim, the indemnified
party shall not admit any liability with respect to, or settle, compromise or
discharge, such Third Party Claim without the indemnifying party's prior written
consent (which consent shall not be unreasonably withheld). Notwithstanding the
other provisions of this Section 11(f), the Buyer shall be deemed to have
complied with this Section 11(f) as to indemnification under Section 11(b)(iii)
by providing to the Sellers notice as to the amounts and dates of any payment
under the Xxxxxxxx Agreement. (e) Certain Set-off Rights. All payments, if any,
required to be made by MFI under Section 11(b) shall be made solely by (i) a
dollar for dollar reduction of the amount, if any, then remaining payable, under
the MFI Series 1 Notes, applied first to accrued and unpaid interest and then to
principal, or (ii) in the event the MFI Series 1 Notes have been prepaid and the
escrow arrangements have been established pursuant to the terms thereof, a claim
by the Buyer under such escrow arrangements. All payments, if any, required to
be made by the Sellers under Section 11 other than those set forth in the
preceding sentence shall be made solely by a dollar for dollar reduction of the
amount, if any, then remaining payable, under the MFI Series 2 Notes, applied
first to accrued and unpaid interest and then to principal; provided, however,
that the maximum potential amount (the "Potential Set-Off Amount") of such right
of set-off (which right would allow a maximum set-off against the MFI Series 2
Notes during the first year after the Closing Date of $3,000,000, assuming that
there are no prepayments during such year) shall decrease by $600,000 on each
anniversary of the Closing Date, commencing on the first anniversary thereof.
MFI shall have no right of contribution against the Subsidiaries in respect of
any indemnification obligation under this Section 11(g). (i) Waiver of Other
Remedies. The Buyer acknowledges and agrees that, from and after the Closing,
its sole and exclusive remedy with respect to any and all claims relating to the
subject matter of this Agreement (other than claims of fraud) shall be pursuant
to the indemnification provisions set forth in this Section 11. In furtherance
of the foregoing, the Buyer hereby waives, from and after the Closing, to the
fullest extent permitted under applicable law, any and all rights, claims and
causes of action (other than claims of, or causes of action arising from, fraud)
it may have against the Sellers or any of their affiliates, creditors or
stockholders relating to the subject matter of this Agreement arising under or
based upon any federal, state or local statute, law, ordinance, rule or
regulation. (ii) MFI acknowledges and agrees that, from and after the Closing,
its sole and exclusive remedy with respect to any and all claims relating to the
subject matter of this Agreement (other than claims of fraud) shall be pursuant
to the indemnification provisions set forth in this Section 11. In furtherance
of the foregoing, MFI hereby waives, from and after the Closing, to the fullest
extent permitted under applicable law, any and all rights, claims and causes of
action (other than claims of, or causes of action arising from, fraud) it may
have against the Buyer or any of its affiliates, creditors or stockholders
relating to the subject matter of this Agreement arising under or based upon any
federal, state or local statute, law, ordinance, rule or regulation. 5.
Assignment. This Agreement and the rights and obligations hereunder shall not be
assignable or transferable by the Buyer or the Sellers (other than by operation
of law in connection with a merger, a sale of substantially all the assets, or a
liquidation of the Buyer or the Sellers) without the prior written consent of
the other parties hereto (which consent shall not be unreasonably withheld);
provided, however, that the Buyer may assign its right to purchase the Acquired
Assets hereunder to a subsidiary or affiliate of the Buyer without the prior
written consent of the Sellers and, following the Closing Date, may freely
dispose of the Acquired Business and the Sellers may assign their rights
hereunder to their lenders; provided further, however, that no assignment shall
limit or affect the assignor's obligations hereunder; and provided further,
however, that the Buyer Notes (other than the MFI Series 4 Notes and any shares
of the Buyer's common stock issuable upon conversion thereof) shall be
transferable in accordance with their terms, subject to applicable laws and
regulations and subject to the requirement that the Buyer Notes not be
transferred or distributed in respect of MFI's common stock or otherwise in a
manner which could subject the Buyer to reporting under the U.S. federal or U.K.
securities laws. In connection with seeking any such consent, a party proposing
to so assign or transfer its rights and obligations shall give to the party
whose consent is sought reasonable details of the proposed assignment or
transfer, including the proposed method of making adequate provision for such
party's obligations hereunder. 6. No Third-Party Beneficiaries. Except as
provided for indemnified parties in Section 11 and except for the waivers of
other remedies by MFI and the Buyer in Section 11(h), this Agreement is for the
sole benefit of the parties hereto and their permitted assigns and nothing
herein expressed or implied shall give or be construed to give to any person or
entity, other than the parties hereto and such assigns, any legal or equitable
rights hereunder. (a) Termination. Anything contained herein to the contrary
notwithstanding, this Agreement may be terminated and the transactions
contemplated hereby abandoned at any time prior to the Closing Date: (i) by
mutual written consent of the Sellers and the Buyer; (ii) by the Sellers if any
of the conditions set forth in Section 3(b) hereof shall have become incapable
of fulfillment, and shall not have been waived by the Sellers; (iii) by the
Buyer if any of the conditions set forth in Section 3(a) hereof shall have
become incapable of fulfillment, and shall not have been waived by the Buyer; or
(iv) by either party hereto, if the Closing does not occur on or prior to
October 30, 1996. (a) In the event of termination by the Sellers or the Buyer
pursuant to this Section 14, written notice thereof shall forthwith be given to
the other parties and the transactions contemplated by this Agreement shall be
terminated, without further action by either party. If the transactions
contemplated by this Agreement are terminated as provided herein: (i) the Buyer
shall return all documents and other material received from any Seller or any
Subsidiary relating to the transactions contemplated hereby, whether so obtained
before or after the execution hereof, to the Sellers; and (ii) all confidential
information received by the Buyer with respect to the Acquired Business shall be
kept confidential. (b) If this Agreement is terminated and the transactions
contemplated hereby are abandoned as described in this Section 14, this
Agreement shall become void and of no further force and effect, except for the
provisions of (i) Section 16 hereof relating to certain expenses, (ii) Section
8(c) hereof relating to publicity, (iii) Section 23 hereof relating to finder's
fees and broker's fees and (iv) this Section 14. Nothing in this Section 14
shall be deemed to release either party from any liability for any breach by
such party of the terms and provisions of this Agreement or to impair the right
of either party to compel specific performance by the other party of its
obligations under this Agreement. 5. Survival of Representations. The
representations and warranties in this Agreement and in any other document
delivered in connection herewith shall survive the Closing solely for purposes
of Sections 11(b) and 11(c) of this Agreement and shall terminate at the close
of business 18 months following the Closing Date. 6. Expenses. Whether or not
the transactions contemplated hereby are consummated, except as otherwise
expressly provided in this Agreement, all costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby shall be
paid by the party incurring such costs and expenses; provided, however, that the
costs and expenses listed on Schedule 16 shall be paid as set forth on Schedule
16. (a) Arbitration. Subject to the provisions of Sections 2(c) and 25, any
disagreement, dispute, controversy or claim arising out of or relating to this
Agreement or the transactions contemplated hereby, including, without
limitation, the interpretation hereof and any breach, termination or invalidity
hereof, shall be settled exclusively and finally (i) through good faith
negotiation of the parties for a period not in excess of 30 days and (ii) in the
event such negotiations do not yield a settlement within such 30-day period, by
arbitration (irrespective of the magnitude thereof, the amount in controversy or
whether such matter would otherwise be considered justiciable or ripe by a court
or arbitral tribunal). (b) The arbitration shall be conducted in accordance with
the commercial arbitration rules of the American Arbitration Association (the
"Arbitration Rules"), except as those rules conflict with the provisions of this
Section 17, in which event the provisions of this Section 17 shall control. (c)
The arbitral tribunal shall consist of three arbitrators chosen in accordance
with the Arbitration Rules. The arbitration shall be conducted in New York City.
Any submission of a matter for arbitration shall include joint written
instructions of the parties requiring the arbitral tribunal to render a decision
resolving the matters submitted within 60 days following the submission thereof.
(d) Any decision or award of the arbitral tribunal shall be final and binding
upon the parties to the arbitration proceeding. The parties agree that the
arbitral award may be enforced against the parties to the arbitration proceeding
or their assets wherever they may be found and that a judgment upon the arbitral
award may be entered in any court having jurisdiction thereof. (e) All
out-of-pocket costs and expenses incurred by any party in connection with the
resolution of any disagreement, dispute, controversy or claim pursuant to this
Section 17, including, but not limited to, reasonable attorney's fees and
disbursements, shall be borne by the party incurring the same; provided,
however, that the arbitral tribunal shall have the discretion to declare any
party as the "prevailing party" with respect to one or more of the issues that
were the subject of the arbitration and to require the other parties to the
arbitration to reimburse such "prevailing party" for some or all of its costs
and expenses incurred in connection with such proceeding. (f) The costs of the
arbitral tribunal shall be divided evenly between any parties thereto affiliated
with the Sellers, on the one hand, and any parties thereto affiliated with the
Buyer, on the other hand, unless there is a "prevailing party", in which case
the arbitral tribunal may allocate more or all of such costs to the party
thereto that is not the "prevailing party". (g) This Section 17 shall not
prohibit or limit in any way any party from seeking or obtaining preliminary or
interim injunctive or other equitable relief from a court for a breach or
alleged breach of any of the covenants and agreements of another party contained
in this Agreement. 7. Amendments. No amendment to this Agreement shall be
effective unless it shall be in writing and signed by all parties hereto. 8.
Notices. All notices or other communications required or permitted to be given
hereunder shall be in writing and shall be delivered by hand or sent prepaid
telex, cable or telecopy, or sent, postage prepaid, by registered, certified or
express mail, or reputable overnight courier service and shall be deemed given
when so delivered by hand, telexed, cabled or telecopied, or if mailed, three
days after mailing (one business day in the case of express mail or overnight
courier service), as follows: (i) if to Capricorn or the Buyer,
c/o Capricorn Investors II, L.P.
00 Xxxx Xxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxx, Xx.
Telecopy: (000) 000-0000
with a copy to:
Skadden, Arps, Slate, Xxxxxxx & Xxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxx
Telecopy: (000) 000-0000
(ii) if to MFI or the Other Sellers:
Xxx. Xxxxxx Inc.
000 Xxxx Xxxxxxx Xxxxx
Xxxx Xxxx Xxxx, Xxxx 00000
Attention: Xxxxx X. Xxxxxx, President
Telecopy: (000) 000-0000
with a copy to:
Stoel Rives LLP
000 Xxxxx Xxxx Xxxxxx
Xxxxx 0000
Xxxx Xxxx Xxxx, Xxxx 00000
Attention: Xxxx X. Xxxxxx
Telecopy: (000) 000-0000
4. Interpretation. The headings contained in this Agreement,
in any Exhibit or Schedule hereto and in the table of contents and index of
defined terms to this Agreement, are for reference purposes only and shall not
affect in any way the meaning or interpretation of this Agreement. The phrase
"to the Sellers' knowledge" or similar phrases means the actual knowledge, as of
the time the relevant statement is made, of any officer or director of any of
the Sellers. For purposes of the representations, warranties and covenants
hereunder, references to "the date of this Agreement," "the date hereof" or
other similar phrases shall be deemed to be references to August 13, 1996.
5. Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more such counterparts have been signed by
each of the parties and delivered to the other party.
6. Entire Agreement. This Agreement contains the entire
agreement and understanding between the parties hereto with respect to the
subject matter hereof and supersedes all prior agreements and understandings
relating to such subject matter.
7. Fees. Each party hereto hereby represents and warrants that
the only broker or finder that has acted in connection with this Agreement or
the transactions contemplated hereby or that may be entitled to any brokerage
fee, finder's fee or commission in respect thereof is Xxxxxx, Read & Co. Inc.
Any fees or commissions payable to Xxxxxx, Read & Co. Inc. in connection with
the transactions contemplated hereby shall be paid as provided on Schedule 16.
8. Severability. If any provision of this Agreement or the
application of any such provision to any person or circumstance shall be held
invalid, illegal or unenforceable in any respect by a court of competent
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provision hereof.
(a) Consent to Jurisdiction. Each of the Sellers, Capricorn
and the Buyer irrevocably submits to the exclusive jurisdiction of (i) the
Supreme Court of the State of New York, New York County and (ii) the United
States District Court for the Southern District of New York, solely for the
purposes of seeking specific performance or enforcing an arbitral award arising
out of this Agreement or any transaction contemplated hereby. Each of the
Sellers, Capricorn and the Buyer agrees to commence any such action, suit or
proceeding relating thereto either in the United States District Court for the
Southern District of New York or, if, for jurisdictional reasons, such suit,
action or other proceeding may not be brought in such court, in the Supreme
Court of the State of New York, New York County. Each of the Sellers, Capricorn
and the Buyer further agrees that service of any process, summons, notice or
document by U.S. registered mail to such party's respective address set forth
above shall be effective service of process for any action, suit or proceeding
in New York with respect to any matters to which it has submitted to
jurisdiction as set forth above in this Section 25(a). Each of the Sellers,
Capricorn and the Buyer irrevocably and unconditionally waives any objection to
the laying of venue of any action, suit or proceeding described above in (i) the
Supreme Court of the State of New York, New York County or (ii) the United
States District Court for the Southern District of New York, and hereby further
irrevocably and unconditionally waives and agrees not to plead or claim in any
such court that any such action, suit or proceeding brought in any such court
has been brought in an inconvenient forum.
(b) Should any litigation be commenced in connection with the
matters described in the preceding Section 25(a), the party prevailing shall be
entitled, in addition to such other relief as may be granted, to a reasonable
sum for such party's attorneys' fees and expenses determined by the court in
such litigation or in a separate action brought for that purpose.
9. Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York
applicable to agreements made and to be performed entirely within such State,
without regard to the conflicts of law principles of such State.
IN WITNESS WHEREOF, the parties have caused this Agreement to
be duly executed as of the date first written above.
XXX. XXXXXX INC.
By:/s/Xxxxx X. Xxxxxx
Name:Xxxxx X. Xxxxxx
Title:President/CEO
XXX. XXXXXX DEVELOPMENT CORPORATION
By:/s/Xxxxx X. Xxxxxx
Name:Xxxxx X. Xxxxxx
Title:President/CEO
XXX. XXXXXX COOKIES
By:/s/Xxxxx X. Xxxxxx
Name:Xxxxx X. Xxxxxx
Title:President/CEO
XXX. XXXXXX' ORIGINAL COOKIES, INC.
By:/s/Xxxxxxx X. Xxxxxxx
Name:Xxxxxxx X. Winomur
Title:Manager
CAPRICORN INVESTORS II, LP.
By CAPRICORN HOLDINGS, L.L.C.,
General Partner
By:/s/Xxxxxxx X. Xxxxxxx
Name: Xxxxxxx X. Xxxxxxx, Xx.
Title: Manager
APPENDIX A
INDEX OF DEFINED TERMS
Defined Term Page
Acquired Assets 2
Acquired Business 2
Acquired Leases 64
Allocation Schedule 8
Arbitration Rules 94
Arbitrator 17
Assumed Liabilities 4
Balance Sheet 32
Benefit Plans 43
Buyer 1
Buyer Note Agreement 12
Buyer Notes 11
Capricorn 1
Chocamerican 20
Closing 10
Closing Cash Amount 14
Closing Date 11
Code 8
Continued Employees 71
Contracts 41
DOJ 65
Election 69
Employees 71
Environmental Laws 48
ERISA 43
Excluded Assets 3
Excluded Liabilities 5
Fairfield 2
Fairfield Shares 29
Financial Statements 31
Founders 26
Founders Agreement 27
FTC 65
Hazardous Substance 48
HSC 20
HSR Act 20
Indemnified Party 85
Intellectual Property 36
License Agreement 23
License Buyer 20
License Purchase Agreement 20
Licensing Assets 4
Liens 35
Loss 73
MF Australia 2
MF Australia Shares 29
MF Canada 2
MF Canada Shares 29
MFD 1
MFD Preferred Stock 6
MFHK 2
MFHK Shares 29
MFI 1
MFI Preferred Stock 6
MFI Series 1 Notes 12
MFI Series 2 Notes 12
MFI Series 3 Notes 12
MFI Series 4 Notes 12
MFUK 2
MFUK Shares 29
Notice of Disagreement 16
OCC 20
OCC/HSC Agreement 20
Other Agreements 23
Other Sellers 1
Pension Plans 43
Permitted Liens 35
Potential Set-Off Xxxxxx 00
Xxxxxxxx Price 6
Records 66
Related Documents 79
Seller 1
Series A Notes 5
Store Cash 3
Straddle Period 75
Subsidiaries 2
Subsidiary Shares 11
Tax Returns 34
Taxes 34
Third Party Claim 85
Trade Secrets 3
Transaction Documents 59
Trust Cash 3
Unassigned Asset 9
Value Creation Plan 5
W/C Statement 12
Working Capital Amount 14
Working Capital Base Amount 15
ii
TABLE OF CONTENTS
Page
1. Purchase, Sale and Assumption 2
2. Closing; Transactions to be Effected; Purchase Price Adjustment 10
3. Conditions to Closing 18
4. Representations and Warranties of the Sellers 25
5. Covenants of the Sellers 51
6. Representations and Warranties of the Buyer and Capricorn 55
7. Covenants of the Buyer and Capricorn 60
8. Mutual Covenants 62
9. Employee and Related Matters 71
10. Further Assurances 72
11. Indemnification 73
12. Assignment 89
13. No Third-Party Beneficiaries 90
14. Termination 91
15. Survival of Representations 93
16. Expenses 93
17. Arbitration 93
18. Amendments 96
19. Notices 96
20. Interpretation 97
21. Counterparts 97
22. Entire Agreement 98
23. Fees 98
24. Severability 98
25. Consent to Jurisdiction 98
26. Governing Law 100
0151160.23-01S1a
Appendix A Index of Defined Terms
Exhibit A Form of Buyer Note Agreement (including forms of the Buyer Notes)
Exhibit B Form of Stoel Rives Opinion
Exhibit C OCC/HSC Agreement
Exhibit D Form of License Purchase Agreement
Exhibit E Form of Skadden, Arps, Slate, Xxxxxxx & Xxxx Opinion
Exhibit F Form of License Agreement
Schedules
1(b) Licensing Assets
1(c) Ordinary Working Capital
1(d)(viii) Affiliate Contracts
3(a)(vii) Agreements Requiring Consent to Transfer or Assign
4(c) Ownership of Subsidiaries
4(d) Equity Interests
4(e)(i) Financial Statements
4(e)(ii) Disclosed Liabilities
4(f) Tax Returns
4(h) Condition of Assets
4(i) Trademarks, etc.
4(j) Contracts
4(k) Litigation
4(l) Insurance
4(m)(i) Benefit Plans
4(m)(ii)-1 Benefit Plan Documents
4(m)(ii)-2 Proceedings
4(m)(iii) Contributions and Payments;
Funding Deficiencies
4(m)(v) Liabilities to Multiemployer Plans
4(m)(vii) Employee Welfare Benefit Plans
4(n) Material Events
4(o) Compliance with Applicable Laws;
Environmental Matters
4(p) Employee and Labor Relations
4(q) Material Licenses and Permits
4(r) Inventory
6(h) Pro Forma Balance Sheet of Buyer
16 Fees and Expenses
