01/21/98
STOCK ACQUISITION AGREEMENT
AMONG
▇▇▇. ▇▇▇▇▇▇' HOLDING COMPANY, INC.,
PRETZEL TIME, INC.,
AND
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
September 2, 1997
227839.4
01/21/98
TABLE OF CONTENTS
Page
1. Definitions......................................................... 1
"Adverse Consequences".............................................. 1
"Affiliate"......................................................... 1
"Affiliated Group".................................................. 1
"Basis"......................................... ................... 2
"Closing"........................................................... 2
"Closing Date"...................................................... 2
"Code".............................................................. 2
"Company"........................................................... 2
"Company Share"..................................................... 2
"Controlled Group of Corporations".................................. 2
"Deferred Intercompany Transaction"................................. 2
"Disclosure Schedule"............................................... 2
"Employee Benefit Plan"............................................. 2
"Employee Pension Benefit Plan"..................................... 2
"Employee Welfare Benefit Plan"..................................... 2
"Environmental, Health, and Safety Laws"............................ 2
"ERISA"............................................................. 3
"Excess Loss Account"............................................... 3
"Extremely Hazardous Substance"..................................... 3
"Fiduciary"......................................................... 3
"Fields"............................................................ 3
"Financial Statement"............................................... 3
"Franchise Agreements".............................................. 3
"GAAP".............................................................. 3
"Intellectual Property"............................................. 3
"Knowledge"......................................................... 4
"Liability"......................................................... 4
"MFOC".............................................................. 4
"Most Recent Balance Sheet"......................................... 4
"Most Recent Financial Statements".................................. 4
"Most Recent Fiscal Month End"...................................... 4
"Most Recent Fiscal Year End"....................................... 4
"Multiemployer Plan"................................................ 4
"Ordinary Course of Business"....................................... 4
"Parties"........................................................... 4
"PBGC".............................................................. 4
"Person"............................................................ 4
"Preferred Shares".................................................. 5
"Principal Shareholder"............................................. 5
"Prohibited Transaction"............................................ 5
"Purchase Proceeds"................................................. 5
"Related Transactions".............................................. 5
"Related Transactions Documents".................................... 5
"Reportable Event".................................................. 5
"Shares"............................................................ 5
"Securities Act".................................................... 5
"Security Interest"................................................. 5
"Subsidiary"........................................................ 5
"Tax"............................................................... 5
"Tax Return"........................................................ 6
"Third Party Claim"................................................. 6
2. Transaction Terms................................................... 6
(a) Purchase of Shares......................................... 6
(b) The Closing................................................ 6
3. Representations and Warranties of the Principal Shareholder......... 6
(a) Authorization of Transaction............................... 6
(b) Principal Shareholders Company Shares...................... 7
(c) Noncontravention........................................... 7
(d) Brokers' Fees.............................................. 7
(e) Information Accurate and Complete.......................... 7
4. Representations and Warranties of Fields............................ 7
(a) Organization of Fields..................................... 8
(b) Authorization of Transaction............................... 8
(c) Noncontravention........................................... 8
(d) Investment................................................. 8
(e) Broker's Fees.............................................. 8
(f) Information Accurate and Complete.......................... 8
5. Representations and Warranties Concerning the Company and Its Subsidiaries 8
(a) Organization, Qualification, and Corporate Power........... 9
(b) Capitalization............................................. 9
(c) The Shares................................................. 10
(d) Noncontravention........................................... 10
(e) Brokers' Fees.............................................. 11
(f) Title to Assets............................................ 11
(g) Subsidiaries............................................... 11
(h) Financial Statements....................................... 12
(i) Events Subsequent to Most Recent Fiscal Year End........... 12
(j) Undisclosed Liabilities.................................... 15
(k) Legal Compliance........................................... 15
(l) Tax Matters................................................ 16
(m) Real Property.............................................. 18
(n) Intellectual Property...................................... 21
(o) Tangible Assets............................................ 24
(p) Inventory; Company......................................... 24
(q) Contracts.................................................. 24
(r) Franchise Agreements....................................... 26
(s) Notes and Accounts Receivable.............................. 26
(t) Powers of Attorney......................................... 26
(u) Insurance.................................................. 26
(v) Litigation................................................. 27
(w) Product Warranty........................................... 28
(x) Product Liability.......................................... 28
(y) Employees.................................................. 28
(z) Employee Benefit........................................... 29
(aa) Guaranties................................................. 31
(ab) Environment, Health, and Safety............................ 31
6. Pre-Closing Covenants............................................... 32
(a) General.................................................... 32
(b) Notices and Consents....................................... 32
(c) Operation of Business...................................... 33
(d) Preservation of Business................................... 33
(e) Full Access................................................ 33
(f) Notice of Developments..................................... 33
(g) Exclusivity................................................ 33
7. Further Assurances.................................................. 34
8. Conditions to Obligation to Close................................... 34
(a) Conditions to Obligation of Fields.................................... 34
(b) Conditions to Obligation of the Company and the Principal Shareholder. 36
9. Remedies for Breaches of This Agreement............................. 37
(a) Survival of Representations and Warranties................. 37
(b) Indemnification Provisions for Benefit of Fields........... 37
(c) Matters Involving Third Parties............................ 39
(d) Determination of Adverse Consequences...................... 41
(e) Other Indemnification Provisions........................... 41
(f) Rights of Offset........................................... 42
(g) Limitation of Rights of Offset............................. 42
10. Termination......................................................... 42
(a) Termination of Agreement................................... 42
(b) Effect of Termination..................................... 43
11. Miscellaneous....................................................... 43
(a) Nature of Certain Obligations.............................. 43
(b) Press Releases and Public Announcements.................... 43
(c) No Third-Party Beneficiaries............................... 43
(d) Entire Agreement........................................... 43
(e) Succession and Assignment.................................. 44
(f) Counterparts............................................... 44
(g) Headings................................................... 44
(h) Notices.................................................... 44
(i) Governing Law.............................................. 45
(j) Amendments and Waivers..................................... 46
(k) Severability............................................... 46
(l) Expenses................................................... 46
(m) Construction............................................... 46
(n) Incorporation of Exhibits, Annexes, and Schedules.......... 46
(o) Specific Performance....................................... 47
(p) Submission to Jurisdiction................................. 47
(q) Arbitration................................................ 47
EXHIBITS
A List of Related Transactions and Related Transaction Documents
B Financial Statements of the Company
C Debt Reduction Schedule
ANNEXES
I Exceptions to Company's and Principal Shareholder's Representations and
Warranties Concerning Transaction
II Exceptions to Fields' Representations and Warranties Concerning Transaction
SCHEDULES
2(a) Obligations of Company to be Retired from Proceeds at Closing
5(a) Officers and Directors of Company and Subsidiaries
5(b) Capitalization of Company
5(g) Subsidiaries and Subsidiary Information
5(l)(iii) Federal, State and Local Tax Returns
5(l)(iv) Basis of Company and Subsidiary in Assets; Stockholder's Basis; Net
Operating Loss, etc.;
Deferred Gain or Loss
5(m)(i) Real Property Owned by the Company
5(m)(ii) Real Property Leased or Subleased by the Company, and/or Leased or
Subleased to Third Parties,
including Franchisees and Area Developers
5(n)(iii) Intellectual Property of the Company and Licenses Thereof
5(n)(iv) Licenses Held by the Company From Third Parties
5(q) Contracts
5(u) Insurance
5(v) Litigation
5(w) Product Warranty
5(z) Employee Benefit Plans
227839.4
01/21/98
27
227839.4
01/21/98
STOCK ACQUISITION AGREEMENT
This Agreement is entered into as of September ____, 1997, by and among
▇▇▇. ▇▇▇▇▇▇' Holding Company, Inc. a Delaware corporation ("Fields"), Pretzel
Time, Inc., a Delaware corporation (the "Company") and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, the
principal shareholder of the Company ("Principal Shareholder"). Fields, the
Company and the Principal Shareholder are referred to collectively herein as the
"Parties."
WHEREAS, the Principal Shareholder is the principal shareholder of
the Company, owning forty-four (44) Company Shares, that being forty-four
percent (44%) of the outstanding common stock of the Company; and
WHEREAS, there are currently, or on the Closing Date (defined
herein) there will be, fourteen (14) shares of the Company's authorized common
stock held in treasury (the "Shares"); and
WHEREAS, the Company is prepared to sell all of the Shares to Fields on the
terms and conditions set forth herein; and
WHEREAS, concurrently or in conjunction with the transaction
described herein, Fields or its affiliated company are entering into a Stock
Purchase Agreement with other holders of Company Shares, together with the
Related Transactions described on Exhibit A hereto.
NOW, THEREFORE, in consideration of the premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows.
. 1. Definitions
means all actions, suits, proceedings, hearings, investigations, charges,
complaints, claims, demands, injunctions, judgments, orders,
decrees, rulings, damages, dues, penalties, fines, costs, amounts
paid in settlement, Liabilities, obligations, Taxes, liens, losses,
expenses, and fees, including court costs and reasonable attorneys'
fees and expenses.
has the meaning set forth in Rule 12b-2 of the regulations promulgated
under the Securities Exchange Act.
means any affiliated group within the meaning of Code Sec. 1504 or any
similar group defined under a similar provision of state, local or
foreign law.
means any past or present fact, situation, circumstance, status,
condition, activity, practice, plan, occurrence, event, incident,
action, failure to act, or transaction that forms or could form the
basis for any specified consequence.
has the meaning set forth in Section 2(b) below.
has the meaning set forth in Section 2(b) below.
means the Internal Revenue Code of 1986, as amended.
has the meaning set forth in the preface above.
means any share of the Common Stock, par value $10.00 per share, of the
Company.
has the meaning set forth in Code Sec. 1563.porations"
has the meaning set forth in Treas. Reg. Section 1. 1502-13.
has the meaning set forth in Section 5 below.
means any (a) nonqualified deferred compensation or retirement plan or
arrangement which is an Employee Pension Benefit Plan, (b)
qualified defined contribution retirement plan or arrangement which
is an Employee Pension Benefit Plan, (c) qualified defined benefit
retirement plan or arrangement which is an Employee Pension Benefit
Plan (including any Multiemployer Plan), or (d) Employee Welfare
Benefit Plan or
has the meaning set forth in ERISA Sec. 3(2).t Plan"
has the meaning set forth in ERISA Sec. 3(1).t Plan"
means the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, the Resource Conservation and Recovery Act of 1976, and the
Occupational Safety and Health Act of 1970, each as amended, together with all
other laws (including rules, regulations, codes, plans, injunctions, judgments,
orders, decrees, rulings, and charges thereunder) of federal, state, local, and
foreign governments (and all agencies thereof) concerning pollution or
protection of the environment, public health and safety, or employee health and
safety, including laws relating to emissions, discharges, releases, or
threatened releases of pollutants, contaminants, or chemical, industrial,
hazardous, or toxic materials or wastes into ambient air, surface water, ground
water, or lands or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport, or handling of
pollutants, contaminants, or chemical, industrial, hazardous, or toxic materials
or wastes.
means the Employee Retirement Income Security Act of 1974, as amended.
has the meaning set forth in Treas. Reg. Section 1.1502-19.
has the meaning set forth in Sec. 302 of the Emergency Planning and
Community Right-to-Know Act of 1986, as amended.
has the meaning set forth in ERISA Sec. 3(21).
has the meaning set forth in the preface above.
has the meaning set forth in Section 5(h) below.
has the meaning set forth in Section 5(q) below.
means United States generally accepted accounting principles as in effect from
time to time.
means (a) all inventions (whether patentable or unpatentable and whether or
not reduced to practice), all improvements thereto, and all patents, patent
applications, and patent disclosures, together with all reissuances,
continuations, continuations-in-part, revisions, extensions, and reexaminations
thereof, (b) all trademarks, service marks, trade dress, logos, trade names, and
corporate names, together with all translations, adaptations, derivations, and
combinations thereof and including all goodwill associated therewith, and all
applications, registrations, and renewals in connection therewith, (c) all
copyrightable works, all copyrights, and all applications, registrations, and
renewals in connection therewith, (d) all trade secrets and confidential
business information (including ideas, research and development, know-how,
formulas, compositions, manufacturing and production processes and techniques,
technical data, designs, drawings, specifications, customer and supplier lists,
pricing and cost information, and business and marketing plans and proposals),
(e) all computer software (including data and related documentation), (f) all
other proprietary rights, and (g) all copies and tangible embodiments thereof
(in whatever form or medium).
means actual knowledge after reasonable investigation.
means any liability (whether known or unknown, whether asserted or
unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated, and whether due or
to become due), including any liability for Taxes.
means ▇▇▇. ▇▇▇▇▇▇' Original Cookies, Inc.
means the balance sheet contained within the Most Recent Financial Statements.
has the meaning set forth in Section 5(h) below.ements"
has the meaning set forth in Section 5(h) below.nd"
has the meaning set forth in Section 5(h) below.d"
has the meaning set forth in ERISA Sec. 3(37).
means the ordinary course of business consistent with past custom and
practice (including with respect to quantity and frequency).
has the meaning set forth in the preface above.
means the Pension Benefit Guaranty Corporation.
means an individual, an entity including a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an
unincorporated organization, or a governmental entity (or any
department, agency, or political subdivision thereof).
has the meaning set forth in Section 5(b)(1)(B).
has the meaning set forth in the preface above.
has the meaning set forth in ERISA Sec. 406 and Code Sec. 4975.
has the meaning set forth in Section 2(a) below
means the transactions that are the subject of the Related Transactions
Documents to be closed concurrently or in conjunction with the
transactions that are the subject of this Agreement.
means the documents listed on Exhibit A, executed or to be executed in
connection with the Related Transactions.
has the meaning set forth in ERISA Sec. 4043.
has the meaning set forth in the preface above.
means the Securities Act of 1933, as amended.
means any mortgage, pledge, lien, encumbrance, charge, or other security
interest, other than (a) mechanic's, materialmen's, and similar
liens, (b) liens for Taxes not yet due and payable or for Taxes
that the taxpayer is contesting in good faith through appropriate
proceedings, (c) purchase money liens and liens securing rental
payments under capital lease arrangements, and (d) other liens
arising in the Ordinary Course of Business and not incurred in
connection with the borrowing of money.
means any corporation with respect to which a specified Person (or a
Subsidiary thereof) owns a majority of the common stock or has the
power to vote or direct the voting of sufficient securities to
elect a majority of the directors.
means any federal, state, local, or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under
Code Sec. 59A), customs duties, capital stock, franchise, profits,
withholding, social security (or similar), unemployment,
disability, real property, personal property, sales, use, transfer,
registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any
interest, penalty, or addition thereto, whether disputed or not.
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.
has the meaning set forth in Section 9(c) below.
. 2. Transaction Terms
. In consideration for One Million Fifty Thousand Dollars
($1,050,000) (the "Purchase Proceeds"), or Seventy Five Thousand
Dollars ($75,000) for each of the Shares, the Company and the
Principal Shareholder shall issue and deliver to Fields the Shares.
The Shares shall be fully paid and nonassessable, free and clear of
all liens, encumbrances and claims of every kind and nature.
Following the Closing of the transaction described herein and the
Related Transactions, Fields shall own no less than fifty-six
percent (56%) of the issued and outstanding Company Shares on a
fully diluted basis. Fields shall deliver to the Company the
Purchase Proceeds by certified check, bank check, wire transfer, or
other immediately available funds on the Closing Date. All of the
Purchase Proceeds shall be used by the Company to retire the
Company obligations as set forth in the Debt Reduction Schedule
attached hereto as Exhibit C.
. Following the satisfaction or waiver of all conditions to the
obligations of the Parties to consummate the transactions
contemplated hereby (other than conditions with respect to actions
the respective Parties will take at the Closing itself), the
closing of the transactions contemplated by this Agreement (the
"Closing") shall take place at the offices of Mette, ▇▇▇▇▇ &
Woodside, ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇, on or
before September 2, 1997, commencing at a time agreed upon by the
Parties, or such other date as Fields and the Company may mutually
determine (the "Closing Date").
. The Principal Shareholder hereby represents and warrants to Fields that the
statements contained in this Section 3 are correct and complete as of the date
of this Agreement and will be correct and complete as of the Closing Date (as
though made then and as though the Closing Date were substituted for the date of
this Agreement throughout this Section 3) with respect to himself.
. The Principal Shareholder has full power and authority to execute
and deliver this Agreement and to perform his obligations
hereunder. This Agreement constitutes the valid and legally binding
obligation of the Principal Shareholder, enforceable in accordance
with its terms and conditions. The Principal Shareholder need not
give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any third-party including
any government or governmental agency in order to consummate the
transactions contemplated by this Agreement.
. The Principal Shareholder owns as of the date hereof and upon
Closing shall own forty-four (44) Company Shares (equalling
forty-four percent (44%) of the outstanding Company Shares on a
fully diluted basis. The Principal Shareholder does not own or
hold, directly or indirectly, any options, warrants, or other
instruments convertible into Company Shares or into any other
security of the Company.
. Neither the execution and the delivery of this Agreement, nor
the consummation of the transactions contemplated hereby, will (A)
violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of any
government, governmental agency, or court to which the Principal
Shareholder is subject or (B) conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create in
any party the right to accelerate, terminate, modify, or cancel, or
require any notice under any agreement, contract, lease, license,
instrument, or other arrangement to which the Principal Shareholder is
a party or by which he is bound or to which any of his assets is
subject.
. The Principal Shareholder has no Liability or obligation to pay any
fees or commissions to any broker, finder or agent with respect to
the transactions contemplated by this Agreement for which Fields
could become liable or obligated.
. Without limiting the specific language of any other representation
or warranty herein, all information furnished or to be furnished by
the Principal Shareholder in this Agreement, in exhibits or
schedules attached hereto is or will be accurate and complete in
all material respects.
. Fields represents and warrants to the Company that the statements contained in
this Section 4 are correct and complete as of the date of this Agreement and
will be correct and complete as of the Closing Date (as though made then and as
though the Closing Date were substituted for the date of this Agreement
throughout this Section 4), except as set forth in Annex II attached hereto.
. Fields is a corporation duly organized, validly existing,
and in good standing under the laws of the jurisdiction of its
incorporation.
. Fields has full power and authority (including full corporate power
and authority) to execute and deliver this Agreement and to perform
its obligations hereunder. This Agreement constitutes the valid and
legally binding obligation of Fields, enforceable in accordance
with its terms and conditions. Fields need not give any notice to,
make any filing with, or obtain any authorization, consent, or
approval of any third party including any government or
governmental agency in order to consummate the transactions
contemplated by this Agreement.
. Neither the execution and the delivery of this Agreement,
nor the consummation of the transactions contemplated hereby,
will (A) violate any constitution, statute, regulation, rule,
injunction, judgment, order, decree, ruling, charge, or other
restriction of any government, governmental agency, or court to
which Fields is subject or any provision of its charter or bylaws
or, (B) conflict with, result in a breach of, constitute a
default under, result in the acceleration of, create in any party
the right to accelerate, terminate, modify, or cancel, or require
any notice under any agreement, contract, lease, license,
instrument, or other arrangement to which Fields is a party or by
which it is bound or to which any of its assets is subject.
. Fields is not acquiring the Shares with a view to or for sale in
connection with any distribution thereof within the meaning of the
Securities Act.
. Fields has no Liability or obligation to pay any fees or
commissions to any broker, finder or agent with respect to the
transactions contemplated by this Agreement for which the Principal
Shareholder or Company could become liable or obligated.
. Without limiting the specific language of any representation or
warranty herein, all information furnished or to be furnished by
Fields in this Agreement, in exhibits or schedules attached hereto,
is or will be accurate and complete in all material respects.
. The Company and the Principal Shareholder hereby represent and warrant,
jointly and severally, to and with Fields that the statements contained in this
Section 5 are correct and complete as of the date of this Agreement and will be
correct and complete as of the Closing Date (as though made then and as though
the Closing Date were substituted for the date of this Agreement throughout this
Section 5), except as set forth in the disclosure schedule delivered by the
Company and the Principal Shareholder to Fields on the date hereof and initialed
by the Parties (the "Disclosure Schedule"). Nothing in the Disclosure Schedule
shall be deemed adequate to disclose an exception to a representation or
warranty made herein, however, unless the Disclosure Schedule identifies the
exception with reasonable particularity and describes the relevant facts in
reasonable detail. The Disclosure Schedule will be arranged in paragraphs
corresponding to the lettered and numbered paragraphs contained in this Section
5. For purposes of this Section 5 references to the Company shall be deemed to
include officers, directors, and employees of the Company (excluding, however,
the Principal Shareholder) having responsibilities for the matter to which the
representation pertains.
. Each of the Company and its Subsidiaries is a corporation or other
entity duly organized, validly existing, and in good standing under
the laws of the jurisdiction of its incorporation or formation.
Each of the Company and its Subsidiaries is duly authorized to
conduct business and is in good standing under the laws of each
jurisdiction where such qualification is required. Each of the
Company and its Subsidiaries has full corporate power and authority
and all licenses, permits, and authorizations necessary to carry on
the businesses in which it is engaged and to own and use the
properties owned and used by it. Section 5(a) of the Disclosure
Schedule lists the directors and officers of each of the Company
and its Subsidiaries. The Company and the Principal Shareholder
have delivered to Fields correct and complete copies of the charter
and bylaws of each of the Company and its Subsidiaries (as amended
to date). The minute books (containing the records of meetings of
the stockholders, the board of directors, and any committees of the
board of directors), the stock certificate books, and the stock
record books of each of the Company and its Subsidiaries are
correct and complete. None of the Company and its Subsidiaries is
in default under or in violation of any provision of its charter or
bylaws.
. (b) Capitalization
(i) The entire authorized capital stock of the Company consists
of
(A) one thousand (1,000) Company Shares,
of which ninety-one (91) Company Shares are issued
and outstanding and nine (9) Company Shares are
held in treasury and,
(B) five hundred (500) shares of
nonvoting preferred shares, par value $10,000 per
share (the "Preferred Shares"), of which one
hundred forty-four and one-half (144.5) shares are
issued and outstanding, having the rights and
privileges set forth in Section 5(b)(1)(B) of the
Disclosure Schedule.
(ii) all of the issued and outstanding Company
Shares and Preferred Shares have been duly authorized, are
validly issued, fully paid, and nonassessable, and are
held of record as set forth in Section 5(b) of the
Disclosure Schedule. Section 5(b) sets forth each of the
rights and preferences of the Preferred Shares (other than
rights and preferences) under the Pennsylvania Business
Corporation law and common law of the Commonwealth of
Pennsylvania) and all agreements, by and among the Company
and any of the owners or holders of the Preferred Shares,
concerning the Preferred Shares, including without
limitation the redemption thereof or the payment of
dividends with respect thereto.
(iii) There are no outstanding or authorized
options, warrants, purchase rights, subscription rights,
conversion rights, exchange rights, preference rights or
other contracts or commitments that could require the
Company to issue, sell, or otherwise cause to become
outstanding any of its capital stock. There are no
outstanding or authorized stock appreciation, phantom
stock, profit participation, or similar rights with
respect to the Company. Section 5(b) of the Disclosure
Schedule describes all of the voting trusts, proxies, or
other agreements or understandings with respect to the
voting of the capital stock of the Company, all of which
shall be terminated, relinquished and of no further force
or effect on or before the Closing.
. The Shares, when issued and delivered to Fields at the Closing,
shall be duly authorized, fully paid, nonassessable, validly
issued, and free and clear of all Security Interests, charges,
pledges, claims and encumbrances of any kind or nature whatsoever.
The Shares shall constitute no less than nine percent (9%) of the
issued and outstanding Company Shares on a fully diluted basis.
. To the Knowledge of the Principal Shareholder, neither the
execution and the delivery of this Agreement, nor the
consummation of the transactions contemplated hereby, will (i)
violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of
any government, governmental agency, or court to which any of the
Company and its Subsidiaries is subject or any provision of the
charter or bylaws of any of the Company and its Subsidiaries or
(ii) conflict with, result in a breach of, constitute a default
under, result in the acceleration of, create in any party the
right to accelerate, terminate, modify, or cancel, or require any
notice under any agreement, contract, lease, license, instrument,
or other arrangement to which any of the Company and its
Subsidiaries is a party or by which it is bound or to which any
of its assets is subject (or result in the imposition of any
Security Interest upon any of its assets). None of the Company
and its Subsidiaries needs to give any notice to, make any filing
with, or obtain any authorization, consent, or approval of any
government or governmental agency in order for the Parties to
consummate the transactions contemplated by this Agreement.
. None of the Company and its Subsidiaries has any Liability or
obligation to pay any fees or commissions to any broker, finder, or
agent with respect to the transactions contemplated by this
Agreement.
. The Company and its Subsidiaries have good and marketable title to,
or a valid leasehold interest in, the properties and assets used by
them, located on their premises, or shown on the Most Recent
Balance Sheet or acquired after the date thereof, free and clear of
all Security Interests, except for properties and assets disposed
of in the Ordinary Course of Business since the date of the Most
Recent Balance Sheet.
. Section 5(g) of the Disclosure Schedule sets forth for
each Subsidiary of the Company (i) its name and jurisdiction of
incorporation or formation, (ii) the number of shares of
authorized capital stock of each class of its capital stock,
(iii) the number of issued and outstanding shares of each class
of its capital stock, the names of the holders thereof, and the
number of shares held by each such holder, and (iv) the number of
shares of its capital stock held in treasury. All of the issued
and outstanding shares of capital stock of each Subsidiary of the
Company have been duly authorized and are validly issued, fully
paid, and nonassessable. The Company holds of record and owns
beneficially all of the outstanding shares of each Subsidiary of
the Company, free and clear of any restrictions on transfer
(other than restrictions under the Securities Act and state
securities laws), Taxes, Security Interests, options, warrants,
purchase rights, contracts, commitments, equities, claims, and
demands. There are no outstanding or authorized options,
warrants, purchase rights, conversion rights, exchange rights, or
other contracts or commitments that could require any of the
Company and its Subsidiaries to sell, transfer, or otherwise
dispose of any capital stock of any of its Subsidiaries or that
could require any Subsidiary of the Company to issue, sell, or
otherwise cause to become outstanding any of its own capital
stock. There are no outstanding stock appreciation, phantom
stock, profit participation, or similar rights with respect to
any Subsidiary of the Company. There are no voting trusts,
proxies, or other agreements or understandings with respect to
the voting of any capital stock of any Subsidiary of the Company.
None of the Company and its Subsidiaries controls directly or
indirectly or has any direct or indirect equity participation in
any corporation, partnership, trust, or other business
association which is not a Subsidiary of the Company. Section
5(g) of the Disclosure Schedule lists any subsidiary sold by the
Company or merged into the Company, including the date of and
parties to any such transaction and the documents executed by the
Company in connection therewith.
. Attached hereto as Exhibit B are the following financial statements
(collectively the "Financial Statements"): (i) unaudited
consolidated and consolidating balance sheets and statements of
income, changes in stockholders' equity, and cash flow as of and
for the fiscal years ended December 27, 1992, December 26, 1993,
December 25, 1994, and December 31, 1995 for the Company and its
Subsidiaries; (ii) audited consolidated balance sheets and
statements of income, changes in shareholders' equity, and cash
flow as of and for the fiscal year ended December 29, 1996 (the
"Most Recent Fiscal Year End") for the Company and its
Subsidiaries; and (iii) unaudited consolidated and consolidating
balance sheets and statements of income, changes in stockholders'
equity, and cash flow (the "Most Recent Financial Statements") as
of and for the six months ended July 13, 1997 (the "Most Recent
Fiscal Month End") for the Company and its Subsidiaries. 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 and its Subsidiaries as of such
dates and the results of operations of the Company and its
Subsidiaries for such periods, are correct and complete, and are
consistent with the books and records of the Company and its
Subsidiaries (which books and records are correct and complete);
provided, however, that the Most Recent Financial Statements are
subject to normal year-end adjustments (which will not be material
individually or in the aggregate) and lack footnotes and other
presentation items.
. Since the Most Recent Fiscal Year End, there has not been any
material adverse change in the business, financial condition,
operations, results of operations, or future prospects of any of
the Company and its Subsidiaries. Without limiting the generality
of the foregoing, except as set forth in the Related Transactions
Documents, since that date:
(i) none of the Company and its Subsidiaries has
sold, leased, transferred, or assigned any of its assets,
tangible or intangible, other than for a fair
consideration in the Ordinary Course of Business;
(ii) none of the Company and its Subsidiaries has
entered into any agreement, contract, lease, or license
(or outside series of related agreements, contracts,
leases, and licenses) outside the Ordinary Course of
Business;
(iii) no party (including any of the Company and
its Subsidiaries) has accelerated, terminated, modified,
or cancelled any agreement, contract, lease, or license
(or series of related agreements, contracts, leases, and
licenses) involving more than $1,000 to which any of the
Company and its Subsidiaries is a party or by which any of
them is bound;
(iv) none of the Company and its Subsidiaries has
imposed any Security Interest upon any of its assets,
tangible or intangible;
(v) none of the Company and its Subsidiaries has
made any capital expenditure (or series of related capital
expenditures) either involving more than $10,000 or
outside the Ordinary Course of Business;
(vi) none of the Company and its Subsidiaries has
made any capital investment in, any loan to, or any
acquisition of the securities or assets of, any other
Person (or series of related capital investments, loans,
and acquisitions) either involving more than $5,000 or
outside the Ordinary Course of Business;
(vii) none of the Company and its Subsidiaries has
issued any note, bond, or other debt security or created,
incurred, assumed, or guaranteed any indebtedness for
borrowed money or capitalized lease obligation either
involving more than [$5,000 singly or $10,000 in the
aggregate;] Rich has requested changing to 10K and 50k.
Why?
(viii) none of the Company and its Subsidiaries
has delayed or postponed the payment of accounts payable
and other Liabilities outside the Ordinary Course of
Business;
(ix) none of the Company and its Subsidiaries has
cancelled, compromised, waived, or released any right or
claim (or series of related rights and claims) either
involving more than $10,000 or outside the Ordinary Course
of Business;
(x) none of the Company and its Subsidiaries has
granted any license or sublicense of any rights under or
with respect to any Intellectual Property except as set
forth in Schedule 5(n)(iii) setting forth each of the
Company's franchise area developer agreements and other
similar documents;
(xi) there has been no change made or authorized
in the charter or bylaws of any of the Company and its
Subsidiaries;
(xii) none of the Company and its Subsidiaries has
issued, sold, or otherwise disposed of any of its capital
stock, or granted any options, warrants, or other rights
to purchase or obtain (including upon conversion,
exchange, or exercise) any of its capital stock;
(xiii) none of the Company and its Subsidiaries
has declared, promised, committed to, set aside, or paid
any dividend or made any distribution with respect to its
capital stock (whether in cash or in kind) or redeemed,
purchased, or otherwise acquired, or promised or committed
to redeem, purchase or otherwise acquire, any of its
capital stock;
(xiv) none of the Company and its Subsidiaries has
experienced any damage, destruction, or loss (whether or
not covered by insurance) to its property;
(xv) none of the Company and its Subsidiaries has
made any loan to, or entered into any other transaction
with, any of its directors, officers, and employees
outside the Ordinary Course of Business;
(xvi) none of the Company and its Subsidiaries has
entered into any employment contract or collective
bargaining agreement, written or oral, or modified the
terms of any such existing contract or agreement;
(xvii) none of the Company and its Subsidiaries
has granted any increase in the base compensation of any
of its directors, officers, and employees outside the
Ordinary Course of Business;
(xviii) none of the Company and its Subsidiaries
has adopted, amended, modified, or terminated any bonus,
profit-sharing, incentive, severance, or other plan,
contract, or commitment for the benefit of any of its
directors, officers, and employees (or taken any such
action with respect to any other Employee Benefit Plan);
(xix) none of the Company and its Subsidiaries has
made any other change in employment terms for any of its
directors, officers, and employees outside the Ordinary
Course of Business;
(xx) none of the Company and its Subsidiaries has
made or pledged to make any charitable or other capital
contribution outside the Ordinary Course of Business;
(xxi) there has not been any other material
occurrence, event, incident, action, failure to act, or
transaction outside the Ordinary Course of Business
involving any of the Company and its Subsidiaries; and
(xxii) none of the Company and its Subsidiaries
has committed to any of the foregoing.
. None of the Company and its Subsidiaries has any Liability (and to
the Knowledge of the Principal Shareholder, there is no Basis for
any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand against any of
them giving rise to any Liability), except for (i) Liabilities set
forth on the face of the Most Recent Balance Sheet (rather than in
any notes thereto), and (ii) Liabilities which have arisen after
the Most Recent Fiscal Month End in the Ordinary Course of Business
(none of which results from, arises out of, relates to, is in the
nature of, or was caused by any breach of contract, breach of
warranty, tort, infringement, or violation of law).
. To the Knowledge of the Principal Shareholder, each of the Company,
its Subsidiaries, and their respective predecessors and Affiliates
has complied with all applicable laws (including rules,
regulations, codes, plans, injunctions, judgments, orders, decrees,
rulings, and charges thereunder) of federal, state, local, and
foreign governments (and all agencies thereof), and no action,
suit, proceeding, hearing, investigation, charge, complaint, claim,
demand, or notice has been filed or commenced against any of them
alleging any failure so to comply.
. (l) Tax Matters
(i) To the Knowledge of the Principal Shareholder,
each of the Company and its Subsidiaries has filed all Tax
Returns that it was required to file. All such Tax Returns
were correct and complete in all respects. All Taxes owed
by any of the Company and its Subsidiaries (whether or not
shown on any Tax Return) have been paid. None of the
Company and its Subsidiaries currently is the beneficiary
of any extension of time within which to file any Tax
Return. No claim has ever been made by an authority in a
jurisdiction where any of the Company and its Subsidiaries
does not file Tax Returns that it is or may be subject to
taxation by that jurisdiction. There are no Security
Interests on any of the assets of any of the Company and
its Subsidiaries that arose in connection with any failure
(or alleged failure) to pay any Tax.
(ii) To the Knowledge of the Principal
Shareholder, each of the Company and its Subsidiaries has
withheld and paid all Taxes required to have been withheld
and paid in connection with amounts paid or owing to any
employee, independent contractor, creditor, stockholder,
or other third party.
(iii) Neither the Principal Shareholder, nor the
Company and its Subsidiaries expects any authority to
assess any additional Taxes for any period for which Tax
Returns have been filed. There is no dispute or claim
concerning any Tax Liability of any of the Company and its
Subsidiaries either (A) claimed or raised by any authority
in writing or (B) as to which the Principal Shareholder or
the Company or its Subsidiaries has Knowledge based upon
personal contact with any agent of such authority. Section
5(l) of the Disclosure Schedule lists all federal, state,
local, and foreign income Tax Returns filed with respect
to any of the Company and its Subsidiaries, indicates
those Tax Returns that have been audited, and indicates
those Tax Returns that currently are the subject of audit.
The Company has delivered to Fields correct and complete
copies of all federal income Tax Returns, examination
reports, and statements of deficiencies assessed against
or agreed to by any of the Company and its Subsidiaries.
(iv) None of the Company and its Subsidiaries has
waived any statute of limitations in respect of Taxes or
agreed to any extension of time with respect to a Tax
assessment or deficiency.
(v) None of the Company and its Subsidiaries has
filed a consent under Code Sec. 341(f) concerning
collapsible corporation. None of the Company and its
Subsidiaries has made any payments, 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 Code Sec.
280G(a). None of the Company and its Subsidiaries has been
a United States real property holding corporation within
the meaning of Code Sec. 897(c)(2) during the applicable
period specified in Code Sec. 897(c)(1)(A)(ii). Each of
the Company and its Subsidiaries has disclosed on its
federal income Tax Returns all positions taken therein
that could give rise to a substantial understatement of
federal income Tax within the meaning of Code Sec. 6662.
None of the Company and its Subsidiaries is a party to any
Tax allocation or sharing agreement. None of the Company
and its Subsidiaries (A) has been a member of an
Affiliated Group filing a consolidated federal income Tax
Return (other than a group the common parent of which was
the Company) or (B) has any Liability for the Taxes of any
Person (other than any of the Company and its
Subsidiaries) under Treas. Reg. Section 1.1502-6 (or any
similar provision of state, local, or foreign law), as a
transferee or successor, by contract, or otherwise.
(vi) Section 5(l) of the Disclosure Schedule sets
forth the following information with respect to each of
the Company and its Subsidiaries (or, in the case of
clause (B) below, with respect to each of the
Subsidiaries) as of the most recent practicable date (as
well as on an estimated pro forma basis as of the Closing
giving effect to the consummation of the transactions
contemplated hereby):
(A) the basis of the Company or Subsidiary in its assets;
(B) the basis of the stockholders of the
Subsidiary in its stock (or the amount of any
Excess Loss Account);
(C) the amount of any net operating loss,
net capital loss, unused investment or other
credit, unused foreign tax, or excess charitable
contribution allocable to the Company or
Subsidiary; and
(D) the amount of any deferred gain or
loss allocable to the Company or Subsidiary
arising out of any Deferred Intercompany
Transaction.
(vii) The unpaid Taxes of the Company and its Subsidiaries
(A) did not, as of the Most Recent Fiscal
Month End, exceed the reserve for Tax Liability
(rather than any reserve for deferred Taxes
established to reflect timing differences between
book and Tax income) set forth on the face of the
Most Recent Balance Sheet (rather than in any
notes thereto); and
(B) do not exceed that reserve as
adjusted for the passage of time through the
Closing Date in accordance with the past custom
and practice of the Company and its Subsidiaries
in filing their Tax Returns.
. (m) Real Property
(i) Section 5(m)(i) of the Disclosure Schedule
lists and describes briefly all real property that any of
the Company and its Subsidiaries owns. With respect to
each such parcel of owned real property:
(A) the identified owner has good and
marketable title to the parcel of real property,
free and clear of any Security Interest, easement,
covenant, or other restriction, except for
installments of special assessments not yet
delinquent and recorded easements, covenants, and
other restrictions which do not impair the current
use, occupancy, or value, or the marketability of
title, of the property subject thereto;
(B) there are no pending or threatened
condemnation proceedings, lawsuits, or
administrative actions relating to the property or
other matters affecting materially and adversely
the current use, occupancy, or value thereof;
(C) the legal description for the parcel
contained in the deed thereof describes such
parcel fully and adequately, the buildings and
improvements are located within the boundary lines
of the described parcels of land, are not in
violation of applicable setback requirements,
zoning laws, and ordinances (and none of the
properties or buildings or improvements thereon
are subject to "permitted non-conforming use" or
"permitted non-conforming structure"
classifications), and do not encroach on any
easement which may burden the land, and the land
does not serve any adjoining property for any
purpose inconsistent with the use of the land, and
the property is not located within any flood plain
or subject to any similar type restriction for
which any permits or licenses necessary to the use
thereof have not been obtained;
(D) all facilities have received all
approvals of governmental authorities (including
licenses and permits) required in connection with
the ownership or operation thereof and have been
operated and maintained in accordance with
applicable laws, rules, and regulations;
(E) there are no leases, subleases,
licenses, concessions, or other agreements,
written or oral, granting to any party or parties
the right of use or occupancy of any portion of
the parcel of real property;
(F) there are no outstanding options or
rights of first refusal to purchase the parcel of
real property, or any portion thereof or interest
therein;
(G) there are no parties (other than the
Company and its Subsidiaries) in possession of the
parcel of real property, other than tenants under
any leases disclosed in Section 5(m)(ii) of the
Disclosure Schedule who are in possession of space
to which they are entitled;
(H) all facilities located on the parcel
of real property are supplied with utilities and
other services necessary for the operation of such
facilities, including gas, electricity, water,
telephone, sanitary sewer, and storm sewer, all of
which services are adequate in accordance with all
applicable laws, ordinances, rules, and
regulations and are provided via public roads or
via permanent, irrevocable, appurtenant easements
benefitting the parcel of real property; and
(I) each parcel of real property abuts on
and has direct vehicular access to a public road,
or has access to a public road via a permanent,
irrevocable, appurtenant easement benefitting the
parcel of real property, and access to the
property is provided by paved public right-of-way
with adequate curb cuts available.
(ii) Section 5(m)(ii) of the Disclosure Schedule
lists and describes briefly all real property:
(A) leased or subleased to any of the Company and its
Subsidiaries; and
(B) leased or subleased by any of the
Company and its subsidiaries to third parties,
including Company's franchisees and area
developers. The Company has delivered or made
available to Fields correct and complete copies of
the leases and the subleases listed in Section
5(m)(ii) of the Disclosure Schedule (as amended to
date). With respect to each lease and sublease
listed in Section 5(m)(ii) of the Disclosure
Schedule:
(C) the lease or sublease is legal,
valid, binding, enforceable, and in full force and
effect;
(D) the lease or sublease will continue
to be legal, valid, binding, enforceable, and in
full force and effect on identical terms following
the consummation of the transactions contemplated
hereby;
(E) no party to the lease or sublease is
in breach or default, and no event has occurred
which, with notice or lapse of time, would
constitute a breach or default or permit
termination, modification, or acceleration
thereunder;
(F) no party to the lease or sublease has
repudiated any provision thereof;
(G) there are no disputes, oral
agreements, or forbearance programs in effect as
to the lease or sublease;
(H) with respect to each sublease, the
representations and warranties set forth in
subsections (A) through (E) above are true and
correct with respect to the underlying lease;
(I) none of the Company and its
Subsidiaries has assigned, transferred, conveyed,
mortgaged, deeded in trust, or encumbered any
interest in the leasehold or subleasehold;
(J) 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, rules, and
regulations;
(iii) all facilities leased or subleased
thereunder are supplied with utilities and other services
necessary for the operation of said facilities; and
. (n) Intellectual Property
(i) The Company and its Subsidiaries own or have
the right to use pursuant to license, sublicense,
agreement, or permission all Intellectual Property
necessary for the operation of the businesses of the
Company and its Subsidiaries as presently conducted. Each
item of Intellectual Property owned or used by any of the
Company and its Subsidiaries immediately prior to the
Closing hereunder will be owned or available for use by
the Company or the Subsidiary on identical terms and
conditions immediately subsequent to the Closing
hereunder. Each of the Company and its Subsidiaries has
taken all necessary action to maintain and protect each
item of Intellectual Property that it owns or uses.
(ii) To the Knowledge of the Principal
Shareholder, none of the Company and its Subsidiaries has
interfered with, infringed upon, misappropriated, or
otherwise come into conflict with any Intellectual
Property rights of third parties, and the Company and its
Subsidiaries has never received any charge, complaint,
claim, demand, or notice alleging any such interference,
infringement, misappropriation, or violation (including
any claim that any of the Company and its Subsidiaries
must license or refrain from using any Intellectual
Property rights of any third party). To the Knowledge of
the Company and the Principal Shareholder, no third party
has interfered with, infringed upon, misappropriated, or
otherwise come into conflict with any Intellectual
Property rights of any of the Company and its
Subsidiaries.
(iii) Section 5(n)(iii) of the Disclosure Schedule
identifies each patent, trademark or registration which
has been issued to any of the Company and its Subsidiaries
with respect to any of its Intellectual Property,
identifies each pending patent and trademark application
or application for registration which any of the Company
and its Subsidiaries has made with respect to any of its
Intellectual Property, and identifies each license,
agreement, or other permission which any of the Company
and its Subsidiaries has granted to any third party with
respect to any of its Intellectual Property (together with
any exceptions). The Company has delivered to Fields
correct and complete copies of all such patents,
trademarks, registrations, applications, licenses,
agreements, and permissions (as amended to date) and have
made available to Fields correct and complete copies of
all other written documentation evidencing ownership and
prosecution (if applicable) of each such item. Section
5(n)(iii) of the Disclosure Schedule also identifies each
trade name or unregistered trademark used by any of the
Company and its Subsidiaries in connection with any of its
businesses. With respect to each item of Intellectual
Property required to be identified in Section 5(n)(iii) of
the Disclosure Schedule:
(A) the Company and its Subsidiaries
possess all right, title, and interest in and to
the item, free and clear of any Security Interest,
license, or other restriction;
(B) the item is not subject to any
outstanding injunction, judgment, order, decree,
ruling, or charge;
(C) no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand
is pending or to the Knowledge of any of the
Company or the Principal Shareholder (and
employees with responsibility for Intellectual
Property matters) of the Company and its
Subsidiaries, is threatened which challenges the
legality, validity, enforceability, use, or
ownership of the item; and
(D) none of the Company and its
Subsidiaries has ever agreed to indemnify any
Person for or against any interference,
infringement, misappropriation, or other conflict
with respect to the item.
(iv) Section 5(n)(iv) of the Disclosure Schedule
identifies each item of Intellectual Property that any
third party owns and that any of the Company and its
Subsidiaries uses pursuant to license, sublicense,
agreement, or permission. The Company has delivered to
Fields correct and complete copies of all such licenses,
sublicenses, agreements, and permissions (as amended to
date). With respect to each item of Intellectual Property
required to be identified in Section 5(n)(iv) of the
Disclosure Schedule:
(A) subject to and limited by applicable
bankruptcy and insolvency laws and principles of
equity, the license, sublicense, agreement, or
permission covering the item is legal, valid,
binding, enforceable, and in full force and
effect;
(B) subject to and limited by applicable
bankruptcy and insolvency laws and principles of
equity, the license, sublicense, agreement, or
permission will continue to be legal, valid,
binding, enforceable, and in full force and effect
on identical terms following the Closing;
(C) no party to the license, sublicense,
agreement, or permission is in breach or default,
and no event has occurred which with notice or
lapse of time would constitute a breach or default
or permit termination, modification, or
acceleration thereunder;
(D) no party to the license, sublicense,
agreement, or permission has repudiated any
provision thereof;
(E) with respect to each sublicense, the
representations and warranties set forth in
subsections (A) through (D) above are true and
correct with respect to the underlying license;
(F) the underlying item of Intellectual
Property is not subject to any outstanding
injunction, judgment, order, decree, ruling, or
charge;
(G) no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand
is pending or is threatened which challenges the
legality, validity, or enforceability of the
underlying item of Intellectual Property; and
(H) none of the Company and its
Subsidiaries has granted any sublicense or similar
right with respect to the license, sublicense,
agreement, or permission.
(v) To the Knowledge of the Company and the
Principal Shareholder, the Company and its Subsidiaries
will not interfere with, infringe upon, misappropriate, or
otherwise come into conflict with, any Intellectual
Property rights of third parties as a result of the
continued operation of its business as presently
conducted.
(vi) Neither the Company nor the Principal
Shareholder has any Knowledge of any new products,
inventions, procedures, or methods of manufacturing or
processing that any competitors or other third parties
have developed which reasonably could be expected to
supersede or make obsolete any product or process of any
of the Company and its Subsidiaries.
. The Company and its Subsidiaries own or lease all buildings,
machinery, equipment, and other tangible assets necessary for the
conduct of their businesses as presently conducted.
. The Company and its Subsidiaries have no inventory
other than inventory in the Company-owned stores.
. Section 5(q) of the Disclosure Schedule lists the following
contracts and other agreements to which any of the Company and its
Subsidiaries is a party:
(i) each contract or agreement of any kind or
nature entered into by any of the Company Subsidiaries and
the Principal Shareholders, with any franchisee or area
developer of the Company or its Subsidiaries or any
officer, principal, owner shareholders, representative of
any such franchisee or area developer (collectively, the
"Franchise Agreements");
(ii) any agreement (or group of related
agreements) for the lease of personal property to or from
any Person providing for lease payments;
(iii) any agreement (or group of related
agreements) for the purchase or sale of raw materials,
commodities, supplies, products, or other personal
property, or for the furnishing or receipt of services,
the performance of which will extend over a period of more
than one year, result in a material loss to any of the
Company and its Subsidiaries;
(iv) any agreement concerning a partnership or joint
venture;
(v) any agreement (or group of related agreements)
under which it has created, incurred, assumed, or
guaranteed any indebtedness for borrowed money, or any
capitalized lease obligation, or under which it has
imposed a Security Interest on any of its assets, tangible
or intangible;
(vi) any agreement concerning confidentiality or
noncompetition;
(vii) any profit sharing, stock option, stock
purchase, stock appreciation, deferred compensation,
severance, or other plan or arrangement for the benefit of
its current or former directors, officers, and employees;
(viii) any collective bargaining agreement;
(ix) any agreement for the employment of any
individual on a full-time, part-time, consulting, or other
basis;
(x) any agreement under which it has advanced or
loaned any amount to any of its directors, officers, and
employees outside the Ordinary Course of Business;
(xi) any agreement under which the consequences of
a default or termination could have a material adverse
effect on the business, financial condition, operations,
results of operations, or future prospects of any of the
Company and its Subsidiaries; or
(xii) any other agreement (or group of related
agreements) the performance of which involves
consideration in excess of $5,000.
The Company and the Principal Shareholder have delivered to Fields a correct and
complete copy of each written agreement listed in Section 5(q) of the Disclosure
Schedule (as amended to date) and a written summary setting forth the terms and
conditions of each oral agreement referred to in Section 5(q) of the Disclosure
Schedule. With respect to each such agreement, subject to and limited by
applicable bankruptcy and insolvency laws and principles of equity: (A) the
agreement is legal, valid, binding, enforceable, and in full force and effect;
(B) the agreement will continue to be legal, valid, binding, enforceable, and in
full force and effect on identical terms following the consummation of the
transactions contemplated hereby; (C) no party is in breach or default, and no
event has occurred which with notice or lapse of time would constitute a breach
or default, or permit termination, modification, or acceleration, under the
agreement; and (D) no party has repudiated any provision of the agreement.
. Subject to and limited by applicable bankruptcy and insolvency laws
and principles of equity, all Franchise Agreements are in full
force and effect, enforceable in accordance with their terms, and
free of defaults. Without limiting the generality of the foregoing:
(i) each of the Franchise Agreements are in full force and
effect and has not been amended or modified;
(ii) no default or threatened default exist under any
Franchise Agreement;
(iii)each Franchise developer is, in fact, complying with
its obligations under its Franchise Agreement;
(iv) each Franchise Agreement has been prepared in
accordance with, and does not violate any, applicable
federal or state law (including Franchise and business
opportunity laws; and
(v) the Company has not received notices of any breach by
it of any Franchise Agreement from any party thereto.
. All notes and accounts receivable of the Company and its
Subsidiaries are reflected properly on their books and records, are
valid receivables subject to no setoffs or counterclaims, are
current and collectible, and will be collected in accordance with
their terms at their recorded amounts, subject only to the reserve
for bad debts set forth on the face of the Most Recent Balance
Sheet (rather than in any notes thereto) as adjusted for the
passage of time through the Closing Date in accordance with the
past custom and practice of the Company and its Subsidiaries.
. There are no outstanding powers of attorney executed on
behalf of any of the Company and its Subsidiaries.
. Section 5(u) of the Disclosure Schedule sets forth the following
information with respect to each insurance policy (including
policies providing property, casualty, liability, and workers'
compensation coverage and bond and surety arrangements) to which
any of the Company and its Subsidiaries has been a party, a named
insured, or otherwise the beneficiary of coverage at any time
within the past four (4) years:
(i) the name, address, and telephone number of the agent;
(ii) the name of the insurer, the name of the policyholder,
and the name of each covered insured;
(iii) the policy number and the period of coverage;
(iv) the scope (including an indication of whether the
coverage was on a claims made, occurrence, or other
basis) and amount (including a description of how
deductibles and ceilings are calculated and operate) of
coverage; and
(v) a description of any retroactive premium adjustments or
other loss-sharing arrangements,
To the Knowledge of the Principal Shareholder, with respect to each such
insurance policy: (A) the policy is legal, valid, binding, enforceable, and in
full force and effect; (B) the policy will continue to be legal, valid, binding,
enforceable, and in full force and effect on identical terms following the
consummation of the transactions contemplated hereby; (C) neither any of the
Company and its Subsidiaries nor any other party to the policy is in breach or
default (including with respect to the payment of 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 (D) no party to the policy has repudiated
any provision thereof. Each of the Company and its Subsidiaries has been covered
during the past four (4) years by insurance in scope and amount customary and
reasonable for the businesses in which it has engaged during the aforementioned
period. Section 5(u) of the Disclosure Schedule describes any self-insurance
arrangements affecting any of the Company and its Subsidiaries.
. Section 5(v) of the Disclosure Schedule sets forth each
instance in which any of the Company and its Subsidiaries (i) is
subject to any outstanding injunction, judgment, order, decree,
ruling, or charge or (ii) is a party or is threatened to be made
a party to any action, suit, proceeding, hearing, or
investigation of, in, or before any court or quasi-judicial or
administrative agency of any federal, state, local, or foreign
jurisdiction or before any arbitrator (including any state or
regulatory authority in connection with the Company's role as a
Franchisor). None of the actions, suits, proceedings, hearings,
and investigations set forth in Section 5(v) of the Disclosure
Schedule could result in any material adverse change in the
business, financial condition, operations, results of operations,
or future prospects of any of the Company and its Subsidiaries.
Neither the Company nor the Principal Shareholder has any reason
to believe that any action, suit, proceeding, hearing, or
investigation described in the preceding sentence may be brought
or threatened against any of the Company and its Subsidiaries.
. Each product manufactured, sold, leased, or delivered by any of the
Company and its Subsidiaries has been in conformity with all
applicable contractual commitments and all express and implied
warranties, and none of the Company and its Subsidiaries has any
Liability (and to the Knowledge of the Principal Shareholder, there
is no Basis for any present or future action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand against
any of them giving rise to any Liability) for replacement or repair
thereof or other damages in connection therewith, subject only to
the reserve for product warranty claims set forth on the face of
the Most Recent Balance Sheet (rather than in any notes thereto) as
adjusted for the passage of time through the Closing Date in
accordance with the past custom and practice of the Company and its
Subsidiaries. No product manufactured, sold, leased, or delivered
by any of the Company and its Subsidiaries is subject to any
guaranty, warranty, or other indemnity beyond the applicable
standard terms and conditions of sale or lease. Section 5(w) of the
Disclosure Schedule includes copies of the standard terms and
conditions of sale or lease for each of the Company and its
Subsidiaries (containing applicable guaranty, warranty, and
indemnity provisions).
. None of the Company and its Subsidiaries has any Liability (and to
the Knowledge of the Principal Shareholder, there is no Basis for
any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand against any of
them giving rise to any Liability) arising out of any injury to
individuals or property as a result of the ownership, possession,
or use of any product manufactured, sold, leased, or delivered by
any of the Company and its Subsidiaries.
. None of the Company and its Subsidiaries is a party to or bound by
any collective bargaining agreement, nor has any of them
experienced any strikes, grievances, claims of unfair labor
practices, or other collective bargaining disputes. Neither the
Company nor its Subsidiaries has committed any unfair labor
practice. Neither the Company nor the Principal Shareholder has any
Knowledge of any organizational effort presently being made or
threatened by or on behalf of any labor union with respect to
employees of any of the Company and its Subsidiaries.
. (z) Employee Benefit
(i) Section 5(z) of the Disclosure Schedule lists
each Employee Benefit Plan that any of the Company and its
Subsidiaries maintains or to which any of the Company and
its Subsidiaries contributes.
(A) Each such Employee Benefit Plan (and
each related trust, insurance contract, or fund)
complies in form and in operation in all respects
with the applicable requirements of ERISA, the
Code, and other applicable laws.
(B) All required reports and descriptions
(including Form 5500 Annual Reports, Summary
Annual Reports, PBGC-1's, and Summary Plan
Descriptions) have been filed or distributed
appropriately with respect to each such Employee
Benefit Plan. The requirements of Part 6 of
Subtitle B of Title I of ERISA and of Code Sec.
4980B have been met with respect to each such
Employee Benefit Plan which is an Employee Welfare
Benefit Plan.
(C) All contributions (including all
employer contributions and employee salary
reduction contributions) which are due have been
paid to each such Employee Benefit Plan which is
an Employee Pension Benefit Plan and all
contributions for any period ending on or before
the Closing Date which are not yet due have been
paid to each such Employee Pension Benefit Plan or
accrued in accordance with the past custom and
practice of the Company and its Subsidiaries. All
premiums or other payments for all periods ending
on or before the Closing Date have been paid with
respect to each such Employee Benefit Plan which
is an Employee Welfare Benefit Plan.
(D) Each such Employee Benefit Plan which
is an Employee Pension Benefit Plan meets the
requirements of a "qualified plan" under Code Sec.
401(a) and has received, within the last two
years, a favorable determination letter from the
Internal Revenue Service.
(E) The market value of assets under each
such Employee Benefit Plan which is an Employee
Pension Benefit Plan (other than any Multiemployer
Plan) equals or exceeds the present value of all
vested and nonvested Liabilities thereunder
determined in accordance with PBGC methods,
factors, and assumptions applicable to an Employee
Pension Benefit Plan terminating on the date for
determination.
(F) The Company has delivered to Fields
correct and complete copies of the plan documents
and summary plan descriptions, the most recent
determination letter received from the Internal
Revenue Service, the most recent Form 5500 Annual
Report, and all related trust agreements,
insurance contracts, and other funding agreements
which implement each such Employee Benefit Plan.
(ii) With respect to each Employee Benefit Plan
that any of the Company, its Subsidiaries, and the
Controlled Group of Corporations which includes the
Company and its Subsidiaries maintains or ever has
maintained or to which any of them contributes, ever has
contributed, or ever has been required to contribute:
(A) No such Employee Benefit Plan which
is an Employee Pension Benefit Plan (other than
any Multiemployer Plan) has been completely or
partially terminated or been the subject of a
Reportable Event as to which notices would be
required to be filed with the PBGC. No proceeding
by the PBGC to terminate any such Employee Pension
Benefit Plan (other than any Multiemployer Plan)
has been instituted or threatened.
(B) There have been no Prohibited
Transactions with respect to any such Employee
Benefit Plan. No Fiduciary has any Liability for
breach of fiduciary duty or any other failure to
act or comply in connection with the
administration or investment of the assets of any
such Employee Benefit Plan. No action, suit,
proceeding, hearing, or investigation with respect
to the administration or the investment of the
assets of any such Employee Benefit Plan (other
than routine claims for benefits) is pending or
threatened. Neither the Company nor the Principal
Shareholder has any Knowledge of any Basis for any
such action, suit, proceeding, hearing, or
investigation.
(C) None of the Company and its
Subsidiaries has incurred, and neither of the
Company or the Principal Shareholder has any
reason to expect that any of the Company and its
Subsidiaries will incur, any Liability to the PBGC
(other than PBGC premium payments) or otherwise
under Title IV of ERISA (including any withdrawal
Liability) or under the Code with respect to any
such Employee Benefit Plan which is an Employee
Pension Benefit Plan.
(iii) None of the Company, its Subsidiaries, and
the other members of the Controlled Group of Corporations
that includes the Company and its Subsidiaries contributes
to, ever has contributed to, or ever has been required to
contribute to any Multiemployer Plan or has any Liability
(including withdrawal Liability) under any Multiemployer
Plan.
(iv) None of the Company and its Subsidiaries
maintains or ever has maintained or contributes, ever has
contributed, or ever has been required to contribute to
any Employee Welfare Benefit Plan providing medical,
health, or life insurance or other welfare-type benefits
for current or future retired or terminated employees,
their spouses, or their dependents (other than in
accordance with Code Sec. 4980B).
. None of the Company and its Subsidiaries is a guarantor or
otherwise is liable for any Liability or obligation (including
indebtedness) of any other Person.
. (ab) Environment, Health, and Safety
(i) To the Knowledge of the Principal Shareholder,
each of the Company, its Subsidiaries, and their
respective predecessors and Affiliates has complied with
all Environmental, Health, and Safety Laws, and no action,
suit, proceeding, hearing, investigation, charge,
complaint, claim, demand, or notice has been filed or
commenced against any of them alleging any failure so to
comply. Without limiting the generality of the preceding
sentence, to the Knowledge of the Principal Shareholder,
each of the Company, its Subsidiaries, and their
respective predecessors and Affiliates has obtained and
been in compliance with all of the terms and conditions of
all permits, licenses, and other authorizations which are
required under, and has complied with all other
limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules, and
timetables which are contained in, all Environmental,
Health, and Safety Laws.
(ii) To the Knowledge of the Principal
Shareholder, none of the Company and its Subsidiaries has
any Liability (and none of the Company, its Subsidiaries,
and their respective predecessors and Affiliates has
handled or disposed of any substance, arranged for the
disposal of any substance, exposed any employee or other
individual to any substance or condition, or owned or
operated any property or facility in any manner that could
form the Basis for any present or future action, suit,
proceeding, hearing, investigation, charge, complaint,
claim, or demand against any of the Company and its
Subsidiaries giving rise to any Liability) for damage to
any site, location, or body of water (surface or
subsurface), for any illness of or personal injury to any
employee or other individual, or for any reason under any
Environmental, Health, and Safety Law.
(iii) To the Knowledge of the Principal
Shareholder, all properties and equipment used in the
business of the Company, its Subsidiaries, and their
respective predecessors and Affiliates have been free of
asbestos, PCBs, methylene chloride, trichloroethylene,
1,2-transdichloroethylene, dioxins, dibenzofurans, and
Extremely Hazardous Substances.
. The Parties agree as follows with respect to the period
between the execution of this Agreement and the Closing.
. Each of the Parties will use his or its best efforts to take all
action and to do all things necessary in order to consummate and
make effective the transactions contemplated by this Agreement
(including satisfaction, but not waiver, of the closing conditions
set forth in Section 8 below).
. The Company will cause each of the Company and its Subsidiaries to
give any notices to third parties, and will cause each of the
Company and its Subsidiaries to use its best efforts to obtain any
third-party consents, that Fields may request. Each of the Parties
will give any notices to, make any filings with, and use its best
efforts to obtain any authorizations, consents, and approvals of
governments and governmental agencies as may be required hereunder.
. Neither the Company nor its Subsidiaries will engage in any
practice, take any action, or enter into any transaction outside
the Ordinary Course of Business. Without limiting the generality of
the foregoing, neither the Company nor its Subsidiaries will (i)
declare, promise, commit to, set aside, or pay any dividend or make
any distribution with respect to its capital stock or redeem,
purchase, or otherwise acquire any of its capital stock, (ii)
acquire additional indebtedness or enter into any loans; or (iii)
otherwise engage in any practice, take any action, or enter into
any transaction of the sort described in Section 5(i) above.
. The Company and its Subsidiaries will keep its business and
properties substantially intact, including its present operations,
physical facilities, working conditions, and relationships with
lessors, licensors, suppliers, customers, franchisees and area
developers.
. The Company and its Subsidiaries will permit representatives of
Fields to have full access to all premises, properties, personnel,
books, records (including Tax records), contracts, and documents of
or pertaining to each of the Company and its Subsidiaries.
. The Company and the Principal Shareholder will give prompt
written notice to Fields of any material adverse development
causing a breach of any of the representations and warranties in
Section 5 above. Each of the Parties will give prompt written
notice to the others of any material adverse development causing
a breach of any of his or its own representations and warranties
in Sections 3 and 4 above. No disclosure by any of the Parties
pursuant to this Section 6(f), however, shall be deemed to amend
or supplement Annex I, Annex II, or the Disclosure Schedule or to
prevent or cure any misrepresentation, breach of warranty, or
breach of covenant.
. The Principal Shareholder will not, except with Fields or its
Affiliates, cause or permit any of the Company and its Subsidiaries
to (i) solicit, initiate, or encourage the submission of any
proposal or offer from any Person relating to the acquisition of
any capital stock or other voting securities, or any substantial
portion of the assets of, any of the Company and its Subsidiaries
(including any acquisition structured as a merger, consolidation,
or share exchange) or (ii) participate in any discussions or
negotiations regarding, furnish any information with respect to,
assist or participate in, or facilitate in any other manner any
effort or attempt by any Person to do or seek any of the foregoing.
The Principal Shareholder will not vote his Company Shares in favor
of any such acquisition structured as a merger, consolidation, or
share exchange. The Principal Shareholder will notify Fields
immediately if any Person makes any proposal, offer, inquiry, or
contact with respect to any of the foregoing.
. For so long as this Agreement and the Related Transaction Documents remain in
force, the Company and the Principal Shareholder shall take such further actions
as Fields deems necessary or desirable to carry out the purposes of this
Agreement.
. 8. Conditions to Obligation to Close
. The obligation of Fields to consummate the transactions to be
performed by it in connection with the Closing is subject to
satisfaction of the following conditions:
(i) the representations and warranties set forth
in Section 3 and Section 5 above shall be true and correct
in all material respects at and as of the Closing Date;
(ii) the Principal Shareholder and the Company
shall have performed and complied with all of its their
covenants hereunder in all material respects through the
Closing;
(iii) the Company and its Subsidiaries shall have
procured all of the third-party consents specified in
Section 6(b) above;
(iv) there shall have been no material adverse
changes in the Company and its Subsidiaries;
(v) Fields shall have concluded its due diligence
review of the Company and its Subsidiaries to Fields' sole
satisfaction;
(vi) no action, suit, or proceeding shall be
pending or threatened before any court or quasi-judicial
or administrative agency of any federal, state, local, or
foreign jurisdiction or before any arbitrator wherein an
unfavorable injunction, judgment, order, decree, ruling,
or charge would
(A) prevent consummation of any of the transactions
contemplated by this Agreement;
(B) cause any of the transactions contemplated by this
Agreement to be rescinded following consummation;
(C) affect adversely the right of Fields to own the Company
Shares and to control the Company and its Subsidiaries;
or
(D) affect adversely the right of any of the Company and
its Subsidiaries to own its assets and to operate its
businesses (and no such injunction, judgment, order,
decree, ruling, or charge shall be in effect);
(vii) the Company and the principal Shareholder
shall have delivered to Fields a certificate to the effect
that each of the conditions specified above in Section
8(a)(i), (ii), (iii), (iv) and (vi) is satisfied in all
respects;
(viii) Fields shall have received from counsel to
the Company and from counsel to the Principal Shareholder
written opinions addressed to Fields, dated as of the
Closing Date and in form and substance acceptable to
Fields and its counsel;
(ix) the Related Transaction Documents shall have
been executed by each of the parties thereto, and each of
the Related Transactions shall have been closed or each of
the conditions for the closing of the Related Transactions
concurrently with the Closing of the transaction
contemplated by this Agreement shall have been satisfied
or waived to Fields' satisfaction;
(x) the Company shall have delivered a share
certificate to Fields evidencing the Shares;
(xi) following the Closing of the transaction
described herein and the Related Transactions, Fields
shall own fifty-six (56%) of the outstanding Company
Shares on a fully diluted basis, and there shall be no
other shareholders of the Company except the Principal
Shareholder;
(xii) all actions to be taken by the Company and
the Principal Shareholder in connection with consummation
of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents
required to effect the transactions contemplated hereby
will be satisfactory in form and substance to Fields.
Fields may waive any condition specified in this Section 8(a) if it
executes a writing so stating at or prior to the Closing.
. The obligation of the Company and the Principal Shareholder to
consummate the transactions to be performed by them in connection
with the Closing is subject to satisfaction of the following
conditions:
(i) the representations and warranties set forth
in Section 4 above shall be true and correct in all
material respects at and as of the Closing Date;
(ii) Fields shall have performed and complied with
all of its covenants hereunder in all material respects
through the Closing;
(iii) no action, suit, or proceeding shall be
pending or threatened before any court or quasi-judicial
or administrative agency of any federal, state, local, or
foreign jurisdiction for before any arbitrator wherein an
unfavorable injunction, judgment, order, decree, ruling,
or charge would (A) prevent consummation of any of the
transactions contemplated by this Agreement or (B) cause
any of the transactions contemplated by this Agreement to
be rescinded following consummation (and no such
injunction, judgment, order, decree, ruling, or charge
shall be in effect);
(iv) Fields shall have delivered to the Company
and the Principal Shareholder a certificate to the effect
that each of the conditions specified above in Section
8(b) is satisfied in all respects;
(v) the Related Transactions Documents, including
a developer agreement between the Company and the
Principal Shareholder whereby the Principal Shareholder
receives the area development rights for Vermont, New
Hampshire, Massachusetts, Maine and the Greater Dallas/Ft.
Worth, Texas area shall have been executed by all of the
parties thereto, and each of the Related Transactions
shall have occurred or each of the conditions for the
closing of the Related Transactions concurrently with the
closing of the transactions contemplated by this Agreement
shall have been satisfied or waived to the Company and
Principal Shareholder's satisfaction;
(vi) Fields shall be prepared to deliver the
Purchase proceeds upon compliance with the matters set
forth in Section 8(a); and
(vii) all actions to be taken by Fields in
connection with consummation of the transactions
contemplated hereby and all certificates, opinions,
instruments, and other documents required to effect the
transactions contemplated hereby will be reasonably
satisfactory in form and substance to the Company.
The Company and the Principal Shareholder may waive any condition specified in
this Section 8(b) if they execute a writing so stating at or prior to the
Closing.
. 9. Remedies for Breaches of This Agreement
. (a) Survival of Representations and Warranties
All of the representations and warranties of the Parties contained
in this Agreement shall survive the Closing hereunder (even if the damaged Party
knew or had reason to know of any misrepresentation or breach of warranty at the
time of Closing) and continue in full force and effect
(i) forever after the Closing Date (subject to any
applicable statutes of limitations) with respect to the
representations and warranties set forth in Sections 5(k),
(1), (r) and (z), and,
(ii) otherwise for a period of one (1) year from
the Closing Date.
. (b) Indemnification Provisions for Benefit of Fields
(i) In the event the Company or the Principal
Shareholder breaches any of the representations,
warranties, and covenants contained in Sections 5 and 6
above, provided that Fields makes a written claim for
indemnification against the Principal Shareholder pursuant
to this Section 9, then the Principal Shareholder agrees
to indemnify Fields from and against the entirety of any
Adverse Consequences Fields may suffer through and after
the date of the claim for indemnification (including any
Adverse Consequences Fields may suffer after the end of
any applicable survival period) resulting from, arising
out of, relating to, in the nature of, or caused by the
breach.
(ii) In the event the Principal Shareholder
breaches any of his representations and warranties in
Section 3 above or any of his covenants in Section 6
above, provided that Fields makes a written claim for
indemnification against the Principal Shareholder pursuant
to this Section 9, then the Principal Shareholder agrees
to indemnify Fields from and against the entirety of any
Adverse Consequences Fields may suffer through and after
the date of the claim for indemnification (including any
Adverse Consequences Fields may suffer after the end of
any applicable survival period) resulting from, arising
out of, relating to, in the nature of, or caused by the
breach.
(iii) Provided that Fields makes a written claim
for indemnification against the Principal Shareholder, the
Principal Shareholder agrees to indemnify Fields from and
against the entirety of any Adverse Consequences Fields
may suffer resulting from, arising out of, relating to, in
the nature of, or caused by:
(A) any Liability of any of the Company
and its Subsidiaries for unpaid Taxes, including
the unpaid Taxes of any Person under Treas. Reg.
Section 1.1502-6 (or any similar provision of
state, local, or foreign law), as a transferee or
successor, by contract, or otherwise; or
(B) any violation prior to the Closing by
any of the Company, its Subsidiaries and its past
or present officers, directors, employees, agents
and representatives (including the Principal
Shareholder) of any state or federal securities
laws or regulations;
(C) the failure of any of the Company and
its Subsidiaries to have qualified to transact
business in any jurisdiction;
(D) any breach, prior to the Closing, by
any of the Company and the Subsidiaries of any of
the Franchise Agreements;
(E) any violation, prior to the Closing,
by any of the Company, its Subsidiaries and their
respective officers, directors, employees, agents
and representatives and the Principal Shareholder,
of any state or federal franchise laws or
regulations; or
(F) any violation by any of the Company,
its Subsidiaries and the Principal Shareholders of
ERISA or any regulation adopted pursuant thereto.
The Principal Shareholder's obligation to indemnify Fields
pursuant to this Section 9(b)(iii) shall not in any way
depend or be conditioned upon any inaccuracy, the
incompleteness or the breach by the Company or the
Principal Shareholder, of any representation, warranty or
covenant in this Agreement (or in any of the Related
Transactions Documents), and shall not be barred,
impaired, limited or adverseley affected by any
investigation at any time made by or on behalf of, or any
disclosure made at any time to, Fields.
. (c) Matters Involving Third Parties
(i) If any third party shall notify any Fields
with respect to any matter (a "Third Party Claim") which
may give rise to a claim for indemnification against the
Principal Shareholder under this Section 9, then Fields
shall promptly notify the Principal Shareholder thereof in
writing; provided, however, that no delay on the part of
Fields in notifying the Principal Shareholder shall
relieve the Principal Shareholder from any obligation
hereunder unless (and then solely to the extent) the
Principal Shareholder thereby is prejudiced.
(ii) The Principal Shareholder will have the right
to defend Fields against the Third Party Claim with
counsel of its choice satisfactory to the Fields so long
as
(A) the Principal Shareholder notifies
Fields in writing within 15 days after Fields has
given notice of the Third Party Claim that the
Principal Shareholder will indemnify Fields from
and against the entirety of any Adverse
Consequences Fields may suffer resulting from,
arising out of, relating to, in the nature of, or
caused by the Third Party Claim;
(B) the Principal Shareholder provides
Fields with evidence acceptable to Fields that the
Principal Shareholder will have the financial
resources to defend against the Third Party Claim
and fulfill its indemnification obligations
hereunder;
(C) the Third Party Claim involves only
money damages and does not seek an injunction or
other equitable relief;
(D) the settlement of, or an adverse
judgment with respect to, the Third Party Claim is
not, in the good faith judgment of the Fields,
likely to establish a precedential custom or
practice materially adverse to the continuing
business interests of Fields; and
(E) the Principal Shareholder conducts
the defense of the Third Party Claim actively and
diligently.
(iii) The party not conducting the defense of the
Third Party Claim above may retain separate co-counsel at
its sole cost and expense and participate in the defense
of the Third Party Claim;
(iv) The party conducting the defense
(A) will not consent to the entry of any
judgment or enter into any settlement with respect
to the Third Party Claim without the prior written
consent of the other party (not to be withheld
unreasonably); and
(B) will not consent to the entry of any
judgment or enter into any settlement with respect
to the Third Party Claim without the prior written
consent of the other party (not to be withheld
unreasonably).
(v) In the event any of the conditions in Section
9(c)(ii) above is or becomes unsatisfied, however,
(A) Fields may defend against, and
consent to the entry of any judgment or enter into
any settlement with respect to, the Third Party
Claim in any manner it reasonably may deem
appropriate (and Fields need not consult with, or
obtain any consent from, any Principal Shareholder
in connection therewith);
(B) the Principal Shareholder will
reimburse Fields promptly and periodically for the
costs of defending against the Third Party Claim
(including reasonable attorneys' fees and
expenses); and
(C) the Principal Shareholder will remain
responsible for any Adverse Consequences Fields
may suffer resulting from, arising out of,
relating to, in the nature of, or caused by the
Third Party Claim to the fullest extent provided
in this Section 8.
. The indemnity payment to Fields by the Principal Shareholder with
respect to any claim indemnifified under Sections 9(b)(i) or (ii),
but not with respect to any Third Party Claim under Section 9(c)
hereof, shall be limited to:
(i) any loss or reduction, arising from or by
reason of such claim, of amounts the Company paid,
distributed, or that would have otherwise been available
for the Company's payment or distribution to Fields by
reason of its status as a shareholder of the Company, or
otherwise, which loss or reduction arises from or by
reason of a claim for which the Principal Shareholder is
obligated to indemnify Fields pursuant to this Agreement;
and
(ii) all professional fees (including without
limitation attorney's fees) and costs, and out of pocket
expenses reasonably incurred by Fields in connection with
such claims; and
(iii) additional amounts necessary to compensate
the Fields for the time cost of money (using the
Applicable Rate as the discount rate) in determining the
amount of the indemnity payment pursuant to this Section
9(d).
. The foregoing indemnification provisions are in
addition to, and not in derogation of, any statutory,
equitable, or common law remedy Fields may have for
breach of representation, warranty, or covenant. The
Company and the Principal Shareholder hereby agree that
he or it will not make any claim for indemnification
against any of the Company and its Subsidiaries by
reason of the fact that he or it was a director,
officer, employee, or agent of any such entity or was
serving at the request of any such entity as a partner,
trustee, director, officer, employee, or agent of
another entity (whether such claim is for judgments,
damages, penalties, fines, costs, amounts paid in
settlement, losses, expenses, or otherwise and whether
such claim is pursuant to any statute, charter
document, bylaw, agreement, or otherwise) with respect
to any action, suit, proceeding, complaint, claim, or
demand brought by Fields against the Company or the
Principal Shareholder (whether such action, suit,
proceeding, complaint, claim, or demand is pursuant to
this Agreement, applicable law, or otherwise). For
purposes of determining the amount of the indemnity
payment due from the Principal Shareholder, the term
"Fields" in Section 9(d) above shall include ▇▇▇.
▇▇▇▇▇▇' Original Cookies, Inc., a Fields' affiliate
("MFOC"), which entered into that certain Management
Agreement of even date with the Company, for purposes
of determining any such payable by the Principal
Shareholder under this Agreement.
. In the event of any claim by Fields under this Section 9, the
Fields shall be entitled to exercise rights of offset against any
amounts due the Principal Shareholder from the Company in the form
of a bonus payable to him in connection with his employment by the
Company, or as a dividend by reason of his status as a shareholder
of the Company.
. No exercise of the rights of offset under Section 9(f) shall be
permitted with respect to claims made under this Section 9 unless
and until the Adverse Consequences (determined in accordance with
Section 9 (d) above) suffered by Fields, in the aggregate for
claims asserted under this Section 9, exceeds $100,000; but once
such amount is exceeded, Fields may recover the initial $100,000
together with amounts in excess of $100,000.
. 10. Termination
. Certain of the Parties may terminate this Agreement as provided below:
(i) Fields, the Principal Shareholder, and the
Company may terminate this Agreement by mutual written
consent at any time prior to the Closing;
(ii) Fields may terminate this Agreement by giving
written notice to the Company and the Principal
Shareholder on or before the Closing if Fields is not
satisfied with the results of its continuing business,
legal, and accounting due diligence regarding the Company
and its Subsidiaries;
(iii) Fields may terminate this Agreement by
giving written notice to the Company and the Principal
Shareholder any time prior to the Closing (A) in the event
any of the Company or the Principal Shareholder has
breached any material representation, warranty, or
covenant contained in this Agreement in any material
respect, Fields has notified the Company of the breach,
and the breach has continued without cure for a period of
seven (7) business days after the notice of breach; or (B)
if the Closing shall not have occurred on or before
October 1, 1997, by reason of the failure of any condition
precedent under Section 8(a) hereof (unless the failure
results primarily from Fields itself breaching any
representation, warranty, or covenant contained in this
Agreement); and
(iv) the Company may terminate this Agreement by
giving written notice to Fields and the Principal
Shareholder at any time prior to the Closing (A) in the
event Fields has breached any material representation,
warranty, or covenant contained in this Agreement in any
material respect, any of the Company or the Principal
Shareholder has notified Fields of the breach, and the
breach has continued without cure for a period of seven
(7) business days after the notice of breach or (B) if the
Closing shall not have occurred on or before October 1,
1997 by reason of the failure of any condition precedent
under Section 8(b) hereof (unless the failure results
primarily from any of the Company or the Principal
Shareholder themselves breaching any representation,
warranty, or covenant contained in this Agreement).
. If any Party terminates this Agreement pursuant to Section 10(a)
above, all rights and obligations of the Parties under this
Agreement and under the Related Transactions Documents shall
terminate without any Liability of any Party to any other Party
(except for any Liability of any Party then in breach).
. 11. Miscellaneous
. The representations and warranties of each of the Principal
Shareholder and the Company in Section 3 and Section 5 above
concerning the transaction are several obligations. This means that
each will be solely responsible to the extent provided in Section 9
above for any Adverse Consequences Fields may suffer as a result of
any breach thereof.
. None of the Parties shall issue any press release or make any
public announcement relating to the subject matter of this
Agreement prior to the Closing without the prior written approval
of Fields and the Company provided, however, that any of the
Parties may make any public disclosure it believes in good faith is
required by applicable law (in which case the disclosing Party will
use its best efforts to advise the other Parties prior to making
the disclosure).
. This Agreement shall not confer any rights or remedies upon any
Person other than the Parties and their respective successors and
permitted assigns.
. This Agreement (including the documents referred to herein)
together with the Related Transaction Documents constitutes the
entire agreement among the Parties and supersedes any prior
understandings, agreements, or representations by or among the
Parties, written or oral, to the extent they related in any way to
the subject matter hereof.
. This Agreement shall be binding upon and inure to the
benefit of the Parties named herein and their respective
successors and permitted assigns. None of the Parties may assign
either this Agreement or any of his or its rights, interests, or
obligations hereunder without the prior written approval of
Fields and the Company; provided, however, that Fields may (i)
assign any or all of its rights and interests hereunder to one or
more of its Affiliates and (ii) designate one or more of its
Affiliates to perform its obligations hereunder (in any or all of
which cases Fields nonetheless shall remain responsible for the
performance of all of its obligations hereunder).
. This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original but all of which together will
constitute one and the same instrument.
. The section headings contained in this Agreement are inserted for
convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
. All notices, requests, demands, claims, and other communications
hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and
then two business days after) it is sent by registered or certified
mail, return receipt requested, postage prepaid, and addressed to
the intended recipient as set forth below:
If to the Company: Pretzel Time, Inc.
ATTN: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, President
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
With a copy to: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
If to the Principal
Shareholder: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
With a copy to: Mette, ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
ATTN: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
If to Fields: ▇▇▇. ▇▇▇▇▇▇' Holding Company, Inc.
ATTN: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, President
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
With a copy to: Jones, Waldo, ▇▇▇▇▇▇▇▇
& ▇▇▇▇▇▇▇▇▇
ATTN: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
170 So. ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such notice,
request, demand, claim, or other communication shall be deemed to have been duly
given unless and until it actually is received by the intended recipient. Any
Party may change the address to which notices, requests, demands, claims, and
other communications hereunder are to be delivered by giving the other Parties
notice in the manner herein set forth.
. This Agreement shall be governed by and construed in accordance with
the domestic laws of the State of Utah without giving effect to any
choice or conflict of law provision or rule (whether of the State of
Utah or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of Utah.
. No amendment of any provision of this Agreement shall be valid unless
the same shall be in writing and signed by Fields and the Company. No
waiver by any Party of any default, misrepresentation, or breach of
warranty or covenant hereunder, whether intentional or not, shall be
deemed to extend to any prior or subsequent default, misrepresentation,
or breach of warranty or covenant hereunder or affect in any way any
rights arising by virtue of any prior or subsequent such occurrence.
. Any term or provision of this Agreement that is invalid or
unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining terms and provisions hereof
or the validity or enforceability of the offending term or provision in
any other situation or in any other jurisdiction.
. Each of the Parties, the Company, and its Subsidiaries will bear his or
its own costs and expenses (including legal fees and expenses) incurred
in connection with this Agreement and the transactions contemplated
hereby. The Principal Shareholder agrees that none of the Company and
its Subsidiaries has borne or will bear any of the Principal
Shareholder's costs and expenses (including any of his legal fees and
expenses) in connection with this Agreement or any of the transactions
contemplated hereby.
. The Parties have participated jointly in the negotiation and drafting
of this Agreement. In the event an ambiguity or question of intent or
interpretation arises, this Agreement shall be construed as if drafted
jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of
any of the provisions of this Agreement. Any reference to any federal,
state, local, or foreign statute or law shall be deemed also to refer
to all rules and regulations promulgated thereunder, unless the context
requires otherwise. The word "including" shall mean including without
limitation. The Parties intend that each representation, warranty, and
covenant contained herein shall have independent significance. If any
Party has breached any representation, warranty, or covenant contained
herein in any respect, the fact that there exists another
representation, warranty, or covenant relating to the same subject
matter (regardless of the relative levels of specificity) which the
Party has not breached shall not detract from or mitigate the fact that
the Party is in breach of the first representation, warranty, or
covenant.
. The Exhibits, Annexes, and Schedules identified in this Agreement are
incorporated herein by reference and made a part hereof.
. Each of the Parties acknowledges and agrees that the other Parties
would be damaged irreparably in the event any of the provisions of this
Agreement are not performed in accordance with their specific terms or
otherwise are breached. Accordingly, each of the Parties agrees that
the other Parties shall be entitled to an injunction or injunctions to
prevent breaches of the provisions of this Agreement and to enforce
specifically this Agreement and the terms and provisions hereof in any
action instituted in any court of the United States or any state
thereof having jurisdiction over the Parties and the matter (subject to
the provisions set forth in Section 11(p)(d) below), in addition to any
other remedy to which they may be entitled, at law or in equity.
. Each of the Parties submits to the jurisdiction of any state or federal
court sitting in Salt Lake City, Utah, in any action or proceeding
arising out of or relating to this Agreement and agrees that all claims
in respect of the action or proceeding may be heard and determined in
any such court. Each Party also agrees not to bring any action or
proceeding arising out of or relating to this Agreement in any other
court. Each of the Parties waives any defense of inconvenient forum to
the maintenance of any action or proceeding so brought and waives any
bond, surety, or other security that might be required of any other
Party with respect thereto. Each Party agrees that a final judgment in
any action or proceeding so brought shall be conclusive and may be
enforced by suit on the judgment or in any other manner provided by law
or at equity.
. All disputes hereunder shall be resolved by binding arbitration in
accordance with the terms of this arbitration clause. Arbitrations
conducted pursuant to this Agreement, including selection of
arbitrators, shall be administered by the American Arbitration
Association (the "Administrator") pursuant to the Commercial
Arbitration rules of the Administrator. Judgment upon any award
rendered hereunder may be entered in any court having jurisdiction. Any
party who fails to submit to binding arbitration following a lawful
demand by the opposing party shall bear all costs and expenses,
including reasonable attorney's fees, incurred by the opposing party in
compelling arbitration of any dispute hereunder.
[Remainder of page intentionally left blank]
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as
of the date first above written.
FIELDS: ▇▇▇. ▇▇▇▇▇▇' Holding Company, Inc.
By:/s/▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇▇, President
COMPANY: Pretzel Time, Inc.
By:/s/▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, President
PRINCIPAL
SHAREHOLDER:
/s/▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, individually
EXHIBIT A
RELATED TRANSACTIONS DOCUMENT LIST
RELATED TRANSACTIONS DOCUMENTS
1. Stock Purchase Agreement Between Fields and Nonprincipal Shareholders
2. Stock Purchase Agreement Between Fields and the Principal Shareholder
(Exhibit A to the Shareholders' Agreement Among Fields, the Company and the
Principal Shareholder)
3. Employment Agreement Between the Company and Principal Shareholder
4. Management Agreement Between ▇▇▇. ▇▇▇▇▇▇' Original Cookies, Inc. and
Company
5. Promissory Note from Principal Shareholder to Fields
6. Shareholders' Agreement Among Fields, the Company and Principal
Shareholder
7. Franchise Agreement and Area Developer Agreement (and installment
payment and security agreements), Between Pretzel Time, Inc. and New England
Concepts, Inc.
8. Letter Agreement from MFDC re franchise relationship with Principal
Shareholders
9. Exchange Agreement
10. Amended and Restated Bylaws and Consent
11. Settlement Agreement and Release Between Pretzel Time, Inc. and ▇▇▇▇
▇▇▇▇▇▇▇▇ et al, and Stock Certificates (endorsed in blank, or delivered
with an executed Stock Power, evidencing 5 shares of PTI stock issued to
▇▇▇▇ ▇▇▇▇▇▇▇▇).
ANNEX I
Exceptions to Company's and Principal Shareholder's Representations
and Warranties Concerning Transaction
ANNEX II
Exceptions to Fields' Representations and Warranties
Concerning Transaction
SCHEDULE 2(a)
List of Company Obligations to be Retired at Closing
SCHEDULE 5(a)
Officers and Directors of Company and Subsidiaries
SCHEDULE 5(b)
Capitalization of Company
SCHEDULE 5(g)
Subsidiaries and Subsidiary Information
SCHEDULE 5(l)(iii)
Federal, State and Local Tax Returns
SCHEDULE 5(l)(vi)
Basis of Company and Subsidiary in Assets; Stockholder's Basis;
Net Operating Loss, etc.; Deferred Gain or Loss
SCHEDULE 5(m)(i)
Real Property Owned by the Company
SCHEDULE 5(m)(ii)
Real Property Leased or Subleased by the Company,
and/or Leased or Subleased to Third Parties, including Franchisees
and Area Developers
SCHEDULE 5(n)(iii)
Intellectual Property of the Company and Licenses Thereof
SCHEDULE 5(n)(iv)
Intellectual Property used by Company pursuant to
License, Sublicense, Agreement or Permission
SCHEDULE 5(p)
List of Company-Owned Stores
SCHEDULE 5(q)
Contracts and Agreements to which the Company is a Party
SCHEDULE 5(u)
Insurance Policies of Company
SCHEDULE 5(v)
Outstanding Judgments, Liens, Judicial Orders and Litigation
SCHEDULE 5(w)
Product Warranty
SCHEDULE 5(z)
Employee Benefit Plans