Exhibit 4
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TRANSACTION AGREEMENT
AMONG
HFMI ACQUISITION CORPORATION,
and
HARRY'S FARMERS MARKET , INC.
DATED AS OF JANUARY 31, 1997
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Exhibits
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Exhibit A Secured Loan Agreement
Exhibit B Series B Preferred Stock
Exhibit C Warrant Certificate
Exhibit D Registration Rights Agreement
Exhibit E IP Acquisition Agreement
Exhibit F Company Preferred Stock Agreement
Exhibit G Bank Agreement
Exhibit H Opinion of Xxxxxxxxxx, Xxxxxx & Xxxxxxx
Exhibit I Opinion of Xxxxxx & Bird
TRANSACTION AGREEMENT
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This Agreement dated as of January 31, 1997, is by and between Harry's
Farmers Market, Inc., a Georgia corporation (the "Company"), and HFMI
Acquisition Corporation, a Delaware corporation ("Newco").
In consideration of the mutual promises and covenants contained in this
Agreement, and intending to be legally bound by the terms and conditions of this
Agreement, the parties hereto hereby agree as follows:
1. Transactions Between Newco and the Company.
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1.1 Secured Loan. Subject to the terms and conditions of this
Agreement, at the Closing (as defined in Section 2) Newco and the Company shall
enter into a secured loan agreement in the form attached as Exhibit A hereto
(the "Secured Loan Agreement") and Newco shall fund the Refinancing Loan (as
defined in the Secured Loan Agreement). The Secured Loan Agreement will also
grant to Newco an option (the "Option") to acquire, on the terms provided in the
Secured Loan Agreement, 500,000 shares (the "Preferred Shares") of Series B
Preferred Stock, stated value $40 per share, of the Company ("Series B Preferred
Stock"), which Series B Preferred Stock shall have the terms of the Articles of
Amendment in the form of Exhibit B hereto.
1.2 Purchase of Warrants. Subject to the terms and conditions of this
Agreement, at the Closing the Company shall sell and issue to Newco, warrants
(the "Warrants") to purchase 2,000,000 shares (the "Warrant Shares") of Class A
Common Stock, no par value, of the Company (the "Class A Common Stock"), which
shall have the terms set forth in the Warrant Certificate in the form of Exhibit
C hereto (the "Warrants"), for an aggregate purchase price of One Million
Dollars ($1,000,000), payable in cash.
1.3 Registration Rights. Subject to the terms and conditions of this
Agreement, at the Closing Newco and the Company shall enter into a Registration
Rights Agreement in the form of Exhibit D hereto.
1.4 Intellectual Property Acquisition. Subject to the terms and
conditions of this Agreement, at the Closing (as defined in Section 2) the
Company shall transfer certain intellectual property to HFMI Trust, a newly-
organized Delaware business trust (the "IP Trust"), the Company shall transfer a
certificate of interest in the IP Trust to Newco, the IP Trust shall enter into
an administration and servicing agreement with Newco and the IP Trust shall
enter into license agreements with each of
Newco and the Company, all on the terms provided in the acquisition agreement
between Newco and the Company in the form set forth as Exhibit E hereto (the "IP
Acquisition Agreement").
1.5 Consulting Services Agreement. Subject to the terms and conditions
of this Agreement, at the Closing Newco shall make the payments to the Company
provided for in the consulting services agreement of even date herewith among
Newco, the Company and HB (the "Consulting Services Agreement").
2. The Closing. The closing of the Loans, the purchase and sale of the
Warrants and the transactions contemplated by the IP Acquisition Agreement and
the Consulting Services Agreement shall take place at the offices of Xxxxxxxxxx,
Xxxxxx & Xxxxxxx, L.L.P., 000 Xxxxxxxxx Xxxxxx, X.X., Xxxxxxx, Xxxxxxx 00000-
3996, or at such other time, date, and place as are mutually agreeable to the
Company and Newco (the "Closing"). The date of the Closing is hereinafter
referred to as the "Closing Date." At the Closing, (i) the Company shall deliver
to Newco the Refinancing Note (as defined in the Secured Loan Agreement) and
Newco shall pay to the Company by wire transfer the proceeds of the Refinancing
Loan, (ii) the Company shall deliver to Newco a certificate evidencing the
Warrants and Newco shall pay to the Company by wire transfer the purchase price
therefor, (iii) the Company and Newco shall execute and deliver the Registration
Rights Agreement, (iv) the Company and Newco shall make the deliveries, and take
the other actions, required to be made or taken by them under the IP Acquisition
Agreement, and (v) Newco shall pay to the Company by wire transfer the
Consulting Fee (as defined in the Consulting Services Agreement).
3. Representations of the Company. The Company hereby represents and
warrants to Newco as follows:
3.1 Organization and Qualification; Subsidiaries.
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(a) Each of the Company and each of the persons listed in Section
3.1(a) of the Disclosure Schedule (the "Company Disclosure Schedule") delivered
to Newco by the Company prior to the date of this Agreement (collectively, the
"Company Subsidiaries") has been duly organized, and is validly existing and,
where applicable, in good standing under the laws of the jurisdiction of its
incorporation or organization, as the case may be, and has the requisite power
and authority and all necessary governmental approvals to own, lease and operate
its properties and to carry on its business as it is now being conducted, except
where the failure to be so organized, existing or in good standing or to have
such power, authority and governmental approvals could not reasonably be
expected to have, individually or in the aggregate, a Company Material Adverse
Effect (as defined below). Each of the Company and the Company Subsidiaries is
duly qualified or licensed to do business, and is in good standing, in each
jurisdiction where the character of the properties
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owned, leased or operated by it or the nature of its business makes such
qualification or licensing necessary, except for such failures to be so
qualified or licensed and in good standing that could not reasonably be expected
to have, individually or in the aggregate, a Company Material Adverse Effect.
For purposes of this Agreement, "Company Material Adverse Effect" means any
change, event or effect in, on or relating to the business of the Company and
the Company Subsidiaries that is, or is reasonably likely to be, materially
adverse to the business, assets (including intangible assets), liabilities
(contingent or otherwise), condition (financial or otherwise), prospects or
results of operations of the Company and the Company Subsidiaries taken as a
whole, other than any change or effect arising out of general economic
conditions in the United States.
(b) The copies of the Company's Articles of Incorporation, together
with the Articles of Incorporation of each Company Subsidiary of the Company, as
amended to the date hereof (including the Articles of Amendment designating the
Company's Series AA Preferred Stock and the Company's Series B Preferred Stock),
and the Company's Bylaws, together with the Bylaws of each Company Subsidiary of
the Company, as amended to the date hereof (collectively, the "Company Charter
Documents"), that have been provided to Newco by the Company are complete and
correct copies thereof. Each of the Company Charter Documents are in full force
and effect. Neither the Company nor any of the Company Subsidiaries are in
violation of any of the provisions of the Company Charter Documents.
(c) The Company Subsidiaries are the only persons in which the Company
owns an equity interest.
3.2 Capitalization of the Company and its Subsidiaries.
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(a) The authorized capital stock of the Company consists of:
22,000,000 shares of Class A Common Stock, of which as of the date hereof,
4,159,253 shares are issued and outstanding; 3,000,000 shares of Class B Common
Stock, no par value ("Class B Common Stock"), of which as of the date hereof,
2,050,071 shares are issued and outstanding; and 3,000,000 shares of Preferred
Stock, of which as of the date hereof, 1,222,221 shares have been issued in
series designated as the Series A Redeemable Convertible Preferred Stock, and
are issued and outstanding. (The Class A Common Stock and the Class B Common
Stock are herein sometimes collectively referred to as the "Company Common
Stock" and the Preferred Stock is sometimes referred to as the "Company
Preferred Stock".) All of the issued and outstanding shares of Company Common
Stock and Company Preferred Stock have been duly authorized, validly issued and
are fully paid, nonassessable and free of preemptive rights, except as set forth
in the Company Disclosure Schedule. As the date hereof, approximately 434,200
shares of Class A Common Stock are reserved for issuance and issuable upon or
otherwise deliverable in connection with the exercise of outstanding options to
purchase Class A Common Stock ("Company Options")
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issued pursuant to the Management Incentive Plan and the Outside Directors
Incentive Plan (the "Company Plans") and 833,611 shares of Class A Common Stock
are reserved for issuance and issuable upon or otherwise deliverable in
connection with the exercise of outstanding warrants to purchase Class A Common
Stock ("Company Warrants"). Section 3.2(a) of the Company Disclosure Schedule
sets forth, as of the date hereof, (i) the persons to whom Company Options and
Company Warrants have been granted, (ii) the exercise price for the Company
Options and Company Warrants held by each such person and (iii) whether such
Company Options are exercisable. Except as described in the Company Filed SEC
Reports (as defined below) and as disclosed in Section 3.2(a) of the Company
Disclosure Schedule, as of the date hereof, since January 31, 1996 (i) no shares
of the Company's capital stock have been issued other than pursuant to the
exercise of Company Options and (ii) no stock options have been granted by the
Company. Except as set forth above or in Section 3.2(a) of the Company
Disclosure Schedule, as of the date hereof, there are outstanding (i) no shares
of capital stock or other voting securities of the Company, (ii) no securities
of the Company or any Company Subsidiary convertible into or exchangeable for
shares of capital stock or voting securities of the Company, (iii) no options,
warrants or other rights to acquire from the Company or any Company Subsidiary,
and no obligations of the Company or any Company Subsidiary to issue, any
capital stock, voting securities or securities convertible into or exchangeable
for capital stock or voting securities of the Company, (iv) no equity
equivalents, interests in the ownership or earnings of the Company or any
Company Subsidiary or other similar rights (including stock appreciation rights)
(the items listed in subclauses (i), (ii), (iii) and (iv) being referred to,
collectively, as "Company Securities") and (v) no obligations of the Company or
any Company Subsidiary to repurchase, redeem or otherwise acquire any Company
Securities. Except as set forth in Section 3.2(a) of the Company Disclosure
Schedule, there are no shareholder agreements, voting trusts or other agreements
or understandings to which the Company is a party or to which it is bound
relating to the voting or registration of any shares of capital stock of the
Company. Except as disclosed in Section 3.2(a) of the Company Disclosure
Schedule, the Company has not taken any action that would result in any Company
Stock Options that are unvested becoming vested in connection with or as a
result of the execution and delivery of this Agreement or the consummation of
the transactions contemplated hereby.
(b) The direct or indirect interest of the Company in each Company
Subsidiary, as described next to the name of such Company Subsidiary in Section
3.1(a) of the Company Disclosure Schedule, is the only direct or indirect
interest of the Company in such Company Subsidiary. Each outstanding share of
capital stock of each Company Subsidiary that is a corporation is duly
authorized, validly issued, fully paid and nonassessable and each share of
capital stock and/or each other direct or indirect interest of the Company in
each Company Subsidiary described in Section 3.1(a) of the Company Disclosure
Schedule as being owned by the Company or a Company Subsidiary is owned by the
Company or a Company Subsidiary free and clear of all
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security interests, liens, claims, pledges, options, rights of first refusal,
limitations on voting rights, charges and other encumbrances of any nature
whatsoever (collectively, "Liens"), except where failure to own such shares or
other interests free and clear could not reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect, and except
for the pledge of stock of Company Subsidiaries to Creditanstalt-Bankverein.
Except as set forth in Schedule 3.2(b) of the Company Disclosure Schedule and
except as contemplated by this Agreement, there are no securities of the Company
or any Company Subsidiary convertible into or exchangeable for, no options or
other rights to acquire from the Company or any Company Subsidiary, and no other
contract, understanding, arrangement or obligation (whether or not contingent)
providing for the issuance or sale, directly or indirectly, of, any capital
stock of or other ownership interests in, or any other securities of, any
Company Subsidiary. There are no outstanding contractual obligations of the
Company or any Company Subsidiary to repurchase, redeem or otherwise acquire any
outstanding shares of capital stock or other ownership interests in or make any
other investment (in the form of a loan, capital contribution of otherwise) in
any Company Subsidiary or any other person.
(c) The Class A Common Stock constitutes the only class of securities
of the Company or any Company Subsidiary registered or required to be registered
under the Securities Exchange Act of 1934, as amended (the "Exchange Act").
3.3 Authority Relative to this Agreement; Board Action; Preferred
Shares, Conversion Shares, Warrant Shares. The Company has all necessary
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby and thereby. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby have been duly and validly authorized by the Board of Directors of the
Company (the "Company Board") and no other corporate proceedings on the part of
the Company are necessary to authorize this Agreement or to consummate the
transactions contemplated hereby or thereby. One million two hundred twenty-two
thousand two hundred twenty-one shares of the Company's Preferred Stock have
been designated Series AA Preferred Stock and 500,000 shares of the Company's
Preferred Stock have been designated Series B Preferred Stock. The Preferred
Shares, the shares of Class A Common Stock issuable upon exercise of the Option
(the "Conversion Shares") and the Warrant Shares have been duly authorized and
reserved for issuance by all necessary corporate action on the part of the
Company. The Preferred Shares, the Conversion Shares and the Warrant Shares,
when issued and delivered upon exercise of the Option, upon conversion of the
Preferred Shares, or upon exercise of the Warrants in accordance with their
respective terms, as applicable, will be duly and validly issued, fully paid and
nonassessable. This Agreement has been duly and validly executed and delivered
by the Company and constitutes the valid, legal and binding agreement of the
Company, enforceable against the Company in accordance with its terms.
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3.4 SEC Reports; Financial Statements.
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(a) Since May 26, 1993, the Company has filed all forms, reports,
registration statements and other documents (including all exhibits thereto)
(the "Company SEC Reports") required to be filed with the Securities and
Exchange Commission (the "SEC") each of which has complied in all material
respects with all applicable requirements of the Securities Act of 1933, as
amended (the "Securities Act"), and the Exchange Act, each as in effect on the
dates such forms, reports, registration statements and other documents were
filed. The Company has heretofore delivered to Newco a true, correct and
complete copy of each of the following (the "Company Filed SEC Reports"): (i)
its Annual Reports on Form 10-K for each of the fiscal years ended February 2,
1994, February 1, 1995 and January 31, 1996, (ii) all definitive proxy
statements relating to the Company's meetings of shareholders (whether annual or
special) held since May 26, 1993 and prior to the date of this Agreement and
(iii) all other Company SEC Reports filed prior to the date of this Agreement by
the Company with the SEC since May 26, 1993. None of the Company SEC Reports,
including, without limitation, any financial statements or schedules included or
incorporated by reference therein, contained, when filed, any untrue statement
of a material fact or omitted to state a material fact required to be stated or
incorporated by reference therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The consolidated financial statements of the Company included in the
Company SEC Reports comply as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto and all of such financial statements fairly present, in
conformity with generally accepted accounting principles applied on a consistent
basis ("GAAP") (except as may be indicated in the notes thereto), the
consolidated financial position of the Company and the consolidated Company
Subsidiaries as of the dates thereof and their consolidated results of
operations and cash flows for the periods then ended (subject, in the case of
the unaudited interim financial statements, to normal year-end adjustments).
(b) There are no material amendments or modifications, which have not
yet been filed with the SEC, to agreements, documents or other instruments which
prior to the date of this Agreement had been filed by the Company with the SEC
pursuant to the Securities Act or the Exchange Act.
3.5 [Intentionally omitted]
3.6 Consents and Approvals; No Violations. Except for filings,
permits, authorizations, consents and approvals as may be required under, and
other applicable requirements of, the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements
Act of 1976, as amended (the "HSR Act"), no filing, registration or submission
with or notice to, and no permit, authorization, consent or approval of or with,
any court or tribunal or
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administrative, governmental or regulatory body, agency or authority (each a
"Governmental Entity") is necessary for the execution and delivery by the
Company of this Agreement or the consummation by the Company of the transactions
contemplated hereby, including the issuance and delivery of the Preferred
Shares, the Conversion Shares and the Warrant Shares. Except as set forth in the
Company Disclosure Schedule, neither the execution, delivery and performance of
this Agreement by the Company nor the consummation by the Company of the
transactions contemplated hereby will (i) conflict with or result in any breach
of any provision of the Company Charter Documents, (ii) result in a violation or
breach of, or constitute (with or without due notice or lapse of time or both) a
default (or give rise to any right of termination, amendment, cancellation or
acceleration or Lien) under, any of the terms, conditions or provisions of any
note, bond, mortgage, indenture, lease, license, contract, agreement or other
instrument or obligation to which the Company or any Company Subsidiary is a
party or by which any of them or any of their respective properties or assets
may be bound, or (iii) assuming that all consents, permits, approvals,
authorizations and other actions described in the preceding sentence have been
obtained and all filings described in the preceding sentence have been made,
violate any order, writ, injunction, decree, law, statute, rule or regulation
applicable to the Company or any Company Subsidiary or any of their respective
properties or assets, except in the case of clause (ii) or (iii) for violations,
breaches or defaults which could not reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect.
3.7 No Default. None of the Company or any Company Subsidiary is in
default or violation (and no event has occurred which with notice or the lapse
of time or both would constitute a default or violation) of any term, condition
or provision of (i) the Company Charter Documents, (ii) any note, bond,
mortgage, indenture, lease, license, contract, agreement or other instrument or
obligation to which the Company or any Company Subsidiary is now a party or by
which any of them or any of their respective properties or assets may be bound
or (iii) any order, writ, injunction, decree, law, statute, rule or regulation
applicable to the Company, any Company Subsidiary or any of their respective
properties or assets, except in the case of clause (ii) or (iii) for violations,
breaches or defaults that could not reasonably be expected to have, individually
or in the aggregate, a Company Material Adverse Effect.
3.8 No Undisclosed Liabilities; Absence of Changes. Except as and to
the extent disclosed in the Company Filed SEC Reports or in Section 3.8 of the
Company Disclosure Schedule, as of January 31, 1996, neither the Company nor any
Company Subsidiary had any liabilities or obligations of any nature, whether or
not accrued, contingent or otherwise, and whether due or to become due or
asserted or unasserted, which would be required by GAAP to be reflected in,
reserved against or otherwise described in the consolidated balance sheet of the
Company and the consolidated Company Subsidiaries (including the notes thereto)
of such date included
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in the consolidated financial statements included in the Company Filed SEC
Reports (the "Company Balance Sheet") and which could reasonably be expected to
have a Company Material Adverse Effect. Except as disclosed by in the Company
Filed SEC Reports or in Section 3.8 of the Company Disclosure Schedule, since
January 31, 1996, the business of the Company and the Company Subsidiaries has
been carried on only in the ordinary and usual course and in a manner consistent
with past practice, neither the Company nor any Company Subsidiary has incurred
any liabilities of any nature, whether or not accrued, contingent or otherwise
and whether due or to become due or asserted or unasserted, which could
reasonably be expected to have, and there have been no events, changes or
effects with respect to the Company or any Company Subsidiary having or which
could reasonably be expected to have, a Company Material Adverse Effect. Except
as disclosed in the Company Filed SEC Reports or in Section 3.8 of the Company
Disclosure Schedule, since January 31, 1996, there has not been (i) any material
change by the Company in its accounting methods, principles or practices, (ii)
any declaration, setting aside or payment of any dividend or distribution in
respect of Shares or any redemption, purchase or other acquisition of any of the
Company Securities or (iii) any increase in the compensation or benefits or
establishment of any bonus, insurance, severance, deferred compensation,
pension, retirement, profit sharing, stock option (including, without
limitation, the granting of stock options, stock appreciation rights,
performance awards or restricted stock awards), stock purchase or other employee
benefit plan, or any other increase in the compensation payable or to become
payable to any executive officers of the Company or any Company Subsidiary
except in the ordinary course of business consistent with past practice or
except as required by applicable law.
3.9 Litigation. Except as disclosed in Section 3.9 of the Company
Disclosure Schedule or in the Company Filed SEC Reports, there is no suit,
claim, action, proceeding or investigation pending or, to the knowledge of the
Company, threatened against the Company or any Company Subsidiary or any of
their respective properties or assets which (i) if adversely determined, could
reasonably be expected to have, individually or in the aggregate, a Company
Material Adverse Effect or (ii) questions the validity of this Agreement or any
action to be taken by the Company in connection with the consummation of the
transactions contemplated hereby. Except as disclosed by the Company, neither
the Company nor any Company Subsidiary is subject to any outstanding order,
writ, injunction or decree which, insofar as can be reasonably foreseen in the
future, could reasonably be expected to have a Company Material Adverse Effect.
3.10 Compliance with Applicable Law. Except as disclosed in the
Company Filed SEC Reports, the Company and all Company Subsidiaries have made or
have obtained and hold all material registrations, filings, submissions,
certificates, determinations, permits, licenses, variances, exemptions, orders
and approvals of all Governmental Entities necessary for the lawful conduct of
their respective businesses
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(collectively, the "Company Permits"). Except as disclosed in the Company Filed
SEC Reports, the Company and all Company Subsidiaries are in compliance, in all
material respects, with the terms of the Company Permits. Except as disclosed by
the Company in the Company Filed SEC Reports, the businesses of the Company and
the Company Subsidiaries are not being conducted in violation, in any material
respect, of any law, ordinance or regulation of any Governmental Entity. Except
as disclosed in the Company Filed SEC Reports, no material investigation or
review by any Governmental Entity with respect to the Company or any Company
Subsidiary is pending or, to the knowledge of the Company, threatened, nor has
the Company received notice that any Governmental Entity indicated an intention
to conduct the same other than in the ordinary course of business.
3.11 Employees; Employee Plans.
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(a) With respect to each employee benefit plan, program, arrangement and
contract (including, without limitation, any "employee benefit plan"), as
defined in section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), maintained or contributed to by the Company or any Company
Subsidiary, or with respect to which the Company or any Company Subsidiary could
incur any liability under section 4069, 4212(c) or 4204 of ERISA (collectively,
the "Company Benefit Plans"), the Company will make available to Newco, promptly
after the date hereof, a true and complete copy of (i) the most recent annual
report (Form 5500) filed with the Internal Revenue Service (the "IRS"), (ii)
such Company Benefit Plan, (iii) each trust agreement relating to such Company
Benefit Plan, (iv) the most recent summary plan description for each Company
Benefit Plan for which a summary plan description is required, (v) the most
recent actuarial report or valuation relating to a Company Benefit Plan subject
to Title IV of ERISA and (vi) the most recent determination letter, if any,
issued by the IRS with respect to any Company Benefit Plan qualified under
section 401(a) of the Internal Revenue Code of 1986, as amended (the "Code").
(b) Except as set forth in Section 3.11(b) of the Company Disclosure
Schedule, with respect to the Company Benefit Plans, no event has occurred and
there exists no condition or set of circumstances in connection with or relating
to the Company or any Company Benefit Plan, ERISA, the Code or any other
applicable Law which could reasonably be expected to have a Company Material
Adverse Effect.
(c) Neither the Company nor any Company Subsidiary is a party to any
collective bargaining or other labor union contract applicable to persons
employed by the Company or any Company Subsidiary and no collective bargaining
agreement or other labor union contract is being negotiated by the Company or
any Company Subsidiary. There is no labor dispute, strike or work stoppage
against the Company or any Company Subsidiary pending or threatened in writing
which may interfere with the
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respective business activities of the Company or any Company Subsidiary. None of
the Company, any Company Subsidiary, or their respective representatives or
employees, has committed any unfair labor practices in connection with the
operation of the respective businesses of the Company or any Company Subsidiary,
and, to the knowledge of the Company, there is no charge or complaint against
the Company or any Company Subsidiary by the National Labor Relations Board or
any comparable state or foreign agency pending or threatened.
(d) The Company has made available to Newco true and complete: (i) copies
of all written severance and employment agreements with officers of the Company
and each Company Subsidiary; (ii) copies of all written severance programs and
policies of the Company and each Company Subsidiary with or relating to its
employees; and (iii) copies of all plans, programs, agreements and other
arrangements of the Company and each Company Subsidiary with or relating to its
employees which contain change of control provisions.
(e) Except as provided in Section 3.11(e) of the Company Disclosure
Schedule or as otherwise required by law, no Company Benefit Plan provides
retiree medical or retiree life insurance benefits to any person.
(f) Neither the Company nor any Company Subsidiary is a party to or
obligated under any agreement, plan, contract or other arrangement pursuant to
which the Company or any Company Subsidiary is or might be required to make
payments that would not be deductible or capitalizable for federal income tax
purposes by reason of the application of Section 280G of the Code.
(g) As of the date hereof, none of the Company, the Company Subsidiaries or
any ERISA Affiliate has incurred any liability or obligation under the Worker
Adjustment and Retraining Notification Act, as it may be amended from time to
time ("WARN").
3.12 Environmental Laws and Regulations.
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(a) Except as disclosed in Section 3.12(a) of the Company Disclosure
Schedule or the Company Filed SEC Reports, (i) each of the Company and each
Company Subsidiary is in compliance, in all material respects, with all
applicable federal, state and local laws and regulations relating to pollution
or protection of human health or the environment (including, without limitation,
ambient air, surface water, ground water, land surface or subsurface strata)
(collectively, "Environmental Laws"), which compliance includes, but is not
limited to, the possession by the Company and the Company Subsidiaries of all
material permits and other governmental authorizations required under applicable
Environmental Laws, and compliance with the terms and conditions thereof; (ii)
neither the Company nor any Company Subsidiary has received
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written notice of, or, to the knowledge of the Company, is the subject of, any
material action, cause of action, claim, investigation, demand or notice by any
person or entity alleging liability under or non-compliance with any
Environmental Law (an "Environmental Claim"); and (iii) to the knowledge of the
Company, there are no circumstances that are reasonably likely to prevent or
interfere with such material compliance in the future.
(b) Except as disclosed in the Company Filed SEC Reports, there are no
material Environmental Claims that are pending or, to the knowledge of the
Company, threatened against the Company or any Company Subsidiary or, to the
knowledge of the Company, against any person whose liability for any
Environmental Claim the Company or any Company Subsidiary has or may have
retained or assumed either contractually or by operation of law.
3.13 Tax Matters. The Company and all Company Subsidiaries have accurately
prepared and duly filed with the appropriate federal, state, local and foreign
taxing authorities all tax returns, information returns and reports required to
be filed with respect to the Company and the Company Subsidiaries and have paid
in full or made adequate provision, in accordance with GAAP, for the payment of
all Taxes (as defined below). Neither the Company nor any Company Subsidiary is
delinquent in the payment of Taxes. As used herein, the term "Taxes" means all
federal, state, local and foreign taxes, charges, fees, levies and other similar
assessments, including, without limitation, income, profits, franchise,
employment, transfer, withholding, property, excise, sales and use taxes
(including interest and penalties thereon and additions thereto).
3.14 Intangible Property. Exhibit D to the Trust Agreement creating the IP
Trust sets forth a list of all federal, state and foreign patents, patent
applications, trademarks (registered and unregistered), trademark applications,
service marks (registered and unregistered) service xxxx applications, trade
names, trade name rights and publicity rights, copyrights and copyright
registrations, trade secrets, know-how and other intellectual property of the
Company and all Company Subsidiaries (the "Intellectual Property"). The Company
and the Company Subsidiaries own or possess adequate licenses or other valid
rights to use all of the Intellectual Property in connection with the business
of the Company and the Company Subsidiaries as currently conducted or as
contemplated by the Company's management to be conducted, and the Company is
unaware of any assertion or claim challenging the validity of any of the
Intellectual Property which, individually or in the aggregate, could reasonably
be expected to have a Company Material Adverse Effect. The conduct of the
business of the Company and the Company Subsidiaries as heretofore and currently
conducted has not and does not conflict in any way with any intellectual
property rights of any third party that, individually or in the aggregate, could
reasonably be expected to have a Company Material Adverse Effect. To the
knowledge
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of the Company, there are no infringements of any intellectual property rights
owned by or licensed by or to the Company or any Company Subsidiary which,
individually or in the aggregate, could reasonably be expected to have a Company
Material Adverse Effect.
3.15 Material Contracts.
------------------
(a) The Company has delivered or otherwise made available to Newco true,
correct and complete copies of all contracts and agreements in effect on the
date hereof (and all amendments, modifications and supplements thereto and all
related letter agreements to which the Company is a party affecting the
obligations of any party thereunder) to which the Company or any Company
Subsidiaries is a party or by which any of its properties or assets are bound
that are material to the financial condition, results of operations, business,
properties, prospects or assets of the Company and the Company Subsidiaries
taken as whole (collectively, the "Company Material Contracts"). The Company
Material Contracts shall be deemed to include all: (i) employment, consulting,
non-competition, severance, golden parachute or indemnification contracts
(including, without limitation, any contract to which the Company is a party
involving employees of the Company); (ii) licensing, merchandising or
distribution agreements; (iii) contracts granting a right of first refusal or
first negotiation; (iv) partnership or joint venture agreements; (v) agreements
for the acquisition, sale or lease of material properties or assets of the
Company (by merger, purchase or sale of assets or stock or otherwise) entered
into since May 26, 1993 (other than the acquisition of the Brentwood, Tennessee
property, which has been disposed of by the Company); (vi) contracts or
agreements with any Governmental Entity; (vii) all material agreements relating
to indebtedness of the Company or any Company Subsidiary or guarantees of
indebtedness by the Company or any Company Subsidiary; (viii) all
noncompetition, exclusivity or other agreements restricting the ability of the
Company or any Company Subsidiary to operate its business as now, or
contemplated to be, conducted; (ix) agreements between the Company and any of
its officers, its directors, holders of 5% of the outstanding Shares or other
affiliates of the Company or any Company Subsidiary (all of which agreements are
also listed in Section 3.15(a)(ix) of the Company Disclosure Schedule); and (x)
all commitments and agreements to enter into any of the foregoing.
(b) Except as set forth in Section 3.15(b) of the Company Disclosure
Schedule:
(i) There is no default under any Company Material Contract either by
the Company or, to the knowledge of the Company, by any other party
thereto, and no event has occurred that with the lapse of time or the
giving of notice or both would constitute a default thereunder by the
Company or, to the knowledge of the Company, any other party, in any such
case in which such
12
default or event could reasonably be expected to have a Company Material
Adverse Effect.
(ii) No party to any such Company Material Contract has given notice
to the Company of or made a claim against the Company with respect to any
breach or default thereunder, in any such case in which such breach or
default could reasonably be expected to have a Company Material Adverse
Effect.
3.16 Title to Properties; Retail Stores; Real Estate.
-----------------------------------------------
(a) The Company and each Company Subsidiary has the ownership in fee and
good marketable title to all real property owned by it, each parcel of which is
legally described in Section 3.16(a) of the Company Disclosure Schedule, and
good title to its other owned properties and assets, tangible and intangible,
including, without limitation, the properties and assets reflected in the
Company Balance Sheet (except personal properties since sold or otherwise
disposed of in the ordinary course of business and except for personal
properties and assets not material to the operation of its business), free and
clear of all Liens whatsoever, except as disclosed in Section 3.16(a) of the
Company Disclosure Schedule or (i) as reflected in the Company Balance Sheet,
(ii) Liens in respect of pledges or deposits under workers' compensation,
unemployment insurance, social security and public liability laws and other
similar legislation, (iii) Liens imposed by law, such as carriers',
warehousemen's, supplier's, contractor's, or mechanics' liens incurred in good
faith in the ordinary course of business, (iv) such imperfections of title and
other Liens, if any, which do not in the aggregate materially interfere with the
use of such properties or assets or otherwise could not reasonably be expected
to have a Company Material Adverse Effect, (v) Liens in favor of Creditanstalt-
Bankverein as agent ("Agent") under the Amended and Restated Credit Agreement
dated as of December 30, 1994, as amended, among the Company, the Lenders party
thereto and the Agent, and (vi) Liens in favor of Nationwide Life Insurance
Company.
(b) The Company has previously made available to Newco correct and complete
copies of all leases or agreements under which the Company or any Company
Subsidiary is lessee of, or holds or operates, any real property owned by any
third party which is material to the operation of its business. Neither the
Company nor any Company Subsidiary is in material default under the terms of any
such lease or agreement. Each such lease under which the lessor is an officer,
director, 5% or greater shareholder or other related party of the Company has
been identified on Section 3.16(b) of the Company Disclosure Schedule and was,
at the time entered into, on terms not materially less favorable to the Company
than if made with an independent third party in an arm's length transaction. The
Company or the applicable Company Subsidiary, and to the knowledge of the
Company, each lessor, have in all material
13
respects performed all the obligations required to be performed by them to date
and are not in default in any material respect under any such lease or
agreement. None of the rights of the Company or any Company Subsidiary in such
property under any such lease or agreement is subject to termination as the
result of the transactions contemplated by this Agreement.
(c) Neither the Company nor any Company Subsidiary is in violation of any
applicable zoning regulation, ordinance or other similar laws, order, regulation
or requirement relating to its operations or properties which, if enforced,
could reasonably be expected to have a Company Material Adverse Effect.
3.17 Brokers. No broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Company except for Xxxxxxx X. Xxxxxxx.
3.18 Prevention or Delay of the Contemplated Transactions. To the best of
the Company's knowledge, no change, event, effect or circumstance has occurred
or exists relating to the Company or any Company Subsidiary that could
reasonably be expected to prevent or materially hinder or delay the transactions
contemplated by this Agreement or the performance by the Company of its
obligations under this Agreement.
4. Representations of Newco. Newco represents and warrants to the
Company as follows:
4.1 Organization. Newco has been duly organized and is validly existing and
in good standing under the laws of the State of Delaware.
4.2 Authority Relative to this Agreement. Newco has all necessary corporate
power and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly and
validly authorized by the Board of Directors of Newco (the "Newco Board"), and
no other corporate proceedings on the part of Newco are necessary to authorize
this Agreement or to consummate the transactions contemplated hereby. This
Agreement has been duly and validly executed and delivered by Newco and
constitutes the valid, legal and binding agreement of Newco, enforceable against
Newco in accordance with its terms.
4.3 Consents and Approvals; No Violations. Except for filings, permits,
authorizations, consents and approvals as may be required under, and other
applicable requirements of, the HSR Act, no filing with or notice to, and no
permit,
14
authorization, consent or approval of, any Governmental Entity is necessary for
the execution and delivery by Newco of this Agreement or the consummation by
Newco of the transactions contemplated hereby. Neither the execution, delivery
and performance of this Agreement by Newco nor the consummation by Newco of the
transactions contemplated hereby or thereby will (a) conflict with or result in
any breach of any provision of the Certificate of Incorporation or Bylaws of
Newco (b) result in a violation or breach of, or constitute (with or without due
notice or lapse of time or both) a default (or give rise to any right of
termination, amendment, cancellation or acceleration or Lien) under, any of the
terms, conditions or provisions of any note, bond, mortgage, indenture, lease,
license, contract, agreement or other instrument or obligation to which Newco is
a party or by which Newco or its properties or assets may be bound or (c)
assuming that all consents, permits, approvals, authorizations and other actions
described in the preceding sentence have been made, violate any order, writ,
injunction, decree, law, statute, rule or regulation applicable to Newco or any
of its properties or assets, except in the case of clause (ii) or (iii) for
violations, breaches or defaults which could not reasonably be expected to have,
individually or in the aggregate, a Newco Material Adverse Effect. For purposes
of this Agreement, "Newco Material Adverse Effect" means any change, event or
effect in, on or relating to the business of Newco that is, or is reasonably
likely to be, materially adverse to the business, assets (including intangible
assets), liabilities (contingent or otherwise), conditions (financial or
otherwise), prospects or results of operations of Newco other than any change or
affect arising out of general economic conditions in the United States.
4.4 Brokers. No broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with the
transactions contemplated hereby based upon arrangements made by or on behalf of
Newco.
4.5 Prevention or Delay of the Contemplated Transactions. No change, event,
effect or circumstance has occurred or exists relating to Newco that could
reasonably be expected to prevent or materially delay the transactions
contemplated by this Agreement or the performance by Newco of its obligations
under this Agreement.
4.6 Investment Representation.
-------------------------
(a) Newco is an "accredited investor," as defined in Regulation D under the
Securities Act.
(b) Newco understands and agrees that the Note, the Preferred Shares, the
Conversion Shares and the Warrant Shares have not been registered under the
Securities Act or under the securities laws of any state or other jurisdiction
in reliance upon exemptions for private offerings, and that, while the Company
may in the
15
future register the Conversion Shares or the Warrant Shares, except as set forth
in the Registration Rights Agreement (as hereinafter defined) the Company is
under no obligation to do so. Newco acknowledges and agrees that the Preferred
Shares, the Conversion Shares and the Warrant Shares cannot be resold unless
they are registered under the Securities Act and any applicable state securities
law, or an exemption from registration is available.
(c) Newco represents that the Note is being acquired solely for its own
account, for investment and not with a view to or for the resale, distribution,
subdivision, or fractionalization thereof.
5. Covenants.
---------
5.1 Conduct of Business of the Company. Except as contemplated by this
Agreement, during the period from the date hereof to the Closing Date, the
Company will, and will cause each of the Company Subsidiaries to, conduct its
operations in the ordinary course of business consistent with past practice and,
to the extent consistent herewith, with no less diligence and effort than would
be applied in the absence of this Agreement, seek to preserve intact its
reputation and current business organizations, keep available the service of its
current officers and key employees and preserve in all material respects its
relationships with customers, suppliers, and others having business dealings
with it to the end that goodwill and ongoing businesses shall not be materially
impaired at the Closing Date. Without limiting the generality of the foregoing,
and except as otherwise expressly provided in or contemplated by this Agreement,
prior to the Closing Date, the Company will not, and will cause the Company
Subsidiaries not to, without the prior consent of Newco:
(a) amend the Company Charter Documents or the comparable organizational
documents of any Company Subsidiary;
(b) authorize for issuance, issue, sell, deliver or agree or commit to
issue, sell or deliver (whether through the issuance or granting of options,
warrants, commitments, subscriptions, rights to purchase (whether or not
contingent) or otherwise) any stock of any class or any other securities or
equity equivalents (including, without limitation, any stock options or stock
appreciation rights), and the issuance or sale of shares of Class A Common Stock
pursuant to options granted to employees under the Option Plans (in each case,
in the ordinary course of business and consistent with past practice);
(c) split, combine or reclassify any shares of its capital stock, declare,
set aside or pay any dividend or other distribution (whether in cash, stock or
property or any combination thereof) in respect of its capital stock (other than
dividends or distributions required to be made to the holders of the Company
Preferred Stock or
16
made by wholly-owned Company Subsidiaries), make any other actual, constructive
or deemed distribution in respect of any shares of its capital stock or
otherwise make any payments to shareholders in their capacity as such (other
than such dividends or distributions), or redeem or otherwise acquire any of its
securities;
(d) adopt a plan of complete or partial liquidation, dissolution, merger,
consolidation, restructuring, recapitalization or other reorganization of the
Company or any Company Subsidiary;
(e) alter through merger, liquidation, recapitalization, restructuring or
in any other fashion the corporate structure or ownership of any Company
Subsidiary;
(f) (i) incur or assume any long-term or short-term debt or issue any debt
securities except for borrowings from the Banks under existing lines of credit
in the ordinary course of business; (ii) assume, guarantee, endorse or otherwise
become liable or responsible (whether directly, contingently or otherwise) for
the obligations of any other person except in the ordinary course of business
consistent with past practice and in amounts not material to the Company and the
Company Subsidiaries, taken as a whole, except for obligations of the wholly-
owned Company Subsidiaries; (iii) make any loans, advances or capital
contributions to, or investments in, any other person (other than to the wholly-
owned Company Subsidiaries or customary loans or advances to employees in the
ordinary course of business consistent with past practice and in amounts not
material to the maker of such loan or advance); (iv) pledge or otherwise
encumber shares of capital stock of the Company or any Company Subsidiary; or
(v) mortgage or pledge any of the Company's or any Company Subsidiary's material
assets, tangible or intangible, or create or suffer to exist any material Lien
thereupon;
(g) except as may be required by law, enter into, adopt or amend or
terminate any bonus, profit sharing, compensation, severance, termination, stock
option, stock appreciation right, restricted stock, performance unit, stock
equivalent, stock purchase agreement, pension, retirement, deferred
compensation, employment, severance or other employee benefit agreement, trust,
plan, fund, award or other arrangement for the benefit or welfare of any
director, officer or employee in any manner, or (except for normal increases in
the ordinary course of business consistent with past practice that, in the
aggregate, do not result in a material increase in benefits or compensation
expense to the Company or any Company Subsidiary, as required under existing
agreements or in the ordinary course of business generally consistent with past
practice, or to the extent permitted pursuant to paragraph (b) above) increase
in any manner the compensation or fringe benefits of any director, officer or
employee or pay any benefit not required by any plan and arrangement as in
effect as of the date hereof (including, without limitation, the granting of
stock options, warrants or stock appreciation rights);
17
(h) acquire, sell, lease or dispose of any assets outside the ordinary
course of business or any assets which in the aggregate are material to the
Company and the Company Subsidiaries, taken as a whole, or enter into any
commitment or transaction outside the ordinary course of business consistent
with past practice;
(i) except as may be required as a result of a change in law or in GAAP,
change any of the accounting principles or practices used by it;
(j) revalue in any material respect any of its assets, including, without
limitation, writing down the value of inventory or writing-off notes or accounts
receivable other than in the ordinary course of business;
(k) (i) acquire (by merger, consolidation, or acquisition of stock, debt
securities or assets) any person or any division thereof, any equity interest
therein or indebtedness thereof; (ii) enter into any contract or agreement,
other than in the ordinary course of business consistent with past practice or
amend any of the Company Material Contracts, including, without limitation, the
agreements referred to in Section 3.15 and those identified in any subsection of
Section 3.15 of the Company Disclosure Schedule; (iii) authorize any new capital
expenditure or expenditures which, individually, is in excess of $50,000 or, in
the aggregate, are in excess of $250,000; or (iv) enter into or amend any
contract, agreement, commitment or arrangement providing for the taking of any
action that would be prohibited hereunder;
(l) make or revoke any tax election or settle or compromise any tax
liability material to the Company and the Company Subsidiaries taken as a whole
or change (or make a request to any taxing authority to change) any material
aspect of its method of accounting for tax purposes;
(m) pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), other than
the payment, discharge or satisfaction in the ordinary course of business of
liabilities reflected or reserved against in, or contemplated by, the
consolidated financial statements (or the notes thereto) of the Company and the
Company Subsidiaries or incurred in the ordinary course of business consistent
with past practice;
(n) enter into or amend or otherwise modify any agreement or arrangement
with persons that are affiliates or, as of the date hereof, are officers,
directors or employees of the Company or any Company Subsidiary;
(o) settle or compromise any pending or threatened suit, action or claim
relating to the transactions contemplated hereby;
18
(p) without Newco's written consent, which shall not be unreasonably
withheld, close any Company or Company Subsidiary operated store; or
(q) take, propose to any third party to take or agree in writing or
otherwise to take, any of the actions described in Sections 5.1(a) through
5.1(p) or any action which would make any of the representations or warranties
of the Company contained in this Agreement that are qualified as to materiality
untrue or incorrect or any such representations or warranties that are not so
qualified untrue or incorrect in any material respect.
5.2 Other Actions. Each of the Company and Newco shall not, and the
Company shall cause the Company Subsidiaries not to, take any action or agree in
writing or otherwise to take any action that would result in (i) any of the
representations and warranties of such party (without giving effect to any
"knowledge" qualification) set forth in this Agreement that are qualified as to
materiality becoming untrue or incorrect, (ii) any of such representations and
warranties (without giving effect to any "knowledge" qualification) that are not
so qualified becoming untrue or incorrect in any material respect or (iii) any
of the conditions to the Closing set forth in Article 6 not being satisfied.
5.3 Access to Information.
(a) Between the date hereof and the Closing Date, the Company will give
Newco and Newco's authorized representatives reasonable access to all of its
employees, plants, offices, warehouses and other facilities and to all of its
books and records, will permit Newco to make such inspections as Newco may
reasonably require and will cause its officers and those of the Company
Subsidiaries to furnish Newco with such financial and operating data and other
information with respect to its and the Company Subsidiaries' business,
properties and personnel as Newco from time to time reasonably request, but in
any such case only to the extent as not to unreasonably interfere with its
business and operations or those of the Company Subsidiaries; provided that no
investigation pursuant to this Section 5.3(a) shall affect or be deemed to
modify any of the representations or warranties made by either party in this
Agreement or in any certificate required to be delivered pursuant to Section 6.2
or 6.3.
(b) Between the date hereof and the Closing Date, the Company shall furnish
to Newco (i) within 15 days after the end of each retail period, an unaudited
balance sheet, income statement and statement of cash flows of the Company and
the Company Subsidiaries on a consolidated basis and (ii) within 30 days after
the end of each fiscal quarter, an unaudited balance sheet, income statement and
statement of cash flows of the Company and the Company Subsidiaries on a
consolidated basis, each prepared in accordance with GAAP in conformity with the
practices consistently applied by the Company with respect to its retail period
or quarterly financial
19
statements (as the case may be). All the foregoing shall be in accordance with
the books and records of the Company and fairly present the consolidated
financial position of the Company as of the last day of the period then ended
and the consolidated results of operations of the Company as of the last day of
the period then ended (in each case, taking into account the differences between
retail period and quarterly statements prepared by the Company in conformity
with its past practices).
(c) Newco will hold and will cause its consultants and advisors to hold in
confidence all documents and information concerning the Company furnished to
Newco in connection with the transactions contemplated by this Agreement in
accordance with the terms of that certain Confidentiality Agreement entered into
between the Company and Newco dated as of January 14, 1997 (collectively the
"Confidentiality Agreement").
5.4 Reasonable Best Efforts. Upon the terms and subject to the
conditions set forth in this Agreement, each of the parties agrees to use its
reasonable best efforts to take, or cause to be taken, all actions, and to do,
or cause to be done, and to assist and cooperate with the other parties in
doing, all things necessary, proper or advisable to fulfill all conditions to
the obligations of the parties under this Agreement and to consummate and make
effective, in the most expeditious manner practicable, the transactions
contemplated hereby, including, but not limited to, (i) the obtaining of all
necessary actions or nonactions, waivers, consents and approvals from
Governmental Entities and the making of all necessary registrations and filings
(including filings under the HSR Act and all other filings with Governmental
Entities, if any) and the taking of all reasonable steps as may be necessary to
obtain an approval, waiver or exemption from, or to avoid an action or
proceeding by, any Governmental Entity; (ii) the obtaining of all necessary
consents, approvals, waivers or exemption from non-governmental third parties;
(iii) the defending of any lawsuits or other legal proceedings, whether judicial
or administrative, challenging this Agreement or the consummation of the
transactions contemplated hereby, including seeking to have any stay or
temporary restraining order entered by any court or other Governmental Entity
vacated or reversed; and (iv) the execution and delivery of any additional
instruments necessary to consummate the transactions contemplated by and to
fully carry out the purposes of, this Agreement.
5.5 Public Announcements. Newco and the Company, as the case may be,
will consult and cooperate with one another before issuing any press release or
otherwise making any public statements with respect to the transactions
contemplated hereby and shall not issue any such press release or make any such
public statement prior to such consultation, except as may be required by
applicable law or by obligations pursuant to any listing agreement with the
Nasdaq Stock Market, as determined by Newco or the Company, as the case may be,
but only upon the advice of independent counsel.
20
5.6 Notification of Certain Matters. The Company shall give prompt
notice to Newco, and Newco shall give prompt notice to the Company, of (i) the
occurrence or nonoccurrence of any event the occurrence or nonoccurrence of
which would be likely to cause any representation or warranty contained in this
Agreement that is qualified as to materiality to be untrue or inaccurate or any
such representation or warranty not so qualified to be untrue or inaccurate in
any material respect, in either case, at or prior to the Closing Date, (ii) any
material failure of the Company or Newco, as the case may be, to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
it hereunder, (iii) any notice of, or other communication relating to, a default
or event which, with notice or lapse of time or both, would become a default,
received by it (or in the case of the Company, any Company Subsidiaries)
subsequent to the date of this Agreement and prior to the Closing Date, under
any contract or agreement material to the financial condition, businesses, or
results of operations of it (and Subsidiaries) taken as a whole to which it (and
in the case of the Company, any Company Subsidiary) is a party or is subject,
(iv) any notice or other communication from any third party alleging that the
consent of such third party is or may be required in connection with the
transactions contemplated by this Agreement or (v) any Newco Material Adverse
Effect (in the case of Newco) or Company Material Adverse Effect (in the case of
the Company); provided, however, that the delivery of any notice pursuant to
this Section 5.6 shall not cure such breach or non-compliance or limit or
otherwise affect the remedies available hereunder to the party receiving such
notice.
5.7 SEC Filings. The Company shall promptly provide Newco (or its
counsel) with copies of all filings made by it or any Company Subsidiaries with
the SEC or any other local, state or federal Governmental Entity in connection
with this Agreement and the transactions contemplated hereby.
5.8 Right of First Negotiation; Right of First Refusal Regarding Future
Financings. If at any time the Company determines that it requires additional
financing (whether debt or equity) (including, but not limited to, all capital-
type transactions and sale/leaseback transactions), the Company agrees (a) to
negotiate in good faith with Newco for a period of 20 days with regard to any
portion of the entire amount (at the option of Newco) of such financing prior to
negotiating with any other entity with regard thereto, (b) if the Company has
engaged in good faith negotiations under clause (a) of this Section 5.8 and such
negotiations have been unsuccessful, to notify Newco of the existence of any
other financing arrangement it proposes to consummate and the terms and
conditions thereof and grant to Newco a right of first refusal with respect to
such financing on the same terms and subject to the same conditions contained
therein and upon receipt of such notice (setting forth in detail all relevant
terms and conditions of such financing), in which event Newco shall have 30 days
thereafter in which to agree to provide all of the financing on the same terms
and conditions, and (c) with respect to any financing other than a pure debt
financing in
21
which the debt instrument to be offered has no equity-type features, to grant to
Newco a right to participate therein on a fully diluted basis. As used herein "a
right to participate therein on a fully diluted basis" shall mean Newco's right
to maintain the same percentage equity interest in Company (calculated by
including as outstanding the shares subject to all outstanding conversion
rights, options and warrants, including shares which Newco has a right to
purchase or acquire, whether or not currently exercisable) after such financing
is completed as it had prior to such financing.
5.9 Right of First Negotiation; Right of Final Offer Regarding Sale of
Business. If at any time the Company desires to sell substantially all of its
assets, merge, consolidate or engage in any other business combination
transaction (a "Transaction"), the Company agrees (a) to negotiate in good faith
with Newco for a period of 20 days with regard to the Transaction prior to
negotiating with any other entity with regard thereto, (b) if the Company has
engaged in good faith negotiations under clause (a) of this Section 5.9 and such
negotiations have been unsuccessful, to make a final offer to Newco (the "Final
Company Offer") prior to engaging in negotiations with, soliciting offers from
or accepting any offer of, any third party with respect to a Transaction. In
the event Newco does not accept the Final Company Offer within 20 days after the
date it is received by Newco, the Company shall thereupon have the right, during
the six-month period following the expiration of such twenty-day period, to
enter into an agreement to enter into a definitive agreement relating to a
Transaction (which transaction shall be consummated within the nine-month period
following the execution of such twenty-day period) with any third party at a
price and on terms no less favorable to the Company than the terms set forth in
the Final Company Offer, and provided, however, that if the Company does not
enter into a Transaction during such six-month period or consummate a
Transaction during the nine-month period following the expiration of such
twenty-day period, as the case may be, this Section 5.9 shall once again become
applicable to any Transaction.
6. Conditions to Closing
6.1 Conditions to the Obligations of Newco and the Company. The
respective obligations of each party hereto to effect the Closing and the other
transactions contemplated hereby are subject to the satisfaction at or prior to
the Closing Date of the following conditions:
(a) no statute, rule, regulation, executive order, decree, ruling,
injunction or other legal prohibition shall have been enacted, entered,
promulgated or enforced by any Governmental Entity which prohibits, restrains,
enjoins or imposes material restrictions on the consummation of the transactions
contemplated hereby;
(b) any waiting period applicable to the transactions contemplated hereby
under the HSR Act shall have terminated or expired; and
22
(c) all governmental or regulatory notices (other than those in connection
with the HSR Act) or approvals required with respect to the transactions
contemplated hereby shall have been either filed or received, except where the
failure to file such notices or receive such approvals, individually or in the
aggregate, could not reasonably be expected to have a Newco Material Adverse
Effect or a Company Material Adverse Effect and could not reasonably be expected
to adversely affect the ability of Newco or the Company (as applicable) to
consummate such transactions.
6.2 Conditions to the Obligations of the Company. The obligation of the
Company to effect the Closing is subject to the satisfaction at or prior to the
Closing Date of the following conditions:
(a) the representations and warranties of Newco set forth in this Agreement
that are qualified as to materiality shall be true and correct, and the
representations and warranties of Newco set forth in this Agreement that are not
so qualified shall be true and correct in all material respects, in each case as
of the Closing Date, as though made on and as of the Closing Date, except to the
extent the representation or warranty is expressly limited by its terms to
another date, and the Company shall have received a certificate (which
certificate may be qualified by knowledge to the same extent as the
representations and warranties of Newco contained herein are so qualified)
signed on behalf of Newco by an executive officer of Newco to such effect;
(b) each of the obligations of Newco to be performed at or before the
Closing Date pursuant to the terms of this Agreement shall have been duly
performed in all material respects at or before the Closing Date and at the
Closing Newco shall have delivered to the Company a certificate signed on behalf
of Newco by an executive officer of Newco to such effect;
(c) each holder of shares of Company Preferred Stock issued and outstanding
on the date hereof shall have entered into an agreement with the Company in the
form set forth as Exhibit F hereto (the "Company Preferred Stock Agreement");
(d) the Banks shall have entered into an agreement with the Company in the
form set forth in Exhibit G hereto (the "Bank Agreement");
(e) the Company shall have received the opinion of Xxxxxxxxxx, Xxxxxx &
Xxxxxxx, L.L.P., in the form set forth in Exhibit H hereto.
6.3 Conditions to the Obligations of Newco. The obligations of Newco to
effect the Closing are subject to the satisfaction at or prior to the Closing
Date of the following conditions:
23
(a) the representations and warranties of the Company set forth in this
Agreement that are qualified as to materiality shall be true and correct, and
the representations and warranties of the Company set forth in this Agreement
that are not so qualified shall be true and correct in all material respects, in
each case as of the Closing Date, as though made on and as of the Closing Date,
except to the extent the representation or warranty is expressly limited by its
terms to another date, and Newco shall have received a certificate (which
certificate may be qualified by knowledge to the same extent as the
representations and warranties of the Company contained herein are so qualified)
signed on behalf of the Company by an executive officer of the Company to such
effect;
(b) each of the obligations of the Company to be performed at or before the
Closing Date pursuant to the terms of this Agreement shall have been duly
performed in all material respects at or before the Closing Date and at the
Closing the Company shall have delivered to Newco a certificate signed on behalf
of the Company by an executive officer of the Company to such effect;
(c) the Company shall have obtained the consent, approval or waiver of each
non-governmental person whose consent, approval or waiver shall be required in
order for each of them to consummate the transactions contemplated hereby,
except those for which the failure to obtain such consent, approval or waiver,
individually or in the aggregate, could not reasonably be expected to have a
Company Material Adverse Effect;
(d) Newco shall have obtained the consent, approval or waiver of each non-
governmental person whose consent, approval or waiver shall be required in order
for Newco to consummate the transactions contemplated hereby, except those for
which the failure to obtain such consent, approval or waiver, individually or in
the aggregate, could not reasonably be expected to have a Newco Material Adverse
Effect;
(e) each holder of shares of Company Preferred Stock issued and outstanding
on the date hereof shall have entered into the Preferred Stock Agreement;
(f) the Banks shall have entered into the Bank Agreement;
(g) Newco shall have obtained the opinion of Xxxxxx & Bird, counsel to the
Company, in the form set forth as Exhibit I hereto.
7. Termination; Fees and Expenses; Amendment; Waiver
7.1 Termination. This Agreement may be terminated at any time prior to
the Closing Date:
24
(a) by written consent of Newco and the Company, duly authorized by Newco
Board and the Company Board;
(b) by either Newco or the Company, if the Closing shall not have occurred
on or before February 3, 1997; provided, however, that the right to terminate
this Agreement under this Section 7.1(b) shall not be available to the party
whose failure to fulfill any obligation under this Agreement shall have been the
cause of, or resulted in, the failure of the Closing to occur on or before such
date;
(c) by either Newco or the Company, if any final order, decree or ruling
preventing the consummation of the Closing shall have been entered by any court
of competent jurisdiction or Governmental Entity and shall have become final and
nonappealable;
(d) by Newco, (i) in the case of the Company's representations and
warranties set forth in this Agreement that are not qualified as to materiality,
upon a material breach by the Company of any such representation or warranty, or
if any such representation or warranty shall have become untrue in any material
respect and (ii) in the case of the Company's representations and warranties set
forth in this Agreement that are qualified as to materiality, upon a breach by
the Company of any such representation or warranty, or if any such
representation or warranty shall have become untrue (any, a "Terminating Company
Breach"), in any case such that the conditions set forth in Section 6.3(a) could
not reasonably be expected to be satisfied within 30 days following such
Terminating Company Breach upon the Company's exercise of its reasonable best
efforts or such breach has not in any event been cured within 30 days following
notification by Newco to the Company of such Terminating Company Breach;
(e) by the Company, (i) in the case of Newco's representations and
warranties set forth in this Agreement that are not qualified as to materiality,
upon a material breach by Newco or Sub of any such representation or warranty,
or if any such representation or warranty shall have become untrue in any
material respect and (ii) in the case of Newco's representations and warranties
set forth in this Agreement that are qualified as to materiality, upon a breach
by Newco of any such representation or warranty, or if any such representation
or warranty shall become untrue (any, a "Terminating Newco Breach"), in any case
such that the conditions set forth in Section 6.2(a) could not reasonably be
expected to be satisfied within 30 days following such Terminating Newco Breach
upon Newco's exercise of its reasonable best efforts or such Terminating Newco
Breach has not in any event been cured within 30 days following notification by
the Company to Newco of such Terminating Newco Breach;
(f) by Newco, upon the material breach by the Company of any covenant or
agreement of the Company set forth in this Agreement which is not
25
reasonably capable of being cured within 30 days following such breach upon the
Company's exercise of its reasonable best efforts or, in any event, upon the
30th day following notification by Newco to the Company of such breach if such
breach has not been cured by such 30th day; or
(g) by the Company, upon the material breach by Newco of any covenant or
agreement of Newco set forth in this Agreement which is not reasonably capable
of being cured within 30 days following such breach upon Newco's exercise of its
reasonable best efforts or, in any event, upon the 30th day following
notification by the Company to Newco of such breach if such breach has not been
cured by such 30th day.
7.2 Fees and Expenses. Each party shall bear its own expenses in
connection with this Agreement and the transactions contemplated hereby.
7.3 Amendment. This Agreement may not be amended except by an instrument
in writing signed on behalf of the parties hereto.
7.4 Extension; Waiver. At any time prior to the Closing, each party
hereto may (i) extend the time for the performance of any of the obligations or
other acts of the other party, (ii) waive any inaccuracies in the
representations and warranties of the other party contained herein or in any
document, certificate or writing delivered pursuant hereto or (iii) waive
compliance by the other party with any of the agreements or conditions contained
herein. Any agreement on the part of either party hereto to any such extension
or waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party. The failure of either party hereto to assert any of its
rights hereunder shall not constitute a waiver of such rights.
8. Miscellaneous
8.1 Survival of Representations, Warranties and Agreements. The
representations, warranties and agreements in this Agreement and in any
certificate delivered pursuant hereto shall survive the Closing without
limitation, except that the representations and warranties in Sections 3.1, 3.2,
3.3, 3.5, 4-1, 4-2, 4-3, and 4.6 this Agreement shall expire on the fifth
anniversary of the Closing and all other representations and warranties in this
Agreement shall expire on the fifth anniversary of the Closing. Each party
agrees that, except for the representations and warranties contained in this
Agreement and the Company Disclosure Schedule, no party hereto has made any
other representations and warranties, and each party hereby disclaims any other
representations and warranties, made by itself or any of its officers,
directors, employees, agents, financial and legal advisors or other
representatives with respect to the execution and delivery of this Agreement or
the transactions contemplated hereby, notwithstanding the delivery of disclosure
to any other party or any party's
26
representatives of any documentation or other information with respect to any
one or more of the foregoing.
8.2 Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto with respect to the subject matter hereof and
supersedes all other prior agreements and understandings, both written and oral,
between the parties with respect to the subject matter hereof.
8.3 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns.
8.4 Validity. If any provision of this Agreement, or the application
thereof to any person or circumstance, is held invalid or unenforceable, the
remainder of this Agreement, and the application of such provision to other
persons or circumstances, shall not be affected thereby, and to such end, the
provisions of this Agreement are agreed to be severable.
8.5 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in person, by cable,
telegram, facsimile or telex, or by registered or certified mail (postage
prepaid, return receipt requested), to the other party as follows:
if to Newco: 00000 Xxxxxx Xxxx Xxxxxxx
Xxxxxx, Xxxxxxxx 00000
Attention: Xxxx X. Xxxxxx
Facsimile: (000) 000-0000
if to the Company to: Harry's Farmers Market, Inc.
0000 Xxxxx Xxxxxxx Xxxx
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxx X. Blazer
Facsimile: (000) 000-0000
with a copy to: Xxxxxx & Bird
One Atlantic Center
0000 Xxxx Xxxxxxxxx Xxxxxx
Xxxxxxx, XX 00000
Attention: Xxxx Xxxxxx
Facsimile: (000) 000-0000
or to such other address as the person to whom notice is given may have
previously furnished to the other in writing in the manner set forth above.
27
8.7 Further Assurances. The Company hereby agrees to execute and deliver
such other documents and instruments and to take such other actions as are
necessary or desirable in the reasonable opinion of Newco to carry out the
transactions contemplated by this Agreement, including, without limitation, any
actions (required under Section 7.13 of the Secured Loan Agreement or otherwise)
required to permit the exercise of the Options or the Warrants.
8.8 Severability. If any term or other provision of this Agreement is
invalid, illegal or unenforceable, all other provisions of this Agreement shall
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner materially
adverse to any party.
8.9 Specific Performance. The parties hereto acknowledge that
irreparable damage would result if this Agreement were not specifically
enforced, and they therefore consent that the rights and obligations of the
parties under this Agreement may be enforced by a decree of specific performance
issued by a court of competent jurisdiction. Such remedy shall, however, not be
exclusive and shall be in addition to any other remedies which any party may
have under this Agreement or otherwise; provided, that after the Closing, each
party agrees that rescission of this Agreement or any of the transactions
contemplated hereby shall not be an available remedy for my breach of this
Agreement or any of the other agreements contemplated hereby.
8.10 Brokers. The Company agrees to indemnify and hold harmless Newco,
and Newco agrees to indemnify and hold harmless the Company, from and against
any and all liability to which Newco, on the one hand, or the Company, on the
other hand, may be subjected by reason of any brokers, finders or similar fees
or expenses with respect to the transactions contemplated by this Agreement to
the extent such similar fees and expenses are attributable to any action
undertaken by or on behalf of the Company or Newco, as the case may be.
8.11 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement.
8.12 Interpretation. The table of contents and headings herein are for
convenience of reference only, do not constitute part of this Agreement and
shall not be deemed to limit or otherwise affect any of the provisions hereof.
Where a reference in this Agreement is made to a schedule, section, exhibit or
annex, such reference shall be to a schedule, section of or exhibit or annex to
this Agreement unless otherwise indicated. All capitalized terms used without
definition in any such schedule, section, exhibit or annex shall have the
meaning assigned to them in this Agreement and any capitalized terms used
without definition in this Agreement shall have the meanings
28
assigned to them in such schedules, exhibits and annexes. Where the reference
"hereby" or "herein" appears in this Agreement, such reference shall be deemed
to be a reference to this Agreement. Whenever the words "include," "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation."
8.13 Certain Definitions. For purposes of this Agreement:
An "affiliate" of any person means another person that directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, such first person.
"person" means an individual, corporation, partnership, limited liability
company, joint venture, association, trust, unincorporated organization or other
entity.
8.14 Governing Law; Waiver of Jury Trial.
(a) THIS AGREEMENT SHALL BE DEEMED TO BE MADE IN AND IN ALL RESPECTS SHALL
BE INTERPRETED, CONSTRUED AND GOVERNED BY AND IN ACCORDANCE WITH THE LAW OF THE
STATE OF GEORGIA WITHOUT REGARD TO THE CONFLICT OF LAW PRINCIPLES THEREOF.
(b) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE
UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND
THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDI TIONALLY WAIVES ANY
RIGHT SUCH PARTY MAY HAVE TO (i) A TRIAL BY JURY OR (ii) ANY PUNITIVE OR
EXEMPLARY DAMAGES THAT MAY OTHERWISE BE AWARDED, IN CONNECTION WITH ANY
LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR ANY RELATED AGREEMENT, OR THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT OR ANY RELATED AGREEMENT. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT
(iii) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (iv) EACH SUCH PARTY
UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (v) EACH SUCH
PARTY MAKES THIS WAIVER VOLUNTARILY, AND (vi) EACH SUCH PARTY HAS BEEN INDUCED
TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SEC TION 8.14.
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IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
duly executed on its behalf as of the day and year first above written.
HFMI ACQUISITION CORPORATION
By /s/ Xxxx X. Xxxxxx
-----------------------------
Name: Xxxx X. Xxxxxx
Title: Chairman, President and Chief
Executive Officer
HARRY'S FARMERS MARKET , INC.
By /s/ Xxxxx X. Blazer
-----------------------------
Name: Xxxxx X. Blazer
Title: Chairman, President and
Chief Executive Officer
30
