Exhibit 10.44
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
SHOPRITE OF PENNINGTON, INC.,
BVNJ PARTNERSHIP, L.P.,
BIG V SUPERMARKETS, INC.
AND
THE STOCKHOLDERS OF SHOPRITE OF PENNINGTON, INC.
November 12, 1999
TABLE OF CONTENTS
Page
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ARTICLE I....................................................................1
1.1 Definitions...........................................................1
ARTICLE II...................................................................8
2.1 The Merger............................................................8
2.2 Consideration.........................................................8
2.3 Control of Assets and Liabilities.....................................9
2.4 Time and Place of Closing............................................10
2.5 Deliveries by the Stockholders.......................................10
2.6 Designation of Stockholders' Agent...................................10
2.7 Indemnification of Stockholders' Agent...............................10
2.8 Closing Balance Sheet................................................11
2.9 Post-Closing Adjustment to the Merger Consideration re:
Net Working Capital ...............................................12
2.10 Escrow Accounts......................................................12
2.11 Exchange of Certificates.............................................13
2.12 Stock Transfer Books.................................................14
2.13 No Further Ownership Rights in Company Capital Stock.................14
2.14 Allocation of Merger Consideration...................................14
ARTICLE III.................................................................15
3.1 Organization and Qualification.......................................15
3.2 Authority; No Violation..............................................15
3.3 Capitalization.......................................................16
3.4 Subsidiaries; Investments............................................16
3.5 Financial Statements.................................................16
3.6 Absence of Undisclosed Liabilities...................................16
3.7 Absence of Certain Changes...........................................16
3.8 Listing of Accounts Payable..........................................18
3.9 Title to Assets; Condition of Assets.................................18
3.10 Real Estate..........................................................18
3.11 Accounts Receivable..................................................19
3.12 Inventories..........................................................20
3.13 Intellectual Property................................................20
3.14 Contracts............................................................20
3.15 Customers and Suppliers..............................................21
3.16 Compliance with Laws.................................................22
3.17 Taxes................................................................22
3.18 Employee Benefit Plans...............................................25
3.19 Environmental Matters...............................................28
3.20 Employees............................................................30
3.21 Litigation...........................................................30
3.22 Insurance............................................................31
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3.23 Company Products.....................................................31
3.24 Powers of Attorney...................................................31
3.25 Brokers..............................................................32
3.26 Burdensome Agreements................................................32
3.27 Records and Books....................................................32
3.28 Transactions with Interested Persons.................................32
3.29 Bank Accounts........................................................32
3.30 Copies of Documents..................................................32
3.31 Disclosure of Material Information...................................32
ARTICLE IV..................................................................33
4.1 Organization and Qualification.......................................33
4.2 Authority; No Violation..............................................33
4.3 Brokers..............................................................33
4.4 Financing Commitment.................................................33
4.5 Concerning the Merger Sub............................................34
4.6 Sophistication: Investment Intent...................................34
4.7 Availability of Documents............................................34
4.8 Unregistered Shares..................................................35
4.9 Opportunity to Discuss terms.........................................35
4.10 Representations of Company and Stockholders Unaffected...............35
ARTICLE V...................................................................35
5.1 Covenants of the Company.............................................35
5.2 Covenants of the Company and Each Stockholder........................37
5.3 Covenants of Each Stockholder........................................38
5.4 Covenants of Merger Sub and Parent...................................38
ARTICLE VI..................................................................39
6.1 Conditions to Obligations of Merger Sub and Parent...................39
6.2 Conditions to Obligations of the Company and the Stockholders........43
ARTICLE VII.................................................................44
7.1 Termination of Agreement.............................................44
7.2 Effect of Termination and Right to Proceed...........................45
ARTICLE VIII................................................................45
8.1 Survival of Representations and Warranties...........................45
8.2 Indemnification by Stockholders......................................46
8.3 Indemnification by Parent and Merger Sub.............................47
8.4 Notice and Opportunity to Defend.....................................47
8.5 Contribution.........................................................48
8.6 Right of Set-Off.....................................................48
8.7 Unconditionality of Stockholders' Liability..........................48
8.8 Adjustment for Insurance and Taxes...................................48
ARTICLE IX..................................................................49
9.1 ▇▇▇▇▇▇▇▇▇▇ Land......................................................49
9.2 Consultation Regarding Parent's Plans for Current Employees..........49
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ARTICLE X...................................................................50
10.1 Fees and Expenses....................................................50
10.2 Publicity and Disclosures............................................50
10.3 Notices..............................................................50
10.4 Successors and Assigns...............................................51
10.5 Descriptive Headings.................................................51
10.6 Counterparts.........................................................51
10.7 Severability.........................................................51
10.8 Attorneys' Fees......................................................52
10.9 Course of Dealing....................................................52
10.10 Third Parties........................................................52
10.11 Tax Matters..........................................................52
10.12 Waivers and Consents; Amendments.....................................56
10.13 Variations in Pronouns...............................................57
10.14 WAIVER OF JURY TRIAL.................................................57
10.15 Governing Law........................................................57
10.16 Entire Agreement.....................................................58
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Table of Exhibits
Exhibit A Listing of Stockholders and Shares Held
Exhibit B Form of Stockholder Note
Exhibit C-1 Form of Escrow Agreement
Exhibit C-2 Second Escrow Agreement
Exhibit D Form of Non-Competition Agreements
Exhibit E Form of Consulting Agreements
Exhibit F Form of Opinion of Stockholders' and Company's Counsel
Exhibit G-1 Form of Opinion of Parent/Merger Sub's Special Counsel
Exhibit G-2 Form of Opinion of Parent/Merger Sub's Special Counsel
Exhibit H Merger Certificate
Table of Schedules
Schedule 3.1 Qualification
Schedule 3.3 Capitalization
Schedule 3.4 Subsidiaries
Schedule 3.5 Financial Statements
Schedule 3.6 Liabilities
Schedule 3.7 Changes
Schedule 3.8 Payables
Schedule 3.10(b) Leased Real Property
Schedule 3.11 Accounts Receivables
Schedule 3.12 Inventories
Schedule 3.14 Contracts
Schedule 3.15 Major Customers and Suppliers
Schedule 3.17 Taxes
Schedule 3.18 Employee Benefit Plans
Schedule 3.19 Environmental Matters
Schedule 3.20 Employees
Schedule 3.21 Litigation
Schedule 3.22 Insurance
Schedule 3.23 Warranty and other Claims
Schedule 3.25 Brokers
Schedule 3.28 Transactions with Interested Persons
Schedule 3.29 Bank Accounts
Schedule 5.1(a) Interim Conduct
Schedule 10.11(h)(i) Allocation of Merger Consideration
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AGREEMENT AND PLAN OF MERGER
The Agreement and Plan of Merger (the "Agreement") dated as of November 12,
1999, by and among Big V Supermarkets, Inc., a New York corporation ("Parent"),
BVNJ Partnership, L.P., a New Jersey Limited Partnership ("Merger Sub"),
ShopRite of Pennington, Inc., a New Jersey corporation (the "Company"), and the
parties whose names are set forth on Exhibit A attached hereto (the
"Stockholders").
The Board of Directors of the Company, the general partner of Merger Sub,
the Board of Directors of the Parent and the Stockholders holding 100% of the
outstanding shares of the Company's common stock, have approved a merger (the
"Merger") of the Company with and into the Merger Sub, with the Merger Sub as
the surviving entity, all in accordance with the New Jersey Business
Corporations Act (the "NJBCA"), on the terms and conditions set forth herein.
In consideration of the foregoing, the mutual representations, warranties
and covenants set forth herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties to
this Agreement hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. For the purposes of this Agreement, all capitalized words
or expressions used in this Agreement (including the Schedules and Exhibits
annexed hereto) shall have the meanings specified in this Article I (such
meanings to be equally applicable to both the singular and plural forms of the
terms defined):
"Affiliate" means when used with respect to any Person, (a) if such Person
is a corporation, any officer or director thereof and any Person which is,
directly or indirectly, the beneficial owner (by itself or as part of any group)
of more than five percent (5%) of any class of any Equity Security thereof, and,
if such beneficial owner is a partnership, any general or limited partner
thereof, or if such beneficial owner is a corporation, any Person controlling,
controlled by or under common control with such beneficial owner, or any officer
or director of such beneficial owner or of any corporation occupying any such
control relationship, (b) if such Person is a partnership, any general or
limited partner thereof and (c) any other Person which, directly or indirectly,
controls or is controlled by or is under common control with such Person. For
purposes of this definition, "control" (including the correlative terms
"controlling", "controlled by" and "under common control with"), with respect to
any Person, shall mean possession, directly or indirectly, of the power to
direct the management and policies of such Person, whether through the ownership
of voting securities or by contract or otherwise.
"Agreement" means this Agreement and Plan of Merger (together with all
Exhibits and Schedules hereto).
"Assets" means all of the Company's, or the Parent's, (as the case may be)
assets, properties, business, goodwill and rights of every kind and description,
real and personal, tangible and intangible, wherever situated and whether or not
reflected in financial statements.
"Business Day" means any day, excluding Saturday, Sunday and any other day
on which commercial banks in New York, New York are authorized or required by
law to close.
"CERCLA" means the Comprehensive Environmental Response Compensation and
Liability Act of 1980, as amended, and the regulations thereunder, and court
decisions in respect thereof, all as the same shall be in effect at the time.
"Charter" means the Certificate of Incorporation, Articles of Incorporation
or Organization or other organizational document of a corporation, as amended
through the date hereof.
"Claim" means an action, suit, proceeding, hearing, investigation,
litigation or any written statement of intent by a third party to initiate any
of the foregoing in the absence of settlement.
"Code" means the Internal Revenue Code of 1986, as amended, and the
regulations thereunder, published Internal Revenue Service rulings, and
controlling court decisions in respect thereof, all as the same shall be in
effect at the time.
"Commission" means the Securities and Exchange Commission and any successor
agency of the federal government administering the Securities Act or the
Exchange Act.
"Common Stock" means the common stock of the Company, no par value.
"Company" means ShopRite of ▇▇▇▇▇▇▇▇▇▇, Inc., a New Jersey corporation.
"Effective Time" is defined in Section 2.1.
"Environmental Action" means any administrative, regulatory or judicial
action, suit, demand, demand letter, claim, notice of non-compliance or
violation, investigation, request for information, proceeding, consent order or
consent agreement relating in any way to any Environmental Law or any
Environmental Permit, including without limitation (a) any claim by any
governmental or regulatory authority for enforcement, cleanup, removal,
response, remedial or other actions or damages pursuant to any Environmental Law
and (b) any claim by any third party seeking damages, contribution,
indemnification, cost recovery, compensation or injunctive relief resulting from
Hazardous Materials, damage to the environment or alleged injury or threat of
injury to human health or safety from pollution or other environmental
degradation.
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"Environmental Law" means any applicable federal, state or local law,
statute, rule, regulation, or ordinance relating to the environment, human
health or safety from pollution or other environmental degradation or Hazardous
Materials, including, without limitation, CERCLA, the Resource Conservation and
Recovery Act, the Hazardous Materials Transportation Act, the Clean Water Act,
the Toxic Substances Control Act, the Clean Air Act, the Safe Drinking Water
Act, the Atomic Energy Act, the Federal Insecticide, Fungicide and Rodenticide
Act and the Occupational Safety and Health Act and the rules, regulations and
interpretations thereunder, all as the same shall be in effect from time to
time.
"Environmental Permit" means any permit, approval, identification number,
license or other authorization required under any Environmental Law.
"Equity Security" shall have the meaning given to such term in Section
3(a)(ii) of the Exchange Act.
"ERISA" means the Employee Retirement Income Security Act of 1974, and any
similar or successor federal statute, and the rules, regulations and
interpretations thereunder, all as the same shall be in effect at the time.
"ERISA Affiliate" means, for purposes of Title IV of ERISA, any trade or
business, whether or not incorporated, that together with the Company would be
deemed to be a "single employer" within the meaning of Section 4001 of ERISA,
and, for purposes of the Code, any member of any group that, together with the
Company is treated as a "single employer" for purposes of Section 414 of the
Code.
"Exchange Act" means the Securities Exchange Act of 1934, and any similar
or successor federal statute, and the rules and regulations and interpretations
of the Commission thereunder, all as the same shall be in effect at the time.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession, which are applicable to the circumstances as of the date of
determination.
"Hazardous Materials" means (a) petroleum or petroleum products, natural or
synthetic gas, asbestos, urea formaldehyde foam insulation and radon gas, (b)
any substances defined as or included in the definition or "hazardous
substances," "hazardous wastes," "hazardous materials," "extremely hazardous
wastes" "restricted hazardous waters," toxic substances," "toxic pollutants,"
"contaminants" or "pollutants," or words of similar import, under any
Environmental Law and (c) any other substance exposure to which is regulated
under any Environmental Law.
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"Indebtedness" means all obligations, contingent or otherwise, whether
current or long-term, which in accordance with GAAP would be classified upon the
obligor's balance sheet as liabilities (other than deferred taxes) and shall
also include capitalized leases, guaranties, endorsements (other than for
collection in the ordinary course of business) or other arrangements whereby
responsibility is assumed for the obligations of others, including any agreement
to purchase or otherwise acquire the obligations of others or any agreement,
contingent or otherwise, to furnish funds for the purchase of goods, supplies or
services for the purpose of payment of the obligations of others.
"Indemnity Agreement" is defined in Section 2.10(c).
"IRS" means the Internal Revenue Service and any successor agency of the
federal government administering the Code.
"Lien" means, with respect to any asset, any mortgage, deed of trust,
pledge, hypothecation, assignment, security interest, lien, charge, restriction
or encumbrance of any kind (including any conditional sale or other title
retention agreement, any lease in the nature thereof, any assignment or other
conveyance of any right to receive income and any assignment of receivables with
recourse against assignor), any filing of any financing statement as debtor
under the Uniform Commercial Code or comparable law of any jurisdiction and any
agreement to give or make any of the foregoing.
"Material Adverse Effect" means a material adverse effect on (a) the
business, operations, assets, liabilities or condition (financial or otherwise)
of the Company taken as a whole, (b) the ability of the Company or any of the
Stockholders to perform their respective obligations under any of the Merger
Documents, (c) the validity or enforceability of any of the Purchaser Documents
or (d) the rights and remedies of the Parent hereunder or thereunder.
"Merger" is defined in the Recitals.
"Merger Certificate" is defined in Section 2.1(b).
"Merger Documents" means this Agreement, the Merger Certificate, the Non-
Competition Agreements, the Consulting Agreements, the Merger Notes and the
Escrow Agreement, and any other certificate, document, instrument, stock power,
or agreement executed in connection therewith.
"Merger Note" is defined in Section 2.1(b).
"Merger Sub" means BVNJ Partnership, L.P., a New Jersey limited
partnership, and its successors and assigns.
"NJBCA" means The New Jersey Business Corporation Act, as amended.
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"Officer's Certificate" means a certificate signed in the name of a
corporation by its President, Chief Executive Officer, Treasurer, Chief
Financial Officer, or, if so specified, the Clerk or Secretary, acting in his or
her official capacity.
"Parent" means Big V Supermarkets, Inc., a New York corporation, and its
successors and assigns.
"Person" means any individual, firm, partnership, association, trust,
corporation, limited liability company, governmental body or other entity.
"PBGC" means the Pension Benefit Guaranty Corporation, and any successor
thereto.
"Premiums Liability" is that amount of all retrospective premiums which may
become due as a result of all ▇▇▇▇▇▇▇'▇ compensation insurance policies of the
Company existing as of the Closing Date.
"Release" means any release, issuance, disposal, discharge, dispersal,
leaching or migration into the indoor or outdoor environment or into or out of
any property, including the movement of Hazardous Materials through or in the
air, soil, surface water, ground water, or property other than in compliance
with all Environmental Laws and Permits.
"Securities Act" means the Securities Act of 1933, and any similar or
successor federal statute, and the rules, regulations and interpretations of the
Commission thereunder, all as the same shall be in effect at the time.
"Shares" means the outstanding shares of Common Stock of the Company.
"Subsidiary" means, with respect to any Person (a) any corporation,
association or other entity of which at least a majority in interest of the
outstanding capital stock or other Equity Securities having by the terms thereof
voting power under ordinary circumstances to elect a majority of the directors,
managers or trustees thereof, irrespective of whether or not at the time capital
stock or other Equity Securities of any other class or classes of such
corporation, association or other entity shall have or might have voting power
by reason of the happening of any contingency, is at the time, directly or
indirectly, owned or controlled by such Person, or (b) any entity (other than a
corporation) in which such Person, one or more Subsidiaries of such Person, or
such Person and one or more Subsidiaries of such Person, directly or indirectly
at the date of determination thereof, has at least majority ownership interest.
For purposes of this Agreement, a Subsidiary of the Company shall include the
direct and indirect Subsidiaries of the Company.
"Surviving Entity" is defined in Section 2.1(a).
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"Tax" means any federal, state or local income, gross receipts, license,
payroll, employment, excise, severance, stamp, occupation, premium, windfall
profits, environmental, customs duties, capital stock, franchise, profits,
withholding, social security, unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or add-on
minimum, estimated, other tax of any kind whatsoever, including any interest,
penalty, or addition thereto, whether disputed or not and any reasonable
expenses or costs incurred in connection with the determination, settlement and
litigation of any liability.
"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.
The following terms are defined in the following Sections of this
Agreement:
Term Section
---- -------
Assumed Liabilities 2.3
Parent's Accountants 2.8
Closing 2.4
Closing Balance Sheet 2.8
Closing Date 2.4
Company Statement 2.3
Consulting Agreements 6.1
Election 2.11
First Escrow Account 2.2
First Escrow Agreement 2.10
Financial Statements 3.5
Indemnifying Party 8.5
Net Working Capital 2.8
Losses 8.2
Merger Notes 2.2
Non-Competition Agreements 6.1
▇▇▇▇▇▇▇▇▇▇ Lease 6.1
▇▇▇▇▇▇▇▇▇▇ Store 2.3
Plan 3.19(a)
Purchased Assets 2.3
Real Estate 3.19
Real Estate Escrow Account 2.2
Real Estate Escrow Agreement 2.10
Second Escrow Account 2.2
Second Escrow Agreement 2.10
Stockholder and Marital Trust
Advances 2.2
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Stockholders' Accountants 2.8
Stockholders' Report 2.8
Third Accounting Firm 2.8(b)
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ARTICLE II
THE MERGER
2.1 The Merger.
(a) Upon the terms and subject to the conditions hereof, and in
accordance with the relevant provisions of applicable law, the Company shall be
merged with and into the Merger Sub as soon as practicable following the
satisfaction or waiver of the conditions set forth in Section 6. Following the
Merger, the Merger Sub shall continue as the surviving entity (the "Surviving
Entity") under the name "BVNJ Partnership, L.P." and shall continue its
existence under the laws of the State of New Jersey, and the separate corporate
existence of the Company shall cease.
(b) The Merger shall be consummated by filing with the New Jersey
Secretary of State a certificate of merger in the form attached hereto as
Exhibit H (the "Merger Certificate"), as is required by, and executed in
accordance with, the relevant provisions of the NJBCA (the time of such filing
being the "Effective Time"). The Merger shall become effective at the close of
business on the Closing Date.
(c) The Merger shall have the effects set forth in N.J.S.A. 14A:10-1,
et.seq.
2.2 Consideration. Upon the terms and subject to the conditions contained
in this Agreement, in reliance upon the representations, warranties and
agreements of the Stockholders contained herein and in consideration of the
Merger, the Shares of the Company issued and outstanding, as of the Effective
Time shall, by virtue of the Merger and without any action on the part of such
holders, automatically be converted into the right to receive from the Merger
Sub at the Closing a total consideration of $34,882,000 (the "Merger
Consideration"). The Merger Consideration shall consist of the following
components:
(a) the first $2,500,000 of Merger Consideration proceeds shall be set
aside in a cash escrow account as described in Section 2.10(a) hereof (the
"First Escrow Account") for the purpose of covering possible payments to the
Parent or Merger Sub for certain post-Closing adjustments and/or
indemnification;
(b) the next $2,000,000 of Merger Consideration proceeds shall be set
aside in a cash escrow account as described in Section 2.10(b) hereof (the
"Second Escrow Account") for the purpose of covering possible liabilities
relating to workmens' compensation insurance premiums.
(c) the next $1,000,000 of the Merger Consideration proceeds shall be
set aside in a cash escrow account as described in Section 2.10(c) hereof (the
"Real Estate Escrow
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Account") for the purpose of covering possible costs and liabilities arising out
of certain environmental, landlord-tenant and liquor business matters.
(d) the amount of $1,238,772, being the actual amount of all internal
advances (including interest) previously made by any of the Stockholders or the
Laurenti Marital Trust (the "Marital Trust") to the Company and remaining
outstanding as of the Closing Date (the "Stockholder and Marital Trust Advances"
(the amount of which is $1,875,237), less the actual amount of all internal
advances (including interest) previously made by the Company to any of the
Stockholders or to the Marital Trust and remaining outstanding as of the Closing
Date (the "Company Advances") (the amount of which is $636,465), shall be
debited against the Merger Consideration and shall be recorded as continuing
debt of the Company owing solely as provided in a promissory note payable to the
Marital Trust (the "Merger Note"), substantially in the form attached hereto as
Exhibit B;
(e) the remaining cash portion of the Merger Consideration, which
shall equal (i) $34,882,000 less (ii) the amounts set aside or debited, as the
case may be, pursuant to clauses (a), (b), (c) and (d) above shall be paid by
the Merger Sub to the Stockholders' Agent at the Closing by certified check in
immediately available funds or by federal funds wire transfer.
The Merger Consideration is subject to adjustment pursuant to Section 2.9
hereof.
2.3 Control of Assets and Liabilities. In completing the Merger described
in Section 2.1 above, the Merger Sub shall acquire control of the Company's
assets and liabilities as set forth on the compiled balance sheet and statements
of income and retained earnings for the Company for the most recent six-month
fiscal period ending July 3, 1999, as previously provided by the Stockholders to
the Merger Sub (the "Company Statement") excluding only (i) the land and
building improvements located at the Company's store at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ (the "Pennington Store"), (ii) the real property commonly
known as the ▇▇▇▇ Avenue property consisting of, inter alia, six garages, and
(iii) the liquor license and all assets, fixtures, inventory, and equipment
located at the liquor store presently operating at or adjacent to the ▇▇▇▇▇▇▇▇▇▇
Store, the title to all of which is to be transferred by the Company to an
Affiliate of one or more of the Stockholders on or prior to the Closing Date
(except as to the assets described in clause (iii) above, which are to be
transferred as soon as possible subsequent to the Closing). The foregoing assets
and liabilities will constitute the "Purchased Assets and Assumed Liabilities"
which underlie the purchase and sale agreement contained herein. The Purchased
Assets and Assumed Liabilities shall be subject only to such changes as may
occur in the ordinary course of business between the date of the Company
Statement and the Closing (it being understood that any changes in the
liabilities of the Company which are not included within the representations and
warranties of the Company as to existing and disclosed liabilities and/or which
the Company has covenanted not to incur shall not be considered changes in the
ordinary course of the business). The Assumed Liabilities will include (i) all
existing long-term debt (excluding current liabilities) and deferred
pension/benefit costs, which non-current
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liabilities shall total no more than $1,153,000, being the amount of such non-
current liabilities shown on the Company Statement, and (ii) continuing
indebtedness in respect of Stockholder and Marital Trust Advances, to the extent
provided under Section 2.2(b) hereof.
2.4 Time and Place of Closing. The closing of the transactions described
in Sections 2.1 and 2.2 of this Agreement (the "Closing") shall take place at
the offices of White & Case, 1155 Avenue of the Americas, New York, New York at
10:00 a.m. on November 12, 1999, or at such other place or time as the parties
hereto may mutually agree. The date and time at which the Closing actually
occurs is hereinafter referred to as the "Closing Date."
2.5 Deliveries by the Stockholders. At the Closing, the Stockholders will
deliver to Merger Sub (a) the various certificates, instruments and documents
referred to in Section 6.1 below, and (b) stock certificates representing the
Shares duly endorsed for cancellation or accompanied by stock powers duly
executed in blank, and any other documents that are necessary to complete such
cancellation, and Merger Sub will deliver to the Stockholders the various
certificates, instruments, and documents referred to in Section 6.2 below.
2.6 Designation of Stockholders' Agent. Each Stockholder hereby
irrevocably appoints ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇. (the "Stockholders' Agent") as
the true and lawful agent and attorney-in-fact of such Stockholder with full
power of substitution (a) to receive and act upon all notices and advices
required or permitted hereunder including, without limitation, all notices
pursuant to Article VII and Article X; (b) to give all notices and advices
required or permitted hereunder; (c) to deliver or authorize the delivery of the
Shares to be cancelled as part of the Merger, with all accompanying evidences of
transfer and authenticity, to Merger Sub in accordance with the terms of this
Agreement; (d) to accept from Merger sub the entire Merger Consideration, to pay
all of the expenses contemplated to be paid by the Stockholders pursuant to this
Agreement and to remit the net proceeds to each of the Stockholders in
accordance with each such Stockholder's pro rata portion as set forth on Exhibit
A; (e) to present certificates representing such Shares for cancellation as part
of the Merger; and (f) unless otherwise provided herein, to take all such other
actions and execute such other documents, agreements, certificates and
instruments on behalf of such Stockholder as may be necessary or desirable in
order to consummate the Merger pursuant to this Agreement. Notwithstanding the
foregoing, the Stockholders' Agent may not, on behalf of any Stockholder, agree
to any waiver or amendment to this Agreement without the prior written consent
of the Stockholders holding a majority of the Shares. This power of attorney is
a power coupled with an interest, and each such Stockholder declares that it is
irrevocable and that it shall survive the death, disability, incapacity or
incompetency of such Stockholder and in all other circumstances.
2.7 Indemnification of Stockholders' Agent. Each Stockholder shall
reimburse and indemnify the Stockholders' Agent, in proportion to his or her
respective interest in all of the Shares outstanding as of the Merger, from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses (including counsel fees and
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disbursements) or disbursements of any kind or nature whatsoever (including all
expenses) which may be imposed on, incurred by or asserted against the
Stockholders' Agent in performing its duties hereunder or in any way relating to
or arising out of this Agreement, provided that no Stockholder shall be liable
for any portion of such liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements resulting from the
Stockholders' Agent's gross negligence or willful misconduct.
2.8 Closing Balance Sheet.
(a) Upon the Closing, the Merger Sub shall engage its independent
auditors, Deloitte & Touche, LLP (the "Merger Sub's Accountants") to audit the
balance sheet and related footnotes for the Company as of the Closing Date,
prepared in accordance with GAAP (as so described, the "Closing Balance Sheet")
and to render as soon as practicable an unqualified auditor's report on such
Closing Balance Sheet, all in accordance with the "Scope of Work" proposal of
the Merger Sub's Accountants previously approved by the Merger Sub and the
Stockholders' Agent. The Merger Sub and the Stockholders shall jointly and
equally bear the audit fees and related costs and expenses relating to the
preparation of the Closing Balance Sheet, provided, however, that accounting
costs associated with the Parent's and Merger Sub's due diligence process and
related matters prior to the Closing are not to be included in the calculation
of such jointly shared costs of the Closing Balance Sheet. The Closing Balance
Sheet shall include, inter alia, a statement of the Company's current assets
less current liabilities, each as determined in accordance with GAAP ("Net
Working Capital"), as of the Closing Date. As part of the completion of the
Closing Balance Sheet, Stockholders, the Company, Merger Sub, Stockholders'
Accountants and Merger Sub's Accountants shall cooperate in carrying out a
store-by-store check of all goods and inventory on hand immediately prior to the
Closing Date, with each party entitled to utilize its own inventory service at
its own cost.
(b) Within thirty (30) business days after delivery by the Merger Sub
to the Stockholders of the Closing Balance Sheet together with all related
footnotes and calculations on which it is based, Stockholders' Agent may deliver
to the Merger Sub a written report (the "Stockholders' Report") of ▇▇▇▇▇▇, ▇▇▇▇▇
& ▇▇▇▇▇, the Company's independent certified public accountants (the
"Stockholders' Accountants"), setting forth any disagreement of the
Stockholders' Accountants with any of the information contained in the Closing
Balance Sheet which affects the determination of Net Working Capital. The costs
and expenses of the services of the Stockholders' Accountants shall be borne by
the Stockholders. If Stockholders' Agent does not submit a Stockholders' Report
within such period, then the Net Working Capital as calculated by the Merger
Sub's Accountants shall be final and binding on the parties hereto.
(c) If Merger Sub and the Stockholders' Agent do not resolve the
disagreements set forth in the Stockholders' Report, within ten (10) business
days of the Merger Sub's receipt of the Stockholders' Report, then either party
by written notice delivered to the other party may elect to have the
disagreements between the two reports resolved by a nationally
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recognized accounting firm mutually agreed upon by the Merger Sub's Accountants
and the Stockholders' Accountants (the "Third Accounting Firm") which shall make
a final and binding resolution of the disagreements and, based on such
resolution, a final and binding determination of Net Working Capital. The Third
Accounting Firm shall be instructed to use all reasonable best efforts to effect
a resolution within fifteen (15) business days of submission of the matter to it
and in any case, as soon as practicable after such submission to it, and to
communicate such resolution in writing to each party hereto. The costs and
expenses for the services of the Third Accounting Firm shall be shared fifty
percent (50%) by Merger Sub and fifty percent (50%) by the Stockholders.
(d) The Merger Sub and/or the Stockholders' Agent, as the case may be,
shall instruct each of the Merger Sub's Accountants, the Stockholders'
Accountants and the Third Accounting Firm to include in their respective reports
or determinations regarding Net Working Capital a calculation of the amount, if
any, by which the Company's Net Working Capital, as determined pursuant to this
Section 2.8, is less than $3,002,000, being the amount of Net Working Capital
shown on the Company Statement (such difference being the "Net Working Capital
Shortfall"), or greater than $3,002,000 (such difference being the "Net Working
Capital Excess"), as the case may be.
2.9 Post-Closing Adjustment to the Merger Consideration re: Net Working
Capital. The Merger Consideration shall be deemed to increase or decrease,
dollar for dollar, by the amount, if any, of the Net Working Capital Shortfall
or the Net Working Capital Excess, as the case may be. The Stockholders shall
pay to Merger Sub the amount of any Net Working Capital Shortfall, or the Merger
Sub shall pay to the Stockholders the amount of any Net Working Capital Excess,
in either case payable in immediately available funds by wire transfer in
accordance with instructions provided by the Stockholders' Agent or Merger Sub,
as the case may be, at least two (2) Business Days prior to such payment. The
payments required to be made pursuant to this Section 2.9 shall be made not
later than five (5) Business Days after final determination of the Net Working
Capital in accordance with Section 2.8 hereof. In order to further assure the
payment to the Merger Sub of any Net Working Capital Shortfall, the Escrow
Accounts will be established at Closing pursuant to Section 2.10(a) hereof.
2.10 Escrow Accounts.
(a) First Escrow Account. The First Escrow Account will be established
by the Parent, Merger Sub and the Stockholders at the time of Closing, and
$2,500,000 of the Merger Consideration proceeds shall be deposited in the First
Escrow Account, all pursuant to an Escrow Agreement (the "First Escrow
Agreement") substantially in the form attached hereto as Exhibit C-1. The First
Escrow Account shall be used to assure (i) payment to the Merger Sub of any Net
Working Capital Shortfall, as determined pursuant to Sections 2.8 and 2.9
hereof, and/or (ii) payment or reimbursement by the Stockholders to the Merger
Sub for those Losses of Merger Sub which are subject to indemnification as
referenced in Section 8 hereof. The procedures for
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the holding, application or release of funds held in the First Escrow Account
shall be those set forth in the First Escrow Agreement. If the total amount of
the Stockholders' obligations under Section 2.9 regarding a Merger Consideration
adjustment and under Section 8 regarding indemnification exceed the total amount
of the First Escrow Account available at any time, the Stockholders shall
nevertheless remain legally responsible, jointly and severally, to pay such
excess to the Merger Sub.
As to that specified portion of the Premiums Liability (as defined in and
finally determined pursuant to the provisions of paragraph (b) below) which is
deemed to be payable within one (1) year and is therefore treated as a current
liability under GAAP, the amount of such current portion of the Premiums
Liability shall be excluded entirely from the calculation of current liabilities
as part of the determination of Net Working Capital.
(b) Second Escrow Account. The Second Escrow Account will be
established by Parent, Merger Sub and the Stockholders at the time of Closing,
and $2,000,000 of the Merger Consideration proceeds shall be deposited in the
Second Escrow Account, all pursuant to the Second Escrow Agreement attached
hereto as Exhibit C-2. The Second Escrow Account shall be used solely to pay to
the Merger Sub an amount equal to all retrospective premiums which may become
due under all workmens' compensation insurance policies of the Company existing
as of the date hereof (the "Premiums Liability"). The procedures for the
holding, application or release of funds held in the Second Escrow Account shall
be those set forth in the Second Escrow Agreement. If the total amount of the
Premiums Liability exceeds the total amount of the Second Escrow Amount, the
Stockholders shall nevertheless remain legally responsible, jointly and
severally, to pay such excess to the Merger Sub.
(c) Real Estate Escrow Account. The Real Estate Escrow Account will be
established by Parent, Merger Sub and the Stockholders at the time of Closing,
and $1,000,000 of the Merger Consideration Proceeds shall be deposited in the
Real Estate Escrow Account, all pursuant to a certain Indemnity Agreement (the
"Indemnity Agreement"), attached hereto as Exhibit C-3. The Real Estate Escrow
Account shall be used to assure payment to the Merger Sub of certain losses
arising from landlord/tenant matters, environmental risk matters, and matters
arising out of the ownership and operation of the liquor store presently
operating at or adjacent to the ▇▇▇▇▇▇▇▇▇▇ Store prior to the transfer of title
of such liquor store and its assets and business to an Affiliate of one or more
of the Stockholders subsequent to the Closing. The procedures for the holding,
application or release of funds held in the Real Estate Escrow Account, and the
limits of liability for particular matters, shall be those set forth in the
Indemnity Agreement.
2.11 Exchange of Certificates. At the Closing, certificates (the
"Certificates") representing all of the issued and outstanding shares of Company
Common Stock shall be surrendered for cancellation and termination in the
Merger. At the Effective Time, each Certificate shall be cancelled in exchange
for the Merger Consideration. Until surrendered, each
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outstanding Certificate which prior to the Effective Time represented the Shares
shall be deemed for all corporate purposes to evidence ownership of the right to
receive the Merger Consideration, but shall, subject to applicable appraisal
rights under the N.J.B.C.A., have no other rights. Subject to appraisal rights
from and after the Effective Time, the holders of the Shares shall cease to have
any rights in respect of such shares and their rights shall be solely in respect
to the Merger Consideration.
2.12 Stock Transfer Books. At the Effective Time, the stock transfer books
of the Company shall be closed, and there shall be no further registration of
transfers of the Shares thereafter on the records of the Company.
2.13 No Further Ownership Rights in Company Capital Stock. The Merger
Consideration delivered upon the surrender for exchange of the Shares in
accordance with the terms hereof shall be deemed to have been issued in full
satisfaction of all rights pertaining to such Shares, and there shall be no
further registration of transfers on the records of the Surviving Corporation of
the Shares which were outstanding immediately prior to the Effective Time. If,
after the Effective Time, Certificates for the Shares are presented to the
Surviving Corporation for any reason, they shall be canceled and exchanged as
provided in this Article II.
2.14 Allocation of Merger Consideration.
(a) Upon the Closing, the Merger Sub shall engage the Merger Sub's
Accountants to complete expeditiously an appraisal to assist in determining the
allocation of the value of the Merger Consideration (plus Assumed Liabilities
and plus or minus adjustments pursuant to Sections 2.8 and 2.9, each to the
extent properly taken into account under Section 1060 of the Code amongst the
Assets and the Non-Competition Agreement contained in Section 6.1(k)) (the
"Allocation"). The Parent shall be responsible for the payment of fees and
related costs and expenses incurred by the Merger Sub's Accountants in
connection with the completion of such appraisal. As part of the completion of
such appraisal, the Company, Stockholders, Parent and Merger Sub and
Stockholder's Accountants shall, at their own costs, cooperate with and assist
Merger Sub's Accountants in completing such tasks. Upon completion of such
appraisal, the Merger Sub's Accountant shall forward a copy of such appraisal to
the Merger Sub, the Stockholders' Agent and their respective counsels.
(b) Upon receipt of such appraisal, the Stockholders' Agent, the
Parent and the Merger Sub shall work in good faith to reach an agreement as to
the Allocation, each recognizing the relative costs and benefits resulting from
such Allocation. Once the parties have agreed upon the Allocation, the parties
shall be bound by the terms set forth in Section 10.11 hereof.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND THE STOCKHOLDERS
Each of the Company and each of the Stockholders, jointly and severally,
hereby represents and warrants to Merger Sub and Parent as follows as of the
Closing Date:
3.1 Organization and Qualification. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
New Jersey. The Company has full power and authority to own, use and lease its
properties and to conduct its business as such properties are owned, used or
leased and as such business is currently conducted. The copies of the Company's
Charter and By-Laws, as amended to date, in each case certified by the Company's
Secretary and delivered to Merger Sub's counsel prior to the Closing, are true,
complete and correct. Except as set forth on Schedule 3.1 attached hereto, the
Company is qualified to do business as a foreign corporation and is in good
standing in each jurisdiction in which it owns or leases property or maintains
inventories or where the conduct of its business would require such
qualification.
3.2 Authority; No Violation. The Company has all requisite corporate power
and authority to enter into this Agreement and to carry out the transactions
contemplated hereby. The execution, delivery and performance of this Agreement
by the Company have been duly and validly authorized and approved by all
necessary corporate action. Each Stockholder has all requisite legal or trust
capacity to enter into this Agreement and to carry out the transactions
contemplated hereby. This Agreement and the other Merger Documents to which the
Company or the Stockholders, respectively, are parties constitutes the legal,
valid and binding obligation of the Company and each of the Stockholders,
enforceable against each of them in accordance with their respective terms.
Assuming the accuracy of the representations and warranties of Merger Sub
hereunder, (a) the entering into of this Agreement by the Company and each of
the Stockholders does not, and the consummation by the Company and each of the
Stockholders of the transactions contemplated hereby, including specifically the
consummation of the Merger, will not violate the provisions of (i) any
applicable federal, state or local laws, (ii) the Company's Charter or By-Laws,
or (iii) any provision of, or result in a default of any obligation under, or
result in any change in the rights or obligations of the Company, any Subsidiary
of the Company or any Stockholder under, any Lien, contract, agreement, license,
order, arbitration award, judgment, or decree to which the Company or any
Stockholder is a party or by which any of them is bound, or to which any
property of the Company is subject; and (b) the transfer and cancellation of the
Shares, as contemplated by this Agreement, are exempt from the registration
requirements of the Securities Act and from any registration or filing
requirements of any applicable state securities laws.
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3.3 Capitalization. The Company's authorized capital stock consists of
1,000 shares of Common Stock, no par value per share, of which 968 shares are
issued and outstanding and owned beneficially and of record by the Stockholders
as set forth on Schedule 3.3. There are no treasury shares held by the Company.
All of such outstanding shares are duly authorized, validly issued, fully paid,
non-assessable, free of all Liens, adverse claims and preemptive rights and have
been issued in compliance with all applicable federal and state laws. Except for
the rights of Parent and Merger Sub hereunder, there are no outstanding options,
warrants, rights or agreements of any kind for the issuance or sale of, or
outstanding securities convertible into or exchangeable for, any additional
shares of Common Stock or any other Equity Security of the Company. Each
Stockholder has good and marketable title to all of the Shares set opposite its
name in Schedule 3.3.
3.4 Subsidiaries; Investments. The Company does not have any Subsidiaries.
Except as set forth on Schedule 3.4, the Company does not own, directly or
indirectly, any securities issued by any other Person except for United States
government securities, certificates of deposit, or other cash equivalents and is
not a partner or participant in any partnership or joint venture of any kind.
3.5 Financial Statements. Attached hereto as Schedule 3.5 are the
following financial statements (collectively the "Financial Statements"): (i)
the Company Statement, which has been prepared in accordance with GAAP, and (ii)
reviewed balance sheets and statements of income, changes in stockholders'
equity and cash flow of the Company as of and for the fiscal year ended January
2, 1999 for the Company. 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
of the Company as of such dates and the results of operations of the Company for
such periods are correct and complete, and are consistent with the books and
records of the Company, subject in the case of the Company Statement to normal
year-end adjustments (which will not be material individually or in the
aggregate) and the absence of footnotes and other presentation items.
3.6 Absence of Undisclosed Liabilities. Except as set forth in the Company
Statement and in Schedule 3.6 attached hereto, there were no material
liabilities of the Company, whether accrued, absolute, contingent or otherwise
(including, without limitation, liabilities as guarantor or otherwise with
respect to obligations of any other Person, or liabilities for Taxes due or then
accrued or to become due), existing on the date of the Company Statement.
3.7 Absence of Certain Changes. Except as expressly addressed in this
Agreement or otherwise disclosed in Schedule 3.7 attached hereto, since the date
of the Company Statement there has not been:
(a) any change in the business, operations, assets, liabilities or
condition (financial or otherwise) of the Company taken as a whole that, by
itself or in conjunction with all
- 16 -
other such changes, whether or not arising in the ordinary course of business,
has been or is reasonably likely to be materially adverse with respect to the
Company (including, by way of example and not of limitation, the loss of any
significant distributor, customer or vendor, any announcement of new
developments in competitive technology, or the intention on the part of any key
employee of the Company to leave the Company's employ);
(b) any obligation or liability (whether direct or contingent or
with respect to the obligations of any other Person) incurred by the Company
other than obligations and liabilities incurred in the ordinary course of
business for an amount not more than $5,000 in any one case or $50,000 in the
aggregate;
(c) any Lien placed on any of the Company's properties or assets, or
any notice of adverse claim with respect to such properties or assets, which
remains in existence on the date hereof, other than Liens incurred in the
ordinary course of business securing an aggregate amount of liabilities of not
more than $25,000;
(d) any purchase, sale, lease, assignment, transfer or other
disposition, or any agreement or other arrangement for the purchase, sale,
lease, assignment, transfer or other disposition, of any part of the Company's
properties or assets, other than purchases for and sales from inventory for fair
consideration and purchases to replace obsolete equipment, each in the ordinary
course of business, except for fixed assets purchased or other capital
expenditures made in amounts not exceeding $5,000 for any single item and
$50,000 in the aggregate for all such items;
(e) any material damage, destruction or loss, whether or not covered
by insurance, adversely affecting the Company's properties, assets or business;
(f) any declaration, setting aside or payment of any dividend on, or
the making of any other distribution in respect of, any Equity Security of the
Company, or any direct or indirect redemption, purchase or other acquisition by
the Company of any of its own Equity Securities, or any issuance by the Company
of any Equity Security;
(g) any material labor trouble or claim of unfair labor practices
involving the Company; any change in the employment contracts of or compensation
payable or to become payable by the Company to any of its officers, directors,
employees, consultants or agents excepting changes made in the ordinary course
of business pursuant to existing employment contracts or policies); or any
change in coverage or benefits available under any Plan described in Section
3.18;
(h) any payment or discharge of a material Lien or liability of the
Company not disclosed on the Financial Statements or incurred in the ordinary
course of business;
- 17 -
(i) any obligation, indebtedness or liability incurred by the
Company with respect to any loan, advance or commitment to lend by any bank,
financial institution or institutional lender to lend to the Company or to any
of its officers, directors, employees, consultants, agents, or stockholders of
the Company or to any other Person; or any loans or advances made by the Company
to any officers, directors, employees, consultants, agents or stockholders of
the Company, except for normal compensation, professional fees, expense
allowances [and bonuses (all pursuant to established policies)] payable to
officers and directors;
(j) any contracts, licenses, leases or agreements entered into by
the Company which are outside the ordinary course of business or which obligate
the Company for more than $5,000 in any one case or more than $25,000 in the
aggregate;
(k) any amendment or other change (or any authorization to make such
an amendment or change) to the Company's Charter or By-Laws, except as required
in connection with the consummation of the transactions contemplated hereby;
(l) any postponement or delay in payment of any accounts payable or
other liability of the Company except in the ordinary course of business
consistent with prior practices;
(m) any cancellation, waiver, compromise or release of any right or
claim either involving more than $10,000 or outside the ordinary course of
business consistent with prior practices; or
(n) any cancellation, termination, modification, or acceleration by
any party to any contract, license, lease or agreement involving more than
$10,000 to which the Company is a party or by which it is bound.
3.8 Listing of Accounts Payable. Schedule 3.8 sets forth a summary of
accounts payable as of the dates set forth thereon and references a detailed
list supporting such listed payables.
3.9 Title to Assets; Condition of Assets. The Company has good and
marketable title to, or a valid leasehold interest in, all real, personal,
tangible and intangible property and assets necessary for the conduct of its
business as such business is presently conducted, free and clear of all Liens,
except for properties and assets disposed of in the ordinary course of business
since the date of the Company Statement and as previously disclosed and listed
in Schedule 3.7(2) and the information referenced therein. All tangible
properties and assets owned or leased by the Company are in good operating
condition and repair, ordinary wear and tear excepted, have been well
maintained, and conform with all applicable laws, statutes, ordinances, rules
and regulations.
3.10 Real Estate.
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(a) The Company owns no real property;
(b) Schedule 3.10(b) lists and describes briefly all real property
leased or subleased to the Company. With respect to each such lease and
sublease;
(i) correct and complete copies thereof have been delivered to
Parent;
(ii) the lease or sublease is legal, valid binding,
enforceable, and in full force and effect;
(iii) no party to the lease or sublease is currently in breach
or default of any lease provision which, with notice and/or lapse of time and a
continuing failure to cure, would permit termination, modification, or
acceleration of such lease or sublease;
(iv) no party to the lease or sublease has repudiated any
provision thereof, and there are no material disputes, oral agreements, or
forbearance programs in effect as to the lease or sublease;
(v) with respect to each sublease, the representations and
warranties set forth in subsections (ii), (iii) and (iv) above are, to the
knowledge of the Company, true and correct with respect to the underlying lease;
(vi) the Company has not assigned, transferred, conveyed,
mortgaged, deeded in trust, or encumbered any interest in the leasehold or
subleasehold;
(vii) all facilities leased or subleased thereunder have
received all approvals of governmental authorities (including licenses and
permits) required in connection with the operation thereof and have been
operated and maintained in accordance with applicable laws, statutes,
ordinances, rules and regulations;
(viii) all facilities leased or subleased thereunder are
supplied with utilities and other services necessary for the operation of said
facilities; and
(ix) all consents which may be required under any such lease
or sublease in order to permit the Merger pursuant to this Agreement have been
obtained.
3.11 Accounts Receivable. All of the accounts receivable of the Company
are properly reflected in the Company Statement in accordance with GAAP and are,
subject to the allowance for doubtful accounts set forth therein, valid and
enforceable claims, subject to no set-off or counterclaim, and are to the
Company's knowledge, fully collectible in the ordinary course of business.
Except as set forth in Schedule 3.11 attached hereto, the Company has no
accounts receivable or loans or notes receivable from any Affiliates or from any
of its officers, directors, consultants, employees, agents or stockholders.
- 19 -
3.12 Inventories. Except as disclosed in Schedule 3.12 attached hereto:
(i) the inventories of the Company are properly reflected in the Company
Statement and are of a quality and quantity saleable in the ordinary course of
business of the Company at prevailing market prices, are priced at the lower of
cost (first in, first out) or market and (ii) the values of the inventories
stated in the Company Statement reflect the Company's normal inventory valuation
policies and were determined in accordance with GAAP consistently applied.
3.13 Intellectual Property. The Company does not own, or hold any license
for, any patents, trademarks, copyrights, trade secrets or license products used
or useful on account of its business, except for the licenses granted to the
Company by Wakefern Food Corp. with respect to the use of the "ShopRite"
trademark or label or any other trademark licensed by or through Wakefern. The
Company has no applications for any patents, trademarks or copyrights, or
negotiations for any license or licensed products, which are currently pending.
3.14 Contracts. Except for contracts, commitments, leases, licenses, plans
and agreements described in Schedule 3.14 attached hereto, the Company is not a
party to or subject to:
(a) any plan or contract regarding or providing for bonuses,
pensions, options, stock purchases, deferred compensation, severance benefits
retirement payments, profit sharing, stock appreciation, collective bargaining
or the like, or any contract or agreement with any labor union;
(b) any employment or consulting contract or contract for personal
services not terminable at will by the Company without penalty to the Company;
(c) any contract or agreement for the purchase of any commodity,
product, material, supplies, equipment or other personal property, or for the
receipt of any service, other than purchase orders entered into in the ordinary
course of business for less than $5,000 each and which in the aggregate do not
exceed $25,000;
(d) any contract or agreement for the purchase or lease of any fixed
asset, whether or not such purchase or lease is in the ordinary course of
business, for a price in excess of $5,000;
(e) any contract or agreement for the sale of any commodity, product,
material, equipment, or other personal property, or the furnishing by the
Company of any service, other than contracts with customers entered into in the
ordinary course of business;
(f) any contract or agreement with any sales agent or distributor of
products of the Company or any of its Subsidiaries;
- 20 -
(g) any contract or agreement concerning a partnership or joint
venture with one or more Persons;
(h) any confidentiality agreement or any non-competition agreement
or other contract or agreement containing covenants limiting the Company's
freedom to compete in any line of business or in any location or with any
Person;
(i) any license agreement (as licensor or licensee);
(j) any contract or agreement with any Stockholder or any present or
former officer, director, consultant, agent or stockholder of the Company or
with any Affiliate of any of them;
(k) any loan agreement, indenture, note, bond, debenture or any
other document or agreement evidencing a capitalized lease obligation or
Indebtedness to any Person;
(l) any agreement of guaranty, indemnification, or other similar
commitment with respect to the obligations or liabilities of any other Person
(other than lawful indemnification provisions contained in the Charters and
By-Laws of the Company);
(m) any agreement under which the consequences of a default or
termination is reasonably expected to have a Material Adverse Effect;
(n) any agreement, contract or commitment with Wakefern Food Corp.;
or
(o) any other agreement or contract (or group or related agreements
or contracts) the performance of which involves consideration paid or received
by the Company or any Subsidiary of the Company in excess of $5,000.
Copies of all such contracts, commitments, plans, leases, licenses and
agreements have been provided to Parent or Merger Sub or their counsel prior to
the execution of this Agreement, and all such copies are true, correct and
complete, except such as are described in Schedule 3.14.] Except as listed and
described in Schedule 3.14, none of the Company, or to the knowledge of the
Company and each Stockholder, any other Person, is in default under any such
contract, commitment, plan, lease, license or agreement described in Schedule
3.14 (a "default" being defined for purposes hereof as an actual default or
event of default or the existence of any fact or circumstance which would, upon
receipt of notice or passage of time, constitute a default).
3.15 Customers and Suppliers. Schedule 3.15 attached hereto sets forth the
twenty (20) largest suppliers and customers of the Company in the calendar year
19__ (the "Large Suppliers and Customers"). Except as reflected in Schedule
3.15, no supplier is a material sole source of supply to the Company. Except as
set forth on Schedule 3.15, neither (i) any of the
- 21 -
Large Suppliers and Customers nor (ii) any supplier who was or is the sole
source of supply of any item, has canceled or otherwise terminated, or
threatened to cancel or otherwise terminate, its relationship with the Company
or has during the last twelve (12) months decreased materially or threatened to
decrease or limit materially, its services, supplies or materials to the Company
or its usage or purchase of the services or products of the Company. The Company
has no knowledge that any of the Large Suppliers and Customers intends to cancel
or otherwise adversely modify its relationship with the Company, or to decrease
materially or limit its services, supplies or materials to the Company, or its
usage or purchase of the services or products of the Company.
3.16 Compliance with Laws.
(a) The Company has all licenses, permits, franchises, orders,
approvals, accreditations, written waivers and other authorizations as are
necessary in order to enable it to own and conduct its business as currently
conducted and to occupy and use its real and personal properties without
incurring any material liability. No registration, filing, application, notice,
transfer, consent, approval, order, qualification, waiver or other action of any
kind on the part of the Company or any Stockholder is required by virtue of the
execution and delivery of this Agreement or the consummation of the transactions
contemplated hereby to avoid the loss of any rights pertaining to any such
license, permit, franchise, order, approval, accreditation, waiver or
authorization. The Company is in full compliance with the terms and conditions
of all such licenses, permits, franchises, orders, approvals, accreditations,
waivers and authorizations.
(b) The Company has conducted and is conducting its business in
material compliance with all applicable federal, state or local laws, statutes,
ordinances, regulations, rules or orders or other requirements of any
governmental, regulatory or administrative agency or authority or court or other
tribunal relating to it (including, but not limited to, any law, statute,
ordinance, regulation, rule, order or requirement relating to securities,
properties, business, products, advertising, sales or employment practices,
immigration, terms and conditions of employment, wages and hours, safety,
occupational safety, health or welfare conditions relating to premises occupied,
product safety and liability or civil rights). The Company is not currently
charged with, and to the knowledge of the Company and each of the Stockholders,
is not now under investigation with respect to, any material violation of any
applicable law, statute, ordinance, regulation, rule, order or requirement
relating to any of the foregoing in connection with the business of the Company,
and the Company has filed all material reports required to be filed with any
governmental, regulatory or administrative agency or authority.
3.17 Taxes.
(a) Except as set forth in Schedule 3.17 attached hereto, the
Company has filed all Tax Returns that it was required to file. All such Tax
Returns were correct and prepared in accordance with applicable law in all
respects. All Taxes owed by the Company have been
- 22 -
paid (whether or not shown on any Tax Return). The Company currently is not the
beneficiary of any extension of time within which to file any Tax Return. There
is no outstanding Claim by an authority in a jurisdiction where the Company does
not file Tax Returns that it is or may be subject to the imposition of any Tax
by that jurisdiction. There are no Liens on any of the assets of any of the
Company which have arisen in connection with any failure (or alleged failure) to
pay any Tax.
(b) The Company has withheld and paid all Taxes required to have
been withheld and paid in connection with amounts paid or owing to any employee,
consultant, independent contractor, creditor, stockholder, or other third party.
(c) To the best of their knowledge, none of the Stockholders or the
Company expects any authority to assess any additional Taxes for any period for
which Tax Returns have been filed. Neither the Company nor any of the
Stockholders is aware of any dispute or Claim concerning any liability for Taxes
of the Company. Schedule 3.17 attached hereto lists all federal, state and local
Tax Returns filed with respect to any of the Company's taxable periods ended on
or after January 1, 1996, indicates those Tax Returns that have been audited,
and indicates those Tax Returns that currently are the subject of audit. The
Stockholders have delivered to Parent correct and complete copies of all federal
income Tax Returns, examination reports, and statements of deficiencies assessed
against or agreed to by the Company since January 1, 1996.
(d) The Company has not waived any statute of limitations in respect
of Taxes or agreed to any extension of time with respect to any Tax assessment
or deficiency, or the collection of any Tax, which remains outstanding.
(e) The Company has not filed a consent under Section 341(f) of the
Code concerning collapsible corporations, or agreed to have Section 341(f)(2)
applied to any disposition of an asset owned by the Company. The Company has not
made or is obligated to make any payments or is a party to any agreement that
under certain circumstances could obligate it to make any payments that will not
be deductible under Section 280G of the Code or that are subject to an excise
tax under Section 4999 of the Code. The Company is not, and has not been a
United States real property holding corporation within the meaning of Section
897(c)(2) of the Code during the applicable period specified in Section
897(c)(1)(A)(ii) of the Code. The Company is not a party to any Tax allocation
or sharing agreement. The Company has not been a member of an Affiliated Group
(as defined by Section 1504 of the Code) filing a consolidated federal income
Tax Return (other than a group the common parent of which was the Company). The
Company has no Liability for the Taxes of any Person (other than that of the
Company) under Treas. Reg. Section 1.1502-6 (or any similar provision of state
and local law), as a transferee, successor by contract, guarantee,
indemnification or otherwise.
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(f) The unpaid Taxes of the Company (i) did not, as of the date of
the Company Statement, exceed the reserve allocated for Tax Liabilities, which
is maintained under the statement entry entitled "Accrued expenses and other
current liabilities" (other than any reserve for deferred Taxes established to
reflect timing differences between book and Tax income) set forth on the face of
the Company Statement (rather than in any notes thereto) and (ii) do not exceed
such allocated portion of that reserve as adjusted for the passage of time
through the Closing Date in any manner that is inconsistent with the past custom
and practice of the Company in filing its Tax Returns.
(g) The Company has been a validly electing S corporation within the
meaning of Sections 1361 and 1362 of the Code effective March 29, 1987, and
thereafter also elected S corporation status under applicable state statutes
after such election was permitted under the laws of New Jersey, all as set forth
on Schedule 3.17 and at all times during its existence and will be such an S
corporation up to and including the Closing Date.
(h) The Stockholders timely reported their distributive share of the
Company's income, gain and losses on their Tax Returns and paid all Taxes due
with respect to said income, gain and losses.
(i) The Company will not be required (i) as a result of a change in
method of accounting for a tax period, to include any adjustment under Section
481(a) of the Code (or any corresponding provision of state, local or foreign
Tax law) in taxable income for any such Tax period or (ii) as a result of any
"closing agreement," as described in Section 7121 of the Code (or any
corresponding provision of state, local or foreign Tax law), to include any item
of income or exclude any item of deduction from any Tax period.
(j) The Company is not subject to any closing agreements with any
Tax authority.
(k) The Company would not be liable for any Tax under Section 1374
of the Code or corresponding state statute if its assets were sold for their
fair market value as of the Closing Date. The Company will not be liable for any
Tax under Section 1374 of the Code or corresponding state statute in connection
with the Merger, the Deemed Asset Sale, or the transactions contemplated hereby
or under any other Merger Document). The Company has not, in the past 10 years,
(A) acquired assets from another corporation in a transaction in which the
Company's Tax basis for the acquired assets was determined, in whole or in part,
by reference to the Tax basis of the acquired assets (or any other property) in
the hands of the transferor, or (B) acquired the stock of any corporation which
is a qualified subchapter S subsidiary. The Company will not be in its taxable
year ending on the Closing Date, and has not been in any prior taxable year
subject to tax under Section 1375 of the Code on any of its income or gains. The
Company does not own any stock in another corporation that is a qualified
Subchapter S Subsidiary as defined in Section 1361(b)(3)(B) of the Code.
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(l) Except as disclosed in Schedule 3.17, the Company is not a party
to any joint venture, partnership or other arrangement that is treated as a
partnership for federal income Tax purposes.
(m) The Company has not taken any action including, but not limited
to, the sale of any asset using the installment method that would have the
effect of deferring any material liability for Taxes for the Company from any
taxable period ending at or before the date hereof to any taxable period
thereafter.
(n) No power of attorney has been granted by the Company, and is
currently in force, with respect to any matter relating to Taxes.
(o) Compensation paid to Stockholders, officers, directors,
employees and owners of the Company is not unreasonable and all rental or lease
payments paid to Stockholders, officers, directors, employees or owners of the
Company are reasonable.
3.18 Employee Benefit Plans.
(a) Identification of Plans.
Schedule 3.18 attached hereto lists and identifies each:
(1) "Employee Pension Benefit Plan" (as such term is defined in
Section 3(2) of ERISA) which is not a Multiemployer Plan;
(2) "Multiemployer Plan" (as such term is defined in Section 3(37)
or 4001(a)(3) of ERISA);
(3) "Employee Welfare Benefit Plan" (as such term is defined in
Section 3(3) of ERISA); and
(4) Stock purchase, option or bonus plan, deferred compensation,
severance pay, incentive, vacation, sick pay or leave, fringe benefit plan,
policy or arrangement or payroll practice;
which is maintained or contributed to by the Company or any ERISA Affiliate or
under which the Company or any ERISA Affiliate has any liability or contingent
liability (individually a "Plan" and collectively, the "Plans").
(b) Representations Applicable to All Employee Pension Benefit Plans.
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(1) Each Plan which is intended to be "qualified" under Section
401(a) of the Code is and has been at all times so qualified, and the trusts
maintained thereunder are and have been at all times exempt from taxation under
Section 501(a) of the Code. There have been no amendments to any such Plans
which are not the subject of a determination letter issued with respect thereto
by the Internal Revenue Service. No event has occurred that will or could give
rise to disqualification of any such Plan under the Code.
(2) No Plan has incurred any "accumulated funding deficiency" (as
described in Section 302 of ERISA or Section 412 of the Code), whether or not
waived, nor has there been any failure to make by its due date a required
installment under Section 302(e) of ERISA or Section 412(m) of the Code with
respect to any Plan.
(c) Representations Applicable to All Title IV Plans.
(1) With respect to each Plan, no liability under Title IV of ERISA
has been incurred since the effective date of ERISA that has not been satisfied
in full, and no condition exists that presents a risk of incurring a liability
under Title IV, other than liability for PBGC premiums which have been paid when
due.
(2) No steps have been taken to terminate any Plan subject to Title
IV of ERISA.
(3) No Plan has been the subject of a "reportable event" (as
described in Section 4043 of ERISA) as to which a notice would be required to be
filed with the PBGC.
(4) With respect to each Plan which is subject to Title IV of ERISA,
neither (i) the present value of accrued benefits under such Plan (based upon
the actuarial assumptions used for funding purposes in the most recent actuarial
report prepared by the Plan's actuary with respect to such Plan), nor (ii) the
"benefit liabilities" (as described in Section 4001(a)(18) of ERISA) of such
Plan exceeded, as of its last valuation date, the then current value of the
assets of such Plan. All costs of any Plan subject to Title IV of ERISA have
been provided for on the basis of consistent methods in accordance with sound
actuarial assumptions and practices. Since the last valuation date for each such
Plan, there have been no amendments or changes to such Plans that would increase
the amount of benefits thereunder.
(5) No Plan is a plan described in Section 4063(a) of ERISA.
(d) Representations Applicable to All Multiemployer Plans.
(1) With respect to each Multiemployer Plan: (i) none of the Company
or any ERISA Affiliate has withdrawn, partially withdrawn, or received any
notice of any claim or demand for withdrawal liability or partial withdrawal
liability against any of them; (ii) none of the Company or any ERISA Affiliate
has received any notice that any Multiemployer Plan is in
- 26 -
reorganization, that increased contributions may be required to avoid a
reduction in plan benefits or the imposition of any excise tax, or that any
Multiemployer Plan is or may become insolvent or may be terminated; and (iii)
none of the Company or any ERISA Affiliate has failed to make any required
contribution.
(2) For each Multiemployer Plan, Schedule 3.18 sets forth, as of its
last valuation date, the amount of potential withdrawal liability of the Company
and the ERISA Affiliates, calculated according to the information made available
by each Multiemployer Plan pursuant to Section 4221(e) of ERISA.
(e) Representations Applicable to All Plans.
(1) Each Plan complies and has been administered in form and
operation with all requirements of law and regulation applicable thereto. The
Company and the ERISA Affiliates have performed all of their obligations under
all such Plans.
(2) There have been no acts or omissions which have given rise to,
or which could give rise to, any penalty, tax, or fine under Sections 409,
502(c), or 502(i) of ERISA, or Sections 4975 or 4976 of the Code, for which the
Company or any ERISA Affiliate may be liable.
(3) None of the assets of any Plan are invested in any employer
securities, employer real property, or any annuity contracts.
(4) All payments required by any Plan, any collective bargaining
agreement or other agreement, or by-law (including, without limitation, all
contributions, insurance premiums, or intercompany charges) with respect to all
periods through the date of the Closing shall have been made prior to the
Closing (on a pro rata basis where such payments are otherwise discretionary at
year end) or provided for by the Company as applicable, by full accruals as if
all targets required by such Plan had been or will be met at maximum levels) on
its financial statements. All such payments and contributions intended to be
deducted for income tax purposes have been fully deducted; and no such deduction
has been challenged or disallowed or is expected to be challenged or disallowed.
(5) All required reports and descriptions of each Plan (including
IRS Form 5500 Annual Reports, Summary Annual Reports, and Summary Plan
Descriptions) have been timely filed and distributed.
(6) None of the Company or any ERISA Affiliate has any plan or
commitment to establish any additional Plans or to amend any existing Plan.
(7) No Plan provides benefits, including without limitation death,
medical, or severance benefits, with respect to current or former employees or
directors (or their
- 27 -
beneficiaries) beyond their retirement or other termination of service other
than (i) coverage for benefits mandated by applicable law, (ii) death benefits
or retirement benefits under an Employee Pension Benefit Plan, (iii) deferred
compensation benefits properly accrued as liabilities on the Financial
Statements, or (iv) benefits the full cost of which is borne by the current or
former employee or director or his beneficiaries.
(8) There are no actions, suits, or claims (other than routine
claims for benefits made in the ordinary course of plan administration for which
plan administrative review procedures have not been exhausted) pending or
threatened involving any Plans or the assets of such Plans, and no facts exist
which could give rise to any such action, suit, or claim.
(9) No Plan is, or to the knowledge of the Company and the
Stockholders is reasonably expected to be, under audit or investigation by the
IRS, DOL, or any other governmental authority and no such completed audit, if
any, has resulted in the imposition of any additional tax or penalty. With
respect to each Plan that is funded mostly or partially through an insurance
policy, the Company has no liability in the nature of retroactive rate
adjustment, loss sharing arrangement or other actual or contingent liability
arising wholly or partially out of events occurring on or before the Closing. No
event, condition or circumstance exists that would prevent the amendment or
termination of any Plan.
(10) For each Plan, a true and complete copy of each of the
following documents have been delivered to Parent: (i) Plan document and all
amendments thereto; (ii) most recent Summary Plan Description (together with
each Summary of Material Modifications required under ERISA); (iii) IRS Form
5500 Annual Report, if required under ERISA, for the two most recent plan years,
together with all schedules, financial statements, and opinions of independent
accountants; (iv) the actuarial report, if required under ERISA, for the two
most recent plan years; (v) Form PBGC-1, if required under ERISA, for the two
most recent plan years; (vi) if the Plan is funded through a trust or any third
party funding vehicle (including a voluntary employee benefit association under
Section 501(c)(9) of the Code, or a "multiple employer welfare arrangement"
described in Section 3(40) of ERISA), the trust or other funding agreement, all
amendments thereto, and the latest financial statements thereof for the two most
recent plan years; and (vii) the most recent determination letter received from
the Internal Revenue Service with respect to each Plan that is intended to be
qualified under Section 401 of the Code.
3.19 Environmental Matters.
(a) Except as disclosed in Schedule 3.19 attached hereto, the use
and operation by the Company and, to the knowledge of the Company, by all past
owners and operators, of all facilities and properties used in the business of
the Company have been, and will be on the Closing Date, in compliance in all
material respects with all Environmental Laws, and no Environmental Action has
been filed, commenced, or, to the knowledge of the Company and
- 28 -
each of the Stockholders, threatened with or against any of them alleging any
failure so to comply.
(b) The Company has received all Environmental Permits required to
allow it to conduct its operations and businesses, such Environmental Permits
are valid and in effect, and the Company is in compliance with such
Environmental Permits.
(c) Except as disclosed in Schedule 3.19, the Company has never sent
or arranged for the transportation of Hazardous Materials to a site, or owned or
operated a site, which, pursuant to CERCLA or any similar state law, has been
placed or is proposed (by the United States Environmental Protection Agency
("EPA") or similar state authority) to be placed, on the "National Priorities
List," as in effect as of the Closing Date, of hazardous waste sites or any
similar state list.
(d) Except as disclosed in Schedule 3.19, neither the Company nor
any Stockholder has received notice from any Person, (i) that it has been
identified by the EPA or similar state authority as a potentially responsible
party under CERCLA with respect to a site listed on the "National Priorities
List," as in effect as of the Closing Date, of hazardous waste sites or any
similar state list; (ii) that any Hazardous Materials which the Company has
generated, transported, or disposed of has been found at any site at which a
Person has conducted or has ordered that the Company conduct a remedial
investigation, removal, or other response action pursuant to any Environmental
Law; or (iii) that the Company is or shall be a named party to any Environmental
Action arising out of any Person's incurrence of costs, expenses, losses, or
damages of any kind whatsoever in connection with the release of Hazardous
Materials.
(e) Except as disclosed in Schedule 3.19, there are no underground
fuel or other storage tanks located at any of the facilities of the Company. All
such tanks disclosed in Schedule 3.19, together with all appurtenant piping,
valve, and related facilities, are, except as disclosed in Schedule 3.19,
structurally sound, are not currently and have not in the past been leaking or
releasing their contents into the soil or groundwater, and are in compliance
with all applicable registration, testing, monitoring, containment, and
corrosion protection requirements.
(f) Except as disclosed in Schedule 3.19, there have been no
unpermitted Releases or threatened Releases that are or at any time were
reasonably likely to occur of Hazardous Materials on, upon, into, or from any
real property owned or leased by the Company or any of its Subsidiaries (the
"Real Estate"); and, to the knowledge of the Company and each of the
Stockholders, there have been no Releases on, upon, from, or into any real
property located in the vicinity of the Real Estate or other assets of the
Company or any of its Subsidiaries which, through the soil, groundwater, or
surface water, may have come to be located on, upon, or under such Real Estate
or other assets.
- 29 -
(g) Without in any way limiting the generality of the foregoing,
there is, to the knowledge of the Company and each of the Stockholders, no
asbestos contained in or forming part of any building, building component,
structure, or office space owned or leased by the Company; and, to the knowledge
of the Company and each of the Stockholders, no polychlorinated biphenyls
("PCBs") are used or stored at any property owned or leased by the Company. All
properties and equipment used in the business of the Company and its respective
predecessors have been free of methylene chloride, trichloroethylene, 1, 2 -
transdichloroethylene, dioxins, dibenzofurans, and Extremely Hazardous
Substances, as such term is defined in Section 302 of the Emergency Planning and
Community Right-to-Know Act of 1986, as amended.
(h) None of the Real Estate or other assets of the Company is or is
expected to be subject to any applicable environmental clean-up responsibility
law or environmental restrictive transfer law or regulation, solely by virtue of
the transactions set forth herein and contemplated hereby.
3.20 Employees. Schedule 3.20 attached hereto sets forth a true and
complete list of (a) all directors of the Company, (b) all officers (with office
held) of the Company, (c) all consultants and independent contractors retained
by the Company currently or during the last fiscal year and (d) all employees of
the Company, including each such employee's job title, remuneration and duration
of employment period. Except as disclosed in Schedule 3.20 or Schedule 3.18, the
Company is not a party to any written or oral employment, consulting, service,
severance or pension agreement. The Company is not a party to, and none of its
employees are subject to, any collective bargaining agreement or other union
contract, other than as disclosed in Schedule 3.20. The Company is in compliance
in all material respects with applicable federal, state and local laws affecting
employment and employment practices, including terms and conditions of
employment and wages and hours, and there are, and have been during the past
five (5) years, no complaints against the Company pending or, to the knowledge
of the Company and each of the Stockholders, threatened before the National
Labor Relations Board or any similar state or local agency, except as set forth
on Schedule 3.20. There is no pending or, to the knowledge of the Company and
each of the Stockholders, threatened labor trouble with or effort to organize
any of its employees, and there has been no such labor trouble or, to the
knowledge of the Company and each of the Stockholders, effort to organize during
the past five (5) years.
3.21 Litigation. Except as disclosed on Schedule 3.21 attached hereto, (a)
there is no Claim pending or, to the knowledge of the Company or any Stockholder
threatened (or, to the knowledge of the Company and each Stockholder, any facts
which could lead to such a Claim) by, against, affecting or regarding the
Company or its business, properties or assets, or any Stockholder at law or in
equity, before any federal, state or local court or any other governmental or
administrative agency or tribunal or any arbitrator or arbitration panel, and
(b) there are no judgments, orders, rulings, charges, decrees, injunctions,
notices of violation or other mandates
- 30 -
against or affecting the Company or any Stockholder with respect to the
business, properties or assets of the Company. Nothing listed on Schedule 3.21,
either individually or when aggregated with other listings on such Schedule, is
reasonably expected to have a Material Adverse Effect.
3.22 Insurance. Schedule 3.22 attached hereto sets forth a summary of all
insurance policies (including policies providing property, casualty, liability,
and workers' compensation coverage, benefits or coverage for any Plan described
in Section 3.18, and bond and surety arrangements) to which the Company is a
party, a named insured, or otherwise the beneficiary of coverage and specifies
the insurer, the amount of coverage, type of insurance, expiration date, and any
retroactive premium adjustments or other loss sharing arrangements. With respect
to each such insurance policy: (a) the policy is legal, valid, binding,
enforceable, and in full force and effect; (b) neither the Company nor any other
party to the policy is in breach or default of any requirements thereunder which
is reasonably expected to lead to the cancellation of, or refusal to recognize
any claim under, such policy (including with respect to the payment of all
premiums or the giving of notices), and no event has occurred which, with notice
or the lapse of time, would constitute such a breach or default, or permit
termination, modification, or acceleration under the policy; and (c) no party to
the policy has repudiated any provision thereof. The Company has been covered
during the past ten (10) years by insurance in scope and amount customary and
reasonable for the businesses in which it has engaged during the aforementioned
period. Schedule 3.22 describes any self-insurance arrangements affecting any of
the Company.
3.23 Company Products. Each product manufactured, sold, leased,
distributed or delivered by the Company ("Company Products") has been in
conformity with all material and applicable contractual commitments and all
applicable express and implied service and product warranties. Except as
disclosed in Schedule 3.23 attached hereto, (a) there are no existing or, to the
knowledge of the Company or any Stockholder, threatened Claims against the
Company for services or merchandise which are defective or fail to meet any
express or implied service or product warranties, or any facts which, if
discovered by a third party, would support such a Claim; and (b) no Claim has
been asserted against the Company for renegotiation or price redetermination
with respect to any transaction, and there are no facts upon which any such
Claim could be based. Except as set forth on Schedule 3.23, there are no
statements, citations or decisions by any governmental or regulatory body or
agency that any Company Product is defective or fails to meet any standards
promulgated by any such governmental or regulatory body or agency. Except as set
forth on Schedule 3.23, there have been no recalls ordered by any such
governmental or regulatory body or agency with respect to any Company Product.
3.24 Powers of Attorney. Except for powers of attorney granted in the
ordinary course of business to independent certified public accountants or in
connection with the establishment or amendment of a Plan described in Schedule
3.18(a)(1), the Company has not granted any outstanding power of attorney.
- 31 -
3.25 Brokers. Except as disclosed in Schedule 3.25 attached hereto,
neither the Company nor the Stockholders, or anyone acting on their behalf, has
engaged, retained, or incurred any liability to any broker, investment banker,
finder or agent or has agreed to pay any brokerage fees, commissions, finder's
fees or other fees with respect to the Merger, this Agreement or the
transactions contemplated hereby.
3.26 Burdensome Agreements. The Company is not subject to or bound by any
agreement, judgment, decree or order which does or may in the future reasonably
be expected to result in a Material Adverse Effect.
3.27 Records and Books. The minute books of the Company have previously
been made available to Parent and Merger Sub and accurately record all corporate
action taken by the stockholders and boards of directors and committees thereof
from the date of organization through the date hereof. The stock transfer
ledgers or record books of the Company completely and accurately set forth all
transfers of the Company's capital stock from the date of organization through
the date hereof.
3.28 Transactions with Interested Persons. Except as set forth on Schedule
3.28 attached hereto, no officer, supervisory employee or director of the
Company owns directly or indirectly, either individually or jointly, any
material interest in, or serves as an officer or director of, any customer,
competitor or supplier of the Company, or any organization which has a material
contract or arrangement with the Company.
3.29 Bank Accounts. Schedule 3.29 contains a complete and accurate list of
all bank accounts, safe deposit boxes and lock boxes maintained by the Company,
together with a list of all authorized signatories thereto.
3.30 Copies of Documents. The Company and the Stockholders have made
available for inspection and copying by Merger Sub and its counsel true and
correct copies of all documents referred to in this Article III or in the
Schedules delivered to Parent pursuant to this Agreement.
3.31 Disclosure of Material Information. Neither this Agreement (including
the Schedules and Exhibits hereto) nor any document, certificate or instrument
furnished in connection therewith contains, with respect to the Company or any
Stockholder, any untrue statement of a material fact or intentionally, knowingly
or recklessly omits to state a material fact necessary to made the statements
therein not misleading. There is no fact known to the Company or any Stockholder
which has or would reasonably be expected in the future to result in a Material
Adverse Effect and which has not been set forth in this Agreement.
- 32 -
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent hereby represents and warrants to the Company and the Stockholders
as follows as of the Closing Date:
4.1 Organization and Qualification. Parent is a corporation duly
organized, validly existing and in good standing under the laws of the State of
New York, with full power and authority to own, use or lease its properties and
to conduct its business as such properties are owned, used or leased and as such
business is conducted. The copies of the Parent's Charter and By-Laws, as
amended to date, in each case certified by its Secretary and delivered to
Stockholders' counsel prior to the Closing, are true, complete and correct.
4.2 Authority; No Violation. Parent has the requisite corporate power and
authority to enter into this Agreement and to carry out the transactions
contemplated hereby. The execution, delivery and performance of this Agreement
by Parent have been duly and validly authorized and approved by all necessary
corporate action on the part of Parent. This Agreement and the other Merger
Documents to which the Parent is a party constitute the legal, valid and binding
obligations of Parent, enforceable against Parent in accordance with their
respective terms. Assuming the accuracy of the representations and warranties of
the Company and the Stockholders hereunder, the entering into of this Agreement
by Parent does not, and the consummation by Parent of the transactions
contemplated hereby will not, violate the provisions of (i) any applicable laws
of the United States or any other state or jurisdiction in which Parent does
business, (ii) the Charter or By-Laws of Parent or (iii) any provision of, or
result in a default of any obligation under, or result in any change in the
rights or obligations of Parent under, any Lien, agreement, contract, license,
order, arbitration award, judgment, or decree to which Parent is a party or by
which Parent is bound, or to which any property of Parent is subject.
4.3 Brokers. Neither Parent nor anyone acting on its behalf has engaged,
retained or incurred any liability to any broker, investment banker, finder or
agent or has agreed to pay any brokerage fees, commissions, finder's fees or
other fees with respect to the Merger, this Agreement or the transactions
contemplated hereby.
4.4 Financing Commitment. Parent has previously delivered to the
Stockholders true, accurate and complete copies of commitment letter(s) relating
to the debt financing of the transactions contemplated hereby. Pending the
Closing, Parent shall keep in place such commitments or replacements thereof
from institutional lenders who are not Affiliates of Parent that are no less
favorable taken as a whole to Parent than terms and conditions generally
available from commercial lenders for transactions of the kind contemplated
hereby and for borrowers having a credit rating similar to Parent.
- 33 -
4.5 Concerning the Merger Sub. The Parent and the Merger Sub jointly
represent and warrant to the Company and the Stockholders as follows:
(a) The Merger Sub is a limited partnership duly organized and
existing and in good standing under the laws of the State of New Jersey. An
accurate and complete copy of the Certificate of Limited Partnership of the
Merger Sub will be delivered to the Company and the Stockholders prior to the
Closing.
(b) The Merger Sub has the requisite organizational power and
authority to execute, deliver and perform the Merger Documents to which it is a
party and to perform the transactions contemplated hereby and thereby. Such
execution, delivery and performance have been duly authorized by all necessary
action in accordance with the Limited Partnership Agreement. This Agreement and
the other Merger Documents to which the Merger Sub a party constitute the legal,
valid and binding obligations of the Merger Sub, enforceable against the Merger
Sub in accordance with their terms.
(c) Assuming the accuracy of the representations and warranties of
the Company and the Stockholders hereunder, the entering into of this Agreement
by the Merger Sub does not, and the consummation by the Merger Sub of the
transactions contemplated hereby will not, violate the provisions of or
constitute a default under (i) any applicable laws of the United States or any
other state or jurisdiction in which Merger Sub does business, (ii) the Limited
Partnership Agreement of Merger Sub, or (iii) any Lien, agreement, contract,
license, order, arbitration order, judgment or decree to which Merger Sub is a
party or by which Merger Sub is bound, or to which any property of Merger Sub is
subject.
4.6 Sophistication: Investment Intent. Each of the Parent and Merger Sub
possess the experience and sophistication as an investor which are adequate for
the evaluation of the merits and risks of the Merger. Each of Parent and Merger
Sub has determined that the Merger is appropriate to undertake.
4.7 Availability of Documents. Each of the Parent and Merger Sub
acknowledges that the Company and the Stockholders have made available to each
of the Parent and Merger Sub copies of the Company's current financial
information as set forth in the Merger Documents, including on the disclosure
schedules annexed hereto. Except as set forth in the Merger Documents, no other
representations, assurances, or warranties have been made to either the Parent
or the Merger Sub by the Company or any of the Stockholders, or by any of their
officers, directors, agents, employees, or affiliates, nor anyone else on their
behalf, concerning, among other things, future profitability of the Company, or
the tax consequences of the Merger. Neither Parent nor Merger Sub is relying
upon any information supplied by the Stockholders other than that contained or
referenced in the Merger Documents (including all schedules and exhibits
thereto) and the results of its own independent investigation.
- 34 -
4.8 Unregistered Shares. Parent is aware that the Shares have not been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
or any state securities laws or regulations in reliance upon exemptions under
the Securities Act and under exemptions under state law.
4.9 Opportunity to Discuss Terms. Parent has been provided the opportunity
to discuss the terms and conditions of the Merger and the business of the
Company with members of the Company's management.
4.10 Representations of Company and Stockholders Unaffected. The
acknowledgements of Parent and Merger Sub set forth in Sections 4.6 through 4.9,
inclusive, shall not be deemed in any manner to limit or diminish the applicable
terms of each representation and warranty of each of the Stockholders and the
Company as set forth in the Merger Documents.
ARTICLE V
COVENANTS
The parties hereto agree to the following covenants:
5.1 Covenants of the Company. The Company hereby agrees with Merger Sub
and Parent to keep, perform and fully discharge the following covenants and
agreements:
(a) Interim Conduct of Business. From the date hereof until the
Closing, the Company shall operate its business as a going concern consistent
with prior practice and in the ordinary course of business (except as may be
authorized pursuant to this Agreement or as set forth on Schedule 5.1(a)
hereto). Without limiting the generality of the foregoing, from the date hereof
until the Closing, except for transactions contemplated by this Agreement or
expressly approved in writing by Merger Sub, the Company shall not:
(i) make any increases in the level of compensation of its
officers or employees, or make any changes in pensions, benefits,
bonus or severance plans except such increases or changes as are
mandated by existing contracts or policies (it being understood that
bonus payments to employees shall continue to accrue as a Company
liability in accordance with historic practice through the Closing
Date);
(ii) purchase, lease or otherwise acquire any real estate or
any interest therein;
(iii) declare, set aside or pay any dividend or make any other
distribution with respect to any Equity Security;
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(iv) merge or consolidate with or agree to merge or consolidate
with, or purchase or agree to purchase all or substantially all of the
assets of, acquire securities of or otherwise acquire any Person;
(v) sell, lease or otherwise dispose of or agree to sell,
lease or otherwise dispose of any of its assets, properties, rights or
claims, whether tangible or intangible, except in the ordinary course
of business consistent with prior practice;
(vi) authorize for issuance, issue, sell or deliver any of its
own Equity Securities;
(vii) split, combine or reclassify any class of Equity Security
or redeem or otherwise acquire, directly or indirectly, any of its
Equity Securities;
(viii) incur any additional indebtedness above that shown on the
Company Statement, or any other liability, guaranty or obligation
(fixed or contingent) other than in the ordinary course of business
consistent with prior practice;
(ix) place or permit to be placed any Lien on any of its assets
or properties, other than statutory Liens arising in the ordinary
course of business;
(x) make or authorize any amendments or changes to its Charter
or By-Laws, or make or authorize any change to its existing
capitalization;
(xi) make investments in excess of $50,000 in the aggregate in
property, plant and equipment and other items of capital expenditure;
(xii) accelerate receivables or delay or postpone payment of any
accounts payable or other liability, except in the ordinary course of
business consistent with prior practice;
(xiii) abandon any part of its business;
(xiv) make any payment, distribution or advance of cash,
securities or other property to any of the Stockholders or any related
parties, except pursuant to currently existing compensation
arrangements or historic practices of the Company (including the
repayment of Stockholder Advances prior to the Closing);
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(xv) make any change in financial or Tax accounting principles
or methods from those employed as of the date of the audited Financial
Statements, except as required by GAAP or by applicable law or
regulatory requirements; or
(xvi) make any material Tax election, file any amended return or
settle or compromise any material federal, state or local Tax
liability.
(b) Access. The Company and each of its Subsidiaries shall, upon
reasonable notice, give Parent and Merger Sub and its representatives full and
free access to all properties, assets, books, contracts, commitments and records
of the Company and each of its Subsidiaries during reasonable business hours and
shall promptly furnish Parent and Merger Sub with all financial and operating
data and other information as to the history, ownership, Affiliates, business,
operations, properties, assets, liabilities, or condition (financial or
otherwise) of the Company and each of its Subsidiaries as Parent and Merger Sub
may from time to time reasonably request, provided that such access shall be
subject to the Company's need to avoid disruption of its business and
operations. Parent and Merger Sub shall promptly restore any physical damages
caused by its access to the Company's store properties, inventory or equipment.
(c) Satisfaction of Conditions. The Company agrees to use its
reasonable commercial good faith efforts to accomplish the satisfaction of the
conditions precedent to Closing contained in Section 6.1 herein on or prior to
the Closing Date.
5.2 Covenants of the Company and Each Stockholder. Each of the Company and
each Stockholder agrees with Merger Sub and Parent to keep, perform and fully
discharge the following covenants and agreements:
(a) No Solicitation, Confidentiality, Etc. The Stockholders and the
Company agree that, prior to the termination of this Agreement pursuant to
Article VII hereof, neither the Company or any of the Stockholders will (i)
solicit or negotiate with respect to any inquiries or proposals relating to (x)
the possible direct or indirect acquisition of the Shares or any other Equity
Security of the Company or of all or a portion of the assets or business of the
Company, or (y) any merger, consolidation, joint venture or business combination
with the Company, or (ii) discuss or disclose either this Agreement or other
confidential information pertaining to the Company with any Person (except as
may be required by law or except as may be required in connection with the
transactions contemplated by this Agreement to Affiliates, officers, directors,
employees and agents of the Company or any of the Stockholders) without the
prior written approval of Parent or Merger Sub. The Company and the Stockholders
shall advise such parties of the existence of this Agreement and shall refrain
from entering into further discussions with such parties concerning the sale of
the Company or any Subsidiary of the Company to the extent otherwise prohibited
by this Section 5.2(a).
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5.3 Covenants of Each Stockholder. Each Stockholder, severally and not
jointly, agrees with Merger Sub and Parent to keep, perform and fully discharge
the following covenants and agreements:
(a) Accuracy of Representations and Warranties. Without the prior
written consent of Parent or Merger Sub, no Stockholder will take any action
from the date hereof to the Closing Date, whether as an officer, director or
stockholder of the Company or otherwise, that would cause any representation or
warranty of the Company or any Stockholder contained in this Agreement to become
untrue or cause the breach of any agreement hereof or covenant contained herein.
Each of the Company and the Stockholders will promptly bring to the attention of
Parent or Merger Sub any facts which come to his or her attention that the
Company or such Stockholder knows could reasonably be expected to cause any of
the representations and warranties of the Company or any of the Stockholders to
be untrue or materially misleading in any respect.
(b) Satisfaction of Conditions. The Stockholders agree to use their
reasonable commercial good faith efforts to cause the Company to comply with
Sections 5.1 and 5.2 above and to accomplish the satisfaction of the conditions
precedent to Closing contained in Section 6.1 below on or prior to the Closing
Date.
(c) Disclosure Supplements. From time to time prior to the Closing,
the Company and the Stockholders will supplement or amend the Schedule(s) hereto
with respect to any matter hereafter arising which, if existing or occurring at
or prior to the date of this Agreement, would have been required to be set forth
or described in any such Schedule or which is necessary to complete or correct
any information in any such Schedule or in any representation or warranty of the
Company and the Stockholders which has been rendered inaccurate thereby. For
purposes of determining the satisfaction of the conditions set forth in Section
6.1 hereof, no such supplement or amendment shall be given effect.
5.4 Covenants of Merger Sub and Parent. Merger Sub and Parent each hereby
agrees with the Company and the Stockholders to keep, perform and fully
discharge the following covenants and agreements:
(a) Confidentiality. Each of Parent and Merger Sub agree to hold,
and to cause its officers, directors, employees, consultants, advisors, agents
and stockholders to hold, all information heretofore or hereafter obtained from
the Company or its advisors in strict confidence and to use the information so
obtained only for the purpose of evaluating and consummating the purchase of the
Company; provided however, that (a) Parent or Merger Sub shall also be entitled
to share such information with any Person with whom it is discussing the
possibility of providing funds to finance the transactions contemplated hereby
or their respective officers, employees, accountants, attorneys or advisors, and
(b) the parties hereto acknowledge that the employees of the Company have been
generally informed of the purchase of the
- 38 -
Company by the Parent or Merger Sub. Parent or Merger Sub shall promptly return
all such information to the Company if the Closing is not consummated as
contemplated hereby.
(b) Satisfaction of Conditions. Parent agrees to use its reasonable
commercial good faith efforts to accomplish the satisfaction of the conditions
precedent to Closing contained in Section 6.2 herein on or prior to the Closing
Date.
(c) WARN Act. The parties hereto agree that for purposes of the
United States Worker Adjustment and Restraining Notification Act, as amended
(the "WARN Act") and any similar state statute, the Closing Date shall be the
"effective date" as such term is used in the WARN Act. Parent and Merger Sub
each acknowledges and represents that it has no present intent to engage in a
"mass layoff" or "plant closing" with respect to the Company as defined in the
WARN Act. Parent and Merger Sub each agrees that after the Closing Date Merger
Sub shall be responsible for any notification required under the WARN Act or any
similar state statute with respect to the Company.
ARTICLE VI
CLOSING CONDITIONS
6.1 Conditions to Obligations of Merger Sub and Parent. The obligations of
Merger Sub and Parent to consummate this Agreement and the transactions
contemplated hereby are subject to the fulfillment, prior to or at the Closing,
of the following conditions precedent:
(a) Representations, Warranties and Covenants; No Default. Each of
the representations and warranties of the Company and each of the Stockholders
contained in this Agreement shall remain true and correct at the Closing Date as
fully as if made on the Closing Date; the Company and each of the Stockholders
shall have performed, on or before the Closing Date, all of its, his or her
respective obligations under this Agreement and the other Merger Documents which
by the terms thereof are to be performed on or before the Closing Date; and
there shall not exist any Default or Event of Default under this Agreement at
the Closing Date. The Company and each of the Stockholders shall have delivered
to Merger Sub an Officer's Certificate dated the Closing Date of the Company and
a certificate from each Stockholder in his or her individual capacity to the
foregoing effect;
(b) No Pending Action. No legislation, order, rule, ruling or
regulation shall have been proposed, enacted or made by or on behalf of any
governmental body, department or agency, and no legislation shall have been
introduced in either House of Congress or in the legislature of any state, and
no investigation by any governmental authority shall have been commenced or
threatened, and no action, suit, investigation or proceeding shall have been
commenced before, and no decision shall have been rendered by, any court or
other governmental authority or arbitrator, which, in any such case, in the
reasonable judgment of Parent or Merger Sub is likely to adversely affect,
restrain, prevent or rescind the transactions
- 39 -
contemplated by this Agreement (including, without limitation, the Merger) or
result in a Material Adverse Effect;
(c) Merger Permitted by Applicable Laws; Legal Investment. The
Merger (a) shall not be prohibited by any applicable law or governmental order,
rule, ruling, regulation, release or interpretation, (b) shall not subject
Merger Sub or Parent to any penalty, Tax, liability or, in Parent or Merger
Sub's reasonable judgment, any other onerous condition under or pursuant to any
applicable law, statute, ordinance, regulation or rule, (c) shall not constitute
a fraudulent or voidable conveyance under any applicable law and (d) shall be
permitted by all applicable laws, statutes, ordinances, regulations and rules of
the jurisdictions to which Merger Sub or Parent is subject;
(d) Proceedings Satisfactory. All proceedings taken in connection
with the Merger, the transactions contemplated by the Financing, all of the
other Merger Documents and all documents and papers relating thereto, shall be
in form and substance reasonably satisfactory to Parent or Merger Sub. Parent or
Merger Sub and their counsel shall have received copies of such documents and
papers as Merger Sub or its counsel may reasonably request in connection
therewith, all in form and substance reasonably satisfactory to Merger Sub. Any
Merger Document, any Schedule or Exhibit to this Agreement and any other
document, agreement or certificate contemplated by this Agreement shall be
reasonably satisfactory in form and substance to Parent and Merger Sub;
(e) Consents; Permits. The Company shall have received (and there
shall be in full force and effect) all material consents, approvals, licenses,
permits, orders and other authorizations of, and shall have made (and there
shall be in full force and effect) all such filings, registrations,
qualifications and declarations with, any Person pursuant to any applicable law,
statute, ordinance regulation or rule or pursuant to any agreement, order or
decree to which the Company is a party or to which it is subject, in connection
with the Merger and the other transactions contemplated by this Agreement. All
applicable waiting periods under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements
Act of 1976, as amended, with respect to the transactions contemplated hereby
shall have expired or been terminated;
(f) Corporate Documents. The Company shall have delivered to Merger
Sub:
(i) an Officer's Certificate of the [Secretary] [Clerk] of the
Company certifying (x) the incumbency and genuineness of signatures of all
officers of the Company executing this Agreement, any document delivered by the
Company at the Closing and any other document, instrument or agreement executed
in connection herewith, (y) the correctness, completeness and continuing effect
of resolutions of the Company authorizing the entry by the Company into this
Agreement and the transactions contemplated hereby and (z) the correctness,
completeness and continuing effect of the By-Laws of the Company;
- 40 -
(ii) the minute books and stock record books of the Company;
(iii) the Charter of the Company certified as of a recent date
by the Secretary of State of the State of Jersey; and
(iv) certificates of corporate and tax good standing and legal
existence of the Company as of a recent date from the Secretary of State of the
State of New Jersey.
(g) Appraisal Rights. The holders of 100% of the issued and
outstanding shares of Common Stock shall have voted in favor of the approval of
the Merger and the transactions contemplated hereby and no holders of shares of
Common Stock shall have demanded appraisal rights in respect of the Merger;
(h) Certificate of Merger. The Company shall have executed and
delivered to the Merger Sub and Parent counterparts of the Certificate of Merger
to be filed with the Secretary of State of the State of New Jersey in connection
with the Merger;
(i) Due Diligence. The Merger Sub and Parent shall have completed
its business, accounting and legal due diligence investigations with respect to
the Company's business (including, without limitation, review of financial
statements, accountant's work papers, tax returns and related work papers),
assets, liabilities, inventory, methods of accounting, information systems and
other business records; investigation of the Company's customers and suppliers,
and inspection of the Company's facilities; examination of the corporate
records, material contracts, leases, employee benefit plans (including
bonus/severance plans or policies), agreements respecting stock, labor and
collective bargaining agreements and similar documents or matters; title and
lien searches; and completion of a "phase 1" environmental study of the
Company's supermarket properties showing no material environmental exposure or
risk. The results of all such due diligence shall be reasonably satisfactory to
the Parent;
(j) Escrow Agreements. The Parent, the Merger Sub, the Stockholders'
Agent, the Stockholders and the Person acting as escrow agent shall have
executed and delivered the First Escrow Agreement, the Second Escrow Agreement
and the Real Estate Escrow Agreement.
(k) Non-Competition Agreements. Each of the Stockholders except
▇▇▇▇▇▇ ▇▇▇▇▇ shall have executed and delivered to the Parent and Merger Sub
non-competition and non-disclosure agreements in substantially the form of
Exhibit D attached hereto (the "Non-Competition Agreements");
(l) Consulting Agreements. Each of ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇. and
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ shall have entered into a consulting agreement with Merger Sub
in substantially the form attached hereto as Exhibit E (the "Consulting
Agreements");
- 41 -
(m) Solvency Certificate. The Merger Sub shall have received a
solvency certificate addressed to it in satisfactory form and content from the
Chief Financial Officer of the Company regarding the financial condition of the
Company after giving effect to the transactions contemplated hereby;
(n) Financing. The Parent and the Merger Sub shall have entered into
and received the proceeds of definitive financing arrangements in an amount
sufficient to pay the cash portion of the Merger Consideration;
(o) Lease Agreement. A Lease Agreement between Laurenti Holdings
L.L.C. ("Holdings"), and the Merger Sub shall have been executed, on mutually
satisfactory terms, governing the leasing by Holdings to the Company of the
Company's ▇▇▇▇▇▇▇▇▇▇ Store (it being understood that Holdings will retain the
fee ownership of the land and building(s) at the aforesaid Pennington location).
In connection with the transfer of all leases to the Merger Sub and the other
real estate transactions hereunder, a portion of the Merger Consideration will
be set aside in a cash escrow account for the purpose of covering possible
losses relating to such transactions;
(p) Severance of Liquor Store. The parties shall have entered into
documentation providing for the interim operation of the liquor store adjacent
to the Company's ▇▇▇▇▇▇▇▇▇▇ Store location and the ultimate severing of such
liquor business to Big "L", Inc. or Laurenti Holdings or its Affiliate as soon
as practical, all upon terms mutually satisfactory to the Merger Sub and the
Stockholders' Agent;
(q) Real Estate Indemnities. The parties shall have entered into the
Indemnity Agreement and any related documents assuring indemnification by the
Stockholders for the benefit of BVNJ and Parent as to certain environmental and
landlord/tenant matters and as to the liquor business referenced in clause (p)
above, all upon terms mutually satisfactory to the Merger Sub and the
Stockholders' Agent.
(r) Obligations. All contractual or other obligations, including
notice and disclosure requirements, existing between the Company, the Parent and
Wakefern Food Corp., a New Jersey corporation of which both the Company and the
Parent are members, shall have been satisfied;
(s) Titling of Equipment, etc. Each Stockholder shall have caused to
be transferred to the Company good and marketable title to all equipment and
tangible personal property (excluding fixtures) which are currently owned by any
of the Stockholders or any affiliate thereof and which are used or useful in the
Company's business;
(t) Opinion of Counsel. Parent and Merger Sub shall have received a
favorable opinion, dated the Closing Date and satisfactory in form to Parent,
Merger Sub and its special counsel ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, A Professional
Corporation, of ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
- 42 -
& ▇▇▇▇▇▇, LLP, counsel to the Company and the Stockholders substantially in the
form set forth on Exhibit F attached hereto.
6.2 Conditions to Obligations of the Company and the Stockholders. The
obligations of the Company and the Stockholders to consummate this Agreement and
the transactions contemplated hereby are subject to the fulfillment, prior to or
at the Closing, of the following conditions precedent:
(a) Representations and Warranties. Each of the representations and
warranties of Parent and Merger Sub in this Agreement shall remain true and
correct at the Closing Date, and Parent and Merger Sub shall, on or before the
Closing Date, have performed all of their respective obligations under this
Agreement and the other Merger Documents which by the terms thereof are to be
performed by it on or before the Closing Date; and Parent and Merger Sub shall
have delivered an Officer's Certificate to the Stockholders dated the Closing
Date to such effect.
(b) No Pending Action. No legislation, order, rule, ruling or
regulation shall have been proposed, enacted or made by or on behalf of any
governmental body, department or agency, and no legislation shall have been
introduced in either House of Congress or in the legislature of any state, and
no investigation by any governmental authority shall have been commenced or
threatened, and no action, suit, investigation or proceeding shall have been
commenced before, and no decision shall have been rendered by, any court or
other governmental authority or arbitrator, which, in any such case, was not
known by the Company or any Stockholder on the date hereof and which, in the
reasonable judgment of the Company or Stockholders, is likely to adversely
affect, restrain, prevent or rescind the transactions contemplated by this
Agreement (including, without limitation, the purchase and sale of the Shares)
or result in a Material Adverse Effect.
(c) Corporate Documents. Parent shall have delivered to the
Stockholders:
(i) an Officer's Certificate of the Secretary of Parent
certifying (x) the incumbency and genuineness of signatures of all officers of
Parent executing this Agreement, any document delivered by Parent at the Closing
and any other document, instrument or agreement executed in connection herewith,
(y) the correctness, completeness and continuing effect of resolutions of Parent
authorizing the entry by Parent into this Agreement and the transactions
contemplated hereby and (z) the correctness, completeness and continuing effect
of the By-Laws of Parent;
(ii) the Charter of Parent certified as of a recent date by
the Secretary of State of the State of New York; and
(iii) certificates of corporate good standing and legal
existence of Parent as of a recent date from the Secretary of State of the State
of New York.
- 43 -
(d) Opinion of Counsel to Merger Sub and Parent. The Stockholders
shall have received favorable opinions, each dated the Closing Date and
satisfactory in form to the Stockholders, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, A
Professional Corporation and Cole, Schotz, Meisel, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, each as
special counsel to Parent and Merger Sub, substantially in the respective forms
set forth on Exhibit G-1 and G-2 hereto.
(e) Execution and Delivery of Documents. The Parent and Merger Sub
shall have executed and delivered all of the contractual documents listed in
Section 6.1 hereof as to which it is a named party.
(f) Certificate of Merger. The Merger Sub shall have executed and
delivered to the Company counterparts of the Certificate of Merger to be filed
with the Secretary of State of the State of New Jersey in connection with the
Merger.
ARTICLE VII
TERMINATION
7.1 Termination of Agreement. This Agreement and the transactions
contemplated hereby may (at the option of the party having the right to do so)
be terminated at any time on or prior to the Closing Date:
(a) Mutual Consent. By mutual written consent of Merger Sub and the
Stockholders holding a majority of the Shares;
(b) Court Order. By Merger Sub, the Company or the Stockholders
holding a majority of the Shares if any court of competent jurisdiction shall
have issued an order pursuant to the request of a third party restraining,
enjoining or otherwise prohibiting the consummation of the transactions
contemplated by this Agreement;
(c) Failure to Close By November 15, 1999. By Merger Sub or the
Stockholders holding a majority of the Shares if the transactions contemplated
hereby shall not have been consummated on or before November 15, 1999, provided,
however, that such right to terminate this Agreement shall not be available to
any party whose intentional or willful failure to fulfill any obligation of this
Agreement has been the cause of, or resulted in or contributed to, the failure
of the transactions contemplated hereby to be consummated on or before such
date;
(d) Termination by Stockholders. By the Stockholders holding a
majority of the Shares upon notice to Merger Sub at any time prior to the
Closing Date if (i) a condition to the performance of the Stockholders set forth
in Section 6.2 hereof shall not be fulfilled at the time specified for the
fulfillment thereof, (ii) a default under or a breach shall be made by Parent or
Merger Sub with respect to their respective covenants and agreements hereunder,
or (iii) any
- 44 -
representation or warranty set forth in this Agreement or in any instrument
delivered by Parent or Merger Sub pursuant hereto shall be materially false or
misleading; or
(e) Termination by Merger Sub. By Merger Sub by notice to the
Company and the Stockholders at any time prior to the Closing Date if (i) a
condition to the performance of Parent and Merger Sub set forth in Section 6.1
hereof shall not be fulfilled at the time specified for the fulfillment thereof,
(ii) a default under or a breach of this Agreement shall be made by the Company
or the Stockholders with respect to their respective covenants and agreements
hereunder, or (iii) any representation set forth in this Agreement or in any
instrument delivered by the Company or the Stockholders pursuant hereto shall be
materially false or misleading.
7.2 Effect of Termination and Right to Proceed. If this Agreement is
terminated pursuant to this Article VII, then except as provided below, all
further obligations of Merger Sub, the Company and the Stockholders under this
Agreement shall terminate without further liability of Parent or Merger Sub or
any Affiliate thereof to the Stockholders or the Company or of the Stockholders
or the Company to Parent or Merger Sub or any Affiliate thereof, except, in the
case of termination pursuant to Section 7.1(d) or Section 7.1(e), because of a
material default or a material breach resulting from the fault of the other
party, the aggrieved party or parties may pursue whatever rights and remedies
they may have at law or in equity by reason of such breach, including the right
to specifically enforce this Agreement and recover from the defaulting party
damages for breach of this Agreement, including, without limitation, the amount
of expenses incurred by such aggrieved party or parties in connection with this
Agreement and the transactions contemplated hereby. In addition, anything in
this Agreement to the contrary notwithstanding, if any of conditions to
obligations specified in Sections 5.1, 5.2 or 5.3 hereof have not been
satisfied, Parent and Merger Sub, in addition to any other rights which it may
have, shall have the right to waive their respective rights to have such
conditions satisfied and elect to proceed with the transactions contemplated
hereby and, if any of the conditions to the obligations of the Stockholders
specified in Section 5.4 hereof have not been satisfied, the Stockholders
holding a majority of the Shares may elect, in addition to any other rights
which may be available to them, to waive their rights to have such conditions
satisfied and elect to proceed with the transactions contemplated hereby.
ARTICLE VIII
INDEMNIFICATION
8.1 Survival of Representations and Warranties. The parties hereto agree
that each and every representation and warranty set forth in this Agreement
(including the Officer's Certificates required by Sections 6.1(a) and 6.2(a)
above), which in each case shall be deemed to apply to the facts and
circumstances in existence on and as of the Closing Date shall continue until
the third anniversary of the Closing Date, except with respect to (a) the
representations and warranties set forth in Sections 3.2, 3.3, 3.9, 3.18, 3.19,
3.25, 4.2 and 4.3, which shall survive the
- 45 -
Closing without limitation; and (b) the representations and warranties set forth
in Section 3.17, which shall survive the Closing until the first to occur of (x)
the expiration of the statute of limitations (after giving effect to any mutual
agreement extending the statute or anything tolling the statute) applicable to
the Tax in respect of which indemnification is being sought without the
assertion of a deficiency in respect thereof by the applicable governmental
entity, or (y) the completion of the final audit and determination by the
applicable governmental entity with respect to such Tax and final disposition of
any deficiency resulting therefrom. From and after the applicable period of
survival with respect to such respective representations and warranties of the
Stockholders and Parent or Merger Sub, as the case may be, none of the
Stockholders or Parent or any Affiliate of the Stockholders, Merger Sub or
Parent shall have any right of action whatsoever with respect to any such
representation or warranty, except for breaches as to which any party shall have
notified the other party prior to such date, and except for claims for fraud or
intentional misrepresentation. This Section 8.1 shall have no effect upon any
other obligation of the parties hereto, whether to be performed before or after
the Closing Date.
8.2 Indemnification by Stockholders. Each Stockholder hereby agrees,
jointly and severally, to indemnify, defend and hold each of the Parent and the
Merger Sub and their officers, directors, employees, owners, agents and
Affiliates, harmless from and in respect of any and all losses, damages, costs
and expenses of any kind and nature whatsoever (including, without limitation,
interest and penalties, reasonable expenses of investigation and court costs,
reasonable attorneys' fees and disbursements and the reasonable fees and
disbursements of other professionals) which may be sustained or suffered by any
of them (collectively, "Losses"), arising out of or resulting from (i) any
breach or inaccuracy of any representation or warranty or the breach of or
failure to perform any warranty, covenant, undertaking or other agreement of the
Company or any Stockholder contained in this Agreement or any other Merger
Document; (ii) fraud or intentional misrepresentation on the part of the Company
or any Stockholder; (iii) any Taxes required to be paid, indemnified or
reimbursed by the Company or the Stockholders pursuant to Section 10.11; (iv)
any and all Claims by any Person subsequent to the date hereof relating to the
single share described in Schedule 3.3; (v) the failure by the Company to obtain
a favorable determination letter from the Internal Revenue Service for its
ShopRite of ▇▇▇▇▇▇▇▇▇▇, Inc. Savings and Investment Plan ("401k Plan); (vi) any
event or circumstance which is specified as entitling Parent or Merger Sub to
indemnification under the Indemnity Agreement and is not otherwise paid
thereunder (subject, however, to all applicable limits on maximum liability set
forth in such Indemnity Agreement; and/or (vii) any and all actions, suits,
investigations, proceedings, demands, assessments, audits, judgments and claims
arising out of any of the foregoing.
In furtherance of the rights described in this Section 8.2, the Parent and
the Merger Sub shall have the right to be reimbursed from the Escrow Accounts
established pursuant to Section 2.10 hereof and the Escrow Agreements.
- 46 -
8.3 Indemnification by Parent and Merger Sub. Each of Parent and Merger
Sub hereby agree to indemnify, defend and hold each Stockholder, its officers,
directors, employees, owners, agents and Affiliates, harmless from and in
respect of any and all Losses which may be sustained or suffered by any of them
arising out of or resulting from (i) any breach or inaccuracy of any
representation or warranty or the breach of or failure to perform any warranty,
covenant, undertaking or other agreement of Parent and the Merger Sub contained
in this Agreement or any other Merger Document; (ii) fraud or intentional
misrepresentation on the part of the Parent or the Merger Sub; and/or (iii) any
and all actions, suits, investigations, proceedings, demands, assessments,
audits, judgments and claims arising out of any of the foregoing.
8.4 Notice and Opportunity to Defend. If there occurs an event which a
party asserts is an indemnifiable event pursuant to Section 8.2 or 8.3, the
parties seeking indemnification shall promptly notify the other parties
obligated to provide indemnification (collectively, the "Indemnifying Party").
If such event involves any Claim, or the commencement of any Claim, by a third
person, the party seeking indemnification will give such Indemnifying Party
prompt written notice of such Claim or the commencement thereof, provided,
however, that the failure to provide prompt notice as provided herein will
relieve the Indemnifying Party of its obligations hereunder only to the extent
that such failure prejudices the Indemnifying Party hereunder. In case any such
action, suit or proceeding shall be brought against any party seeking
indemnification and it shall notify the Indemnifying Party of the commencement
thereof, the Indemnifying Party shall be entitled to participate therein and, to
the extent that it desires to do so, to assume the defense thereof, with counsel
reasonably satisfactory to such party seeking indemnification and, after notice
from the Indemnifying Party to such party seeking indemnification of such
election so to assume the defense thereof, the Indemnifying Party shall not be
liable to the party seeking indemnification hereunder for any attorneys' fees or
any other expenses, in each case subsequently incurred by such party, in
connection with the defense of such action, suit or proceeding (unless the
interests of such Indemnifying Party and the interests of the party seeking
indemnification cannot adequately be represented by a single counsel, in which
event such counsel fees and expenses incurred by the party seeking
indemnification shall be included as a Loss). The party seeking indemnification
agrees to cooperate fully with the Indemnifying Party and its counsel in the
defense against any such action, suit or proceeding. In any event, the party
seeking indemnification shall have the right to participate at its own expense
in the defense of such action, suit or proceeding. In no event shall an
Indemnifying Party be liable for any settlement or compromise effected without
its prior consent, which shall not be unreasonably withheld. If, however, the
party seeking indemnification refuses its consent to a bona fide offer of
settlement which the Indemnifying Party wishes to accept (which must include the
unconditional release of the parties seeking indemnification from all liability
with respect to the Claim at issue), the party seeking indemnification may
continue to pursue such matter, free of any participation by the Indemnifying
Party, at the sole expense of the party seeking indemnification. In such event,
the obligation of the Indemnifying Party to the party seeking indemnification
shall be equal to the lesser of (i) the amount of the offer or settlement which
the party seeking indemnification refused to accept plus the costs and expenses
of such party prior to
- 47 -
the date the Indemnifying Party notifies the party seeking indemnification of
the offer of settlement and (ii) the actual out-of-pocket amount the party
seeking indemnification is obligated to pay as a result of such party's
continuing to pursue such matter.
8.5 Contribution. If the indemnification provided for in Section 8.2 or
8.3, as the case may be, of this Agreement is unavailable to a party seeking
indemnification in respect to any Losses, then the Indemnifying Party, in lieu
of indemnifying such party seeking indemnification, shall have an obligation to
contribute, and shall contribute, to the amount paid or payable by such party
seeking indemnification as a result of such Losses, in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party, on the one
hand, and the party seeking indemnification, on the other hand, in connection
with the actions which resulted in such Losses, as well as any other relevant
equitable considerations. The relative fault of the Indemnifying Party and the
parties seeking indemnification shall be determined by reference to, among other
things, whether any action in question, including any breach or inaccuracy of
any representation or warranty, relates to information supplied by the
Indemnifying Party or the parties seeking indemnification and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. No Person guilty of fraudulent
misrepresentation shall be entitled to contribution from any Person who was not
guilty of such fraudulent misrepresentation.
8.6 Right of Set-Off. If a claim for indemnification is made by Parent or
Merger Sub as the party seeking indemnification under this Article VIII, Parent
may, at its option by written notice to the Stockholders' Agent (and without
limiting any other rights it may have at law or in equity), withhold the amount
of such claimed indemnity by Parent or Merger Sub from the amount of any
payments otherwise due under the Merger Note. Upon final determination of such
claim, Parent may reduce, for its own account, the principal of the Merger Note
or any interest payments or payment of principal thereunder, at Parent's
election, by the amount to which it is entitled hereunder provided that, in the
event of a determination of such claim in favor of Stockholders, all amounts (if
any) of overdue principal and/or overdue interest thereon which have been
withheld by Parent shall be promptly paid in full to the holder(s) of the Merger
Note.
8.7 Unconditionality of Stockholders' Liability. Each Stockholder hereby
waives any rights he or she may claim at law or in equity to seek damages,
reimbursement, indemnification, contribution or other similar rights or relief
from the Company in respect of any breach of the representations, warranties and
covenants hereunder.
8.8 Adjustment for Insurance and Taxes. The amount which an Indemnifying
Party is required to pay to, for or on behalf of any other party (hereinafter
referred to as an "Indemnitee") pursuant to this Article VIII shall be adjusted
(including, without limitation, retroactively) (i) by any insurance proceeds
actually recovered by or on behalf of such Indemnitee in reduction of the
related indemnifiable loss (the "Indemnifiable Loss") and (ii) to take account
of any Tax benefit realized as a result of any Indemnifiable Loss. Amounts
required to be paid, as so reduced, are
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hereafter sometimes called an "Indemnity Payment." If an Indemnitee shall have
received or shall have had paid on its behalf an Indemnity Payment in respect of
an Indemnifiable Loss and shall subsequently receive insurance proceeds in
respect of such Indemnifiable Loss, or realize any Tax benefit as a result of
such Indemnifiable Loss, then the Indemnitee shall pay to the Indemnifying Party
the amount of such insurance proceeds or Tax benefit or, if lesser, the amount
of the Indemnity Payment.
ARTICLE IX
POST-CLOSING AGREEMENTS OF THE PARTIES
9.1 Pennington Land. The parties acknowledge that one or more of the
Stockholders, or Affiliates of the same, are currently attempting to acquire a
parcel of land adjoining or abutting the Company's store location in Pennington,
New Jersey in order to permit future expansion of such store. The parties
further acknowledge that the availability of such adjoining land or abutting
parcel or rights thereto (the "Additional Pennington Land") sufficient to permit
future expansion is an important component of the Parent's decision to acquire
all of the stock of the Company. Accordingly, the Stockholders agree to continue
to diligently pursue the ultimate acquisition of the Additional Pennington Land,
or rights therein, sufficient to permit the expansion of the Pennington store
and thereafter undertake, as soon as feasible (and subject to applicable
governmental approvals and the availability of utilities), such expansion for
the benefit of the Company.
9.2 Consultation Regarding Parent's Plans for Current Employees. The
parties hereto acknowledge and agree that, following the Closing, the Parent
shall be entitled to all of its management prerogatives as the owner of the
Company with respect to the continuation or termination of any individual's
employment, or any employment, compensation or bonus plan or policy (subject to
the Company's legal obligations regarding any such employment, plan or policy,
including any legal requirement to the effect that any such employment, plan or
policy must be continued as a matter of contract or applicable law). The parties
further acknowledge that the Parent will undertake, following the Closing, a
plan of staff reductions to eliminate redundant officer, supervisor and
administrative staff positions and related overhead expenses. However, in order
to facilitate the Company's disclosures to its employees regarding the
transactions contemplated by this Agreement, the Parent agrees (i) to maintain
until December 31, 1999 the Company's existing bonus plan for those employees
who currently are included and remain eligible to participate therein, and to
pay year-end bonuses to such employees based on all accruals under such existing
bonus plan for calendar year 1999, and (ii) not to terminate without cause the
employment of any Company employee prior to December 31, 1999.
- 49 -
ARTICLE X
MISCELLANEOUS
10.1 Fees and Expenses. Each of the parties hereto will pay and discharge
its own expenses and fees in connection of with the negotiation of and entry
into this Agreement and the consummation of the transactions contemplated
hereby.
10.2 Publicity and Disclosures. Prior to the Closing, no press release or
any public disclosure, either written or oral, of the transactions contemplated
by this Agreement shall be made by any party without the prior knowledge and
written consent of the Company and Parent.
10.3 Notices. All notices, requests, demands, consents and communications
necessary or required under this Agreement or any other Purchase Document shall
be made in the manner specified, or, if not specified, shall be delivered by
hand or sent by registered or certified mail, return receipt requested, by
overnight courier or by telecopy (receipt confirmed) to:
if to Parent Big V Supermarkets, Inc.
or the Merger Sub: ▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
Chief Financial Officer
Facsimile Transmission Number: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to: ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Facsimile Transmission Number: (▇▇▇) ▇▇▇-▇▇▇▇
if to any Stockholder or to ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇.
Stockholders' Agent: ▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile Transmission Number: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to: ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ and ▇▇▇▇▇▇, LLP
Princeton ▇▇▇▇▇▇▇▇▇ Village
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Facsimile Transmission Number: (▇▇▇) ▇▇▇-▇▇▇▇
- 50 -
if to the Company: ShopRite of ▇▇▇▇▇▇▇▇▇▇, Inc.
▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇.
Facsimile Transmission Number: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to: ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ and ▇▇▇▇▇▇, LLP
Princeton ▇▇▇▇▇▇▇▇▇ Village
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Facsimile Transmission Number: (▇▇▇) ▇▇▇-▇▇▇▇
All such notices, requests, demands, consents and other communications
shall be deemed to have been duly given or sent (i) two (2) business days
following the date on which mailed, (ii) one (1) business day following the date
on which received by an overnight courier, or (iii) on the date on which
delivered by hand or by facsimile transmission (receipt confirmed), as the case
may be, and addressed as aforesaid. All such notices, requests, demands,
consents and communications shall be deemed to have been duly given only when
such notice, request, demand, consent or communication is delivered or, if sent
by telecopier, when received.
10.4 Successors and Assigns. All covenants and agreements set forth in
this Agreement and made by or on behalf of any of the parties hereto shall bind
and inure to the benefit of the successors and assigns of such party, whether or
not so expressed, except that none of the Stockholders or the Company may assign
or transfer any of their respective rights or obligations under this Agreement
without the consent in writing of Parent.
10.5 Descriptive Headings. The headings of the sections and paragraphs of
this Agreement have been inserted for convenience of reference only and shall
not be deemed to be part of this Agreement.
10.6 Counterparts. This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which when so executed and delivered shall be an original, but all of which
together shall constitute one and the same instrument, and it shall not be
necessary in making proof of this Agreement to produce or account for more than
one such counterpart.
10.7 Severability. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstances, is held
invalid, illegal or unenforceable in any respect for any reason in any
jurisdiction, the validity, legality and enforceability of any such
- 51 -
provision in every other respect and of the remaining provisions hereof shall
not be in any way impaired or affected, it being intended that each of parties'
rights and privileges shall be enforceable to the fullest extent permitted by
law, and any such invalidity, illegality and unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. To the fullest extent permitted by law, the parties hereby
waive any provision of any law, statute, ordinance, rule or regulation which
might render any provision hereof invalid, illegal or unenforceable.
10.8 Attorneys' Fees. In any action or proceeding brought to enforce any
provision of this Agreement or the other Merger Documents, or where any
provision hereof or thereof is validly asserted as a defense, the successful
party shall be entitled to recover reasonable attorneys' fees in addition to any
other available remedy.
10.9 Course of Dealing. No course of dealing and no delay on the part of
any party hereto in exercising any right, power, or remedy conferred by this
Agreement shall operate as a waiver thereof or otherwise prejudice such party's
rights, powers and remedies. The failure of any of the parties to this Agreement
to require the performance of a term or obligation under this Agreement or the
waiver by any of the parties to this Agreement of any breach hereunder shall not
prevent subsequent enforcement of such term or obligation or be deemed a waiver
of any subsequent breach hereunder. No single or partial exercise of any rights,
powers or remedies conferred by this Agreement shall preclude any other or
further exercise thereof or the exercise of any other right, power or remedy.
10.10 Third Parties. Except as specifically set forth or referred to
herein, nothing herein expressed or implied is intended or shall be construed to
confer upon or give to any Person, other than the parties hereto and their
successors or assigns, any rights or remedies under or by reason of this
Agreement or any other Merger Document.
10.11 Tax Matters.
(a) (i) Stockholders will cause to be timely filed on behalf of
the Company all federal, state and local Tax Returns for any period which ends
on or prior to the Closing Date and which are required to be filed to reflect
the operations of the Company. The Stockholders will also cause to be prepared
and filed federal, state, and local income Tax Returns for the Company for the
period commencing on January 1, 1999 and ending on the day of Closing. Such
final short S corporation Tax Returns shall reflect, among other required items,
(i) taxable income of the Company (including separately stated items) arising
from the Merger, the Deemed Asset Sale, and all transactions contemplated hereby
or under any other Merger Document and (ii) other taxable income of the Company,
including separately stated items. Copies of all such returns shall be submitted
to Parent for review and its timely consent (which shall not be unreasonably
withheld) at least thirty (30) days prior to filing such returns. Parent shall
be entitled to reasonably participate in the preparation of such returns. All
such returns will
- 52 -
be prepared and filed using Tax accounting methods, elections and principles
which are substantially consistent with those used in the returns of Taxes for
the Company for preceding Tax periods unless Parent otherwise consents (which
consent shall not be unreasonably withheld). No positions shall be taken on any
such Tax Return that would have a material adverse effect on the Company, Merger
Sub or Parent for Tax periods ending after the Closing Date without the consent
of the Parent. Any item of income, deduction or credit to be included in any
such Tax Return shall be based on the permanent records (including work papers)
of the Company.
(ii) Parent shall prepare or cause to be prepared and file or
cause to be filed any Tax Returns of the Company or Merger Sub for Tax periods
which begin before the Closing Date and end after the Closing Date. Copies of
all such Tax Returns shall be submitted to Stockholders' Agent for review at
least thirty (30) days prior to filing such Tax Return. Stockholders' Agent
shall be entitled to reasonably participate in the preparation of such Tax
Returns. All Tax Returns will be prepared and filed using Tax accounting
methods, elections and principles which are substantially consistent with those
used in the Tax Returns for the Company for preceding Tax periods unless
Stockholders' Agent otherwise consents (which consent shall not be unreasonably
withheld). Any item of income, deduction or credit to be included in any such
Tax Returns shall be based upon the permanent records (including work papers) of
the Company. Stockholders shall pay to Parent within fifteen (15) days after the
date on which Taxes are paid with respect to such periods an amount equal to the
portion of such Taxes which relates to the portion of such Tax period ending on
the Closing Date. For purposes of this Section 10.11(a)(ii), in the case of any
Taxes that are imposed on a periodic basis and are payable for a Tax period that
includes (but does not end on) the Closing Date, the portion of such Tax which
relates to the portion of such Tax period ending on the Closing Date shall (x)
in the case of any Taxes other than Taxes based upon or related to income or
receipts, be deemed to be the amount of such Tax for the entire Tax period
multiplied by a fraction the numerator of which is the number of days in the Tax
period ending on the Closing Date and the denominator of which is the number of
days in the entire Tax period, and (y) in the case of any Tax based upon or
related to income or receipts be deemed equal to the amount which would be
payable if the relevant Taxable period ended on the Closing Date. All Taxes
attributable to the transactions contemplated hereby shall be paid by
Stockholders.
(b) All refunds of Taxes attributable to the Company or Merger Sub
for any or all years or periods after the Closing shall belong to and be
retained by Merger Sub and any such refunds attributable to prior periods shall
be paid over to Stockholders
(c) Parent will give notice to Stockholders' Agent of any Tax Claim
relating to any Tax year or period ending on or prior to the Closing Date or
that includes the Closing Date, and shall keep Stockholders' Agent informed of
the progress of, and the issues involved in, the same, in each case which may be
the subject of indemnification by Stockholders pursuant to this Agreement.
Parent shall be entitled to control the defense and resolution of any such
audits
- 53 -
and proceedings; provided, however, that Stockholders' Agent will be allowed,
through a representative selected by him and at his own expense (and with
appropriate access to books and records), to participate in and observe any such
audits or proceedings to the extent such audits or proceedings covers any period
of time in which the Stockholders were responsible for the operations of the
Company. The parties hereto shall, and shall cause Merger Sub to, provide such
necessary information as any other party hereto may reasonably request in
connection with the preparation of such parties' Tax Returns, or to respond to
or contest any audit, prosecute any claim for refund or credit or otherwise
satisfy any requirements relating to Taxes of the Company or Merger Sub.
Sections 8.4, 8.5 and 8.8 shall not apply to any matters covered by this Section
10.11 with respect to indemnification for Taxes.
(d) Parent, Merger Sub and Stockholders shall cooperate fully, as
and to the extent reasonably requested by the other party, in connection with
the filing of Tax Returns pursuant to this Section 10.11(d) and any audit,
litigation or other proceeding with respect to Taxes. Such cooperation shall
include the retention and (upon the other party's request) the provision of
records and information which are reasonably relevant to any such audit,
litigation or other proceeding and making employees available on a mutually
convenient basis to provide additional information and explanation of any
material provided hereunder. Merger Sub and Stockholders agree (A) to retain all
books and records with respect to Tax matters pertinent to the Company or Merger
Sub relating to any Tax period beginning before the Closing Date until the
expiration of the statute of limitations (and, to the extent notified by Parent
or Stockholders, any extensions thereof) of the respective Tax periods, and to
abide by all record retention agreements entered into with any Tax authority,
and (B) to give the other party reasonable written notice prior to transferring,
destroying or discarding any such books and records and, if the other party so
requests, Merger Sub or Stockholders, as the case may be, shall allow the other
party to take possession of such books and records.
(e) Parent and Stockholders further agree, upon request, to use
their reasonable commercial good faith efforts to obtain any certificate or
other document from any governmental authority or any other person as may be
necessary to mitigate, reduce or eliminate any Tax that could be imposed
(including, but not limited to, with respect to the transactions contemplated
hereby).
(f) Stockholders shall pay all stock transfer Taxes, real property
transfer Taxes, sales Taxes, documentary stamp Taxes, recording charges and
other similar Taxes resulting from, arising under or in connection with the
Merger, the Deemed Asset Sale, or the transactions contemplated hereby or under
any other Merger Document, the New York Cap Transfer Tax and any similar tax
imposed in other states or subdivisions.
(g) The obligations of the Stockholders set forth in the Agreement
relating to Taxes shall, except as otherwise agreed in writing, be unconditional
and absolute and shall remain in effect without limitation as to time or amount
of recovery by Parent until thirty (30)
- 54 -
days after the expiration of the applicable statute of limitations governing the
Taxes to which such obligations relate (after giving effect to any agreement
extending the statute of limitations or any tolling of such statute of
limitations).
[(h) Stockholders shall be responsible for and shall pay and shall
indemnify and hold harmless the Company, Merger Sub and Parent for any Tax
imposed on the Company or Merger Sub attributable to, arising under or resulting
from the Merger, the Deemed Asset Sale, or any of the transactions contemplated
hereby or under any other Merger Document, including, but not limited to, (i)
any Tax imposed under Section 1374 or 1375 of the Code or corresponding foreign,
state or local law, (ii) any federal, state, local or foreign Tax imposed on the
Company's or Merger Sub's gain or income and (iii) any Taxes for periods after
the Closing Date if measured by gain or income resulting from the Merger, the
Deemed Asset Sale, or transactions contemplated hereby or under any other Merger
Document, and Stockholders shall indemnify Parent, the Company and Merger Sub
against any adverse consequences arising out of any failure to pay any such
Taxes.]
(i) The Merger Consideration shall be allocated as follows:
(i) The Merger Consideration (plus Assumed Liabilities and
plus or minus any adjustments pursuant to Section 2.9, each to the extent
properly taken into account under Section 1060 of the Code) shall be allocated
in accordance with the Allocation.
(ii) Once the parties have agreed to the Allocation pursuant
to Section 2.14, Stockholders and Parent each agree (A) to be bound by the
Allocation, (B) to act in accordance with the Allocation in the preparation of
financial statements and filing of all Tax returns (including, without
limitation filing Form 8594 with its federal income Tax return for the Tax year
that includes the date of the Closing) and in the course of any Tax audit, Tax
review or Tax litigation relating thereto and (C) to take no position and cause
their Affiliates to take no position inconsistent with the Allocation for all
Tax or accounting purposes.
(iii) Not later than 30 days prior to the filing of their
respective Forms 8594 relating to the Merger, the Deemed Asset Sale, and the
transactions contemplated hereby, each party shall deliver to the other party a
copy of its Form 8594.
(iv) To the extent permitted by applicable law, the
Stockholders shall include on their individual returns any income, gain, loss,
deduction or other Tax items on the final short S corporation Tax Return in a
manner consistent with the Schedules K-1 furnished by the Company to the
Stockholders in connection with such final short S corporation Tax Return,
including any income, gain, loss deduction or other tax item of the Company
resulting from the Merger, the Deemed Asset Sale, and all of the transactions
contemplated hereby or under any other Merger Document.
- 55 -
(j) The Company and Stockholders will not revoke the Company's
election to be taxed as an S corporation within the meaning of Sections 1361 and
1362 of the Code and corresponding state statute. The Company and Stockholders
will not take or allow any action that would result in the termination of the
Company's status as a validly electing S corporation within the meaning of
Sections 1361 and 1362 of the Code and corresponding state statute. Stockholders
shall indemnify Parent, the Company and Merger Sub for all Taxes and against any
adverse consequences arising out of any failure to comply with this Section
10.11(j) or for breach of warranties and representations contained in Section
3.17(g).
(k) All indemnification payments under this Agreement shall be
deemed an adjustment of the Merger Consideration.
(l) Stockholders shall be responsible for and shall pay and shall
indemnify and hold harmless the Company, Merger Sub (other than with respect to
pre-Merger activities of Merger Sub) and Parent for (i) all Taxes and Losses
resulting from any breach of warranties and representations contained in Section
3.17 and (ii) for all Taxes and related Losses of the Company and Merger Sub due
for periods ending on or before the Closing Date, and Stockholders shall
indemnify Parent, the Company, and Merger Sub against any adverse consequences
arising out of any failure to pay any such Taxes.
(m) Stockholders shall be responsible for and shall pay and shall
indemnify and hold harmless the Company, Merger Sub and Parent for all Taxes
that may result with respect to the Company's disposition of the Company's
▇▇▇▇▇▇▇▇▇▇ Store to Holdings described in Section 6.1(o); the Company's
severance from its business the operation of the liquor store as described in
Section 6.1(p); and the disposition of the real property commonly known as the
▇▇▇▇ Avenue Property consisting of, inter alia, six garages, as described in
Section 2.3 and Stockholders shall indemnify Parent, the Company, and Merger Sub
against any adverse consequences arising out of any failure to pay any such
Taxes.
(n) The parties agree and intend that for Tax purposes the Merger
shall constitute a fully taxable sale of assets of the Company to the Merger Sub
for the Merger Consideration plus the assumption of the Company's liabilities by
the Merger Sub followed by a complete liquidation of the Company immediately
thereafter (the "Deemed Asset Sale"). The parties shall not take a position or
take any action on any Tax Return or before any taxing authority or otherwise
that is inconsistent with this Section 10.11.
10.12 Waivers and Consents; Amendments. No consents required hereunder, or
waiver of any provision hereof, shall be effective unless signed by the party
which is to be bound by such consent or waiver. No amendment or modification of
any of the provisions of this Agreement shall be effective unless set forth in a
written instrument executed by the Company, the Parent and the Stockholders'
Agent.
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10.13 Variations in Pronouns. All pronouns and any variations thereof
refer to the masculine, feminine or neuter, singular or plural, as the identity
of the Person or Persons may require.
10.14 WAIVER OF JURY TRIAL. EACH OF PARENT, MERGER SUB, THE COMPANY AND
THE STOCKHOLDERS HEREBY EXPRESSLY WAIVES ITS RESPECTIVE RIGHTS TO A JURY TRIAL
OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT, ANY
OTHER MERGER DOCUMENT OR THE SHARES OR ANY DEALINGS BETWEEN THEM RELATING TO THE
SUBJECT MATTER OF THIS AGREEMENT. THE COMPANY, THE STOCKHOLDERS AND PARENT ALSO
WAIVE ANY BOND OR SURETY OR SECURITY UPON SUCH BOND WHICH MIGHT, BUT FOR THIS
WAIVER, BE REQUIRED OF ANY PARTY. THE SCOPE OF THIS WAIVER IS INTENDED TO BE
ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT
RELATE TO THE SUBJECT MATTER OF THIS TRANSACTION, INCLUDING WITHOUT LIMITATION,
CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW
AND STATUTORY CLAIMS. THE COMPANY, THE STOCKHOLDERS AND PARENT FURTHER WARRANT
AND REPRESENT THAT EACH HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND
THAT EACH VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH
LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE AND MAY ONLY BE MODIFIED BY A WRITTEN
INSTRUMENT EXECUTED BY THE PARTIES HERETO. IN THE EVENT OF LITIGATION, THIS
AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL (WITHOUT A JURY) BY THE
COURT.
10.15 Governing Law. This agreement, including the validity hereof and the
rights and obligations of the parties hereunder, shall be construed in
accordance with and governed by the laws of the State of New Jersey applicable
to contracts made and to be performed entirely in such state (without giving
effect to the conflicts of laws provisions thereof). Each of the parties hereto
agrees that any action or proceeding brought to enforce the rights or
obligations of any party hereto under this agreement may be commenced and
maintained in any court of competent jurisdiction located in the State of New
Jersey, and that any United States District Court for the State of New Jersey
shall have non-exclusive jurisdiction over any such action, suit or proceeding
brought by any of the parties hereto. Each of the parties hereto further agrees
that process may be served upon it by certified mail, return receipt requested,
addressed as more generally provided in section 9.3 hereof, and consents to the
exercise of jurisdiction over it and its properties with respect to any action,
suit or proceeding arising out of or in connection with this agreement or the
transactions contemplated hereby or the enforcement of any rights under this
agreement.
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10.16 Entire Agreement. This Agreement, including the Schedules and
Exhibits referred to herein, is complete, and all promises, representations,
understandings, warranties and agreements with reference to the subject matter
hereof, and all inducements to the making of this Agreement relied upon by all
the parties hereto, have been expressed herein or in said Schedules or Exhibits.
This Agreement supersedes, in their entirety, all of the terms and provisions of
that certain letter of intent, dated September 8, 1999, among Parent,
Stockholders and the Company relating to the transactions hereunder. This
Agreement may not be amended except by an instrument in writing signed on behalf
of the Company, Parent and the Stockholders holding a majority of the Shares.
[Remainder of Page Intentionally Left Blank]
- 58 -
IN WITNESS WHEREOF the parties hereto have executed this Agreement under
seal as of the date first set forth above.
ATTEST: COMPANY:
SHOP-RITE OF PENNINGTON, INC.
By: /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇.
______________________________ ----------------------------------------
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇., President
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
----------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Vice President
MERGER SUB:
BVNJ PARTNERSHIP, L.P.,
a New Jersey limited partnership
By: Big V Supermarkets, Inc.
General Partner
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
----------------------------------------
ATTEST: PARENT:
BIG V SUPERMARKETS, INC.
______________________________ By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
----------------------------------------
Title: Vice Chairma
WITNESS: STOCKHOLDERS:
______________________________ /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇.
--------------------------------------------
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇.
Shareholder, Shop-Rite of Pennington, Inc.
- S1 -
______________________________ /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
--------------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Shareholder, Shop-Rite of Pennington, Inc.
______________________________ /s/ ▇▇▇▇▇▇ ▇▇▇▇▇ by ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇.
--------------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇
Shareholder, Shop-Rite of Pennington, Inc.
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Grantor Retained
Interest Trust
Shareholder, Shop-Rite of Pennington, Inc.
By: /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇.
------------------------------------
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇., Trustee
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Trustee
For due and valuable consideration, receipt and sufficiency of which is
hereby acknowledged, the undersigned hereby Consents as to Section 8.16
hereunder.
Laurenti Marital Trust
By: /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇.
------------------------------------
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇., Trustee
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Trustee
- S2 -
EXHIBIT A
On the date of this agreement, the number of shares of ShopRite of Pennington,
Inc. issued and outstanding and owned beneficially and of record are as follows:
968 total shares issued and outstanding (of total of 1,000 authorized shares)
Stockholder: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇.
Address: ▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Shares: 260 Shares
Percentage of Voting Interest: 26.86 Percent
Stockholder: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Address: ▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Shares: 260 Shares
Percentage of Voting Interest: 26.86 Percent
Stockholder: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Address: ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Shares: 144 Shares
Percentage of Voting Interest: 14.88 Percent
Stockholder: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ Grantor Retained Interest Trust
Address: ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Shares: 304 Shares
Percentage of Voting Interest: 31.40 Percent
NOTE: Records indicate that in 1963, one (1) share of the Company's stock was
given by ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇. to ▇▇▇▇ ▇▇▇▇▇▇▇▇, his mother. No written
record exists documenting the transfer of this share back to ▇▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇, ▇▇. However, every written record dated 1965 or after, whether in the
Company's minute books, the Company's share certificates or the merger documents
on file with the Secretary of State of New Jersey, indicates that ▇▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇, ▇▇. came to own this one (1) share that had been at one time owned by
▇▇▇▇ ▇▇▇▇▇▇▇▇. The Stockholders listed above and the Secretary of the Company
all believe and hereby certify that collectively they represent 100% of the
total issued and outstanding shares of the Company. This disclosure, however,
does not relieve the Stockholders from liability resulting from losses arising
from the matter set forth above.