STOCK PURCHASE AGREEMENT
among
Nature's Fresh Northwest, Inc.
General Nutrition, Incorporated
and
Wild Oats Markets, Inc.
Dated April 22, 1999
TABLE OF CONTENTS
1. DEFINITIONS
2. SALE AND TRANSFER OF SHARES
3. PURCHASE PRICE AND CLOSING
3.1 Purchase Price
3.2 Closing
3.3 Closing Obligations
3.4 Earnout Increase in Purchase Price
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SHAREHOLDER
4.1 Authority; No Conflict
4.2 Capitalization
4.3 Financial Statements
4.4 Books and Records
4.5 Title to Properties; Encumbrances
4.6 Condition and Sufficiency of Assets
4.7 Notes and Accounts Receivable
4.8 Inventory
4.9 No Undisclosed Liabilities
4.10 Taxes
4.11 No Adverse Change
4.12 Employee Benefits
4.13 Compliance with Legal Requirements, Governmental Authorization
4.14 Legal Proceedings; Orders
4.15 Absence of Certain Changes and Events
4.16 Contracts; No Defaults
4.17 Insurance
4.18 Employees
4.19 Labor Relations; Compliance
4.20 Intellectual Property
4.21 Disclosure
4.22 Brokers or Finders
4.23 Environmental Matters
4.24 Representations of the Shareholder
5. REPRESENTATIONS AND WARRANTIES OF BUYER
5.1 Organization and Good Standing
5.2 Authority; No Conflict
5.3 Certain Proceedings
5.4 Brokers or Finders
6. COVENANTS OF THE COMPANY PRIOR TO CLOSING DATE
6.1 Access and Investigation
6.2 Operation of the Business of the Company
6.3 Negative Covenant
6.4 Required Approvals
6.5 Notification
6.6 Payment of Indebtedness by Related Persons
6.7 No Negotiation
6.8 Best Efforts
7. COVENANTS OF BUYER PRIOR TO CLOSING DATE
7.1 Approvals of Governmental Bodies
7.2 Best Efforts
7.3 Notification
7.4 Release of Certain Guarantees
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8. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE
8.1 Accuracy of Representations
8.2 The Company's and Shareholder's Performance
8.3 Consents
8.4 Additional Documents
8.5 No Proceedings
8.6 No Claim Regarding Stock Ownership or Sale Proceeds
8.7 No Prohibition
8.8 Real Estate Matters
9. CONDITIONS PRECEDENT TO THE COMPANY'S OBLIGATION TO CLOSE 9.1 Accuracy of
Representations 9.2 Buyer's Performance 9.3 Consents 9.4 Additional
Documents 9.5 No Proceedings
10. TERMINATION
10.1 Termination Events
10.2 Effect of Termination
11. INDEMNIFICATION; REMEDIES
11.1 Survival
11.2 Indemnification and Payment of Actual Damages by the Company
11.3 Indemnification and Payment of Actual Damages by the Shareholder
11.4 Indemnification and Payment of Actual Damages by Buyer
11.5 Time Limitations
11.6 Limitations on Amount - The Company, and the Shareholder
11.7 Limitations on Amount - Buyer
11.8 Right of Set-Off
11.9 Procedure for Indemnification - Third Party Claims
12. GENERAL PROVISIONS
12.1 Expenses
12.2 Public Announcements
12.3 Confidentiality
12.4 Notices
12.5 Arbitration, Resolution of Disputes
12.6 Further Assurances
12.7 Waiver
12.8 Entire Agreement and Modifications
12.9 Disclosure Exhibits
12.10 Assignments, Successors, and No Third-Party Rights
12.11 Severability
12.12 Section Headings, Construction
12.13 Time of Essence
12.14 Governing Law
12.15 Counterparts
ANCILLARY DOCUMENTS
Trademark Assignment
Non Competition Agreement
First Amendment to Promissory Note
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EXHIBITS
1.1(a) Senior Secured Multiple Advance Note
1.1(b) Security Documents
1.1(c) List of Stores
3.3(a)(iv) Non-Competition Agreement
3.3(a)(vi) Assignment of Intellectual Property Assets
3.3(a)(vii) Form of Amendment to Assumed Note
3.4 Earnout Budget 4.1(c)Consent
4.5 List of Real Property, Leaseholds, or Other Interests in
Real Property
4.6 Condition and Sufficiency of Assets
4.7 Accounts Receivable
4.9 Liabilities and Obligations
4.10 Taxes
4.11 Liens, Encumbrances or Charges Against Assets or Properties
4.12(a) Pension, Profit Sharing or Other Employment Benefit Plans
4.13 Compliance with Legal Requirements; Governmental
Authorization
4.14 Legal Proceedings; Orders
4.15 Absence of Certain Changes and Events
4.16 Contracts
4.17 Insurance
4.18 Employee/Director Information as of April ____, 1999
4.18(b) Planned Termination of Key Personnel
4.20(b) Contracts Relating to Intellectual Property Assets
4.20(c) Marks
4.21(c) Material Adverse Affects
4.23 Environmental
4.24 Representations of Shareholder
4.26 Year 2000 Compliance Plan
5.2(b) Consents
6.3 Construction Budgets, Plans and Timetables of New Stores
8.10 Liens
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STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement ("Agreement") is made as of April 22,
1999, by and among Wild Oats Markets, Inc., a Delaware corporation ("Buyer"),
Nature's Fresh Northwest, Inc., a Delaware corporation ("the Company"), and
General Nutrition, Incorporated (the "Shareholder").
RECITALS
The Shareholder desires to sell and Buyer desires to purchase all of
the issued and outstanding shares (the "Stock") of capital stock of the Company
for the consideration and on the terms set forth in this Agreement.
The parties, intending to be legally bound, agree as follows:
1. DEFINITIONS
For purposes of this Agreement, the following terms have the meanings
specified or referred to in this Section 1:
"Actual Damages" - Any loss, liability, claim, damage or expense on a dollar for
dollar basis for the monetary loss actually incurred by such party arising
directly or indirectly and whether or not involving a third party claim
including the cost of investigation and defense and reasonable attorney fees,
but excluding loss of profit, incidental and consequential damages and
diminution of value.
"Applicable Contract" - any Contract identified or required to be identified in
Exhibit 4.16.
"Assumed Note" - the outstanding Senior Secured Multiple Advance Note dated
February 1, 1997 from the Company to the Shareholder in the principal amount of
$17,000,000, as secured by the Security Documents. The Assumed Note bears
interest at an annual rate equal to the Shareholder's blended borrowing rate
plus one-eighth of 1% per annum (at Closing Shareholder's blended rate is as set
forth on a certificate from the Shareholder) and is adjustable quarterly as the
Shareholder's borrowing rate adjusts.
"Best Efforts" - the efforts that a prudent Person desirous of achieving a
result would use in similar circumstances to ensure that such result is achieved
as expeditiously as possible; provided, however, that an obligation to use Best
Efforts under this Agreement does not require the Person subject to that
obligation to take actions that would result in a materially adverse change in
the benefits to such Person under this Agreement and the Contemplated
Transactions.
"Breach" - a "Breach" of a representation, warranty, covenant, obligation, or
other provision of this Agreement or any instrument delivered pursuant to this
Agreement will be deemed to have occurred if there is or has been (a) any
inaccuracy or omission in or breach of, or any failure to perform or comply
with, such representation, warranty, covenant, obligation, or other provision,
or (b) any or other occurrence or circumstance that is or was inconsistent with
such representation, warranty, covenant, obligation, or other provision, and the
term "Breach" means any such inaccuracy, breach, failure, occurrence, or
circumstance.
"Company" - the Company and its predecessor in interest.
"Consent" - any approval, consent, ratification, waiver, or other authorization
(including any Governmental Authorization).
"Contemplated Transactions" - all of the transactions contemplated by this
Agreement, including:
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(a) the sale of the stock by the Shareholder to the Buyer;
(b) the performance by Buyer, Shareholder, and the Company of their
respective covenants and obligations under this Agreement.
"Contract" - any oral or written agreement, contract, obligation, promise, or
undertaking (whether express or implied) entered into by the Company or
Shareholder on behalf of the Company.
"Encumbrance" - any charge, claim, community property interest, condition,
equitable interest, lien, option, pledge, security interest, right of first
refusal, or restriction of any kind, including any restriction on use, voting,
transfer, receipt of income, or exercise of any other attribute of ownership.
"ERISA" - the Employee Retirement Income Security Act of 1974 or any successor
law, and regulations and rules issued pursuant to that Act or any successor law.
"Facilities" - any real property, leaseholds, or other interests currently owned
or operated by the Company and any buildings, plants, structures, fixtures or
equipment (including motor vehicles, tank cars, and rolling stock) currently
owned by the Company.
"GAAP" - generally accepted accounting principles as that term is used in the
United States, applied on a basis consistent with the basis on which the Balance
Sheet and other financial statements referred to in Section 4.3 were prepared.
"Governmental Body" - any:
(a) nation, state, county, city, town, village, district, or other
jurisdiction of any nature (including any governmental agency, branch,
department, official, or entity and any court or other tribunal);
(b) federal, state, local, municipal, foreign, or other government;
(c) governmental or quasi-governmental authority of any nature
(including any governmental agency, branch, department, official, or entity and
any court or other tribunal);
(d) multi-national organization or body; or
(e) body exercising, or entitled to exercise, any administrative,
executive, judicial, legislative, police, regulatory, or taxing authority or
power of any nature.
"HSR Act" means the Xxxx-Xxxxx Xxxxxx Antitrust Improvements Act of 1976, as
amended.
"Intellectual Property Assets" - those assets defined in Section 4.20 below.
"IRC" - the Internal Revenue Code of 1986 or any successor law, and regulations
issued by the IRS pursuant to the Internal Revenue Code or any successor law.
"IRS" - the United States Internal Revenue Service or any successor agency, and,
to the extent relevant, the United States Department of the Treasury.
"Knowledge" - an individual will be deemed to have "Knowledge" of a particular
fact or other matter if such individual is actually aware of such fact or other
matter.
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A Person (other than an individual) will be deemed to have "Knowledge"
of a particular fact or other matter if any individual who is serving as a
director, officer, partner, executor, or trustee of such Person or, as to the
Company, the general manager thereof, or at any time had, Knowledge of such fact
or other matter.
"Legal Requirement" - any federal, state, local, municipal, foreign,
international, multinational, or other administrative order, constitution, law,
ordinance, principle of common law, regulation, statute, or treaty.
"Occupational Safety and Health Law" - any Legal Requirement designed to provide
safe and healthful working conditions and to reduce occupational safety and
health hazards, and any program, whether governmental or private (including
those promulgated or sponsored by industry associations and insurance
companies), designed to provide safe and healthful working conditions.
"Order" - any award, decision, injunction, judgment, order, ruling, subpoena, or
verdict entered, issued, made, or rendered by any court, administrative agency,
or other Governmental Body or by any arbitrator.
"Ordinary Course of Business" - an action taken by a Person will be deemed to
have been taken in the "Ordinary Course of Business" only if:
(a) such action is consistent with the past practices of such Person
and is taken in the ordinary course of the normal day-to-day operations of such
Person; and
(b) such action is similar in nature and magnitude to actions
customarily taken, without any authorization by the board of directors (or by
any Person or group of Persons exercising similar authority), Shareholder or any
Governmental Authority in the ordinary course of the normal day-to-day
operations of other Persons that are in the same line of business of such
Person.
Ordinary Course of Business shall not include execution of loan agreements in
excess of $10,000 or the closure of Stores comprising any part of the Company's
operations.
"Person" - any individual, corporation (including any non-profit corporation),
general or limited partnership, limited liability company, joint venture, estate
trust, association, organization, labor union, or other entity or Governmental
Body.
"Proceeding" - any action, arbitration, audit, hearing, investigation,
litigation, or suit (whether civil, criminal, administrative, investigative, or
informal) commenced, brought, conducted, or heard by or before, or otherwise
involving, any Governmental Body or arbitrator.
"Representative" - with respect to a particular Person, any director, officer,
employee, agent, consultant, advisor, or other representative of such Person,
including legal counsel, accountants, and financial advisors.
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"Securities Act" - the Securities Act of 1933 or any successor law, and
regulations and rules issued pursuant to that Act or any successor law.
"Security Documents" - means the Security Agreement, the Trust Deed, Assignment
of Rents, and Fixture Filing on the real property underlying the Lake Oswego
Store and the two Leasehold Trust Deeds, Assignments of Rent and Fixture
Filings, copies of which are attached hereto as Exhibit 1.1(b), each of which is
dated February 1, 1997, and each securing the Senior Secured Multiple Advance
Note attached hereto as Exhibit 1.1(a).
"Shares" - all of the issued and outstanding stock of the Company.
"Stores" - the Company's current operating grocery stores, proposed sites and
relocations, offices, kitchens, warehouse or commissary operations as listed on
Exhibit 1.1(c) attached hereto.
"Tax" - any tax (including any income tax, franchise, capital stock, capital
gains tax, value-added tax, sales tax, property tax, gift tax, or estate tax,
and any federal, state or local payroll or withholding taxes, FICA, FUTA or
SUTA), levy, assessment, tariff, duty (including any customs duty), deficiency,
or other fee, and any related charge or amount (including any fine, penalty,
interest, or addition to tax), imposed, assessed, or collected by or under the
authority of any Governmental Body or payable pursuant to any tax-sharing
agreement or any other Contract relating to the sharing or payment of any such
tax, levy, assessment, tariff, duty, deficiency, or fee.
"Tax Return" - any return (including any information return), report, statement,
schedule, notice, form, or other document or information filed with or submitted
to, or required to be filed with or submitted to, any Governmental Body in
connection with the determination, assessment, collection, or payment of any Tax
or in connection with the administration, implementation, or enforcement of or
compliance with any Legal Requirement relating to any Tax.
"Threatened" - a claim, Proceeding, dispute, action, or other matter will be
deemed to have been "Threatened" if any demand or statement has been made or any
notice has been given, or if any other event has occurred or any other
circumstances exist, that would lead a prudent Person to conclude that such a
claim, Proceeding, dispute, action, or other matter is likely to be asserted,
commenced, taken, or otherwise pursued in the future.
2. SALE AND TRANSFER OF SHARES
On and subject to the terms and conditions of this Agreement, the Buyer agrees
to purchase from the Shareholder, and the Shareholder agrees to sell to the
Buyer, all of the issued and outstanding Shares of the Company for the
consideration specified in Section 3 below.
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3. PURCHASE PRICE AND CLOSING
3.1 PURCHASE PRICE
Subject to the terms and conditions hereof, the Buyer agrees to pay the
Shareholder at the Closing $40,000,000 (the "Purchase Price) by payment of
$40,000,000 by wire transfer on June 1, 1999 to the account specified by the
Shareholder. At Closing, Buyer shall assume all liabilities of the Company
(except as set forth herein), including the obligations under the Assumed Note
and Security Documents. The Shareholder and Buyer agree that at Closing, the
parties shall amend the terms of the Assumed Note and Security Documents to (i)
delete the payment-on-demand provisions thereof and substitute therefor an
18-month term and (ii) provide that (A) 20% of the principal balance outstanding
on the Assumed Note shall be payable on or before one year following the date of
Closing, together with any unpaid and accrued interest thereon, and (B) the
remainder of the principal balance of the Assumed Note, together with any
interest accrued thereon, shall be payable on or before 18 months following the
date of Closing .
3.2 CLOSING
The closing on the Contemplated Transactions (the "Closing") provided for in
this Agreement will take place in Portland, Oregon at the offices of the Company
at 9:00 a.m. (local time) on the later of (i) May 29, 1999 or (ii) the date that
is two business days following the termination of the applicable waiting period
or any extended investigative period under the HSR Act, or at such other time
and place as the parties may agree. Subject to the provisions of Section 10,
failure to consummate the Contemplated Transactions provided for in this
Agreement on the date and time and at the place determined pursuant to this
Section 3.2 will not result in the termination of this Agreement and will not
relieve any party of any obligation under this Agreement.
3.3 CLOSING OBLIGATIONS
At the Closing:
(a) The Shareholder will deliver to Buyer:
(i) certificates representing the Shares endorsed/assigned to
Buyer and with a duly executed stock power;
(ii) a certificate executed by the Company representing and
warranting to Buyer that each of the Company's representations and
warranties in this Agreement were accurate in all material respects as
of the date of this Agreement and are accurate in all material respects
as of the Closing Date as if made on the Closing Date; and
(iii) a certificate executed by the Shareholder representing
and warranting to Buyer that each of the Shareholder representations
and warranties in this Agreement were accurate in all material respects
as of the date of this Agreement and are accurate in all material
respects as of the Closing Date as if made on the Closing Date; and
(iv) a Non-Competition Agreement in the form of Exhibit
3.3(a)(iv) attached hereto;
(v) an opinion of counsel for each of the Company and the
Shareholder in form satisfactory to Buyer that (A) the Agreement
constitutes the valid and binding obligation of the Company and of the
Shareholder, enforceable in accordance with its terms, (B) the Company
is duly incorporated, validly existing and in good standing under the
laws of the State of Delaware, and (C) the transfer of the Shares as
contemplated is in accordance with the Securities Act.
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(vi) an assignment (if not previously or concurrently made to
the Company), in the form of Exhibit 3.3(a)(vi) attached hereto, by
General Nutrition Investment Company, a Delaware corporation, of the
Intellectual Property Assets;
(vii) an amendment to the Assumed Note in substantially the
form of Exhibit 3.3(a)(vii) attached hereto; and
(viii) a letter of resignation, effective immediately, from
certain officers and directors of the Company identified by Buyer.
(b) At Closing, Buyer will deliver to the Shareholder (i) a certificate
executed by Buyer representing and warranting that each of Buyer's
representations and warranties in this Agreement were accurate in all material
respects as of the date of this Agreement and are accurate in all material
respects as of the date of this Agreement and are accurate in all material
respects as of the Closing Date as if made on the Closing Date; (ii) irrevocable
wire transfer instructions for the wire transfer of the Purchase Price on June
1, 1999; (iii) the amendment to the Assumed Note in the form of Exhibit
3.3(a)(vii) hereto, and (iv) the NonCompetition Agreement in the form of Exhibit
3.3(a)(iv) hereto.
3.4 EARNOUT INCREASE TO PURCHASE PRICE
(a) The aggregate value of the Purchase Price shall be increased by an
additional $1,000,000 if Gross Sales for the Stores, as defined below, including
the New Stores (as defined in Section 4.9(b) below) for the one-year period
commencing on the first day of the first accounting period subsequent to the
opening of the later to open of the New Stores exceed in the aggregate the
amount set forth on the budget attached as Exhibit 3.4. Exhibit 3.4 shall be
revised and attached to this Agreement (which budget shall be consistent with
documentation previously provided to Buyer)within 5 days following execution
hereof to reflect current estimated opening dates for the New Stores.
(b) The incremental increase in Purchase Price (if any) will be due and
payable in immediately available funds within 60 days following the close of the
one-year period described in Section 3.4(a) above.
(c) The gross sales calculation and net adjustments shall be made
consistent with the Company's practice prior to the Closing Date and reported to
the Shareholder each accounting period. The Shareholder shall have the right to
audit the gross sales calculations for the Stores in the event the earnout
increase is not achieved as reported.
(d) "Gross Sales" means the total retail sales from all business
conducted upon or from the Stores, including but not limited to all goods, wares
and merchandise sold and services rendered in or from the Stores by Buyer, its
subtenants, licensees and concessionaires, and whether such sales of goods,
services, etc. be evidenced by check, credit, charge account, exchange or
otherwise, and shall further include, but not be limited to, the amount of all
orders taken or received at the Stores, whether such orders be filled from the
Stores or elsewhere. Each sale upon installment or credit shall be treated as a
sale for the full price at the time such sale is made.
Gross Sales shall not include: Sales of merchandise subsequently returned for
refund or credit and sales of fixtures, equipment and other property which is
not stock in trade.
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4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SHAREHOLDER
The Company and Shareholder each represent and warrant to Buyer as follows:
4.1 AUTHORITY; NO CONFLICT
(a) This Agreement constitutes the legal, valid, and binding obligation
of the Company and the Shareholder, enforceable against the Company and the
Shareholder in accordance with its terms.
(b) Except as set forth in Exhibit 4.1(b), neither the execution and
delivery of this Agreement nor the consummation or performance of any of the
Contemplated Transactions will, directly or indirectly (with or without notice
or lapse of time):
(i) contravene, conflict with, or result in a violation of (A)
any provision of the Certificate of Incorporation or Bylaws of the
Company, or (B) any resolution adopted by the board of directors of the
Company or the Shareholders of the Company;
(ii) contravene, conflict with, or result in a violation of,
or give any Governmental Body or other Person the right to challenge
any of the Contemplated Transactions or to exercise any remedy or
obtain any relief under, any Legal Requirement or any Order to which
the Company or, to the Company's Knowledge, or any of the assets owned
or used by the Company, may be subject;
(iii) contravene, conflict with, or result in a violation of
any of the terms or requirements of, or give any Governmental Body the
right to revoke, withdraw, suspend, cancel, terminate, or modify, any
Governmental Authorization that is held by the Company or that
otherwise relates to the business of, or any of the assets owned or
used by, the Company; or
(iv) contravene, conflict with, or result in a violation or
breach of any provision of, or give any Person the right to declare a
default or exercise any remedy under, or to accelerate the maturity or
performance of, or to cancel, terminate, or modify, any Applicable
Contract.
(v) result in the imposition of any lien or encumbrance
on any of the assets of the Company;
(vi) cause Buyer to become liable for the payment of any
municipal or state tax arising from the transfer of the Shares.
(c) Except as set forth in Exhibit 4.1(c), neither the Company nor the
Shareholder is or will be required to give any notice to or obtain any Consent
from any Person in connection with the execution and delivery of this Agreement
or the consummation or performance or any of the Contemplated Transactions.
(d) The Company has no subsidiaries, nor is the Company a partner,
member, joint venturer or shareholder of any other entity.
4.2 CAPITALIZATION
The authorized equity securities of the Company consist of 1,000 shares of
common stock, without par value, of which 100 shares are issued and outstanding
and constitute all of the capital stock of the Company. The Shareholder is and
will be on the Closing Date the record and beneficial owner of the Shares, free
and clear of all Encumbrances. There are no Contracts relating to the issuance,
sale, or transfer of the Shares or any equity securities or other securities of
the Company. All of the Shares are fully paid and non-assessable.
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4.3 FINANCIAL STATEMENTS
(a) The Company has delivered to Buyer: (a) balance sheets of the
Company as of February 6, 1999 and April 3, 1999, and the related statements of
income (the April 3, 1999 balance sheet, including the notes thereto, referred
to herein as the "Balance Sheet"). Such financial statements and notes fairly
present in all material respects the financial condition and the results of
operations, changes in retained earnings, and cash flow of the Company as at the
date referred to in such financial statements, all in accordance with GAAP. The
financial statement referred to in this Section 4.3 reflect the consistent
application of such accounting principles throughout the periods involved,
except as disclosed in the notes to such financial statements. No financial
statements of any Person other than the Company are required by GAAP to be
included in the financial statements of the Company.
4.4 BOOKS AND RECORDS
The books of account, minute books, stock record books, and other records of the
Company, all of which have been made available to Buyer, are complete and
correct and have been maintained in accordance with sound business practices,
for a privately held company of similar size. The minute books of the Company
contains accurate and complete records of all meetings held of, and corporate
action taken by, the Shareholder, the Board of Directors, and committees of the
Board of Directors of the Company, and no meeting of any such Shareholders,
Board of Directors, or committee has been held for which minutes have not been
prepared and are not contained in such minute books. At the Closing, all of
those books and records will be in the possession of the Company.
4.5 TITLE TO PROPERTIES; ENCUMBRANCES
(a) Exhibit 4.5 contains a complete and accurate list of all real
property, leaseholds, or other interests in real property owned by the Company
or for which the Company is obligated. The Company has delivered or made
available to Buyer copies of the deeds and other instruments (as recorded) by
which the Company acquired such real property and interests, and copies of all
title insurance policies, opinions, abstracts, and surveys in the possession of
the Company and relating to such property or interests. The Company owns (with
good and marketable title, subject only to the matters permitted by the
following sentence) all the properties and assets (whether real, personal, or
mixed and whether tangible or intangible) located in the Stores or reflected as
owned in the books and records of the Company, including all of the properties
and assets reflected in the Balance Sheet, except (i) as otherwise disclosed on
Exhibit 4.5, which includes a list of (A) assets held under capitalized or
operating leases and (B) personal property sold since the date of the Balance
Sheet in the Ordinary Course of Business, and all of the properties and assets
purchased or otherwise acquired by the Company since the date of the Balance
Sheet (except for personal property acquired and sold since the date of the
Balance Sheet in the Ordinary Course of Business and consistent with past
practice).
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(b) Except as set forth on Exhibit 4.5 hereof, all properties and
assets reflected in the Balance Sheet are free and clear of all Encumbrances and
are not, in the case of real property, subject to any rights of way, building
use restrictions, exceptions, variances, reservations, or limitations of any
nature except, with respect to all such properties and assets, (i) liens for
current taxes not yet due, and (ii) with respect to real property, (A) minor
exception to title, if any, none of which is substantial in amount, materially
detracts from the value or impairs in Buyer's determination, or the use of the
property subject thereto, or impairs the operations of the Company, (B) zoning
laws and other land use restrictions and (C) other such use restrictions set
forth in the real estate leases that do not impair the present or anticipated
use of the property subject thereto.
(c) Except as set forth on Exhibit 4.5, all buildings, plants, and
structures owned by the Company lie wholly within the boundaries of the real
property owned by the Company and do not encroach upon the property of, or
otherwise conflict with the property rights of, any other Person.
(d) At or prior to Closing, the Shareholder shall record the: (i) Trust
Deed, Assignment of Rents, and Fixture Filing previously executed by the Company
and securing the Assumed Note with an interest in the real property owned by the
Company at Lake Oswego, 00000 Xxxx Xxxx, Xxxx Xxxxxx, Xxxxxx; (ii) Leasehold
Trust Deed, Assignment of Rent and Fixture Filing previously executed by the
Company and securing the Assumed Note with an interest in the property owned by
the Company at Laurelhurst, 0000 Xxxxx Xxxx Xxxxxxxx, Xxxxxxxx, Xxxxxx, (iii)
Leasehold Trust Deed, Assignment of Rent and Fixture Filing previously executed
by the Company and securing the Assumed Note with an interest in the property
owned by the Company at Fremont, 0000 Xxxxx Xxxx 00xx Xxxxxx, Xxxxxxxx, Xxxxxx.
4.6 CONDITION AND SUFFICIENCY OF ASSETS
Except as set forth on Exhibit 4.6, the buildings, structures, and equipment of
the Company are structurally sound, are in good operating condition and repair,
ordinary wear and tear excepted, and are adequate for the uses to which they are
being put, and none of such buildings, structures, or equipment is in need of
maintenance or repairs except for ordinary, routine maintenance and repairs that
are not material in nature or cost. The building, structures, and equipment of
the Company are sufficient for the continued conduct of the Company's business
after the Closing in substantially the same manner as conducted prior to the
Closing.
4.7 NOTES AND ACCOUNTS RECEIVABLE
All notes receivable and accounts receivable of the Company that are reflected
on the Balance Sheet or on the accounting records of the Company as of the
Closing Date (collectively, the "Accounts Receivable") represent or will
represent valid obligations and unless paid prior to the Closing Date, the
Accounts Receivable are or will be as of the Closing Date, current and
collectible net of the respective reserves shown on the Balance Sheet or the
Balance Sheet or on the accounting records of the Company as of the Closing Date
(which reserves are adequate and calculated consistent with past practice).
Subject to such reserves, each of the Accounts Receivable either has been
collected or will be collectable in full, without any set-off in due course. If
such accounts receivable are carried as credits for product returns then such
amounts need not be collected prior to Closing. There is no contest, claim, or
right of set-off, other than returns in the Ordinary Course of Business, under
any Contract with any obligor of an Accounts Receivable relating to the amount
or validity of such Accounts Receivable. Exhibit 4.7 contains a complete and
accurate list of all Accounts Receivable as of the date of the Balance Sheet,
which list sets forth the aging of such Accounts Receivable.
9
4.8 INVENTORY
All inventory of the Company, whether or not reflected in the Balance Sheet
consists of a quality and quantity usable and salable in the Ordinary Course of
Business, except for obsolete items and items of below-standard quality, which
in the aggregate comprise less than 1% of the current aggregate inventory value
and all of which have been written off or written down to net realizable value
in the Balance Sheet or on the accounting records of the Company as of the
Closing Date, as the case may be. The inventory reflected on the Balance Sheet
is reflected at cost, based on actual inventory in the Stores determined by
periodic physical counts in accordance with normal industry practices. The
quantities of each item of inventory (whether raw materials, work-in-process, or
finished goods) are not excessive, but are reasonable in the present
circumstances of the Company. All supplies used in the operation of the Company
are valued as inventory on the Company's financial statements. No liens or
encumbrances exist on any of the inventory.
4.9 NO UNDISCLOSED LIABILITIES; LIABILITIES AS OF CLOSING
(a) Except as set forth in Exhibit 4.9, the Company has no material
liabilities or obligations of any nature (whether known or unknown and whether
absolute, accrued, contingent, or otherwise) except for liabilities or
obligations reflected or reserved against in the Balance Sheet and current
liabilities incurred in the Ordinary Course of Business since the respective
dates thereof, all of which are reflected on the interim financial statements
provided by the Company.
(b) As of the Closing Date, the Shareholder shall reimburse the Company
for the unpaid costs of design, construction, materials, permitting or other
costs identified in Section 6.3(b) below relating to the Laurelhurst and
relocated Fremont Stores (the "New Stores'), whether arising prior to or after
the Closing Date; however, the Buyer shall assume all liabilities and
responsibilities for the Gresham Store. As of Closing, the Company's liabilities
shall be as set forth on the balance sheet as of the Closing Date, which is to
be prepared by the parties and attached hereto as Exhibit 4.9(b) (the "Closing
Balance Sheet") within 5 days following the Closing Date. As of the Closing Date
the total outstanding liabilities of the Company (the "Liabilities"), for which
the Company is responsible with the exception of the Assumed Note and certain
excluded payables for the New Stores as identified in Section 6.3 below, as
reflected on the Closing Balance Sheet, shall not exceed $4,000,000. In the
event the Liabilities reflected on the Closing Balance Sheet exceed $4,000,000,
the parties shall, upon completion of the Closing Balance Sheet, execute an
amendment to the Assumed Note to reduce the Assumed Note principal balance by
the difference between the calculated amount of the Liabilities and $4,000,000.
(c) On the Closing Date, the parties shall take an inventory of all
usable and saleable, not out of code or damaged merchandise sold in the Stores
(including any New Store open as of the Closing Date)(the "Merchandise") using
the inventory methods that were used to value the Merchandise as shown on the
April 3, 1999 Balance Sheet. On the night prior to the opening of each New Store
that opens after the Closing Date, the parties shall take an inventory of the
Merchandise in such Store. The cost of the independent inventory service
retained to assist in the inventories shall be split between the parties. Upon
opening of the final New Store, the amount of Merchandise located in that Store
will be added to the Merchandise value on the Closing Balance Sheet, together
with the value of the Merchandise of any New Store opened after the Closing
Date. The sum of these amounts shall equal or exceed $4,850,000. In the event
the sum is less than $4,850,000, the parties shall execute an amendment to the
Assumed Note under which the principal balance of the Assumed Note will be
reduced by the amount of the difference.
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4.10 TAXES
(a) The Company has timely filed or caused to be timely filed, all tax
returns that are or were required to be filed by it pursuant to applicable Legal
Requirements. The Company has timely paid, or made provision for the payment of,
all Taxes that have or may have become due pursuant to those tax returns. No
Taxes are being contested at this time by the Company or the Shareholder. The
Shareholder shall pay on a timely basis, as such become due, all Taxes that are
or may become due and payable and arise from the operation of the Company or the
Stores prior to the Closing Date. No consent to the application of Section
341(f)(2) of the IRC has been filed with respect to any assets or property held
by or to be acquired by the Company.
(b) The United States federal income tax returns have been audited and
closed through the year ending August 17, 1996. Returns for all periods through
1997 during which the Shareholder owned the Shares are currently being audited.
All state income tax returns and IRS Revenue Agents' Reports have been filed and
at Closing no states have requested any additional information. Exhibit 4.10
contains a listing of all audits currently in progress at the time of Closing.
The Shareholder shall provide the Company with information regarding the results
of the current audits. Exhibit 4.10 describes all adjustments to the United
States federal income Tax Returns filed by the Company or any group of
corporations including the Company for all taxable years since 1986 where the
adjustments were directly related to the operations of the Company, and the
resulting deficiencies proposed by the IRS.
(c) All charges, accruals, and reserves with respect to Taxes arising
from the operation of the Company prior to the Closing will be the
responsibility of and paid by, accrued by or reserved by the Shareholder. If any
audits take place after the Closing Date and relate to returns filed prior to
the Closing Date or for periods prior to the Closing Date, Shareholder shall
respond to such audits. Any adjustments or deficiencies determined by the
auditing agency shall be paid by the Shareholder. The Shareholder agrees to
notify the Buyer as to the progress and results of any such audit.
(d) The Shareholder will timely file short period federal and state tax
returns as part of its consolidated group, for the period up to and including
the Closing Date. The Shareholder shall timely pay all Taxes determined to be
due from the operations of the Company through that date. The Shareholder shall
provide a copy of all necessary work papers and carryover schedules to complete
Buyer's tax return for that portion of 1999 following the Closing Date, and
shall advise Buyer if any changes were made to Shareholder's tax returns
relating to the Company's operations for those periods in which the Shareholder
owned the Shares.
(e) The Shareholder acknowledges that Buyer will be required to prepare
audited financial statements for the past year of operation of the Company as
part of its securities filings relating to the Contemplated Transactions. The
Shareholder agrees to cooperate with and assist Buyer in obtaining the
information necessary to prepare such audited financial statements.
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4.11 ADVERSE CHANGE
There have been no material adverse events or changes since the Balance Sheet in
the financial condition, assets, liabilities, properties or business of the
Company or in its title to any of its assets or properties, or any material
transaction except in the ordinary course of business, except as disclosed on
the attached schedules. Since the date of the Balance Sheet, the Company has not
(a) issued or sold any stock, notes, or other corporate securities or options to
purchase securities or entered into an agreement for any such sale, (b) incurred
any damage or destruction whether covered by insurance or not and materially
affecting its properties, (c) incurred any material indebtedness, obligation or
liability (absolute or contingent), other than current liabilities in the
Ordinary Course of Business, (d) suffered any material adverse change in
relationship with any key supplier, officers, key employees, independent
contractors, customers or contract parties, (e) sold, assigned or transferred
any trademarks, trade names, copyrights, licenses, franchises or other
intangible assets or sold, leased, transferred, released or abandoned any of its
tangible or intangible assets, other than in the ordinary course of business,
(f) mortgaged, pledged or suffered any liens, encumbrances or charges against
its assets or properties, except as listed on Exhibit 4.11 hereto and the
Security Documents referenced in Section 4.5(d) above, (g) waived any rights of
a material value or canceled any debts or claims owed, (h) amended or terminated
any Contract that may individually or in the aggregate materially effect the
Company's business, (i) made any change in the compensation paid to employees,
other than increases based on merit and in the ordinary course, (j) adopted any
resolution or taken any other action with respect to dissolution, winding up or
liquidation of the Company, no such resolution has been proposed, and there is
no proceeding or other action pending or to the knowledge of the Company or
Shareholder, threatened, proposed or contemplated by any court, agency or group
of the Company's or Shareholder's creditors, or (k) to the best of Shareholder's
or the Company's knowledge, suffered any other event or condition materially
adversely affecting the Company, its properties, assets, operations or business.
4.12 EMPLOYEE BENEFITS
(a) The Company is not a party to and does not maintain or contribute
to any pension, profit sharing or other employee benefit plans, as defined in
section 3(3) of the ERISA, except as listed on Exhibit 4.12(a). Except as set
forth on Exhibit 4.12 (a) each plan listed on Exhibit 4.12(a) is in compliance,
and has been in compliance, with all applicable requirements of law including
the provisions of ERISA and the IRC, and no liability has been incurred by the
Company with respect to any such plan which, singly or in the aggregate, may
have an adverse effect on the Company's business, financial condition, results
of operation or prospects. Except as listed on Exhibit 4.12(a) the Company does
not maintain or contribute to any form of plan or agreement with any of its
employees, officers, directors, agents or representatives providing for present
or future employee benefits or deferred compensation of any nature whatsoever,
or stock options, stock purchases, unemployment compensation plan, vacation pay,
severance pay, bonus or benefit agreement, insurance or hospitalization program
or other fringe benefit arrangement, whether pursuant to contract, arrangement,
custom or informal understanding, whether or not such plan, arrangement or
agreement an "employee benefit plan" (as defined in section 3(3) of ERISA). The
Company is not a party to any employment agreement not terminable on thirty (30)
days' or less written notice, without further liability.
12
(b) The Company will make all contributions to employee benefit plans
listed on Exhibit 4.12(a) for all periods ending prior to the Closing Date
(including periods from the first day of the current plan year to the Closing
Date) no later than the day before the Closing Date in accordance with past
practice. Neither the Company nor any of its directors, officers, employees or
any other "fiduciary", as that term is defined in section 3(21) of ERISA of
section 4975 of the IRC, or committed any breach of fiduciary responsibility
imposed by ERISA or any other applicable law with respect to any employee
benefit plan listed on Exhibit 4.12 (a) which would subject the Company or Buyer
or any of their respective directors, officers or employees to liability under
ERISA or any applicable law. None of the assets of any employee benefit plan are
invested in any employer security (as defined in ERISA Section 407(d)(1) or
employer real property (as defined in ERISA Section 407(d)(2)).
(c) Neither the Company nor any member of the Controlled Group has ever
maintained, contributed to, or been obligated to contribute to any plan that is
subject to Title IV of ERISA or the minimum funding requirements of IRC section
412. Neither the Company nor any member of the Controlled Group has ever
contributed to, been obligated to contribute to, or incurred any liability
(whether primary or secondary) to a multiemployer plan (as such term is defined
in ERISA Section 3(37)). "Controlled Group" shall mean a controlled or
affiliated group within the meaning of IRC sections 414(b), (c), (m), or (o) of
which the Company (or a predecessor of the Company, including any entity that
merged into the Company) is or has ever been a member.
(d) The Company does not maintain or contribute to any plan that
provides retiree medical or retiree life insurance benefits to any person and is
not contractually or otherwise obligated (whether or not in writing) to provide
any person with life insurance or medical benefits upon retirement or
termination of employment, other than as required by the provisions of ERISA
sections 601 through 608 and Code section 4980B ("COBRA"). The Company has no
liability for post retirement welfare benefits, except for COBRA continuation
coverage.
(e) No payment made pursuant to the Company's compensation arrangements
and no payments resulting from the consummation of the Contemplated Transactions
Agreement will constitute an excess parachute payment as defined in Code section
280G.
(f) None of the transactions contemplated by this Agreement is a
"prohibited transaction", as such term is defined in ERISA section 406 of ERISA
or in IRC section 4975.
(g) There are no actions, suits or claims (other than routine claims
for benefits) pending or threatened involving any employee benefit plans or the
assets of such plans, and no facts exist that could give rise to any such
actions, suits or claims. Except as set forth in Exhibit 4.12 (a), there have
been no acts or omission by the Company that have given rise to or may give rise
to penalties, Taxes or related charges under sections 502(c), 502(i) or 4071 of
ERISA or chapter 43 of the IRC for which the Company may be liable.
(h) Except as set forth in Exhibit 4.12 (a), all group health plans of
the Company (and any predecessor of the Company including any entity that merged
into the Company) (including any plans of current and former affiliates of the
Company that must be taken into account under section 162(i) of the IRC or
section 601 of ERISA) have been operated in compliance with the group health
plan continuation coverage requirements of section 4980B of the IRC and section
601 of ERISA.
13
(i) The Company has the right to modify and terminate benefits to
retirees (other than pensions) with respect to both retired and active employees
without liability to the Company.
(j) Except as set forth in Exhibit 4.12 (a), the consummation of the
Contemplated Transactions will not result in the payment, vesting, or
acceleration of any benefit.
4.13 COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL AUTHORIZATION
(a) Except as set forth in Exhibit 4.13 and where noncompliance has
been corrected, as indicated on Exhibit 4.13:
(i) the Company is, and at all times since January 1, 1998 has
been, in full compliance with each Legal Requirement that is or was
applicable to it or to the conduct or operation of its business or the
ownership or use of any of its assets;
(ii) no event has occurred or circumstance exists that (with
or without notice or lapse of time) (A) may constitute or result in a
violation by the Company to comply with, any Legal Requirement, or (B)
may give rise to any obligation on the part of the Company to
undertake, or to bear all or any portion of the cost of, any remedial
action of any nature; and
(iii) the Company has not received, at any time since January
1, 1998, any notice or other written communication from any
Governmental Body or any other Person regarding (A) any actual,
alleged, possible, or potential violation of, or failure to comply
with, any Legal Requirement, or (B) any actual, alleged, possible, or
potential obligation on the part of the Company to undertake, or to
bear all or any portion of the cost of, any remedial action of any
nature.
(b) Exhibit 4.13 contains a complete and accurate list of each
Governmental Authorization that is held by the Company or that otherwise relates
to the business of, or to any of the assets owned or used by, the Company. Each
Governmental Authorization listed or required to be listed in Exhibit 4.13 is
valid and in full force and effect. Except as set forth in Exhibit 4.13:
(i) the Company is, and at all times since January 1, 1998 has
been, in full compliance or such noncompliance has been corrected with
all of the terms and requirements of each Governmental Authorization
identified or required to be identified in Exhibit 4.13;
(ii) no circumstance exists that may (with or without notice
or lapse of time) (A) constitute or result directly or indirectly in a
violation of or a failure to comply with any term or requirement of any
Governmental Authorization listed or required to be listed in Exhibit
4.13 or (B) result directly or indirectly in the revocation,
withdrawal, suspension, cancellation, or termination of, or any
modification to, any Governmental Authorization listed or required to
be listed in Exhibit 4.13;
14
(iii) the Company has not received, at any time since January
1, 1998, any notice or other written communication from any
Governmental Body or any other Person regarding (A) any actual,
alleged, possible, or potential violation of or failure to comply with
any term or requirement of any Governmental Authorization, or (B) any
actual, proposed, possible, or potential revocation, withdrawal,
suspension, cancellation, termination of, or modification to any
Governmental Authorization; and
(iv) all applications required to have been filed and all fees
required to be paid for the renewal of the Governmental Authorizations
listed or required to be listed in Exhibit 4.13 have been duly filed on
a timely basis with the appropriate Governmental Bodies, and all other
filings required to have been made with respect to such Governmental
Authorizations have been duly made on a timely basis with the
appropriate Governmental Bodies.
The Governmental Authorizations listed in Exhibit 4.13 collectively constitute
all of the Governmental Authorizations necessary to permit the Company to
lawfully conduct and operate its business and to permit the Company to own and
use its assets in the manner in which it currently owns and uses such assets.
4.14 LEGAL PROCEEDINGS; ORDERS
(a) Except as set forth in Exhibit 4.14, there is no pending or, to the
knowledge of the Shareholder or Company, Threatened Proceeding:
(i) that has been commenced by or against the Company or that
otherwise relates to or may affect the business of, or any of the
assets owned or used by, the Company; or
(ii) that arises from an alleged breach by the Company or
Shareholder of any Contract;
(iii) that challenges, or that may have the effect of
preventing, delaying, making illegal, or otherwise interfering with,
any of the Contemplated Transactions. To the Knowledge of the Company,
(1) no such Proceeding has been Threatened, and (2) no event has
occurred or circumstance exists that may give rise to or serve as a
basis for the commencement of any such Proceeding.
The Company has delivered to Buyer copies of all pleadings, correspondence, and
other documents relating to each Proceeding listed in Exhibit 4.14. If decisions
adverse to the Company are rendered in all of the Proceedings, the Proceedings
listed in Exhibit 4.14 will not have a material adverse effect on the business,
operations, assets, condition, or prospects of the Company.
(b) Except as set forth in Exhibit 4.14:
(i) there is no Order to which the Company, or any of the
assets or Stores owned or used by the Company, is subject; and
(ii) to the Knowledge of the Company or the Shareholder, no
officer, director, agent, or employee of the Company is subject to any
Order that prohibits such officer, director, agent, or employee from
engaging in or continuing any conduct, activity, or practice relating
to the business of the Company.
(c) Except as set forth in Exhibit 4.14:
(i) the Company is, and at all times, has been, in full
compliance with all of the terms and requirements of each Order to
which it, or any of the assets or Stores owned or used by it, is or has
been subject;
(ii) no event has occurred or circumstance exists that may
constitute or result in (with or without notice or lapse of time) a
violation of or failure to comply with any term or requirement of any
Order to which the Company, or any of the assets owned or used by the
Company, is subject; and
15
(iii) neither the Shareholder nor the Company has received any
notice or other written communication from any Governmental Body or any
other Person regarding any actual, alleged, possible, or potential
violation of, or failure to comply with, any term or requirement of any
Order to which the Company, or any of the assets owned or used by the
Company, is or has been subject.
4.15 ABSENCE OF CERTAIN CHANGES AND EVENTS
Except as set forth in Exhibit 4.15, since April 3, 1999, the Company has
conducted its business only in the Ordinary Course of Business and there has not
been any:
(a) change in the Company's authorized or issued capital stock; grant
of any stock option or right to purchase shares of capital stock of the Company;
issuance of any security convertible into such capital stock; grant of any
registration rights; repurchase, redemption, retirement, or other acquisition by
the Company of any shares of any such capital stock; or declaration or payment
of any dividend or other distribution or payment in respect of shares of capital
stock;
(b) amendment to the Certificate of Incorporation or Bylaws of the
Company;
(c) payment or increase by the Company of any bonuses, salaries, or
other compensation to any stockholder, director, officer, or (except in the
Ordinary Course of Business) employee or entry into any employment, severance,
or similar Contract with any director, officer, or employee;
(d) adoption of, or increase in the payments to or benefits under, any
profit sharing, bonus, deferred compensation, savings, insurance, pension,
retirement, or other employee benefit plan for or with any employees of the
Company;
(e) damage to or destruction or loss of any asset or property of the
Company, whether or not covered by insurance, in excess of $5,000 or materially
and adversely affecting the properties, assets, business, financial condition,
or prospects of the Company, taken as a whole, or of any Store;
(f) entry into, termination of, or receipt of notice of termination of
(i) any license, distributorship, dealer, sales representative, joint venture,
credit, or similar agreement, or (ii) any Contract or transaction involving a
total remaining commitment by or to the Company of at least $2,000 or not in the
Ordinary Course of Business, other than termination of a lease for the closed
Store located at 0000 XX Xxxxxxx Xxxxxx, Xxxxxxxx, Xxxxxx (the "Xxxxxxx Store"),
or the payment of certain deferred maintenance costs for the Xxxxxxx Store;
(g) sale (other than sales of inventory in the Ordinary Course of
Business), lease, or other disposition of any asset or property of the Company
or mortgage, pledge, or imposition of any lien or other encumbrance on any
material asset or property of the Company, including the sale, lease, or other
disposition of any of the Intellectual Property Assets;
16
(h) cancellation or waiver of any claims or rights with a value to
the Company in excess of $5,000;
(i) material change in the accounting methods used by the Company;
or
(j) agreement, whether oral or written, by the Company or Shareholder
to do any of the foregoing.
4.16 CONTRACTS; NO DEFAULTS
(a) Exhibit 4.16 contains a complete and accurate list, and the Company
has delivered to Buyer true and complete copies all written contracts and
provided detailed summaries of oral (as such are known to the General Manager of
the Company) agreements, of:
(i) each Contract that involves performance of services or
delivery of goods or materials by or to the Company of an amount or
value in excess of $2,000; unless such contract is cancelable by the
Company with not more than 90 days notice and the amount or value of
the services to be performed or of the goods or materials to be
delivered by or to the Company within such 90 day period would not
exceed $2,000;
(ii) each Contract that was not entered into in the Ordinary
Course of Business or that involves expenditures or receipts of the
Company in excess of $2,000;
(iii) each lease, rental or occupancy agreement, license,
installment and conditional sale agreement, and other Contract
affecting the ownership of, leasing of, title to, use of, or any
leasehold or other interest in, any real or personal property (except
personal property leases and installment and conditional sales
agreements having a value per item or aggregate payments of less than
$2,000 and with terms of less than one year);
(iv) each licensing agreement or other Contract (except for
commonly available software programs with a value of less than $2,000)
with respect to patents, trademarks, copyrights, or other intellectual
property, including agreements with current or former employees,
consultants, or contractors regarding the appropriation or the
nondisclosure of any of the Intellectual Property Assets;
(v) each joint venture, partnership, and other Contract to or
with any labor union or other employee representative of a group of
employees;
(vi) each Contract containing covenants that in any way
purport to restrict the business activity of the Company, the parties
with whom it contracts or limit the freedom of the Company to engage in
any line of business or to compete with any Person or that purport to
grant an option to any Person to acquire any of the assets of the
Company or Shares of the Company;
17
(vii) each Contract providing for payments to or by any Person
based on sales, purchases, or profits, other than direct payments for
goods;
(viii) each power of attorney that is currently effective and
outstanding;
(ix) each Contract entered into other than in the Ordinary
Course of Business that contains or provides for an express undertaking
by the Company to be responsible for consequential damages;
(x) each Contract for capital expenditures in excess of
$25,000;
(xi) each written warranty, guaranty, and or other similar
undertaking with respect to contractual performance of any Person
extended by the Company other than in the Ordinary Course of Business;
(xii) each amendment, supplement, and modification in respect
of any of the foregoing; and
(xiii) each Contract for the removal of hazardous wastes or
materials, as defined under Legal Requirements or for its disposal.
(b) Except as set forth in Exhibit 4.16: to the Knowledge of the
Shareholder and the Company, no officer, director or employee, of the Company is
bound by any Contract that purports to limit the ability of such officer,
director or employee, to (i) engage in or continue any conduct, activity, or
practice relating to the business of the Company, or (ii) assign to the Company
or to any other Person any rights to any invention, improvement, or discovery.
(c) Except as set forth in Exhibit 4.16, each Applicable Contract is in
full force and effect and is valid and enforceable in accordance with its terms.
(d) Except as set forth in Exhibit 4.16:
(i) the Company is, and at all times since January 1, 1998 has
been, in full compliance with all material applicable terms and
requirements of each Applicable Contract under which the Company has or
had any obligation or liability or by which the Company or any of the
assets owned or used by the Company is or was bound;
(ii) to the best of the Company's Knowledge each other Person
that has or had any obligation or liability under any Applicable
Contract under which the Company has or had any rights is, and at all
times since January 1, 1998 has been, in full compliance with all
material applicable terms and requirements of such Contract;
(iii) no event has occurred or circumstance exists since
January 1, 1998 that (with or without notice or lapse of time) may
contravene, conflict with, or result in a material violation or breach
of by the Company or other Person, or give the Company or other Person
the right to declare a default or exercise any remedy under, or to
accelerate the maturity or performance of, or to cancel, terminate, or
modify, any Applicable Contract; and
18
(iv) the Company has not given to or received from any other
Person, at any time any notice or other communication (whether oral or
written) regarding any actual, alleged, possible, or potential
violation or breach of, or default under, any Applicable Contract by
the Company where such breach was not subsequently cured or Proceedings
commenced.
(e) There are no renegotiations of, attempts to renegotiate, or
outstanding rights to renegotiate any material amounts paid or payable to the
Company under current or completed Contracts with any Person and, no such Person
has made written demand to the Company for such renegotiation.
(f) The Contracts relating to the sale, design, manufacture, or
provision of products or services by the Company have been entered into in the
Ordinary Course of Business and have been entered into without the commission of
any act alone or in concert with any other Person, or any consideration having
been paid or promised, that is or would be in violation of any Legal Requirement
by the Company.
4.17 INSURANCE
(a) The Company has delivered to Buyer:
(i) true and complete copies of all policies of insurance,
including policies for workers compensation insurance, to which the
Company is a party or under which the Company is or has been covered at
any time within the three years preceding the date of this Agreement;
and
(ii) true and complete copies of all pending applications for
policies of insurance.
(b) Exhibit 4.17 describes:
(i) any self-insurance arrangement by or affecting
the Company, including any reserves established thereunder;
(ii) any contract or arrangement, other than a policy of
insurance, for the transfer or sharing of any risk by the Company; and
(iii) all obligations of the Company to third parties with
respect to insurance (including such obligations under leases and
service agreements) and identifies the policy under which such coverage
is provided.
(c) The Company has delivered to Buyer for the current policy year and
each of the two preceding policy years:
(i) a summary of the loss experience under each policy;
(ii) a statement describing each claim under an
insurance policy for an amount in excess of $25,000, which sets
forth:
(A) the name of the claimant;
(B) a description of the policy by insurer, type of
insurance, and period of coverage; and
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(C) the amount and a brief description of the
claim; and
(iii) a statement describing the loss experience for all
claims that were self-insured including the number and aggregate cost
of such claims, or for claims where insurance coverage was denied.
(d) Except as set forth on Exhibit 4.17:
(i) All policies to which the Company is a party or that
provide coverage to the Company:
(A) are valid, outstanding, and enforceable;
(B) taken together are believed by the Company to
provide adequate insurance coverage for the assets and the
operations of the Company for all risks normally insured
against by a Person carrying on the same business or
businesses as the Company and for all risks to which the
Company is normally exposed ;
(C) are sufficient for compliance with all Legal
Requirements and Contracts to which the Company is a party or
by which it is bound;
(D) will continue in full force and effect following
the consummation of the Contemplated Transactions until
terminated in accordance with their terms; and
(E) except for the Company's worker's compensation
insurance, do not provide for any retrospective premium
adjustment or other experience-based liability on the part of
the Company.
(ii) The Company has not, since the Balance Sheet Date,
received (A) any refusal of coverage or any notice that a defense will
be afforded with reservation of rights, or (B) any notice of
cancellation or any other indication that any insurance policy is no
longer in full force or effect or will not be renewed or that the
issuer of any current or past policy is not willing or able to perform
its obligations thereunder.
(iii) The Company has paid all premiums when due, and has
otherwise performed all of its respective obligations, under each
policy to which any Company is a party or that provides coverage to the
Company or director thereof.
(iv) The Company has given notice to each current or past
insurer of all claims that may be insured thereby to the extent that
such claims are known to the Company.
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4.18 EMPLOYEES
(a) Exhibit 4.18 contains a complete and accurate list, as of April 22,
1999, of the following information for each employee or director of the Company,
including each employee on leave of absence or layoff status: employer; name;
job title; current compensation paid or payable; vacation accrued; service
credited for purposes of vesting and eligibility to participate under the
Company's pension, retirement, profit-sharing, thrift-savings, deferred
compensation, stock bonus, stock option, cash bonus, employee stock ownership
(including investment credit or payroll stock ownership), severance pay,
insurance, medical, welfare, or vacation plan, other Employee Pension Benefit
plan or Employee Welfare Benefit Plan, or any other employee benefit plan or any
Director Plan.
(b) To the Company's knowledge, no employee or director of the Company
is a party to, or is otherwise bound by, any agreement or arrangement, including
any confidentiality, noncompetition, or proprietary rights agreement, between
such employee or director and any other Person ("Proprietary Rights Agreement")
that in any way adversely affects or will affect (i) the performance of his
duties as an employee or director of the Company, or (ii) the ability of the
Company to conduct its business. Except as indicated on Exhibit 4.18(b), to the
Company's Knowledge, no officer, or other key employee of the Company intends to
terminate his employment with the Company. No employee of the Company is a party
to an employment agreement with the Company which may (A) limit the Company's
ability to terminate the employee at will, (B) require the Company to pay any
severance or other amounts on a termination of employment, whether for cause or
otherwise, other than for work performed to the date of termination and accrued
benefits to which the employee is entitled under Company policy and applicable
Legal Requirements.
(c) Exhibit 4.18 also contains a complete and accurate list of the
following information for each retired employee or director of the Company, or
their dependents, receiving benefits or scheduled to receive benefits in the
future: name, pension benefit, pension option election, retiree medical
insurance coverage, retiree life insurance coverage, and other benefits.
(d) As of the Closing Date, the Company or the Shareholder shall have
(i) paid all wages, including overtime wages, due to any employee of the Company
for work performed by the employee prior to the Closing Date; (ii) made all
applicable withholdings and timely payment of payroll taxes, FICA, FUTA, SUTA
and other taxes derived from the payment of wages to employees, or collected all
such amounts in reserve for timely payment when due by the Company. All taxes
collected but not yet paid shall be in the possession of the Company as of the
date of Closing and shall be shown on the books of the Company as of the date of
closing as a tax liability accrual.
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4.19 LABOR RELATIONS; COMPLIANCE
The Company is not a party to any collective bargaining or other labor Contract.
Since January 1, 1998, there has not been, there is not presently pending or
existing, and there is not Threatened, (a) any strike, slowdown, picketing, work
stoppage, or employee grievance process (b) any Proceeding against or affecting
the Company relating to the alleged violation of any Legal Requirement
pertaining to labor relations or employment matters, including any charge or
complaint filed by an employee or union with the National Labor Relations Board,
the Equal Employment Opportunity Commission, or any comparable Governmental
Body, organizational activity, or other labor or employment dispute against or
affecting any of the Company or their premises, or (c) any application for
certification of a collective bargaining agent. No event has occurred or
circumstance exists that could provide the basis for any work stoppage or other
labor dispute. There is no lock-out of any employees by the Company, and no such
action is contemplated by the Company. The Company has complied in all material
respects with all Legal Requirements relating to employment, equal employment
opportunity, classification of exempt and non-exempt status, nondiscrimination,
immigration, wages, including overtime wages, hours, benefits, collective
bargaining, the payment of social security and similar taxes, occupational
safety and health, and plant closing and all other legal requirements, the
failure to comply with which may result in liability to or adverse impact on the
Company or its operations. The Company is not liable for the payment of any
compensation, damages, taxes, fines, penalties, or other amounts, however
designated, for failure to comply with any of the foregoing Legal Requirements.
4.20 INTELLECTUAL PROPERTY
(a) Intellectual Property Assets - The term "Intellectual
Property Assets" includes: the Company's name, all fictional business
names, trade names, registered and unregistered trademarks, service marks,
applications (collectively, "Marks");
(b) Agreements - Exhibit 4.20(b) contains a complete and accurate list
and summary description, including any royalties paid or received by the
Company, of all Contracts relating to the Intellectual Property Assets to which
the Company is a party or by which the Company is bound, except for any license
implied by the sale of a product and perpetual, paid-up licenses for commonly
available software programs with a value of less than $2,000 under which the
Company is the licensee. There are no outstanding and, to the Company's and
Shareholders' Knowledge, no Threatened disputes or disagreements with respect to
any such agreement.
(c) Trademarks
(i) Exhibit 4.20(c) contains a complete and accurate list and
summary description of all Marks.
(ii) No Xxxx has been or is now involved in any opposition, or
invalidation, or cancellation and, to the Company's Knowledge, no such
action is Threatened with the respect to any of the Marks.
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(iii) To the Company's Knowledge, there is no potentially
interfering registered trademark or trademark application of any third
party.
(iv) To the Company's Knowledge, no Xxxx is infringed or, has
been challenged or threatened in any way. None of the Marks used by the
Company to the Company's Knowledge infringes or is alleged to infringe
any trade name, trademark, or service xxxx of any third party.
4.21 DISCLOSURE
(a) No representation or warranty of the Company or the Shareholder in
this Agreement and no statement in the Exhibits omits to state a material fact
necessary to make the statements herein or therein, in light of the
circumstances in which they were made, not misleading.
(b) No notice given pursuant to Section 6.5 will have contained any
untrue statement or omit to state a material fact necessary to make the
statements therein or in this Agreement, in light of the circumstances in which
they were made, not misleading.
(c) Except as set forth in Exhibit 4.21 (c) there is no fact known to
the Company or Shareholder that has specific application to the Company (other
than general economic or industry conditions) and that materially adversely
affects or, is known to materially threaten, the assets, business, prospects,
financial condition, or results of operations of the Company that has not been
set forth in this Agreement or the Exhibits.
4.22 BROKERS OR FINDERS
Neither the Company nor the Shareholder nor their agents have incurred any
obligation or liability, contingent or otherwise, for brokerage or finders' fees
or agents' commissions or other similar payment in connection with this
Agreement, and will indemnify and hold Buyer harmless from any such payments
alleged to be due by or through the Company or Shareholder as a result of the
action of the Company, Shareholders or their officers or agents.
4.23 ENVIRONMENTAL MATTERS
(a) For the purposes of Section 4.23
(i) "Environmental Claim" means any claim, action,
cause of action, investigation or written notice by any person or
entity alleging potential liability (including, without limitation,
potential liability for investigatory costs, cleanup costs,
governmental response costs, natural resources damages, property
damages, personal injuries, or penalties) arising out of, based on or
resulting from (a) the presence, or release into the environment, of
any Material of Environmental Concern at any location, whether or not
owned or operated by the person making the representation, or (b)
circumstances forming the basis of any violation, or alleged violation,
of any Environmental Law.
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(ii) "Environmental Laws" means all federal, state,
local and foreign laws and regulations relating to pollution or
protection of human health or the environment (including, without
limitation, ambient air, surface water, ground water, land surface or
subsurface strata), including, without limitation, laws and regulations
relating to emissions. discharges, releases or threatened releases of
Materials of Environmental Concern, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Materials of Environmental Concern.
(iii) "Materials of Environmental Concern" means
chemicals, pollutants, contaminants, wastes, toxic substances,
asbestos, petroleum and petroleum products.
(b) Company is in compliance with all applicable Environmental Laws,
which compliance includes, but is not limited to the possession by Company of
all permits and other governmental authorizations required under applicable
Environmental Laws, and compliance with the terms and conditions thereof. Except
as set forth in Exhibit 4.23, Company has not received any written
communication, from a governmental authority that alleges that Company is not in
such full compliance and, to the best of Company's knowledge, there are no
circumstances that may prevent or interfere with such full compliance in the
future. All permits and other governmental authorizations currently held by
Company pursuant to the Environmental Laws are identified in Exhibit 4.23.
(c) Except as set forth in Exhibit 4.23 there is no Environmental Claim
pending or, to the best of Company's or Shareholder's knowledge, Threatened
against Company or, to the best of Company's or Shareholder's knowledge, against
any person or entity whose liability for any Environmental Claim Company has or
may have retained or assumed either contractually or by operation of law.
(d) Except as set forth in Exhibit 4.23 to the best of Company's or
Shareholder's knowledge, there are no past or present actions, activities,
circumstances, conditions, events or incidents, including, without limitation,
the release, emission, discharge, presence or disposal of any Material of
Environmental Concern, that would form the basis of any Environmental Claim
against Company or against any person or entity contractually or by operation of
law.
(e) Without in any way limiting the generality of the foregoing, (i)
all on-site and off-site locations where Company has stored, disposed of or, to
the Company's Knowledge, arranged for the disposal of, Materials of
Environmental Concern are identified in Exhibit 4.23, (ii) all underground
storage tanks (whether or not in use by Company), and the capacity and contents
of such tanks, located on property owned or leased by Company are identified in
Exhibit 4.23, (iii) except as set forth in Exhibit 4.23, there is no asbestos
contained in or forming part of any building, building component, structure or
office space owned or leased by Company, and (iv) except as set forth in Exhibit
4.23, no polychlorinated biphenyls (PCBs) are used or stored at any property
owned or leased by the Company.
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(f) Environmental Indemnification. Notwithstanding anything contained
herein to the contrary, Company's and Shareholder's indemnification obligations
pursuant to this Section shall be deemed to include any and all Losses sustained
by, imposed on, incurred by, or accrued against Buyer, the Company, their
Affiliates, and their respective stockholders, directors, officers, employees,
agents, representatives, successors and assigns, as a result of any
representations or warranties being in any way untrue or misleading when made or
as of the Closing Date.
(g) No Violation of Environmental Laws.The business of the Company as
currently being conducted does not violate any applicable law or regulation
relating to pollution, the environment, human safety and health, transportation
or the production, storage, labeling or disposition of Wastes (as hereinafter
defined). The Company has not (and to the Company's or Shareholder's Knowledge
no other Person has) placed, held, located, stored, buried, dumped, disposed,
spilled or released any Materials of Environmental Concern on, beneath or about
any of the properties used, owned or leased by the Company. The Company has not
received any written notice from any governmental agency or private or public
entity advising it that it is responsible for or potentially responsible for
corrective action or investigation or response costs with respect to a release,
a threatened released or clean up of Wastes and has no reason to believe that
such notice may be forthcoming.
4.24 REPRESENTATIONS OF THE SHAREHOLDER
The Shareholders represents and warrants to Buyer as follows:
(a) This Agreement constitutes the legal, valid, and binding obligation
of the Shareholder, enforceable in accordance with its terms. The Shareholder
has the absolute and unrestricted right, power, authority, and capacity to
execute and deliver this Agreement and to perform its obligations under this
Agreement.
(b) Except as set forth in Exhibit 4.24, neither the execution and
delivery of this Agreement nor the consummation or performance of any of the
Contemplated Transactions will, directly or indirectly (with or without notice
or lapse of time):
(i) contravene, conflict with, or result in a violation of (A)
any provision of the Organizational Documents of the Company, or (B)
any resolution adopted by the board of directors or the shareholders of
the Company;
(ii) contravene, conflict with, or result in a violation of,
or give any Governmental Body or other Person the right to challenge
any of the Contemplated Transactions or to exercise any remedy or
obtain any relief under, any Legal Requirement or any Order to which
the Shareholder may be subject;
(iii) require the Shareholder to give any notice to or obtain
any Consent from any Person in connection with the execution and
delivery of this Agreement or the consummation or performance or any of
the Contemplated Transactions.
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4.25 COMPLIANCE WITH SECURITIES ACT
Shareholder warrants that the transfer of the Shares will be made in accordance
with the Securities Act and all regulations promulgated thereunder and all
applicable state securities laws. Shareholder will make all filings and pay all
fees required to effect the transfer of the Shares.
4.26 YEAR 2000 DISCLOSURE
"Year 2000 Compliant" shall mean that an asset shall not cease to operate,
function properly, or properly process information because of an inability to
recognize the date "1/1/00" as January 1, 2000, or to process information such
as credit card information bearing the date "1/1/00". The Company has developed
the Compliance Plan as set forth on Exhibit 4.26. The Company's status report is
attached as Exhibit 4.26.
5. REPRESENTATIONS AND WARRANTIES OF BUYER
5.1 ORGANIZATION AND GOOD STANDING
Buyer is a corporation duly organized, validly existing, and in good standing
under the laws of the Delaware.
5.2 AUTHORITY; NO CONFLICT
(a) This Agreement constitutes the legal, valid, and binding obligation
of Buyer enforceable against Buyer in accordance with its terms. Buyer, subject
to the consents set forth in Exhibit 5.2(b), has the absolute and unrestricted
right, power, and authority to execute and deliver this Agreement and to perform
its obligations under this Agreement.
(b) Except as set forth in Exhibit 5.2(b), neither the execution and
delivery of this Agreement by Buyer, nor the consummation or performance of any
of the Contemplated Transactions by Buyer will give any Person the right to
prevent, delay, or otherwise interfere with any of the Contemplated Transactions
pursuant to:
(i) any provision of the Organizational Documents of Buyer;
(ii) any resolution adopted by the board of directors or
the stockholders of Buyer;
(iii) any Legal Requirement or Order to which Buyer may be
subject; or
(iv) any Contract to which Buyer is a party or by which Buyer
may be bound.
Except as set forth in Exhibit 5.2(b), Buyer is or will not be required to
obtaining any Consent from any Person in connection with the execution and
delivery of this Agreement or the consummation or performance of any of the
Contemplated Transactions.
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5.3 CERTAIN PROCEEDINGS
There is no pending Proceeding that has been commenced against Buyer and that
challenges, or may have the effect of preventing, delaying, making illegal, or
otherwise interfering with, any of the Contemplated Transactions. To the
Knowledge of Buyer, no such Proceeding has been Threatened.
5.4 BROKERS OR FINDERS
Buyer and its officers and agents have incurred no obligation or liability,
contingent or otherwise, for brokerage or finders' fees or agents' commissions
or other similar payment in connection with this Agreement and will indemnify
and hold the Company and the Shareholder harmless from any such payment alleged
to be due by or through Buyer as a result of the action of Buyer or its officers
or agents.
6. COVENANTS OF THE SHAREHOLDER AND THE COMPANY PRIOR TO
CLOSING DATE
6.1 ACCESS AND INVESTIGATION
Between the date of this Agreement and the Closing Date, the Shareholder will,
and will cause the Company and its Representatives to, (a) afford Buyer and its
Representatives and prospective lenders and their Representatives (collectively,
"Buyer's Advisors") full and free access to the Company's personnel, properties
(including subsurface testing), contracts, books and records, and other
documents and data, (b) furnish Buyer and Buyer's Advisors with copies of all
such contracts, books and records, and other existing documents and data as
Buyer may reasonably request, and (c) furnish Buyer and Buyer's Advisors with
such additional financial, operating, and other data and information as Buyer
may reasonably request. All due diligence activities will be cleared through the
Company's designated representatives or legal counsel and a high degree of care
will be exercised by Buyer and its representatives to avoid disclosure of the
proposed transaction or cause for concern by employees, customers or suppliers
of the Company as a result of such due diligence activities.
6.2 OPERATION OF THE BUSINESSES OF THE COMPANY
(a) Between the date of this Agreement and the Closing Date, the
Shareholder will, and will cause the Company to:
(i) conduct the business of the Company only in the
Ordinary Course of Business except as otherwise expressly agreed by Buyer;
(ii) use its Best Efforts to preserve intact the current
business organization of the Company, keep available the services of
the current officers, employees, and agents of the Company, and
maintain the relations and good will with suppliers, customers,
landlords, creditors, employees, agents, and others having business
relationships with the Company;
27
(iii) confer with Buyer concerning operational matters of a
material nature; and
(iv) otherwise report periodically to Buyer concerning the
status of the business, operations, and finances of the Company.
6.3 CONSTRUCTION OF NEW STORES
(a) Shareholder shall, and shall cause the Company to continue to
construct, fixture and stock the Company's New Stores in accordance with the
construction budgets, plans and timetables attached hereto as Exhibit 6.3.
Shareholder and the Company shall use their Best Efforts to complete the
construction of, fully stock and open the New Stores for business prior to the
Closing Date of the Contemplated Transactions.
(b) If, as of the Closing Date, either of the New Stores is not yet
open for business, Shareholder shall, as to the unopened New Stores, assume the
supervisory responsibility for and shall reimburse Buyer for the cost of (i)
completing the construction of all planned leasehold improvements and
installation of all planned equipment and fixtures, as reflected in the budget
attached hereto as Exhibit 6.3,, (ii) fully stocking the New Store with all
required inventory necessary to operate the New Store in the same manner as the
Stores already operating, and (iii) obtaining all permits, licenses, approvals
and other items required to commence operations at the New Stores in accordance
with the plans and specifications, including but not limited to any permitting
fees, tap or utility connection fees, development fees and licensing fees. All
outstanding invoices or obligations for costs incurred to the Closing Date and
remaining unpaid for design, construction, permitting, fixturing and stocking
with inventory of the New Stores shall be paid by Buyer, and the Shareholder
shall reimburse Buyer weekly for invoices paid by Buyer in the previous week. If
Shareholder fails to timely reimburse Buyer for such amounts paid by Buyer,
Buyer may, on notice to the Shareholder, offset the amounts paid against the
principal balance of the Assumed Note
(c) The parties acknowledge that certain of the Company's personnel are
currently responsible for supervising and constructing improvements to the New
Stores. From the day following the Closing Date until the New Stores are opened
and all punch list items (as defined below) are corrected to the reasonable
satisfaction of Buyer, the Shareholder shall appoint a project director employed
and paid by Shareholder. To the extent such project director utilizes Company
personnel after the Closing, Shareholder shall reimburse the Company for all
costs (including benefit costs) directly related to one such Company employee.
To the extent Buyer receives invoices after the Closing Date for completion of
the construction of the New Stores, such invoices shall be forwarded for review
by the Shareholder's project director and authorized for payment according to
the invoice terms by Buyer. The Shareholder shall immediately reimburse Buyer on
a weekly basis for all such approved invoices paid by Buyer in the previous
week. If Shareholder fails to timely reimburse Buyer for paid New Store
invoices, Buyer may offset unpaid amounts against the principal balance of the
Assumed Note.
28
(d) If Shareholder fails to turn the New Stores over to Buyer, fully
fixtured, stocked and ready for business, on or before August 1, 1999, Buyer may
complete the construction, fixturing, stocking and permitting of the New Stores
and obtain reimbursement from Shareholder of all amounts expended by Buyer,
together with a 10% management fee based on the cost of the unfinished portion
of the work required to open the New Store, within 10 days after presentation of
an invoice to Shareholder.
(e) Shareholder and the Company represent and warrant, as of all
periods prior to the Closing Date, and Shareholder represents and warrants to
Buyer (to the extent that either of the New Stores is not opened prior to the
Closing date) for all periods after the Closing Date, that (i) the New Stores
shall be completed in accordance with all applicable Legal Requirements, (ii)
when completed, the New Stores shall be in compliance in all material respects
with the plans and specifications attached hereto as Exhibit 6.3, (iii) all
Persons supplying materials and services for the New Stores shall be paid in
full at the completion of the work provided by such Persons, (iv) the New Stores
shall be free of all liens and encumbrances, including mechanics and
materialmens' liens, and the Shareholder shall, within five days after notice of
the filing of any lien against the property underlying the New Stores, pay all
amounts due or obtain a bond, in amount and form satisfactory to Buyer,
sufficient to release the lien. The Shareholder shall, at its expense, defend
the Company and Buyer, using counsel reasonably satisfactory to Buyer, against
any suit brought by any party relating to sums owed for work performed on the
New Stores, and (v) when completed, the New Stores shall be in good condition
and repair, that each New Store shall have a full inventory of goods for sale
and supplies used in the operations of the New Store, and all inventory of goods
for sale therein shall be usable and saleable in the Ordinary Course of Business
and not damaged or out of code. At such time as the New Stores are completed
(whether prior to or after the Closing date), Shareholder shall notify Buyer of
the completion, and the parties shall perform a walk through with the Company's
construction personnel and a Representative of Shareholder, at which time the
parties shall identify "punch list" items to be corrected or completed.
Shareholder shall, and shall cause the Company (if prior to Closing) to correct
or complete all punch list items within 15 days following the walkthrough.
6.4 NEGATIVE COVENANT
Except as otherwise expressly permitted by this Agreement, between the date of
this Agreement and the Closing Date, the Company and the Shareholders will not,
and will cause the Company not to, without the prior consent of Buyer, take any
affirmative action, or fail to take any reasonable action within their or its
control, as a result of which any of the changes or events listed in Section
4.11 or 4.15 is likely to occur.
6.5 REQUIRED APPROVALS
As promptly as practicable after the date of this Agreement, the Shareholder
will, and will cause the Company to at Shareholder's expense, make all filings
required by Legal Requirements to be made by them in order to consummate the
Contemplated Transactions (including all filings under the HSR Act). Between the
date of this Agreement and the Closing Date, the Shareholder will, and will
cause the Company to, (a) cooperate with Buyer with respect to all filings that
Buyer elects to make or is required by Legal Requirements to make in connection
with the Contemplated Transactions, and (b) cooperate with Buyer in obtaining
all consents identified in Exhibit 4.1 (including taking all actions requested
by Buyer to cause early termination of any applicable waiting period under the
HSR Act). The parties shall each bear one-half of the filing fees under the HSR
Act.
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6.6 NOTIFICATION
Between the date of this Agreement and the Closing Date, the Company and the
Shareholder will promptly notify Buyer in writing if the Shareholder or the
Company becomes aware of any fact or condition that causes or constitutes a
Breach of any of the Company's or the Shareholder's representations and
warranties as of the date of this Agreement, or if the Shareholder or the
Company becomes aware of the occurrence after the date of this Agreement of any
fact or condition that would (except as expressly contemplated by this
Agreement) cause or constitute a Breach of any such representation or warranty
had such representation or warranty been made as of the time of occurrence or
discovery of such fact or condition. Should any such fact or condition require
any change in the Exhibits if the Exhibits were dated the date of the occurrence
or discovery of any such fact or condition, the Company will promptly deliver to
Buyer a supplement to the Exhibits specifying such change. During the same
period, the Company will promptly notify Buyer of the occurrence of any Breach
of any covenant of the Company or Shareholder in this Section 6 or of the
occurrence of any event that may make the satisfaction of the conditions in
Section 8 impossible or unlikely.
6.7 NO NEGOTIATION
Until such time, if any, as this Agreement is terminated pursuant to Section 10,
the Shareholder will not, and will cause the Company and each of their
Representatives not to, directly or indirectly solicit, initiate, or encourage
any inquiries or proposals from, discuss or negotiate with, provide any
non-public information to, or consider the merits of any unsolicited inquiries
or proposals from, any Person (other than Buyer) relating to any transaction
involving the sale of the business or assets (other than in the Ordinary Course
of Business) of the Company, or any of the capital stock of the Company, or any
merger, consolidation, business combination, or similar transaction involving
the Company except with the prior consent of Buyer.
6.8 BEST EFFORTS
Between the date of this Agreement and the Closing Date, the Shareholder and the
Company will use their Best Efforts to cause the conditions in Sections 8 and 9
to be satisfied.
7. COVENANTS OF BUYER PRIOR TO CLOSING DATE
7.1 APPROVALS OF GOVERNMENTAL BODIES
As promptly as practicable after the date of this Agreement, Buyer will make all
filings required by Legal Requirements to be made by it to consummate the
Contemplated Transactions (including all filings under the HSR Act). Between the
date of this Agreement and the Closing Date, Buyer will cooperate with the
Shareholder at Shareholder's expense with respect to all filings that the
Shareholder is required by Legal Requirements to make in connection with the
Contemplated Transactions, and (ii) cooperate with the Shareholder in obtaining
all consents identified in Exhibit 4.1; provided that this Agreement will not
require Buyer to dispose of or make any change in any portion of its business or
to incur any other burden to obtain a Governmental Authorization.
The parties shall each bear one-half of the filing fees under the HSR Act.
30
7.2 BEST EFFORTS
Between the date of this Agreement and the Closing Date, Buyer will use its
Best Efforts to cause the conditions in Sections 8 and 9 to be satisfied.
7.3 NOTIFICATION
Between the date of this Agreement and the Closing Date, the Buyer will promptly
notify the Company and Shareholder in writing if the Buyer becomes aware of any
fact or condition that causes or constitutes a Breach of any of the Buyer's
representations and warranties as of the date of this Agreement, or if Buyer
becomes aware of the occurrence after the date of this Agreement of any fact or
condition that would (except as expressly contemplated by this Agreement) cause
or constitute a Breach of any such representation or warranty had such
representation or warranty been made as of the time of occurrence or discovery
of such fact or condition. Should any such fact or condition require any change
in the Exhibits if the Exhibits were dated the date of the occurrence or
discovery of any such fact or condition, the Buyer will promptly deliver to
Company and the Shareholder a supplement to the Exhibits specifying such change.
During the same period, the Buyer will promptly notify the Company and the
Shareholder of the occurrence of any Breach of any covenant of the Buyer in this
Section 7 or of the occurrence of any event that may make the satisfaction of
the conditions in Section 9 impossible or unlikely.
7.4 RELEASE OF CERTAIN GUARANTEES
At or prior to closing, Buyer shall use its reasonable efforts to obtain
releases of the Shareholder from any guarantees which it may have entered into
with respect to obligations of the Company, and if unable to obtain the release
of the Shareholder, the Buyer agrees to indemnify it from any claim arising from
circumstances after the Closing with respect to such guarantees.
8. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE
Buyer's obligations to consummate the Contemplated Transactions and to take the
other actions required to be taken by Buyer at the Closing is subject to the
satisfaction, at or prior to the Closing of each of the following conditions
(any of which may be waived by Buyer, in whole or in part):
8.1 ACCURACY OF REPRESENTATIONS
All of the representations and warranties of the Company and the Shareholder in
this Agreement (considered collectively), and each of these representations and
warranties (considered individually), must have been accurate in all material
respects as of the date of this Agreement, and must be accurate in all material
respects as of the Closing Date as if made on the Closing Date, without giving
effect to any supplement to the Exhibits unless specifically accepted by Buyer.
8.2 THE COMPANY'S AND SHAREHOLDER'S PERFORMANCE
(a) All of the covenants and obligations that the Company or the
Shareholder are required to perform or to comply with pursuant to this Agreement
at or prior to the Closing (considered collectively), and each of the covenants
and obligations (considered individually), must have been duly performed and
complied with in all material respects.
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(b) Each document required to be delivered pursuant to Section 3 must
have been delivered or contemporaneously delivered at the Closing.
8.3 CONSENTS
Each of the Consents identified in Exhibit 4.1(b) and 5.2(b) must have been
obtained and must be in full force and effect.
8.4 ADDITIONAL DOCUMENTS
Shareholder and the Company must have caused to be delivered to the Buyer such
certificates as Buyer may reasonably request for the purpose of (i) evidencing
the accuracy of any of the Company's and the Shareholder's representations and
warranties, (ii) evidencing the performance by the Company and the Shareholder
of, or the compliance by the Company and the Shareholder with, any covenant or
obligation required to be performed or complied with by the Company and the
Shareholder, (iii) evidencing the satisfaction of any condition referred to in
this Section 8, or (iv) otherwise facilitating the consummation or performance
of any Contemplated Transactions.
8.5 NO PROCEEDINGS
Since the date of this Agreement, there must not have been commenced or
Threatened against Buyer, or against any Person affiliated with Buyer, any
Proceeding (excluding any such proceeding where a material adverse effect
against the Buyer or any affiliate is remote) (a) involving any challenge to, or
seeking damages or other relief in connection with, any of the Contemplated
Transactions, or (b) that may have the effect of preventing, delaying, making
illegal, or otherwise interfering with any of the Contemplated Transactions or
(c) that would, if resolved against the Company, have a material adverse impact
on its assets or operations as a whole on the operations of any Store.
8.6 NO CLAIM REGARDING STOCK OWNERSHIP OR SALE PROCEEDS
There must not have been made or Threatened by any Person any claim asserting
that such Person (a) is the holder or the beneficial owner of, or has the right
to acquire or to obtain beneficial ownership of, any stock of, or any other
voting, equity, or ownership interest in, the Company, or (b) is entitled to all
or any portion of the consideration payable for the Shares pursuant to the
Contemplated Transactions.
8.7 NO PROHIBITION
Neither the consummation nor the performance of any of the Contemplated
Transactions will, directly or indirectly (with or without notice or lapse of
time), materially contravene, or conflict with, or result in a material
violation of, or cause Buyer or any Person affiliated with Buyer to suffer any
material adverse consequence under any Legal Requirement or Order that has been
published, introduced, or otherwise proposed by or before any Governmental Body
after the date of this Agreement.
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8.8 AMENDMENT TO LEASES, CONSENTS AND ESTOPPEL CERTIFICATES
On or prior to the Closing Date, the Company's Landlords for each of the Stores
shall have executed (a) consents, in form and content satisfactory to Buyer, to
the assignment of the leases to Buyer, where such consent is required for the
assignment by operation of law of the leases for the Stores, and (b) Estoppel
Certificates as to the Company's performance and the obligations under each of
the leases for the Stores, each in form satisfactory to Buyer.
8.9 SATISFACTION WITH INVESTIGATION
(a) On the basis of investigations performed by Buyer of information
made available to Buyer to such date, Buyer shall be satisfied, as of April 28,
1999, as to the business, financial condition and liabilities of the Company,
that the Exhibits and Schedules are true and correct and that the Company's and
Shareholder's representations and warranties are true and correct.
(b) After April 28, 1999, Buyer shall, on the basis of further
investigations conducted by Buyer of additional information made available to
Buyer or supplements made to the Schedules and Exhibits attached hereto after
April 28, 1999, be satisfied that such new information or supplements to the
Schedules and Exhibits does not create or evidence a previously undisclosed
material adverse impact on the business, financial condition and liabilities of
the Company, or a material misrepresentation or omission in the Company's or
Shareholder's representations and warranties.
(c) Completion of the investigations described above shall not
constitute a waiver by Buyer of any facts or circumstances affecting the
Company's and Shareholder's representation or warranties in this Agreement or
preclude or stop Buyer from asserting any failure or breach of any such
representations or warranties based upon facts or circumstances that come to
Buyer's attention within the period set forth herein or from pursuing any other
rights or remedy granted to Buyer by this Agreement or law or equity.
(d) For purposes of the foregoing provisions only, a "material adverse
impact" shall be any impact which in the aggregate results in liabilities to or
an impact on the Company's financial condition, assets, business or results of
operations of $150,000 or more.
8.10 STATUS OF TITLE
(a) As a condition precedent to the obligation of Buyer to complete the
Contemplated Transaction and subject to the other provisions of this Agreement,
(i) Shareholder shall have good and marketable title to the Shares, free and
clear of all liens and encumbrances, and (ii) the Company shall have good and
marketable title to all of its assets, free and clear of liens and encumbrances,
except as disclosed to and accepted by Buyer, other than sales and use taxes, ad
valorem, personal property and real estate taxes.
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(b) Shareholder shall deliver to Buyer, at Buyer's cost and expense,
the following as evidence of the Company's good and marketable title to its
assets, all such items to be delivered at least 10 days prior to the Closing:
(1) a lien search under the Uniform Commercial Code under the Company's name and
all trade names, D/B/As, business names or assumed names used by the Company now
or in the past five years, all of which are listed on Exhibit 8.10, (2) federal
and state tax lien searches, and (3) such other lien or title searches as Buyer
may reasonably request. In the event that Buyer determines that defects to title
to the Assets exist, Buyer shall give written notice to Shareholder of such
defects, and Shareholder shall have 15 days from the date of such notice to cure
such defects to Buyer's satisfaction (and the Closing shall be delayed to 5 days
after the expiration of the cure period).
(c) Shareholder shall deliver to Buyer, at least 20 days prior to
Closing and at Buyer's expense, a title commitment in Buyer's name on all real
property owned by the Company, together with copies of all documents shown as
exceptions to title.
8.11 RISK OF LOSS
(a) If between the date of this Agreement and the Closing, any of the
Stores are (i) materially damaged or destroyed by fire or other casualty, or by
vandalism, or (ii) the replacement value of the destroyed assets is more than
$100,000 and no insurance coverage exists, then Buyer shall have the right to
terminate this Agreement upon written notice to the Company. The Company shall
promptly notify Buyer of any such occurrence.
(b) If between the date of this Agreement and the Closing a material
portion of the Company's assets are damaged or destroyed and Buyer does not
terminate the Agreement under (a) above, the Purchase Price shall be reduced by
the value of the asset, unless the Company shall receive prior to Closing
insurance proceeds in an amount sufficient to cover replacement of such damaged
asset with an item or equal or better quality (including any deductibles payable
under the policy). If such insurance proceeds are not received before Closing or
do not cover replacement as described herein, Buyer shall deduct any additional
amounts needed to replace the asset from the Purchase Price hereunder. If Buyer
deducts any such sum from the Purchase Price because insurance proceeds are not
received prior to the closing, then Buyer will pay over to Shareholder the
insurance proceeds when and if received. Shareholder and the Company shall
cooperate with Buyer in collecting any insurance proceeds.
8.12 DIRECTOR CONSENT
The Board of Directors of Buyer shall have approved the transaction and this
Agreement.
9. CONDITIONS PRECEDENT TO THE COMPANY'S AND SHAREHOLDER'S OBLIGATION TO
CLOSE
The Company's and Shareholder's obligation to consummate the Contemplated
Transactions and to take the other actions required to be taken by the Company
and Shareholder at the Closing is subject to the satisfaction, at or prior to
the Closing, each of the following conditions (any of which may be waived by the
Company and Shareholder in whole or in part):
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9.1 ACCURACY OF REPRESENTATIONS
All of the representations and warranties of Buyer in this Agreement (considered
collectively), and each of these representations and warranties (considered
individually), must have been accurate in all material respects as of the date
of this Agreement and must be accurate in all material respects as of the
Closing Date as if made on the Closing Date.
9.2 BUYER'S PERFORMANCE
(a) All of the covenants and obligations that Buyer is required to
perform or to comply with pursuant to this Agreement at or prior to the Closing
(considered collectively), and each of these covenants and obligations
(considered individually), must have been performed and complied with in all
material respects.
(b) Buyer must have delivered each of the documents required
to be delivered by Buyer pursuant to Section 3 or contemporaneously delivered
at the Closing.
9.3 CONSENTS
Each of the Consents identified in Exhibit 4.1(b) must have been obtained and
must be in full force and effect.
9.4 ADDITIONAL DOCUMENTS
Buyer must have caused the following documents to be delivered to the Company or
the Shareholder such other documents as the Company may reasonably request for
the purpose of (i) evidencing the accuracy of any representation or warranty of
Buyer, (ii) evidencing the performance by Buyer of, or the compliance by Buyer
with, any covenant or obligation required to be performed or complied with by
Buyer, (iii) evidencing the satisfaction of any condition referred to in this
Section 9, or (iv) otherwise facilitating the consummation of any of the
Contemplated Transactions.
9.5 NO PROCEEDINGS
Since the date of this Agreement, there must not have been commenced or
Threatened against the Company or the Shareholder, or against any Person
affiliated with the Company or the Shareholder, any Proceeding (excluding any
such proceeding where a material adverse effect against the Company or the
Shareholder is remote) (a) involving any challenge to, or seeking damages or
other relief in connection with, any of the Contemplated Transactions, or (b)
that may have the effect of preventing, delaying, making illegal, or otherwise
interfering with any of the Contemplated Transactions.
10. TERMINATION
10.1 TERMINATION EVENTS
This Agreement may, by written notice given prior to or at the Closing, be
terminated:
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(a) by either Buyer or the Company or Shareholder if a material Breach
of any provision of this Agreement has been committed by the other party and
such Breach has not been waived or cured;
(b) (i) by Buyer if any of the conditions in Section 8 has not been
satisfied as of the Closing Date or if satisfaction of such a condition is or
becomes impossible (other than through the failure of Buyer to comply with its
obligations under this Agreement) and Buyer has not waived such condition on or
before the Closing Date; or (ii) by the Shareholder, if any of the conditions in
Section 9 has not been satisfied of the Closing Date or if satisfaction of such
a condition is or becomes impossible (other than through the failure of the
Company or the Shareholder to comply with their obligations under this
Agreement) and the Shareholder has not waived such condition on or before the
Closing Date;
(c) by mutual consent of Buyer, Shareholder and the Company; or
(d) by either Buyer or Shareholder if the Closing has not occurred
(other than through the failure of any party or Related Party of such party
seeking to terminate this Agreement to comply fully with its obligations under
this Agreement) on or before June 15, 1999, or such later date as the parties
may agree upon.
10.2 EFFECT OF TERMINATION
Each party's right of termination under Section 10.1 is in addition to any other
rights it may have under this Agreement or otherwise, and the exercise of a
right of termination will not be an election of remedies. If this Agreement is
terminated pursuant to Section 10.1 all further obligations of the parties under
this Agreement will terminate, except that the obligations in Section 12.1,
12.3, and 12.5 will survive; provided, however, that if this Agreement is
terminated by a party because of the Breach of this Agreement by the other party
or because one or more of the conditions to the terminating party's obligations
under this Agreement is not satisfied as a result of the other party's failure
to comply with its obligations under this Agreement, the terminating party's
right to pursue all legal remedies will survive such termination unimpaired.
11. INDEMNIFICATION; REMEDIES
11.1 SURVIVAL
All representations, warranties, covenants, and obligations in this Agreement,
the Exhibits, the supplements to the Exhibits, the certificate delivered
pursuant to Section 3.4(a)(v) and Section 3.4(a)(vi) and any other certificate
or document delivered pursuant to this Agreement will survive the Closing.
11.2 INDEMNIFICATION AND PAYMENT OF ACTUAL DAMAGES BY THE COMPANY AND
SHAREHOLDER
The Company and Shareholder (prior to Closing) and the Shareholder (for
indemnification of claims after Closing), will indemnify and hold harmless
Buyer, and its respective Representatives, stockholders, controlling persons,
and affiliates (collectively, the "Indemnified Persons") for, and will pay to
the Indemnified Persons the amount of Actual Damage arising, directly or
indirectly, from or in connection with:
36
(a) any Breach prior to Closing of any representation or warranty made
by the Company or Shareholder in this Agreement (without giving effect to any
supplement to the Exhibits unless specifically agreed to by Buyer), the
Exhibits, the supplements to the Exhibits, or any other certificate or document
delivered pursuant to this Agreement;
(b) any Breach after the Closing of any representation or warranty made
by the Company or Shareholder in this Agreement as if such representation or
warranty were made on and as of the Closing Date without giving effect to any
supplement to the Exhibits, other than any such Breach that is disclosed in a
supplement to the Exhibits and is expressly identified in the certificate
delivered pursuant to Section 3.3(a)(v) and specifically waived by Buyer;
(c) any Breach by Shareholder or the Company of any covenant or
obligation of such parties in this Agreement;
(d) any claim by any Person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or understanding
alleged to have been made by any such Person with the Company or Shareholder (or
any Person acting on their behalf) in connection with any of the Contemplated
Transactions; or
(e) any Actual Damages resulting from (i) any legend or other reference
to any purported Encumbrance appearing upon any certificate representing equity
securities of the Company; (ii) any failure of the Shares to have been duly
authorized and validly issued or be fully paid and nonassessable or, (iii) any
securities violation relative to the authorization, issuance or transfer of the
Shares of the Company.
(f) the amount of any Actual Damages (including costs of cleanup,
containment, or other remediation) arising, directly or indirectly, from or in
connection with the Environmental Matters set forth in Section 4.23 and
Exhibits.
The remedies provided in this Section 11.2 will not be exclusive of or limit
any other remedies that may be available to Buyer or the other Indemnified
Persons.
11.3 INDEMNIFICATION AND PAYMENT OF ACTUAL DAMAGES BY BUYER
Buyer will indemnify and hold harmless the Shareholder, and will pay to the
Shareholder the amount of any Actual Damages arising, directly or indirectly,
from or in connection with (a) any Breach of any representation or warranty made
by Buyer in this Agreement or in any certificate delivered by Buyer pursuant to
this Agreement, (b) any Breach by Buyer of any covenant or obligation of Buyer
in this Agreement, or (c) any claim by any Person for brokerage or finder's fees
or commissions or similar payments based upon any agreement or understanding
alleged to have been made by such Person with Buyer (or any Person acting on its
behalf) in connection with any of the Contemplated Transactions. The remedies
provided in this Section 11.3 will not be exclusive of or limit any other
remedies that may be available to the Shareholder.
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11.4 TIME LIMITATIONS
If the Closing occurs, the Shareholder will not have any liability (for
indemnification or otherwise) with respect to any representations or warranty,
or covenant or obligation to be performed and complied with prior to the Closing
Date, unless on or before two years after the date of Closing (except for tax
issues the time limit shall be the period of limitations for assessment for
federal and state income tax purposes, without extensions), Buyer notifies the
Shareholder of a claim specifying the factual basis of that claim in reasonable
detail to the extent then known by Buyer. If the Closing occurs, Buyer will have
no liability (for indemnification or otherwise) with respect to any
representation or warranty, or covenant or obligation to be performed and
complied with prior to the Closing Date, unless on or before one year from the
date of Closing (except for tax issues the time limit shall be the period of
limitations for assessment for federal and state income tax purposes) the
Shareholder notify Buyer of a claim specifying the factual basis of that claim
in reasonable detail to the extent then known by the Shareholder.
11.5 LIMITATIONS ON AMOUNT - THE COMPANY, AND THE SHAREHOLDER
The Company or the Shareholder will have no liability (for indemnification or
otherwise) with respect to the matters described in clause (a), clause (b),
clause (c) or clause (e) of Section 11.2 until the aggregate total of all Actual
Damages with respect to such matters exceeds $75,000, and then only for the
amount by which such Actual Damages exceed $75,000. To the extent the aggregate
Actual Damages of all such matters exceeds a $6,000,000 aggregate ceiling, the
Company and the Shareholder will have no obligation to indemnify the Buyer for
amounts in excess of $6,000,000. However, this Section 11.5 will not apply to
any Breach of any of the Shareholder's or the Company's representations and
warranties of which Shareholder or Company had Knowledge at any time prior to
the date on which such representation and warranty is made or any intentional
Breach by the Shareholder or Company of any covenant or obligation, and the
Shareholder (prior to or after Closing) and the Company (prior to Closing) will
be liable for all Actual Damages with respect to such Breaches. No limits or
minimum amounts shall apply to a breach of the representation and warranties
with respect to the matters described in 11.2(d) or 11.2(f), or to reimbursement
amounts due to Buyer under Section 6.3 above, or the amounts which Buyer is
entitled to offset against the Assumed Note under the terms of this Agreement.
11.6 LIMITATIONS ON AMOUNT - BUYER
Buyer will have no liability (for indemnification or otherwise) with respect to
the matters described in clause (a) or (b) of Section 11.3 until the total of
all Actual Damages with respect to such matters exceeds $75,000, and then only
for the amount by which such Actual Damages exceed $75,000. However, this
Section 11.6 will not apply to any Breach of any of Buyer's representations and
warranties of which Buyer had Knowledge at any time prior to the date on which
such representation and warranty is made or any intentional Breach by Buyer of
any covenant or obligation, and Buyer will be liable for all Actual Damages with
respect to such Breaches. To the extent the Actual Damages of all such matters
exceeds a $6,000,000 aggregate ceiling, Buyer will have no obligation to
indemnify the Shareholder or the Company for amounts in excess of $6,000,000.
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11.7 PROCEDURE FOR INDEMNIFICATION - THIRD PARTY CLAIMS
(a) Promptly after receipt by an indemnified party under Section 11.2
or 11.3 of notice of the commencement of any Proceeding against it, such
indemnified party will, if a claim is to be made against an indemnifying party
under such Section, give notice to the indemnifying party of the commencement of
such claim, but the failure to notify the indemnifying party will not relieve
the indemnifying party of any liability that it may have to any indemnified
party, except to the extent that the indemnifying party demonstrates that the
defense of such action is prejudiced by the indemnified party's failure to give
such notice.
(b) If any Proceeding referred to in Section 11.7(a) is brought against
an indemnified party and it gives notice to the indemnifying party of the
commencement of such Proceeding, the indemnifying party will, unless the claim
involves Taxes, be entitled to participate in such Proceeding and, to the extent
that it wishes (unless (i) the indemnifying party is also a party to such
Proceeding and the indemnified party determines in good faith that joint
representation would be inappropriate, or (ii) the indemnifying party fails to
provide reasonable assurance to the indemnified party of its financial capacity
to defend such Proceeding and provide indemnification with respect to such
Proceeding), to assume the defense of such Proceeding with counsel reasonably
satisfactory to the indemnified party. After notice from the indemnifying party
to the indemnified party of its election to assume the defense of such
Proceeding, the indemnifying party will not, as long as it diligently conducts
such defense, be liable to the indemnified party under this Section 11 for any
fees of other counsel or any other expenses with respect to the defense of such
Proceeding, in each case subsequently incurred by the indemnified party in
connection with the defense of such Proceeding, other than reasonable costs of
investigation. If the indemnifying party assumes the defense of a Proceeding,
(i) no compromise or settlement of such claims may be effected by the
indemnifying party without the indemnified party's consent unless (A) there is
no finding or admission of any violation of Legal Requirements or any violation
of the rights of any Person and no effect on any other claims that may be made
against the indemnified party, and (B) the sole relief provided is monetary
damages that are paid in full by the indemnifying party; and (ii) the
indemnified party will have no liability with respect to any compromise or
settlement of such claims effected without its consent. If notice is given to
any indemnifying party of the commencement of any Proceeding and the
indemnifying party does not, within ten days after the indemnified party's
notice is given, give notice to the indemnified party of its election to assume
the defense of such Proceeding, the indemnifying party will be bound by any
determination made in such Proceeding and shall pay all costs and fees incurred
by the indemnified party in defending such claim.
(c) Notwithstanding the foregoing, if an indemnified party determines
in good faith that there is a reasonable probability that a Proceeding may
adversely affect it or its affiliates other than as a result of monetary damages
for which it would be entitled to indemnification under this Agreement, the
indemnified party may, by notice to the indemnifying party, assume the exclusive
right to defend, compromise, or settle such Proceeding, but the indemnifying
party will not be bound by any determination of a Proceeding so defended or any
compromise or settlement effected without its consent (which may not be
unreasonably withheld).
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12. GENERAL PROVISIONS
12.1 EXPENSES
Except as otherwise expressly provided in this Agreement, each party to this
Agreement will bear its respective expenses incurred in connection with the
preparation, execution, and performance of this Agreement and the Contemplated
Transactions, including all fees and expenses of agents, representatives,
counsel, and accountants. The Shareholder and Buyer will each pay the one-half
of HSR Act filing fee. In the event of termination of this Agreement, the
obligation of each party to pay its own expenses will be subject to any rights
of such party arising from a breach of this Agreement by another party.
12.2 PUBLIC ANNOUNCEMENTS
Any public announcement or similar publicity with respect to this Agreement or
the Contemplated Transactions will be issued, if at all, at such time and in
such manner as Buyer determines in consultation with Shareholder. Unless agreed
to by all parties in advance or required by Legal Requirements, prior to the
Closing each party shall keep this Agreement strictly confidential and may not
make any disclosure of this Agreement to any Person other than its
Representatives. The Shareholder and Buyer will consult with each other
concerning the means by which the Company's employees, customers, and suppliers
and others having dealings with the Company will be informed of the Contemplated
Transactions, and Buyer will have the right to be present for any such
communication.
12.3 CONFIDENTIALITY
(a) Between the date of this Agreement and the Closing Date, Buyer, the
Company and the Shareholder will maintain in confidence, and will cause the
directors, officers, employees, agents, and advisors of Buyer, Shareholder and
the Company to maintain in confidence, and not use to the detriment of another
party or the Company any written, oral, or other information obtained in
confidence from another party or the Company in connection with this Agreement
or the Contemplated Transactions, unless (i) such information is already known
to such party or to others not bound by a duty of confidentiality or such
information becomes publicly available through no fault of such party, (ii) the
use of such information is necessary or appropriate in making any filing or
obtaining any consent or approval required for the consummation of the
contemplated Transactions, or (iii) the furnishing or use of such information is
required by or necessary or appropriate in connection with legal proceedings.
(b) If the Contemplated Transactions are not consummated, each party
will return or destroy as much of such written information as the other party
may reasonably request. In addition, all information regarding the Company
provided to or which may be provided to Buyer or its representatives will be
governed by the terms of the Confidentiality Agreement dated March 8, 1999 by
and between Buyer and the Company.
(c) After the Closing Date, the parties shall maintain as confidential
the terms of this Agreement, except as required to be disclosed or deemed
necessary by either party's legal counsel or as required or deemed necessary in
connection with legal proceedings.
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(d) Neither party shall make any public statements or release any
information regarding the Contemplated Transaction or the terms of this
Agreement without the prior review by and consent of the other party.
Notwithstanding the foregoing, Shareholder and the Company agree that Buyer may
announce the execution of this Agreement with Buyer's regular quarterly press
release on April 28, 1999.
12.4 NOTICES
All notices, consents, waivers, and other communications under this Agreement
must be in writing and will be deemed to have been duly given when (a) delivered
by hand (with written confirmation of receipt), (b) sent by telecopier (with
written confirmation of receipt), or (c) when received by the addressee, if sent
by a nationally recognized overnight delivery service (receipt requested), in
each case to the appropriate addresses and telecopier numbers set forth below
(or to such other addresses and telecopier numbers as a party may designate by
notice to the other parties):
The Company: Natures Fresh Northwest, Inc.
0000 X. X. Xxxxxxxx Xxxxxx
Xxxxxxxx, XX 00000-0000
Attention: President
Facsimile No. 000-000-0000
The Shareholder: General Nutrition, Incorporated
000 Xxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Attention: Chief Legal Officer
Buyer: Wild Oats Markets, Inc.
0000 Xxxxxxxx Xxxx
Xxxxxxx, XX 00000
Attention: General Counsel
12.5 ARBITRATION, RESOLUTION OF DISPUTES
(a) Policy - Mediation. The parties hope there will be no disputes
arising out of their relationship. To that end, each commits to cooperate in
good faith and to deal fairly in performing its duties under this agreement in
order to accomplish their mutual objectives and avoid disputes. But if a dispute
arises, the parties may, upon the agreement of all parties, resolve all disputes
by the following alternate dispute resolution process: (a) the parties will seek
a fair and prompt negotiated resolution, but if this is not successful, (b) all
disputes shall be resolved by binding arbitration, provided that during this
process, (c) at the request of either party made not later than seventy-five
(75) days after the initial arbitration demand, the parties will attempt to
resolve any dispute by nonbinding mediation (but without delaying the
arbitration hearing date). The parties recognize that negotiation or mediation
may not be appropriate to resolve some disputes and, in such disputes, agree
that either party may proceed with arbitration without negotiating or mediating.
The parties confirm that by agreeing to this dispute resolution process, they
intend to give up their right to have any dispute decided in court by a judge or
jury.
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(b) Binding Arbitration. Any claim between the parties, including but
not limited to those arising out of or in relation to this agreement and any
claim based on or arising form an alleged tort, shall be determined by
arbitration in Portland, Oregon commenced in accordance with the then existing
Commercial Arbitration rules of the American Arbitration Association (AAA);
provided that the total award by a single arbitrator (as opposed to a majority
of the arbitrators) shall not exceed $250,000, including interest, attorneys'
fees and costs. If either party demands a total award greater than $250,000
there shall be three (3) neutral arbitrators. If the parties cannot agree on the
identity of the arbitrator(s) within ten (10) days of the arbitration demand,
the arbitrator(s) shall be selected by the administrator of the AAA office in
Portland Oregon from its Large, Complex Case Panel (or have similar professional
credentials). Each arbitrator shall be an attorney with at least fifteen (15)
years' experience in corporate law. All statutes of limitations which would
otherwise be applicable shall apply to any arbitration proceeding hereunder.
(c) Procedures. The arbitration shall be conducted in accordance with
the AAA Corporate Arbitration Rules with Expedited Procedures, in effect on the
date hereof, as modified by this agreement. There shall be no dispositive motion
practice. As may be shown to be necessary to ensure a fair hearing, the
arbitrator(s) may authorize limited discovery; and may enter pre-hearing orders
regarding (without limitation) scheduling, document exchange witness disclosure
and issues to be heard. The arbitrator(s) shall not be bound by the rules of
evidence or of civil procedure but may consider such writings and oral
presentations as reasonable business people would use in the conduct of their
day-to-day affairs, and may require the parties to submit some or all of their
case by written declaration or such other manner of presentation as the
arbitrator(s) may determine to be appropriate. The parties intend to limit live
testimony and cross-examination to the extent necessary to ensure a fair hearing
on material issues.
(d) Hearing - Law - Appeal Limited. The arbitrator(s) shall take such
steps as may be necessary to hold a private hearing within one hundred twenty
(120) days of the initial demand for arbitration and to conclude the hearing
within three (3) days; and the arbitrator(s)'s written decision shall be made
not later than fourteen (14) calendar days after the hearing. The parties have
included these time limits in order to expedite the proceeding, but they are not
jurisdictional, and the arbitrator(s) may for good cause afford or permit
reasonable extensions or delays, which shall not affect the validity of the
award. The written decision shall contain a brief statement of the claim(s)
determined and the award made on each claim. In making the decision and award,
the arbitrator(s) shall apply the applicable substantive law of the State of
Oregon without regard to its conflict of laws provisions. Absent fraud,
collusion, willful misconduct or mistake of law by an arbitrator, the award
shall be final, and judgment may be entered in any court having jurisdiction
thereof. The arbitrator(s) may award injunctive relief or any other remedy
available from a judge, including the joinder of parties or consolidation of
this arbitration with any other involving common issues of law or fact or which
may promote judicial economy, and may award attorneys' fees and costs to the
prevailing party but shall not have the power to award punitive or exemplary
damages. The decision and award of the arbitrators need not be unanimous;
rather, the decision and award of two arbitrators shall be final.
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(e) Provisional Remedies. Pending selection of the arbitrator(s),
either party may request the AAA to appoint unilaterally an arbitrator for the
limited purpose of awarding temporary or preliminary relief. This award may be
immediately entered in any federal or state court having jurisdiction over the
parties even though the decision on the underlying dispute may still be pending.
Once appointed, the arbitrator(s) may, upon request of a party, issue a
superseding order to modify or reverse such temporary or preliminary relief or
may confirm such relief pending a full hearing on the merits of the underlying
dispute. Any such initial or superseding order of temporary or preliminary
relief may be immediately entered in any federal or state court having
jurisdiction over the parties even though the decision on the underlying dispute
may remain pending. Such relief may be granted by the arbitrator(s) only after
notice to and opportunity to be heard by the opposing party unless the party
applying for such relief demonstrates that its purpose would be rendered futile
by giving notice.
12.6 FURTHER ASSURANCES
The parties agree (a) to furnish upon request to each other such further
information, (b) to execute and deliver to each other such other documents, and
(c) to do such other acts and things, all as the other party may reasonably
request for the purpose of carrying out the intent of this Agreement and the
documents referred to in this Agreement.
12.7 WAIVER
The rights and remedies of the parties to this Agreement are cumulative and not
alternative. Neither the failure nor any delay by any party in exercising any
right, power, or privilege under this Agreement or the documents referred to in
this Agreement will operate as a waiver of such right, power, or privilege, and
no single or partial exercise of any such right, power, or privilege will
preclude any other or further exercise of such right, power, or privilege or the
exercise of any other right, power, or privilege. To the maximum extent
permitted by applicable law, (a) no claim or right arising out of this Agreement
or the documents referred to in this Agreement can be discharged by one party,
in whole or in part, by a waiver or renunciation of the claim or right unless in
writing signed by the other party; (b) no waiver that may be given by a party
will be applicable except in the specific instance for which it is given; and
(c) no notice to or demand no one party will be deemed to be a waiver of any
obligation of such party or of the right of the party giving such notice or
demand to take further action without notice or demand as provided in this
Agreement or the documents referred to in this Agreement.
12.8 ENTIRE AGREEMENT AND MODIFICATION
This Agreement supersedes all prior agreements between the parties with respect
to its subject matter and constitutes (along with the documents referred to in
this Agreement) a complete and exclusive statement of the terms of the agreement
between the parties with respect to its subject matter. This Agreement may not
be amended except by a written agreement executed by all parties.
43
12.9 DISCLOSURE EXHIBITS
In the event of any inconsistency between the statements in the body of this
Agreement and those in the Exhibits (other than an exception expressly set forth
as such in the Exhibits with respect to a specifically identified representation
or warranty), the statements in the body of this Agreement will control.
12.10 ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS
Neither party may assign any of its rights under this Agreement without the
prior consent of the other parties except that Buyer may assign any of its
rights under this Agreement to any Subsidiary of Buyer. Subject to the preceding
sentence, this Agreement will apply to, be binding in all respects upon, and
inure to the benefit of the successors and permitted assigns of the parties.
Nothing expressed or referred to in this Agreement will be construed to give any
Person other than the parties to this Agreement any legal or equitable right,
remedy, or claim under or with respect to this Agreement or any provision of
this Agreement. This Agreement and all of its provisions and conditions are for
the sole and exclusive benefit of the parties to this Agreement and their
successors and assigns.
12.11 SEVERABILITY
If any provision of this Agreement is held invalid or unenforceable by any court
of competent jurisdiction, the other provisions of this Agreement will remain in
full force and effect. Any provision of this Agreement held invalid or
unenforceable only in part or degree will remain in full force and effect to the
extent not held invalid or unenforceable.
12.12 SECTION HEADINGS, CONSTRUCTION
The headings of Sections in this Agreement are provided for convenience only and
will not affect its construction or interpretation. All references to "Section"
or Sections" refer to the corresponding Section or Sections of this Agreement.
All words used in this Agreement will be construed to be of such gender or
number as the circumstances required. Unless otherwise expressly provided, the
word "including" does not limit the preceding words or terms.
12.13 TIME OF ESSENCE
With regard to all dates and time periods set forth or referred to in this
Agreement, time is of the essence.
12.14 GOVERNING LAW
This Agreement will be governed by the laws of the State Oregon without regard
to conflicts of laws principles.
12.15 COUNTERPARTS
This Agreement may be executed in one or more counterparts, each of which will
be deemed to be an original copy of this Agreement and all of which, when taken
together, will be deemed to constitute one and the same agreement.
44
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first written above.
BUYER: THE COMPANY:
WILD OATS MARKETS, INC. NATURE'S FRESH NORTHWEST, INC.
By:___________________________ By: -----------------------------
Its:____________________________ Its: President
THE SHAREHOLDER:
GENERAL NUTRITION, INCORPORATED
By:__________________________
Its: __________________________
EXHIBIT 1.1(a)
Attached to the Stock Purchase Agreement among
Nature's Fresh Northwest, Inc., General
Nutrition, Incorporated and Wild Oats
Markets, Inc.
SENIOR SECURED MULTIPLE ADVANCE NOTE
SENIOR SECURED
MULTIPLE ADVANCE NOTE
$25,000,000 Maximum Pittsburgh, Pennsylvania
February 1, 1997
For valuable consideration, receipt and sufficiency of which are hereby
acknowledged, NATURE'S FRESH NORTHWEST, INC., a Delaware corporation whose
principal business address is 0000 X.X. Xxxxxxxx Xxxxxx, Xxxxxxxx, Xxxxxx 00000
("Maker") hereby promises to pay to the order of GENERAL NUTRITION,
INCORPORATED, a Pennsylvania corporation whose principal business address is 000
Xxxxx Xxxxxx, Xxxxxxxxxx, Xxxxxxxxxxxx 00000 ("Payee") on demand (the "Maturity
Date"), the amounts of all advances made by Payee to Maker under this Note,
which will not exceed the sum of TWENTY-FIVE MILLION AND NO/100 DOLLARS
($25,000,000).
Maker also promises to pay interest on the unpaid principal from the
date such sum is loaned to Maker until such sum is repaid, at a variable rate
per annum equal to the rate announced to Maker at the end of each of Payee's
fiscal year quarters by Payee as its Blended Rate (the "Blended Rate") plus
one-eighth of one percent per annum. Notwithstanding the interest rates
described above, from and after the occurrence of any Event of Default, this
Note will, at Payee's election, bear interest at a rate equal to five percent
per annum above the Blended Rate. The Blended Rate is Payee's calculation of its
external cost of borrowing funds during a particular period, and Payee's
calculation of the Blended Rate in effect for a particular period shall be
conclusive and binding upon Maker. The Blended Rate is not normally the lowest
rate at which Payee borrows funds. Each and every change in the interest rate
under this Note resulting from a change in the Blended Rate will become
effective on the date such change is announced by Payee. Interest with respect
to the Blended Rate will be calculated on the basis of a year deemed to consist
of 365 days.
Maker understands that any late payment of any sum due under this Note
will cause Payee to incur additional costs and expenses and damages due to the
loss of use of the money that is past due. Accordingly, if any payment is not
received by Payee within ten days after it is due, Maker shall pay on demand a
late fee equal to five percent (5%) of any overdue amount. Payee may collect the
late fee without prejudice to Payee's rights to collect any other amounts due
under this Note or to declare an Event of Default.
Nothing in this Note will be deemed to establish or require the payment
of interest in excess of the maximum rate permitted at any time by applicable
law. If the rate of interest required to be paid under this Note at any time
exceeds the maximum rate permitted by applicable law, the rate of interest
required to be paid under this Note will be automatically reduced to the maximum
rate permitted by law.
Absent manifest error, the amounts due under this Note will be the
amounts reflected on Payee's books and records. Payee may, at its option, from
time to time, record advances by Payee and payments of principal and interest by
Maker on Schedule A attached hereto or on any continuation of Schedule A.
Schedule A, in the absence of manifest error, will constitute prima facie
evidence of the accuracy of the information contained in Payee's books and
records.
This Note will be paid as follows:
1.Maker will make quarterly payments of interest only, in arrears, within ten
days following Maker's written notice to Payee of the Blended Rate in effect
for the immediately preceding fiscal year quarter, with the first of such
fiscal year quarters ending on April 26, 1997; and
2. In addition to the preceding, Maker will pay the full
principal balance and all accrued interest and other sums due under this Note at
any time upon Payee's demand.
All payments will be made in lawful money of the United States of
America. All payments will first be applied to interest, then to any expenses or
fees payable to Payee in connection with this Note, before application to
principal.
Payment of this Note is secured by, among other collateral, a security
interest pursuant to a Security Agreement dated contemporaneously with this
Note, and by any other collateral granted to Payee by Maker prior to,
contemporaneously with or subsequent to the date of this Note. The above
described Security Agreement and any other similar agreements are referred to
collectively as the "Loan Documents".
At the election of Payee, the entire principal balance of this Note,
together with all accrued interest and all other sums due under this Note, will
become immediately due and collectible, without notice or demand, upon the
occurrence of any default of any obligation by Maker pursuant to this Note or
any Event of Default under any of the Loan Documents.
Maker hereby waives presentment, demand, notice of nonpayment, and all
other notices and acts to which Maker might otherwise be entitled under
applicable law.
No delay or omission on the part of Payee in the exercise of any right
or remedy, whether before or after any Event of Default, will operate as a
waiver of such right or remedy or impair Payee's right to fully and strictly
enforce such right or remedy and every other provision of this Note. No waiver
on one or more than one occasion will operate as a waiver of any right or remedy
on any future occasion.
Maker agrees to pay all costs of collection, including reasonable
attorney fees and disbursements, incurred by Payee in connection with any
failure by Maker to pay any sum when due under this Note or any other Event of
Default, whether or not legal proceedings are instituted. If any legal
proceeding is instituted by Payee to collect any sum payable under this Note,
Maker will pay Payee's costs, disbursements and reasonable attorney fees in such
proceeding and in any appeal.
MAKER HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND,
ACTION OR CAUSE OF ACTION ARISING UNDER THIS NOTE, WHETHER NOW OR HEREAFTER
EXISTING, WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE. MAKER AGREES AND
CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED
BY COURT TRIAL WITHOUT A JURY.
This Note will be binding upon Maker and upon its successors and
assigns, and will inure to the benefit of Payee and its successors and assigns,
including but not limited to any surviving company in any merger involving Payee
or any acquiror of all of Payee's voting stock. This Note will be fully
assignable by Payee without Maker's consent.
This Note will be governed, interpreted and enforced in all respect in
accordance with the laws of the State of Oregon without resort to its choice of
law provisions.
IN WITNESS WHEREOF, Maker has executed this Note as of the date first
set forth above.
MAKER: NATURE'S FRESH NORTHWEST, INC.
By: ______________________________
Its: ______________________________
EXHIBIT 3.3(a)(iv)
Attached to the Stock Purchase Agreement among
Nature's Fresh Northwest, Inc., General
Nutrition, Incorporated and Wild Oats
Markets, Inc.
NONCOMPETITION AGREEMENT
This Agreement, dated __________________, 1999, is between Wild
Oats Markets, Inc. ("Buyer") and General Nutrition, Incorporated ("Seller").
RECITALS
A. Buyer, Seller and Natures Fresh Northwest, Inc. are parties
to a Stock Purchase Agreement dated April ___, 1999 (the "Purchase Agreement"),
pursuant to which Buyer is purchasing all of the issued and outstanding stock of
Natures Fresh Northwest, Inc. which owns the grocery stores or future locations
of grocery stores set forth on Attachment 1 hereto (the "Stores").
B. As a condition to closing of the stock purchase, the
undersigned parties have agreed to provide to Buyer the noncompetition agreement
set forth below.
AGREEMENT
In consideration of the recitals set forth above and for good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
1. Covenant Not to Compete.
(a) Restrictions. In consideration for the execution of the
Purchase Agreement, for a period of two years from the date hereof, Seller will
not directly or indirectly, on its own account or as a consultant, partner,
owner or stockholder of any other firm, partnership or corporation, conduct,
engage in, have any interest in a retail grocery business similar to that of
Buyer's conducted within the geographic area of the Stores as they exist on the
date hereof, nor will Seller in any way directly or indirectly, solicit, divert,
take away or interfere with any of the business customers, trade or personnel of
the Stores; nor will Seller disparage Buyer or the Company to the suppliers,
manufacturers, distributors, wholesalers or other such companies with which
Buyer transacts business, provided, however, nothing contained herein shall
prevent Seller from owning shares of stock of any such type of corporation, the
shares of which are publicly traded on a nationally recognized stock exchange.
For purposes of this Agreement, (i) the operation by Seller or its affiliates of
a "GNC" or Value Nutrition retail store or Internet store selling vitamins,
supplements and other items normally carried in a GNC or Value Nutrition stores,
(ii) the acquisition by Seller of any vitamins and supplements distribution,
wholesale or retail business providing goods to Buyer or its competitors, or
(iii) the wholesale or retail sale by Seller or its affiliates in the ordinary
course of business of vitamins and supplements, whether under the GNC label, a
third party label or a private label, to any retail grocery store in competition
with Buyer, shall not constitute a breach of the foregoing restrictions by
Seller. Seller shall not, except for the foregoing exceptions in (i), (ii) or
(iii) above, staff, own or operate on its behalf or for the benefit of any third
party a vitamin or supplements department in any retail grocery store within the
geographic limitations set forth below.
(b) Geographic Limitation. The geographic limitation within
which Seller shall not compete as set forth in paragraph (a) of this
Noncompetition Agreement is within ten miles of the Stores. If the geographic
limitation as set forth herein is deemed to be unreasonable, Seller agrees to
abide by the maximum limitation decided by a court of competent jurisdiction.
(c) Acknowledgments. Seller hereby acknowledges that the terms
of this covenant not to compete is a minimum period of time and that the area of
restriction is reasonable and necessary in order to protect Buyer.
2. Remedies. Seller further agrees that damages cannot reasonably
compensate Buyer in the event of a violation of this covenant and that it would
be difficult to ascertain the lost profits which would be suffered and that, by
reason thereof, injunctive relief would be essential for the protection of
Buyer. Accordingly, Seller hereby agrees and consents that in the event of any
such breach or violation, Buyer may obtain such injunctive relief in order to
prevent a continued violation of the terms of this Agreement. Seller agrees that
Buyer may obtain a temporary restraining order and temporary and permanent
injunctions ex parte against Seller. The foregoing shall not limit Buyer in the
pursuit of other remedies it may have, including damages. Said relief, if
necessary, may be obtained from the District Court for ____________ County,
Oregon, or any other court of competent jurisdiction.
3. Severability. No waiver of any breach or violation hereof shall be
implied from forbearance or failure by the Buyer to take action thereon. It is
the desire and intent of the parties that the provisions of the covenant be
enforced to the fullest extent permissible under the laws and the applicable
public policies of the State of Oregon. Accordingly, the terms of this covenant
are determined to be severable, and if any particular portion be adjudicated or
determined to be invalid or unenforceable, such determination shall only apply
to that portion of the Agreement and the balance of said Agreement shall
nevertheless be enforceable to the fullest extent permissible under the laws and
public policies applying thereto.
4. Miscellaneous. (a) This agreement shall be governed by and construed
under the laws of the State of Oregon. (b) This agreement shall be binding upon
the parties hereto, their successors and assigns. (c) This agreement may not be
amended except in writing, signed by all parties hereto. (d) In the event of any
breach of this agreement, Buyer may bring an action for enforcement or remedies
or both in the District Court of __________ County, Oregon, and Seller agrees to
such venue and jurisdiction.
Executed this ____ day of _____________, 1999.
SELLER: BUYER:
GENERAL NUTRITION, INCORPORATED WILD OATS MARKETS, INC.
By: By:
ATTACHMENT 1
(Attached to the Noncompetition Agreement among Nature's Fresh Northwest, Inc.,
Wild Oats Markets, Inc. and General Nutrition, Inc.)
BEAVERTON FREMONT (To Relocate)
0000 XX 000xx Xxxxxx 0000 XX 00xx Xxxxxx
Xxxxxxxxx, XX 00000 Xxxxxxxx, XX 00000
XXXXXX XXXXX XXXXXXXXX
00000 Xxxx Xxxx 0000 XX Xxxxxxx Xxxxxxx
Xxxx Xxxxxx, XX 00000 Xxxxxxxx, XX 00000
CORPORATE OFFICE VANCOUVER
3008 SE Division 0000 X. Xxxx Xxxxx Xxxxxxxxx
Xxxxxxxx, XX 00000 Xxxxxxxxx, XX 00000
DIVISION CENTRAL KITCHEN COMMISSARY
3016 SE Division 0000-0000 Xxxxx Xxxx 00xx Xxxxxx
Xxxxxxxx, XX 00000 Xxxxxxxx, XX 00000
New Locations
XXXXXXXXXXX XXX XXXXXXX
0000 Xxxxx Xxxx Xxxxxxxx 0000 Xxxxx Xxxx 00xx Xxxxxx
Xxxxxxxx, XX 00000-0000 Xxxxxxxx, XX 00000
XXXXXXX
0000 Xxxxx Xxxx Xxxxxxxx
Xxxxxxxx, XX 00000-0000
EXHIBIT 3.3(a)(vii)
Attached to the Stock Purchase Agreement among
Nature's Fresh Northwest, Inc., General
Nutrition, Incorporated and Wild Oats
Markets, Inc.
FORM OF AMENDMENT TO ASSUMED NOTE
AMENDMENT TO
SENIOR SECURED MULTIPLE ADVANCE NOTE
This AMENDMENT TO SENIOR SECURED MULTIPLE ADVANCE NOTE (this "Amendment") is
made and entered into by and between NATURE'S FRESH NORTHWEST, INC., a Delaware
corporation whose principal business address is 0000 X.X. Xxxxxxxx Xxxxxx,
Xxxxxxxx, Xxxxxx 00000 ("Maker") and GENERAL NUTRITION, INCORPORATED, a
Pennsylvania corporation whose principal business address is 000 Xxxxx Xxxxxx,
Xxxxxxxxxx, Xxxxxxxxxxxx 00000 ("Payee"), for the purpose of amending and
modifying that certain Senior Secured Multiple Advance Note dated February 1,
1997, made by Maker and delivered to Payee (the "Original Note"). The Original
Note, as amended and modified by this Amendment, is referred to as the "Note".
NOW THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Maker and Payee agree
as follows:
1. Current Balance of Original Note. The Original Note was a multiple advance
note for up to Twenty-Five Million and No/100 Dollars ($25,000,000). The current
balance of principal, interest, fees, charges, and expenses owed by Maker to
Payee pursuant to the Original Note as of the date hereof is Seventeen Million
and No/100 Dollars ($17,000,000). Maker under the original Note is entitled to
certain offset rights as set forth in the Stock Purchase Agreement dated April
22, 1999 among Maker, Payee and Wild Oats Markets, Inc. Such offset rights shall
survive any assignment of the original Note by Payee.
2. Amendment to Opening Paragraph of Original Note. The opening paragraph of the
Original Note is hereby amended to read in its entirety as follows:
For valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, NATURE'S FRESH NORTHWEST, INC., a Delaware
corporation whose principal business address is 0000 X.X. Xxxxxxxx
Xxxxxx, Xxxxxxxx, Xxxxxx 00000 ("Maker") hereby promises to pay to the
order of GENERAL NUTRITION, INCORPORATED, a Pennsylvania corporation
whose principal business address is 000 Xxxxx Xxxxxx, Xxxxxxxxxx,
Xxxxxxxxxxxx 00000 ("Payee") the sum of SEVENTEEN MILLION AND NO/100
DOLLARS ($17,000,000), together with interest as specified below.
3. Deletion of Sixth Paragraph of Original Note. The following language,
contained in the sixth paragraph of the Original Note, is hereby deleted in its
entirety:
Absent manifest error, the amounts due under this Note will be the
amounts reflected on Payee's books and records. Payee may, at its
option, from time to time, record advances by Payee and payments of
principal and interest by Maker on Schedule A attached hereto or on any
continuation of Schedule A. Schedule A, in the absence of manifest
error, will constitute prima facie evidence of the accuracy of the
information contained in Payee's books and records.
4. Payment of Note. The seventh paragraph of the Original Note (including the
subparagraphs numbered 1 and 2) is hereby amended to read in its entirety as
follows:
This Note will be paid as follows:
a. Maker will make quarterly payments of interest only, in
arrears, within ten days following Maker's written notice
to Payee of the Blended Rate in effect for the immediately
preceding fiscal year quarter, with the first of such
fiscal year quarters ending on April 26, 1997;
b. Maker will pay twenty percent (20%) of the outstanding
principal balance, as a principal payment, on or before
May 28, 2000 (one year following the Effective Date);
c. Maker will pay the remaining balance of principal, on
or before November 28, 2000 (eighteen months following the
Effective Date); and
d. Notwithstanding any contrary provision of the Note, Maker
will pay all accrued interest and any other sums due under
this Note on or before November 28, 2000, using the
interest rate as calculated for the period between the end
of the prior fiscal quarter and the payoff date.
e. Maker shall have the right to prepay, at any time, any sum
owing under this Note without penalty or premium.
f. Notwithstanding any contrary provision of the Note, Maker
will prepay the full outstanding balance of principal and
all accrued interest immediately upon completion of a
public offering and sale of securities of Maker, its
successors or Wild Oats Markets, Inc., where the proceeds
of the offering to the Maker, its successors or Wild Oats
Markets, Inc. exceeds the outstanding principal balance and
accrued interest under the Note."
5. Amendment to Ninth Paragraph of Original Note. The ninth paragraph of the
Original Note is hereby amended to read in its entirety as follows:
Payment of this Note is secured by, among other collateral, a security
interest pursuant to a Security Agreement dated February 1, 1997, a
Trust Deed, Assignment of Rents, and Fixture Filing dated February 1,
1997, and two Leasehold Trust Deeds, Assignment of Rents, and Fixture
Filings dated August 7, 1998 and January 21, 1999, respectively, and by
any other collateral granted to Payee by Maker prior to,
contemporaneously with or subsequent to the date of this Note. The
above-described Security Agreement, Trust Deed, Leasehold Trust Deeds,
and any other similar agreements are sometimes referred to collectively
as the "Loan Documents".
6. Effective Date. The effective date of this Amendment is May 29, 1999 the
"Effective Date". Nothing in this Amendment shall be deemed to apply to any of
the terms or provisions of the Original Note before the Effective Date.
7. No Other Changes. Except as specifically modified by this Amendment, the
Original Note remains in full force and effect.
IN WITNESS WHEREOF, Maker and Payee have executed this
Amendment as of the date first set forth above.
MAKER: NATURE'S FRESH NORTHWEST, INC.
By:
Its:
PAYEE: GENERAL NUTRITION, INCORPORATED
By:
Its:
