Exhibit 10.12
* * * * *
AGREEMENT AND PLAN OF MERGER
AND REORGANIZATION
among
Syndicated Food Service International, Inc.
(f/k/a Floridino's International Holdings, Inc.),
Syndicated Food Service Group, Inc.,
Syndicated Transportation Service Group, Inc.,
▇▇▇▇▇▇▇ Food Service, Inc.,
▇▇▇▇▇▇▇ Transportation, Inc.
and
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
* * * * *
November 27, 2001
TABLE OF CONTENTS
Page
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ARTICLE 1 THE MERGER AND REORGANIZATION...................................................................2
1.1 The Merger......................................................................................2
1.2 Conversion of Shares into Company Shares and Notes..............................................2
1.3 Tax-free Reorganization.........................................................................2
1.4 Exchange or Consideration.......................................................................3
1.5 Closing.........................................................................................3
1.6 Certificate of Incorporation and By-Laws of the Surviving Corporation...........................3
1.7 Board of Directors and Officers.................................................................3
1.8 Treatment of Stock Options and Warrants.........................................................3
ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF BFS AND BTI
AND THE SHAREHOLDERS............................................................................4
2.1. Representations and Warranties..................................................................4
2.2 Disclosure.....................................................................................21
ARTICLE 3 ADDITIONAL REPRESENTATIONS AND WARRANTIES
OF THE SHAREHOLDERS............................................................................21
3.1 Representations and Warranties.................................................................21
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF
THE COMPANY, SFSI AND STSI....................................................................22
4.1 Representations and Warranties.................................................................22
ARTICLE 5 COVENANTS RELATING TO CONDUCT OF BUSINESS......................................................25
5.1 Conduct of Business by BFS and BTI Pending the Closing.........................................25
5.2 Certain Tax Matters............................................................................27
5.3 Other Actions..................................................................................27
ARTICLE 6 ADDITIONAL COVENANTS AND AGREEMENTS............................................................28
6.1 Access and Information.........................................................................28
6.2 Employment Agreements and Agreements Not to Compete............................................28
6.3 Press Releases.................................................................................28
6.4 Negotiations...................................................................................28
6.5 Indemnification................................................................................29
6.6 Nature and Survival of Representations.........................................................31
6.7 Limitations on Transfer of Shares; Rights of First Refusal.....................................33
ARTICLE 7 CONDITIONS TO CLOSING..........................................................................35
7.1 Conditions to BFS's, BTI's and Shareholders' Obligations.......................................35
i
Page
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7.2 Conditions to the Obligations of the Company...................................................35
7.3 Closing Deliveries By BFS, BTI and Shareholders................................................36
7.4 Closing Deliveries By Company..................................................................37
7.5 Real Estate Purchase Agreement.................................................................37
ARTICLE 8 TERMINATION....................................................................................38
8.1 Termination by Company or Shareholders.........................................................38
8.2 Termination by Mutual Consent..................................................................38
8.3 Termination by Any Party.......................................................................38
8.4 Material Breach................................................................................38
8.5 Lapse of Time..................................................................................38
8.6 Effect of Termination..........................................................................38
ARTICLE 9 GENERAL PROVISIONS.............................................................................39
9.1 Notices........................................................................................39
9.2 Interpretation.................................................................................40
9.3 Severability...................................................................................40
9.4 Miscellaneous..................................................................................40
9.5 Separate Counsel...............................................................................40
9.6 Governing Law..................................................................................40
9.7 Counterparts...................................................................................40
9.8 Amendment......................................................................................40
9.9 Parties In Interest: No Third Party Beneficiaries..............................................41
9.10 Expenses.......................................................................................41
9.11 Rule of Construction that Ambiguities to be Construed Against Drafter Not
Applicable.....................................................................................41
9.12 STSI Signature.................................................................................41
ii
AGREEMENT AND PLAN OF
MERGER AND REORGANIZATION
This Agreement and Plan of Merger and Reorganization, dated as of
November 27, 2001, (this "Agreement"), among Syndicated Food
Service International, Inc., f/k/a Floridino's International Holdings, Inc., a
Florida corporation (the "Company"), Syndicated Food Service
Group, Inc., a Delaware corporation ("SFSI"), Syndicated Transportation Service
Group, Inc., a to-be formed Delaware corporation ("STSI"), ▇▇▇▇▇▇▇ Food Service,
Inc. ("BFS"), an Indiana corporation, ▇▇▇▇▇▇▇ Transportation, Inc, ("BTI"), an
Indiana corporation, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ("CB") and ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ("MB"), both
residents of Monroe County, Indiana (CB and MB are referred to herein
individually and collectively, as the "Shareholders").
W I T N E S S E T H:
WHEREAS, the Boards of Directors of the Company, SFSI, STSI, BFS and
BTI have adopted resolutions approving and adopting this Agreement upon the
terms and conditions set forth in this Agreement;
WHEREAS, the Shareholders own 100% of the outstanding capital stock of
BFS and BTI, and the real estate (the "Real Estate") on which they conduct their
wholesale food distribution business operations and desire to enter into this
Agreement to provide for the conversion of their shares of BFS and BTI stock for
stock in the Company and other consideration in a statutory merger, so that
after the merger BFS and BTI will be wholly owned subsidiaries of SFSI, the
receipt of cash as provided below and the sale of the Real Estate by the
Shareholders to Syndicated Bloomington I, LLC, a Delaware limited liability
company, a subsidiary of the Company ("LLC").
WHEREAS, the Boards of Directors of the Company, SFSI, STSI, BFS and
BTI have approved the proposed mergers, on the terms and conditions set forth in
this Agreement, of BFS and BTI with and into SFSI and STSI, respectively
(collectively, the "Merger") in accordance with the terms set forth in the Plans
of Merger in the form attached hereto as Exhibits A-1 and A-2 (the "Plans of
Merger"), which states, among other things, the manner and basis of converting
the issued and outstanding shares of BFS and BTI Common Stock, without par value
("BFS and BTI Common Stock"), into shares of Company common stock, cash and
promissory notes to be issued by the Company;
WHEREAS, the parties' obligations under this Agreement are conditioned
upon the Merger becoming effective under the laws of the States of Delaware and
Indiana.
NOW THEREFORE, in consideration of the representations, warranties,
covenants and agreements herein contained in this Agreement, the legal
sufficiency of which is hereby acknowledged, the parties agree as follows:
ARTICLE 1
THE MERGER AND REORGANIZATION
1.1 The Merger. Subject to the terms and conditions of this
Agreement and the Plans of Merger, BFS and BTI shall be merged
with and into SFSI and STSI so that BFS and BTI shall become
wholly owned subsidiaries of the Company, and SFSI and STSI
shall be the surviving corporations in the Merger (sometimes
referred to as the "Surviving Corporations") and SFSI and STSI
shall continue their corporate existence under the laws of the
State of Delaware. The Merger shall be consummated when
properly executed and certified copies of the Plans of Merger
are filed in accordance with the General Corporation Law of
the State of Delaware and the Indiana Business Corporation Law
with the Secretaries of State of the States of Delaware and
Indiana (the date and time of such filings is the "Effective
Time"). From and after the Effective Time, the Surviving
Corporation in each merger shall possess all of the rights,
privileges, powers and franchises of a public as well as of a
private nature, and be subject to all the restrictions,
disabilities and duties, of each of the parties to the Merger,
all as set forth in the General Corporation Law of the State
of Delaware.
1.2 Conversion of Shares into Company Shares and Notes. Upon
effectiveness of the Merger, by virtue of the Merger and
without any further action on the part of any of the Company,
SFSI, STSI or the Shareholders, all of the outstanding shares
of BFS and BTI Common Stock shall be exchanged for and
converted into (a) 458,716 shares of Company Common Stock
("Shares"), (b) a $1,266,420.00 Promissory Note of the Company
in the form attached as Exhibit B ("Note") and (3) the cash
amount of $800,000. The Note will be secured pursuant to the
terms of a Security Agreement in the form attached as Exhibit
C ("Security Agreement"). The Shares shall be subject to the
transfer restrictions provided under Sections 3.1(c) and 6.7
and held in escrow pursuant to the Pledge and Escrow Agreement
to be entered into substantially in the form attached as
Exhibit D. The Note shall be subject to set-off as provided
below. All outstanding shares of BFS and BTI Common Stock will
be cancelled in the Merger. Fractional shares will be rounded
to the nearest whole number in an effort to equitably account
for otherwise fractional shares. No fractional shares or cash
in lieu of fractional shares will be issued.
1.3 Tax-free Reorganization. The parties intend that the Merger
shall constitute a tax- free reorganization within the meaning
of Section 368(a)(1)(A) and Section 368(a)(2)(D) of the
Internal Revenue Code of 1986, as amended (the "Code").
2
1.4 Exchange or Consideration. On the Closing Date, the
Shareholders shall surrender all certificates representing BFS
and BTI Common Stock, and the Shareholders shall then be
entitled to receive the cash payment of $800,000, the number
of shares of Company Common Stock provided for in Section
1.2(a) above and the Note provided in 1.2(b) above. The Shares
of Company Common Stock will be delivered by the transfer
agent for Company to ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, acting as escrow
agent, pursuant to the Pledge and Escrow Agreement as soon as
practical after the Closing Date, but in no event later than
the fifth (5th) business day after the Closing.
1.5 Closing. Subject to the provisions of this Agreement, the
closing (the "Closing") of the transactions contemplated by
this Agreement shall take place at the offices of Proskauer
Rose LLP, ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, on or
before December 17, 2001 at 10:00 a.m. (the "Closing Date"),
or at such other time, place or date as the Company and the
Shareholders may mutually agree; provided however, that if a
condition to the Closing set forth in Article 7 or elsewhere
herein shall not have been fulfilled or waived at that time,
any party entitled to the benefits of the condition may
postpone the Closing by notice to the other parties until the
condition or conditions shall have been met or waived, except
that in no event shall the Closing occur after December 31,
2001 without the written agreement of all parties.
Concurrently with the Closing, the Plans of Merger shall be
filed with the Secretaries of State of the States of Delaware
and Indiana. Closing shall be conditioned upon effectiveness
of the Merger in such States.
1.6 Certificate of Incorporation and By-Laws of the Surviving
Corporation. The Certificates of Incorporation and By-Laws of
SFSI and STSI (when formed), as in effect immediately prior to
the effective time, shall be the Certificates of Incorporation
and By-Laws of the Surviving Corporations, until thereafter
changed or amended as provided therein or by law.
1.7 Board of Directors and Officers. The directors and officers of
SFSI and STSI (when formed) immediately prior to the Merger
shall be the initial directors and officers of the Surviving
Corporations, each of such directors and officers to hold
office, subject to the applicable provisions of the
Certificates of Incorporation and By-Laws of the Surviving
Corporations, until their successors are duly elected and
qualified, or their earlier death, resignation or removal. The
Surviving Corporations may add such additional officers and
directors on or after the Closing Date as they shall see fit.
1.8 Treatment of Stock Options and Warrants. Immediately prior to
the effective time of the Merger, each outstanding debt
obligation convertible into shares, option or warrant to
purchase shares of BFS or BTI capital stock, if any, whether
vested or unvested, will be cancelled as of the effective time
of the Merger and releases in form
3
and substance satisfactory to the Company and its counsel will
be executed by each such option or warrant holder.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF BFS AND BTI
AND THE SHAREHOLDERS
2.1. Representations and Warranties. As an inducement to the
Company to enter into and perform its obligations under this
Agreement, BFS, BTI and the Shareholders, jointly and
severally, represent and warrant to the Company and SFSI as
follows:
(a) Organization. BFS and BTI are corporations duly
organized and validly existing under the laws of the
State of Indiana, and each has the requisite corporate
power to carry on its respective business as now
conducted, to own, operate or lease the properties and
assets its currently owns, operates or holds under
lease.
(b) Capitalization. The authorized capital stock of BFS
consists of 1,000 shares of BFS common stock, of which
100 shares are issued and outstanding. There are no
shares of BFS preferred stock authorized, issued or
outstanding. All of the issued and outstanding shares
of BFS common stock are duly authorized, validly
issued, fully paid, nonassessable and free of
preemptive rights. The authorized capital stock of BTI
consists of 1,000 shares of BTI common stock, of which
100 shares are issued and outstanding. There are no
shares of BTI preferred stock authorized, issued or
outstanding. All of the issued and outstanding shares
of BTI common stock are duly authorized, validly
issued, fully paid, nonassessable and free of
preemptive rights. Except as set forth on Schedule
2.1(b) (▇▇▇▇▇▇▇ Options and Equity Rights), there are
no outstanding or authorized options, rights,
warrants, calls, convertible securities or debt
obligations, rights to subscribe, conversion rights or
other agreements or commitments to which BFS, BTI or
the Shareholders is a party or which are binding upon
BFS, BTI or the Shareholders providing for the
issuance or transfer by BFS, BTI, or the Shareholders
of additional shares of its capital stock, and none of
BFS, BTI or the Shareholders has reserved any shares
of its capital stock for issuance or transfer, nor are
there any outstanding stock option rights, phantom
equity or similar rights, contracts, arrangements or
commitments. There are no voting trusts or any other
agreements or understandings with respect to voting
capital stock of BFS or BTI.
4
(c) Certain Corporate Matters. Each of BFS and BTI is duly
licensed or qualified to do business as a foreign
corporation and is in good standing in each
jurisdiction, as set forth on Schedule 2.1(c) (Foreign
Corporation Qualification-▇▇▇▇▇▇▇), in which the
ownership of its properties, the employment of its
personnel or the conduct of its business requires it
to be so qualified, except where such failure would
not have a material adverse effect on either BFS's or
BTI's financial condition, results of operations or
business. Each of BFS and BTI has full corporate power
and authority and has obtained all authorizations,
licenses and permits necessary to carry on the
business in which it is engaged and to own and use the
properties owned and used by it.
When used in this Agreement, "material adverse effect"
means, when used in connection with BFS, BTI or the
Company, as the case may be, any state of facts,
change, event, condition, matter, effect or occurrence
that is or is reasonably likely to be materially
adverse to the business, condition (financial or
otherwise), properties, assets, liabilities, earnings,
capitalization, shareholders' equity, operations or
prospects of such party and its subsidiaries, taken as
a whole, as the case may be; provided, however, that
any state of facts, change, effect or occurrence
relating to the economy in general or such entity's
industry in general and not specifically relating to
such entity shall not be taken into account in
determining whether there has been or would be a
"material adverse effect" on or with respect to such
entity. "Materially adverse" with respect to BFS and
BTI means any such state of facts, change, event,
condition, matter, effect, or occurrence or any
related set of similar such states of facts, changes,
events, conditions, matters, effects or occurrences of
a magnitude affecting BFS or BTI in an aggregate
amount of $50,000 or greater.
(d) Authority Relative to this Agreement. Except for any
required filing, permit, authorization, consent or
approval set forth on Schedule 2.1(d) (Required
Corporate Approvals-▇▇▇▇▇▇▇), each of BFS, BTI and the
Shareholders has the requisite individual or corporate
power and authority to enter into this Agreement and
to carry out its or their obligations hereunder. The
execution, delivery and performance of this Agreement
by each of BFS, BTI and the Shareholders, and the
consummation by BFS, BTI and the Shareholders of the
transactions contemplated hereby have been duly
authorized by them and, where applicable, their
respective Board of Directors by all necessary actions
and proceedings and no other actions on the part of
BFS, BTI or the Shareholders are necessary to
authorize this Agreement or the transactions described
in this Agreement. This Agreement has been duly and
validly executed and delivered by BFS, BTI, and the
Shareholders and constitutes a valid and binding
agreement of BFS, BTI, and the Shareholders,
enforceable against each of them in accordance with
its terms, except as such enforcement
5
may be limited by bankruptcy, insolvency or other
similar laws affecting the enforcement of creditors'
rights generally or by general principles of equity.
(e) Consents and Approvals; No Violations. Except as set
forth on Schedule 2.1(e) (Third Party
Consents-▇▇▇▇▇▇▇) and except for applicable
requirements of federal securities laws and state
securities or blue sky laws, no filing with, and no
permit, authorization, consent or approval of, any
third party, public body or authority is necessary for
the consummation by BFS, BTI or the Shareholders of
the transactions described in this Agreement. Neither
the execution and delivery of this Agreement by BFS,
BTI or the Shareholders nor the consummation by BFS,
BTI or the Shareholders of the transactions described
herein, nor compliance by BFS, BTI or the Shareholders
with any of the provisions hereof, will (a) conflict
with or result in any breach of any provisions of the
Articles of Incorporation or Bylaws of BFS or BTI, (b)
(i) conflict with or result in a violation or breach
of, (ii) constitute (with or without notice or lapse
of time or both) a default under, (iii) require BFS,
BTI or the Shareholders to obtain any consent,
approval or action of, make any filing with or give
any notice (other than those that have been obtained
or given) to any third party as a result or under the
terms of, (iv) result in or give to any third party
any right of termination, cancellation, acceleration
or modification in or with respect to, (A) result in
or give to any third party any additional rights or
entitlement to increased, additional, accelerated or
guaranteed payments under or (B) result in the
creation or imposition of any Lien upon BFS, BTI or
the Shareholders or any of their respective affiliates
or their respective assets and properties under, any
contract, license, permit, franchise or other
agreement or instrument to which BFS, BTI or the
Shareholders is a party or by which any of its assets
or properties is bound, or that would prevent the
consummation of the transactions contemplated thereby
under, any of the terms, conditions or provisions of
any note, bond, mortgage, indenture, license,
contract, agreement or other instrument or obligation
to which the Shareholders, BFS, BTI or any of their
respective Subsidiaries or affiliates of any of them,
is a party or by which any of them or their properties
or assets may be bound or (c) violate any order, writ,
injunction, decree, statute, rule or regulation
applicable to BFS, BTI or any of their respective
Subsidiaries, if any, and the Shareholders or any of
their properties or assets, except in the case of
clauses (b) and (c) for violations, breaches or
defaults which are not in the aggregate materially
adverse to BFS, BTI and their respective Subsidiaries,
if any.
"Lien" shall mean (i) any encumbrance, mortgage,
pledge, lien, charge or other security interest of any
kind (including any conditional sale or other title
retention agreement, any lease in the nature thereof
and the filing of any financing statement under the
Uniform Commercial Code in any jurisdiction
6
in connection with the creation of a security
interest) upon any property or assets of any
character, or upon the income, profits or proceeds
therefrom; (ii) any acquisition of or agreement to
have an option to acquire any property or assets upon
a conditional sale or other title retention agreement,
device or arrangement (including a capitalized lease);
or (iii) any sale, assignment, pledge or other
transfer for security of any accounts, general
intangibles or chattel paper, with or without
recourse; provided that "Lien" shall not include any
Lien arising out of this Agreement.
(f) Subsidiaries and Equity Investments.
-----------------------------------
(1) Schedule 2.1(f) (Subsidiaries-▇▇▇▇▇▇▇) sets
forth (i) the name of each corporation of
which BFS or BTI owns, directly or
indirectly, shares of capital stock
(collectively, "Subsidiaries" and
individually, "Subsidiary"); (ii) the name
of each corporation, partnership, joint
venture or other entity (other than the
Subsidiaries) in which BFS or BTI has, or
pursuant to any agreement has the right to
acquire at any time by any means, directly
or indirectly, an equity interest or
investment; (iii) in the case of each of
such corporations described in clauses (i)
and (ii) above, (A) the jurisdiction of
incorporation, (B) the capitalization
thereof and the percentage of each class of
capital voting stock owned by BFS or BTI,
(C) a description of any contractual
limitations on the holder's ability to vote
or alienate such securities, (D) a
description of any outstanding options or
other rights to acquire securities of or
interest in such corporation, and (E) a
description of any other contractual
obligation or impediment which would
materially limit or impair any of BFS's or
BTI's ownership of such entity or interest
or its ability effectively to exercise the
full rights of ownership of such entity or
interest; and (iv) in the case of each of
such unincorporated entities, information
substantially equivalent to that provided
pursuant to clause (iii) above with regard
to corporate entities.
(2) Each Subsidiary is a corporation duly
organized and validly existing under the
laws of its jurisdiction of incorporation
and has all requisite corporate power and
authority to own its properties and assets
and to conduct its business as now
conducted. Each Subsidiary is duly qualified
to do business as a foreign corporation in
every jurisdiction in which the character of
the properties owned or leased by it or the
nature of the business conducted by it makes
such qualification necessary, except where
such failure would not have a material
adverse effect on the Subsidiary's financial
condition, results of operation or business.
Each Subsidiary is duly qualified to do
7
business in good standing in each
jurisdiction where the nature of the
business conducted by BFS or BTI or the
ownership or leasing of their respective
properties makes such qualification and
being in good standing necessary, except
where the failure to be so qualified and in
good standing will not have a material
adverse effect on the business, operations,
properties, assets, condition or results of
operation of BFS or BTI. All the outstanding
shares of capital stock of each Subsidiary
owned by BFS or BTI have been duly
authorized and validly issued, are fully
paid and non-assessable, and are owned of
record and beneficially, directly or
indirectly, by BFS or BTI, free and clear of
any Liens, or other legal or equitable
encumbrances, limitations or restrictions.
There are no outstanding options, warrants,
agreements, conversion rights, preemptive
rights or other rights to subscribe for,
purchase or otherwise acquire any issued or
unissued shares of capital stock of any
Subsidiary.
(g) Financial Statements. Attached hereto as Schedule
2.1(g)(i)-(iv) (BFS/BTI Financial Statements) for BFS
and BTI, respectively, are balance sheets at December
31, 2000 (reviewed) and June 30, 2001 (compiled) and
September 30, 2001 (compiled) and related statements
of income, changes in stockholders' equity, and cash
flows for the period ended December 31, 2000, June 30,
2001 and September 30, 2001 (compiled) (the "BKD
Financial Statements"). Except as described in
Schedule 2.1(g), the BKD Financial Statements were
prepared in accordance with generally accepted
accounting principles ("US GAAP") applied on a
consistent basis with prior periods and, present
fairly, in all material aspects, the financial
position, results of operations and changes in
financial position of BFS and BTI as of such dates.
The Shareholders undertake to provide to the Company,
at the Company's cost, audited financial statements of
both BFS and BTI for the two most recently ended
fiscal years within 60 days of the Closing Date,
prepared in accordance with US GAAP.
There is no Indebtedness (as defined in Section 2.1
(h) (6)) or other liabilities or obligations of BFS or
BTI, whether absolute, accrued, contingent or
otherwise, that are required in accordance with US
GAAP to be, but are not, fully reflected or reserved
against in the BKD Financial Statements or in notes
thereto, except for liabilities that may have arisen
in the ordinary and usual course of business and
consistent with past practices since September 30,
2001 or which are disclosed in Schedule 2.1(g)(i),
(ii) and (iii).
Set forth on Schedule 2.1(g)(iv) is an unaudited
balance sheet, income statement and cash flows
("BFS/BTI Financials") for the period ended October
31, 2001. The BFS/BTI Financials were prepared in the
same
8
manner as warranted in respect to the BKD Financial
Statements and there are no changes therein as of the
date hereof.
(h) Absence of Certain Changes or Events. Except as
disclosed in Schedule 2.1(h) (Absence of
Changes-▇▇▇▇▇▇▇) and except for entering into this
Agreement and consummating the transactions
contemplated hereby and thereby, since September 30,
2001, none of the following has occurred and neither
BTI, BFS nor the Shareholders has, whether or not in
the ordinary course of business, done any of the
following:
(1) issued any Capital Securities or other
equity interest or any rights, options,
warrants or convertible securities with
respect thereto or split, combined or
reclassified any Capital Securities or in
the case of the Shareholders with respect to
the shares of BTI or BFS. Capital Securities
shall mean, as to any corporation, the
authorized shares of such corporation's
equity, including all classes of common,
preferred, voting and non-voting equity, any
non-equity securities that are convertible
into common shares and any rights to
purchase such shares of Capital Securities,
including, warrants, options, participations
or other equivalents of or interests therein
(however designated), and, as to any person
that is not a corporation or an individual,
the ownership interests in such person,
including, without limitation, the right to
share in profits and losses, the right to
receive distributions of cash and property
and the right to receive allocations of
items of income, gain, loss, deduction and
credit and similar items from such person,
whether or not such interests include voting
or similar rights entitling the holder
thereof to exercise control over such person
and any rights to purchase such shares of
Capital Securities, including, convertible
securities, warrants, options,
participations or other equivalents thereof
or interests therein (however designated).
(2) declared, set aside, paid to a reserve fund
or made any payment or distribution of cash
or other property to its equity holders or
owners with respect to any class of its
Capital Securities or purchased or redeemed
any shares of its Capital Securities or
otherwise, other than distributions to
Shareholders as described in Schedule
2.1(h);
(3) made any increases in the base compensation,
bonuses, paid vacation time allowed or
fringe benefits for its managers, directors,
officers, partners, employees or
consultants;
(4) suffered any taking by eminent domain or
condemnation, damage, destruction or other
casualty loss, or forfeiture of, any
property or
9
assets, whether or not covered by insurance,
which has had or may reasonably be expected
to have a material adverse effect, as
defined in this Agreement;
(5) made any capital expenditures, additions or
improvements or commitments for the same in
excess of US$10,000 individually or in the
aggregate;
(6) entered into any contract, commitment or
agreement under which it has outstanding
Indebtedness or for the deferred purchase
price of property in excess of US$10,000 or
has the right or obligation to incur any
such Indebtedness or obligation, or made any
loan or advance to any person other than
advances to employees for business expenses
not exceeding US$10,000 in the aggregate.
Indebtedness shall mean, all obligations
with respect to borrowed money, contingent
and otherwise, which, in accordance with US
GAAP, should be classified on the obligor's
balance sheet as liabilities, or to which
reference should be made by footnotes
thereto, including without limitation, in
any event and whether or not so classified
(i) all debt and similar monetary
obligations, whether direct or indirect;
(ii) all liabilities secured by any
mortgage, pledge, security interest, lien,
charge or other encumbrance existing on
property owned or acquired subject thereto,
whether or not the liability secured thereby
shall have been assumed; (iii) all
guaranties, endorsements and other
contingent obligations whether direct or
indirect in respect of Indebtedness or
performance of others, including any
obligation to supply funds to or in any
manner to invest in, directly or indirectly,
the debtor, to purchase Indebtedness, or to
assure the owner of Indebtedness against
loss, through an agreement to purchase
goods, supplies or services for the purpose
of enabling the debtor to make payment of
the Indebtedness held by such owner or
otherwise; and (iv) obligations to reimburse
issuers of any letters of credit.
(7) paid any bonuses, deferred or otherwise, or
deferred any compensation to any of its
managers, directors, members, officers,
partners or employees;
(8) made any material change in accounting
procedures, policies or practices;
(9) mortgaged or pledged any of its properties
or assets, tangible or intangible, or
subjected them to any Lien, as defined in
this Agreement, except Liens for current
property taxes not yet due and
10
payable and Liens on personal property
created in connection with equipment leases,
installment purchase contracts, conditional
sales contracts, purchase money mortgages
and the like to secure Indebtedness incurred
to acquire property;
(10) other than in the ordinary course of
business, entered into any agreement or
arrangement granting any rights to purchase
or lease any of its assets, properties or
rights or requiring the consent of any
Person to the transfer, assignment or lease
of any such assets, properties or rights;
(11) sustained any labor dispute or stoppage that
could have a material adverse effect;
(12) other than in the ordinary course of
business, sold, assigned or transferred any
of its tangible or intangible properties or
assets, or canceled, waived or compromised
any debts or claims or entered into any
agreement or understanding to do any of the
foregoing;
(13) entered into any transaction, or any
amendment, whether written or oral, of any
contract, lease, agreement or license or
entered into any agreement or understanding
to do any of the foregoing involving in each
case an amount in excess of US$10,000 other
than transactions entered into in the
ordinary course of business;
(14) amended the articles of incorporation or
by-laws (or other comparable corporate
charter documents) of any of its
Subsidiaries; or
(15) suffered any material loss to any of its
assets.
(i) Tax Matters. BFS, BTI and each Subsidiary has filed
all Tax Returns which it is required to file under
applicable laws; all such Tax Returns are true and
accurate and have been prepared in compliance with all
applicable laws; BFS and BTI have paid all Taxes due
and owing by each of them or any Subsidiary (whether
or not such Taxes are required to be shown on a Tax
Return) and have withheld and paid over to the
appropriate taxing authorities all Taxes which it is
required to withhold from amounts paid or owing to any
employee, stockholder, creditor or other third
parties; and since June 30, 2001, the charges,
accruals and reserves for Taxes with respect to BFS
and BTI (including any provisions for deferred income
taxes) reflected on their books are adequate to cover
any Tax liabilities if its current tax year were
treated as ending on the date hereof.
11
No claim has been made by any federal, state, county,
local, or foreign taxing authority in a jurisdiction
where any of BTI and BFS does not file Tax Returns
that BTI and BFS or any subsidiary is or may be
subject to taxation by that jurisdiction. There are no
foreign, federal, state, county or local tax audits or
administrative or judicial proceedings pending or
being conducted with respect to BTI, BFS or any
Subsidiary; no information related to Tax matters has
been requested by any foreign, federal, state, county
or local taxing authority; and, except as disclosed
above, no written notice indicating an intent to open
an audit or other review has been received by BTI, BFS
or any Subsidiary from any foreign, federal, state,
county or local taxing authority. There are no
material unresolved questions or claims concerning the
Tax liability of BFS or BTI. Neither BTI nor BFS (A)
has executed or entered into a closing agreement
pursuant to ss.7121 of the Internal Revenue Code of
1986, as amended (the "Code") or any predecessor
provision thereof or any similar provision of state,
local or foreign law; or (B) has agreed to or is
required to make any adjustments pursuant to ss.481
(a) of the Internal Revenue Code or any similar
provision of state, local or foreign law by reason of
a change in accounting method initiated by BTI, BFS or
any of its Subsidiaries or has any knowledge that the
IRS has proposed any such adjustment or change in
accounting method, or has any application pending with
any taxing authority requesting permission for any
changes in accounting methods that relate to their
business or operations. Neither BTI nor BFS has been a
United States real property holding corporation within
the meaning of ss.897(c)(2) of the Code during the
applicable period specified in ss. 897(c)(1)(A)(ii) of
the Code.
BTI and BFS have not made an election under ss. 341(f)
of the Code and are not liable for the Taxes of
another person that is not a subsidiary of any of them
(A) under Treas. Reg. ss. 1.1502-6 (or comparable
provisions of state, local or foreign law), (B) as a
transferee or successor, (C) by contract or indemnity
or (D) otherwise. Neither BTI nor BFS is a party to
any tax sharing agreement. Neither BTI nor BFS has
made any payments, is obligated to make payments or is
a party to an agreement that could obligate it to make
any payments that would not be deductible under ss.
280G of the Code.
For purposes of this Section 2.01(i): "Tax" or "Taxes"
means federal, state, county, local, foreign, or other
income, gross receipts, ad valorem, franchise,
profits, sales or use, transfer, registration, excise,
utility, environmental, communications, real or
personal property, capital stock, license, payroll,
wage or other withholding, employment, social
security, severance, stamp, occupation, alternative or
add-on minimum, estimated and other taxes of any kind
whatsoever (including, without limitation,
deficiencies, penalties,
12
additions to tax, and interest attributable thereto)
whether disputed or not: and "Tax Return" means any
federal, state, foreign, county or local return,
information report or filing with respect to Taxes,
including any schedules attached thereto and including
any amendment thereof.
(j) Absence of Undisclosed Liabilities. Except as set
forth on Schedule 2.1(j) (Undisclosed
Liabilities-▇▇▇▇▇▇▇) neither BFS nor BTI has any
material (more than $10,000) indebtedness or
liability, absolute or contingent, known or unknown,
which is not shown or provided for on the BKD
Financial Statements or BFS/BTI Financials other than
liabilities incurred or accrued in the ordinary course
of business since September 30, 2001.
(k) Interests in Real Property. Neither BFS nor BTI own
real property. Any real property and buildings held
under lease (all of which are listed on Schedule
2.1(k)) by BFS or BTI as tenant are held by them under
valid, subsisting and enforceable leases with such
exceptions which do not interfere with the use made
and intended to be made of such property and buildings
by BFS or BTI.
(l) Personal Property. BFS and BTI own all Personal
Property (including properties that may be deemed to
be a mix of personal property and real property,
(collectively, "▇▇▇▇▇▇▇ Personal Property") purported
to be owned by them as of the date hereof, in each
case free and clear of all Liens, except for those
Liens described in Schedule 2.1(l) (Personal Property
Liens-▇▇▇▇▇▇▇). As of the date of the BFS/BTI
Financials, the only assets or liabilities of BFS or
BTI of any kind or nature are reflected on the BFS/BTI
Financials.
(m) Licenses, Permits and Governmental Approvals. BFS and
BTI own all licenses, permits, franchises,
authorizations and approvals issued or granted to BFS
and BTI by any federal, state or local government, or
any department, agency, board, commission, bureau or
instrumentality of any of the foregoing necessary for
the present conduct of their business, without any
known conflict with the rights of others which, or the
failure to obtain which, as the case may be, would
result in a material adverse effect on BFS or BTI
("▇▇▇▇▇▇▇ License(s) and Permit(s)"), and all pending
applications therefore. Each ▇▇▇▇▇▇▇ License and
Permit is valid and in full force and effect, and, to
BFS's and BTI's knowledge after due inquiry, is not
subject to any pending or threatened administrative or
judicial proceeding to revoke, cancel, suspend or
declare such License and Permit invalid in any
respect. Schedule 2.1(m) --------------- (Licenses and
Permits-▇▇▇▇▇▇▇) lists the material ▇▇▇▇▇▇▇ License(s)
and Permit(s).
13
(n) Compliance with Law. The operations of each of BFS and
BTI are being conducted in accordance with all
applicable laws, regulations, orders and other
requirements of all courts and other governmental or
regulatory authorities having jurisdiction over each
of BFS and BTI and their respective assets, properties
and operations, including, without limitation, all
such laws, regulations, orders and requirements
promulgated by or relating to consumer protection,
equal opportunity, health, environmental protection,
architectural barriers to the handicapped, fire,
zoning and building and occupation safety.
(o) Litigation. Except as set forth on Schedule 2.1(o)
(Claims-▇▇▇▇▇▇▇), there are no claims, actions, suits,
proceedings, labor disputes or investigations pending
or, to BFS's and BTI's best knowledge after due
inquiry, threatened before any federal, state or local
court or governmental or regulatory authority,
domestic or foreign, or before any arbitrator of any
nature, brought by or against BFS or BTI or any of
their respective officers, directors, employees,
agents or affiliates involving, affecting or relating
to any assets, properties or operations of BFS or BTI
or the transactions contemplated by this Agreement.
Schedule 2.1(o) sets forth a list and a summary
description of all such pending actions, suits,
proceedings, disputes or investigations. Neither BFS
nor BTI or any of their respective assets or
properties is subject to any order, writ, judgment,
award, injunction or decree of any country, judicial,
state or local court or governmental or regulatory
authority or arbitrator, which would interfere with
the transactions contemplated by this Agreement.
(p) Contracts. Schedule 2.1(p) (Material
Contracts-▇▇▇▇▇▇▇) sets forth a true and complete list
of all material contracts, agreements and other
instruments to which each of BFS and BTI is a party or
otherwise relating to or affecting any of their
respective assets, properties or operations,
including, without limitation, all written or oral,
express or implied, material, (a) contracts,
agreements and commitments not made in the ordinary
course of business; (b) purchase and supply contracts;
(c) contracts, loan agreements, repurchase agreements,
mortgages, security agreements, trust indentures,
promissory notes and other documents or arrangements
relating to the borrowing of money or for lines of
credit; (d) leases and subleases of real or personal
property; (e) agreements and other arrangements for
the sale of any assets other than in the ordinary
course of business or for the grant of any options or
preferential rights to purchase any assets, property
or rights; (f) contracts or commitments limiting or
restraining BFS or BTI from engaging or competing in
any lines of business or with any person, firm, or
corporation; (g) partnership or joint venture
agreements or acquisition agreements; (h) licensing
agreements; (i) all contracts, agreements and
commitments that involve minimum payments by either
BFS or BTI of more than US$25,000
14
per annum or involve minimum payments to BFS or BTI of
more than US$25,000 per annum; (j) all written or oral
contracts or agreements of employment with any
officer, consultant, manager, director or employee
that is not terminable at will by BFS or BTI or any
Subsidiary; and (k) all amendments, modifications,
extensions or renewals of any of the foregoing (the
foregoing contracts, agreements and documents are
hereinafter referred to collectively as the
"Commitments" and individually as a "Commitment". Each
Commitment is valid, binding and enforceable against
the parties thereto in accordance with its terms, and
in full force and effect on the date hereof.
(q) Employee Plans. Except as set forth in Schedule 2.1(q)
(Employee Plans), there is no Employee Benefit Plan
and no such Employee Benefit Plan has been maintained
or operated during the past three years. Neither BTI,
BFS nor any ERISA Affiliate nor any Subsidiary
maintains or contributes to, ever has maintained or
contributed to, any Guaranteed Pension Plan. With
respect to each Employee Plan set forth in Schedule
2.1(q), to the extent applicable:
(1) each Employee Plan has been maintained and
operated in all material respects in
compliance with its terms and with all
applicable provisions, if any, of ERISA, the
Code (including without limitation any
provisions of the Code compliance with which
is necessary for any intended favorable tax
treatment) and all applicable regulations,
rulings and other authority issued
thereunder, and all applicable laws, except
such matter of non-compliance as would not
cause a material adverse effect on either
BFS's or BTI's financial condition, results
of operations or business;
(2) all contributions and payments required by
law and the terms of such plan have been
made under each such Employee Plan (without
regard to any waivers granted under Section
412 of the Code) to any fund or trust
established thereunder or in connection
therewith, and such contributions have been
made by the due date thereof;
(3) with respect to BFS and BTI, each Employee
Plan intended to qualify under Section
401(a) of the Code is in the form of a
master or prototype plan sponsored by a
qualified financial institution, insurance
company or broker-dealer, and no
circumstances have occurred that would
adversely affect the qualified status of any
Employee Plan;
(4) no Employee Plan that is an "employee
welfare benefit plan" as defined in Section
3(1) of ERISA provides for continuing
benefits or
15
coverage for any participant or beneficiary of a
participant after such participant's termination of
employment, except as required by applicable law;
(5) neither BFS, BTI nor any ERISA Affiliate
has, or at any time has had, any obligation
to contribute to or any liability with
respect to, any Multiemployer Plan;
(6) there is no suit, action, dispute, claim,
arbitration or legal, administrative or
other proceeding or governmental
investigation pending, or to the knowledge
of BFS or BTI threatened, alleging any
breach of the terms of any such Employee
Plan or of any fiduciary duties thereunder
or violation of any applicable law with
respect to any such plan;
(7) with respect to BFS and BTI, there has been
no violation of Section 4980B of the Code or
Sections 601 through 608 of ERISA with
respect to any such Employee Plan that could
result in any material liability;
(8) all Employee Plans which provide medical,
dental, health or long-term disability
benefits are fully insured and claims for
benefits with respect to any participant or
covered dependent under such Employee Plan
under Applicable Law could not result in any
uninsured liability to BTI or BFS;
(9) with respect to each Employee Plan, true,
correct, and complete copies of the
applicable following documents have been
made available to the Company: (a) all
current plan documents and related trust
documents, and any amendment thereto; (b)
Forms 5500, financial statements, and
actuarial reports for the last three plan
years and all other forms, statements and
reports required for the last three plan
years under applicable law; (c) summary plan
descriptions and all summaries of material
modifications; and (d) all written
communications to employees relating to such
plans; and
(10) BTI and BFS has properly classified for all
purposes (including, without limitation, for
all Tax purposes and for purposes of
determining eligibility to participate in
any employee benefit plan) all employees,
leased employees, consultants and
independent contractors, and has withheld
and paid all applicable Taxes and made all
appropriate filings in connection with
services provided by such persons to BTI or
BFS.
16
Without limiting any other provision of this section,
no event has occurred and no condition exists, with
respect to any Employee Plan, that has subjected or
could subject BTI or BFS or any of their subsidiaries
or any Employee Plan, to any tax, fine, penalty or
other liability (other than, in the case of BTI or BFS
a liability arising in the normal course to make
contributions or payments, as applicable, when
ordinarily due under an Employee Plan with respect to
employees of BTI or BFS and their subsidiaries). No
event has occurred and no condition exists with
respect to any Employee Plan that could subject the
Company or any plan maintained by the Company thereof,
to any tax, fine, penalty or other liability that
would not have been incurred by the Company or any of
its Affiliates, or any Employee Plan, but for the
transactions contemplated hereby. No Employee Plan or
arrangement exists which could result in the payment
of money or any other property or rights, or
accelerate or provide any other rights or benefits, to
any current or former employee of BTI or BFS or any of
their subsidiaries that would not have been required
but for the transactions provided for herein, and none
of BTI or BFS or any of their subsidiaries is a party
to any plan, program, arrangement or understanding
that could in connection with the transactions
contemplated hereby, result, separately or in the
aggregate, in the payment (whether in connection with
any termination of employment or otherwise) of any
"excess parachute payment" within the meaning of
Section 280G of the Code with respect to a current or
former employee of, or current or former independent
contractor to, BTI or BFS.
(r) Insurance. Except as set forth on Schedule 2.1(r), BFS
and BTI presently maintain and have maintained in
effect since their formation all the insurance
policies required by applicable law or reasonably
appropriate, as determined by BFS or BTI in exercise
of reasonable business judgment, not inconsistent with
industry standards in the areas in which BFS and BTI
conduct business operations, in connection with the
operation of their business as presently conducted.
Schedule 2.1(r) (Insurance-▇▇▇▇▇▇▇) lists the
aggregate coverage amount and type and generally
applicable deductibles of all policies of title,
liability, fire, casualty, business interruption,
workers' compensation, disability and other forms of
insurance insuring the properties, assets and
operations of the business of each of BFS and BTI.
Except as set forth in Schedule 2.1(r), all such
policies and bonds are in full force and effect.
Except as set forth in Schedule 2.1(r), there is no
claim by either BFS or BTI pending under any of such
policies or bonds as to which coverage has been
questioned, denied or disputed by the underwriters of
such policies or bonds. Except as set forth on
Schedule 2.1(r), all insurance policies in force and
effect on the Closing Date shall inure to the benefit
of the Company.
17
(s) Environmental Matters. BTI and BFS have complied and
are in compliance, in each case in all material
respects, with all Environmental, Health and Safety
Requirements related to BTI and BFS each of their
properties except for such matters of non-compliance
as would not cause a material adverse effect on either
BFS's or BTI's financial condition, results of
operations or business.
Without limiting the generality of the foregoing, each
of BTI and BFS has obtained, have complied, and are in
compliance with, in each case in all material
respects, all material permits, licenses and other
authorizations that are required pursuant to
Environmental, Health, and Safety Requirements for the
occupation of its facilities and the operation of its
business; a list of all such material permits,
licenses and other authorizations is set forth on
Schedule 2.1(s) relating to BTI and BFS each of their
properties.
Neither BTI nor BFS has ever received any written or
oral notice, report or other information regarding any
actual or alleged material violation of Environmental,
Health, and Safety Requirements, or any material
liabilities or potential material liabilities (whether
accrued, absolute, contingent, unliquidated or
otherwise), including any material investigatory,
remedial or corrective obligations, relating to any of
them or its facilities arising under Environmental,
Health, and Safety Requirements.
Except as set forth on Schedule 2.1(s), to the
knowledge of BTI and BFS, none of the following exists
at any property or facility operated by BTI or BFS:
(1) underground storage tanks, (2) asbestos containing
material in any friable and damaged form or condition,
(3) materials or equipment containing polychlorinated
biphenyls, or (4) landfills, surface impoundments, or
disposal areas.
Neither BTI nor BFS and any of their respective
predecessors or affiliates neither has ever treated,
stored, disposed of, arranged for or permitted the
disposal of, transported, handled, or released any
substance, including without limitation any hazardous
substance, or owned or operated any property or
facility (and no such property or facility is
contaminated by any such substance) in a manner that
has given or would give rise to material liabilities,
including any material liability for response costs,
corrective action costs, personal injury, property
damage, natural resources damages or attorney fees,
pursuant to the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended
("CERCLA") or the Solid Waste Disposal Act, as amended
or any other Environmental, Health, and Safety
Requirements.
18
Neither this Agreement nor the consummation of the
transaction that is the subject of this Agreement will
result in any material obligations for site
investigation or cleanup, or notification to or
consent of government agencies or third parties,
pursuant to any of the so called "transaction
triggered" or "responsible property transfer"
Environmental, Health, and Safety Requirements.
For purposes of this Section 2.1(s):
"Environmental, Health, and Safety Requirements" shall
mean all federal, state, local and foreign statutes,
regulations, ordinances and similar provisions having
the force or effect of law, all judicial and
administrative orders and determinations, and all
common law concerning public health and safety, worker
health and safety, and pollution or protection of the
environment, including without limitation all those
relating to the presence, use, production, generation,
handling, transportation, treatment, storage,
disposal, distribution, labeling, testing, processing,
discharge, release, threatened release, control, or
cleanup of any Hazardous Substance, noise or
radiation.
"Hazardous Substance" shall mean any substance
presently or hereafter listed, defined, designated or
classified as hazardous, toxic, radioactive, or
dangerous, or otherwise regulated, under any
Environmental, Health, and Safety Requirements.
Hazardous Substance includes any substance to which
exposure is regulated by any government authority or
any Environmental, Health and Safety requirements
including, without limitation, any toxic waste,
pollutant, contaminant, hazardous substance, toxic
substance, hazardous waste, special waste, industrial
substance or petroleum or any derivative or by product
thereof, radon, radioactive material, asbestos or
asbestos containing material, urea formaldehyde foam
insulation, lead or polychlorinated biphenyls.
(t) Labor Matters.
-------------
(i) Except as set forth in Schedule 2.1(t)
(Employment/Labor Agreements-▇▇▇▇▇▇▇):
neither BFS nor BTI is a party to (1) any
outstanding employment agreements or
contracts with officers or employees that
are not terminable at will, or that provide
for the payment of any bonus or commission;
(2) any agreement, policy or practice that
requires either of them to pay termination
or severance pay to salaried, non-exempt or
hourly employees (other than as required by
law); (3) any collective bargaining
agreement or other labor union contract
applicable to persons employed by either of
them
19
nor do either of them know of any activities
or proceedings of any labor union to
organize any such employees.
(ii) Except as set forth in Schedule 2.1(t) or
for matters not having a material adverse
effect on the operations or properties of
BFS or BTI: (1) BFS and BTI are in
compliance in all material respects with all
applicable laws relating to employment and
employment practices, wages, hours, and
terms and conditions of employment; (2)
there is no unfair labor practice charge or
complaint pending or threatened; (3) there
is no labor strike, material slowdown or
material work stoppage or lock-out actually
pending or, to the best knowledge of each of
BFS and BTI after due inquiry, threatened
against or affecting either of them, and
none of BFS or BTI have experienced any
strike, material slow down or material work
stoppage, lock-out or other collective labor
action by or with respect to employees of
BFS or BTI since January 1, 2000 nor will
there be any as of the Closing Date; (4)
there is no question concerning
representation which exists relating to the
employees of BFS or BTI; (5) there are no
charges with respect to or relating to BFS
or BTI pending before the Equal Employment
Opportunity Commission or any state, local
or foreign agency responsible for the
prevention of unlawful employment practices;
(6) neither BFS nor BTI has received any
formal notice from any federal, state, local
or foreign agency responsible for the
enforcement of labor or employment laws of
an intention to conduct an investigation of
BFS or BTI and no such investigation is in
progress.
(u) Intellectual Property. All of the trademarks,
trade-names, service marks, patents, copyrights or any
applications with respect thereto incorporating or
using the name "▇▇▇▇▇▇▇" or any stylized form thereof
used by BFS or BTI ("Intellectual Property-▇▇▇▇▇▇▇")
are owned by BFS and BTI, respectively, free and clear
of all Liens. Except as set forth on Schedule 2.1(u)
--------------- (Intellectual Property--▇▇▇▇▇▇▇), no
Intellectual Property of BFS or BTI has been licensed
to any third party. To the best of BFS's and BTI's
knowledge, no third party has interfered with,
infringed upon, misappropriated, or violated any
material Intellectual Property rights of BFS or BTI,
respectively. Neither BFS nor BTI has any knowledge of
any claim that, or inquiry as to whether, any of their
respective products, activities or operations
infringes upon or involves, or has resulted in the
infringement of, any trademarks, trade-names, service
marks, patents, copyrights or other proprietary rights
of any other person, corporation or other entity; and
no proceedings have been instituted, are pending or
are threatened.
20
(v) Brokers. None of the Shareholders, BFS or BTI has
incurred any obligation or liability, contingent or
otherwise, for brokers' or finders' fees or
commissions in connection with the transactions
contemplated by this Agreement.
(w) Inventory. All inventory BFS and BTI has been
maintained in the ordinary course of the business and
is in a condition and with expiration dates that are
reasonable by industry standards in the areas in
which BFS and BTI conduct business operations.
(x) S Corporations. BFS and BTI have been S Corporations
as defined in Section 1361 of the Code throughout
their existence and will maintain that status until
the Closing.
2.2 Disclosure. Neither this Agreement and the representations and
warranties contained in this Article 2, nor the Schedules
hereto and any certificate attached hereto or delivered in
accordance with the terms hereby by or on behalf of BFS and
BTI in connection with the transactions contemplated by this
Agreement, contains any untrue statement of a material fact or
omits to state any material fact known or reasonably
discoverable with exercise of reasonable business diligence
required to be stated therein or necessary to make the
statements contained herein and/or therein not misleading. Any
item disclosed on any of the Schedules to this Agreement shall
be deemed as included on any other Schedule if the inclusion
of the item on any Schedule would cause any warranty or
representation to not give rise to any liability by the
Shareholders, BTI or BFS.
ARTICLE 3
ADDITIONAL REPRESENTATIONS AND WARRANTIES
OF THE SHAREHOLDERS
3.1 Representations and Warranties. The Shareholders jointly and
severally represent and warrant to SFSI and the Company as
follows:
(a) Title to BFS and BTI Shares. The Shareholders have
valid and marketable title to all of the BFS and BTI
Shares and the BFS and BTI Shares are free and clear
of any Liens.
(b) Authorization and Reliability of Agreement. The
Shareholders have the power to enter into this
Agreement and to carry out their obligations
hereunder. This Agreement has been duly executed by
the Shareholders, and constitutes the valid and
binding obligation of the Shareholders and is
21
enforceable against the Shareholders in accordance
with its terms except as such enforcement may be
limited by bankruptcy, insolvency or other similar
laws affecting the enforcement of creditors' rights
generally or by general principles of equity. The
Shareholders are "accredited investors" as defined in
Regulation D promulgated under the Securities Act of
1933, as amended (the "Securities Act") and/or
otherwise have such knowledge and experience in
financial, investment and business matters that they
are capable of evaluating the merits and risks of an
investment in the Shares and Note that they will
receive.
(c) Investment Representations.
--------------------------
(i) The Shareholders (A) are acquiring the
Shares and the Note for their own account
and for investment and not with a view to
public resale or distribution, (B) will not
sell, transfer or otherwise dispose of the
Shares or Note except in compliance with the
Securities Act; and (C) are aware that the
Shares and Note constitute "restricted
securities" as that term is defined in Rule
144 or the General Rules and Regulations
under the Securities Act.
(ii) The Shareholders acknowledge and understand
that the Shares and the Note have not been
registered and must be held indefinitely
unless subsequently registered under the
Securities Act or an exemption from such
registration is available.
(iii) The Shareholders further acknowledge that
they are fully aware of the applicable
limitations on the resale of the Shares as
set forth in Rule 144.
(iv) The Shareholders acknowledge that each
certificate evidencing the Shares will bear
a legend consistent with the foregoing
provisions and the Company shall have the
right to issue stop-transfer instructions to
its transfer agent and acknowledges that the
Company has informed the Shareholders of its
intention to issue such instructions.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE COMPANY, SFSI AND STSI
4.1 Representations and Warranties. The Company, SFSI and STSI
hereby represent and warrant to BFS, BTI and the Shareholders
as follows:
22
(a) Organization. The Company is a corporation duly
organized, validly existing and in good standing under
the laws of the State of Florida, and has the
requisite corporate power to carry on its respective
business as now conducted, to own, operate or lease
the properties and assets it currently owns, operates
or holds under lease, SFSI is a corporation duly
organized and validly existing under the laws of the
State of Delaware, and has the requisite corporate
power to carry on its business as now conducted, to
own, operate or lease the properties and assets it
currently owns, operates or holds under lease. STSI,
when formed, will be a corporation duly organized and
validly existing under the laws of the State of
Delaware.
(b) Capitalization. The authorized capital stock of the
Company consists of 100,000,000 shares of common
stock, of which 8,259,043 shares are issued and
outstanding and 20,000,000 shares of preferred stock,
none of which are outstanding. All of the issued and
outstanding shares of common stock are duly
authorized, validly issued, fully paid, nonassessable
and free of preemptive rights. Except as set forth in
the Company's SEC Reports, as provided on Schedule
4.1(b) or as required pursuant to this Agreement,
there are no outstanding or authorized options,
rights, warrants, calls, convertible securities,
rights to subscribe, conversion rights or other
agreements or commitments to which the Company is a
party or which are binding upon the Company providing
for the issuance or transfer by the Company of
additional shares of its capital stock, and the
Company has not reserved any shares of its capital
stock for issuance and there are no outstanding stock
option rights, phantom equity or similar rights,
contracts, arrangements or commitments. There are no
voting trusts or any other agreements or
understandings with respect to voting capital stock of
the Company. The Shares to be issued to the
Shareholders hereunder will, when issued, be duly
authorized, validly issued, fully paid and
nonassessable and free of preemptive rights.
(c) Certain Corporate Matters. The Company is duly
licensed or qualified to do business as a foreign
corporation and is in good standing in each
jurisdiction, as set forth on Schedule 4.1(c) (Company
Foreign Corporation Qualification), in which the
ownership of its properties, the employment of its
personnel or the conduct of its business requires it
to be so qualified, except where such failure would
not have a material adverse effect on the Company's
financial condition, results of operations or
business. The Company has full corporate power and
authority and has obtained all material
authorizations, licenses and permits necessary to
carry on the business in which it is engaged and to
own and use the properties owned and used by it.
(d) Authority Relative to this Agreement. Except for any
required filing, permit, authorization, consent or
approval set forth on Schedule 4.1(d) (Company
23
Required Corporate Approvals), the Company has the
requisite corporate power and authority to enter into
this Agreement and carry out and cause SFSI and STSI
(when formed) to carry out its obligations hereunder.
The execution, delivery and performance of this
Agreement by the Company and the consummation by the
Company of the transactions contemplated hereby have
been duly authorized by its Board of Directors by all
necessary actions and proceedings and no other actions
on the part of the Company are necessary to authorize
this Agreement or the transactions described in this
Agreement. This Agreement has been duly and validly
executed and delivered by the Company and constitutes
a valid and binding agreement of the Company,
enforceable against each of them in accordance with
its terms, except as such enforcement may be limited
by bankruptcy, insolvency or other similar laws
affecting the enforcement of creditors' rights
generally or by general principles of equity.
(e) Consents and Approvals; No Violations. Except as set
forth on Schedule 4.1(e) (Company Third Party
Consents) and except for applicable requirements of
federal securities laws and state securities or blue
sky laws, no filing with, and no permit,
authorization, consent or approval of, any third
party, public body or authority is necessary for the
consummation by the Company of the transactions
described in this Agreement. Neither the execution and
delivery of this Agreement by the Company nor the
consummation by the Company of the transactions
described herein, nor compliance by the Company with
any of the provisions hereof, will (a) conflict with
or result in any breach of any provisions of the
Articles of Incorporation or Bylaws of the Company,
(b) (i) conflict with or result in a violation or
breach of, (ii) constitute (with or without notice or
lapse of time or both) a default under, (iii) require
the Company to obtain any consent, approval or action
of, make any filing with or give any notice (other
than those that have been obtained or given) to any
third party as a result or under the terms of, (iv)
result in or give to any third party any right of
termination, cancellation, acceleration or
modification in or with respect to, (v) result in or
give to any third party any additional rights or
entitlement to increased, additional, accelerated or
guaranteed payments under or (vi) result in the
creation or imposition of any Lien upon the Company or
any of its affiliates or their respective assets and
properties under, any contract, license, permit,
franchise or other agreement or instrument to which
the Company is a party or by which any of its assets
or properties is bound, or that would prevent the
consummation of the transactions contemplated thereby
under, any of the terms, conditions or provisions of
any note, bond, mortgage, indenture, license,
contract, agreement or other instrument or obligation
to which the Company, all of which, if any, is a party
or by which any of them or their properties or assets
may be bound or (c) violate any order, writ,
injunction,
24
decree, statute, rule or regulation applicable to the
Company, except in the case of clauses (b) and (c) for
violations, breaches or defaults which are not in the
aggregate material to the Company.
(f) SEC Filings: Financial Statements. The Company has
filed all reports required to be filed by the Company
with the SEC (collectively, the "Company's SEC
Reports"), and the Shareholders, BFS and BTI
acknowledge (i) having copies of all items filed since
December 31, 2000 and (ii) their ability to have
access to any records of the Company of which they do
not have copies thereof. As of the respective dates
they became effective, the Company's SEC Reports which
were filed under The Securities Exchange Act of 1934
(Exchange Act), and as of the respective dates of
filing of the last applicable amendment thereto the
Company's SEC Reports which were filed pursuant to the
Exchange Act, did not contain any untrue statement of
a material fact required to be stated therein or
necessary to make the statements therein, in light of
the circumstances under which they were made, not
misleading. The financial statements of the Company
included in the Company's SEC Reports complied as to
form in all material respects with the applicable
published rules and regulations of the SEC with
respect thereto, were prepared in accordance with
generally accepted accounting principles applied on a
consistent basis throughout the periods involved
(except as otherwise noted therein) and fairly present
the consolidated financial position of the Company and
its consolidated subsidiaries as at the dates thereof
and the consolidated results of operations and cash
flows for the periods then ended, except that in the
case of the unaudited consolidated financial
statements included in any Form 10-SB, the
presentation and disclosure conform with the
applicable rules of the Exchange Act and are subject
to year-end adjustments.
(g) Brokers. The Company has not incurred any obligation
or liability, contingent or otherwise, for brokers' or
finders' fees or commissions in connection with the
transactions contemplated by this Agreement.
ARTICLE 5
COVENANTS RELATING TO CONDUCT OF BUSINESS
5.1 Conduct of Business by BFS and BTI Pending the Closing. Except
as contemplated by this Agreement, BFS and BTI covenant and
agree that prior to the Closing Date:
(a) BFS and BTI shall conduct their respective business
and operations only in the usual and ordinary course
of business;
25
(b) Other than in the ordinary course of business and with
the prior written consent of the Company, neither BFS
nor BTI shall directly or indirectly do any of the
following: (i) sell, pledge, dispose of or encumber
any of their respective assets; (ii) amend or propose
to amend their respective Articles of Incorporation or
Bylaws; (iii) split, combine or reclassify any
outstanding shares of their respective capital stock,
or declare, set aside or, except as set forth on
Schedule 5.1 (Dividends and Distributions), pay any
dividend or other distribution payable in cash, stock,
property or otherwise with respect to shares of their
respective capital stock; (iv) redeem, purchase or
acquire or offer to acquire any shares of their
respective capital stock or other securities; (v)
create any subsidiaries; or (vi) enter into or modify
any contract, agreement, commitment or arrangement
with respect to any of the foregoing;
(c) Other than in the ordinary course of business and with
the prior written consent of the Company, neither BFS
nor BTI shall (i) issue, sell, pledge or dispose of,
or agree to issue, sell, pledge or dispose of, any
additional shares of, or any options, warrants,
conversion privileges or rights of any kind to acquire
any shares of, their respective capital stock and/or
other BFS or BTI securities; (ii) acquire (by merger,
consolidation, acquisition of stock or assets or
otherwise) any corporation, partnership or other
business organization or division or the material
assets thereof; (iii) incur any indebtedness for
borrowed money, issue any debt securities or guarantee
any indebtedness to others; or (iv) enter into or
modify any contract, agreement, commitment or
arrangement with respect to any of the foregoing;
(d) Neither BFS nor BTI shall enter into any employment,
severance or similar agreements or arrangements with,
or grant any bonus, salary increase, severance or
termination pay to, any of their respective officers
or directors;
(e) Neither BFS nor BTI shall adopt any bonus, profit
sharing, compensation, stock option, pension,
retirement, deferred compensation, employment or other
employee benefit plan, agreement, trust, fund or
arrangement for the benefit or welfare of any
employee;
(f) BFS and BTI shall each (i) use its best efforts not to
take any action which would render, or which
reasonably may be expected to render, any
representation or warranty made by it in this
Agreement untrue at any time prior to the Closing Date
as if then made; and (ii) immediately notify the
Company of any emergency or other change in the normal
course of its business or in the operation of its
properties and of any tax audits, tax claims,
governmental or third party complaints, investigations
or hearings (or communications indicating that the
same may be contemplated) if such
26
emergency, change, audit, claim, complaint,
investigation or hearing would be material,
individually or in the aggregate, to the financial
condition, results of operations or business of BFS or
BTI, or to the ability of any of the parties hereto to
consummate the transactions described in this
Agreement;
(g) BFS and BTI shall each notify the Company promptly of
any material adverse event or circumstance affecting
BFS or BTI (including the filing of any material
litigation against BFS or BTI, the existence of any
dispute with any person or entity which involves a
reasonable likelihood of such litigation being
commenced); and
(h) BFS and BTI shall each comply with all legal
requirements and contractual obligations applicable to
its operations and business and pay all applicable
taxes.
5.2 Certain Tax Matters. During the period from the date of this
Agreement to the Closing: (i) BFS and BTI will timely file all
Tax Returns ("Post-Signing Returns") required by the Code or
by applicable state, local or foreign tax laws to be filed by
each such entity (after taking into account any extensions);
(ii) the Shareholders will timely pay all Taxes due and
payable with respect to income attributable to them under Code
Section 1366 and reflected on such Post-Signing Returns that
are so filed; (iii) BFS and BTI will accrue a reserve in their
books and records and financial statements in accordance with
past practice for all Taxes payable by them for which no
Post-Signing Return is due prior to the Closing Date; (iv)
BFS, BTI and the Shareholders will promptly notify the Company
of any suit, claim, action, investigation proceeding or audit
(collectively, "Actions") pending against or with respect to
any of them in respect of any Tax where there is a reasonable
possibility of a determination or decision which would have a
material adverse effect on any of BFS's or BTI's Tax
liabilities or Tax attributes; (v) neither BFS nor BTI will
make any material tax election not in accordance with past
practice without the Company's consent; and (vi) BFS and BTI
will remain as S Corporations until the Closing Date.
5.3 Other Actions. Unless approved in writing by the Company,
neither BFS nor BTI shall take any action or permit any action
to occur that might reasonably be expected to result in any of
the representations and warranties of BFS and BTI contained in
this Agreement becoming untrue after the date hereof or any of
the conditions to the Closing set forth in Article 7 of this
Agreement not being satisfied.
27
ARTICLE 6
ADDITIONAL COVENANTS AND AGREEMENTS
6.1 Access and Information. The Shareholders, BFS and BTI, shall
each afford to the Company and to its financial advisors,
legal counsel, accountants, consultants and other
representatives necessary access throughout the period prior
to the Closing to all of its books, records, properties and
personnel and, during such period in order to allow the
Company to complete its due diligence review, which due
diligence review will continue up to the Closing, each shall
furnish promptly to the Company all information as it may
reasonably request. Each party shall hold in confidence all
non- public information until such time as such information is
otherwise publicly available and, if this Agreement is
terminated, each party will upon written request deliver to
the other all documents, work papers and other material
obtained by such party or on its behalf from the other party
as a result of this Agreement or in connection herewith,
whether so obtained before or after the execution hereof.
6.2 Employment Agreements and Agreements Not to Compete.
---------------------------------------------------
(a) BFS, BTI and the Shareholders shall cause those BFS
and BTI employees set forth on Schedule 6.2 to
execute non-compete and non-disclosure agreements
with BFS, BTI, SFSI and the Company in form and
substance acceptable to the Company as a condition of
continued employment with BFS, BTI, SFSI or the
Company.
(b) CB shall execute a five (5) year employment
agreement, containing restricting covenants, in the
form attached as Exhibit E.
6.3 Press Releases. The Company and the Shareholders individually
and on behalf of BFS and BTI, shall consult with each other as
to the form and substance of any press release or other public
disclosure of matters related to this Agreement or any of the
transactions described herein; provided, however, that nothing
in this Section 6.3 shall be deemed to prohibit any party
hereto from making any disclosure that is required to fulfill
such party's disclosure obligations imposed by law, including,
without limitation, federal securities laws provided that the
disclosing party shall provide the non-disclosing party
reasonable advance notice and text of any such disclosure.
6.4 Negotiations. From and after the date hereof until the earlier
of the Closing or the termination of this Agreement, neither
the Shareholders nor BFS and BTI nor their officers or
directors nor anyone acting on behalf of such party or persons
shall, directly or indirectly, encourage, solicit, engage in
discussions or negotiations with, or provide any information
to, any person, firm, or other entity or group concerning
28
any merger, sale of substantial assets, purchase or sale of
shares of common stock or similar transaction involving any
party thereof except as agreed to by the Company. BFS, BTI and
the Shareholders shall promptly communicate to the Company any
inquiries or communications concerning any such transaction
which they may receive or of which they may become aware.
6.5 Indemnification.
---------------
(a) Indemnification by the Shareholders. From and after
the Closing, the Shareholders agree to indemnify,
defend and save the Company, SFSI, STSI (when formed)
and Affiliates of each of them, and each of their
respective officers, directors, employees, agents,
plans and fiduciaries, plan administrators or other
parties dealing with any such plans (each, an
"Indemnified Company Party"), harmless from and
against, and to promptly pay to an Indemnified Company
Party or reimburse an Indemnified Company Party for,
any and all liabilities, losses, costs, expenses,
interest and fines (including reasonable fees and
expenses of attorneys, accountants and other experts
incurred by any Indemnified Company Party in any
action or proceeding between such indemnified party
and the indemnitor or between any indemnified party
and any third party or otherwise) (individually a
"Loss" and collectively, the "Losses") sustained or
incurred by any Indemnified Company Party relating to,
resulting from, arising out of or otherwise by virtue
of any breach of a representation or warranty made
herein by the Shareholders, BFS or BTI or breach or
failure to observe or perform any of the covenants or
agreements made by any of them and contained in this
Agreement.
(b) Indemnification by the Company. From and after the
Closing, the Company agrees to indemnify, defend and
save the Shareholders (each, an "Indemnified
Shareholder Party") harmless from and against, and to
promptly pay to an Indemnified Shareholder Party or
reimburse an Indemnified Shareholder Party for, any
and all Losses sustained or incurred by any
Indemnified Shareholder Party relating to, resulting
from, arising out of or otherwise by virtue of any
breach of a representation or warranty made herein by
the Company or the covenants or agreements of the
Company contained in this Agreement.
(c) Procedure for Indemnification. The following procedure
shall apply to the foregoing agreements to indemnify
and hold harmless:
(1) The party who is seeking indemnification
(the "Claimant") shall give written notice
to the party from whom indemnification is
sought (the "Indemnitor") promptly after the
Claimant learns of the claim or
29
proceeding, provided that the failure to
give such notice shall not relieve the
Indemnitor of its obligations hereunder
except to the extent it is actually damaged
thereby.
(2) With respect to any third-party claims or
proceedings as to which the Claimant is
entitled to indemnification after
satisfaction of any applicable Basket, the
Indemnitor shall have the right to select
and employ counsel of its own choosing to
defend against any such claim or proceeding,
to assume control of the defense of such
claim or proceeding, and to compromise,
settle or otherwise dispose of the same, if
the Indemnitor deems it advisable to do so,
all at the expense of the Indemnitor. No
settlement, compromise or disposition shall
be made without the prior consent of the
Claimant, which consent shall not be
unreasonably withheld; provided, however, no
consent need be given if there is not a
general release given to the Claimant or if
any injunctive relief is imposed on the
Claimant. The parties will fully cooperate
in any such action, and shall make available
to each other any books or records useful
for the defense of any such claim or
proceeding. The Claimant may elect to
participate in the defense of any such third
party claim, and may, at its sole expense,
retain separate counsel in connection
therewith. Subject to the foregoing the
Claimant shall not settle or compromise any
such third party claim without the prior
consent of the Indemnitor, which consent
shall not be unreasonably withheld.
(d) Limitation on Indemnification Rights.
------------------------------------
(1) It is understood and agreed that no claim
for recovery of indemnifiable damages may be
asserted based on a representation, warranty
or applicable portion thereof set forth in
this Agreement after it has been
extinguished in accordance with Section 6.5
(d) (2) hereof, except as to any matters
with respect to which a bona fide written
claim shall have been made or an action at
law or in equity shall have commenced before
such date, in which event survival shall
continue (but only with respect to and to
the extent of, such claim or action) until
the final resolution of such claim or
action, including all applicable periods of
appeal.
(2) Notwithstanding any other provision of this
Agreement, neither party shall be entitled
to indemnification from the other(s) under
the provisions of this Section 6.5 until the
aggregate of any and all Losses, inclusive
of those relating to a possible violation of
the Emergency Planning Community Right to
Know Act, 42 USC
30
ss. 11001 et seq., affecting the Real
Estate, suffered by the Indemnified Company
Parties or the Indemnified Shareholder
Parties exceeds the sum of $50,000 (the
"Basket"), whereupon the Indemnified Company
Parties or the Indemnified Shareholder
Parties shall thereafter be entitled to
indemnification for all Losses suffered by
them which arise under the provisions of
Section 6.5 (a) on a dollar-for-dollar basis
(other than the above-described one-time
$50,000 deductible) as they occur; provided
that such requirement of an aggregate of
$50,000 of Losses shall not apply to Losses
in the case of fraud or for breach of the
representations in Section 2.1 (a), (b),
(c), (d), (e), (f), (i), Section 2.2 or
Section 3.1. Notwithstanding anything to the
contrary in this Agreement, the maximum
aggregate liability of the Shareholders for
Losses pursuant to Section 6.5 (a) and the
Company for Losses pursuant to Section 6.5
(b) above is limited to $3,000,000.
(e) Remedy for Damages. The indemnification obligations of
the parties set forth in this Section 6.5 shall not
constitute the sole and exclusive remedies of the
parties for the recovery of money damages with respect
to any and all matters arising out of this Agreement.
It is specifically understood that the Company and
SFSI may also and additionally elect to (i) off set
any payments due under the Note and/or (ii) foreclose
on the Shares, as provided in the Pledge and Escrow
Agreement, in the event that any Indemnified Company
Party sustains or incurs in any Losses in excess of
the Basket subject to and as provided above in Section
6.5(d)(2). Notwithstanding the foregoing, the terms of
this Section 6.5 shall not be construed as limiting in
any way whatsoever any remedy to which any party may
be entitled other than the recovery of money damages,
including but not limited to equitable remedies,
specific performance, injunctive relief and
rescission.
6.6 Nature and Survival of Representations.
--------------------------------------
(a) Notwithstanding any right of any party (whether or
not exercised) to investigate the accuracy of the
representations and warranties of the other party
contained in this Purchase Agreement, BFS, BTI, the
Shareholders and the Company have the right to rely
fully upon the representations, warranties, covenants
and agreements of the others contained in this
Purchase Agreement.
(b) The representations, warranties, covenants and
agreements of BFS, BTI and the Shareholders, as
applicable, will survive the relevant Closing:
(1) indefinitely in the case of fraud, and with
respect to the representations and
warranties contained in Sections 2.1(a),
2.1(b),
31
2.1(d), and 2.1(f) (but only insofar as it
relates to the capital stock of the
Subsidiaries of BFS and BTI), 2.1 (a)(v) and
3.1(a);
(2) until 60 calendar days after the expiration
of all applicable statutes of limitation
(including all periods of extension, whether
automatic or permissive) with respect to
matters covered in Sections 2.1(i), and
2.1(q);
(3) for a period of 36 months following the
relevant Closing in the case of all other
representations and warranties and any
covenant or agreement to be performed in
whole on or prior to such Closing; or
(4) with respect to each other covenant or
agreement contained in this Agreement, for a
period of 18 months following the last date
on which such covenant or agreement is to be
performed or, if no such date is specified,
indefinitely,
(b) The representations, warranties, covenants and
agreements of the Company, will survive the relevant
Closing:
(1) indefinitely in the case of fraud, and with
respect to the representations and
warranties contained in Sections 4.1(a),
4.1(b), 4.1(d) and 4.1(g);
(2) for a period of 36 months following the
relevant Closing in the case of all other
representations and warranties and any
covenant or agreement to be performed in
whole on or prior to such Closing; or
(3) with respect to each other covenant or
agreement contained in this Agreement, for a
period of 18 months following the last date
on which such covenant or agreement is to be
performed or, if no such date is specified,
indefinitely,
except that any representation, warranty, covenant or
agreement that would otherwise terminate in
accordance with Section 6.6(b)(2), (3) or (4) or
6.6(c)(2) and (3) above will continue to survive if a
claim or indemnity notice (as applicable) shall have
been timely given under Section 6.5 on or prior to
such termination date, until the related claim for
indemnification has been satisfied or otherwise
resolved as provided in Section 6.5.
32
6.7 Limitations on Transfer of Shares; Rights of First Refusal.
----------------------------------------------------------
(a) In addition to the restrictions on transfer of the
Shares existing under the Securities Act, the
Shareholders agree that none of them shall sell,
assign, pledge, mortgage, encumber, hypothecate or
otherwise dispose of or transfer (or suffer any of the
foregoing to occur) their Shares, whether voluntarily
or involuntarily or by operation of law or otherwise
(any such transaction being hereinafter called a
"Transfer"), for a period of two (2) years from the
Closing Date; provided that CB may Transfer his
Shares, subject to the securities laws of the United
States and state securities laws and the provisions of
Section 6.7(b) before such two years term if his
employment with the Company or any of its affiliates
is terminated by the Company "without cause" or is
terminated by CB for "good reason", and such good
reason is not challenged by the Company or, if
challenged, is adjudicated in favor of CB. The terms
"without cause" and "good reason" shall have the
meaning ascribed to them in the Employment Agreement.
(b) After the restrictive period described in Section 6.7
(a), or if CB's employment is terminated without cause
or is terminated by CB for "good reason", and such
good reason is not challenged by the Company or, if
challenged, is adjudicated in favor of CB, the Shares
may be Transferred only in compliance with the
provisions of this Section 6.7 (b):
(1) If any Shareholder shall at any time receive
a bona fide offer from a third party ("Third
Party Transferee") to transfer any of the
Shares held by such Shareholder in a single
transaction or series of related
transactions (a "Shareholder Sale"), and
such Shareholder desires to accept such
offer (a "Third Party Offer"), the selling
Shareholder shall first deliver written
notice to the Company (the "Notice of
Offer"), which Notice of Offer to sell shall
specify (i) the name and address of the
Third-Party Transferee; (ii) the number of
Shares owned by such Shareholder that are
subject to the Third-Party Offer (the
"Offered Shares"); (iii) the proposed
consideration per share for the Offered
Shares (the "Offer Price"); and (iv) all
other terms and conditions of the
Third-Party Offer (the "Offer Terms"). The
Notice of Offer shall constitute an
irrevocable offer by the selling Shareholder
to sell to the Company the Offered Shares on
the Offer Terms and at a price equal to the
lower of (i) the Offer Price minus a fifteen
percent (15%) discount and (ii) the average
closing asked price of the shares of common
stock of the Company during the seven-day
period prior to the Notice of Offer (the
"Company Offer Price").
33
(2) Within ten (10) days following the Company's
receipt of the Notice of Offer (the
"Company's Offer Period"), the Company may
elect to purchase all or any portion of the
Offered Shares by delivering to the selling
Shareholder notice of the Company's election
to purchase the Offered Shares (such notice
being hereinafter referred to as the
"Company's Acceptance"). The Company's
Acceptance shall be deemed to be an
irrevocable commitment by the Company to
purchase from the selling Shareholder the
Offered Shares at the Company Offer Price.
(3) If the Company does not elect to purchase
any of the Offered Shares available for
purchase, the selling Shareholder may,
within a period of two months from the date
of the Notice of Offer sell the Offered
Shares not purchased by the Company to the
Third-Party Transferee that made the
Third-Party Offer, for aggregate
consideration not less than the Offer Price,
and on such terms and conditions as are no
more favorable to the Third-Party Transferee
than the Offer Terms. Upon any such sale,
Third-Party Transferee that acquires any of
the Offered Shares shall acquire them
subject to the securities laws of the United
States and the existing blue sky laws. If
the selling Shareholder does not complete
the Shareholder Sale within such two-month
period, the provisions of this Section
6.7(b) shall again apply as if the selling
Shareholder had not originally delivered a
Notice of Offer.
(4) If the Company elects to purchase the
Offered Shares, the closing of the purchase
of the Offered Shares by the Company
pursuant to this Section 6.7 shall take
place within ten (10) days after the
expiration of the Company's Offer Period, at
such time and place as the parties to the
sale may agree. At such closing,
simultaneously with the delivery by the
selling Shareholder of certificate(s)
representing the Offered Shares, the Company
shall deliver to the selling Shareholder an
amount, in cash in immediately available
funds (to the extent the consideration
therefore is payable in cash) equal to the
product of the Company Offered Price
multiplied by the number of Offered Shares.
34
(5) If the Company elects to purchase the
Offered Shares and, for any reason, fails to
purchase the Offered Shares on the terms
specified in this Section 6.7, then, in
addition to any damages the Shareholders may
be entitled to as a matter of law, the
provisions of this Section 6.7 shall no
longer be applicable to any Shares.
ARTICLE 7
CONDITIONS TO CLOSING
7.1 Conditions to BFS's, BTI's and Shareholders' Obligations. The
obligations of BFS, BTI and the Shareholders to effect the
Closing are subject to the satisfaction of the following
additional conditions on or before the Closing Date:
(a) The representations and warranties of the Company set
forth in Article 4 of this Agreement will be true and
correct in all material respects as of the date
hereof and at and as of the Closing Date as though
then made;
b) The Company and SFSI shall have performed, in all
material respects, each obligation and agreement and
complied with each covenant to be performed and
complied with by it under this Agreement prior to the
Closing Date;
(c) All consents by third party or governmental or
regulatory agencies or otherwise that are required to
be obtained by the Company or SFSI for the
consummation of the transactions described herein
will have been obtained;
(d) No action or proceeding before any court or
governmental body will be pending or threatened
wherein a judgment, decree, injunction or order would
prevent any of the transactions described herein or
cause such transactions to be declared unlawful or
rescinded;
7.2 Conditions to the Obligations of the Company. The obligations
of the Company to effect the Closing are subject to the
satisfaction of the following conditions on or before the
Closing Date:
(a) The representations and warranties set forth in
Article 2 and Article 3 of this Agreement will be
true and correct in all material respects as of the
date hereof and at and as of the Closing Date as
though then made;
(b) BFS, BTI and the Shareholders shall have performed,
in all material respects, each obligation and
agreement and complied with each covenant required to
be performed and complied with by them under this
Agreement prior to the
35
Closing Date, including but not limited to execution
of all employment agreements and other agreements as
described in Section 6.2 hereof, including, but not
limited to, those to be executed by the persons set
forth on Schedule 6.2.
(c) All consents by any third party or governmental or
regulatory agencies or otherwise that are required to
be obtained by BFS, BTI and the Shareholders for the
consummation of the transactions described herein
will have been obtained.
(d) No action or proceeding before any court or
governmental body will be pending or threatened
wherein a judgment, decree, injunction or order would
prevent any of the transactions described herein or
cause such transactions to be declared unlawful or
rescinded;
7.3 Closing Deliveries By BFS, BTI and Shareholders. On the
Closing Date, BFS, BTI and the Shareholders shall have
delivered to the Company the following:
(a) certificates executed on behalf of each of BFS, BTI
and the Shareholders stating that the conditions set
forth in Sections 7.2(a) through (d) of this
Agreement have been satisfied;
(b) resolutions duly adopted by each of BFS's and BTI's
Board of Directors authorizing and approving the
Agreement and the execution, delivery and performance
of the Agreement;
(c) a certificate of existence for each of BFS and BTI
from the Secretary of State of the State of Indiana,
dated not earlier than five days prior to the Closing
Date;
(d) copies of the Articles of Incorporation of BFS and
BTI certified as of a recent date by the Secretary
of State of the State of Indiana;
(e) incumbency certificates of the officer(s) of BFS and
BTI;
(f) a stock certificate of BFS for all authorized shares
of BFS;
(g) a stock certificate of BTI for all authorized shares
of BTI;
(h) such other documents and actions as the Company may
reasonably request in connection with the
transactions described herein including the executed
employment agreement of CB and the executed
non-compete agreement of MB.
36
7.4 Closing Deliveries By Company. On the Closing Date, the
Company shall have delivered or caused to be delivered to BFS,
BTI and the Shareholders, the following:
(a) a certificate executed on behalf of the Company
stating that the conditions set forth in Sections
7.1(a) through (d) of this Agreement have been
satisfied;
(b) certified resolutions duly adopted by the Company's
and SFSI's Boards of Directors authorizing and
approving the Agreement and the execution, delivery
and performance of this Agreement;
(c) good standing for the Company from the Secretary of
State of the State of Florida, dated not earlier than
five days prior to the Closing Date; and certificate
of existence for SFSI from the Secretary of State of
the State of Indiana, dated not earlier than five
days prior to the Closing Date;
(d) a copy of the Company's Articles of Incorporation, as
amended, certified as of a recent date by the
Secretary of State of the State of Florida; a copy of
SFSI's Articles of Incorporation, as amended,
certified as of a recent date by the Secretary of
State of the State of Indiana;
(e) an incumbency certificate of the officers of the
Company and of SFSI;
(f) the Note duly executed by an authorized
representative of the Company as described in Section
1.2 of this Agreement together with the Letter of
Credit and Security Agreement;
(g) certificates for the Shares as described in Section
1.2 of this Agreement;
(h) executed Articles of Merger, with Plan of Merger
attached, for filing with the Secretary of State of
the State of Indiana;
(i) executed Employment Agreement for ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇;
and
(j) such other documents and actions as BFS, BTI and the
Shareholders may reasonably request in connection
with the transactions described herein.
(k) provide for wire transfer to Shareholders, in
accordance with instructions given to the Company at
least five Business Days prior to the Closing Date,
of $800,000.
7.5 Real Estate Purchase Agreement. Closing of the transactions
contemplated by the Real Estate Purchase Agreement of even
date shall occur simultaneously with
37
Closing of the transactions contemplated herein and it is a
condition of the Closing hereunder.
ARTICLE 8
TERMINATION
8.1 Termination by Company or Shareholders. This Agreement may be
terminated by (i) the Company in the event that any of the
conditions of Closing set forth in 7.2 or 7.3 have not been
met by BFS, BTI and the Shareholders or (ii) the Shareholders
in the event that any of the conditions of Closing set forth
in Section 7.1 or 7.4 have not been met by the Company.
8.2 Termination by Mutual Consent. This Agreement may be
terminated at any time prior to the Closing by the mutual
consent in writing of the parties hereto.
8.3 Termination by Any Party. This Agreement may be terminated by
any party hereto if a United States federal or state court of
competent jurisdiction or United States federal or state
governmental, regulatory or administrative agency or
commission shall have issued an order, decree or ruling or
taken any other action permanently restraining, enjoining or
otherwise prohibiting the transactions described in this
Agreement and such order, decree, ruling or other action shall
have become final and non-appealable; provided, however, that
the party seeking to terminate this Agreement pursuant to this
clause shall have used all reasonable efforts to remove such
injunction, order or decree.
8.4 Material Breach. This Agreement may be terminated if there has
been a material breach of this Agreement and such breach has
not been cured by the alleged breaching party within 30 days
of receipt of written notice in the manner set forth in this
Agreement from a non-breaching party detailing such breach.
8.5 Lapse of Time. Notwithstanding anything in this Article 8 to
the contrary, in the event that the Closing of the
transactions described in this Agreement has not occurred by
December 31, 2001, this Agreement shall terminate and be of no
further force and effect, unless it is extended in writing by
all parties hereto.
8.6 Effect of Termination. In the event of termination of this
Agreement pursuant to this Article 8, all obligations of the
parties hereto shall terminate, except the obligations of the
parties pursuant to Section 6.1 and 9.10.
38
ARTICLE 9
GENERAL PROVISIONS
9.1 Notices. All notices and other communications hereunder shall
be in and shall be deemed to have been duly given if delivered
personally, sent by overnight courier or mailed by registered
or certified mail (postage prepaid and return receipt
requested) to the party to whom the same is so delivered, sent
or mailed at the following addresses (or at such other address
for a party as shall be specified by like notice):
If to the Company, SFSI or STSI (when formed):
----------------------------------------------
▇▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Chief Executive Officer
Syndicated Food Service Group, Inc.
(f/k/a Floridino's International Holdings, Inc.)
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax No.: ▇▇▇-▇▇▇-▇▇▇▇
With copies to:
---------------
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, Esq.
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, P.A.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax No: ▇▇▇-▇▇▇-▇▇▇▇
And
---
Proskauer Rose LLP
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Fax No: ▇▇▇-▇▇▇-▇▇▇▇
If to BFS, BTI and the Shareholders:
------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, President
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Shareholder
▇▇▇▇▇▇▇ Food Service, Inc.
▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Fax No: ▇▇▇-▇▇▇-▇▇▇▇
39
With a copy to:
---------------
▇▇▇▇ ▇. ▇▇▇▇, Esq.
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax No: ▇▇▇-▇▇▇-▇▇▇▇
9.2 Interpretation. The headings contained in this Agreement are
for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement. References to
Sections and Articles refer to sections and articles of this
Agreement unless otherwise stated.
9.3 Severability. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction
to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this
Agreement shall remain in full force and effect and shall in
no way be affected, impaired or invalidated, and the parties
shall negotiate in good faith to modify this Agreement to
preserve each party's anticipated benefits under this
Agreement.
9.4 Miscellaneous. This Agreement (together with all other
documents and instruments referred to herein): (a) constitutes
the entire agreement and supersedes all other prior
agreements, undertakings, statements and documents provided
(except as referred to herein), both written and oral, among
the parties with respect to the subject matter hereof; (b)
except as expressly set forth herein, is not intended to
confer upon any other person any rights or remedies hereunder
and (c) shall not be assigned by operation of law or
otherwise, except as may be mutually agreed upon by the
parties hereto.
9.5 Separate Counsel. Each party hereby expressly acknowledges
that it has been advised and urged to seek its own separate
legal counsel for advice with respect to this Agreement.
9.6 Governing Law. This Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the
State of Indiana, without regard to conflicts or choice of law
provisions of the State of Indiana.
9.7 Counterparts. This Agreement may be executed in two or more
counterparts which together shall constitute a single
agreement.
9.8 Amendment. This Agreement may be amended, modified or
supplemented only by an instrument in writing executed by all
parties hereto.
40
9.9 Parties In Interest: No Third Party Beneficiaries. Except as
otherwise provided herein, the terms and conditions of this
Agreement shall inure to the benefit of and be binding upon
the respective heirs, legal representatives, successors and
assigns of the parties hereto. This Agreement shall not be
deemed to confer upon any person not a party hereto any rights
or remedies hereunder.
9.10 Expenses. Except as may be specifically provided herein, the
parties hereto shall pay all of their own expenses relating to
the transactions described in this Agreement, including,
without limitation, the fees and expenses of their respective
counsel and financial advisers.
9.11 Rule of Construction that Ambiguities to be Construed Against
Drafter Not Applicable. The parties to this Agreement
acknowledge that they have each carefully read and reviewed
this Agreement with their respective counsel and therefore
agree that the rule of construction that ambiguities shall be
construed against the drafter shall not be applicable.
9.12 STSI Signature. The Company undertakes to have STSI sign a
counterpart of this Agreement promptly after organization and
in any event prior to the Closing.
[remainder of page intentionally blank]
41
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
Syndicated Food Service International, Inc. ▇▇▇▇▇▇▇ Food Service, Inc.
f/k/a Floridino's International Holdings, Inc.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------- ---------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, President
Chief Executive Officer
Syndicated Food Service Group, Inc. ▇▇▇▇▇▇▇ Transportation, Inc.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------- ---------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, President
Chief Executive Officer
Syndicated Transportation Service
Group, Inc.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
Chief Executive Officer
SHAREHOLDERS:
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, individually
/s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------------
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, individually
Exhibit List
Exhibit A-1 - Plan of Merger
Exhibit A-2 - Plan of Merger
Exhibit B - Promissory Note
Exhibit C - Security Agreement
Exhibit D - Pledge and Escrow Agreement
Exhibit E - ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Employment Agreement
42
Schedule List
Schedule 2.1 - ▇▇▇▇▇▇▇ Options and Equity Rights Schedule 2.1(c) - Foreign
Corporation Qualification-▇▇▇▇▇▇▇ Schedule 2.1(d) - Required Corporate
Approvals-▇▇▇▇▇▇▇ Schedule 2.1(e) - Third Party Consents-▇▇▇▇▇▇▇ Schedule 2.1(f)
- Subsidiaries-▇▇▇▇▇▇▇ Schedule 2.1(g)(i),
(ii), (iii) and (iv)- BFS/BTI Financial Statements
Schedule 2.1(h) - Absence of Changes-▇▇▇▇▇▇▇
Schedule 2.1(j) - Undisclosed Liabilities-▇▇▇▇▇▇▇
Schedule 2.1(k) - Real Property and Buildings Held Under Lease-▇▇▇▇▇▇▇
Schedule 2.1(l) - Personal Property Liens-▇▇▇▇▇▇▇
Schedule 2.1(m) - Licenses and Permits-▇▇▇▇▇▇▇
Schedule 2.1(o) - Claims-▇▇▇▇▇▇▇
Schedule 2.1(p) - Material Contracts-▇▇▇▇▇▇▇
Schedule 2.1(q) - Employee Plan-▇▇▇▇▇▇▇
Schedule 2.1(r) - Insurance-▇▇▇▇▇▇▇
Schedule 2.1(s) - Environmental Matters-▇▇▇▇▇▇▇
Schedule 2.1(t) - Employment/Labor Agreements-▇▇▇▇▇▇▇
Schedule 2.1(u) - Intellectual Property-▇▇▇▇▇▇▇
Schedule 4.1(b) - Company Stock Options, Warrants and Equity Rights
Schedule 4.1(c) - Company Foreign Corporation Qualification
Schedule 4.1(d) - Company Required CorporateApprovals
Schedule 4.1(e) - Company Third Party Consents
Schedule 5.1 - Dividends and Distributions-▇▇▇▇▇▇▇
Schedule 6.2 - Key Employees (form of Employment Agreement)