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ASSET PURCHASE AGREEMENT
among
H&O FOODS, INC.,
THE SHAREHOLDERS
SET FORTH ON
SCHEDULE 1 HERETO
and
XXXXXX-XXXXXX, INC.,
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Dated as of October 26, 1995
TABLE OF CONTENTS
1. Warranties, Representations and Covenants of Principals . . . . . . .1
1.1 Corporation. . . . . . . . . . . . . . . . . . . . . . . . . . .2
1.2 Ownership. . . . . . . . . . . . . . . . . . . . . . . . . . . .2
1.3 Authority Relative to this Agreement . . . . . . . . . . . . . .2
1.4 Financial Statements . . . . . . . . . . . . . . . . . . . . . .2
1.5 Absence of Undisclosed Liabilities . . . . . . . . . . . . . . .3
1.6 Title to Assets and Absence of Encumbrances. . . . . . . . . . .3
1.7 Real Property and Leaseholds . . . . . . . . . . . . . . . . . .4
1.8 Tangible Personal Property . . . . . . . . . . . . . . . . . . .5
1.9 Intellectual Property. . . . . . . . . . . . . . . . . . . . . .5
1.10 Condition of Inventory . . . . . . . . . . . . . . . . . . . . .6
1.11 Accounts Receivable. . . . . . . . . . . . . . . . . . . . . . .7
1.12 Accounts Payable . . . . . . . . . . . . . . . . . . . . . . . .7
1.13 Self-Insurance Reserve . . . . . . . . . . . . . . . . . . . . .8
1.14 Conduct of Business. . . . . . . . . . . . . . . . . . . . . . .8
1.15 Business Records . . . . . . . . . . . . . . . . . . . . . . . 10
1.16 Business Organization. . . . . . . . . . . . . . . . . . . . . 10
1.17 Material Documents, Debts and Restrictive Contracts. . . . . . 10
1.18 Licenses and Permits . . . . . . . . . . . . . . . . . . . . . 11
1.19 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . 12
1.20 Labor and Employment Agreements. . . . . . . . . . . . . . . . 12
1.21 Pension and Welfare Plans. . . . . . . . . . . . . . . . . . . 13
1.22 Tax Matters. . . . . . . . . . . . . . . . . . . . . . . . . . 15
1.23 Environmental Matters. . . . . . . . . . . . . . . . . . . . . 16
1.24 Customer Information . . . . . . . . . . . . . . . . . . . . . 16
1.25 Customer Relationships . . . . . . . . . . . . . . . . . . . . 16
1.26 No Litigation. . . . . . . . . . . . . . . . . . . . . . . . . 17
1.27 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . 17
1.28 Prohibited Payments. . . . . . . . . . . . . . . . . . . . . . 17
1.29 General Warranties . . . . . . . . . . . . . . . . . . . . . . 17
1.30 Notes Receivable . . . . . . . . . . . . . . . . . . . . . . . 18
2. Warranties and Representations of Buyer . . . . . . . . . . . . . . 18
2.1 Corporation. . . . . . . . . . . . . . . . . . . . . . . . . . 18
2.2 Authority Relative to this Agreement . . . . . . . . . . . . . 18
2.3 Valid and Binding Obligation . . . . . . . . . . . . . . . . . 18
3. Purchase and Sale of Business and Certain Assets. . . . . . . . . . 18
4. Purchase and Sale of Real Estate. . . . . . . . . . . . . . . . . . 20
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5. Consideration Payable by Buyer. . . . . . . . . . . . . . . . . . . 20
5.1 Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . 20
5.2 Payment of Purchase Price. . . . . . . . . . . . . . . . . . . 21
5.3 Accounting Standards and Procedures; Inventory Procedures. . . 22
5.4 Post-Closing Payment Based on Cash Purchase Price. . . . . . . 24
5.5 Accounts Receivable. . . . . . . . . . . . . . . . . . . . . . 25
5.6 Method of Payment of Purchase Price. . . . . . . . . . . . . . 25
5.7 Allocation of Purchase Price . . . . . . . . . . . . . . . . . 25
6. Other Agreements of Seller and the Principals . . . . . . . . . . . 26
6.1 Non-Competition Agreements . . . . . . . . . . . . . . . . . . 26
6.2 Phase I Environmental Study. . . . . . . . . . . . . . . . . . 26
6.3 Environmental Remediation. . . . . . . . . . . . . . . . . . . 26
6.4 Roof Repair. . . . . . . . . . . . . . . . . . . . . . . . . . 26
6.5 Unsalable Inventory. . . . . . . . . . . . . . . . . . . . . . 27
6.6 Financing Statement Matters. . . . . . . . . . . . . . . . . . 27
7. Other Agreements of Buyer . . . . . . . . . . . . . . . . . . . . . 27
7.1 Assumption of Specified Liabilities. . . . . . . . . . . . . . 27
7.2 Employment of Seller's Employees . . . . . . . . . . . . . . . 28
7.3 Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . 28
7.4 Employment of Xxxxx Xxxxxxx . . . . . . . . . . . . . . . . . 28
8. Closing Conditions. . . . . . . . . . . . . . . . . . . . . . . . . 28
8.1 Conditions to Buyer's Obligations. . . . . . . . . . . . . . . 28
8.2 Conditions to Obligations of Seller and Majority Shareholders. 31
9. Publicity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
10. Expenses and Brokers. . . . . . . . . . . . . . . . . . . . . . . . 32
10.1 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
10.2 Brokers. . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
11. Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
12. Termination of Agreement and Remedies . . . . . . . . . . . . . . . 33
12.1 Termination. . . . . . . . . . . . . . . . . . . . . . . . . . 33
12.2 Rescission . . . . . . . . . . . . . . . . . . . . . . . . . . 34
12.3 Arbitration. . . . . . . . . . . . . . . . . . . . . . . . . . 34
12.4 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
12.5 Litigation Expense . . . . . . . . . . . . . . . . . . . . . . 35
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13. Indemnification of Buyer. . . . . . . . . . . . . . . . . . . . . . 35
13.1 Generally. . . . . . . . . . . . . . . . . . . . . . . . . . . 35
13.2 Procedure. . . . . . . . . . . . . . . . . . . . . . . . . . . 35
14. Indemnification of Seller . . . . . . . . . . . . . . . . . . . . . 36
14.1 Generally. . . . . . . . . . . . . . . . . . . . . . . . . . . 36
14.2 Procedure. . . . . . . . . . . . . . . . . . . . . . . . . . . 37
15. Survival of Representations, Warranties and Covenants . . . . . . . 37
16. Indemnification Threshold . . . . . . . . . . . . . . . . . . . . . 37
17. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
18. Parties in Interest . . . . . . . . . . . . . . . . . . . . . . . . 38
20. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
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ASSET PURCHASE AGREEMENT
THIS AGREEMENT is made and entered into as of this 26th day of October,
1995, by and among:
H&O FOODS, INC., a corporation organized under the laws of the
State of Nevada (hereinafter called "Seller");
THE SHAREHOLDERS set forth on Schedule 1 hereto (collectively,
the "Majority Shareholders," and who, together with Seller, are
hereinafter sometimes collectively referred to as "Principals");
and
XXXXXX-XXXXXX, INC., a corporation organized under the laws of
the State of Delaware (the "Buyer");
INTRODUCTION
A. Seller is engaged in the business of institutional food service
distribution (the "Business") to institutions located in Nevada, California
and Arizona (the "Territory").
B. The land and buildings used by Seller in connection with the
Business are located in Nevada and legally described in paragraph 1.7 of the
Schedule of Exceptions attached hereto as Exhibit A (the "Real Estate") and
are owned by Seller.
C. Seller desires to sell the Business and the Real Estate, including
all of its customer accounts, together with all of the goodwill and other
assets related thereto.
D. Subject to and upon the terms and conditions hereinafter set forth,
Buyer desires to purchase the Business and all of the goodwill and other
assets related thereto, free and clear of any and all liabilities, liens,
claims, and encumbrances of every kind and character whatsoever, excepting
only those liabilities hereinafter expressly provided to be assumed by Buyer.
AGREEMENT
NOW, THEREFORE, in consideration of the above recitals, which are hereby
made a part of this Agreement, and the following mutual promises, it is
hereby agreed as follows:
1. WARRANTIES, REPRESENTATIONS AND COVENANTS OF PRINCIPALS. To induce
the making of the transaction hereinafter provided for, Principals jointly
and severally represent and warrant
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as follows with respect to Seller, subject to any exceptions set forth in the
Schedule attached hereto as Exhibit A (hereinafter called the "Schedule").
1.1 CORPORATION. Seller is a corporation duly organized, validly
existing and in good standing under the laws of the State of Nevada; and
has the corporate power to own or lease its properties and to carry on
its Business as now being conducted. Seller does not own any capital
stock in any corporation, is not a partner in any partnership and is not
a member of any limited liability company. Seller is duly qualified to
do business and in good standing in each jurisdiction in which the
nature of its business requires such qualification.
1.2 OWNERSHIP. Paragraph 1.2 of the Schedule is a complete
listing of each person or entity who collectively own all of the
outstanding capital stock of Seller.
1.3 AUTHORITY RELATIVE TO THIS AGREEMENT. The execution, delivery
and performance of this Agreement by the Principals, including without
limitation the sale, conveyance, transfer and delivery contemplated
hereby:
(a) Have been duly and effectively authorized by the Board of
Directors of Seller, with respect to the Business and the assets
sold by Seller hereunder;
(b) Have been authorized and approved by all of the
shareholders of Seller;
(c) Do not and will not violate any provision of any order,
writ, injunction or decree of any court or federal, state,
municipal or other governmental department, commission, board,
agency or instrumentality, domestic or foreign, or conflict with,
or result in a breach of, or constitute a default under the
Articles of Incorporation or By-Laws of Seller, or any material
agreement or instrument to which any of the Principals is a party
or by which any of them is bound. Furthermore, this Agreement
constitutes a valid and binding obligation of the Principals
enforceable against the Principals in accordance with its terms.
1.4 FINANCIAL STATEMENTS. Exhibit B-1 contains the audited
balance sheets of Seller as of December 31, 1994, and for the two years
then ended and the related statements of income, statements of
stockholders' equity and statements of cash flows for each of the fiscal
years then ended December 31, 1992, 1993 and 1994 (the "Financial
Statements"). Exhibit B-2 contains the unaudited balance sheets of
Seller as of September 30, 1995 and September 30, 1994, and related
unaudited statements of income and statements of stockholders' equity
for such nine-month period (the "Interim Statements"). Exhibit B-2 also
contains in comparative form the budgeted amounts and actual results for
such nine-month period. The Financial Statements and the Interim
Statements (i) are correct and complete in all material respects, (ii)
have been prepared from the books and
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records of Seller, (iii) have been prepared in accordance with generally
accepted accounting principles consistently applied, except that in the
case of the Interim Statements, (A) such statements are subject to
year-end adjustments, (B) such statements have no footnotes and (C) the
valuation of Seller's inventory as set forth on such statements is based
on the lower of cost (using the average cost method of inventory
valuation plus freight less the amount of the LIFO Reserve (as defined
below)) or market; and (iv) fairly present the financial position of
Seller on the dates indicated and the results of its operations for the
periods then ended. For purposes of this Agreement, "Latest Balance
Sheet" means the audited balance sheet of Seller as of December 31, 1994.
From and after the date hereof and through the end of each month
prior to the Closing Date (as such term is defined in Section 11 below),
within twenty days after the end of each month, Seller will provide
balance sheets as of the month then ended, and statements of income and
statements of stockholders' equity for the period from September 30,
1995 through the end of such month. The financial statements delivered
pursuant to the preceding two sentences are hereinafter referred to as
the "Monthly Statements." Upon delivery of each Monthly Statement,
Principals shall be deemed to have made the same representations and
warranties with respect to such Monthly Statements as Principals made
about the Interim Statements.
Principals will cooperate with and provide to Buyer any and all
other financial statements and other disclosures needed to satisfy
applicable requirements of the Securities and Exchange Commission and
applicable laws with respect to reporting of the transaction
contemplated herein by Buyer before and after the Closing Date.
1.5 ABSENCE OF UNDISCLOSED LIABILITIES. Except as reflected or
reserved against in the Financial Statements, Seller has no liabilities
or obligations of any nature, whether secured or unsecured, accrued,
absolute, contingent or otherwise, whether due or to become due, that
would, individually or in the aggregate, materially affect the Business
or the Seller. All debts, liabilities and obligations incurred after
December 31, 1994 (the "Balance Sheet Date") have been incurred in the
ordinary course of business, and do not and will not individually or in
the aggregate have a material adverse effect upon the Business or
financial condition of Seller.
1.6 TITLE TO ASSETS AND ABSENCE OF ENCUMBRANCES. Seller owns and
has good and marketable title to all Assets (as defined in Section 3
below) being sold by it hereunder (in fee simple with respect to the
Real Estate), such Assets to be free and clear of any liens and
encumbrances of every kind and nature. The delivery to Buyer of the
instruments of transfer of ownership contemplated by this Agreement will
vest good and marketable title to the Assets being sold hereunder in
Buyer, free and clear of any liens and encumbrances of every kind and
nature.
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The Assets to be acquired by Buyer hereunder include all assets
necessary for the operation of the Business as it has been operated by
Seller.
1.7 REAL PROPERTY AND LEASEHOLDS. There is listed in paragraph
1.7 of the Schedule (i) a description of the Real Estate, (ii) a
description of each other parcel of real property owned by, leased to or
used in the Business of Seller or with respect to which Seller has
executed a purchase agreement to buy or as to which Seller has an option
to acquire, and (iii) a description of each lease of real property under
which the Seller is a lessor, lessee, sublessor or sublessee (the "Real
Estate Leases"). Except as indicated in paragraph 1.7 of the Schedule:
(a) Seller has good and marketable, indefeasible, fee simple
title to, or a valid leasehold interest in, all real property
reflected in the Balance Sheet or acquired after the Balance Sheet
Date, including, without limitation, the Real Estate, except for
properties sold since the Balance Sheet Date in the ordinary course
of business consistent with past practices;
(b) All Real Estate Leases are valid, binding and enforceable
in accordance with their respective terms and there does not exist
under any such Real Estate Lease any default or any event which
with notice or lapse of time or both would constitute a default
thereunder;
(c) To the best knowledge of Principals, and except as
otherwise disclosed in the structural engineering report delivered
to Buyer pursuant to Section 8.1(o) hereof, the plants, buildings
and structures located on the Real Estate and those reflected on
the Latest Balance Sheet are in good operating condition and repair
and have been maintained consistent with standards generally
followed in the industry (giving due account to the age and length
of use of same, ordinary wear and tear excepted), are suitable for
their present uses and, in the case of each plant, building and
other structure (including without limitation, the roofs thereof),
are structurally sound;
(d) Seller currently has access to public roads or valid
easements over private streets or private property for such ingress
to and egress from all such real properties, including, without
limitation, the Real Estate, as is necessary for the conduct of the
Business of Seller, except for such access or easements which are
not valid and which would not, individually or in the aggregate,
have a material adverse effect on the value or present use of such
property;
(e) None of the real property, including, without limitation,
the Real Estate is subject to any liens, except (i) liens disclosed
on the Balance Sheet, (ii) liens for taxes not yet due or being
contested in good faith (and for which adequate reserves have been
established on the Balance Sheet), or (iii) liens which do not
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detract from the value of such property as now used, or interfere
with the present use of such property; and
(f) There are no other matters affecting any of such
properties, including, without limitation, the Real Estate pending
or, to the best knowledge of Principals, threatened which might
reasonably be expected to have a material adverse effect on the
condition of the assets, properties or business of Seller,
materially interfere with any present use of such property or
materially adversely affect the marketability of such properties.
1.8 TANGIBLE PERSONAL PROPERTY. There is listed in paragraph 1.8
of the Schedule (i) a description of each item of tangible personal
property (other than inventory) owned by Seller, (ii) a description of
each item of tangible personal property not owned by Seller, but in the
possession of or used in the Business of Seller, and (iii) a description
of any leases relating to the use of each such item of tangible personal
property not owned by Seller. Except as indicated in paragraph 1.8 of
the Schedule:
(a) Seller has good and marketable title to each item of such
tangible personal property described in clause 1.8(i) above, free
and clear of all liens, leases, encumbrances, claims under bailment
and storage agreements, equities, conditional sales contracts,
security interests, charges and restrictions, except for liens, if
any, for personal property taxes not due and liens which do not
detract from the value of such property as now used, or interfere
with any present use of such property;
(b) As to each item of such tangible personal property now
leased by Seller, the present condition of each item complies with
the requirements of the applicable agreement between Seller and the
owner or lessor thereof;
(c) Each item of tangible personal property listed in
paragraph 1.8 of the Schedule (other than with respect to any item
of beverage equipment identified in paragraph 1.8 of the Schedule
which is not in Seller's physical possession) is in satisfactory
operating condition and repair and is fit for Seller's current
intended purposes, ordinary wear and tear excepted; and
(d) Seller owns or otherwise has the right to use all of the
tangible personal property now used by it in the operation of its
Business or the use of which is necessary for the performance of
any contract or letter of intent or proposal to which it is a party.
1.9 INTELLECTUAL PROPERTY. There is listed in paragraph 1.9 of
the Schedule (the "Intellectual Property") (i) a description of the
items of intellectual property owned by, or used in the Business of
Seller, including but not limited to, United States and foreign
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patents, patent applications, trade names, trademarks, trade name and
trademark registrations, copyright registrations and applications for
any of the foregoing and (ii) a true and complete list of all licenses
or similar agreements or arrangements to which Seller is a party either
as licensee or licensor for each such item of intellectual property.
Except as indicated in paragraph 1.9 of the Schedule:
(a) Seller is the owner of all right, title and interest in
and to each such item of Intellectual Property, free and clear of
all liens, security interests, charges, encumbrances, equities and
other adverse claims;
(b) No interference actions or other judicial or adversary
proceedings concerning any of such items of Intellectual Property
have been initiated, and no such action or proceeding is threatened
and there is no reasonable basis for any action or proceeding,
which if adversely determined, would have a material adverse effect
on Seller;
(c) Seller has the right and authority to use said items of
Intellectual Property in connection with the conduct of its
Business in the manner presently conducted, and Seller has not
received notice that such use conflicts with, infringes upon or
violates any rights of any other person, firm or corporation; and
(d) There are no outstanding, nor any threatened disputes
with respect to any licenses or similar agreements or arrangements
described in paragraph 1.9 of the Schedule.
Promptly after the Closing Date, Seller shall change its name to a
name that does not include the names H&O, HO Foods, Xxxxxxx Xxxxx Egg
Co., Nevada Cold Storage or any of the other trade names listed in
paragraph 1.9 of the Schedule, nor any variations thereof.
1.10 CONDITION OF INVENTORY.
(a) Seller's inventories of refrigerated products, frozen
products, products, canned products and packaged products,
tableware, cleaning supplies and other non-food products which are
reflected on the Latest Balance Sheet and on the latest Monthly
Statement were purchased or acquired in the ordinary course of
business and in a manner consistent with the regular inventory
practices of Seller and, except for any obsolete inventory
described in the inventory report previously delivered to Buyer and
dated October 19, 1995, the value of which in the aggregate does
not exceed 8% of the cost of inventory as reflected on the Closing
Balance Sheet (the "Unsalable Inventory"), are new, good and
merchantable, and are salable in the ordinary course of business
without discount from the prices generally charged by Seller for
like items. The quantities of such inventory held by Seller
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are reasonable and justified in the present circumstances of its
Business. On the Balance Sheet Date, Seller's inventories which
are reflected on the Latest Balance Sheet were priced at lower of
cost (on the last-in first-out basis) or market, and were (as to
classes of items inventoried and methods of accounting and pricing)
determined in a manner consistent with prior years.
(b) Seller has not acquired or disposed of any significant
quantity of inventory since the Balance Sheet Date, except in the
ordinary course of business and in accordance with customary past
practices with respect to quantities and terms.
(c) The inventory report previously delivered by Seller to
Buyer and dated October 2, 1995 is a true, correct and complete
list of all of Seller's Inventory (as defined in Section 3(b)
below) on the date of such report, and the Inventory list to be
delivered on the Closing Date, reflecting Seller's on-hand
Inventory as of the Cut-Off Date (as defined in Section 5.3(a)
below) will be a true, correct and complete listing of Seller's
Inventory as of the Cut-Off Date.
(d) On the Closing Date, the quantities of items of
Inventory consisting of :
(i) dry products, canned products and packaged products
will not exceed a six (6) month supply;
(ii) frozen products will not exceed a three (3)
month supply;
(iii) refrigerated products will not exceed a
supply of such products, all of which Buyer will be able to
sell on or prior to the expiration date of such items of
Inventory; and
(iv) non-food products will not exceed a twelve-
(12) month supply, and will not include any discontinued items.
1.11 ACCOUNTS RECEIVABLE. All of the accounts receivable reflected
on the Closing Balance Sheet will constitute the valid and bona fide
claims of Seller against unrelated third parties for sales, services or
other charges arising in the ordinary course of the Business, free and
clear of any security interests, liens or encumbrances, will not be
subject to any set-off or counterclaims.
1.12 ACCOUNTS PAYABLE. The accounts payable reflected on the
Closing Balance Sheet will constitute only claims by unrelated third
parties against Seller incurred in the ordinary course of Business.
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1.13 SELF-INSURANCE RESERVE. The book reserve reflected on the
Latest Balance Sheet for Seller's accrued workers' compensation claims
is reasonable and adequate in light of the Company's known contingent
liabilities with respect to such claims, after consultation with the
third party administrator of Seller's self-insurance plan, and such
reserve has been determined in accordance with the internal accounting
practices of the Company in a manner consistent with the self-insurance
reserve for prior years.
1.14 CONDUCT OF BUSINESS. Since the date of the Latest Balance
Sheet, there has not been and, between the date of this Agreement and
the Closing Date, there will not be, except as disclosed in paragraph
1.14 of the Schedule:
(a) Any increase in encumbrance against any real estate owned
by Seller, including, without limitation, the Real Estate, or
change in the condition (financial or other), properties, assets or
liabilities of the Business being sold or transferred hereunder,
except changes in the ordinary course of business, none of which
has had or will have a material adverse effect on the Business;
(b) Any material change in the billing or pricing methods or
practices followed by Seller or any material change in depreciation
or amortization policies or rates theretofore adopted;
(c) Any sale, transfer, lease, abandonment or other
disposition by Seller, other than in the ordinary course of the
Business, of any inventory, supplies, vehicles, machinery,
equipment or other operating properties or other assets to be sold
hereunder used by Seller;
(d) Any increase in the compensation of any employee, not in
the ordinary course of Seller's business, (including any Majority
Shareholder) of Seller, nor any termination of the employment of
any of Seller's key employees;
(e) Any direct or indirect distribution by Seller to any
shareholder of Seller, as a dividend, redemption of stock, payments
on debts or otherwise, except for
(i) salaries paid to Majority Shareholders in accordance
with past practices;
(ii) payment of an amount not in excess of $1,350,000,
representing Seller's good faith estimate of the amount by
which the 1994 Threshold Amount (as defined in Section 5.1
below) will be exceeded by the Closing Date Threshold Amount
(as defined in Section 5.1 below), as reflected in the Closing
Balance Sheet delivered pursuant to Section 5.1 below;
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(f) Any material change in payments with respect to rental of
real estate;
(g) Any change by Seller in its methods of accounting;
(h) Any change by Seller in its policies for timing and
recognition of allowances, rebates, concessions from vendors and
similar items;
(i) Any business interruption, damage, loss or other
occurrence having a material adverse effect on the Business or the
Real Estate or other assets herein provided to be sold or
transferred, whether or not covered by insurance, as a result of
any accident, fire, casualty, act of God or the public enemy, or
any labor dispute or disturbance;
(j) Any conduct of the Business other than in the ordinary
course (or otherwise contemplated hereunder), including any
deviation from past standards of quality of products and services
or any reduction in efforts or funds expended by Seller to (1)
repair and maintain vehicles and other equipment to be sold to
Buyer, (2) replace inventories of merchandise held for sale to
customers, (3) promote and sell new items and accounts, (4)
purchase and maintain inventories of supplies and repair parts, and
(5) perform all other activities required to maintain the long-term
viability and quality of the Business;
(k) Any terminations, changes or violations of any of the
leases, including without limitation, the Real Estate Leases,
contracts, commitments, licenses or other arrangements of the
Business, except as required hereunder or as such changes or
terminations occur in the ordinary course of business, none of
which shall have been materially adverse;
(l) Any new borrowing, materially increased borrowing or new
contracts or commitments for the Business, except in the ordinary
course of its Business for the purchase or sale of services,
merchandise or supplies;
(m) Any violations of any permits, licenses, restrictive
covenants, laws or regulations materially adversely affecting the
Real Estate or any of the property or assets herein provided to be
sold or transferred;
(n) Any loss or reduction of the Business from any customer
or any group of customers which is, in the aggregate, material;
(o) Any contribution (or obligation incurred to make such a
contribution) by Seller to any trust or insurance contract under a
pension, profit sharing or other retirement plan (including
post-retirement medical coverage)
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maintained or previously contributed to by any of the Principals
for Seller's employees, other than contributions required by law;
(p) Any delivery of services to Seller's customers through
the use of independent contractors or agents who are not employees
of Seller;
(q) Any decrease from December 31, 1994 through the Closing
Date of more than 10% in the number of Seller's sales and
management employees; or
(r) Any other occurrence, event or condition which materially
adversely affects the Real Estate or the Assets (as defined in
Section 3 below) being sold or transferred to Buyer hereunder.
1.15 BUSINESS RECORDS. Seller has provided Buyer and its agents
with access to, and following the execution of this Agreement, Seller
will continue to make available to Buyer and its agents all of the
business records of Seller, including specifically but not exclusively
information relating to customers, customer service agreements and
purchase orders, customer invoice copies, correspondence with customers,
accounts receivable and sales records showing details concerning
purchases and payments by customers, payroll and commission records,
personnel records, and records of purchases from, accounts payable and
payments to significant suppliers.
1.16 BUSINESS ORGANIZATION. During the period beginning on the
date of the Latest Balance Sheet and continuing up to and including the
Closing Date, Seller has used and will use its best efforts to preserve
the Business intact; to keep available to Buyer the services of the
present employees of Seller, to the extent that Buyer may desire to
retain such services; and to do nothing to undermine the goodwill of
those employees and the suppliers, customers and others having business
relations with Seller.
1.17 MATERIAL DOCUMENTS, DEBTS AND RESTRICTIVE CONTRACTS. Attached
hereto as paragraph 1.17 of the Schedule is a true and complete list of
all contracts, agreements, commitments and other documents to which
Seller is a party or by which Seller, the Business or any of the assets
or employees of Seller is in any way affected or bound, which require a
payment to or a payment from Seller of $5,000 per year or more
(collectively, the "Contracts"), including without limitation, each
written obligation of Seller for the repayment of borrowed money, or
obligation to which the Business or any asset of Seller is subject.
Except as set forth in paragraph 1.17 of the Schedule:
(a) Neither the Seller, nor any of Seller's employees nor any
shareholder of Seller, is a party to any contract, license
agreement or restriction, whether written or otherwise, which is
unduly burdensome or which limits or
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restricts the scope of operation of the Business or the sale
or use of Seller's properties;
(b) Seller is not a party to any sales or sales agency
agreements or arrangements binding Seller with respect to its
services, products or the sale thereof that are not terminable at
will or that would survive the transaction herein provided and be
applicable to and binding upon Buyer;
(c) Seller has no continuing agreements or contractual
arrangements with any person or venture which would survive the
transaction herein provided for and be applicable and binding upon
Buyer;
(d) Seller is not obligated under any contract or agreement
for the provision of merchandise, supplies or services for the
Business, which is not cancelable by Seller without penalty on no
more than thirty (30) days notice; and
(e) With respect to contracts with Seller's suppliers, no
contract with any of Seller's suppliers contains any performance
obligations of Seller that would affect the prices, discounts or
availability of products to be sold in the Business after its
purchase by Buyer and no such supplier has given Seller any written
or oral notice of intent to cancel any such contract.
Copies of all Contracts have heretofore been delivered to Buyer by
Seller, are true and complete and include all amendments, supplements
and modifications thereof.
Except as set forth in paragraph 1.17 of the Schedule, (i) all of
the Contracts are in full force and effect; (ii) Seller has performed
all of the obligations required to be performed by it under the
Contracts; (iii) neither Seller nor any of the other parties to the
Contracts are in default in any respect which, under the terms of such
Contracts, constitutes an event of default; (iv) there is no existing
state of facts that would give rise, by the passage of time or the
giving of notice, to an event of default thereunder; and (v) the
Contracts are assignable to Buyer without such assignment constituting
an event of default thereunder.
1.18 LICENSES AND PERMITS. All licenses, permits, franchises,
approvals and governmental authorizations (collectively the "Licenses
and Permits") required for Seller and the operation of the Business are
listed in paragraph 1.18 of the Schedule. Except for the Licenses and
Permits, no other such licenses, permits, franchises, approvals and
governmental authorizations are required for Seller or the operation of
the Business. Copies of all Licenses and Permits have heretofore been
delivered to Buyer by Seller. Except as set forth in paragraph 1.18 of
the Schedule, (i) all Licenses and Permits are in full force and effect;
(ii) Seller has performed all obligations required to be performed by it
to date under any Licenses and Permits; (iii) Seller is not in default
under any Licenses
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or Permits or the laws, regulations and requirements of the licensing
and permit authorities; and (iv) all such Licenses and Permits will be
assigned to Buyer on the Closing Date to the extent assignable.
1.19 INSURANCE. Paragraph 1.19 of the Schedule sets forth a true
and correct list of all insurance policies of any nature whatsoever
maintained by Seller. All such policies (a) are in full force and
effect and (b) provide insurance coverage for the assets and operations
of Seller for all risks normally insured against by persons carrying on
the same business as Seller in a manner consistent with Seller's past
practices. To the best knowledge of Principals, there has been no
threatened termination of, or premium increase whether retrospective or
prospective with respect to any of such policies.
1.20 LABOR AND EMPLOYMENT AGREEMENTS. Paragraph 1.20 of the
Schedule identifies (i) each collective bargaining agreement and other
labor agreement to which Seller is a party or by which it is bound; and
(ii) each written or material oral agreement providing an individual or
employee with rights to employment, severance pay, profit sharing,
deferred compensation, bonus, stock option, stock purchase, pension,
retainer, consulting, retirement, health, vacation, sick leave,
incentive pay, holiday leave, salary continuation during short absences
for illness or other reasons, and any other plan, agreement, arrangement
or commitment by Seller to provide benefits not previously listed to
which the Seller is a party, or by which it is or may be bound (other
than benefits under Welfare Plans or Retirement Plans as defined in
paragraph 1.21 hereof). Seller is not, and no other party to any such
agreement is, in default with respect to any term or condition thereof,
nor has any event occurred which through the passage of time or the
Seller's notice, or both, would constitute a default thereunder by
Seller or any other party to such agreement, or would cause the
acceleration of any obligation of Seller or any other party to such
agreement. Seller has delivered to Buyer true and complete copies of
all agreements identified in paragraph 1.20 of the Schedule. Except as
set forth in paragraph 1.20 of the Schedule:
(a) Seller has complied with all applicable laws, rules and
regulations relating to the employment of labor, including those
relating to wages, hours, collective bargaining and the payment and
withholding of taxes and other sums as required by appropriate
governmental authorities;
(b) Since October 1, 1995, no unfair labor practice complaint
has been brought or threatened, against Seller before any federal,
state or local agency, no labor strike affecting the Seller has
been brought nor threatened, and no grievance has been brought nor
threatened;
(c) No organization or representation proceeding has been
brought or threatened, respecting the employees of Seller, and no
such proceeding has been brought within the ten (10) year period
prior to the date of this Agreement;
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(d) No arbitration proceeding arising out of or under any
collective bargaining agreement has been brought or threatened, no
basis for any such proceeding exists which, if adversely
determined, would have a material adverse effect on Seller;
(e) All accrued obligations of Seller, whether arising by
operation of law, contract or past custom for unemployment
compensation benefits, pension benefits, salaries, bonuses, sick
leave, severance, vacation and other forms of compensation payable
to the officers, directors and/or other employees of Seller, or to
trusts or other funds or to any governmental agency, in respect of
the services rendered by any such individuals prior to the date
hereof, have been paid or accruals therefor have been made in the
Financial Statements; and
(f) No trade union, council of trade unions, affiliated
bargaining agency or employee bargaining agency has bargaining
rights for any of Seller's employees pursuant to the provisions of
all applicable laws, rules or regulations relating to the
employment of labor.
1.21 PENSION AND WELFARE PLANS.
(a) WELFARE BENEFIT PLANS. Attached hereto as
paragraph 1.21(a) of the Schedule is a list of each group life
insurance, disability, medical, dental, severance pay and other
plan which is an "employee welfare benefit plan" (as defined in
Section 3(1) of the Employee Retirement Income Security Act of
1974, as amended, ("ERISA")) maintained or contributed to by Seller
for its employees or former employees (each a "Welfare Plan").
Seller has not established or contributed to any trust used to fund
any Welfare Plan. All payments due from Seller on account of
Welfare Plans have been paid or accrued on the books of Seller and
no such payment is delinquent for purposes of obtaining a timely
income tax deduction or under the terms of the applicable plan or
federal law.
(b) PENSION BENEFIT PLANS. Paragraph 1.21(b) of the Schedule
also lists each deferred profit sharing, deferred compensation and
pension plan (including without limitations each multi-employer
plan) which is an "employee pension benefit plan" (as defined in
Section 3(2) of ERISA) maintained or contributed to by Seller for
its employees or former employees (each a "Retirement Plan"). All
payments due from Seller on account of Retirement Plans have been
paid or accrued on the books of Seller and no such payment is
delinquent for purposes of obtaining a timely income tax deduction
or under the terms of the applicable plan or federal law. With
respect to each Retirement Plan that is subject to the pension
funding rules of Title I, Part 3 of ERISA (each a "Pension Plan"),
no unfunded liability for past service exists and no accumulated
funding deficiency (as defined in Section 302(a)(2) of ERISA),
whether or not waived, exists.
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Seller has no "ERISA Affiliate", which means any
employer, that together with Seller, would be treated as a single
employer under Section 414 of the Internal Revenue Code of 1986, as
amended (the "Code").
No Retirement Plan has been partially or wholly terminated.
(c) COMPLIANCE WITH ERISA AND OTHER LAWS. All of the
Retirement Plans and any related trust agreements or annuity
contracts (or any other funding instruments) comply (except for
provisions that may be amended retroactively after the date hereof
during plan years beginning in 1994, pursuant to Section 1140 of
the Tax Reform Act of 1986 and similar laws, regulations and
rulings) with the applicable provisions of ERISA, the Code, and all
other applicable laws, rules and regulations; a favorable
determination as to the qualification under the Code of each of the
Retirement Plans and each trust operated thereunder, and any
amendments thereto, has been made by the Internal Revenue Service
and a true and complete copy of each letter stating such a
favorable determination has been delivered to Seller.
Each Welfare Plan and each Retirement Plan has been
administered to date in compliance with its plan and trust
provisions and the applicable requirements of ERISA, the Code and
the Pension Benefit Guaranty Corporation ("PBGC"). No liability to
the PBGC has been incurred by Seller on account of any termination
of a Pension Plan subject to Title IV of ERISA. Seller has not
withdrawn in a "complete withdrawal" or a "partial withdrawal" (as
those terms are defined in Section 4201(b) of ERISA) from any
Pension Plan that is a multi-employer pension plan.
(d) PLAN DOCUMENTS AND REPORTS. Seller has delivered to
Buyer true and complete copies of (i) each Welfare Plan and each
Retirement Plan, including related trust agreements or annuity
contracts or any other funding instruments and summary plan
descriptions, as amended to date, and (ii) the most recent
actuarial report (including without limitation a statement of all
actuarial methods and assumptions used therein) prepared for each
Pension Plan other than an "individual account plan."
(e) BENEFIT CLAIMS. Except as may be disclosed on Schedule
1.20(e), there exist no pending, or threatened, government lawsuit,
investigation or other proceeding with respect to any Welfare Plan,
Retirement Plan or plan, agreement, arrangement or commitment
referred to in paragraph 1.19(ii) under which Seller or any
fiduciary with respect thereto is alleged to have violated any
order, judgment, decree, law, rule or regulation or the rights of
such participants or beneficiaries, or failed to pay any civil
penalty, excise tax or benefit due any participants or beneficiary,
which lawsuits, investigations or proceedings have not
-14-
been barred by the lapse of time or settled, paid or otherwise
satisfied as of the Balance Sheet Date, no such matter has arisen
or been asserted since then, and no facts exist that could result in
any liability to Seller with respect to such matters.
(f) CONTINUATION OBLIGATIONS. Seller shall be solely
responsible for satisfying any employee benefit continuation
obligations Seller may have before or after the Closing Date
relating to "qualifying events" (as defined in Section 603 of
ERISA) occurring on or prior to the Closing Date with respect to
its employees, former employees and their beneficiaries under its
Welfare Plans, Sections 601 through 609 of ERISA and any applicable
state law, as a result of the transactions contemplated by this
Agreement or otherwise.
1.22 TAX MATTERS.
(a) For purposes of this Agreement, the term "Taxes"
means all taxes, charges, fees, levies or other assessments,
including, without limitation, all net income, gross income, gross
receipts, sales, use, ad valorem, transfer, franchise, profits,
license, withholding, payroll, employment, social security,
unemployment, excise, estimated, severance, stamp, occupation,
personal property, real property or other taxes, customs duties,
fees, assessments or charges of any kind whatsoever, including,
without limitation, all interest and penalties thereon and
additions to tax or additional amounts imposed by any taxing
authority, domestic or foreign, upon Seller.
(b) There are no liens for Taxes upon the Real Estate or any
assets of Seller.
(c) Seller has filed by the applicable due date (including
extensions thereof) all returns or documents with respect to Taxes
which are required to be filed, and such returns are correct.
Seller is not delinquent with respect to payment of any Taxes.
(d) Except as set forth on the Schedule, no deficiency for
any Taxes has been proposed, asserted or assessed against Seller
that has not been resolved and paid in full or settled without any
amounts due or owing. Except as set forth on the Schedule, there
has been no tax audit or other administrative proceeding or court
proceeding with regard to any Taxes nor is any such tax audit or
other proceeding pending or threatened with regard to any Taxes.
Seller does not expect the assessment of any additional Taxes of
Seller and is not aware of any unresolved questions, claims or
disputes concerning the liability for Taxes of Seller that would
exceed the estimated reserves established on Seller's Financial
Statements.
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1.23 ENVIRONMENTAL MATTERS. Other than as set forth in that
certain Environmental Site Assessment study prepared by Western
Technologies, Inc. and dated September 14, 1995 (the "Phase I
Environmental Study"), no toxic or hazardous substances or wastes,
pollutants or contaminants (including, without limitation, asbestos,
urea formaldehyde, the group of organic compounds known as
polychlorinated biphenyls, petroleum products including gasoline, fuel
oil, crude oil and various constituents of such products, and any
hazardous substance as defined in the Comprehensive Environmental
Response, Compensation and Liability Act of 1980 ("CERCLA"), 42 U.S.C.
Section 9601-9657, as amended) have been generated, treated, stored,
released or disposed of, or otherwise placed, deposited in or located on
the Real Estate, nor has any activity been undertaken on the Real
Estate, that would cause or contribute to (a) the Real Estate becoming a
treatment, storage or disposal facility within the meaning of, or
otherwise bring the Real Estate within the ambit of, the Resource
Conservation and Recovery Act of 1976 ("RCRA"), 42 U.S.C. Section 6901
et seq., or any similar state law or local ordinance, (b) a release or
threatened release of toxic or hazardous wastes or substances,
pollutants or contaminants from the Real Estate within the ambit of
CERCLA or any similar state law or local ordinance, or (c) the discharge
of pollutants or effluents into any water source or system, the dredging
or filling of any waters or the discharge into the air of any emissions,
that would require a permit under the Federal Water Act, 33 U.S.C.
Section 1251 et seq., or the Clean Air Act, 42 U.S.C. Section 7401 et
seq., or any similar state law or local ordinance. There are no
substances or conditions in or on the Real Estate that may support a
claim or cause of action under RCRA, CERCLA or any other federal, state
or local environmental statutes, regulations, ordinances or other
environmental regulatory requirements. There are no above ground or
underground tanks that have been located under, in or about the Real
Estate which have been subsequently removed or filled. To the extent
storage tanks exist on or under the Real Estate, such storage tanks have
been duly registered with all appropriate regulatory and governmental
bodies and are otherwise in compliance with applicable Federal, state
and local statutes, regulations, ordinances and other regulatory
requirements.
1.24 CUSTOMER INFORMATION. Set forth in paragraph 1.24 of the
Schedule is a true and complete list of the top twenty (20) customers of
Seller who have generated the largest revenues for Seller during each of
the last three (3) fiscal years of Seller and during the period from the
Balance Sheet Date to the date hereof.
1.25 CUSTOMER RELATIONSHIPS. With respect to the Business,
except as set forth in paragraph 1.24 of the Schedule (which shall
identify customer names and dollar amounts involved with respect to each
exception):
(a) Seller has received no notice (written or otherwise) from
any of the customers listed in paragraph 1.24 of the Schedule or
any other customer who generates revenues in excess of $500,000 per
year for Seller (a "Major Customer")
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of its intention to cease doing business or to reduce its current
business with Seller, and, to the best of Seller's knowledge, no
Major Customer intends to do so;
(b) There are no customer accounts for Major Customers which
have made deposits or prepayments that remain as liabilities of
Seller;
(c) There are no Major Customers whose credit terms are more
liberal than those provided under Seller's standard credit plans;
(d) Except as disclosed on paragraph 1.25 of the Schedule,
all of Seller's contracts with its Major Customers are assignable
to Buyer without such assignment constituting an event of default
thereunder; and
(e) There are no customer accounts for Major Customers whose
balances payable to Seller are more than thirty (30) days past due.
1.26 NO LITIGATION. There are no claims, disputes, actions,
proceedings or investigations of any nature pending (or threatened)
against or involving the Principals, any of the Assets to be sold
hereunder, any of the Assumed Liabilities (as defined in Section 5.2(c)
below) or any of Seller's officers, directors, agents or employees of
Seller, at law or in equity or before or by any federal, state,
municipal or other governmental department, commission, board, agency or
instrumentality, domestic or foreign. Seller is not operating under or
subject to, or in default with respect to, any order, writ, injunction
or decree of any court or federal, state, municipal or other
governmental department, commission, board, agency, or instrumentality,
domestic or foreign.
1.27 COMPLIANCE WITH LAWS. Seller has not violated or failed to
comply with any statute, law, ordinance or regulation of any government
or department or agency thereof in the conduct of the Business which
could have a material adverse effect on the Business or the financial
condition of Seller. Seller has not received notice of violation of any
applicable zoning regulation, ordinance or other law, order, regulation
or requirement relating to the Business.
1.28 PROHIBITED PAYMENTS. Seller has not entered into any
understanding, agreement or arrangement, written or oral, under or
pursuant to which bribes, kickbacks, illegal rebates, payoffs or other
forms of illegal payments have been or will be made, provided for or
suffered.
1.29 GENERAL WARRANTIES. No representation or warranty of
Principals contained in this Agreement, the Schedule, any exhibit hereto
or in any statement (including, but not limited to, financial
statements), certificate, instrument of transfer or conveyance or other
document furnished to Buyer pursuant to this Agreement or in connection
with the transaction contemplated hereby contains or will contain any
untrue statement of a material
-17-
fact or omits or will omit to state any material fact required to make the
statements herein or therein not misleading.
1.30 NOTES RECEIVABLE. All of the notes receivable reflected on
the Closing Balance Sheet are the valid and bona fide claims of Seller
against unrelated third parties or employees for sales, services or
other charges arising out of the Business, will be free and clear of any
security interests, liens or encumbrances, will not be subject to any
set-off or counterclaims, are not in default on the date hereof and will
be fully collectible.
2. WARRANTIES AND REPRESENTATIONS OF BUYER. To induce the making of the
transaction hereinafter provided for, Buyer represents and warrants as follows:
2.1 CORPORATION. Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware.
2.2 AUTHORITY RELATIVE TO THIS AGREEMENT. The execution, delivery
and performance of this Agreement by Buyer, including without limitation
the purchase and payments contemplated hereby:
(a) Have been duly and effectively authorized by the Board
of Directors of Buyer; and
(b) Do not and will not violate any provision of any order,
writ, injunction or decree of any court or federal, state,
municipal or other governmental department, commission, board,
agency or instrumentality, domestic or foreign, or judgment or
conflict with, or result in a breach of, or constitute a default
under the Certificate of Incorporation or By-Laws of Buyer or any
material agreement or instrument to which Buyer is a party or by
which Buyer is bound.
2.3 VALID AND BINDING OBLIGATION. This Agreement constitutes a
valid and binding obligation of Buyer enforceable against Buyer in
accordance with its terms.
3. PURCHASE AND SALE OF BUSINESS AND CERTAIN ASSETS. Subject to and
upon the terms and conditions hereinafter set forth (other than with respect
to Seller's rights under that certain Agreement for Sale and Repurchase of
Real Estate, Option Agreement dated July 10, 1995 between 70 Limited
Partnership and Seller, which agreement is not being acquired by Buyer
hereunder), Seller hereby agrees to sell, transfer, convey and assign to
Buyer, and Buyer agrees to purchase from Seller, the following described
assets as of the Closing Date, whether or not listed on the Closing Balance
Sheet (as defined in Section 5.3(a) below) (collectively, the "Assets"):
(a) All cash on hand, bank accounts, investments and similar assets;
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(b) All inventories of merchandise and supplies held for
sale, wherever located, including without limitation, all refrigerated
products, frozen products, dry products, canned products, packaged
products, tableware, cleaning supplies and other non-food products,
(collectively the "Inventory");
(c) All leasehold improvements affixed to the Real Estate which
are not considered part of the Real Estate, fixtures, signs, furniture,
equipment, vehicles, tools, supplies, delivery equipment, warehouse
equipment and computer equipment and related software wherever located;
(d) All prepaid items, deposits, and all other similar items of
Seller, including without limitation the items to be listed on Exhibit C
to be attached hereto on the Closing Date;
(e) All accounts receivable of Seller, including without
limitation any accounts receivable written off by Seller prior to the
Closing Date and any security held by Seller for the payment of any
accounts receivable, whether such accounts arose out of Seller's
Business or otherwise (the "Accounts Receivable");
(f) All contracts and proposals for the sale or lease of Seller's
Inventory and the sale of its services as described on Exhibit D to be
attached hereto on the Closing Date, and all rights of Seller
thereunder, including without limitation, all contracts to be assigned
and customer deposits, customer sales and service agreements, work in
process, unbilled services, purchase orders and proposals for services
or merchandise, whether unfilled or partially filled (the "Purchased
Contracts");
(g) All of the Business as a going concern and its goodwill,
including specifically the use of the names H&O Foods, Inc., HO Foods,
Xxxxxxx Xxxxx Egg Co., Nevada Cold Storage and any variations thereof;
(h) All rights and interests in the Intellectual Property;
(i) All business records, personnel data, information
regarding customers (active, inactive and prospective), correspondence
with suppliers and customers, all lists of suppliers, all accounts
receivable and payable records and all other records, documents and
other information (both written and machine-readable) in Seller's
possession as may be reasonably necessary to enable Buyer to see to the
efficient and proper conduct and administration of the Business and
assets herein being sold;
(j) All Seller's rights necessary for the purpose of preserving
and continuing existing arrangements (whether exclusive or otherwise)
with the suppliers of Inventory (and any services essential to Seller's
provision of services to its customers) and all rights under and
pursuant to contracts with such suppliers, including any to be described
on
-19-
Exhibit E to be attached hereto on the Closing Date, for the purchase
of Inventory not yet delivered and services not yet performed;
(k) All contracts and all rights of Seller thereunder under all
leases of personal property and the Real Estate Leases and maintenance
and service agreements relating thereto and all purchase options
thereunder (the "Purchased Leases") to be described on Exhibit F and to
be attached hereto on the Closing Date;
(l) All rights to enforce any agreement restricting the conduct of
any individual currently or formerly employed by Seller (whether as
employee or independent contractor), or restricting the conduct of any
party from whom Principals purchased any part of the Business or other
assets being sold hereunder and to be described on Exhibit G to be
attached hereto on the Closing Date; and
(m) All of the other assets, property, rights and claims owned by
Seller on the Closing Date, including without limitation all assets
shown on the Closing Balance Sheet.
4. PURCHASE AND SALE OF REAL ESTATE. Subject to and upon the terms
and conditions hereinafter set forth, Seller agrees to sell, transfer and
convey the Real Estate to Buyer, by grant, bargain and sale deed in form
satisfactory to Buyer's counsel (the "Deed"), and to deliver to Buyer, at
Seller's expense a current title insurance commitment (the Title Commitment
) showing that Seller has good and marketable title to the land and buildings
comprising the Real Estate and all easements, interests, license and permits
used or available for use in connection therewith.
5. CONSIDERATION PAYABLE BY BUYER.
5.1 PURCHASE PRICE. The consideration to be paid for the
Assets (the "Purchase Price") shall be $30,755,000: (a) plus the
amount, if any, by which the 1994 Threshold Amount (as defined in this
Section 5.1 below) is exceeded by the Closing Date Threshold Amount (as
defined in this Section 5.1 below), or (b) minus the amount, if any, by
which the Closing Date Threshold Amount is exceeded by the 1994
Threshold Amount, and (c) minus the amount, if any, by which the
Appraised Value (as defined in this Section 5.1 below) of the Real
Estate is exceeded by the net book value of the Real Estate as of the
Closing Date, and (d) plus the amount, if any, of Additional Debt (as
defined below), and (e) plus the Assumed Liabilities. The sum of
$30,755,000, plus the amounts represented in items 5.1(a)-(d) above is
referred to herein as the "Cash Purchase Price."
"Additional Debt" shall mean the amount, if any, by which (i)
indebtedness for borrowed money of the types described in Notes 3, 4,
and 5 to the Financial Statements and reflected on the Closing Balance
Sheet exceeds (ii) $6,865,367 (i.e., the sum of indebtedness for
borrowed money as set forth on the Latest Balance Sheet and described in
Notes 3, 4, and 5 of the Financial Statements); provided, however, that
Additional Debt shall not include the amount of any increases in
indebtedness incurred by Seller since the Balance Sheet Date: (i)
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for the payment of any dividend or other distribution in respect of the
capital stock of Seller, (ii) for the repayment or refinancing of any
indebtedness of the type described in Note 5 to the Financial Statements
or (iii) outside the ordinary course of Seller's business.
Notwithstanding the foregoing, Additional Debt shall also include any
increase in shareholder indebtedness arising out of insider loans to
Seller from and after the Latest balance Sheet Date, the proceeds of
which were used by Seller for operating activities in the ordinary
course of its business.
"1994 Threshold Amount" shall mean $7,216,715 which is determined
by adding stockholders' equity on the Latest Balance Sheet to the LIFO
Reserve in the amount of $43,638 as set forth in Note 2 thereto.
"Closing Date Threshold Amount" shall mean the sum of
stockholders' equity on the Closing Balance Sheet plus the LIFO Reserve
in the amount of $43,638 as set forth in Note 2 to the Latest Balance
Sheet. For purposes of the Closing Date Threshold Amount, the LIFO
Reserve shall not be increased or decreased from an amount equal to the
LIFO Reserve as set forth in Note 2 to the Latest Balance Sheet.
"Appraised Value" shall mean an amount equal to the appraised value
of the Real Property as determined by the Real Estate Appraiser pursuant
to the Appraisal.
"Appraisal" shall mean the report of the Real Estate Appraiser.
"Real Estate Appraiser" shall mean Xxxxxxx X. Xxxxx &
Associates, or such other independent real estate appraiser mutually
satisfactory to Buyer and Seller.
5.2 PAYMENT OF PURCHASE PRICE. The Purchase Price for the Assets
will be paid as follows:
(a) $694,197.86 shall be payable in cash to Seller on the
Closing Date; plus
(b) $21,350,000 shall be payable on the Closing Date by
delivery of Buyer's promissory note, in the form of Exhibit H-1
attached hereto (the "Installment Note"); plus
(c) $5,305,000 shall be payable on the Closing Date by
delivery of Buyer's promissory note, in the form of Exhibit H-2
attached hereto (the "Escrow Note"), as security for the
performance of the Seller's and Majority Shareholders' respective
obligations hereunder, which note shall be held by Xxxxxxx &
Xxxxxxx, Chtd., as custodian, for a period of two (2) years until
disbursement pursuant to the terms of the Escrow Agreement
substantially in the form attached hereto as Exhibit I (the "Escrow
Agreement"); plus
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(d) Buyer shall assume on the Closing Date and thereafter pay
on a timely basis the amount of Seller's debts and obligations
specifically assumed by Buyer pursuant to Section 7.1 (the "Assumed
Liabilities"); plus
(e) Any remaining balance of the Cash Purchase Price shall be
determined and paid pursuant to Sections 5.3 and 5.4 hereof.
5.3 ACCOUNTING STANDARDS AND PROCEDURES; INVENTORY PROCEDURES.
(a) DETERMINATION OF CLOSING BALANCE SHEET. Seller
shall prepare and deliver to Buyer, and shall cause at its sole
expense Xxxxxx Xxxxxxxx LLP (the "Auditors"), as soon as
practicable after the Closing Date, but in no event later than
forty-five (45) days after the Closing Date, (i) to audit a balance
sheet prepared in accordance with generally accepted accounting
principles applied on a consistent basis reflecting Seller's
assets, liabilities and stockholders equity, with a separate line
item for the Unsalable Inventory, (the "Audited Closing Balance
Sheet") as of midnight on October 31, 1995 (the "Cut-Off Date");
and (ii) to prepare a calculation of the Cash Purchase Price after
making the adjustment set forth below (the "Adjustment") to the
stockholders' equity in Seller shown on the Audited Closing Balance
Sheet, which calculation shall set forth such details as Buyer may
reasonably require. The Audited Closing Balance Sheet together
with the schedule reflecting the Adjustments to the stockholders'
equity in Seller shall collectively be the "Closing Balance Sheet,"
as that term is used throughout this Agreement. Buyer and Seller
hereby acknowledge that any and all costs and expenses incurred in
connection with the operation of the Business subsequent to the
Cut-Off Date shall not be reflected on the Closing Balance Sheet.
(b) ADJUSTMENT. The Auditors shall make the following
Adjustment pursuant to Section 5.3(a)(ii) to the stockholders'
equity in Seller as appearing on the Audited Closing Balance Sheet:
The increase or decrease in the stockholders' equity
attributable to the net income or loss for the period from January
1, 1995 through the Cut-Off Date shall be determined without any
increase or decrease to the LIFO Reserve as set forth in Note 2 to
the Latest Balance Sheet and accordingly Inventory at the beginning
and end of such period shall be priced at the lower of cost (using
the average cost method of inventory valuation less the amount of
the LIFO Reserve) or market.
(c) RESOLUTION OF ACCOUNTING DISPUTES.
Within thirty (30) days of Buyer's receipt of the Closing
Balance Sheet, Buyer shall notify Seller in writing of any items of
dispute with respect to the Closing Balance Sheet.
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If any differences are not resolved by agreement of Seller and
Buyer within thirty (30) days after delivery of such statement of
objections, such differences shall be submitted by any affected
party for resolution to an independent certified public accounting
firm of national standing that is mutually acceptable to Buyer and
Seller or, in the event that Seller and Buyer cannot agree as to
such accounting firm, to an independent certified public accounting
firm chosen by the President of the American Arbitration
Association on application of Seller or Buyer. The determination
of such independent accounting firm shall be set forth in a written
report delivered to the parties and shall be final and binding upon
all parties. Seller and Buyer shall each be responsible for
one-half of the fees of any such independent accounting firm
employed pursuant to this paragraph 5.3(c).
(d) PHYSICAL INVENTORY. A physical inventory shall be
commenced on a date that will permit completion on the Cut-Off
Date. Such physical inventory shall be taken by Buyer and Seller
and shall be recorded in duplicate books and the representatives of
Seller and Buyer shall sign both copies.
In pricing such inventory the method to be applied shall be
the average cost method of inventory valuation plus freight.
Any dispute as to the grade or value of inventory items, or as
to whether such items of inventory shall be unsalable shall be
determined by the representatives of Seller and Buyer who are
taking the physical inventory, and such determination shall be
conclusive; provided, that in making such determination those
representatives shall be bound by the following guidelines:
(i) Food--All dry products, canned products and
packaged products purchased by Seller in excess of a six
(6) month supply, all frozen foods purchased by Seller in
excess of a three (3) month supply, and all refrigerated
products purchased by Seller in excess of a supply of such
products which Buyer will be able to sell on or prior to
the expiration date of such items of inventory shall be
deemed unsalable unless Buyer's representative in his or
her sole judgment shall determine otherwise.
(ii) Non-Food--All non-food merchandise inventory in
excess of a twelve- (12) month supply shall be deemed
unsalable.
(iii) All used merchandise inventory, inventory which
is in open packages, broken lots or broken patterns or
which has freezer burn or deterioration, and all items
which have been discontinued shall be deemed unsalable.
A broken lot shall mean units in number fewer than
customarily sold as a lot by Seller as shown in its current
catalog. Discontinued items shall mean items of merchandise
inventory of which Seller or the
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manufacturer is no longer carrying as a current
item or pattern or which Seller is not reordering for stock.
5.4 POST-CLOSING PAYMENT BASED ON CASH PURCHASE PRICE.
(a) If the Cash Purchase Price exceeds $30,755,000,
then the Buyer shall pay to the Seller the difference between
the Cash Purchase Price $30,755,000; if the Cash Purchase
Price is less than $30,755,000, then the Seller shall pay to
the Buyer the difference (any such payment by Buyer or Seller,
a "Payment Adjustment").
(b) Any payment required to be made pursuant to this
Section 5.4 shall be made within thirty-one (31) days of the
delivery to the Buyer of the Closing Balance Sheet, by wire
transfer of immediately available funds to an account
designated by the recipient; provided, however, that in the
event Buyer disputes the Cash Purchase Price as calculated by
the Seller pursuant to Section 5.3(a), then (i) in the case
where the parties agree that the Cash Purchase Price either
exceeds or is less than the $30,755,000, the party making the
Payment Adjustment shall pay to the other party only that
portion of the Payment Adjustment as to which the parties
agree and shall deposit the balance of the Payment Adjustment
into escrow, and (ii) in the case where Seller asserts that
the Cash Purchase Price exceeds $30,755,000, and Buyer asserts
that the Cash Purchase Price is less than $30,755,000, then
Seller shall deposit into escrow the amount by which Buyer's
asserted Cash Purchase Price is less than $30,755,000, and
Buyer shall deposit into escrow an amount by which the Cash
Purchase Price based on the Closing Balance Sheet exceeds
$30,755,000.
(c) All amounts deposited into escrow shall be deposited
into an interest-bearing escrow account pursuant to an Escrow
Agreement in substantially the form attached hereto as Exhibit
J (the "Post-Closing Payment Escrow Agreement").
(d) If the amount deposited into escrow by either party
is less than the amount necessary to fully pay the amount
finally determined to be due to the other party under Section
5.3(c), the party obligated to pay shall pay the amount of
such shortfall to the other party within ten (10) days of
final determination pursuant to Section 5.3(c) by wire
transfer of immediately available funds to an account
designated by the recipient.
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5.5 ACCOUNTS RECEIVABLE.
(a) During the first one hundred fifty (150) days
following the Closing Date, Buyer will use its reasonable
efforts to collect the Accounts Receivable. In the event that
on or prior to the one hundred fifty (150) days after the
Closing Date (the "End Date") the Accounts Receivable and any
amounts owing under the Time Note in the original principal
amount of $32,000 dated September 28, 1992 from Xxxxxx X.
Xxxxx to Seller purchased by Buyer have not been paid in full,
net of (a) the applicable reserve amount for uncollectible
receivables set forth on the Closing Balance Sheet and (b) the
amount of any Accounts Receivable which had been written off
prior to the Closing Date, but then collected by Buyer between
the period after the Closing Date and on or prior to the End
Date (such receivables which have not been paid in full being
hereinafter called "Unpaid Receivables"), Seller shall pay
Buyer within thirty (30) days of the End Date an amount equal
to the Unpaid Receivables, and thereafter, Buyer shall assign
to the Seller the Unpaid Receivables. Buyer shall assert its
right to reimbursement of such amount by offset against the
principal amount of the Escrow Note .
(b) Seller hereby acknowledges that Buyer shall have no
liability for its failure to be successful in any of its
collection efforts hereunder, since Buyer's sole
responsibility is to use its reasonable efforts in accordance
with Buyer's then existing collection policies and procedures
(but excluding any obligation on the part of Buyer to threaten
or initiate any judicial proceedings or process in connection
with such collection efforts) to collect the Accounts
Receivable only through the End Date.
(c) Any payments collected by Buyer pursuant to this
Section 5.5 shall be applied to the Account Receivable
designated by the account debtor with such payment and, if no
such designation is made, shall be applied to such account
debtor's oldest Account Receivable amount.
5.6 METHOD OF PAYMENT OF PURCHASE PRICE. Any cash amounts
due hereunder shall be payable by wire transfer of immediately
available funds to an account designated by the intended recipient,
or by delivery of certified or official bank checks. No amount
payable hereunder shall accrue any interest except as otherwise
specifically provided herein.
5.7 ALLOCATION OF PURCHASE PRICE. The purchase price
determined under this Section 5 shall be allocated among goodwill
and the categories of Assets in the amounts reflected on the
Closing Balance Sheet. Each party hereto agrees to report to the
Internal Revenue Service such information concerning the foregoing
allocation as may be required by Section 1060 of the Code.
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6. OTHER AGREEMENTS OF SELLER AND THE PRINCIPALS. Seller and the
Principals, for themselves, covenant and agree as follows:
6.1 NON-COMPETITION AGREEMENTS. On the Closing Date, Seller
and Xxxxx Xxxxxxx, Xxxxx Xxxxxxx and Xxxxxx Xxxxx shall execute and
deliver to Buyer a Non-competition Agreement substantially in the
form of Exhibit K hereto (the "Noncompetition Agreement") for a
period commencing on the Closing Date and ending on the fifth
anniversary thereof, and Xxxxx Xxxxxxx and Xxxxxx Xxxxx will
execute and deliver to Buyer Employment and Non-competition
Agreements substantially in the form attached hereto as Exhibit L
(the "Employment Agreement").
6.2 PHASE I ENVIRONMENTAL STUDY. Principals jointly and
severally agree to pay for the Phase I Environmental Study.
6.3 ENVIRONMENTAL REMEDIATION.
(a) Seller covenants and agrees at its own cost and
expense, (i) to install, within 30 days after the Closing
Date, a monitoring well on the Real Property as contemplated
by the Phase I Environmental Study, and (ii) within 60 days
after the Closing Date, to acquire and deliver to Buyer, an
asbestos handling and maintenance manual, as contemplated by
the Phase I Environmental Study, and (iii) prior to the
Closing Date, to remove and dispose of all surface soil
contamination identified in the Phase I Environmental Study.
(b) From and after the Closing Date, Principals jointly
and severally agree to pay the cost of any environmental
remediation identified by the Phase I Environmental Study in
an amount not to exceed $25,000; PROVIDED, HOWEVER, within 30
days of the Closing Date, Buyer, after consultation with a
licensed hazardous waste disposal contractor reasonably
acceptable to Seller, shall have the right to increase such
amount to a figure not in excess of $50,000.
6.4 ROOF REPAIR. From and after the Closing Date, Principals
jointly and severally agree to pay all costs and expenses incurred
by Buyer in connection with third-party repairs to or the entire
replacement of the roof of the building located on the Real Estate
(the "Roof") in an amount not to exceed $400,000; PROVIDED, HOWEVER,
such amount shall be subject to reduction at any time prior to the
first payment made by Buyer under the Installment Note upon mutual
agreement of the parties (the "Repair Fund"). Upon the earlier to
occur of (i) the third anniversary of the Closing Date, (ii) Buyer's
replacement of the Roof or (iii) the closing of the purchase and
sale of the Real Estate in connection with Buyer's sale of the Real
Estate, Buyer will pay to Seller the unexpended amounts of the
Repair Fund by paying the holder of the Escrow Note (not the Agent)
the then outstanding balance of the Repair Fund (reduced by any
reserve or other purchase price reductions required for repair or
replacement of the Roof in the case of (iii) above). Buyer
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shall assert its right to payment hereunder by offset against the Repair
Fund under the Escrow Note.
6.5 UNSALABLE INVENTORY. One hundred fifty (150) days after
the Closing Date, Seller shall pay to Buyer an amount equal to the
difference between (a) the value of the Unsalable Inventory as set
forth on the Closing Balance Sheet and (b) the aggregate actual
sale price received by Buyer during such period for the Unsalable
Inventory, after giving full effect to any and all discounts,
promotional allowances and any other sales incentives granted by
Buyer in connection with its sales of such items of Unsalable
Inventory. Upon expiration of such period, the items of Unsalable
Inventory then remaining in Buyer's possession shall automatically
and without any further written evidence be deemed transferred to
Seller. Buyer shall assert its right to reimbursement for the full
amount owing to it under this Section 6.5 by offset against the
principal amount of the Escrow Note.
6.6 FINANCING STATEMENT MATTERS. From and after the Closing
Date, Principals jointly and severally agree to obtain a UCC-2
termination statement related to that certain UCC-1 Financing
Statement, filed with the Nevada Secretary of State by Xxxxx
Packing Association, Inc. ("Xxxxx"), as document number 92-07382,
as amended (the "Financing Statement"), and to pay all costs and
expenses in connection therewith in an aggregate amount not to
exceed $80,000 (the "UCC Fund"). Notwithstanding the foregoing,
Buyer shall remit to Seller the entire amount of the UCC Fund
within twenty (20) business days after the filing of a UCC-2
termination statement related to the Financing Statement. In the
event no such termination statement is filed within six (6) months
of the date hereof, Buyer, at its sole option, may obtain a
termination statement related thereto and take all such other
action as necessary in connection therewith, including without
limitation, payment of the proceeds of the UCC Fund to Xxxxx or its
successors or assigns.
7. OTHER AGREEMENTS OF BUYER. Buyer covenants and agrees as follows:
7.1 ASSUMPTION OF SPECIFIED LIABILITIES. On the Closing
Date, subject to the terms and conditions hereof, Buyer shall
assume and agree to perform the following obligations of Seller
relating to the Business from and after the Closing Date:
(a) the accounts payable, accrued payroll, accrued
liabilities and deferred officer compensation incurred by
Seller in the ordinary course of its business in the amounts
set forth on the Closing Balance Sheet, provided that Buyer
shall not assume any of Seller's obligations with respect to
workers' compensation claims, but will simply disburse funds
in connection with settlement of such claims in an aggregate
amount not to exceed the amount of the book reserve reflected
on the Closing Balance Sheet (the "Self-Insurance Reserve")
representing Seller's accrued workers compensation claims
("Worker's Compensation Claims"); and
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(b) all obligations arising after the Closing Date under
the Purchased Contracts and Purchased Leases pursuant to and
subject to the terms of such Purchased Contracts and Purchased
Leases.
Other than with respect to the foregoing specified
liabilities, Buyer shall not assume any other obligation or
liability, contingent, known or otherwise of Seller.
7.2 EMPLOYMENT OF SELLER'S EMPLOYEES. Buyer shall be
permitted by Seller to review Seller's personnel and pay records on
or before the Closing Date and interview any employee of Seller it
elects to interview prior to the Closing Date and after disclosure
of the transactions contemplated herein to Seller's employees.
Except as otherwise restricted by the terms of any collective
bargaining agreements to which it is a party, Buyer will use its
reasonable efforts to offer those employees, including sales
employees of Seller, whom Buyer determines in its sole discretion
are necessary to operate the Business a position with Buyer and a
salary and benefits program determined by Buyer in its sole
discretion; provided, however, that except for employing Xxxxx
Xxxxxxx and Xxxxxx Xxxxx, Buyer shall not be required to hire any
certain employees of Seller, nor shall Buyer be required to assume
any compensation, fringe benefit or retirement plan heretofore
provided by Seller or retain for a certain time any employees of
Seller hired by Buyer.
7.3 CONFIDENTIALITY. The terms of the Confidentiality
Agreement dated March 27, 1995 between Seller and Buyer shall be
incorporated herein by reference (the "Confidentiality Agreement").
7.4 EMPLOYMENT OF XXXXX XXXXXXX. From and after the Closing
Date, and for a period of not less than five (5) years, Buyer
agrees to employ Xx. Xxxxx Xxxxxxx ("Xx. Xxxxxxx"), and Xx. Xxxxxxx
agrees to be employed by Buyer as an at-will employee in Buyer's
H&O Foods Division. During the term of Xx. Xxxxxxx'x employment
with Buyer, Buyer will pay Xx. Xxxxxxx not less than Ten Thousand
Dollars ($10,000) per annum in the manner and at the times
consistent with Buyer's general policies regarding compensation of
employees. Xx. Xxxxxxx shall also be entitled to participate in
Buyer's health insurance plans or programs to the extent that his
position, title, tenure, salary, age, health and other
qualifications make him eligible to participate.
8. CLOSING CONDITIONS. The closing of the transaction herein provided
shall be subject to the conditions precedent set forth below:
8.1 CONDITIONS TO BUYER'S OBLIGATIONS. All obligations of
Buyer under this Agreement are subject to fulfillment or
satisfaction, on or prior to the Closing Date, of each of the
following conditions:
(a) Seller shall have furnished Buyer with all
documentation deemed reasonably necessary by and reasonably
acceptable to Buyer's counsel, reflecting
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that all Assets herein provided to be sold to Buyer are free and
clear of any and all liens, claims and encumbrances, except as
specifically permitted hereunder. Such documentation shall include
(without limitation) (i) reports of searches of government
records for security interests filed under the Uniform
Commercial Code, tax liens and judgments affecting any of the
property of Seller being sold hereunder, and (ii) evidence
showing that Seller is not delinquent in the filing of returns
or payment of any taxes (including without limitation sales,
use, payroll, income and franchise taxes) due and payable on
or before the Closing Date.
(b) Buyer shall have been permitted to assume Seller's
supply and/or distribution agreements, as needed and
appropriate to continue the Business, or shall have entered
into similar agreements with the same parties.
(c) All applicable filing and waiting periods under HSR
shall have expired without action taken to prevent
consummation of the transactions contemplated by this
Agreement and no such action is in fact contemplated or
reasonably foreseeable.
(d) The representations and warranties of Principals
contained in this Agreement, the Schedule or in any exhibit,
certificate or other document delivered hereunder or otherwise
in connection with the transaction contemplated hereby, shall
be true and correct on and as of the Closing Date as though
such representations and warranties were made on and as of
such date and Buyer shall have received a certificate from
Principals dated the Closing Date and signed by the President
of Seller to that effect.
(e) Principals shall have performed and complied with
all agreements and conditions required by this Agreement to be
performed or complied with by each of them prior to, on or as
of the Closing Date and Buyer shall have received a
certificate from Principals dated the Closing Date and signed
by the President of Seller to that effect.
(f) Principals shall have furnished to Buyer
certificates reasonably acceptable in form and substance to
Buyer's counsel, reflecting the authorization of the Board of
Directors of Seller to enter into this transaction and execute
this Agreement, and the consent thereto by each Shareholder,
as the holders of all of the outstanding stock of Seller.
(g) Buyer will have received an opinion of counsel to
Seller dated the Closing Date, in form and substance
satisfactory to counsel for Buyer, containing the statements
set forth in Exhibit M.
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(h) Buyer and its representatives shall have been given
reasonable access to the books and records, premises, lessors,
personnel, suppliers and Major Customers of Seller for the
purpose of conducting a due diligence examination of Seller
and its assets, business and employees and Buyer shall be
satisfied in its sole discretion with the results of such due
diligence examination.
(i) Buyer shall have been given reasonable opportunity
to review all of Seller's supply arrangements and existing
commitments for merchandise, and all orders and contracts for
the sale of Inventory and services to customers, and the
information regarding such arrangements, commitments, orders
and contracts shall in all respects be fully consistent with
the presentation thereof as set forth herein and in the
Schedule.
(j) Seller, Xxxxxxx, Xxxxx Xxxxxxx, Xxxxxx Xxxxx and
shall have executed and delivered the Non-competition
Agreements.
(k) Xxxxx Xxxxxxx and Xxxxxx Xxxxx shall have executed
the Employment Agreements.
(l) Buyer shall have received the Title Commitment, the
Deed and any other items reasonably requested in connection
with the transfer of Real Estate.
(m) Buyer shall have received the appraisal of the Real
Estate by the Real Estate Appraiser and such Appraisal shall
be satisfactory to Buyer in its sole discretion.
(n) Buyer shall have received the Phase I Environmental
Audit, such report shall be satisfactory to Buyer in its sole
discretion and Buyer shall be satisfied that no remedial work
is required or shall have reached agreement with Seller with
respect to performance of and payment for any remedial work
required by the Phase I Environmental Audit.
(o) Buyer shall have received the report of a structural
engineer (engaged by Buyer at its sole expense) regarding the
buildings located on the Real Estate and such report shall be
satisfactory to Buyer in its sole discretion.
(p) No more than fifteen percent (15%) of Seller's sales
employees and no more then two (2) of Seller's management
employees shall have either terminated their employment with
Seller prior to the Closing Date or refused to accept
employment with Buyer, in the event such employment is offered
to them.
(q) Between the date of the Latest Balance Sheet and the
Closing Date, there will not have been any (i) increase in
encumbrances against the Real Estate
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or (ii) change in the condition (financial or other), properties,
assets, liabilities or prospects of Seller, except changes in the
ordinary course of business, none of which has had a material
adverse effect on the Business.
(r) No claim, action, suit or proceeding shall be
pending or threatened against Seller, the Real Estate, or
Buyer which, if adversely determined, would prevent or hinder
the consummation of the transaction and other actions
contemplated hereby or result in the payment of substantial
damages as a result of such transaction and action.
(s) All actions, proceedings, instruments and documents
required to carry out this Agreement or incidental thereto and
all other related legal matters shall have been approved by
Xxxxxx Xxxxxxx Xxxxxx & Brand, a Professional Limited
Liability Partnership, as counsel for Buyer.
(t) The written consents of any third parties necessary
to consummate the transaction contemplated by this Agreement
shall have been obtained and delivered to Buyer.
(u) A letter from Western Technologies, Inc., certifying
satisfaction of Buyer's obligation under Section 6.3(a)(iii).
The foregoing conditions are to be solely for the benefit
of and protection of Buyer, and any one or more of them may be
waived by Buyer in whole or in part at Buyer's option.
8.2 CONDITIONS TO OBLIGATIONS OF SELLER AND MAJORITY SHAREHOLDERS.
All obligations of Seller and Majority Shareholders under this Agreement
are subject to the fulfillment or satisfaction, on or prior to the Closing
Date, of each of the following conditions:
(a) The representations and warranties of Buyer
contained in this Agreement or in any list, certificate or
document delivered by Buyer to Seller pursuant to the
provisions hereof shall be true at and as of the Closing Date
with the same effect as though such representations and
warranties were made on and as of such date.
(b) Buyer shall have paid the sums and taken the other
actions required by Section 5.2, and complied with all other
agreements required by this Agreement to be performed or
complied with by it on or before the Closing Date.
(c) Counsel for Buyer shall have delivered to Seller a
written opinion, dated the Closing Date containing the
statements set forth in Exhibit N.
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(d) No claim, action, suit or proceeding shall be
pending or threatened against Buyer which, if adversely
determined, would prevent or hinder the consummation of the
transaction and other actions contemplated hereby or result in
the payment of substantial damages as a result of such
transaction and actions.
(e) All applicable filing and waiting periods under HSR
shall have expired without action taken to prevent
consummation of the transactions contemplated by this
Agreement.
(f) Buyer shall have executed and delivered the
Employment Agreements.
(g) Buyer shall have furnished to Seller
certificates reasonably acceptable in form and substance to
Seller's counsel, reflecting the authorization of the Board of
Directors of Buyer to enter into this transaction and execute
this Agreement.
The foregoing conditions are solely for the benefit and protection of
Seller and any one or more of them may be waived by Seller, in whole or in
part at Seller's sole option.
9. PUBLICITY. Each of the parties hereto agrees that, except as
otherwise required by law, all press releases and other announcements,
whether written or oral, to be made by any of them with respect to the
transaction contemplated hereby, shall be subject to mutual agreement prior
to the dissemination thereof.
10. EXPENSES AND BROKERS.
10.1 EXPENSES. Seller, each Shareholder and Buyer acknowledge and
agree that the expenses in connection with this transaction shall be
borne as follows:
(a) Except with respect to the cost of the
Appraisal which shall be paid one-half by Buyer and one-half by
Seller, each of the parties hereto will bear and pay his, her or
its own expenses incurred in connection with the transaction
contemplated herein, whether incurred prior to or after the date
hereof; including without limitation all accounting, legal, broker,
investment banking and appraisal fees, whether or not the
transaction contemplated herein is completed by the parties.
(b) Seller shall pay (i) any fees or other charges charged by
Seller's creditors or other third parties in connection with
Buyer's assumption of the Assumed Liabilities and the release of
any security interests and guaranties granted by Principals to such
creditors in connection with such debts and (ii) all transfer,
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sale or other taxes arising as a result of Seller's transfer of the
Assets and Real Estate to Buyer.
(c) Buyer shall pay all fees required to be paid in
connection with all filings under HSR.
10.2 BROKERS. Majority Shareholders jointly and severally
represent that none of them has, and Seller and Buyer each respectively
hereby represents that it has not, engaged or employed any brokers,
finders, or consultants in connection with this Agreement and the
transactions herein contained. Majority Shareholders and Seller shall
hold Buyer and Buyer shall hold Majority Shareholders and Seller
harmless against any and all claims or liabilities asserted by or due to
any such person upon the basis of an engagement by any of the Majority
Shareholders and Seller on the one hand or Buyer, on the other hand.
11. CLOSING. The closing of the sale contemplated by this Agreement
shall take place at 9:00 a.m. on November 1, 1995, at the offices of Xxxxxxx
& Xxxxxxx, Chtd., or at such other time and place as may be mutually agreed
upon by the parties hereto. The date and time at which the closing takes
place are referred to elsewhere in this Agreement as the "Closing Date". The
closing, if completed, shall be effective for purposes of allocation of
revenue and expenses of Seller, as of the Cut-Off Date.
At said closing, Buyer shall deliver to Principals the funds, and any
other items required hereunder to be delivered on the Closing Date.
Contemporaneously therewith, the Principals shall deliver possession of,
assign, convey and transfer marketable title to Buyer of all of the Assets to
be acquired by Buyer hereunder and shall execute and deliver to Buyer the
Non-competition Agreements and Employment Agreements, the Deed, and such
assignments, deeds, bills of sale and other instruments as may be appropriate
or necessary to transfer marketable title to the Assets being purchased by
Buyer hereunder. The form of all instruments of transfer shall be subject to
approval by counsel for Buyer. Seller and Majority Shareholders agree that,
upon and after the Closing Date, they shall cooperate in good faith to carry
out such transfer of Assets and shall execute and deliver such further
instruments as may be reasonably necessary to complete such transfer all at
the expense of Seller and promptly upon Buyer's request.
12. TERMINATION OF AGREEMENT AND REMEDIES.
12.1 TERMINATION. This Agreement and the transactions
contemplated hereby may be terminated at any time prior to the Closing
Date:
(a) by the Seller or the Buyer if the Closing Date has not
occurred by December 15, 1995; provided that if the delay is caused
by the act or omission of a particular party, or if such party is,
at the time it wishes to terminate this
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Agreement, in breach of any of its terms, such party shall not have
the right to terminate hereunder; or
(b) by mutual consent of Buyer and Seller; or
(c) by Buyer or Seller if there has been a material
misrepresentation or breach of the representations and warranties
of the other party set forth herein (or in any schedule, exhibit or
certificate delivered pursuant hereto by such party); or
(d) by Buyer or Seller if the transactions contemplated by
this Agreement have become impracticable by reason of the
institution or threat by state, local or federal government
authorities, or by any other person, of material litigation or
proceedings against Buyer, Principals or the Assets to be sold or
transferred hereunder.
12.2 RESCISSION. In the event this Agreement shall be terminated
pursuant to Section 12.1 without a material default, material
misrepresentation or breach of warranty by any party, or because of the
failure to satisfy any of the conditions specified in Section 8 for
reasons other than a material breach of any party, then all further
obligations of Buyer and Principals under this Agreement shall terminate
without further liability of Buyer or Principals.
12.3 ARBITRATION. Any dispute between Principals and Buyer under
this Agreement shall be resolved by informal arbitration by an
arbitrator selected under the rules of the American Arbitration
Association (located in Minneapolis, Minnesota) and the arbitration
shall be conducted in that same location under the rules of said
Association.
Principals and Buyer shall each be entitled to present evidence and
argument to the arbitrator. The arbitrator shall have the right only to
interpret and apply the provisions of this Agreement and may not change
any of its provisions. The arbitrator shall permit reasonable
pre-hearing discovery of facts, to the extent necessary to establish a
claim or a defense to a claim, subject to supervision by the arbitrator.
The determination of the arbitrator shall be conclusive and binding
upon the parties and judgment upon the same may be entered in any court
having jurisdiction thereof. The arbitrator shall give written notice
to the parties stating his determination, and shall furnish to each
party a signed copy of such determination. Notwithstanding the
foregoing, Buyer shall not be required to seek arbitration regarding any
breach of the Non-competition Agreements or Employment Agreements.
12.4 REMEDIES. It is understood that, in the event of Buyer's
breach of its respective agreements to purchase as herein provided and,
in the event of Principals' breach of their agreements to sell as herein
provided or Principals' failure to perform the covenants set forth in
this Agreement or delivered hereunder, the measure of damages at
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law to the affected party will be difficult to ascertain and the remedy at
law may be inadequate. Accordingly, it is specifically agreed that both
Buyer and Principals, as the case may be, shall be entitled to the
remedy of specific performance to enforce the terms and conditions of
this Agreement.
12.5 LITIGATION EXPENSE. If any party (including Principals as one
party) hereto is made or shall become a party to any litigation
(including arbitration) commenced by or against the other involving the
enforcement of any of the rights or remedies of such party, or arising
on account of a default of the other party in its performance of any of
the other party's obligations hereunder, then the prevailing party in
such litigation shall receive from the other party all costs incurred by
the prevailing party in such litigation, plus reasonable attorneys' fees
to be fixed by the court, with interest thereon from the date of
judgment at the maximum rate permitted by law.
13. INDEMNIFICATION OF BUYER.
13.1 GENERALLY. Except as herein otherwise expressly provided
with respect to Assumed Liabilities, Buyer is not assuming any of the
liabilities, obligations, contracts or commitments of the Principals.
The Principals each hereby agree, jointly and severally, to defend,
indemnify and hold harmless Buyer from, against and in respect of:
(a) Any and all losses, damages or deficiencies (whether as a
result of a direct claim by Buyer against Principals, a third party
claim against Buyer or otherwise) resulting to Buyer from any and
all breaches of representations, warranties, covenants or other
terms of this Agreement by any of the Principals made or contained
in (i) this Agreement or (ii) in any certification, list, document,
exhibit or schedule delivered to Buyer under or in connection with
this Agreement or the transactions contemplated herein;
(b) All losses, costs, damages, liabilities, obligations and
reasonable expenses related to or arising out of Seller's operation
of the Business and Assets and Real Estate sold hereunder, in each
case, prior to the Closing Date, except with respect to the Assumed
Liabilities described in Section 7.1(a); and
(c) All costs and expenses incident to any and all actions,
suits, proceedings, claims, demands, assessments or judgments in
respect of paragraphs (a) and (b) of this Section 13, regardless of
the merit thereof, including Buyer's reasonable legal and
accounting fees and expenses (whether incident to the foregoing or
to Buyer's enforcement of said rights of defense and indemnity).
13.2 PROCEDURE.
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(a) If any action, suit or proceeding shall be commenced
against Buyer or any claim, demand or assessment be asserted
against Buyer in respect of which Buyer proposes to demand defense
and indemnification, Seller shall be notified to that effect with
reasonable promptness and shall have the right, but not the
obligation, to assume the entire control of the defense, compromise
or settlement thereof, including, at the expense of Principals,
employment of counsel reasonably satisfactory to Buyer, and, in
connection therewith, Buyer shall cooperate fully to make available
to Seller all pertinent information under its control. If Seller
does not promptly notify Buyer that Principals will assume the
entire control of such defense, Principals shall jointly and
severally thereafter reimburse Buyer for all of Buyer's expenses
(as described herein) for such defense, as and when they are
incurred; and
(b) In the event that (i) Buyer makes any claim against any
of the Principals under the foregoing indemnification provisions
(or any others provided herein) and such claim is not paid or
otherwise satisfied within thirty (30) days, or (ii) Principals
shall fail to pay any of Seller's creditors (except for Assumed
Liabilities) and such unpaid creditor shall assert a claim for
payment therefor against Buyer or any assets sold or transferred
hereunder, Buyer shall notify Seller as provided above and may
assert its right to reimbursement of such amount by offset against
the principal amount of the Escrow Note or, prior to its stated
maturity, the Installment Note.
14. INDEMNIFICATION OF SELLER.
14.1 GENERALLY. Buyer hereby agrees to defend, indemnify and hold
Principals harmless from, against and in respect of:
(a) Any and all losses, damages or deficiencies (whether as a
result of a direct claim by Seller against Buyer, a third party
claim against Seller or otherwise) resulting to Principals from any
and all breaches of representations, warranties, covenants or other
terms of this Agreement by Buyer made or contained in (i) this
Agreement or (ii) in any certification, list, document or exhibit
delivered to Seller by Buyer under or in connection with this
Agreement or the transactions contemplated herein;
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(b) All costs, damages, liabilities, obligations and
reasonable expenses related to or arising out of Buyer's operation
of the Business and assets sold hereunder on or after the Closing
Date; and
(c) All costs and expenses incident to any and all actions,
suits, proceedings, claims, demands, assessments or judgments in
respect of paragraphs (a) and (b) of this Section 14, regardless of
the merit thereof, including Principals' reasonable legal and
accounting fees and expenses (whether incident to the foregoing or
to Principals' enforcement of said rights of defense and indemnity);
14.2 PROCEDURE. If any such action, suit or proceeding shall
be commenced against the Principals or any such claim, demand or
assessment be asserted against the Principals in respect of which the
Principals propose to demand defense and indemnification, Buyer shall be
notified to that effect with reasonable promptness and shall have the
right, but not the obligation, to assume the entire control of the
defense, compromise or settlement thereof, including, at its own
expense, employment of counsel satisfactory to Seller and, in connection
therewith, Principals shall cooperate fully to make available to Buyer
all pertinent information under their control. If Buyer does not
promptly notify Seller that Buyer will assume the entire control of such
defense, Buyer shall thereafter reimburse Principals for all of their
expenses (as described herein) for such defense, as and when they are
incurred.
15. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. All
covenants, representations and warranties herein made shall survive the
closing hereunder until the second anniversary of the Closing Date; except
with respect to claims specifically raised by the aggrieved party or parties
in one or more written notices given to the allegedly offending party or
parties prior to the second anniversary of the Closing Date, and such claims
may continue to be asserted by the aggrieved party or parties after that
date, provided that claims based on (i) fraud or intentional
misrepresentation, (ii) breach of the representations and covenants set
forth in Sections 1.20, 1.22, 1.30, 6.3 and 6.4, and (iii) Workers
Compensation Claims may be brought at any time prior to or after the second
anniversary of the Closing Date.
16. INDEMNIFICATION THRESHOLD. Neither Principals on the one hand, nor
Buyer on the other hand, shall be obligated to indemnify the other hereunder
unless and until the aggregate amount of all losses, damages, costs, expenses
and deficiencies incurred by the aggrieved party (including Principals as one
party) reaches $25,000 (the "Threshold Amount"), at which time the offending
party or parties shall be liable in full thereafter for all losses, damages,
costs, expenses and deficiencies, provided, however, that there shall be no
Threshold Amount with respect to (i) any Workers Compensation Claims, such
that Principals shall be liable for all losses, damages, costs, expenses and
deficiencies with respect to any claim in excess of the Self-Insurance
Reserve, (ii) Seller's disclosed contingent obligations under Section 1.5,
(iii) Seller's obligations under Section 5.5 and Principal's obligations
under Sections 6.3 and 6.4, (iv) any losses, damages,
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costs, expenses or deficiencies arising out of (A) any claim under the federal
Fair Wage and Hour Act and any comparable state or local laws and any claim by
the U.S. Department of Labor or any comparable state or local agency related to
Seller's conduct of the Business prior to the Closing Date, (B) any breach of
Seller's representation in Section 1.30 hereof, and (C) Seller's disclosures
relating to software licenses under Section 1.9 hereof, and (v) claims based
on fraud or intentional misrepresentation, and (vi) penalties or fees arising
out of or in connection with any failure by Seller prior to the Closing Date
to qualify as a foreign corporation in any jurisdiction in which the nature
of its business required such qualification.
17. NOTICES. Any notices given under this Agreement shall be in
writing and sent to the respective party at such party's address set forth
below:
To Buyer: Xxxxxx-Xxxxxx, Inc.
0000 Xxxxxxxxxxx Xxxx
Xxxxx, XX 00000-0000
Attention: Xxxx Xxx Xxxxxxxxxxxx
With a copy to: Xxxx X. Sell, Esq.
Xxxxxx Xxxxxxx Xxxxxx & Brand,
a Professional Limited Liability Partnership
0000 Xxxxxxx Xxxxxx
00 Xxxxx Xxxxxxx Xxxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000
(000) 000-0000
To Principals: Xx. Xxxxx Xxxxxxx
00 Xxxxx Xxxxxx Xxxx
Xxx Xxxxx, Xxxxxx 00000
With a copy to: Xxxxxxx & Xxxxxxx, Chtd.
PriMerit Bank Center
0000 Xxxx Xxxxxx Xxxxxx, Xxxxx 000
Xxx Xxxxx, Xxxxxx 00000
Attention: Xxxxxx Xxxxx, Esq.
Any party named above may change such party's address by notice given
hereunder. Any notice shall be deemed to have been duly given when
personally delivered, whether by hand, air courier or by facsimile confirmed
by receiving party or five (5) days after being mailed by prepaid certified
mail.
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18. PARTIES IN INTEREST. This Agreement shall inure to the benefit of
and bind the parties hereto, and their respective heirs, personal
representatives, legatees, successors and assigns, as the case may be.
20. MISCELLANEOUS. For the convenience of the parties and to
facilitate the execution of this Agreement, any number of counterparts hereof
may be executed and each such executed counterpart shall be deemed to be an
original instrument.
The headings of Sections and paragraphs hereunder are for convenience
and reference only, and shall not be deemed a part of this Agreement.
No delay or failure on the part of any party hereto to exercise any
right, power or privilege hereunder shall operate as a waiver thereof; nor
shall any waiver on the part of any party hereto of any right, power or
privilege hereunder operate as a waiver of any other right, power or
privilege hereunder; nor shall any single or partial exercise of any right,
power, or privilege hereunder preclude any other or further exercise thereof
or the exercise of any other right, power or privilege hereunder.
This Agreement (which includes the Schedule and Exhibits) sets forth the
parties' final and entire agreement with respect to its subject matter and
supersedes any and all prior understandings and agreements, provided, that
the Confidentiality Agreement shall remain in full force and effect in
accordance with its terms. This Agreement shall not be modified or amended
in any fashion except by an instrument in writing signed by the parties
hereto.
This Agreement is not intended to confer upon any person other than the
parties hereto any benefits, rights or remedies hereunder.
If any provision of this Agreement shall be held by any court of
competent jurisdiction to be illegal, invalid or unenforceable, such
provision shall be construed and enforced as if it had been more narrowly
drawn so as not to be illegal, invalid or unenforceable, and such illegality,
invalidity or unenforceability shall have no effect upon and shall not impair
the enforceability of any other provision of this Agreement.
This Agreement shall be construed in accordance with the laws of the
State of Delaware applicable to contracts made and to be performed within
such state.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
H&O FOODS, INC.
/s/ Xxxxx Xxxxxxx
----------------------------------------------------
By: Xxxxx Xxxxxxx
Its: President and Chief Executive Officer
"SELLER"
/s/ Xxxxx Xxxxxxx
----------------------------------------------------
Xxxxx Xxxxxxx, individually and as co-trustee of The
Xxxxxxx Family Trust
/s/ Iva Xxxxx Xxxxxxx
----------------------------------------------------
Iva Xxxxx Xxxxxxx, individually and as co-
trustee of The Xxxxxxx Family Trust
/s/ Xxxxx Xxxxxxx
----------------------------------------------------
Xxxxx Xxxxxxx, individually and as co-trustee of the
Xxxxx and Xxxxx Xxxxxxx Family Trust
/s/ Xxxxx Xxxxxxx
----------------------------------------------------
Xxxxx Xxxxxxx, individually and as co-trustee of the
Xxxxx and Xxxxx Xxxxxxx Family Trust
/s/ Xxxxxx Xxxxxxx
----------------------------------------------------
Xxxxxx Xxxxxxx
/s/ Xxxxx Xxxxxxx
----------------------------------------------------
Xxxxx Xxxxxxx
/s/ Xxxxxxx Xxxxxxx
----------------------------------------------------
Xxxxxxx Xxxxxxx
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/s/ Xxxxx X. Xxx
----------------------------------------------------
Xxxxx X. Xxx, individually and as co-trustee of
the Xxxx and Xxxxx X. Xxx Family Trust
/s/ Xxxx Xxx
----------------------------------------------------
Xxxx Xxx, individually and as co-trustee of the Xxxx
and Xxxxx X. Xxx Family Trust
/s/ Xxxxx X. Xxxx
----------------------------------------------------
Xxxxx X. Xxxx, individually and as co-trustee of The
Xxxxx X. Xxxx and Xxxxx X. Xxxx Family Trust
/s/ Xxxxxx X. Xxxxx
----------------------------------------------------
Xxxxxx X. Xxxxx
"MAJORITY SHAREHOLDERS"
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XXXXXX-XXXXXX, INC.
By: /s/ Xxxxxx X. Xxxxxxx
----------------------------------------------------
Its: Executive Vice President
"BUYER"
41976-1
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SCHEDULE 1
TO
ASSET PURCHASE AGREEMENT
MAJORITY SHAREHOLDERS
1. Xxxxx Xxxxxxx, individually and as co-trustee of The Xxxxxxx Family Trust
2. Xxx Xxxxxxx, individually and as co-trustee of The Xxxxxxx Family Trust
3. Xxxxx Xxxxxxx, individually and as co-trustee of the Xxxxx and Xxxxx
Xxxxxxx Family Trust
4. Xxxxx Xxxxxxx, individually and as co-trustee of the Xxxxx and Xxxxx
Xxxxxxx Family Trust
5. Xxxxxx Xxxxxxx
6. Xxxxx Xxxxxxx
7. Xxxx Xxxxxxx
8. Xxxxx Xxx, individually and as co-trustee of the Xxxx and Xxxxx X. Xxx
Family Trust
9. Xxxx Xxx, individually and as co-trustee of the Xxxx and Xxxxx X. Xxx
Family Trust
10. Xxxxx X. Xxxx, individually and as co-trustee of The Xxxxx X. Xxxx and
Xxxxx X. Xxxx Family Trust
11. Xxxxxx X. Xxxxx
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