ASSET PURCHASE AGREEMENT Among GreenAcres Markets of Oklahoma, LLC, GACorp, Inc. (“Sellers”), the equityholders listed on the signature page hereto (“Majority Equityholders”), Healthy Choice Markets VI, LLC (“Buyer”) and Shannon Hoffmann, as Seller...
Exhibit 2.1
Among
GreenAcres Markets of Oklahoma, LLC,
GACorp, Inc.
(“Sellers”),
the equityholders listed on the signature page hereto
(“Majority Equityholders”),
Healthy Choice Markets VI, LLC
(“Buyer”)
and
Xxxxxxx Xxxxxxxx, as Seller Representative
Dated July 17, 2024
TABLE OF CONTENTS
| Page | ||
| Article 1 PURCHASE AND SALE OF ASSETS | 3 | |
| Section 1.1 | Purchased Assets to be Purchased and Sold | 3 |
| Section 1.2 | Closing Date | 6 |
| Section 1.3 | Purchase Price | 6 |
| Section 1.4 | Payment of Purchase Price | 7 |
| Section 1.5 | No Assumed Liabilities | 8 |
| Section 1.6 | Assumption of Obligations | 8 |
| Section 1.7 | Withholding Tax | 10 |
| Section 1.8 | Third Party Consents | 10 |
| Section 1.9 | Post-Closing Services and Adjustments | 10 |
| Article 2 REPRESENTATIONS AND WARRANTIES OF SELLERS AND THE MAJORITY EQUITYHOLDERS | 11 | |
| Section 2.1 | Organization and Qualification of Sellers | 11 |
| Section 2.2 | Authority of Seller | 11 |
| Section 2.3 | Authority of Majority Equityholders | 11 |
| Section 2.4 | Absence of Conflicts and Consent Requirements | 11 |
| Section 2.5 | Financial Statements | 11 |
| Section 2.6 | Absence of Certain Changes | 12 |
| Section 2.7 | Title to Purchased Assets | 12 |
| Section 2.8 | Condition of Certain Tangible Property | 13 |
| Section 2.9 | PPP Loans | 14 |
| Section 2.10 | No Litigation | 14 |
| Section 2.11 | Compliance with Law; Permits | 14 |
| Section 2.12 | Taxes | 14 |
| Section 2.13 | Employee Benefit Plans | 16 |
| Section 2.14 | Employee Relations | 16 |
| Section 2.15 | Insurance | 17 |
| Section 2.16 | Books and Records; Material Contracts | 17 |
| Section 2.17 | Environmental | 17 |
| Section 2.18 | Conduct Prior to Closing | 19 |
| Section 2.19 | Suppliers | 20 |
| Section 2.20 | Intellectual Property | 20 |
| Section 2.21 | Inventory | 21 |
| Section 2.22 | Brokers | 21 |
| Section 2.23 | No Material Misstatements or Omissions | 21 |
| Article 3 REPRESENTATIONS AND WARRANTIES OF BUYER | 21 | |
| Section 3.1 | Corporate Organization and Authority | 21 |
| Section 3.2 | Absence of Conflicts and Consent Requirements | 22 |
| Section 3.3 | No Material Misstatements or Omissions | 22 |
| Section 3.4 | Brokers | 22 |
| Section 3.5 | Sufficiency of Funds | 22 |
| Section 3.6 | Independent Investigation | 22 |
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| Article 4 EMPLOYEE MATTERS | 22 | |
| Section 4.1 | Employee Matters | 22 |
| Article 5 OTHER COVENANTS AND AGREEMENTS | 24 | |
| Section 5.1 | Press Releases and Announcements | 24 |
| Section 5.2 | Maintenance of Records | 24 |
| Section 5.3 | Further Assurances | 24 |
| Section 5.4 | Fees and Expenses; Prorations | 24 |
| Section 5.5 | Trade Secrets; Confidential Information | 25 |
| Section 5.6 | Exclusivity | 25 |
| Section 5.7 | 26 | |
| Section 5.8 | Access | 26 |
| Section 5.9 | Restrictive Covenants | 27 |
| Section 5.10 | Tax Matters | 29 |
| Section 5.11 | Name Change | 31 |
| Section 5.12 | Kansas and Oklahoma Sales Tax Registration | 31 |
| Article 6 CONDITIONS TO CLOSING; TERMINATION | 31 | |
| Section 6.1 | Conditions to Buyer’s Obligations | 31 |
| Section 6.2 | Conditions to Sellers’ Obligations | 32 |
| Section 6.3 | Termination | 33 |
| Article 7 INDEMNIFICATION AND ENFORCEMENT | 33 | |
| Section 7.1 | Indemnification by Seller and Majority Equityholders | 33 |
| Section 7.2 | Indemnification by Buyer | 34 |
| Section 7.3 | Indemnity Claims | 34 |
| Section 7.4 | Survival | 35 |
| Section 7.5 | Continued Liability for Indemnity Claims | 35 |
| Section 7.6 | Default by Buyer | 35 |
| Section 7.7 | Default by Seller | 35 |
| Section 7.8 | Limitations | 35 |
| Article 8 SELLER REPRESENTATIVE | 36 | |
| Section 8.1 | Seller Representative | 36 |
| Article 9 MISCELLANEOUS | 38 | |
| Section 9.1 | Merger Clause | 38 |
| Section 9.2 | Amendments | 38 |
| Section 9.3 | Assigns | 38 |
| Section 9.4 | Notices | 38 |
| Section 9.5 | Headings | 39 |
| Section 9.6 | Governing Law | 39 |
| Section 9.7 | Schedules and Exhibits | 39 |
| Section 9.8 | Severability | 39 |
| Section 9.9 | Time of Essence | 39 |
| Section 9.10 | Counterparts | 39 |
| Section 9.11 | Interpretation | 39 |
LIST OF EXHIBITS
| Annex I | Defined Terms |
| Exhibit A | Form of Buyer’s Note and Security Agreement |
| Exhibit B | Form of Bill of Sale |
| Exhibit C | Assignment and Assumption Agreement |
| Exhibit D | Form of Assignment of Intellectual Property |
| Exhibit E | Form of Press Release |
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THIS ASSET PURCHASE AGREEMENT (this “Agreement”) is made and entered into as of the 17th day of July, 2024, by and among (i) Healthy Choice Markets VI, LLC, a Florida limited liability company (“Buyer”); (ii) GreenAcres Markets of Oklahoma, LLC, an Oklahoma limited liability company and GACorp, Inc., a Kansas corporation (each, a “Seller”; collectively, the “Sellers”); (iii) the group of equityholders owning the majority interests of the Sellers, specifically all the equityholders listed on the signature page hereto (collectively the “Majority Equityholders”); and (iv) Xxxxxxx Xxxxxxxx, as the Seller Representative (“Seller Representative”). Capitalized terms used but not defined herein shall have the meaning given such terms in Annex I attached hereto.
BACKGROUND:
A. Sellers own and operate grocery and specialty food stores located at 0000 X. 00xx Xxxxxx, Xxxxxxx, XX 00000 (the “Xxxxxxx Fair Store”), 0000 X. Xxxxxxxxxxxx Xxx, Xxxxx X, Xxxxxxxx Xxxx, XX 00000 (the “Walnut Square Store”), 14 X.X. Xxxxxxxx road, Lawton, OK 73505 (the “Lawton Store”), 00000 X. 00xx Xxxxxx, Xxxxxxx, XX 00000 (the “21st & Maize Store”), 0000 X. Xxxxxxx Xxx., Xxxxxxx, XX 00000 (the “ Normandie Store” and collectively with the Xxxxxxx Fair Store, the Walnut Square Store, the Lawton Store and the 21st & Maize Store, the “Stores”).
B. Buyer desires to purchase from Sellers and Sellers desire to sell and assign to Buyer the Purchased Assets, in accordance with the terms hereof.
C. The Majority Equityholders collectively own eighty-four and five hundred seventy-five thousandths percent (84.575%) of the issued and outstanding equity interests in Sellers and will derive substantial benefit from the transaction described in this Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
Article
1
PURCHASE AND SALE OF ASSETS
Section 1.1 Purchased Assets to be Purchased and Sold.
(a) Description of Purchased Assets. At the Closing (hereinafter defined), Sellers shall sell and convey (with respect to owned assets) and assign (with respect to leased assets) to Buyer, and Buyer shall purchase and acquire from Sellers, the Purchased Assets, free and clear of any Encumbrances other than Permitted Encumbrances. For purposes of this Agreement, the “Purchased Assets” shall mean all of Sellers’ right, title and interest in, to and under all of the assets, properties and rights of every kind and nature, whether real, personal or mixed, tangible or intangible (including goodwill), wherever located and whether now existing or hereafter acquired (other than the Excluded Assets), which relate to, or are used or held for use in connection with the operation of the Stores, including, without limitation, the following:
(i) Equipment. All furniture, furnishings, fixtures, walk-in boxes, leasehold improvements, equipment, parts, machinery, and related facilities and all other tangible personal property related to the operation of the Stores (the “Equipment”), and any additions or accessions thereto or substitutions thereto or substitutions therefore or proceeds thereof, subject to the restrictions and limitations of this Agreement;
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(ii) Contracts. All of Sellers’ rights under the contracts and agreements described on Schedule 1.1(a)(ii) (the “Contracts”);
(iii) Leases. All of Sellers’ rights as lessee or lessor pursuant to those real property or personal property leases described on Schedule 1.1(a)(iii) (the “Leases”);
(iv) Marks and Names. The exclusive rights to all telephone numbers, trademarks, service marks, including all federal or state registrations or applications for registration of such trademarks or service marks, trade dress, and trade names now or formerly used by Sellers in the operation of the Stores (severally and collectively, the “Marks and Names”), including without limitation those listed on Schedule 1.1(a)(iv);
(v) Records. All of Sellers’ forecasts, financial information, vendor and customer lists, supplier lists, employee training and personnel manuals and files, computer records, data related to point-of-sale scanning which includes historical purchase and sales data that is data warehoused, plans, specifications, construction documents, real estate files, environmental studies and reports, inspection reports, surveys, UST registrations and reports, government compliance files, correspondence, and all other records and related files and data, all to the extent applicable to the operation of the Stores (the “Records”);
(vi) Permits. All of Sellers’ federal, state and local governmental or quasi-governmental permits, licenses, certificates and approvals required for the conduct of its business (or held with respect to the assets and operations of any Store), as described in Schedule 1.1(a)(vi) (the “Permits”), to the extent assignment thereof to Buyer is permitted by applicable law;
(vii) Purchase Orders. All of Sellers’ purchase orders;
(viii) Inventory. All customary good and saleable inventories and other personal property held for sale at the Stores (the “Inventory”), and ascribed value pursuant to Section 1.3(b);
(ix) Supplies. All supplies held for use or consumption in the Stores (“Supplies”);
(x) Rebates. All rebates of Sellers relating to Inventory purchased by Buyer at the Closing (“Rebates”);
(xi) Vehicles. All trucks and other vehicles of Sellers used in the operation of the Stores, and as described in Schedule 1.1(a)(xi);
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(xii) Intellectual Property. All worldwide right, title and interest in and to all proprietary rights of every kind and nature pertaining to or deriving from any of the Intellectual Property;
(xiii) Other Intangible Purchased Assets. All of the computer software, accounting systems, credit card systems, credit card invoice printers, and electronic point of sale devices, money order machines and money order stock, identification signs and sign holders, all training and marketing materials, advertisements and advertising materials and rights, all warranties and guarantees (including without limitation warranties and guarantees for Improvements and Equipment) and utility deposits, and all goodwill and other intangible assets associated with the ownership and operation of Sellers’ business (collectively, “Other Intangible Purchased Assets”);
(xiv) Leased Property. The real property described on Schedule 1.1(a)(xiv) in which Sellers have a leasehold interest pursuant to the applicable Leases (hereinafter defined), together with Sellers’ interest in the rights, easements and appurtenances pertaining thereto, including without limitation, Sellers’ interest in any right-of-way or easement over any adjoining property and any right, title and interest of Sellers in and to adjacent streets, alleys or rights-of-way (the “Leased Property”); and
(xv) Other Purchased Assets. All other assets and rights of Sellers that are not Excluded Assets.
(b) Excluded Assets. The assets to be purchased and sold hereunder, and the term “Purchased Assets” as used herein, shall not include the following assets of Sellers existing on the Closing Date (the “Excluded Assets”):
(i) Any government permit, license or similar right that is not legally transferable to Buyer;
(ii) All claims and rights of Sellers to federal, state and local income tax refunds, credits and benefits;
(iii) All insurance policies of Sellers and all rights to applicable claims and proceeds thereunder;
(iv) the corporate seals, organizational documents, minute books, stock books, Tax Returns, books of account or other records having to do with the corporate organization of Sellers, all employee-related or employee benefit-related files or records, other than personnel files of employees of Sellers being hired by Xxxxx, and any other books and records which Sellers are prohibited from disclosing or transferring to Buyer under applicable Law and is required by applicable Law to retain;
(v) All amounts deposited as refundable security deposits with the Sellers’ landlords at the Stores attributable to Leases, which, shall be returned to Sellers by Sellers’ landlords;
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(vi) All of Sellers’ cash and cash equivalents on its books as of the Closing;
(vii) All of Sellers’ accounts receivables and credit card receivables, including those receivables for which an amount will be calculated for activity in periods prior to the Closing Date, but is not currently represented in the Financial Statements.
(viii) All personal assets listed at Schedule 1.1(b)(viii).
Section 1.2 Closing Date. Consummation of the sale provided for herein (the “Closing”) shall take place on the second business day following the satisfaction or waiver of all conditions to the obligations of the parties set forth in Article 6 (other than conditions with respect to actions the parties will take at Closing) or such other date as the Buyer and Seller Representative may mutually agree upon in writing (the “Closing Date”). The Closing shall be held electronically by the parties without the need for a physical closing location. At the Closing, Sellers shall convey the Purchased Assets to Buyer by appropriate instruments of transfer and Buyer shall pay the consideration provided in Sections 1.3 and 1.4.
The Closing shall be deemed effective as of 12:00:00 AM eastern time on the Closing Date. All risk of loss with respect to the Purchased Assets shall be borne by Sellers until the Closing, at which time: (i) risk of loss with respect to the Purchased Assets shall be assumed by Buyer; (ii) Sellers shall deliver to Buyer exclusive possession of the Purchased Assets; and (iii) Buyer shall assume operating control of the Stores. Except as otherwise set forth herein, Sellers may cancel all insurance coverage on the Purchased Assets conveyed to Buyer effective at 12:01 a.m., Eastern Time, on the day following the Closing Date.
Section 1.3 Purchase Price.
(a) Amount. The purchase price (the “Purchase Price”) to be paid to Sellers for the Purchased Assets shall be an amount equal to (i) $4,900,000, plus (ii) the value of the Inventory, as determined in accordance with Section 1.3(b) (the “Inventory Value”), plus or minus (iii) an adjustment for pro-rata payments due for pre-Closing periods or previously paid for post-Closing periods with respect to the Leases (the “Pro-Rata Adjustment”).
(b) Determination of Inventory Purchase Price. The Inventory Value shall be determined as follows:
(i) Closing Non-Perishable Inventory. Buyer and Sellers shall engage a third-party inventory service firm (the “Inventory Team”). The cost of such Inventory Team shall be paid half by Xxxxx and half by Xxxxxxx. The Inventory Team shall conduct a physical inventory (other than Perishables) of each Store on July 31, 2024, or at such other time as the Buyer and Seller Representative shall mutually agree (the “Inventory Time”). The Inventory Team shall agree to and record the quantity of all saleable non-Perishable goods in inventory at each Store as of the Inventory Time. Sellers and Xxxxx shall have the right to have their respective representatives observe the taking of the inventory provided that such observation rights do not delay the taking of inventory.
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(ii) Perishable Inventory. The parties shall jointly conduct a physical inventory of Perishables on the day prior to Closing to determine the portion of the Inventory Value attributable to Perishables. The valuation of the Inventory pursuant to clauses 1.3(b)(i) and (ii) shall be equal to Sellers’ cost for such Inventory as reported in the Sellers’ inventory system as of close of business on the day immediately prior to Closing, and shall be further adjusted to the extent (A) to the extent the Inventory Team determines that such Inventory is damaged, spoiled or otherwise non-saleable or (B) in accordance with changes in Inventory identified by the Sellers’ inventory management systems prior to the Closing Date.
(iii) Inventory Rollback. In connection with the non-Perishable Inventory, the parties hereto agree to conduct an inventory rollback for the period from the Closing Date until July 31, 2024 or such other date that is designated the Inventory Time (the “Rollback Period”) in accordance with the procedures set forth in Schedule 1.3(b)(iii). During the Rollback Period, Buyer shall (1) continue to purchase Inventory in the ordinary course of business, and (2) not make any material changes to the LOC Software System in place at the Stores. In the event that the Inventory valuation for the Rollback Period results in a percentage variation greater than 15% from $2,200,000, then the parties agree to conduct a recount of the non-Perishable Inventory as soon as practicable, which the cost of such recount shall be paid half by Buyer and half by Sellers.
(c) Allocation of Purchase Price. The Purchase Price shall be allocated among the Purchased Assets as provided on the Allocation Schedule attached hereto as Schedule 1.3(c) (the “Allocation Schedule”). The parties agree (i) to jointly complete and timely file Form 8594, and any other required reports in accordance with Section 1060 of the Code, with their respective federal income tax returns for the tax year in which the Closing Date occurs (and any amended Form 8594, if necessary) in accordance with the Allocation Schedule and (ii) that no party will take a position on any report, return, or other documents filed with any governmental authority in any judicial or administrative proceeding, that is in any manner inconsistent with the Allocation Schedule.
Section 1.4 Payment of Purchase Price. The Buyer shall pay the Purchase Price as follows:
(a) at Closing, (i) a cash payment of $4,175,000 plus or minus any Pro-Rata Adjustment to the Sellers, and (ii) the issuance of a promissory note (the “Buyer’s Note”) to GreenAcres Markets of Oklahoma, LLC in the principal amount of $1,225,000, together with a security agreement to Sellers (the “Security Agreement, in the forms attached hereto as Exhibit A.
(b) Within five (5) Business Days following determination of the Inventory Value, all additional Purchase Price attributable to Inventory shall be paid, with such additional Purchase Price being paid in a ratio of cash and an increase in the principal amount of the Buyer’s Note such that (i) twenty-five percent (25%) of the aggregate Purchase Price shall paid pursuant to the Buyer’s Note and (ii) seventy-five percent (75%) of the aggregate Purchase Price shall be paid in cash.
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(c) The parties intend that GACorp, Inc.’s portion of the Purchase Price, be funded entirely from a portion of the cash payment required in Sections 1.4(a) and (b) above and that GreenAcres Markets of Oklahoma, LLC’s portion of the Purchase Price be funded with a combination of the remaining cash portion and the Buyer’s Note required in Sections 1.4(a) and (b) above.
(d) The parties agree that only $500,000 of the cash payment made to Sellers pursuant to Section 1.4(a) shall be allocated to the payment for the Inventory Value. For example, if the Closing Inventory is determined to be $2,000,000, then $500,000 shall be credited to the cash portion of the payment for the Inventory, resulting in an additional $1,000,000 due in cash and $500,000 due as part of the Buyer’s Note.
Section 1.5 No Assumed Liabilities. Except as may be set forth in Section 1.6, Buyer will not assume or have any obligation to pay, perform or discharge any debts, liabilities, obligations, expenses, taxes, contracts or commitments of any kind, character or description, whether known or unknown, xxxxxx or inchoate, disclosed or undisclosed, matured or unmatured, accrued, absolute or contingent, of Sellers (the “Liabilities”), which arise out of or relate to the ownership and operation of the Purchased Assets or the Stores prior to the Closing Date, or any Excluded Assets.
Section 1.6 Assumption of Obligations.
(a) Assumed Obligations Defined. As used in this Agreement, “Assumed Obligations” means all Liabilities in respect of the Contracts listed on Schedule 1.6 (the “Assigned Contracts”) but only to the extent that such Liabilities thereunder are required to be performed after the Closing Date, were incurred in the ordinary course of business (including any gift cards or loyalty program obligations) and do not relate to any failure to perform, improper performance, warranty or other breach, default or violation by Sellers on or prior to the Closing.
(b) Excluded Obligations and Liabilities Defined. Inasmuch as Buyer is acquiring the Purchased Assets, and not acquiring a business, Xxxxx shall have no successor liability with respect to the business conducted by Sellers related to the Purchased Assets. As used in this Agreement, the “Excluded Obligations and Liabilities” means any such successor liability, as well as the following obligations, liabilities, covenants, commitments and undertakings of Sellers:
(i) any liabilities of any Sellers arising or incurred in connection with the negotiation, preparation, investigation and performance of this Agreement, the other documents and instruments executed in connection with Closing, and the transactions contemplated hereby and thereby, including, without limitation, fees and expenses of counsel, accountants, consultants, advisers and others;
(ii) any liability or obligation other than Assumed Obligations related to the business carried out with the Purchased Assets by Sellers, including, without limitation, all liabilities for, accrued payroll, accrued taxes, taxes, including federal state and local income, franchise, social security, unemployment, or withholding taxes, or penalties, interest, fines or assessments in connection therewith for the period prior to and through the Closing Date;
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(iii) all trade payables incurred by Sellers for goods or services delivered to Sellers;
(iv) except for Transfer Taxes arising as a result of the transactions contemplated by this Agreement (which Transfer Taxes are governed by Section 5.10(a)), any federal, state, local or foreign income or other Tax, including ad valorem property or intangibles Taxes (i) of Sellers or any of their respective Affiliates, (ii) payable with respect to the Purchased Assets or the business conducted by Sellers related to the Purchased Assets for any period prior to the Closing, (iii) incident to or arising as a consequence of the consummation by Sellers of the transactions contemplated by this Agreement (including income Taxes arising as a result of Seller transferring the Purchased Assets), or (iv) payable by Sellers pursuant to Treasury Regulation Section 1.1502-6 (or similar provision of state, local or foreign Law), as a transferee or successor, by contract or otherwise or (v) any withholding Taxes imposed in connection with the transactions contemplated by this Agreement;
(v) any of the Sellers’ obligations, liabilities, covenants, commitments and undertakings under this Agreement or any instrument or agreement entered into pursuant hereto;
(vi) any of the Sellers’ product liability for any products, goods or services sold, delivered or performed by Sellers prior to Closing Date;
(vii) any of the Sellers’ obligations under any agreement or instrument regarding funded indebtedness, including, without limitation, all existing bank indebtedness, indebtedness from financial institutions, personal indebtedness or lease obligations capitalized in the Financial Statements (it being understood that the foregoing shall be paid in full by Seller at Closing) except as to post-Closing obligations under the Assigned Contracts;
(viii) any accrued and unpaid vacation, holiday, personal leave time, sick leave, or severance benefits or accrued benefits of any nature of any employee, officer and/or director of any of the Sellers as of the Closing Date; any severance pay or other benefits or pension or retirement liability due to any employee employed by any of the Sellers and attributable to employment by any of the Sellers; and any liability for workers compensation or other claims by employees relating to employment by any of the Sellers;
(ix) all of the obligations, liabilities, covenants, commitments and undertakings that accrue or arise prior to the Closing Date under the Assigned Contracts;
(x) any liabilities in respect of any pending or threatened dispute or legal action arising out of, relating to or otherwise in respect of the operation of the business or the Purchased Assets to the extent such action relates to such operation on or prior to the Closing Date;
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(xi) All liabilities, taxes, penalties, interest and sanctions that arise by reason of or relating to any failure by any of the Sellers to comply with the continuation of health coverage requirements of the Code and ERISA, which failure occurred prior to the Closing Date with respect to any current or prior employee of any of the Sellers or any qualified beneficiary of such employee;
(xii) any Liabilities arising out of, in respect of or in connection with the failure by any of the Sellers or any of their Affiliates to comply with any law or governmental order; and
(xiii) all other obligations, liabilities, covenants, commitments and undertakings of any of the Sellers which are not expressly included within the definition of Assumed Obligations.
(c) Payment of Excluded Liabilities and Obligations. The Excluded Obligations and Liabilities shall remain the obligation of Sellers. Any invoices received by Buyer after Closing which relate to goods or services delivered to Sellers prior to and through the Closing Date shall be immediately forwarded to Sellers, and Sellers shall pay the same within ten (10) days after receipt of such invoices. Each Seller covenants and agrees that it will pay, perform and discharge the Excluded Liabilities and Obligations as and when due.
(d) No Assumption of Liabilities. Except for the Assumed Obligations, Buyer is not assuming any of Sellers’ liabilities or obligations, whether known or unknown, contingent or realized.
Section 1.7 Withholding Tax. The Buyer and any other applicable withholding agent will be entitled to deduct and withhold from any consideration payable under this Agreement any Taxes or other amounts required under the Code or any applicable law to be deducted, withheld and timely remitted to the applicable taxing authority. To the extent any such amounts are so deducted and withheld, such amounts will be treated for all purposes of this Agreement as having been paid to the Person in respect of which such deduction and withholding was made.
Section 1.8 Third Party Consents. To the extent that Sellers’ rights under any Contract constituting a Purchased Asset may not be assigned to Buyer without the consent of another Person which has not been obtained, this Agreement shall not constitute an agreement to assign the same if an attempted assignment would constitute a breach thereof or be unlawful, and Sellers, at their expense, shall use commercially reasonable efforts to obtain any such required consent(s) as promptly as possible. If any such consent shall not be obtained or if any attempted assignment would be ineffective or would impair Buyer’s rights under the Purchased Asset in question so that Buyer would not in effect acquire the benefit of all such rights, Sellers, to the maximum extent permitted by law and the Purchased Asset, shall act after the Closing as Buyer’s agent in order to obtain for it the benefits thereunder and shall cooperate, to the maximum extent permitted by Law and the Purchased Asset, with Buyer in any other reasonable arrangement designed to provide such benefits to Buyer.
Section 1.9 Post-Closing Services and Adjustments. Until Buyer instructs Sellers in writing that Sellers’ services, accounts or cooperation are no longer needed, Sellers agree to:
(a) (i) continue to transact all merchant payment processing services of the Stores through Sellers existing payment processing accounts and (ii) forward promptly (but in all instances within five (5) Business Days of receipt by Sellers) to an account designated by the Buyer all amounts received by the Sellers through such payment processing accounts;
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(b) keep in place, and pay, all utility accounts of the Stores;
(c) keep in place existing vendor agreements and accounts for the Stores;
(d) pay for any product vendor charges for the Stores made by Xxxxx following the Closing Date that has been billed to Sellers and
(e) keep in place any service, repair or other contracts related to the operations of the Stores.
Subject to any offset set forth herein or in any of the Transaction Documents, (i) any amounts paid by the Sellers pursuant to Sections 1.9(b) through (e) and (ii) any Pro Ration Payment owed to the Sellers (collectively, the “True Up Amounts”), shall be paid on the date that is sixty (60) days following the Closing Date (the “Initial True Up Date”). Any True Up Amounts incurred or determined after the Initial True Up Date (or incurred prior to such date and not previously reimbursed) shall be paid on each subsequent 30-day anniversary of the Initial True Up Date (each a “Subsequent True Up Date”) to the extent applicable. Any Payroll Reimbursement owed to Sellers shall be paid within five (5) business days following the employee payment date giving rise to any Payroll Reimbursement obligation. In the event that the Sellers owe any amounts to the Buyer for any Pro Ration Payment, such amounts will (y) first, be offset against any payment due to the Sellers pursuant to this Section 1.9 and (z) to the extent any Pro Ration Payment is not offset and remains outstanding, the Sellers shall pay such amounts to the Buyer within thirty (30) days following the Initial True Up Date or the Subsequent True Up Date, whichever true up date gives rise to the outstanding obligation, by wire transfer of immediately available funds to the account(s) specified by the Buyer in writing. Any payment due to the Sellers pursuant to this Section 1.9 shall be made by wire transfer of immediately available funds to the account(s) specified by Seller Representative in writing on the date that is thirty (30) days following the Initial True Up Date or the Subsequent True Up Date, whichever true up date gives rise to the outstanding obligation.
Article 2
REPRESENTATIONS AND WARRANTIES OF SELLERS AND THE MAJORITY EQUITYHOLDERS
To induce Buyer to enter into this Agreement and to purchase the Purchased Assets, Sellers and the Majority Equityholders represent and warrant to, and covenant and agree with, Buyer, as of the date hereof and as of the Closing, that:
Section 2.1 Organization and Qualification of Sellers. Each Seller is a corporation or limited liability company duly organized, validly existing and in good standing under the Laws of the state of its formation as set forth on Schedule 2.1 and has full corporate power and authority to own, operate or lease the properties and assets now owned, operated or leased by it and to carry on the business as currently conducted. No Seller operates in any jurisdiction other than its respective state of formation which requires it to be licensed or qualified to do business in such other jurisdiction.
Section 2.2 Authority of Seller. Each Seller has full corporate or limited liability company power and authority to enter into this Agreement and the other agreements executed by the parties at the Closing (collectively, the “Transaction Documents”) to which such Seller is a party, to carry out its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. The execution and delivery by each Seller of this Agreement and any other Transaction Document to which such Seller is a party, the performance by such Seller of its obligations hereunder and thereunder and the consummation by such Seller of the transactions contemplated hereby and thereby have been duly authorized by all requisite corporate action on the part of such Seller. This Agreement has been duly executed and delivered by each Seller, and (assuming due authorization, execution and delivery by Buyer) this Agreement constitutes a legal, valid and binding obligation of each Seller enforceable against each Seller in accordance with its terms. When each other Transaction Document to which each Seller is or will be a party has been duly executed and delivered by such Seller (assuming due authorization, execution and delivery by each other party thereto), such Transaction Document will constitute a legal and binding obligation of such Seller enforceable against it in accordance with its terms.
Section 2.3 Authority of Majority Equityholders. Each Majority Equityholder has full individual power to enter into and perform their obligations under the Transaction Documents to which such Majority Equityholder is a party.
Section 2.4 Absence of Conflicts and Consent Requirements. Each Seller’s execution and delivery of this Agreement and the other Transaction Documents to which it is a party, and performance of its obligations hereunder and thereunder, including the sale of the Purchased Assets, will not conflict with, violate or result in any default under such Seller’s articles of incorporation or bylaws, or articles of organization or operating agreement, as applicable, or under any mortgage, indenture, agreement, instrument or other contract to which such Seller is a party or by which such Seller or its property is bound, nor will they violate any judgment, order, decree, law, statute, regulation or other judicial or governmental restriction to which such Seller is subject. Except as set forth in Schedule 2.4 hereto, each Seller’s execution and delivery of this Agreement and performance of its obligations hereunder, including the sale of the Purchased Assets, will not require the consent of, or any prior filing with or notice to, any governmental authority or other third party.
Section 2.5 Financial Statements. Attached hereto as Schedule 2.5 are true and complete financial statements for Sellers for each Store the calendar (i) year ending December 31, 2023 (“Annual Financial Statements”) and (ii) five (5) months ended May 31, 2024 (“Interim Financial Statements”, together with the Annual Financial Statements, the “Financial Statements”), consisting of Sellers’ combining statement of assets, liabilities, and equity (deficit) and related statements of revenue and expenses. The Financial Statements (i) are based on the books and records of Sellers, (ii) have been prepared in accordance with the Seller’s standard income tax accounting practices which have been applied on a consistent basis throughout the periods involved, and (iii) present fairly in all material respects the results of the operations of Sellers and each Store, subject, in the case of the Interim Financial Statements, to normal and recurring year-end adjustments. The combining statement of assets, liabilities, and equity (deficit) of the Sellers as of May 31, 2024 is referred to herein as the “Balance Sheet” and the date thereof as the “Balance Sheet Date.”
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Section 2.6 Absence of Certain Changes. Since the Balance Sheet Date, except as set forth or referred to in Schedule 2.6 hereto, with respect to the Purchased Assets there has not been:
(i) any material adverse change in the financial position of Sellers or in the results of its operations (e.g., any such change resulting in a diminution in value of the Sellers by 5% or more);
(ii) any material adverse change in the condition of the Purchased Assets out of the ordinary course of business by 5% or more;
(iii) any material damage, destruction or loss (whether or not covered by insurance) adversely affecting the Purchased Assets;
(iv) any sale, lease, abandonment or other disposition by any Seller of any interest in the Leases, or in any Equipment, other than disposition of such Equipment which was no longer usable in such Seller’s business or which was replaced by Equipment of equal or greater value;
(v) any change in the accounting methods or practices followed by Sellers or in depreciation, amortization or inventory valuation policies theretofore used or adopted;
(vi) any increase in the compensation paid to management-level employees of any Seller other than customary increases in the ordinary course of business;
(vii) (i) settled or compromised any Tax Liability, (ii) made, changed or rescinded any Tax election other than elections made on Tax Returns consistent with past practice, (iii) surrendered any right in respect of Taxes, (iv) consented to any extension or waiver of the limitation period applicable to any claim or assessment in respect of Taxes, or (v) amended any Tax Return; or
(viii) any other material adverse change in the business or, to the knowledge of Sellers, prospects of any Seller, other than economic or regulatory changes generally known through the grocery/specialty food store industry as a whole and not unique to the business of any Seller (e.g., any such change resulting in a diminution in value of any Seller by 5% or more).
Section 2.7 Title to Purchased Assets. Sellers have good and valid title to, or a valid leasehold interest in, all of the Purchased Assets. All such Purchased Assets (including leasehold interests) are free and clear of Encumbrances except for those Encumbrances listed in Schedule 2.7 and the following (collectively referred to as “Permitted Encumbrances”):
(a) liens for taxes not yet due and payable;
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(b) mechanics’, carriers’, workmen’s, repairmen’s or other like liens arising or incurred in the ordinary course of business consistent with past practice or amounts that are not delinquent and which are not, individually or in the aggregate, material to the business or the Purchased Assets;
(c) easements, rights of way, zoning ordinances and other similar encumbrances which are not, individually or in the aggregate, material to the business or the Purchased Assets, and which do not prohibit or interfere with the current operation of any of the Stores; or
(d) liens arising under original purchase price conditional sales contracts and equipment leases with third parties entered into in the ordinary course of business consistent with past practice which are not, individually or in the aggregate, material to the business or the Purchased Assets.
Section 2.8 Condition of Certain Tangible Property.
(a) Leased Property. To the Knowledge of Sellers, all buildings and other improvements constructed upon the Leased Property, together with all permanently attached machinery and fixtures, heating, plumbing, electrical, lighting, ventilating and air-conditioning equipment affixed to or located on the Leased Property (the “Improvements”) and all electric, gas, water and sewer utilities serving the Stores are in good condition and repair, ordinary wear and tear excepted, and are in compliance with all current laws and regulations. There are no zoning or similar land use restrictions presently in effect which would impair the use of the Stores as a grocery stores, and the Stores are in compliance with all applicable zoning or similar land use restrictions of all governmental authorities having jurisdiction thereof.
(b) Equipment. All of the Equipment is in good operating condition and repair (including routine maintenance) and are adequate for the uses to which they are being put, and no such assets are in need of maintenance or repairs except for ordinary, routine maintenance and repairs that are not material in nature or cost. Prior to Closing, Sellers shall maintain the Equipment and Improvements in accordance with all applicable laws and regulations and Sellers’ existing repair and maintenance policies.
(c) Inventory. The type, quantity and quality of Inventory at Closing will be consistent with normal inventory levels historically necessary to conduct each Seller’s business in the ordinary course.
(d) Leases. Sellers have delivered or shall deliver, no later than five (5) days following the date of this Agreement, to Buyer true, correct and complete copies of the Leases, including all amendments thereto. Sellers shall not modify, terminate or permit to expire or terminate any Lease prior to Closing without Buyer’s written consent. Except for (i) the Leases identified on Schedule 1.1(a)(iii), and (ii) leases that are identified on Schedule 1.1(a)(ii) (Contracts), none of the Leased Property or Equipment is leased by any Seller to any other party and none of the real or tangible personal property (or any interest therein) transferred pursuant to this Agreement is leased by any Sellers from any third party. No Seller nor, to the knowledge of any Seller, the other parties thereto are in default under any of the Leases and all of the Leases are valid and enforceable in accordance with their terms. Not more than one month’s rent has been prepaid on any of the Leases. The assignment by each Seller of its rights under the Leases to Buyer, subject only to the obtaining of consents described in Schedule 2.4 with respect thereto, will not violate the terms thereof.
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Section 2.9 PPP Loans. Except as set forth on Schedule 2.9, neither the Sellers nor those certain Affiliates of any Seller which are engaged in the same business as the Seller, have incurred any loan, directly or indirectly, pursuant to the Paycheck Protection Program, established by the Coronavirus Aid, Relief, and Economic Security (CARES) Act, as amended or supplemented from time to time by interim rules, policy statements, FAQs or otherwise, or any other lending program authorized by the CARES Act and administered by the Small Business Administration. All loans set forth on Schedule 2.9 have been forgiven in full by the Small Business Administration and Sellers have provided to Buyer true, correct, and complete evidence of the same.1
Section 2.10 No Litigation. Except as described in Schedule 2.10, there are no claims, actions, suits or other proceedings pending, or to the knowledge of Sellers threatened, against any Seller generally or with respect to the Purchased Assets before any court, agency or other judicial, administrative or other governmental body or arbitrator. Schedule 2.10 identifies all litigation to which any Seller has been a party in the last three years.
Section 2.11 Compliance with Law; Permits.
(a) Sellers have materially complied, and are now materially complying, with all Laws applicable to the conduct of the business as currently conducted or the ownership and use of the Purchased Assets. No Seller has received any written notice of any violation or alleged violation of any Law. “Law” means any statute, law, ordinance, regulation, rule, code, order, constitution, treaty, common law, judgment, decree, other requirement or rule of law of any governmental authority.
(b) All Permits required for each Seller to conduct its business as currently conducted or for the ownership and use of the Purchased Assets have been obtained by such Seller and are valid and in full force and effect. All fees and charges with respect to such Permits as of the date hereof have been paid in full. No event has occurred that, with or without notice or lapse of time or both, would reasonably be expected to result in the revocation, suspension, lapse or limitation of any Permit set forth in Schedule 1.1(a)(vi).
Section 2.12 Taxes.
(a) All Tax Returns required to be filed on or prior to the Closing Date by any Seller or with respect to the Purchased Assets with all taxing authorities have been or prior to the Closing Date will have been duly and timely filed (or valid extensions obtained) and all such Tax Returns are correct and complete; and all Taxes owed by any Seller, whether or not shown or required to be shown on such Tax Returns have been paid and there is no Liability for any Taxes due and payable in connection with such Tax Returns. There are no existing liens for Taxes upon any of the Purchased Assets, except for liens for Taxes which are not yet due and payable. All applicable sales and use Taxes, to the extent due, were paid by Sellers when due.
1 Note to draft: Please provide all evidence of forgiveness.
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(b) There has been withheld or collected from each payment made to each employee, equityholder, creditor or owner of Sellers or any other person the amount of all Taxes (including without limitation federal income Taxes, Federal Insurance Contributions Act Taxes, and state and local income, payroll and wage taxes) required to be withheld or collected therefrom and the same have been paid to the proper Tax depositories or collecting authorities. Sellers have complied with all reporting and recordkeeping requirements under applicable Law.
(c) All ad valorem property taxes for years prior to the calendar year in which the Closing Date occurs imposed on Sellers, with respect to, or which may become a lien on, the Purchased Assets have been paid in full.
(d) There is no proceeding, assessment, adjustment, audit, examination, or claim now pending or, to the Knowledge of the Sellers, threatened, against any Seller or the Purchased Assets in respect of any Taxes. All deficiencies asserted, or assessments in respect to Taxes made against any Seller or with respect to the Purchased Assets have been fully paid.
(e) No Seller has waived (or is subject to a waiver of) any statute of limitations in respect to Taxes agreed to (or is subject to) any extension of the time for assessment of any Taxes relating to the income, revenues, properties or operations of Seller for any period.
(f) There is not and there will not be any Liability for Taxes arising out of, or attributable to, or affecting the Purchased Assets or the business for any period prior to the Closing, or attributable to the conduct of the operations of, or elections made by any Seller at any time for which Buyer will have any Liability at any time for payment or otherwise. There does not exist and will not exist by virtue of the transactions contemplated by this Agreement any Liability for Taxes (except for Transfer Taxes, if any, incident to the consummation of the transactions contemplated hereby, which Taxes are governed by Section 5.10(a) which may be asserted by any governmental authority against the Purchased Assets or the operations of the business).
(g) No claim has ever been made by a governmental authority in a jurisdiction in which any Seller does not file Tax Returns that such Seller is or may be subject to taxation by that jurisdiction or that it may have to file Tax Returns. Each Seller has disclosed on its federal income Tax Returns all positions taken therein that could give rise to a substantial understatement of federal income Tax within the meaning of Section 6662 of the Code. None of the Assumed Obligations is an obligation to make a payment that is not deductible under Code Section 280G.
(h) No Seller has participated in any “reportable transaction” as defined in Section 6707A of the Code or Treasury Regulation Section 1.6011-4 (or any predecessor provision).
(i) No Seller is a party to any Tax allocation or sharing agreement. No Seller has been a member of an affiliated group that filed consolidated federal or state income Tax Returns and No Seller hase any Liability for the Taxes of any Person under Section 1.1502-6 of the Treasury Regulations (or any similar provision of state, local or foreign Law), as a transferee or successor, by contract or otherwise.
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(j) Sellers have made available true and complete copies of all Tax Returns of Sellers for all Tax periods beginning on or after January 1, 2019. Sellers have made available true and complete copies of any examination reports received by Seller, and statements of deficiencies assessed against or agreed to by any Seller, since January 1, 2019.
(k) No private letter rulings, technical advice memoranda or similar agreement or rulings have been requested, entered into or issued by any taxing authority with respect to a Seller.
(l) Each Seller is in compliance with all state unclaimed property Laws and has turned over to the appropriate states all unclaimed property in accordance with relevant state unclaimed property Laws and the priority rules with respect thereto.
(m) Within the past ten (10) years, no Seller has been a distributing corporation or a controlled corporation in a transaction intended to qualify under Section 355 of the Code.
(n) Sellers have not (i) elected to defer the payment of any “applicable employment taxes” (as defined in Section 2302(d)(1) of the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”)) pursuant to Section 2302 of the CARES Act or (ii) claimed any “employee retention credit” pursuant to Section 2301 of the CARES Act.
(o) For purposes of this Section 2.12, a Seller shall be deemed to include any predecessor of such Seller, any Person which merged or was liquidated with and into a Seller or any Person from which a Seller incurs a Liability for Taxes as a result of transferee Liability.
Section 2.13 Employee Benefit Plans. Schedule 2.13 contains a true, complete and correct list of any of the following which relate to or cover the employees of any Seller: (i) “employee pension benefit plans” and “employment benefit plans” as defined respectively in Section 3(2) and 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), including multiemployer plans as defined in Section 3(37) of ERISA and (ii) any other pension, profit sharing, retirement, deferred compensation, stock purchase, stock option, incentive, bonus, holiday, tuition, vacation, severance, disability, hospitalization, medical insurance or other employee benefit plan or program which any Seller or any subsidiary or any other entity which constitutes a controlled group (within the meaning of Section 4001(b) of ERISA and/or Sections 414(b)-(n) of the Internal Revenue Code of 1986, as amended (the “Code”)) maintains or to which Seller or any such other entity has any present or future obligation to contribute (the “Benefit Plans”).
Section 2.14 Employee Relations. Inasmuch as Buyer is acquiring the Purchased Assets, and not acquiring a business, Buyer shall have no successor liability with respect to the business conducted by Sellers related to the Purchased Assets including, without limitation, with respect to any Seller’s employees.
(a) List of Employees. Schedule 2.14(a) contains a list of all employees of each Seller along with their original hire date, home address, FLSA status and compensation. All accrued wages and other compensation, holiday, vacation or personal leave time as of the Closing Date are the responsibility and liability of Sellers.
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(b) Employment Agreements. No employee of any Seller is employed under an employment agreement.
(c) Labor Organizations. No Seller is a party to, and there does not otherwise exist, any union, collective bargaining or similar agreement with respect to employees of Seller. To the Knowledge of Sellers, there is no threatened strike, work stoppage or work slowdown, relating to the Purchased Assets.
(d) Restrictions on Employees. To the Knowledge of Sellers, no employee of any Seller is subject to any agreement with any other person or entity which requires such employee to assign any interest in inventions or other intellectual property or keep confidential any trade secrets, proprietary data, customer lists or other business information or which restricts such officer or employee from engaging in competitive activities or solicitation of customers.
(e) EEOC; Employee Claims. There are no employee claims for employment discrimination or otherwise against any Seller or any of its agents or employees that are currently pending, or, to the Knowledge of Sellers, threatened.
Section 2.15 Insurance. Schedule 2.15 contains a list of all policies of insurance owned by each Seller and now in effect insuring all of the Purchased Assets and personnel, and sets forth for such policy the name of the insurer, the type of coverage, the amount of coverage, the term thereof and the annual premium. There are no claims related to any Seller’s business or the Purchased Assets pending under any such insurance policies as to which coverage has been questioned, denied or disputed or in respect of which there is an outstanding reservation of rights. All such policies are in full force and effect, and no Seller has received any written notice of cancellation of, premium increase with respect to, or alteration of coverage under, any of such insurance policies. Such insurance policies are sufficient for compliance with all applicable laws and contracts to which each Seller is a party or by which it is bound.
Section 2.16 Books and Records; Material Contracts. Sellers have made available and shall continue to make available to Buyer all books and records and other information in Sellers’ control or possession or reasonably available to Sellers relating to the Purchased Assets. All such books, records and information are true, correct and complete. Other than as set forth on Schedule 2.16, no Seller is a party to any Material Contracts.
Section 2.17 Environmental.
(a) The operations of each Seller with respect to the business and the Purchased Assets are currently and have been in material compliance with all Environmental Laws. No Seller has received from any Person, with respect to the business or the Purchased Assets, any: (i) environmental notice or environmental claim; or (ii) written request for information pursuant to Environmental Law, which, in each case, either remains pending or unresolved, or is the source of ongoing obligations or requirements as of the Closing Date. “Environmental Law” means any applicable law, and any governmental order or binding agreement with any governmental authority: (a) relating to pollution (or the cleanup thereof) or the protection of natural resources, endangered or threatened species, human health or safety, or the environment (including ambient air, soil, surface water or groundwater, or subsurface strata); or (b) concerning the presence of, exposure to, or the management, manufacture, use, containment, storage, recycling, reclamation, reuse, treatment, generation, discharge, transportation, processing, production, disposal or remediation of any Hazardous Materials. The term “Environmental Law” includes, without limitation, the following (including their implementing regulations and any state analogs): the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986, 42 U.S.C. §§ 9601 et seq.; the Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery Act of 1976, as amended by the Hazardous and Solid Waste Amendments of 1984, 42 U.S.C. §§ 6901 et seq.; the Federal Water Pollution Control Act of 1972, as amended by the Clean Water Act of 1977, 33 U.S.C. §§ 1251 et seq.; the Toxic Substances Control Act of 1976, as amended, 15 U.S.C. §§ 2601 et seq.; the Emergency Planning and Community Right-to-Know Act of 1986, 42 U.S.C. §§ 11001 et seq.; the Clean Air Act of 1966, as amended by the Clean Air Act Amendments of 1990, 42 U.S.C. §§ 7401 et seq.; and the Occupational Safety and Health Act of 1970, as amended, 29 U.S.C. §§ 651 et seq.
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(b) None of the business or the Purchased Assets is listed on, or has been proposed for listing on, the National Priorities List (or CERCLIS) under CERCLA, or any similar state list.
(c) There has been no Release of Hazardous Materials in contravention of Environmental Law with respect to the business or the Purchased Assets, and no Seller has received an environmental notice that any of the business or the Purchased Assets (including soils, groundwater, surface water, buildings and other structure located thereon) has been contaminated with any Hazardous Material which could reasonably be expected to result in an environmental claim against, or a violation of Environmental Law or term of any environmental permit by any Seller. “Hazardous Materials” means: (a) any material, substance, chemical, waste, product, derivative, compound, mixture, solid, liquid, mineral or gas, in each case, whether naturally occurring or manmade, that is hazardous, acutely hazardous, toxic, or words of similar import or regulatory effect under Environmental Laws; and (b) any petroleum or petroleum-derived products, radon, radioactive materials or wastes, asbestos in any form, lead or lead-containing materials, urea formaldehyde foam insulation and polychlorinated biphenyls. “Release” means any actual or threatened release, spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping, abandonment, disposing or allowing to escape or migrate into or through the environment (including, without limitation, ambient air (indoor or outdoor), surface water, groundwater, land surface or subsurface strata or within any building, structure, facility or fixture).
(d) To the Knowledge of Sellers, there are no active or abandoned aboveground or underground storage tanks owned or operated by any Seller in connection with the business or the Purchased Assets.
(e) There are no off-site Hazardous Materials treatment, storage, or disposal facilities or locations used by any Seller and any predecessors in connection with the business or the Purchased Assets.
(f) No Seller has retained or assumed, by contract or operation of Law, any liabilities or obligations of third parties under Environmental Law.
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(g) No Seller has commissioned or obtained any environmental reports, studies, audits, records, sampling data, site assessments, risk assessments, economic models and other similar documents with respect to the business or the Purchased Assets which are in the possession or control of any Seller related to compliance with Environmental Laws, environmental claims or an environmental notice or the Release of Hazardous Materials.
Section 2.18 Conduct Prior to Closing.
(a) Ordinary Course of Business. From the date hereof through the Closing Date (the “Interim Period”), each Seller has and will conduct its business only in the ordinary course. Without limiting the generality of the foregoing, each Seller has not or will not:
(i) Cancel any debts or claims in excess of $5,000, or waive any rights having a value of more than $5,000, or sell or otherwise dispose of or transfer any of the Purchased Assets, other than by transactions and actions in the ordinary course of business;
(ii) Permit or allow any of the Purchased Assets to be mortgaged, pledged, subjected to security interests or otherwise encumbered;
(iii) Make or incur any account payable other than in the ordinary course of business or incur any unusual or long-term commitment or other obligation in excess of $5,000 (whether absolute, accrued, contingent or other and whether due or to become due) or otherwise adversely affecting the Purchased Assets;
(iv) Permit or allow any default to occur under any funded indebtedness of Sellers or under any contract or agreement of such Seller, which could have a material adverse effect on such Seller or the Purchased Assets (e.g., resulting in a diminution in value of such Seller or the Purchased Assets by 5% or more);
(v) Grant or pay any increase in salary or other type of bonus or compensation pursuant to any bonus, pension, profit-sharing or other plan or commitment, or otherwise, to any employee, other than customary increases in the ordinary course of business;
(vi) Pay, loan, or advance any amount to or in respect of, or sell, transfer or lease any properties or assets (real, personal or mixed, tangible or intangible) to or enter into any agreement, arrangement or transaction with any equityholder of any of the Sellers, any of its officers or directors, or any affiliate or associate (as the term “associate” is presently defined by the Rules and Regulations promulgated under the Securities Act of 1933, as amended) of any equityholder, or any of their officers or directors, or any business or entity in which any equityholder, any officer or director of any of the Sellers, or any affiliate or associate of any such persons has any direct or indirect interest, except for usual salary and expenses provided in the ordinary course of business;
(vii) Reveal to any third person, any customer lists or other confidential or proprietary information (except if such person is a party to a non-disclosure agreement and has a need to know of such information for legitimate business reasons not adverse to the Purchased Assets or to the business of Seller), or act otherwise in any manner which may adversely affect any of the Purchased Assets or the consideration to be paid by Buyer under this Agreement;
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(viii) Make any capital expenditures or commitments in excess of $10,000 in the aggregate for additions to property, plant or equipment; or
(ix) Make any change in any method of accounting or accounting practice.
(b) Preservation of Business. During the Interim Period, each Seller has and will use its commercially reasonable efforts to (i) preserve its present business organization intact, (ii) retain the services of its present employees, (iii) preserve the present relationships of such Seller with its customers, suppliers and other persons with whom they have business dealings, (iv) preserve the good will of such Seller’s business, and (v) keep Buyer informed of any change in facts or circumstances that would materially affect such Seller’s representations, warranties or covenants in this Agreement.
Section 2.19 Suppliers. Schedule 2.19 sets forth (a) each supplier to whom any Seller has paid consideration for goods or services rendered in an amount greater than or equal to $25,000 in the aggregate during the twelve month period prior to June 30, 2024 (collectively, the “Material Suppliers”); and (b) the amount of purchases from each Material Supplier during such periods. No Seller has received any notice, nor does any Seller reasonably expect that any of the Material Suppliers has ceased, or intends to cease, to supply goods or services to the Stores or to otherwise terminate or materially reduce its relationship with any Seller. There are no outstanding disputes with any Material Supplier, and there have been no such disputes in the 12 months preceding the date of this Agreement. No Seller has any Knowledge that any such supplier will materially change its relationship with any Seller, or the terms thereof, as a result of the transactions contemplated by this Agreement.
Section 2.20 Intellectual Property. Sellers own, free and clear from all Encumbrances, or otherwise possess legally enforceable rights to use all of the Intellectual Property necessary to the conduct of the business as it is currently conducted by Sellers (the “Purchased IP”). Schedule 2.20 sets forth a true, correct, and complete list of all Purchased IP for which a registration or application for patent, trademark, service mark or copyright has been filed with or issued by any governmental authority. With respect to such registered Purchased IP, (i) all such Purchased IP is valid, subsisting and in full force and effect and (ii) Sellers have paid all maintenance fees and made all filings required to maintain Sellers’ ownership thereof. For all such registered Purchased IP, Schedule 2.20 lists (A) the jurisdiction where the application or registration is located, (B) the application or registration number, and (C) the application or registration date. Sellers’ prior and current use of the Purchased IP has not and does not infringe, violate, dilute or misappropriate the Intellectual Property of any person or entity and there are no claims pending or threatened by any person or entity with respect to the ownership, validity, enforceability, effectiveness or use of the Purchased IP. No Seller has violated or infringed upon or otherwise come into conflict with any Intellectual Property of third parties, and no Seller has received any notice alleging any such violation, infringement or other conflict. “Intellectual Property” means any and all of the following in any jurisdiction throughout the world: (i) trademarks, service marks, logos, and trade dress, including all applications and registrations and the goodwill connected with the use of and symbolized by the foregoing; (ii) copyrights, including all applications and registrations related to the foregoing; (iii) trade secrets and confidential know-how; (iv) patents and patent applications; (v) internet domain name registrations, web addresses, web pages, websites and related content, accounts with Twitter, Facebook and other social media companies and the content found thereon and related thereto, and URLs; and (vi) other intellectual property and related proprietary rights, interests and protections (including all rights to sue and recover and retain damages, costs and attorneys’ fees for past, present and future infringement and any other rights relating to any of the foregoing).
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Section 2.21 Inventory. All Inventory consists of a quality and quantity usable and salable in the ordinary course of business consistent with past practice and maintained on the Balance Sheet in accordance with sound accounting principles. All such Inventory is owned by the Sellers free and clear of all Encumbrances and no such Inventory is held on a consignment basis. The quantities of each item of Inventory are reasonable under the present circumstances of each Seller’s business.
Section 2.22 Brokers. No agent, broker, investment banker, financial advisor, finder or other Person, except for The Food Partners, LLC (“Seller Advisor”), who shall be paid pursuant to a separate agreement with Sellers, is or will be entitled to receive from the Sellers, the Majority Equityholders, the Seller Representative or their Affiliates any brokerage commission, finder’s fee or like payment in connection with any of the transactions contemplated by this Agreement. Purchaser shall not be responsible for any payments due to Seller Advisor.
Section 2.23 No Material Misstatements or Omissions. The representations and warranties of Seller in this Article do not contain any untrue statement of a material fact or omit to state any material fact necessary to make the statements made therein not misleading as to any material fact.
Article 3
REPRESENTATIONS AND WARRANTIES OF BUYER
To induce Sellers and Majority Equityholders to enter into this Agreement and to sell the Purchased Assets, Buyer hereby represents and warrants to Sellers and Majority Equityholders, as of the date hereof and as of the Closing, that:
Section 3.1 Corporate Organization and Authority. Buyer is a limited liability company validly existing under the laws of the State of Florida, with full power and authority to conduct its business as now conducted and to enter into and perform its obligations under this Agreement. Buyer’s execution, delivery and performance of this Agreement and the other Transaction Documents to which it is a party, and its acquisition of and payment for the Purchased Assets have been duly authorized by all requisite corporate action on the part of Buyer, and this Agreement and the other Transaction Documents to which it is a party constitute Buyer’s legal, valid and binding obligations, enforceable against Buyer in accordance with its terms. Buyer is a wholly owned subsidiary of Healthier Choices Management Corp., a Delaware corporation (“Parent”).
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Section 3.2 Absence of Conflicts and Consent Requirements. Buyer’s execution and delivery of this Agreement and the other Transaction Documents to which it is a party, and performance of its obligations hereunder and thereunder, including the purchase of and payment for the Purchased Assets hereunder, do not and will not conflict with, violate or result in any default under Buyer’s Articles of Incorporation or bylaws, or with any mortgage, indenture, agreement, instrument or other contract to which Buyer is a party or by any judgment, order, decree, law, statute, regulation or other judicial or governmental restriction to which Buyer is subject. Xxxxx’s execution and delivery of this Agreement and the other Transaction Documents to which it is a party, and the performance of its obligations hereunder and thereunder, including the purchase of and payment for the Purchased Assets, do not and will not require the consent of, or any prior filing with or notice to, any governmental authority or other third party.
Section 3.3 No Material Misstatements or Omissions. The representations and warranties of Buyer in this Article do not contain any untrue statement of a material fact or omit to state any material fact necessary to make the statements made therein not misleading as to any material fact.
Section 3.4 Brokers. No agent, broker, investment banker, financial advisor, finder or other Person is or will be entitled to receive from the Buyer or its Affiliates any brokerage commission, finder’s fee or like payment in connection with any of the transactions contemplated by this Agreement.
Section 3.5 Sufficiency of Funds. Buyer has sufficient cash on hand or other sources of immediately available funds to enable it to make payment of the Purchase Price as set forth in Section 1.4 and consummate the transactions contemplated by this Agreement.
Section 3.6 Independent Investigation. Buyer has conducted its own independent investigation, review and analysis of the Sellers, Stores, and the Purchased Assets, and acknowledges that it has been provided access to the personnel, properties, assets, premises, books and records, and other documents and data of Sellers for such purpose. Buyer acknowledges and agrees that: (a) in making its decision to enter into this Agreement and to consummate the transactions contemplated hereby, Xxxxx has relied solely upon its own investigation and the express representations and warranties of Sellers set forth in Article 2 of this Agreement (including related portions of the Disclosure Schedules); and (b) neither Sellers, Majority Equityholders, nor any other Person has made any representation or warranty as to Sellers, the Stores, the Purchased Assets or this Agreement, except as expressly set forth in Article 2 of this Agreement (including the related portions of the Disclosure Schedules).
Article
4
EMPLOYEE MATTERS
Section 4.1 Employee Matters. (a) Sellers and Buyer shall cooperate and shall take or cause to be taken all action as may be necessary, at Buyer’s sole election and within the time provided by ERISA, the Code and other controlling laws and regulations, to: (i) merge Sellers’ 401(k) plan with a 401(k) plan maintained by Buyer, or (ii) terminate Sellers’ 401(k) plan and permit participants in Sellers’ 401(k) plan who are entitled to receive an eligible rollover distribution from Sellers’ 401(k) plan to roll over such eligible rollover distribution, as part of a lump sum cash distribution into an Individual Retirement Account or an account under a 401(k) plan maintained by Buyer.
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(b) Notwithstanding anything herein to the contrary, if requested by Buyer, Sellers and Buyer shall cooperate and shall take or cause to be taken all action as may be necessary to merge, freeze, terminate, amend or take any other action with respect to any Benefit Plan that Buyer, in its sole discretion, deems advisable; to take all steps necessary to accomplish such requests; to provide all the required notices to participants and appropriate governmental authorities; to adopt all necessary resolutions and Benefit Plan amendments; and to provide to Buyer satisfactory evidence of the executed documents described in this Section 4.1.
(c) Sellers shall be responsible for terminating the employment of all employees of Sellers as of either (i) the Paychex Onboarding Completion Date, or (ii) the Closing Date (the “Employee Termination Date”), as determined in Buyer’s sole discretion, and Sellers shall pay all termination and severance payments and shall be responsible for all claims, costs, expenses and liabilities arising from such terminations. Buyer assumes no obligations or liabilities with respect to any of Sellers’ existing employee benefit and pension plans, programs, agreements, arrangements, or policies, whether or not subject to ERISA. All obligations or liabilities whatsoever, whether accruing before or after the Employee Termination Date by reason of Sellers contributing to, maintaining, discontinuing, terminating, or seizing participation in or withdrawing from any employee benefit, welfare, or pension plan or program including, without limitation, severance pay obligations accruing during any employee’s employment by Sellers, shall be and remain Seller’s sole responsibility and obligation except as otherwise specifically provided herein. Sellers shall be solely responsible for giving all necessary WARN Act notices or other notices to employees required of Sellers by law as a result of the transactions contemplated hereby. Seller shall be responsible for all employee-related lawsuits, discrimination charges, wage and hour audits, workers’ compensation claims and unemployment compensation claims (“Employment Claims”) of any employee (or former employee) of Sellers that arise or accrue during the employee’s employment with Sellers prior to the Closing Date, while Buyer shall be responsible for all Employment Claims of any employee of Sellers who are employed by Buyer that arise or accrue following the Closing Date or during such employee’s employment with Buyer.
(d) If Buyer determines that the Employee Termination Date shall be as of the Paychex Onboarding Completion Date, then Xxxxx agrees to reimburse Sellers for all payroll costs from the day following the Closing Date through the Paychex Onboarding Completion Date (the “Payroll Reimbursement”). Sellers agree to maintain through the Paychex Onboarding Completion Date any insurance policies currently in effect that would provide coverage for any Employment Claims.
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Article 5
OTHER COVENANTS AND AGREEMENTS
Section 5.1 Press Releases and Announcements. Neither Buyer, Sellers nor Majority Equityholders will prepare or disseminate any press releases, announcements or other disclosures relating to the transactions contemplated hereby without the written consent of the other party, not to be unreasonably withheld or delayed; provided, that this subsection shall not preclude any party from making any disclosure as to the transactions contemplated hereby which the disclosing party reasonably believes is required by applicable law. Each party shall provide the other with the reasonable opportunity to review any such press releases, announcements or other disclosures prior to dissemination. Notwithstanding the foregoing, Buyer is expressly permitted, from and after the date of this Agreement, to make disclosures of the transactions contemplated hereby in connection with Buyer’s applying for and obtaining the permits, certificates, licenses and approvals necessary for Buyer to carry on the business as now conducted by Sellers, including without limitation the permits, certificates, licenses and approvals needed for liquor, wine and beer sales. Notwithstanding the foregoing, Buyer and Sellers agree that the language set forth on Exhibit E may be included in a press release by either party or filed by Buyer as part of an 8-k with the US Securities and Exchange Commission regarding this Agreement or the transaction that is the subject of this Agreement without the consent of the other party.
Section 5.2 Maintenance of Records. Inasmuch as certain records of Sellers relating to the business are to be included as Purchased Assets and sold to Buyer hereunder, and certain other of such books, records and documents are Excluded Assets to be retained by Seller hereunder, and Buyer or Sellers may have need to have access to the books, records and documents held by the other after the Closing, Buyer and Sellers agree that they shall each maintain for at least four (4) years after the Closing Date (or for such longer period as may be required by applicable law) the respective books, records and documents sold or retained hereunder. During said period, representatives of Buyer shall be permitted to inspect and make copies of said books, records and documents retained by Xxxxxxx and related to the Purchased Assets during normal business hours and upon reasonable notice for purposes related to the continuation by Buyer of the business of Sellers; and representatives of Sellers shall be permitted to inspect and make copies of said books, records and documents sold to Buyer during normal business hours and upon reasonable notice for purposes related to their affairs.
Section 5.3 Further Assurances. Xxxxxxx, Xxxxx, Majority Equityholders and the Seller Representative each hereby covenant and agree with the other that at any time and from time to time they will promptly execute and deliver to the other such further assurances, instruments and documents and take such further action as the other may reasonably request in order to carry out the full intent and purpose of this Agreement.
Section 5.4 Fees and Expenses; Prorations.
(a) Sellers and Buyer shall each bear their own expenses in connection with the negotiation and preparation of this Agreement and the other Transaction Documents, and their consummation of the transactions contemplated hereby and thereby, including without limitation the fees and expenses of their respective counsel, accountants and consultants.
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(b) All prorations and adjustments to be made as of the Closing Date and all determinations of what assets are to be transferred or excluded (other than the Inventory balances) shall be determined as of 12:01 a.m. on the Closing Date. Rebates shall be prorated between the parties based on the Closing Date and number of days in the respective rebate period. Upon receipt of a rebate either prior or subsequent to the Closing Date, the receiving party shall account to the other party and promptly remit the amount due to the other party. Taxes (including ad valorem taxes) and assessments assessed against or with respect to the Purchased Assets, and other items of income or expense shall be prorated as of 12:01 a.m. on the Closing Date. Any post-Closing common area maintenance (CAM) reconciliations related to real property leases of the Seller that relate to any pre-Closing period shall be prorated as of 12:01 a.m. on the Closing Date. All accounts payable of the Business, excluding accounts payable with respect to Inventory, which accrue on or prior to the Closing Date shall be paid by Sellers. All accounts payable of the Business which accrue after the Closing Date shall be paid by the Buyer. All accounts payable for Inventory delivered prior to the Closing Date shall be paid by Sellers. All accounts payable for Inventory delivered at or after the Closing Date shall be paid by Xxxxx. To the extent not otherwise accounted for or prorated under this Agreement, Buyer and Sellers shall pro-rate (as of the Closing Date), to the extent applicable to the Purchased Assets, all real estate and personal property lease payments and utility charges based on the portion of the billing period the Purchased Assets are owned by such party. Such pro-ration calculation and payments shall take place on the Initial True Up Date (or to the extent necessary, on a Subsequent True Up Date) pursuant to Section 1.9, with the parties to exchange information and work in good faith to determine the appropriate pro-rata amounts owed by either party and make any adjusting payments that may be due as a result of such pro rations. Further, if any other taxes, assessments, expenses and charges cannot be determined on the Closing Date, the proration shall be based on the latest available information, with an ultimate adjustment to be made promptly when actual amounts are available. Any payment due pursuant to this Section 5.4 shall be referred to as a “Pro Ration Payment”.
Section 5.5 Trade Secrets; Confidential Information.
(a) General. Each party hereto recognizes and acknowledges that they have had access to certain highly sensitive, special, unique information relating to the operations of the other party hereto that is confidential or proprietary. Each party hereto hereby covenants and agrees that they will not use or disclose of any Confidential Information (hereinafter defined) or trade secrets except to their authorized representatives or except as required by law, regulation or any governmental or judicial authority; provided, however, that the foregoing restrictions shall not apply to items that, through no fault of such party hereto, have entered the public domain.
(b) Confidential Information. For purposes of this Agreement, “Confidential Information” means: (i) any data or information with respect to the business conducted or services provided by any Seller at any of the Stores on the Closing Date that is not generally known by the public and (ii) the existence of the terms of this Agreement. To the extent consistent with the foregoing definition, Confidential Information includes without limitation: (x) reports, training manuals, collection procedures, and financing methods of any of the Sellers, (y) customer lists, and (z) the business plans and financial statements, reports and projections of the businesses conducted by any of the Sellers at any of the Stores.
Section 5.6 Exclusivity. From the date hereof through the Closing, or a sooner date if this Agreement is terminated in accordance with this Agreement, each of the Sellers and Majority Equityholders agree that they will not, and will cause each Seller’s officers and directors, agents or representatives not to, directly or indirectly: (a) solicit, initiate or encourage any inquiry, proposal, offer or contact from any person or entity (other than Buyer and its Affiliates and representatives) relating to any transaction involving the sale of any equity interest or assets (other than the sale of Inventory in the ordinary course of business) of any of the Sellers or any acquisition, divestiture, merger, share exchange, consolidation, business combination, recapitalization, redemption, financing or similar transaction involving any of the Sellers (in each case, an “Acquisition Proposal”); or (b) participate in any discussion or negotiation regarding, furnish any information with respect to, assist or participate in, or facilitate in any other manner any Acquisition Proposal. If any person or entity makes an Acquisition Proposal, Sellers and the Majority Equityholders will promptly notify the Buyer of such Acquisition Proposal and all related details.
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Section 5.7 Mail. Sellers hereby irrevocably authorize Buyer after the Closing to receive and open all mail and other communications received by Xxxxx and addressed or directed to Sellers and, to the extent relating to the Purchased Assets or the Assumed Obligations, to act with respect to such communications in such manner as Buyer may elect. If any such communication does not relate to the Purchased Assets or the Assumed Obligations, Buyer will promptly forward such communication to Sellers. Sellers will, and Majority Equityholders will cause Sellers to, promptly open and deliver to Buyer the original of any mail or other communication received by Sellers after the Closing that relates to the Purchased Assets or the Assumed Obligations. Sellers hereby irrevocably authorize Buyer after the Closing to endorse, without recourse, the name of Sellers on any check or any other evidence of indebtedness received by Buyer on account of any of the Purchased Assets. Buyer shall permit any Majority Equityholder who has an email address provided by a Seller to continue accessing such email address during the first thirty (30) days of the Consulting Period. Additionally, Buyer shall permit Xxxxxxx Xxxxxxxx and Xxxx Xxxxxx to continue accessing any email address provided to them by Seller for the entire Consulting Period. Following the Consulting Period, Buyer shall deactivate the email addresses set forth on Schedule 5.7 and shall not reissue such email addresses to anyone in the future.
Section 5.8 Access. Prior to Closing, Sellers will provide Buyer and its representatives with reasonable access to the Purchased Assets, and all books and records of Sellers relating thereto, and shall furnish Buyer and its representatives copies of all such books, records, Contracts, Leases and other documents relating to the Purchased Assets as Buyer may reasonably request, for purposes of Buyer conducting its due diligence review of the Purchased Assets and business of Sellers, and Sellers shall update such due diligence materials as applicable. At least seven (7) days prior to the Closing Date, upon prior notice from Buyer, Sellers will provide Buyer and its representatives with reasonable access to the Stores when the Stores are closed for business for purposes of Buyer installing and testing Buyer’s point-of-sale computers and other back office systems at the Stores; provided, that all such work shall be performed at Buyer’s sole expense, and if for any reason, the Closing does not occur, Buyer shall promptly remove such systems and if the systems of Sellers are displaced by such work, restore the systems of Sellers to the condition such systems existed prior to such work, all at Buyer’s sole expense. Buyer and its representatives shall, during any access provided under this Section 5.8, maintain the confidentiality of the transaction contemplated by this Agreement and the existence of this Agreement with regard to any of Sellers’ customers, suppliers, and employees. Prior to the Inventory Count, Buyer shall have the right to inspect the stock-keeping unit (SKU) costs previously loaded in the Sellers’ inventory system to confirm accuracy.
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Section 5.9 Restrictive Covenants.
(a) Sellers and the Majority Equityholders each covenant and agree that for a period of five years following the Closing Date (the “Restricted Period”), Sellers and the Majority Equityholders shall not, and shall not permit any of their respective Affiliates to, directly or indirectly, act as an employee, agent, partner, equity holder, member, investor, director, consultant or in any other capacity assist other Persons to engage in any Competitive Business within the States of Kansas or Oklahoma (provided, however, that beneficially owning the stock or options to acquire stock totaling less than 5% of the outstanding shares in a public company shall not be deemed a violation of this Section). “Competitive Business” means the operation of health food store(s), grocery store(s), and/or farm stand(s) and related retail operation(s) in which sales of food-related products (including but not limited to natural/organic grocery and supplements) similar to those of any Seller.
(b) Sellers and the Majority Equityholders each covenant and agree that during the Restricted Period, Sellers and the Majority Equityholders shall not, and shall not permit any of their respective Affiliates to, whether on behalf of any other Person or its own behalf, directly or indirectly: (i) solicit, encourage, cause or attempt to cause a customer or vendor of any Seller during the six (6) month period immediately prior to the Closing (each, a “Business Party”) not to do business with or to reduce any part of its business with the Buyer or its Affiliates; (ii) market, sell or provide any Business Party any services or products competitive with, substantially similar to, or that could be used as a replacement for the types of services and products offered by any Seller immediately prior to Closing; (iii) solicit, encourage, cause or attempt to cause any Person that supplied goods or services to any Seller not to do business with or to reduce any part of its business with the Buyer or its Affiliates; or (iv) inflict harm upon the professional or personal reputation of the Buyer or any of its Affiliates or make any public statement that disparages the Buyer or any of its Affiliates, including any statement that disparages the products, services, finances, financial condition, capabilities or other aspect of the business of such Person.
(c) Sellers and the Majority Equityholders further covenant and agree that during the Restricted Period, each shall not, and shall not permit any of their respective Affiliates to, whether on behalf of any other Person or its own behalf, directly or indirectly: (i) hire or engage or attempt to hire or engage for employment or as an independent contractor any Person who during the prior six (6) months was employed or engaged by Xxxxx (each, a “Restricted Employee”); (ii) solicit or encourage any Restricted Employee to terminate his or her employment or independent contractor relationship with the Buyer or its Affiliates; or (iii) in any way interfere with the Buyer’s and its Affiliates’ business relationships related to its business, including such relationships with its employees, consultants, agents, financing sources or investors. Notwithstanding the foregoing, Sellers and Majority Equityholders shall be permitted to engage Xxxx Xxxxxx and Xxxxxx and Associates, LLC, a Kansas limited liability company, to provide professional services to Sellers, and any such engagement shall not be a violation of the restrictive covenants contained herein.
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(d) Sellers and the Majority Equityholders each have carefully read and considered the provisions of this Section 5.9 and, having done so, agree that the restrictions set forth herein are fair and reasonable given the terms and conditions of this Agreement, the nature of each Seller’s and each of their Affiliates’ business, the area in which each Seller and each of their Affiliates market their products and services, and the consideration being provided pursuant to this Agreement. In addition, Sellers and the Majority Equityholders each specifically agree that the length, scope and definitions used in the covenant not to compete and other restrictions set forth in this Section 5.9 are fair and reasonable. Sellers and the Majority Equityholders each further agree that the restrictions set forth in this Section 5.9 are reasonably required for the protection of the legitimate business interests of the Buyer and its Affiliates. Furthermore, the Majority Equityholders acknowledge and agree that because the Majority Equityholders’ abilities and skills are readily useable in a variety of capacities in most geographic areas, the foregoing restrictions do not unreasonably restrict the Majority Equityholders with respect to seeking employment elsewhere in noncompetitive ventures. Thus, Sellers and the Majority Equityholders each agree not to contest the general validity or enforceability of this Section 5.9 before any court, arbitration panel or other governmental body.
(e) Sellers and the Majority Equityholders each acknowledge and agree that its breach of any of the covenants in this Section 5.9 during the Restricted Period shall result in irreparable damage and continuing injury to the Buyer. Therefore, in the event of any breach or threatened breach of such covenants during the Restricted Period, Sellers and the Majority Equityholders each agree that the Buyer and its Affiliates shall be entitled to seek an injunction from any court of competent jurisdiction enjoining such Person from committing any violation or threatened violation of those covenants. All remedies available to the Buyer and its Affiliates by reason of a breach by any of the Sellers or the Majority Equityholders of the provisions of this Agreement are cumulative, none is exclusive and all remedies may be exercised concurrently or consecutively at the option of the Buyer and its Affiliates. In the event of litigation involving this Section 5.9, the non-prevailing party shall reimburse the prevailing party for all costs and expenses, including reasonable attorneys’ fees and expenses, incurred in connection with any such litigation, including any appeal.
(f) Each of Sellers and Majority Equityholders acknowledge and agree that the provisions of this Section 5.9 shall inure to the benefit of, may be assigned to, and may be enforced by, Xxxxx’s successors and assigns.
(g) As additional consideration for Sellers and Majority Equityholders agreeing to the restrictions set forth in this Section 5.9, each of Xxxxxxx Xxxxxxxx, Xxxxxxx Xxxxxxxx and Xxxx Xxxxxxxx, for so long as the Buyer’s Note remains unpaid, shall receive a 20% discount (the “Store Discounts”) on all items they purchase from the Stores; provided, however, that the Store Discounts shall not apply to in excess of $1,000 in purchases for each individual in any calendar month. This right to the Store Discounts is personal to each individual and may not be transferred or used by any other Person. At Closing, Buyer shall provide each individual with the appropriate means for using the Store Discounts at the Stores.
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Section 5.10 Tax Matters.
(a) Transfer Taxes. Buyer, on the one hand, and Sellers, on the other hand, shall each pay 50% of all transfer, documentary, sales, use, stamp, registration, and other such Taxes and fees incurred as a result of the transactions contemplated by this Agreement (“Transfer Taxes”). The party required by applicable Law shall file all necessary Tax Returns and other documentation with respect to such Transfer Taxes. Buyer, on the one hand, and the Seller Representative, on the other hand, as the case may be, shall use their commercially reasonable efforts to make such Tax Returns available for review by Buyer or the Seller Representative, as applicable, sufficiently in advance of the due date for the filing of such Tax Returns to provide Buyer or the Seller Representative, as applicable, with a meaningful opportunity to analyze and comment on such Tax Returns before filing. The Party filing such Tax Returns shall make such changes and revisions to the Tax Returns as are reasonably requested by Buyer or the Seller Representative, as applicable, subject to the consent of the party filing the returns, which consent shall not be unreasonably withheld or delayed. If a demand is made by the State of Kansas or Oklahoma prior to the Closing Date for the payment of Transfer Taxes in the nature of sales and use tax imposed on the transfer of the Purchased Assets from Sellers to Buyer, the amount of sales and use tax so demanded shall be promptly paid by the Sellers directly to the Oklahoma Tax Commission or the Kansas Department of Revenue, as applicable, at Closing, provided, however, that Buyer shall thereafter promptly reimburse Sellers for 50% of such sales and use tax so paid.
(b) Bulk Sales and Successor Liability Laws. Sellers and Xxxxx acknowledge and agree that the provisions of any “successor liability”, “bulk sales”, “bulk transfers” or similar Laws pertaining to the transactions contemplated by this Agreement or the sale, transfer or closing of a business, including, but not limited to, Kan. Stat. Xxx. § 79-3612 and Okla. Stat. tit. 68, § 1364(H)), including any applicable amendments thereto and any and all regulations relating thereto (collectively, the “Bulk Sales Laws”), shall apply and shall be complied with by the Sellers and Buyer. Any taxes, interest, penalties, fines, liens, fees, delinquencies, additions to tax or other similar amounts incurred by, assessed against, imposed upon or otherwise due from Sellers, directly or indirectly, for which Xxxxx could become personally liable by reason of such Bulk Sales Laws are hereinafter called “Sellers’ Taxes”. For purposes of clarity, the term Sellers’ Taxes does not include any Transfer Taxes as defined in Section 5.10(a) of this Agreement, which Transfer Taxes are payable by the Sellers and Buyer as set forth in Section 5.10(a). Sellers shall (a) pay all Sellers’ Taxes on or before the dates they are due and payable, and (b) timely file any returns related to Sellers’ Taxes. Sellers shall indemnify, defend, and hold Buyer harmless from and against any and all losses (including, but not limited to, indirect, special and consequential loss or damages), claims, suits, liabilities, demands, notices, orders, costs, taxes, interest, penalties, fines, additions to tax, all foreseeable or unforeseeable damages, reasonable attorneys’ fees and other out-of-pocket costs incurred by, assessed against, imposed upon or otherwise due from Buyer, directly or indirectly, as a result of Sellers’ failure to pay any Sellers’ Taxes or otherwise relating to, arising out of or resulting from Buyer or Seller’s failure to comply with the Bulk Sales Laws. Sellers agree to comply with the following:
(i) Kansas. Before the date of Closing, the Seller shall pay any and all Sellers’ Taxes due or accrued to the Kansas Department of Revenue and shall furnish to the Buyer a tax clearance certificate from the Kansas Department of Revenue showing that all tax returns required to be filed by Sellers through the date of Closing have been so filed and all taxes due from Sellers through the date of Closing have been paid. If the Seller has unpaid Sellers’ Taxes due to the Kansas Department of Revenue as of the date of Closing, the Sellers shall advise the Buyer in writing as to the amount and nature of each such liability therefore. The Buyer shall withhold a sufficient amount of the Purchase Price to cover the amount of any Sellers’ Taxes due and unpaid by the Sellers as of the date of Closing and shall hold such withheld amounts in escrow until the Seller shall furnish the Buyer with a tax clearance certificate from the Kansas Department of Revenue showing that such Sellers Taxes have been paid in full and that Sellers are in full compliance through and including the date of Closing with all Kansas tax laws and the payment of all taxes, fees, charges and similar amounts administered by any Kansas state agency. If the Sellers do not furnish such a tax clearance certificate to the Buyer within twenty (20) days from the date of Closing, the Buyer shall remit the amount of such withheld Purchase Price to be credited against the unpaid Sellers’ Taxes to the Kansas Department of Revenue on or before the twentieth (20th) day of the month succeeding the month in which Closing occurred, and Sellers shall remit any additional unpaid Sellers’ Taxes directly to the Kansas Department of Revenue by no later than the due date therefore. Within thirty (30) days from the date of Closing, or at the earliest date reasonably possible, Seller shall file its final Kansas sales and use tax return and pay all taxes showing as due thereon.
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(ii) Oklahoma. Before the date of Closing, the Sellers shall provide to the Buyer a statement from the Oklahoma Tax Commission of any of Sellers’ Taxes, liabilities, delinquencies, assessments or warrants of the Sellers that have not been filed of record, established or become final and which relate to the Seller’s business, and further, as of the date of Closing, shall return its Oklahoma sales tax permit to the Oklahoma Tax Commission for cancellation, together with a remittance in full of any unpaid Sellers’ Taxes accrued or due and owing for any period ending on or prior to the date of Closing or otherwise including the date of Closing (including but not limited to sales and use tax, employer withholding, income tax, penalties, interest, liens, fees, or other Sellers’ Taxes due to the Oklahoma Tax Commission). If the Sellers have unpaid Sellers’ Taxes due to the Oklahoma Tax Commission as of the date of Closing, the Sellers shall advise the Buyer in writing as to the amount and nature of each such liability therefore. The Buyer shall withhold a sufficient amount of the Purchase Price to cover the amount of any Sellers’ Taxes due and unpaid by the Sellers as of the date of Closing and shall hold such withheld amounts in escrow until the Sellers shall furnish the Buyer with documentation from the Oklahoma Tax Commission showing that such Sellers’ Taxes have been paid in full. If the Sellers do not furnish such documentation to the Buyer within twenty (20) days from the date of Closing, the Buyer shall remit the amount of such withheld Purchase Price to be credited against the unpaid Sellers’ Taxes, to the Oklahoma Tax Commission, and Sellers shall remit any additional unpaid Sellers’ Taxes directly to the Oklahoma Tax Commission by no later than the due date therefore. At the earliest date reasonably possible, and in any case no later than the due date therefore, Sellers shall file their final Oklahoma sales and use tax return and pay all taxes showing as due thereon.
(iii) In addition to any other remedies provided herein, Sellers jointly and severally agree to indemnify, defend and hold Buyer harmless without limitation from and against any and all Losses asserted against, imposed upon, incurred by or otherwise suffered by Xxxxx, directly or indirectly, arising out of or relating to the failure of Sellers to pay in full the Sellers’ Tax and/or the failure of Sellers or Buyer to comply with any of the Bulk Sales Laws.
(iv) The indemnification contained in this Section 5.10 shall survive Closing.
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(c) Proration. Ad valorem, property and similar Taxes (but not including income Taxes) and rent, in each case, attributable to the Purchased Assets shall be prorated, as of the Closing, with Sellers paying a fraction thereof based upon the number of days elapsed in the applicable fiscal period prior to the Closing Date and Buyer paying a fraction thereof based upon the number of days elapsed in the applicable fiscal period on and after the Closing Date.
Section 5.11 Name Change. Promptly following Closing, each of the Sellers shall, as mutually approved by the Seller Representative and Buyer, either (i) pursuant to filing with the Secretary of State in the state of formation of such Seller change its legal name such that it shall no longer include the words “GreenAcres” or any variant, extension, abbreviation, derivative or facsimile thereof for any purpose whatsoever, including without limitation the operation or name of any entity or business, and shall execute, deliver and make any governmental filings effectuating such changes with the applicable governmental entities in the State of formation of such Seller, or (ii) file with the Secretary of State in the state of formation of such Seller to dissolve such Seller entity.
Section 5.12 Kansas and Oklahoma Sales Tax Registration. Prior to the Closing, Buyer shall register to do business and to collect sales tax in Kansas and obtain a Kansas sales tax registration number. Promptly following the Closing, Buyer shall register to do business and to collect sales tax in Oklahoma and obtain an Oklahoma sales tax permit.
Article 6
CONDITIONS TO CLOSING; TERMINATION
Section 6.1 Conditions to Buyer’s Obligations. The obligations of Buyer to complete the Closing are contingent upon the fulfillment of each of the following conditions on or before the Closing Date, except to the extent that Buyer may, in its absolute discretion, waive in writing any one or more thereof in whole or in part:
(a) Bringdown. The representations and warranties of Sellers set forth in this Agreement shall be true and correct in all material respects on the Closing Date; all terms, covenants and conditions to be complied with and performed by Sellers under the Agreement on or before the Closing Date shall have been duly complied with and duly performed.
(b) Closing Documents. Sellers shall have delivered to Buyer the following documents and all other instruments of transfer (which shall be in form reasonably satisfactory to Buyer) as are reasonably necessary to convey to Buyer all of the Purchased Assets in accordance with the terms hereof:
(i) A Bill of Sale in the form of Exhibit B, an Assignment and Assumption Agreement in the form of Exhibit C, pursuant to which the Purchased Assets, including the Contracts and Leases under which Seller is a lessee, shall be conveyed and assigned to Buyer and Buyer will assume the Assumed Obligations;
(ii) An Assignment of Intellectual Property, in the form of Exhibit D, pursuant to which certain of the Marks and Names shall be conveyed to Buyer;
(iii) Releases of any Encumbrances on the Purchased Assets;
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(iv) The lease assignments for the leases related to the use and rental of the Leased Property; and
(v) A consulting agreement between the Buyer, Xxxxxxx Xxxxxxxx and Xxxx Xxxxxx, pursuant to which Xxxxxxx Xxxxxxxx and Xxxx Xxxxxx will provide certain consulting services to the Company for a period of ninety (90) days following the Closing Date (the “Consulting Period”).
(c) Consents. The consents described in Schedule 2.4 hereto shall have been obtained in form reasonably satisfactory to Buyer.
(d) No Adverse Proceedings. No action, suit or proceeding before any court or any governmental or regulatory authority shall have been commenced, no investigation by any governmental or regulatory authority shall have been commenced, and no action, suit or proceeding by any governmental or regulatory authority shall have been threatened, against any of the parties to this Agreement, or any of the principals, officers, directors, managers or members of any of them, or any of the Purchased Assets seeking to restrain, prevent or change the transactions contemplated hereby or questioning the validity or legality of any of such transactions or seeking damages in connection with any of such transactions.
(e) Corporate Approvals. Sellers shall have delivered to Buyer copies of resolutions of the Directors and shareholders and members and managers, as applicable, authorizing the execution, delivery and performance of this Agreement and the transactions contemplated hereby, which shall be duly certified by the corporate secretary or a manager, as applicable, of Sellers. Sellers shall also have delivered to Buyer a certificate of good standing for Sellers.
Section 6.2 Conditions to Sellers’ Obligations. The obligations of Sellers to complete the Closing are contingent upon the fulfillment of each of the following conditions on or before the Closing Date, except to the extent that Sellers may, in their absolute discretion, waive in writing any one or more thereof in whole or in part:
(a) Bringdown. The representations and warranties of Buyer set forth in this Agreement shall be true and correct in all material respects on the Closing Date; all terms, covenants and conditions to be complied with and performed by Buyer under the Agreement on or before the Closing Date shall have been duly complied with and duly performed.
(b) Payment of Purchase Price. Buyer shall have paid the Purchase Price in the manner provided in Section 1.4 hereof.
(c) Closing Documents. Buyer shall have delivered to Sellers the following documents:
(i) the Buyer’s Note and Security Agreement, duly executed by Xxxxx; and
(ii) the certificate(s) of exemption for resale applicable to Kansas and to Oklahoma, which the Buyer has completed for purchase of the Inventory; and
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(iii) counterpart copies of the applicable closing documents identified in Section 6.1(b).
(d) No Adverse Proceedings. No action, suit or proceeding before any court or any governmental or regulatory authority shall have been commenced, no investigation by any governmental or regulatory authority shall have been commenced, and no action, suit or proceeding by any governmental or regulatory authority shall have been threatened, against any of the parties to this Agreement, or any of the principals, officers, directors, managers or members of any of them, or any of the Purchased Assets, seeking to restrain, prevent or change the transactions contemplated hereunder or questioning the validity or legality of any of such transactions or seeking damages in connection with any of such transactions.
Section 6.3 Termination. This Agreement may, by written notice given to Sellers or Buyer, as applicable, prior to the Closing, be terminated:
(a) by (i) Buyer if any representation or warranty made by Sellers or any Majority Equityholder is inaccurate in any material respect or Sellers or any Majority Equityholder has breached any covenant or agreement in this Agreement in any material respect or (ii) Sellers, if any representation or warranty made by Buyer is inaccurate in any material respect or Buyer has breached any covenant or agreement in this Agreement in any material respect;
(b) by (i) Buyer, if any condition in Section 6.1 has not been satisfied or waived in writing by Buyer or if satisfaction of any such condition is or becomes impossible (in either case, for reasons other than the failure of Buyer to comply with its obligations under this Agreement) or (ii) Sellers, if any condition in Section 6.2 has not been satisfied or waived in writing by Sellers or if satisfaction of any such condition is or becomes impossible (in either case, for reasons other than the failure of any Seller or any Majority Equityholder to comply with such party’s obligations under this Agreement);
(c) by mutual consent of Xxxxx and Xxxxxx; or
(d) automatically without any notice if the Closing has not occurred by August 31, 2024.
Article 7
INDEMNIFICATION AND ENFORCEMENT
Section 7.1 Indemnification by Seller and Majority Equityholders. From and after the Closing Date, Sellers and Majority Equityholders, jointly and severally, covenant and agree to and shall defend and indemnify Buyer and its officers, directors, members, agents and affiliates and shall hold them harmless against and with respect to any Loss incurred in connection with, arising out of, resulting from, based on, or relating or incident to any of the following:
(a) Pre-Closing Liabilities. The Purchased Assets or the business conducted with respect thereto, provided that such Loss arises out of, results from, is based on, or relates or is incident to an event, action or omission that occurred prior to the Closing Date.
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(b) Misrepresentation or Breach of Warranty. Subject to Section 7.8, any inaccuracy in or breach of any of Sellers’ or Majority Equityholders’ representations or warranties set forth in this Agreement or in any of the documents and instruments executed in connection herewith.
(c) Breach of Covenant or Agreement. Any breach or nonfulfillment by any Sellers or Majority Equityholders of any of their covenants, agreements or other obligations set forth in this Agreement or any of the documents and instruments executed in connection herewith.
(d) Excluded Obligations and Liabilities. Any failure by Sellers to pay any Excluded Obligation and Liabilities.
(e) Successor Liability. Any failure to comply with “successor liability,” “bulk sales,” “bulk transfers” or similar Laws or fraudulent transfer Laws.
Section 7.2 Indemnification by Xxxxx. From and after the Closing Date, Buyer covenants and agrees to and shall defend and indemnify Sellers and its officers, directors, shareholders, managers, members, agents and affiliates, including Majority Equityholders, and shall hold them harmless against and with respect to any Loss incurred in connection with, arising out of, resulting from, based on, or relating to or incident to any of the following:
(a) Misrepresentation or Breach of Warranty. Any inaccuracy in or breach of any of Buyer’s representations or warranties set forth in this Agreement or in any of the documents and instruments executed in connection herewith.
(b) Breach of Covenant or Agreement. Any breach or nonfulfillment by Buyer of any of its covenants, agreements or other obligations set forth in this Agreement or in any of the documents and instruments executed in connection herewith.
(c) Assumed Obligations. Any failure by Buyer to pay any Assumed Obligation.
Section 7.3 Indemnity Claims.
(a) Notice of Claim. If any matter shall arise which constitutes or may give rise to a Loss subject to indemnification by either party as provided in this Agreement (an “Indemnity Claim”), the party seeking to be indemnified shall give prompt written notice (a “Notice of Claim”) of such Indemnity Claim to the indemnifying party, setting forth the relevant facts and circumstances of such Indemnity Claim in reasonable detail and the amount of indemnity sought from the indemnifying party with respect thereto, and shall give the indemnifying party continuing notice promptly thereafter as to developments coming to the indemnified party’s attention materially affecting any matter relating to such Indemnity Claim.
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(b) Third Party Claims. If any Indemnity Claim is based upon any claim, demand, suit or action of any third party against the party seeking to be indemnified or the Purchased Assets (a “Third Party Claim”), then the party seeking to be indemnified, at the time it gives the other party the Notice of Claim with respect to such Third Party Claim, shall:
(i) Offer to the indemnifying party the option to have the indemnifying party assume the defense of such Third Party Claim, which option shall be exercised by the indemnifying party (if the indemnifying party elects to exercise) by written notice to the party seeking to be indemnified within fifteen (15) days after the indemnifying party receives written notice of the Third Party Claim. If the indemnifying party exercises such option, then the indemnifying party shall, at its own expense, assume the defense of such Third Party Claim, shall upon the final determination thereof fully discharge at its own expense all liability of the party seeking to be indemnified with respect to such Third Party Claim, and shall be entitled, in its sole discretion and at its sole expense but without any liability of the indemnified party therefore, to compromise or settle such Third Party Claim upon terms acceptable to the indemnifying party. From the time the indemnifying party so assumes such defense and while such defense is pursued diligently and in good faith, the indemnifying party shall have no further liability for attorneys’ fees or other costs of defense thereafter incurred by the indemnified party in connection with such Third Party Claim; or
(ii) In the event the indemnifying party does not undertake the defense of such Third Party Claim, the party seeking to be indemnified shall conduct such defense as would a reasonable and prudent person to whom no indemnity were available, shall permit the indemnifying party (at the indemnifying party’s sole expense) to participate in (but not control) such defense, and shall not settle or compromise such Third Party Claim without the indemnifying party’s consent, such consent not to be unreasonably withheld or delayed.
(iii) The provisions of this Section 7.3 of this Agreement shall not be enforced or construed so as to invalidate or impair the protection afforded by any insurance policy maintained by either Buyer or Sellers.
(c) Materiality. For purposes of calculating the amount of any Losses incurred in connection with a breach of any representation or warranty, any references to materiality, material adverse effect or other similar qualification shall be disregarded.
Section 7.4 Survival. The representations and warranties of the Majority Equityholders, Sellers and Buyer, and covenants of Majority Equityholders, Sellers and Buyer made in this Agreement and in all the documents and instruments executed in connection herewith shall survive the Closing. Any claim for indemnification hereunder may be made at any time until the later of eighteen (18) months following the Closing Date; provided, however, (i) any claim for indemnification for a breach of Sections 2.1, 2.2, 2.3, 2.7, 2.12, 2.17, 2.22, 3.1, 3.2, or 3.4 (collectively, the “Fundamental Representations”) shall survive until the later of the sixth (6th) anniversary of the Closing Date or the date 90 days after the expiration of the applicable statute or period of limitations, and (ii) any claim for indemnification for a breach of Sections 2.9, 2.13 or 3.5 shall survive until the third (3rd) anniversary of the Closing Date.
Section 7.5 Continued Liability for Indemnity Claims. The liability of any party hereunder with respect to Indemnity Claims shall continue for the applicable survival period set forth in Section 7.4 above and, with respect to any such Indemnity Claims duly and timely made, thereafter until the indemnifying party’s liability therefore is finally determined and satisfied. If any Seller shall liquidate or dissolve at any time when any liability of any Seller with respect to Indemnity Claims may thereafter arise or be determined, then at the time of such liquidation or dissolution, such Seller’s Majority Equityholders, including any liquidating trust established by them, shall assume such Seller’s liability with respect to Indemnity Claims, and unless such Majority Equityholders expressly or by operation of law assume such liabilities, then such Seller’s liabilities and obligations to Buyer shall not be deemed to have been paid, discharged or provided for, and such distribution shall be void as against Buyer to the extent of such liabilities.
Section 7.6 Default by Buyer. If Buyer shall be deemed to be in material default hereunder prior to Closing, Sellers shall have the right to terminate this Agreement, and Buyer shall pay Sellers for Sellers’ damages incurred as a result of Buyer’s default; provided, that Sellers shall not be entitled to make any claim for incidental, consequential, punitive or other indirect damages and Sellers waives any and all right to make a claim or recover for such damages. Buyer shall be deemed to be in material default hereunder if Buyer shall fail to meet, comply with or perform any material covenant, agreement or obligation on its part required within the time limits and in the manner set forth in this Agreement, if any representation or warranty made by Buyer herein shall be untrue or incorrect in a material respect, as of the effective date of such representation or warranty or if any condition to Closing set forth in Section 6.2(a), (b), or (c) is not satisfied.
Section 7.7 Default by Seller. If Sellers shall be deemed to be in material default hereunder prior to Closing, Buyer shall have the right to either (i) terminate this Agreement, and Sellers shall pay Buyer for Buyer’s damages incurred as a result of Seller’s default; provided, that Buyer shall not be entitled to make any claim for incidental, consequential, punitive or other indirect damages and Buyer waives any and all right to make a claim or recover for such damages, or (ii) seek and have specific performance of this Agreement. Sellers shall be deemed to be in material default hereunder if Sellers shall fail, to meet, comply with or perform any material covenant, agreement or obligation on its part required within the time limits and in the manner set forth in this Agreement, or if any representation or warranty made by Sellers herein shall be untrue or incorrect in a material respect, as of the effective date of such representation or warranty or if any condition to Closing set forth in Sections 6.1(a), (b), (d), or (e) is not satisfied.
Section 7.8 Limitations.
(a) The Sellers’ and Majority Equityholders’ obligation to indemnify the Buyer pursuant to this Article 7 for Losses based upon, arising out of, with respect to or by reason of any inaccuracy in or breach of any of the representations or warranties set forth in Article 2, other than the Fundamental Representations, shall not exceed a total of $4,900,000 (the “Cap”). The Buyer’s obligation to indemnify the Seller and the Majority Equityholders pursuant to this Article 7 for Losses based upon, arising out of, with respect to or by reason of any inaccuracy in or breach of any of the representations or warranties set forth in Article 3, other than the Fundamental Representations, shall not exceed the Cap.
(b) No party seeking indemnification pursuant to this Article 7 for Losses based upon, arising out of, with respect to or by reason of any inaccuracy in or breach of any of the representations or warranties set forth in this Agreement, other than the Fundamental Representations, may recover any Losses unless and until one or more Losses are in excess of $30,0000 (the “Basket”), in which case, such party seeking indemnification shall be entitled to recover all losses so identified, including the Basket amount.
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Article 8
SELLER REPRESENTATIVE
Section 8.1 Seller Representative.
(a) Each Seller Party hereby authorizes, directs and appoints Xxxxxxx Xxxxxxxx as the Seller Representative to act as its sole and exclusive agent, attorney-in-fact and representative, with full power of substitution regarding any matter relating to or arising after the date hereof under this Agreement, including determining, giving and receiving notices and processes hereunder, entering into any contracts and delivering any documents required and contesting and settling any and all claims or disputes under Sections 1.3(c) and for indemnification under Article 7 hereof, resolving any other disputes hereunder, performing the duties assigned to the Seller Representative hereunder, making, executing, acknowledging and delivering all such other agreements, guarantees, orders, receipts, endorsements, notices, requests, instructions, certificates, letters and other writings, and, in general, doing any and all things and taking any and all action that the Seller Representative, in its sole and absolute discretion, may consider necessary or proper or convenient in connection with or to carry out the transactions contemplated by this Agreement, and all other Transaction Documents and to engage and employ agents and representatives and to incur such other expenses as the Seller Representative shall reasonably deem necessary or prudent in connection with the foregoing. The Seller Representative shall have the sole and exclusive right on behalf of any Seller Party to take any action or provide any waiver or receive any notice, in each case with respect to any claims or disputes under Sections 1.3(c) and for indemnification under Article 7 and to settle any claim or controversy arising with respect thereto. Any such actions taken, exercises of rights, power or authority, and any decision or determination made by the Seller Representative, shall be absolutely and irrevocably binding on each Seller Party as if such Seller Party had taken such action, exercised such right, power or authority or made such decision or determination in such Seller Party’s individual capacity, and no Seller Party shall have the right to object, dissent, protest or otherwise contest the same. Except to the extent this Agreement obligates any Seller Party to take action following the Closing, any action required to be taken by the Seller Parties hereunder after the date of this Agreement or any action which the Seller Parties, at their election, have the right to take hereunder after the date of this Agreement, shall be taken only by the Seller Representative and no Seller Party acting on such Seller Party’s own shall be entitled to take any such action.
(b) The appointment of the Seller Representative as each Seller Party’s attorney-in-fact revokes any power of attorney heretofore granted that authorized any other Person or Persons to represent such Seller Party with regard to this Agreement. The appointment of the Seller Representative as attorney-in-fact pursuant hereto is coupled with an interest and is irrevocable. The obligations of each Seller Party pursuant to this Agreement (i) will not be terminated by operation of Law, liquidation, dissolution, bankruptcy, insolvency or similar event with respect to such Seller Party or any proceeding in connection therewith, or any other event, and (ii) shall survive the delivery of an assignment by any Seller Party of the whole or any fraction of its interest in any payment due to it under this Agreement.
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(c) The Seller Representative xxxxxx accepts the foregoing appointment and agrees to serve as the Seller Representative, subject to the provisions hereof, from and after the date hereof.
(d) Buyer may rely exclusively, without independent verification or investigation, upon all decisions, communications or writings made, given or executed by the Seller Representative in accordance with the terms of this Agreement in connection with this Agreement, the Transaction Documents and the transactions contemplated hereby and thereby. Xxxxx is entitled to deal exclusively with the Seller Representative on all matters relating to this Agreement, the Transaction Documents and the transactions contemplated hereby and thereby in accordance with the terms of this Agreement. Any action taken or not taken or decisions, communications or writings made, given or executed by the Seller Representative, for or on behalf of any Seller Party, in accordance with the terms of this Agreement shall be deemed an action taken or not taken or decisions, communications or writings made, given or executed by such Seller Party as provided in this Agreement. Any notice or communication delivered by Buyer to the Seller Representative pursuant to the terms of this Agreement shall be deemed to have been delivered to all Seller Parties. Buyer shall be entitled to disregard any decisions, communications or writings made, given or executed by any Seller Party in connection with this Agreement, the Transaction Documents and the transactions contemplated hereby and thereby unless the same is made, given or executed by the Seller Representative.
(e) Notwithstanding anything to the contrary contained in this Agreement, the Seller Representative (in its capacity as Seller Representative only, and not in its capacity as a Seller Party) shall have no Liabilities, duties or responsibilities except those expressly set forth herein and in the other Transaction Documents, and no implied covenants, functions, responsibilities, duties, obligations or Liabilities on behalf of any Seller Party shall otherwise exist against the Seller Representative. The Seller Representative will not be liable to any Seller Party with respect to actions taken or omitted to be taken in its capacity as the Seller Representative under this Agreement (except in the case of bad faith, willful misconduct or fraud by the Seller Representative).
(f) The Seller Representative may resign at any time by giving written notice of resignation to Xxxxx and the Seller Parties, with such resignation to be effective upon the selection of its successor. Upon the acceptance of any appointment as Seller Representative by a successor Seller Representative, such successor Seller Representative shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the resigning Seller Representative, and the resigning Seller Representative shall be discharged from its duties and obligations as Seller Representative under this Agreement. Any successor Seller Representative shall by means of execution of a counterpart hereof be bound by the terms of this Agreement applicable to the Seller Representative. If there is not a Person serving in the position of Seller Representative, for any reason, and the Seller Parties do not appoint at least one person to serve as Seller Representative within fifteen (15) Business Days of such vacancy, Buyer shall have the right to appoint Xxxxxxx Xxxxxxxx as Seller Representative.
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Article 9
MISCELLANEOUS
Section 9.1 Merger Clause. This Agreement and the other Transaction Documents constitute the sole and entire agreement of the parties to this Agreement with respect to the subject matter contained herein and therein, and supersede all prior and contemporaneous understandings and agreements, both written and oral, with respect to such subject matter. In the event of any inconsistency between the statements in the body of this Agreement and those in the other Transaction Documents, the Exhibits and Disclosure Schedules (other than an exception expressly set forth as such in the Disclosure Schedules), the statements in the body of this Agreement will control.
Section 9.2 Amendments. No change, amendment, qualification or cancellation hereof shall be effective unless in writing and executed by the parties hereto by their duly authorized officers, members or managers.
Section 9.3 Assigns. This Agreement shall be binding upon and inure to the benefit of the successors and assigns of the parties hereto. Seller may not assign its rights or delegate its duties hereunder without the prior written consent of Xxxxx. Buyer may not assign its rights or delegate its duties hereunder without the prior written consent of Xxxxxx, except that Buyer may assign its rights and delegate its duties hereunder to an affiliate of Buyer or to a purchaser of all or substantially all of the Purchased Assets without Seller’s prior written consent.
Section 9.4 Notices. All notices, requests, consents, claims, demands, waivers and other communications hereunder shall be in writing and shall be deemed to have been given (a) when delivered by hand (with written confirmation of receipt); (b) when received by the addressee if sent by a nationally recognized overnight courier (receipt requested); (c) on the date sent by facsimile or e-mail of a PDF document (with confirmation of transmission) if sent during normal business hours of the recipient, and on the next Business Day if sent after normal business hours of the recipient or (d) on the third day after the date mailed, by certified or registered mail, return receipt requested, postage prepaid. Such communications must be sent to the respective parties at the following addresses (or at such other address for a party as shall be specified in a notice given in accordance with this Section 9.4):
| As to Seller and Majority | Xxxxxxx Xxxxxxxx | |
| Equityholders: | 000 X. 00xx Xxxxxxx | |
| Kansas City, MO 64131 | ||
| Email: xxxxxxxx@xxxxxxxxxx.xxx | ||
| with a copy to: | Xxxxx Xxx, XX | |
| 000 X. Xxxx Xxxxxx, Xxxxx 000 | ||
| Wichita, KS 67202 | ||
| Attn.: Xxxx X. Xxxxxxxxx | ||
| Email: xxxxxxxxxx@xxxxxxxx.xxx | ||
| As to Buyer: | 0000 X 00xx Xxx | |
| Hollywood, FL 33020 | ||
| Attn.: Xxxxxxxxxxx Xxxxx | ||
| Facsimile: (000) 000-0000 | ||
| Email: xxxxxx@xxxx0.xxx | ||
| with a copy to: | Cozen X’Xxxxxx | |
| 000 X. Xxxxxxxx Xxxxxxxxx, 30th Floor | ||
| Miami, FL 33131 | ||
| Attn.: Xxxxxx X. Xxxxxxx | ||
| Facsimile: (000) 000-0000 | ||
| Email: xxxxxxxx@xxxxx.xxx |
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Any party may change the address(es) to which notices to it are to be sent by giving notice of such change to the other parties in accordance with this Section.
Section 9.5 Headings. The headings are for convenience of reference only and shall not affect the interpretation of this Agreement.
Section 9.6 Governing Law. This Agreement shall be construed under and in accordance with the internal laws of the State of Delaware as applied by the courts of the State of Kansas and applicable federal law. The parties hereby irrevocably and unconditionally consent to submit to the exclusive jurisdiction of the courts of the State of Kansas and of the United States of America located in Sedgwick County, Kansas for any actions, suits or proceedings arising out of or relating to this Agreement and the transactions contemplated hereby, and agree not to commence any action, suit or proceedings relating thereto except in such courts.
Section 9.7 Schedules and Exhibits. All of the Schedules and Exhibits hereto referred to in this Agreement are hereby incorporated herein by reference and shall be deemed and construed to be a part of this Agreement for all purposes.
Section 9.8 Severability. The invalidity or unenforceability of any one or more phrases, sentences, clauses or provisions of this Agreement shall not affect the validity or enforceability of the remaining portions of this Agreement or any part thereof.
Section 9.9 Time of Essence. Time is of the essence of this Agreement.
Section 9.10 Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall be deemed to be one and the same agreement. A signed copy of this Agreement delivered by facsimile, e-mail or other means of electronic transmission shall be deemed to have the same legal effect as delivery of an original signed copy of this Agreement.
Section 9.11 Interpretation. The article and section headings in this Agreement are inserted for convenience only and are not intended to affect the interpretation of this Agreement. Any reference in this Agreement to any Article or Section refers to the corresponding Article or Section of this Agreement. Any reference in this Agreement to any Schedule or Exhibit refers to the corresponding Schedule or Exhibit attached to this Agreement and all such Schedules and Exhibits are incorporated herein by reference. The word “including” in this Agreement means “including without limitation.” This Agreement will be construed as if drafted jointly by the parties and no presumption or burden of proof will arise favoring or disfavoring any party by virtue of the authorship of any provision in this Agreement. Unless the context requires otherwise, any reference to any law will be deemed also to refer to all amendments and successor provisions thereto and all rules and regulations promulgated thereunder, in each case as in effect as of the date hereof and the Closing Date. All accounting terms not specifically defined in this Agreement will be construed in accordance with a income tax accounting principles as in effect on the date hereof (unless another effective date is specified herein). The word “or” in this Agreement is disjunctive but not necessarily exclusive. All words in this Agreement will be construed to be of such gender or number as the circumstances require. References in this Agreement to time periods in terms of a certain number of days mean calendar days unless expressly stated herein to be business days. In interpreting and enforcing this Agreement, each representation and warranty will be given independent significance of fact and will not be deemed superseded or modified by any other such representation or warranty.
[Signatures appear on next page.]
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IN WITNESS WHEREOF, the parties have each caused this Agreement to be executed under seal as of the day and year first above written.
| BUYER: | |
| HEALTHY CHOICE MARKETS VI, LLC, | |
| a Florida limited liability company |
| By: | /s/ Xxxxxxxxxxx Xxxxx | |
| Name: | Xxxxxxxxxxx Xxxxx | |
| Title: | President and Chief Operating Officer |
| SELLERS: | |
| GREENACRES MARKETS OF OKLAHOMA, LLC |
| By: | /s/ Xxxxxxx Xxxxxxx | |
| Name: | Xxxxxxx Xxxxxxxx | |
| Title: | Chief Executive Officer |
| GACORP, INC. | ||
| By: | /s/ Xxxxxxx Xxxxxxx | |
| Name: | Xxxxxxx Xxxxxxxx | |
| Title: | Chief Executive Officer | |
| MAJORITY EQUITYHOLDERS: | |
| XXXXXXXX’X GREEN INDUSTRIES, INC. |
| By: | /s/ Xxxxxxx Xxxxxxx | |
| Name: | Xxxxxxx Xxxxxxxx | |
| Title: | President |
[signature page to Asset Purchase Agreement]
| /s/ Xxxxxxx Xxxxxxx | |
| Xxxxxxx Xxxxxxxx | |
| /s/ Xxxxxxx Xxxxxxx | |
| Xxxxxxx Xxxxxxxx | |
| /s/ Xxxx Xxxxxxx | |
| Xxxx Xxxxxxxx | |
| /s/ Xxxx Xxxxxx | |
| Xxxx Xxxxxx | |
| SELLER REPRESENTATIVE: | |
| /s/ Xxxxxxx Xxxxxxx | |
| Xxxxxxx Xxxxxxxx, as Seller Representative |
[signature page to Asset Purchase Agreement continued]
LIST OF SCHEDULES
| Schedule 1.1(a)(ii) | Contracts |
| Schedule 1.1(a)(iii) | Leases |
| Schedule 1.1(a)(iv) | Marks and Names |
| Schedule 1.1(a)(vi) | Permits |
| Schedule 1.1(a)(xi) | Vehicles |
| Schedule 1.1(a)(xv) | Leased Property |
| Schedule 1.6 | Assumed Obligations |
| Schedule 2.1 | Organization and Qualification |
| Schedule 2.4 | Required Consents |
| Schedule 2.5 | Financial Statements |
| Schedule 2.6 | Absence of Changes |
| Schedule 2.7 | Permitted Encumbrances |
| Schedule 2.10 | Litigation Matters |
| Schedule 2.13 | Employee Benefit Plans |
| Schedule 2.14(a) | List of Employees |
| Schedule 2.15 | List of Insurance Policies |
| Schedule 2.16 | Material Contracts |
| Schedule 2.19 | Suppliers |
| Schedule 2.20 | Intellectual Property |
ANNEX
I
DEFINED TERMS
The following terms have the meanings specified or referred to in this Annex I:
“Acquisition Proposal” has the meaning set forth in Section 5.6.
“Affiliates” means as to the Person in question, any Person that directly or indirectly controls, is controlled by, or is under common control with the Person in question and any successors or assigns of such Persons; and the term “control” means possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person whether through ownership of voting securities, by contract or otherwise.
“Agreement” has the meaning set forth in the preamble to this Agreement.
“Arbitration Firm” means UHY LLP or, if UHY LLP is not available for such assignment or has a conflict of interest, such other nationally recognized independent certified public accounting firm upon which the Buyer and the Seller shall reasonably agree.
“Assigned Contracts” has the meaning set forth in Section 1.6(a).
“Assumed Obligations” has the meaning set forth in Section 1.6(a).
“Balance Sheet” has the meaning set forth in Section 2.5.
“Balance Sheet Date” has the meaning set forth in Section 2.5.
“Basket” has the meaning set forth in Section 7.8(b).
“Benefit Plans” has the meaning set forth in Section 2.13.
“Buyer” has the meaning set forth in the preamble to this Agreement.
“Buyer’s Note” has the meaning set forth in Section 1.4(b).
“Cap” has the meaning set forth in Section 7.8(a).
“Closing” has the meaning set forth in Section 1.2.
“Closing Date” has the meaning set forth in Section 1.2.
“Code” means the United States Internal Revenue Code of 1986, as amended.
“Confidential Information” has the meaning set forth in Section 5.5(b).
“Contracts” has the meaning set forth in Section 1.1(a)(ii).
“Consulting Period” has the meaning set forth in Section 6.1(b)(v).
| Annex - 1 |
“Employment Claims” shall have the meaning set forth in Section 4.1(c).
“Encumbrance” means any mortgages, liens (statutory or otherwise), security interests, claims, pledges, licenses, equities, options, conditional sales contracts, assessments, levies, easements, covenants, conditions, reservations, encroachments, hypothecations, equities, restrictions, rights-of-way, exceptions, limitations, charges, possibilities of reversion, rights of refusal or encumbrances of any nature whatsoever
“Environmental Law” has the meaning set forth in Section 2.17(a).
“Equipment” has the meaning set forth in Section 1.1(a)(i).
“Excluded Assets” has the meaning set forth in Section 1.1(b).
“Excluded Obligations and Liabilities” has the meaning set forth in Section 1.6(b).
“Financial Statements” has the meaning set forth in Section 2.5.
“Hazardous Materials” has the meaning set forth in Section 2.17(c).
“Improvements” has the meaning set forth in Section 2.8(a).
“Indemnity Claim” has the meaning set forth in Section 7.3(a).
“Intellectual Property” has the meaning set forth in Section 2.20.
“Interim Period” has the meaning set forth in Section 2.18(a).
“Inventory” has the meaning set forth in Section 1.1(a)(viii).
“Inventory Team” has the meaning set forth in Section 1.3(b).
“Inventory Time” has the meaning set forth in Section 1.3(b)(i).
“Knowledge” means (a) actual knowledge or (b) the knowledge that would be expected of a reasonable person after reasonable investigation of the matter at issue. Seller will be deemed to have knowledge of a matter if any of Xxxxxxx Xxxxxxxx, Xxxxxxx Xxxxxxxx, Xxxxxx Xxxxxxxx, or Xxxx Xxxxxx has knowledge of such matter.
“Law” has the meaning set forth in Section 2.11(a).
“Leased Property” has the meaning set forth in Section 1.1(a)(xv).
“Leases” has the meaning set forth in Section 1.1(a)(iii).
“Loss” or “Losses” means losses, damages, claims, suits, liabilities, demands, lien, deficiencies, judgments, notices, orders, costs, Taxes, interest, penalties, fines or expense of whatever kind, including, but not limited to indirect, special and consequential loss or damages, foreseeable or unforeseeable damages, reasonable attorneys’ fees and the cost of enforcing any right to indemnification hereunder.
| Annex - 2 |
“Majority Equityholders” has the meaning set forth in the preamble to this Agreement.
“Marks and Names” has the meaning set forth in Section 1.1(a)(iv).
“Material Contract” means, with respect to the Seller, (i) each contract or agreement to which the Seller is a party involving aggregate annual consideration payable to or by the Seller of $20,000 or more (other than purchase orders in the ordinary course of the business of the Seller and other than contracts that by their terms may be terminated by the Seller in the ordinary course of its business upon less than 60 days’ notice without penalty or premium) and (ii) all other contracts or agreements material to the business, operations, condition (financial or otherwise), performance, properties or liabilities of the Seller.
“Material Suppliers” has the meaning set forth in Section 2.19.
“Notice of Claim” has the meaning set forth in Section 7.3(a).
“Other Intangible Purchased Assets” has the meaning set forth in Section 1.1(a)(xiv).
“Paychex Onboarding Completion Date” means the Business Day immediately following the date that the Buyer receives notification from its Paychex that all of the documentation and onboarding requirements for the employees of the Seller have been completed to permit them to be Buyer employees.
“Payroll Reimbursement” has the meaning set forth in Section 4.1(d).
“Perishables” means produce, meats, seafood, dairy, eggs and cooked food items.
“Permits” has the meaning set forth in Section 1.1(a)(vi).
“Permitted Encumbrances” has the meaning set forth in Section 2.7(a)-(d).
“Person” means an individual, corporation, partnership, association, trust, any unincorporated organization or group (within the meaning of Section 13(d)(3) of the Exchange Act).
“Pro-rata Adjustment” has the meaning set forth in Section 1.3.
“Pro Ration Payment” has the meaning set forth in Section 5.4.
“Purchase Price” has the meaning set forth in Section 1.3(a).
“Purchased Assets” has the meaning set forth in Section 1.1(a).
“Purchased IP” has the meaning set forth in Section 2.20.
“Rebates” has the meaning set forth in Section 1.1(a)(x).
| Annex - 3 |
“Records” has the meaning set forth in Section 1.1(a)(v).
“Refunds” means deposits and prepaid expenses, other than Rebates.
“Release” has the meaning set forth in Section 2.17(c).
“Security Agreement” has the meaning set forth in Section 1.4(b).
“Seller Party” means, collectively, Sellers and Majority Equityholders.
“Seller Representative” has the meaning set forth in the preamble to this Agreement.
“Sellers” has the meaning set forth in the preamble to this Agreement.
“Store(s)” has the meaning set forth in the Background to this Agreement.
“Store Discounts” has the meaning set forth in Section 5.9(g).
“Supplies” has the meaning set forth in Section 1.1(a)(ix).
“Tax” or “Taxes” means (a) all taxes (including any tax on or based upon net income, or gross income, or income as specially defined, or earnings, or profits, or selected items of income, earnings or profits) and all gross receipts, sales, use, ad valorem, transfer, franchise, escheat or unclaimed property (whether or not treated as a tax under applicable Law), license, withholding, payroll, employment, excise, severance, occupation, premium, property or windfall profits taxes, real property tax, alternative or add-on minimum taxes, estimated, entertainment, amusement, healthcare (whether or not treated as a tax under applicable Law), or other taxes, customs duties, fees (including accounting, financial advisor and legal fees directly associated therewith), assessments or charges of any kind whatsoever (whether paid directly or by withholding), together with any interest and any penalties, additions to tax, charges duties or additional amounts, imposed by any governmental authority and (b) any Liability for the payment of any amount of the type described in the immediately preceding clause (a) as a result of (i) being a “transferee” (within the meaning of Section 6901 of the Code or any other applicable Law) of another person or a member (or ceasing to be a member) of an affiliated or combined group (or being included (or required to be included) in any Tax Return thereto), (ii) being (or ceasing to be) a member of an affiliated, consolidated, unitary or combined group or (iii) a contractual obligation or otherwise.
“Tax Return” means any report, return, declaration, statement or other information, in whatever form or medium, required to be supplied to a governmental authority in connection with Taxes, including estimated returns and reports of every kind with respect to Taxes.
“Third Party Claim” has the meaning set forth in Section 7.3(b).
“Transaction Documents” has the meaning set forth in Section 2.2.
“Treasury Regulations” means the regulations promulgated under the Code, including any temporary regulations.
| Annex - 4 |
