EXHIBIT 2.1
--------------------------------------------------------------------------------
PURCHASE AGREEMENT
BY AND BETWEEN
H&H PIZZA, INC., A CALIFORNIA CORPORATION, ▇▇▇▇▇▇ ▇▇▇▇▇▇, AND ▇▇▇▇ ▇▇▇▇▇▇;
ON THE ONE HAND
AND
PARADISE PIZZA, INC., A CALIFORNIA CORPORATION
ON THE OTHER HAND
NOVEMBER 14, 2003
--------------------------------------------------------------------------------
PURCHASE AGREEMENT
This Purchase Agreement (the "AGREEMENT") is made as of November 14,
2003 by and among H&H Pizza, Inc., a California corporation ("TARGET"), the
shareholders of Target, each as listed on SCHEDULE 1 (each a "SELLER," and
collectively, the "SELLERS") on the one hand, and Paradise Pizza, Inc., a
California corporation (the "PURCHASER"), on the other hand.
RECITALS
WHEREAS, the Target currently operates Three (3) restaurants as
Paradise Pizza restaurants, and manage Seventeen (17) other restaurants as
Paradise Pizza restaurants.
WHEREAS, the Sellers desire to sell, and Purchaser desires to purchase,
all of the Sellers' stock in Target, subject to and according the terms and
conditions and for the consideration set forth in this Agreement;
NOW, THEREFORE, in consideration of the covenants and representations
set forth herein, and for other good and valuable consideration, the parties
hereby agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, the following terms have the meanings
indicated:
"AFFILIATE" means, with respect to any Person: (i) any Person which
directly, or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, such Person; (ii) any Person of
which five percent (5%) or more of the equity interest is held beneficially or
of record by such Person; (iii) with respect to an individual, any Family Member
of such Person; or (iv) any business of which such Person or any Family Member
of such Person is a director, officer, employee or equity holder. The term
"control" for purposes of this definition means the possession, directly or
indirectly, of the power to influence the direction of the management and
policies of a Person, whether through the ownership of voting securities, by
contract or otherwise.
"CLOSING" and "CLOSING DATE" have the meanings set forth in Section
2.10.
"DISCLOSURE SCHEDULE" means the disclosure schedule prepared by a
Seller or the Purchaser setting forth the exceptions to the representations and
warranties contained in this Agreement.
"FINANCIAL STATEMENTS" has the meaning set forth in Section 3.6.
"DAMAGES" means all losses, liabilities, obligations, judgments, liens,
injunctions, charges, orders, decrees, rulings, damages, dues, assessments,
Taxes (including any state Tax liability (including interest and penalties), if
any, fines, penalties, expenses, fees, costs, amounts paid in settlement
(including reasonable attorneys' and expert witness fees and disbursements in
connection with investigating, defending or settling any action or threatened
action), arising out of any claim, damages, complaint, demand, cause of action,
audit, investigation, hearing, action, suit, or other proceeding asserted or
initiated or otherwise existing in respect of any matter or from any claim that
results from the breach of any representation or warranty made by any party to
this Agreement herein or in the Schedules and Exhibits hereto, or certificate
delivered in connection herewith, or resulting from any such misrepresentation
or breach of warranty, or nonfulfillment of any agreement or covenant of any
party to this Agreement contained herein or in any agreement or instrument
required to be entered into in connection herewith or from any misrepresentation
in or omission from any schedule, document, certificate or other instrument
required to be furnished by any party to this Agreement hereunder. Although
materiality provisions within this Agreement shall, along with the Agreement's
other terms and conditions, determine whether Damages have been incurred with
respect to a party, once Damages have been determined to have been incurred by a
party, such materiality provisions shall not be a factor in determining the
amount of Damages that are recoverable by such party.
"FAMILY MEMBER" means, with respect to an individual, each parent,
spouse, child, grandchild, brother, sister or the spouse of a child, grandchild,
brother or sister of the individual, and each trust created for the benefit of
one or more of such persons and each custodian of a property of one or more of
such persons.
"GAAP" means United States generally accepted accounting principles,
consistently applied in accordance with historic practices.
"INDEBTEDNESS" means, without duplication: (i) all indebtedness for
borrowed money and all bonds, notes and debentures issued by a Seller; (ii) all
obligations secured by any Lien on property owned by the Seller or in which the
Seller has rights, whether or not the indebtedness secured thereby shall have
been assumed; (iii) all amounts representing the capitalization of rentals in
accordance with GAAP; (iv) all amounts owing by the Seller to any Shareholder,
Partner or any Affiliate thereof; (v) letters of credit issued for the account
of the Seller and, without duplication, all drafts drawn thereunder; and (vi)
all guarantees, endorsements and other contingent obligations with respect to
liabilities of a type described in any of clauses (i) through (v) above.
"INTELLECTUAL PROPERTY" means (a) all inventions (whether patentable or
unpatentable and whether or not reduced to practice), all improvements thereto,
(b) all trademarks, service marks, trade dress, logos, trade names, and
corporate names, together with all translations, adaptations, derivations, and
combinations thereof and including all goodwill associated therewith, and all
applications, registrations, and renewals in connection therewith, (c) all
copyrightable works, all copyrights, and all applications, registrations, and
renewals in connection therewith, (d) all mask works and all applications,
registrations, and renewals in connection therewith, (e) all trade secrets and
confidential business information (including ideas, research and development,
know-how, formulas, compositions, manufacturing and production processes and
techniques, technical data, designs, drawings, specifications, customer and
supplier lists, pricing and cost information, and business and marketing plans
and proposals), (f) all computer software (including data and related
documentation), (g) all other proprietary rights, and (h) all copies and
tangible embodiments thereof (in whatever form or medium).
-2-
"KNOWLEDGE" means actual or constructive knowledge of a Person.
"LIABILITIES" means all Indebtedness, obligations and other liabilities
of a Person, whether absolute, accrued, contingent, fixed or otherwise, whether
known or unknown, or whether due or to become due.
"LIEN" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest, assessment, deed of trust, lease, adverse claim,
levy, charge, restriction on transfer, or encumbrance of any kind, or any
conditional sale or title retention agreement or other agreement to give any of
the foregoing in the future.
"ORDINARY COURSE OF BUSINESS" means the usual, regular and ordinary
course of business consistent with past custom and practice (including with
respect to quantity and frequency) and in substantially the same manner as prior
to the date of this Agreement.
"PERSON" means any natural person, corporation, partnership, joint
venture, limited liability company, association, joint-stock company, other
business organization, trust, union, unincorporated organization or government,
or any agency or political subdivision thereof.
"SECURITY INTEREST" means any mortgage, pledge, lien, encumbrance,
charge, or other security interest.
"TAXES" means all taxes, charges, levies, penalties or other
assessments imposed by any federal, state, local or foreign taxing authority,
including but not limited to, income, excise, property, sales, transfer,
franchise, payroll, withholding, social security or other taxes, including any
interest, penalties or additions attributable thereto, and any obligations under
any agreements or arrangements with any other person with respect to such
amounts and including any liability for taxes of a predecessor entity.
"TAX RETURN" means any return, declaration, report, claim for refund,
or information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
ARTICLE II
PURCHASE AND SALE
2.1 SALE OF TARGET SHARES. Subject to the terms and conditions of this
Agreement each Shareholder agrees to sell all shares of stock in Target (the
"TARGET SHARES") then held by each such Shareholder, as set forth on SCHEDULE 1,
to the Purchaser and to deliver the certificates evidencing such shares to the
Purchaser at the Closing. The certificates for such shares will be properly
endorsed for transfer to and accompanied by duly executed stock or similar
powers in favor of the Purchaser and otherwise in a form acceptable for transfer
on the books of the Target, and the Target shall affect such transfer on its
books.
2.2 PURCHASE OF SHARES BY THE PURCHASER. Subject to the terms and
conditions of this Agreement, the Purchaser agrees to acquire the Target Shares
from the Shareholders, respectively, at the Closing for an aggregate purchase
price of Six Hundred Fifty Five Thousand Three Hundred and Thirty-three Dollars,
-3-
($655,335.00) (the "Purchase Price"). The Purchase Price shall be composed of
the following:
(i) A promissory note (the "PROMISSORY NOTE") in the amount of
Six Hundred Fifty Five Thousand Three Hundred and Thirty-three Dollars,
($655,335.00) in the form attached hereto as EXHIBIT A; and
(ii) A warrant in favor of ▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇ to purchase
up to 1,000,000 shares of NewCo stock from ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ at a purchase price of
$0.10 per share.
2.3 PURCHASE PRICE ALLOCATION. The Purchase Price shall be allocated as
set forth in Schedule 2.
2.4 SALE OF REMAINING RESTAURANTS. Purchaser and Sellers agree to
negotiate in good faith regarding the Purchaser's acquisition of the remaining
restaurants owned or controlled, directly or indirectly, by the Sellers. The
parties acknowledge and agree that the ability to acquire all of the restaurants
as a group, and not merely some restaurants, was a material inducement for
Purchaser to enter into this Agreement, and Purchaser would not have entered
into this Agreement without the ability to acquire all of the restaurants.
2.5 ▇▇▇▇ ▇▇▇▇▇▇ EMPLOYMENT AGREEMENT. At the Closing, the parties shall
enter into an employment agreement whereby ▇▇▇▇ ▇▇▇▇▇▇ agrees to render his
full-time services to Purchaser for five (5) years at an annual salary of Two
Hundred Sixty Four Thousand Dollars ($264,000). The remaining terms of his
employment, including but not limited to a covenant not to compete, shall be set
forth in that Employment Agreement attached hereto as Exhibit B.
2.6 LEASE OF TRACY OFFICE BUILDING. At the Closing, the parties shall
enter into a lease for that office building located at ▇▇ ▇. ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ for a period of twenty-four (24) months at a rent of Three Thousand
Dollars ($3,000) per month, triple net. The remaining terms of the lease shall
be set forth in that Lease Agreement attached hereto as Exhibit C.
2.7 CERTAIN ASSETS & LIABILITIES NOT INCLUDED AS PART OF TARGET. On the
Closing Date, it is hereby agreed that the following assets and liabilities
currently reflected in the Target's most recent Financial Statements shall not
be acquired by Purchaser through its acquisition of the Target Shares from
Sellers: (i) all notes and other evidences of indebtedness due to Target from
various entities owned and/or controlled by Sellers, including to Sellers
individually, (ii) all notes and other evidences of indebtedness due from Target
to various entities owned and/or controlled by Sellers, including to Sellers
individually, (iii) Target's 50% ownership interest in Oakland Pizza, Inc., a
California corporation, (iv) any rights of ownership in Paradise Pizza of
Coalinga, a California limited partnership, and (v) any automobile vehicles used
by Sellers for business and/or personal reasons. Sellers shall assume any tax
liabilities associated with the distribution or disposition of the foregoing
items.
2.8 THE CLOSING. The consummation of the purchase and sale under this
Agreement (the "CLOSING") will occur at the offices of Cornerstone Law Group in
San Francisco, California, concurrently with the execution of this Agreement
(the "CLOSING DATE").
-4-
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
The Sellers represent and warrant to the Purchaser as of the Closing
Date, except as expressly indicated on the Seller Disclosure Schedule set forth
in Schedule 3 which exceptions are deemed to be representations and warranties
as if made within this Article III, as follows in this Article III.
3.1 ORGANIZATION AND GOOD STANDING OF TARGET. The Target is duly
organized, validly existing, and in good standing under the laws of the
jurisdiction of its formation, and each is duly authorized to conduct business
and is in good standing under the laws of each jurisdiction where such
qualification is required, except where such failure to be qualified would not
have an adverse effect on the Target. The Target has full corporate power and
authority and all licenses, permits, and authorizations necessary to comply with
its obligations hereunder.
3.2 AUTHORIZATION OF TRANSACTION. Each Seller has full power and
authority to execute and deliver this Agreement and to perform its obligations
hereunder. Without limiting the generality of the foregoing, the Board of
Directors of Target has duly authorized the execution, delivery, and its
performance of this Agreement. This Agreement constitutes the valid and legally
binding obligation of the Target and each Seller, enforceable in accordance with
its terms and conditions, except as limited by bankruptcy, moratorium,
insolvency and similar laws.
3.3 NONCONTRAVENTION. To each Sellers' knowledge, neither the execution
and the delivery of this Agreement, nor the consummation of the transactions
contemplated hereby, will (i) violate any constitution, statute, regulation,
rule, injunction, judgment, order, decree, ruling, charge, or other restriction
of any government, governmental agency, or court to which the Sellers or the
Target are subject or any provision of the charter, partnership agreement or
bylaws of the Target or (ii) conflict with, result in a breach of, constitute a
default under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under any
agreement, contract, lease, license, instrument, or other arrangement to which
the Seller or the Target is a party or by which it is bound or to which any of
its assets is subject (or result in the imposition of any Security Interest upon
any of its assets) which has not been waived.
3.4 CAPITALIZATION; OWNERSHIP OF STOCK.
(a) Each Seller owns beneficially and of record that
number of shares of stock of Target listed opposite such Seller's name on
Schedule 1, free and clear of all Liens, and has, and on the Closing Date will
have, good and valid title to such shares. The delivery of stock certificates
representing the shares owned by each Seller in the manner provided in Section
2.1 will transfer to the Purchaser good and valid title to the Target Shares
free and clear of all Liens.
(b) The authorized capital stock of the Target consists
of 7,500 shares of common stock, $10.00 par value per share, of which 1,002
shares are issued and outstanding. All such issued and outstanding shares have
been issued to the Sellers in the amounts set forth opposite their respective
names on SCHEDULE 1. The Target Shares are duly authorized, validly issued,
-5-
fully paid and non-assessable and were issued in compliance with all applicable
federal and state securities laws.
(c) Except as set forth in the Seller Disclosure
Schedule, there are no: (i) rights, options or warrants of any kind outstanding
to purchase or acquire capital stock or any other voting or ownership interest
in Target; or (ii) other securities, obligations, agreements or rights of any
kind outstanding which are exercisable for, convertible into or exchangeable for
any capital stock or any other voting or ownership interest in Target or under
the terms of which the parties thereto have the right to purchase or acquire
capital stock or any other voting or ownership interest in Target.
(d) Except as set forth in the Seller Disclosure
Schedule, Target is not subject to any obligation to repurchase or otherwise
acquire or retire any shares of capital stock. There are no commitments of
Target to distribute to holders of any class of its capital stock any evidence
of indebtedness or assets, or to pay any dividend or make any other distribution
in respect thereof.
(e) No Person has a contractual right to demand or other
right to cause Target to file any registration or similar statement relating to
any securities of Target or any right to participate in any offering of
securities. There are no agreements between or among any shareholders of Target
or buy-sell agreements of any kind affecting Target capital stock or other
securities.
3.5 TITLE TO ASSETS. Target has good and marketable title to all of its
assets, free and clear of all Security Interests or restriction on transfer. No
Security Interests or restrictions encumber any of the assets of Target.
3.6 FINANCIAL STATEMENTS. Target has made available to Purchaser all of
its financial statements, including, if applicable, all balance sheets,
statements of operation, capital accounts, and changes in equity and cash flow
(collectively, "Financial Statements"). The Financial Statements (including the
notes thereto) have been prepared in accordance with GAAP applied on a
consistent basis throughout the periods covered thereby, present fairly the
financial condition as of such dates and the results of operations for such
periods, are correct and complete, and are consistent with the books and records
of Target (which books and records are correct and complete).
3.7 EVENTS SUBSEQUENT TO MOST RECENT FISCAL YEAR END. Since September
30, 2003, there has not been any adverse change in the business, financial
condition, operations, results of operations, or future prospects of Target
relating to any asset. Without limiting the generality of the foregoing, since
that date through the Closing Date: (i) Target has not sold, leased, licensed,
transferred or assigned any asset, stock or partnership interest; (ii) Target
has not entered into any agreement, contract, lease, or license (or series of
related agreements, contracts, leases, and licenses) relating to any asset;
(iii) no party has accelerated, terminated, modified, or cancelled any
agreement, contract, lease, or license (or series of related agreements,
contracts, leases, and licenses) relating to any asset to which Target is a
party or by which it is bound; (iv) no Security Interest has been imposed upon
any asset, stock or partnership interest of Target; (v) Target has not
cancelled, compromised, waived, or released any right or claim (or series of
related rights and claims) relating to any asset; (vi) Target has not granted
any license or sublicense of any rights under or with respect to all or any
-6-
portion of any Intellectual Property relating directly or indirectly to any
asset; (vii) there has been no change made or authorized in the charter or
bylaws of Target; (viii) Target has not experienced any damage, destruction, or
loss (whether or not covered by insurance) to any asset; (ix) there has not been
any other material occurrence, event, incident, action, failure to act, or
transaction involving any asset, stock or partnership interest; (x) there has
not been paid any bonuses or other pay increases or payments of any type except
base pay to any employee; (xi) there has not been paid or transferred any amount
to any Seller for any reason, including without limitation any dividend,
distribution, repurchase of stock or return of capital, except base salaries at
currently existing levels; and (xii) Target has not committed to any of the
foregoing.
3.8 UNDISCLOSED LIABILITIES. Target has no Liability (and there is no
basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand against it giving rise to any
Liability) relating to or affecting, directly or indirectly, any of assets,
stock or partnership interests, except for Liabilities set forth on the face of
the most recent balance sheet (rather than in any notes thereto) or as otherwise
disclosed in writing to Purchaser as part of this transaction..
3.9 LEGAL COMPLIANCE. There has been no violation by any Seller or
Target of any applicable laws (including rules, regulations, codes, plans,
injunctions, judgments, orders, decrees, rulings, and charges thereunder) of
federal, state, local, and foreign governments (and all agencies thereof), nor
any action, suit, proceeding, hearing, investigation, charge, complaint, claim,
demand or notice has been filed or commenced or threatened that will prohibit or
adversely affect any Seller's ability to enter into and to perform it
obligations under this Agreement or affect any asset, stock or partnership
interest.
3.10 TAX MATTERS.
(a) The Target has filed all Tax Returns that it was
required to file, and all such Tax Returns were correct and complete in all
respects. To Seller's Knowledge, all Taxes owed by Target and due and payable as
of the Closing (whether or not shown on any Tax Return) have been paid. No claim
has ever been made by an authority in a jurisdiction where the Target does not
file Tax Returns that the Seller is or may be subject to taxation by that
jurisdiction. There are no Security Interests or tax liens on any of the assets
of the Target that arose in connection with any failure (or alleged failure) to
pay any Tax.
(b) To Seller's Knowledge, no officer (or employee
responsible for Tax matters) of the Target expects any authority to assess any
additional Taxes with respect to the Target or any of its assets for any period
for which Tax Returns have been filed. There is no dispute or claim concerning
any Tax Liability of the Target or pertaining to the Target's assets.
3.11 INTELLECTUAL PROPERTY. To Seller's knowledge, the Target owns all
Intellectual Property necessary or desirable for the operation of its respective
business. The Target's assets include all the Intellectual Property that is used
to contract the business of Target. Each item of Intellectual Property relating
to the Target's assets owned or used by the Target immediately prior to the
Closing will be owned by the Target on identical terms and conditions
immediately subsequent to the Closing. Immediately subsequent to the Closing,
the Sellers will not have retained any Intellectual Property necessary or
desirable for the continued operation of the Target's business by the Purchaser.
-7-
Each Seller has no Knowledge of any infringement upon its respective
Intellectual Property and, based on such fact, has taken all necessary and
desirable action to maintain and protect each material item of its Intellectual
Property. To Sellers' Knowledge, the Target has good and indefeasible title,
free and clear of all encumbrances or other claims, to all Intellectual Property
currently used by Target and to all Intellectual Property necessary for the
operation of Target's business as now conducted and, to the Knowledge of each
Seller, as presently contemplated to be conducted in the future. To the
Knowledge of each Seller, Target conducts its business without infringement or
claim of infringement of any Intellectual Property or other intangible
properties of others. Notwithstanding the foregoing, it is understood and agreed
that Target does not have any ownership interest in the "Paradise Pizza"
tradename and logo, with ownership interest in said intangibles vested in
Pishos, Inc., a California corporation. Target's right to the use of the
foregoing in the operation and management of the various pizza restaurants in
its capacity as an "at-will" licensee, subject to revocation by Pishos, Inc.
within 30 days written notice.
3.12 CONTRACTS. The Seller has delivered or made available to Purchaser
a correct and complete copy of each written agreement between Target and any
third party. With respect to each such agreement: (i) except as limited by
bankruptcy, moratorium, insolvency and similar laws, the agreement is legal,
valid, binding, enforceable, and in full force and effect; (ii) except as
limited by bankruptcy, moratorium, insolvency and similar laws, the agreement
will continue to be legal, valid, binding, enforceable, and in full force and
effect on identical terms following the consummation of the transactions
contemplated hereby; (iii) no party is in breach or default, and no event has
occurred to Seller's Knowledge which with notice or lapse of time would
constitute a breach or default, or permit termination, modification, or
acceleration, under the agreement; and (iv) no party has repudiated any
provision of the agreement.
3.13 NOTES AND ACCOUNTS RECEIVABLE. To the best of Seller's knowledge,
all notes and accounts receivable of Target are reflected properly on Target's
books and records in accordance with GAAP. To each Seller's Knowledge, such
accounts receivable are valid receivables subject to no setoffs or
counterclaims, are current and collectible.
3.14 POWERS OF ATTORNEY. There are no outstanding powers of attorney
executed on behalf of Target.
3.15 LITIGATION. Target is not (i) subject to any outstanding
injunction, judgment, order, decree, ruling, or charge or (ii) a party or, to
the Knowledge of any of the Seller's, is threatened to be made a party to any
action, suit, proceeding, hearing, or investigation of, in, or before any court
or quasijudicial or administrative agency of any federal, state, local, or
foreign jurisdiction or before any arbitrator.
3.16 PRODUCT WARRANTY. Target has not given to any customers or other
third party any
warranty.
3.17 DISCLOSURE. The representations and warranties contained in this
Article III do not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements and
information contained in this Article III not misleading.
-8-
3.18 ORDINARY COURSE. Target shall operate its business in the Ordinary
Course of Business. Further, Target shall use its best efforts to preserve
intact its present business organization and preserve its relationships with
customers, suppliers, landlords and others in which they have had any business
dealings.
3.19 NO OTHER BIDS. The Sellers shall not, and shall not authorize any
of their Affiliates or agents, to directly or indirectly solicit, initiate or
participate in negotiations with any Person other than Purchaser with respect to
a disposition of, or business combination in connection with, the business or
assets of any restaurant owned or controlled, directly or indirectly, by
Sellers, nor shall they or any of their Affiliates or agents, provide any
information concerning such assets or business to any Person for such purpose.
If anyone should solicit, attempt to initiate negotiations or make inquiries
regarding such business or assets, then such Seller agrees to immediately notify
Purchaser thereof in writing.
3.20 ACCESS TO BUSINESSES. Sellers shall continue to provide Purchaser
and its representatives and agents such access to all books and records and
furnish to Buyer such financial and operating data and other information with
respect to the businesses and property of Sellers (as it pertains to any
restaurant), and permit Purchaser and its representatives and agents to make
such inspections of real and personal properties as they may request. Each
Seller shall promptly arrange for Purchaser and its representatives and agents
to meet with such directors, officers, employees and agents as requested by
Purchaser.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
The Purchaser represents and warrants to the Sellers, as of the Closing
Date, except as expressly indicated on the Purchaser Disclosure Schedule as set
forth in SCHEDULE 4 which exceptions are deemed to be representations and
warranties as if made within this Article IV, as follows in this Article IV.
4.1 EXISTENCE AND POWER. The Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of the State of California
and has full power and authority to execute and deliver this Agreement to which
it is a party and to acquire the Target Shares as provided in this Agreement.
4.2 AUTHORIZATION. All proceedings or actions required to be taken by
Purchaser relating to its execution and performance of this Agreement have been,
or will be, taken at or prior to the Closing.
4.3 AUTHORITY; NO CONFLICTS.
(a) The execution, delivery and performance of this
Agreement by the Purchaser has been duly authorized by all necessary action on
the part of Purchaser's Board of Directors and do not conflict with, result in a
default, right to accelerate or loss of rights under, or result in the creation
of any Lien pursuant to, any provision of the Articles of Incorporation of
Purchaser or any agreement, law, rule or regulation or any order, judgment or
decree to which any such entity is a party or by which any such entity or its
-9-
respective properties are bound or affected, except for any such Lien created
under or pursuant to this Agreement. No consent, approval, or other action is
required to be obtained or taken by Purchaser in connection with the execution,
delivery and performance by such entity of this Agreement.
(b) The Purchaser has full power and authority to enter
into this Agreement and to carry out the transactions contemplated hereby. This
Agreement has been duly executed and delivered by the Purchaser and constitutes
will constitute, valid and binding obligations of such party, enforceable in
accordance with their respective terms, except to the extent that enforcement
may be limited by applicable bankruptcy, reorganization, moratorium or similar
laws of general applicability affecting the enforcement of creditors' rights and
subject to general equitable principles which may limit the right to obtain
equitable remedies.
4.4 COMPLIANCE WITH LAWS AND OTHER INSTRUMENTS. To the Purchaser's
Knowledge, it is in compliance, and has complied with, all existing laws, rules,
regulations, ordinances, orders, judgments and decrees applicable to its
business, properties or currently proposed operations except where the failure
to so comply, in each instance and in the aggregate, will not and could not
reasonably be expected to have an adverse effect on Purchaser. Neither the
ownership nor the use of the Purchaser's properties, nor the conduct or
currently proposed conduct of its business, conflicts with the rights of any
other Person or violates, or with or without the giving of notice or the passage
of time, or both, will violate, conflict with or result in a default, right to
accelerate or loss of rights under, any terms or provisions of the Articles of
Incorporation or the Bylaws of Purchaser, or any Lien, license, agreement,
understanding, law, ordinance, rule, regulation, zoning regulation, order,
judgment or decree to which Purchaser is a party or by which it or its assets
may be bound or affected.
4.5 DISCLOSURE. No representation or warranty by Purchaser in this
Agreement contains or will contain any untrue statement of a material fact, or
omits or will omit to state any material fact necessary to make the facts stated
therein not misleading.
4.6 ACQUISITION FOR INVESTMENT. Purchaser is purchasing the Target
Shares for its own account and not with a present view to a distribution or
resale.
ARTICLE V
SELLERS' CLOSING CONDITIONS
The obligations of the Sellers under this Agreement are subject to
fulfillment prior to or at Closing of each of the following conditions, unless
waived in writing (in whole or in part) by the Purchaser.
5.1 REPRESENTATIONS AND WARRANTIES TRUE. The representations and
warranties of each Seller in this Agreement must be true and correct on the date
hereof and as of the Closing Date.
5.2 COMPLIANCE WITH AGREEMENT. The Sellers must have each performed and
complied with all agreements or conditions required by this Agreement to be
performed and complied with by them prior to or as of the Closing Date.
-10-
5.3 CONSENTS AND APPROVALS. All releases, consents and approvals,
required to be obtained by each Seller for the transactions contemplated by this
Agreement must have been obtained from all necessary third parties. In addition,
no suit or other legal proceeding shall have been commenced seeking to restrict
or prohibit the transactions contemplated by this Agreement.
5.4 EXECUTION AND DELIVERY OF CLOSING DOCUMENTS. Each must deliver to
the Purchaser (or such other party as appropriate), the following, duly executed
as appropriate:
(a) This Agreement;
(b) The stock certificates evidencing the Target Shares
are properly endorsed for transfer to the Purchaser and accompanied by duly
executed stock powers in favor of the Purchaser and otherwise in a form
acceptable for transfer on the books of the Target, and accompanied by duly
executed spousal consents in a form reasonably acceptable to the Purchaser;
(d) A certificate dated as of the Closing Date, signed by
the President and Secretary of Target, in form and substance reasonably
satisfactory to the Purchaser, certifying that that all of its respective
representations, warranties and covenants contained in this Agreement remain
true as of the Closing Date and that all obligations hereunder have been or will
be completed prior to or on the Closing Date;
(e) Such other documents, certificates, instruments or
opinions as the Purchaser or its legal counsel may reasonably request, in form
reasonably satisfactory to the Purchaser.
(f) Purchaser's completion, in its sole judgment, of a
due diligence examination of Target's assets, liabilities, intellectual
property, commitments, products, and business.
(g) Purchaser's receipt of appropriate clearance letters
from state agencies assuring Purchaser that all taxes for sales, unemployment
insurance, withholding taxes, etc. are fully paid.
5.5 NO ADVERSE CHANGE. There must have been no adverse change in the
business, properties, assets, liabilities, operations, condition (financial or
otherwise) or prospects of Target.
5.6 PROCEEDINGS SATISFACTORY. All proceedings to be taken in connection
with the transactions contemplated by this Agreement and all documents incident
to such transaction are reasonably satisfactory in form and substance to the
Purchaser and its counsel.
ARTICLE VI
PURCHASER'S CLOSING CONDITIONS
The obligations of Purchaser under this Agreement are subject to
fulfillment prior to or at the Closing of each of the following conditions,
unless waived in writing (in whole or in part) by the Sellers.
-11-
6.1 REPRESENTATIONS AND WARRANTIES TRUE. The representations and
warranties of the Purchaser in this Agreement must be true and correct on the
date hereof and as of the Closing Date.
6.2 COMPLIANCE WITH AGREEMENT. The Purchaser must have performed and
complied with all agreements or conditions required by this Agreement to be
performed and complied with by it prior to or as of the Closing Date.
6.3 CONSENTS AND APPROVALS. All releases, consents and approvals
required to be obtained by the Purchaser for the transactions contemplated by
this Agreement must have been obtained from all necessary third parties, and no
suit or other legal proceeding shall have been commenced seeking to restrict or
prohibit the transactions contemplated by this Agreement.
6.4 EXECUTION AND DELIVERY OF CLOSING DOCUMENTS. The Purchaser must
deliver to the Sellers or the Partners or Shareholders (as appropriate), this
Agreement, duly executed as appropriate:
(a) A certificate dated as of the Closing Date, signed by
the President and Secretary of the Purchaser and in form and substance
reasonably satisfactory to the Sellers certifying that resolutions have been
duly adopted by the Purchaser's Board of Directors authorizing the execution of
this Agreement and all of the other transactions to be consummated pursuant
hereto;
(b) Such other documents, certificates, instruments or
opinions as the Seller or their legal counsel may reasonably request, in form
reasonably satisfactory to the Sellers.
6.5 PROCEEDINGS SATISFACTORY. All proceedings to be taken in connection
with the transactions contemplated by this Agreement and all documents incident
to such transaction are reasonably satisfactory in form and substance to the
Seller and its counsel.
ARTICLE VII
INDEMNIFICATION
7.1 INDEMNIFICATION OF PURCHASER. The Sellers agree to indemnify,
reimburse, defend and hold harmless the Purchaser and its respective officers,
directors, members, employees, agents, successors, and assigns, including, after
the Closing Date, from and against any and all any and all Damages, incurred in
connection with, arising out of, resulting from or incident to any (a) breach of
any of the representations or warranties; (b) any failure to perform or observe
any covenant, agreement or condition to be performed or observed by it; and (c)
any and all liabilities and obligations including, without limitation, the
Lawsuits. Purchaser shall have the unilateral right to offset against the
Promissory Note against any damages or claims subject to this Section which
arise within six (6) months following the Closing.
7.2 INDEMNIFICATION OF SELLERS. The Purchaser agrees to indemnify,
reimburse, defend and hold harmless each Seller, including, after the Closing
Date, from and against any and all any and all Damages incurred in connection
with, arising out of, resulting from or incident to any (a) breach of any of the
representations or warranties; (b) any failure to perform or observe any
-12-
covenant, agreement or condition to be performed or observed by it; and (c) any
and all liabilities and obligations, including without limitation liabilities
not to exceed the principal amount of the Promissory Note which shall have
accrued within the Ordinary Course of Business by Sellers and unpaid as of the
Closing.
7.3 CLAIMS. Any party seeking to be indemnified hereunder (the
"Indemnified Party") shall promptly notify the other party (the "Obligor") in
writing of any Loss; provided, that any failure or delay in doing so shall
relieve the Obligor of its obligations hereunder only to the extent the defense
of such claim is prejudiced thereby. The Obligor may, by giving written notice
to the Indemnified Party within 15 days following its receipt of the notice of
such claim, elect to assume the defense or the prosecution thereof at its cost
and expense. The Indemnified Party shall have the right to employ counsel
separate from counsel employed by the Obligor in any such action and to
participate therein, but the fees and expenses of such counsel shall be at the
Indemnified Party's own expense.
7.4 LIMITATION. Notwithstanding the provisions of Section 7.1 and 7.2,
no party shall have any indemnification obligation under this Agreement unless,
until and only to the extent that the aggregate amount of Damages of the
Indemnified Party exceeds Five Thousand Dollars ($5,000) in the aggregate.
ARTICLE VIII
TERMINATION PRIOR TO CLOSING
8.1 TERMINATION PRIOR TO CLOSING. This Agreement may be terminated at
any time prior to the Closing by (i) the mutual written consent of Target and
the Sellers on the one hand, and the Purchaser on the other hand; (ii) by the
Purchaser on the Closing Date if any of the conditions set forth in Article V
shall not have been (iii) by any Seller on the Closing Date if any of the
conditions set forth in Article VI shall not have been; (iv) by any Seller if
Purchaser materially breaches any representation, warranty, covenant or
agreement contained in or relating to this Agreement (v) by Purchaser if any
Seller materially breaches any representation, warranty, covenant or agreement
contained in or relating to this Agreement.
ARTICLE IX
MISCELLANEOUS
9.1 GOVERNING LAW. This Agreement will be construed and enforced in
accordance with the substantive laws of the State of California without giving
effect to its conflict of laws principles.
9.2 EXPENSES. Except as otherwise expressly provided in this Agreement,
whether or not the transactions contemplated by this Agreement are consummated,
each party will pay its own costs and expenses incurred in connection with the
negotiation, execution and closing of this Agreement and the transactions
contemplated hereby. The Sellers will be responsible for the payment of any
-13-
Taxes payable with respect to the transfer of the Target Shares pursuant to this
Agreement.
9.3 NOTICES. All notices and other communications under this Agreement
must be in writing and will be deemed given: (i) when received if delivered
personally or by overnight courier (with written confirmation of receipt); (ii)
on the date of transmission if sent by facsimile (with written confirmation of
receipt); or (iii) five (5) days after deposit in the mail if sent by registered
or certified mail (postage prepaid, return receipt requested), to the addresses
set forth on SCHEDULE 5 attached hereto (or such other address furnished to all
other parties in writing).
9.4 ENTIRE AGREEMENT. This Agreement, including the other documents
referred to herein, contain the entire understanding of the parties hereto with
respect to the subject matter contained herein. There are no restrictions,
promises, warranties, covenants or undertakings, other than those expressly
provided for herein. This Agreement supersedes all prior agreements and
undertakings between the parties with respect to such subject matter.
9.5 AMENDMENTS; CONSENTS; WAIVERS. No waiver, modification, amendment
of any provision of this Agreement, or any consent will be effective unless
specifically made in writing and duly signed by the party to be bound thereby.
No waiver of any term or condition of this Agreement, in any one or more
instances, will constitute a waiver of the same term or condition of this
Agreement on any future occasion.
9.6 SEVERABILITY OF INVALID PROVISION. If any one or more of the
provisions provided in this Agreement, or the application thereof, should be
contrary to law, then such provision(s) will be null and void and will in no way
affect the validity of the other provisions of this Agreement, which will
otherwise be fully effective and enforceable.
9.7 SUCCESSORS AND ASSIGNS. This Agreement and the various instruments
and agreements delivered in connection with the consummation of this Agreement
will be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns. Neither this Agreement nor any right,
interest or obligation under this Agreement may be assigned by any party to this
Agreement without the prior written consent of the other parties hereto and any
attempt to do so will be void; provided, however, that the Purchaser may assign
its rights under this Agreement to any Affiliate which is a successor to the
Purchaser whether by merger or otherwise, to any third party that acquires
substantially all of the assets, business, or stock of the Purchaser, and to any
senior lender of the Purchaser to secure the Purchaser's obligations to such
senior lender.
9.8 RULES OF CONSTRUCTION. Section headings contained in this Agreement
are inserted only as a matter of convenience and in no way define, limit, extend
or describe the scope of this Agreement or the intent of any of the provisions
hereof. This Agreement have been negotiated on behalf of the parties with the
advice of legal counsel and no general rule of contract construction requiring
an agreement to be more stringently construed against the drafter or proponent
of any particular provision will be applied in the construction or
interpretation of this Agreement.
-14-
9.9 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, and will become effective when one or more counterparts have been
signed by each of the parties.
9.10 BROKERS OR AGENTS. Other than ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, whose broker's fees
are set forth below, each Seller and Purchaser represents that it has not
employed, retained, otherwise engaged any broker or agent in connection with the
transactions contemplated by this Agreement, each party hereto agrees to
indemnify and hold harmless all other parties against all loss, cost, damages or
expense arising out of claims for fees or commissions of any brokers employed,
retained or otherwise engaged or alleged to have been employed, retained or
otherwise engaged by such party. ▇▇. ▇▇▇▇▇▇▇ shall be paid a broker's fee
immediately following the Closing.
9.11 CUMULATIVE REMEDIES. The rights, remedies, powers and privileges
provided in this Agreement are cumulative and not exclusive and will be in
addition to any and all other rights, remedies, powers and privileges granted by
law, rule, regulation or instrument.
[REMAINDER OF PAGE INTENTIONALLY BLANK]
-15-
IN WITNESS WHEREOF, this Agreement has been duly executed by the
parties hereto as of the day and year first above written.
PURCHASER
PARADISE PIZZA, INC., a California corporation
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
-----------------------
By: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Its: CEO and President
PURCHASER SIGNATURE PAGE TO PURCHASE AGREEMENT
SELLERS SIGNATURE PAGES TO PURCHASE AGREEMENT
By signing below, each Seller acknowledges and aggress that such Seller has read
and understood the Purchase Agreement to which these signature pages are
attached. Specifically, each Seller acknowledges and aggress that he/she/it has
reviewed Schedule 1 attached to such Purchase Agreement and agrees that such
schedule reflects his/her/its entire holdings in all of the entities which are a
party to this transaction. Each Seller acknowledges and agrees that he/she/it is
selling his/her/its entire interest in any and all of the entities listed on
Schedule 1 of the Purchase Agreement.
Target
H&H Pizza, Inc.
/s/ ▇▇▇▇ ▇▇▇▇▇▇
---------------------------
By: ▇▇▇▇ ▇▇▇▇▇▇, President
Sellers:
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
---------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇, individually
/s/ ▇▇▇▇ ▇▇▇▇▇▇
---------------------------
▇▇▇▇ ▇▇▇▇▇▇ individually
SELLERS SIGNATURE PAGES TO PURCHASE AGREEMENT