Exhibit 2.4
ASSET PURCHASE AGREEMENT
dated ____________, 1996
by and among
BAB Holdings, Inc., The American Bagel Company,
Almike Enterprises, Inc., ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
and
▇▇▇▇ ▇. ▇▇▇▇▇▇▇
TABLE OF CONTENTS
ARTICLE 1: PURCHASE OF ASSETS............................................... 1
1.1 Agreement to Purchase and Sell Assets................................... 1
1.2 Excluded Assets......................................................... 4
ARTICLE 2: PURCHASE PRICE, ALLOCATION AND PAYMENT........................... 4
2.1 Purchase Price.......................................................... 4
2.2 Allocation of Purchase Price............................................ 6
2.3 Payment of Purchase Price............................................... 6
2.4 Additional Consideration................................................ 7
ARTICLE 3: ASSUMPTION OF LIABILITIES........................................ 8
3.1 Limitation on Assumption of Liabilities................................. 8
3.2 Assumption of Certain Liabilities....................................... 8
ARTICLE 4: REPRESENTATIONS AND WARRANTIES OF SELLERS AND SHAREHOLDERS....... 9
4.1 Due Incorporation....................................................... 9
4.2 Due Authorization....................................................... 9
4.3 No Breach............................................................... 10
4.4 Clear Title............................................................. 10
4.5 Condition of Assets..................................................... 11
4.6 Litigation.............................................................. 11
4.7 Labor Matters........................................................... 12
4.8 Taxes................................................................... 12
4.9 Employee Benefits....................................................... 13
4.10 Full Disclosure........................................................ 13
4.11 Financial Statements................................................... 14
4.12 Absence of Certain Developments........................................ 14
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TABLE OF CONTENTS, continued
4.13 Proprietary Rights..................................................... 15
4.14 Compliance with Laws................................................... 16
4.15 Operating Contracts.................................................... 16
4.16 Real Estate............................................................ 17
4.17 Receivables............................................................ 18
4.18 Books and Records...................................................... 18
4.19 Employees.............................................................. 18
4.20 Licenses and Permits................................................... 19
4.21 Sufficiency of Assets.................................................. 19
4.22 Other Material Contracts and Obligations............................... 19
4.23 Shareholders........................................................... 20
4.24 Subsidiaries........................................................... 20
4.25 Products Liability Claims.............................................. 20
4.26 Insurance.............................................................. 20
4.27 Brokers................................................................ 21
4.28 Certain Payments....................................................... 21
4.29 Relationship with Related Persons...................................... 21
4.30 Inventory.............................................................. 22
4.31 Private Placement Memorandum........................................... 22
4.32 Environmental Matters.................................................. 22
4.33 Franchise Operations................................................... 23
ARTICLE 5: REPRESENTATIONS AND WARRANTIES OF PURCHASER...................... 24
5.1 Due Incorporation....................................................... 24
5.2 Due Authorization....................................................... 24
5.3 No Breach............................................................... 25
5.4 Full Disclosure......................................................... 25
5.5 Brokers................................................................. 25
5.6 BAB Shares.............................................................. 26
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TABLE OF CONTENTS, continued
5.7 Securities Laws Filings................................................. 26
5.8 Compliance with Laws.................................................... 26
5.9 Licenses and Permits.................................................... 26
ARTICLE 6: PERFORMANCE BY SELLERS AND SHAREHOLDERS PENDING CLOSING.......... 26
6.1 Access to Information................................................... 26
6.2 Business As Usual....................................................... 27
6.3 Encumbrances............................................................ 27
6.4 Pay Increases........................................................... 27
6.5 Restrictions on New Contracts........................................... 27
6.6 Preservation of Business................................................ 28
6.7 Payment and Performance of Obligations.................................. 28
6.8 Restrictions on Sale of Assets.......................................... 28
6.9 Prompt Notice........................................................... 28
6.10 Consents............................................................... 28
6.11 Copies of Documents.................................................... 28
6.12 No Solicitation of Other Offers........................................ 29
6.13 Inventory.............................................................. 29
6.14 Insurance.............................................................. 29
6.15 Filing Reports and Making Payments..................................... 29
6.16 Capital Expenditures................................................... 29
6.17 Monthly Financials..................................................... 29
6.18 COBRA.................................................................. 30
6.19 Cash on Hand........................................................... 30
6.20 Limitation on Transactions in Purchasers' Securities................... 30
6.21 Dividends.............................................................. 30
ARTICLE 7: PERFORMANCE BY PURCHASER PENDING CLOSING......................... 30
7.1 Access to Information................................................... 31
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TABLE OF CONTENTS, continued
7.2 Business As Usual....................................................... 31
7.3 Preservation of Business................................................ 31
7.4 Prompt Notice........................................................... 31
7.5 Insurance............................................................... 31
7.6 Filing Reports and Making Payments...................................... 31
ARTICLE 8: SECURITIES DISCLOSURES REGARDING BAB SHARES...................... 32
8.1 Unregistered Shares; Restrictions on Transfer........................... 32
ARTICLE 9: CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATIONS.................. 33
9.1 Accuracy of Representations and Warranties.............................. 33
9.2 Compliance with Covenants and Agreements................................ 33
9.3 No Adverse Change....................................................... 33
9.4 Proceedings............................................................. 33
9.5 Consents and Approvals.................................................. 33
9.6 The Offering............................................................ 33
9.7 Financial Statements.................................................... 34
9.8 Employment Contracts.................................................... 34
9.9 Due Authorization....................................................... 34
ARTICLE 10: CONDITIONS PRECEDENT TO SELLERS' AND SHAREHOLDERS' OBLIGATIONS.. 34
10.1 Accuracy of Representations and Warranties............................. 34
10.2 Compliance with Covenants and Agreements............................... 34
10.3 Registration Rights.................................................... 35
10.4 No Adverse Change...................................................... 35
10.5 Proceedings............................................................ 35
10.6 Consents and Approvals................................................. 35
10.7 The Offering........................................................... 35
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TABLE OF CONTENTS, continued
ARTICLE 11: INDEMNIFICATION................................................. 35
11.1 Indemnification by Sellers and Shareholders............................ 35
11.2 Indemnification by Purchaser........................................... 37
11.3 Procedure for Indemnification.......................................... 37
11.4 Survival of Representations, Warranties and Covenants.................. 39
11.5 Limitation on Indemnification Obligations.............................. 39
ARTICLE 12: CLOSING......................................................... 40
12.1 Date of Closing........................................................ 40
12.2 Documents to be Delivered by Sellers and Shareholders.................. 40
12.3 Documents to be Delivered by Purchaser................................. 42
ARTICLE 13: PERFORMANCE FOLLOWING THE DATE OF CLOSING....................... 42
13.1 Collection of Receivables.............................................. 43
13.2 Further Acts and Assurances............................................ 43
ARTICLE 14: TERMINATION..................................................... 43
14.1 Termination............................................................ 43
14.2 Return of Documents and Nondisclosure.................................. 44
ARTICLE 15: TITLE AND RISK OF LOSS.......................................... 44
15.1 Title and Risk of Loss................................................. 44
ARTICLE 16: DEFINITIONS..................................................... 45
ARTICLE 17 MISCELLANEOUS.................................................... 48
17.1 Preservation of and Access to Records.................................. 48
17.2 Cooperation Prior To Closing........................................... 49
17.3 Cooperation Following Closing.......................................... 50
17.4 Employees.............................................................. 50
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TABLE OF CONTENTS, continued
17.5 Public Announcements................................................... 50
17.6 Waiver of Bulk Transfers Act........................................... 50
17.7 Sales, Use and Deed Taxes.............................................. 51
17.8 Notices................................................................ 51
17.9 Entire Agreement....................................................... 51
17.10 Remedies Cumulative................................................... 52
17.11 Specific Performance.................................................. 52
17.12 Amendments............................................................ 52
17.13 Successors and Assigns................................................ 52
17.14 Costs................................................................. 52
17.15 Governing Law......................................................... 52
17.16 Counterparts.......................................................... 52
17.17 Headings.............................................................. 53
17.18 Scope of Agreement.................................................... 53
17.19 Number and Gender..................................................... 53
17.20 Severability.......................................................... 53
17.21 Parties in Interest................................................... 53
17.22 Waiver................................................................ 53
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT ("Agreement") is made and entered into as of
the _____ day of ____________, 1996, by and among BAB Holdings, Inc., an
Illinois corporation (the "Purchaser"), The American Bagel Company, a Maryland
corporation ("ABC"), Almike Enterprises, Inc., a Maryland corporation
("Almike"), and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ and ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ (collectively the
"Shareholders").
WHEREAS, Shareholders are the owners of all of the issued and outstanding
shares of each class and series of capital stock of ABC and Almike (individually
a "Seller" and collectively the "Sellers");
WHEREAS, Sellers are engaged in the business of franchising Chesapeake
Bagel Bakery stores and owning and operating company-owned Chesapeake Bagel
Bakery stores (collectively the "Business"); and
WHEREAS, Sellers desire to sell and assign and Purchaser desires to
purchase and assume, or cause one or more Affiliates (as hereinafter defined) of
the Purchaser to purchase and assume substantially all of the assets and rights
used by Sellers or useful in the operations of the Business on the terms and
conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the foregoing premises, the mutual
covenants contained herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE 1: PURCHASE OF ASSETS
1.1 AGREEMENT TO PURCHASE AND SELL ASSETS. On the Date of Closing (as
hereinafter defined), Purchaser agrees to purchase, or cause one or more
Affiliate(s) of Purchaser to which this Agreement has been assigned pursuant to
Section 17.13 hereof to purchase, from Sellers and Sellers agree to sell,
assign, transfer, convey and deliver to Purchaser or to such Affiliate(s) of
Purchaser, on the terms and subject to the conditions set forth in this
Agreement, all of the assets, properties, Contracts (as hereinafter defined),
operations and business of Sellers of every kind, nature and description
whatsoever which are related to arise from, are used or useful in connection
with the operation of the Business or which are reflected to, arise from, are
used or useful in connection with the operation of the Business or which are
reflected on their respective financial statements, wherever the same may be
located, excluding only the assets specifically identified as "Excluded Assets"
in Section 1.2 hereof. The assets, properties, Contracts, operations and
business to be purchased and sold pursuant to this Agreement (collectively the
"Assets") include, without limitation:
-
a. All of Sellers' right, title and interest in and to the real
property leased by either Seller in connection with the operation of the
Business, together with the improvements, fixtures, hereditaments and
appurtenances thereto, including the real property leased by Sellers on
Shady Grove Road in Gaithersburg, Maryland (the "New Store") in connection
with Sellers' proposed opening of a new company-owned Chesapeake Bagel
Bakery store during the fourth quarter of 1996 at that location
(collectively the "Leased Premises");
b. All of Sellers' right, title and interest in and to any and all
federal, state, foreign and common law trademarks, trademark registrations
and applications therefor, service marks, service ▇▇▇▇ registrations and
applications therefor, copyrights, copyright registrations and applications
therefor, trade names, assumed names, logos, patents, patent applications,
technology, know-how, trade secrets, processes, formulas, recipes,
drawings, designs and similar intellectual property and proprietary rights
of any kind, as well as Sellers' transferable interests in any and all
federal, state and foreign common law rights protecting the same,
including, but not limited to, those proprietary rights described on
Schedule 1.1(b) hereto (the "Proprietary Rights");
c. All of Sellers' equipment, machinery, furniture, fixtures,
furnishings, tooling, personal property, shelving, patterns, molds, office
equipment, computer hardware, trade fixtures, leasehold improvements, tools
and other tangible personal property owned or leased by either Seller and
used or useful in the operation of the Business, together with any
manufacturer, vendor or installer warranties thereon;
d. All of Sellers' vehicles used or useful in the operation of the
Business, including, but not limited to, those vehicles described on
Schedule 1.1(d) hereto (the "Vehicles");
e. All of the telephone numbers and telephone directory
advertisements used by Sellers in the operation of the Business;
f. All of Sellers' business records relating to the Business,
including, but not limited to, franchisee files and records, customer
lists, lists of prospective franchisees, lists of suppliers, operations and
other manuals, accounting records (including work papers related thereto),
correspondence, files, research data, advertising data, Contracts and other
records and information necessary or desirable for Purchaser to carry on
the Business in the ordinary course on and after the Date of Closing;
g. All of Sellers' contract rights and benefits in and to the
Contracts, Contracts in progress, commitments, leases, franchise
agreements, area franchise development agreements, licenses and other
agreements which relate to or arise from or are used or are necessary for
the Business and any amendments thereto; all such
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Contracts, Contracts in progress, commitments, leases, franchise
agreements, area franchise development agreements, licenses and other
agreements which are not listed on Schedule 1.2 hereof are described in
Schedule 1.1(g) hereto (the "Operating Contracts");
h. All of Sellers' governmental licenses, certificates, franchises,
permits, registrations, concessions, consents and approvals related to the
Business, including, but not limited to, those described in Schedule 1.1(h)
hereto (the "Licenses") but excluding those listed on Schedule 1.2 hereto
which by their terms are not transferable;
i. All of Sellers' prepaid expenses, credit memos and deposits which
relate to the Business, the categories of which are described in Schedule
1.1(i) hereto;
j. All of Sellers' office, shop and other supplies used in the
operation of the Business and which are on hand as of the Date of Closing;
k. All of Sellers' accounts receivable, notes receivable and other
rights to the payment of money arising out of the operation of the Business
and which remain uncollected on the Date of Closing, whether or not
evidenced by a writing or reflected on the Balance Sheets (as hereinafter
defined) (the "Receivables");
l. All of Sellers' inventory which is on hand as of the Date of
Closing, including raw materials, work in process and finished goods (the
"Inventory");
m. All of the plans, specifications, blueprints, surveys, repair and
operating manuals, warranties, guaranties, maintenance records, information
regarding real estate taxes, assessments and/or insurance and other written
information in the possession of Sellers relating to any of the Assets or
to the improvements on any Leased Premises as well as copies of the
certificates of occupancy for such improvements;
n. All of Sellers' rights, if any and to the extent transferable, in
any computer software and software program documentation in computer
readable and hard-copy forms reasonably acceptable to Purchaser, including,
but not limited to, the software described in Schedule 1.1(n) hereto (the
"Software");
o. All of Sellers' rights and claims against third parties relating
to the Assets ;
p. All of Sellers' supply of brochures, displays, models and other
marketing materials on hand as of the Date of Closing, as well as the
camera ready art, negatives, proofs and other reproduction materials for
the same;
q. All saleable goodwill as a going concern and other intangible
personal property of Sellers which comprise a part of the Business;
r. All cash and cash equivalents on hand and/or on deposit in bank
and/or brokerage accounts as of the Date of Closing;
s. All other assets of Sellers of every type, nature and
description; and
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t. All accretions and additions to the Assets that occur prior to the
Date of Closing.
1.2 EXCLUDED ASSETS. Notwithstanding anything contained in this Agreement
to the contrary, Purchaser will not purchase, and Sellers will not sell, any of
the following assets (the "Excluded Assets"):
a. The corporate minute books, stock books and other corporate
records of Sellers having exclusively to do with the corporate organization
and capitalization of Sellers as well as Sellers' tax records; and
b. All assets listed on Schedule 1.2 hereof.
ARTICLE 2: PURCHASE PRICE, ALLOCATION AND PAYMENT
2.1 PURCHASE PRICE. Subject to the adjustments hereinafter set forth, the
purchase price for the Assets and the Agreement Not To Compete provided for in
Section 12.2(g) hereof (the "Agreement Not to Compete") shall be the sum of
Twenty-Two Million and 00/100 Dollars ($22,000,000.00) plus Nine Hundred
Thousand (900,000) shares of the Common Stock, no par value per share, of BAB
Holdings, Inc. (collectively the "Purchase Price"). Notwithstanding any
provision of this Agreement to the contrary, in the event the aggregate amount
of cash and cash equivalents which the Sellers have on hand and on deposit in
banks and brokerage accounts as of the Date of Closing is less than Five Hundred
Thousand and No/100 Dollars ($500,000.00), the Purchase Price shall be reduced
dollar-for-dollar by the amount of the deficit; provided, however, that on the
Settlement Date (as hereinafter defined), the Sellers and Shareholders may pay
to the Purchaser by certified or bank cashier's check (or by wire transfer of
immediately available funds to Purchaser's designated account) the amount of
such deficit and upon receipt of such payment by the Purchaser, the combined
tangible net worth of the Sellers reflected on the Closing Balance Sheet (as
hereinafter defined) shall be deemed to be increased by the amount of such
payment.
As soon as practicable following the execution of this Agreement, the
parties shall, at Seller's expense, cause Ernst & Young L.L.P. (the "Auditor")
to prepare, audit and issue an unqualified opinion on the combined balance sheet
of Sellers as of the close of business of the Business on December 31, 1995 (the
"Opening Balance Sheet"). The Opening Balance Sheet shall be prepared in
accordance with GAAP (as hereinafter defined) consistently applied, with
appropriate adjustments to eliminate intercompany transactions of the Sellers.
As soon as practicable after the Date of Closing (but in any event within thirty
(30) days after the Date of Closing), the Purchaser, at its expense, shall cause
the Auditor to prepare, audit and issue an unqualified opinion on the combined
balance sheet of the Sellers as of the close of business of the Business on the
Date of Closing and without giving effect to the consummation of the transaction
contemplated herein ("Closing Balance Sheet"). The Closing Balance Sheet shall
be
4
prepared in accordance with GAAP consistently applied and in a manner consistent
with the preparation of the Opening Balance Sheet, with appropriate adjustments
to eliminate intercompany transactions of the Sellers; provided, however, the
Closing Balance Sheet shall include accruals for (i) all amounts due or to
become due and payable under the Operating Contracts with respect to any period
of time ending on or before the Date of Closing, (ii) all amounts accrued for
wages and salaries payable to Sellers' employees, including vacation and sick
leave, with respect to any period of time ending on or before the Date of
Closing (but specifically excluding any benefits under any employee benefit
plans of any nature, none of which shall be assumed by Purchaser), and (iii) all
utility charges, including sewer, water, gas, electricity, telephone and garbage
disposal, as well as other current operating expenses of the Business with
respect to any period of time ending on or before the Date of Closing. The
Closing Balance Sheet shall not include accruals for, and Purchaser expressly
does not assume any liability for, fees and expenses incurred by the Sellers
with respect to the transaction contemplated hereby (including, but not limited
to, counsel fees, investment banking fees, brokers fees, auditing fees, and
related expenses). Both the Operating Balance Sheet and the Closing Balance
Sheet (individually a "Balance Sheet" and collectively the "Balance Sheets")
shall contain a calculation of the combined tangible net worth of the Sellers as
of their respective dates (i.e., total combined tangible assets less total
combined tangible liabilities, in each case as reflected on the applicable
Balance Sheet). The Auditor shall promptly deliver each Balance Sheet to the
Purchaser and the Sellers following the preparation thereof. Representatives of
the Purchaser and Sellers shall have the right to review the Balance Sheets and
perform other audit and review procedures, including a review of the working
papers of the Auditor relative to the preparation of such Balance Sheets. Each
party shall bear its own expenses incurred in connection with the review of the
Balance Sheets. The parties shall be deemed to have accepted the Balance Sheets
and the combined tangible net worth of the Sellers reflected thereon unless
within fifteen (15) days after the last date of the Auditor's transmittal of the
applicable Balance Sheet to the parties (the "Delivery Date"), they give written
notice to the other parties and to the Auditor of their good faith objection to
any item therin setting forth a detailed description of such objection and the
amount they have determined in good faith as the consolidated tangible net worth
of the Sellers as of the date of such Balance Sheet. Any disagreement or
controversy between Sellers and Purchaser which is not resolved by Sellers and
Purchaser within thirty (30) days following the Delivery Date shall be
determined by arbitration as follows. Each party shall designate a firm (other
than the Auditor or the current or former auditor of the Sellers) of independent
certified accountants of recognized national standing to resolve such dispute.
If the two firms cannot agree on a resolution within three weeks from the date
it is submitted to them, they shall jointly agree on a third firm of independent
certified accountants of recognized
5
national standing, whose decision shall be binding on both Sellers and
Purchaser. Each party shall be responsible for the costs of the accountant
selected by it and agree to share the cost of the third accountant.
In the event the consolidated tangible net worth of the Sellers as
reflected on the Closing Balance Sheet is greater than the consolidated tangible
net worth of the Sellers reflected on the Opening Balance Sheet, the Purchase
Price shall be increased by the amount of the excess. However, in the event the
consolidated tangible net worth of the Sellers reflected on the Closing Balance
Sheet is less than the consolidated tangible net worth of the Sellers reflected
on the Opening Balance Sheet, the Purchase Price shall be reduced by the amount
of the difference.
2.2 Allocation of Purchase Price. Purchaser and Sellers shall, in a
reasonable manner, determine the fair market value of the Assets and Purchaser
shall allocate the Purchase Price among the Assets and the Agreement Not to
Compete in accordance with said determination and Section 1060 of the Code (as
hereinafter defined). On the Settlement Date, the Purchaser and Sellers shall
execute a schedule setting forth the allocation of the Purchase Price mutually
agreed upon by the parties. The Purchaser and Sellers shall each file, in
accordance with Section 1060 of the Code, an Asset Allocation Statement on Form
8594 (which conforms with such allocation) with its federal income tax return
for the tax year in which the Date of Closing occurs and shall contemporaneously
provide the other party with a copy of the Form 8594 being filed. Each party
agrees not to assert, in connection with any tax return, audit or other similar
proceeding, any allocation of the Purchase Price which differs from the
allocation determined hereunder.
2.3 Payment of Purchase Price. The Purchase Price shall be paid by the
Purchaser to the Sellers as follows:
a. On the Date of Closing, the Purchaser shall deposit the sum of
Two Million and 00/100 Dollars ($2,000,000.00) (the "Deposit") in
immediately available funds with a mutually acceptable national bank (the
"Escrow Agent"), to be held by the Escrow Agent pursuant to an Escrow
Agreement in substantially the form of Exhibit A hereto (the "Escrow
Agreement") to be entered into by and among the Purchaser, Sellers and the
Escrow Agent on the Date of Closing (the "Escrow Agreement").
b. On the Date of Closing, the Purchaser shall pay to the Sellers by
certified or bank cashier's check (or by wire transfer of immediately
available funds to Sellers' designated account) the sum of Twenty Million
and 00/100 Dollars ($20,000,000.00).
c. In the event the combined tangible net worth of the Sellers
reflected on the Closing Balance Sheet exceeds the combined tangible net
worth of the Sellers reflected on the Opening Balance Sheet, on the
Settlement Date (as hereinafter defined), the Purchaser shall pay to the
Sellers by certified or bank cashier's check (or by wire transfer
6
of immediately available funds to Sellers' designated account) the amount
of the excess and the parties shall instruct the Escrow Agent to disburse
the Deposit and any interest or earnings thereon to the Sellers. For
purposes of this Agreement, the "Settlement Date" shall be such date as is
mutually agreed upon by the parties not later than five (5) days after the
acceptance by all of the parties of both Balance Sheets, or if any party
timely objects to the combined tangible net worth of the Sellers pursuant
to Section 2.1 hereof and such objection is not resolved by mutual
agreement, within five (5) days after completion of the arbitration as
provided in Section 2.1 hereof.
d. In the event the combined tangible net worth of the Sellers
reflected on the Closing Balance Sheet is less than the combined tangible
net worth of the Sellers reflected on the Opening Balance Sheet, on the
Settlement Date the parties shall instruct the Escrow Agent to disburse to
the Purchaser the portion of the Deposit equal to the difference together
with the interest or income thereon and shall instruct the Escrow Agent to
disburse the balance of the Deposit, if any, together with the interest or
income thereon to the Sellers. In the event such difference exceeds the
amount of the Deposit, on the Settlement Date the parties shall instruct
the Escrow Agent to disburse the entire Deposit together with the interest
or income thereon to the Purchaser, and the Sellers and the Shareholders
shall, jointly and severally, on demand, pay to the Purchaser the amount by
which such difference exceeds the Deposit.
e. On the Date of Closing the Purchaser shall deliver to the Sellers
certificates representing Nine Hundred Thousand (900,000) shares of the
Common Stock, no par value of BAB Holdings, Inc. If, prior to the Closing,
there shall be a merger, reorganization, consolidation, recapitalization,
stock dividend, stock split or other change in the corporate structure
affecting the capitalization of the Purchaser, such adjustment shall be
made in the number and type of shares of stock to be delivered hereunder as
is appropriate and equitable in light of such change in the Purchaser's
capitalization.
2.4 ADDITIONAL CONSIDERATION. Purchaser shall pay to Sellers, on the last
business day of each calendar quarter, commencing on the last business day of
the first full calendar quarter following the Date of Closing in which there
shall have been opened and there is then operating at least One Hundred Eighty-
One (181) franchised Chesapeake Bagel Bakery stores, Twenty Thousand Dollars
($20,000) for each such franchised Chesapeake Bagel Bakery store opened during
said quarter pursuant to the terms of a franchise or area development agreement
in place as of the Date of Closing and listed on Schedule 1.1(g) hereto;
provided, however, that for the calendar quarter in which the One Hundred
Eighty-First (181st) franchised Chesapeake Bagel Bakery store is opened, such
payments shall be due and payable only with respect to such franchised stores
opened in excess of One
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Hundred Eighty-One (181). Such amounts shall be paid in cash if the full initial
franchise fee with respect to such store is payable by the franchisee to the
Purchaser after the Date of Closing. However, if all or part of the initial
franchise fee for such store has been paid to either Seller or any of their
franchise brokers on or before the Date of Closing such amounts shall be paid in
shares of the Common Stock of BAB Holdings, Inc., in an amount equivalent to
Twenty Thousand Dollars ($20,000) based upon the average of the closing bid and
asked prices of the Common Stock as quoted on the Nasdaq stock market for the
twenty (20) consecutive trading days immediately preceding the last day of each
such calendar quarter. Interest shall accrue at twelve percent (12%) per
annum on any payments not made within fifteen (15) days of the due date
hereunder. Purchaser shall cause to be kept complete and accurate records with
respect to all store openings. All such records shall be available for
inspection and copying be Sellers or their authorized representative(s) during
normal working hours at the principal office of Purchaser upon reasonable
advance notice.
ARTICLE 3: ASSUMPTION OF LIABILITIES
3.1 Limitation on Assumption of Liabilities. Except as specifically set
forth in Section 3.2 hereof, Sellers shall transfer the Assets to Purchaser on
the Date of Closing free and clear of any Encumbrance (as hereinafter defined)
and Purchaser shall not, by virtue of its purchase of Assets, assume or become
responsible for any debts, liabilities or obligations of either of the Sellers
or either of the Shareholders, whether fixed, contingent, known, unknown or
otherwise.
3.2 Assumption of Certain Liabilities. Notwithstanding the provisions of
Section 3.1 hereof to the contrary, Purchaser covenants and agrees that on the
Date of Closing, it shall execute and deliver to Sellers an Assumption Agreement
in substantially the form of Exhibit B hereto (the "Assumption Agreement")
pursuant to which it will assume and agree to perform and discharge the
following debts, liabilities and obligations of Sellers:
a. All debts, liabilities and obligations of Sellers arising under
the Operating Contracts which become performable after the Date of Closing,
except that Purchaser expressly does not assume any liabilities for (i)
products sold or services rendered by the Business under such Operating
Contracts on or prior to the Date of Closing, (ii) for any debts,
liabilities or obligations arising as a result of a breach or default by
either Seller under any of such Operating Contracts occurring on or before
the Date of Closing or as a result of the consummation of the transactions
contemplated hereby, (iii) any long-term indebtedness (including the
current portion thereof), except as set forth on Schedule 3.2 hereto; or
(iv) any fees or commissions payable by Sellers or any other person to
brokers, consultants, finders or others with respect to the offer or sale
of Sellers' franchises or area development agreements, except as reflected
in the deferred revenues from the sale of franchises on the Closing Balance
Sheet;
8
b. All of Sellers' trade accounts payable, deferred revenues from the
sale of franchises, and other current liabilities, in each case arising out
of the operation of the Business in the Ordinary Course of Business (as
hereinafter defined) which remain unpaid on the Date of Closing, but only
to the extent reflected on the Closing Balance Sheet; provided that
Purchaser expressly does not assume (i) any accrued taxes of any nature,
(ii) any liabilities to any Related Person (as hereinafter defined), or
(iii) any long-term debt (including the current portions thereof), except
as set forth on Schedule 3.2 hereto; and
c. All debts, liabilities and obligations of Sellers identified on
Schedule 3.2 hereto (including leases for the Leased Premises).
ARTICLE 4: REPRESENTATIONS AND WARRANTIES OF SELLERS AND SHAREHOLDERS
As an inducement for Purchaser to enter into this Agreement and consummate
the transactions contemplated hereby, intending that Purchaser rely thereon in
entering into and performing this Agreement, Sellers and Shareholders jointly
and severally warrant and represent to Purchaser that each and all of the
following are true and correct in all material respects as of the date of this
Agreement and will be true and correct in all material respects at and as of the
Closing:
4.1 Due Incorporation. Each Seller is a corporation duly formed, validly
existing and in good standing under the laws of the State of Maryland, and has
all requisite power and authority, corporate and otherwise, to own, operate and
lease its properties and assets and to conduct its respective portion of the
Business as it is now being conducted. Each Seller is duly qualified to transact
business as a foreign corporation and is in good standing under the laws of
those jurisdictions set forth on Schedule 4.1 hereto; and there are no other
jurisdictions in which either Seller is required to be so qualified and the
failure to be so qualified could reasonably be expected to have a Material
Adverse Effect (as hereinafter defined) on either Seller. Neither Seller is
subject to any Contract which restricts or may restrict the conduct of the
Business in any jurisdiction or location except for territorial protections
contained in Sellers' franchise agreements and area development agreements
listed on Schedule 1.1(g) hereto.
4.2 Due Authorization. The execution, delivery and performance of this
Agreement, including the documents, instruments and agreements to be executed
and/or delivered by Sellers pursuant to this Agreement, and the consummation of
the transactions contemplated hereby and thereby have been duly and validly
authorized by all necessary corporate action on the part of Sellers, including
authorization by the Boards of Directors of the Sellers and the Shareholders.
This Agreement and the documents, instruments and agreements to be executed
and/or delivered
9
by Sellers and/or Shareholders pursuant to this Agreement have been or will be
on or before the Date of Closing duly and validly authorized, executed and
delivered by Sellers and/or Shareholders and the obligations of Sellers and/or
Shareholders hereunder and thereunder are or will be upon such execution or
delivery valid and legally binding, and this Agreement and the documents,
instruments and agreements to be executed and/or delivered by Sellers and/or
Shareholders pursuant to this Agreement are or will be upon such execution and
delivery enforceable against Sellers and Shareholders in accordance with their
respective terms, except as such enforcement may be limited by applicable
bankruptcy, reorganization, insolvency, moratorium or other similar laws
presently or hereafter in effect affecting the enforcement of creditors' rights
generally and by general principles of equity (regardless of whether such
enforceability is considered in a proceeding at law or in equity), including,
among others, limitations on the availability of equitable remedies.
4.3 No Breach. Each Seller has full corporate power and authority to
sell, assign, transfer, convey and deliver to Purchaser the Assets to be sold
hereunder and to otherwise perform its obligations under this Agreement and the
documents, instruments and agreements to be executed and/or delivered by such
Sellers pursuant hereto. The execution and delivery of this Agreement, including
the documents, instruments and agreements to be executed and/or delivered by
each Seller pursuant to this Agreement, and the consummation of the transactions
contemplated hereby and thereby will not: (i) violate any provision of the
Articles of Incorporation or Bylaws (or comparable governing documents or
instruments) of such Seller; (ii) to Sellers' Knowledge, violate any Applicable
Laws (as hereinafter defined), issued, enacted, entered or deemed applicable by
any Governmental Body (as hereinafter defined) having jurisdiction over such
Seller or any of its properties or assets; (iii) to Sellers' Knowledge, except
as provided in Schedule 4.3 hereto, require any filing with, permit from,
consent or approval of, or the giving of any notice to, any Person (as
hereinafter defined); (iv) to Sellers' Knowledge, result in a violation or
breach of, or constitute (with or without due notice or lapse of time or both) a
default (or give another party any rights of termination, cancellation or
acceleration) under any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, license, franchise, permit, lease, or other Contract
to which such Seller is a party, or by which it or any of its properties or
assets may be bound, including the Operating Contracts; or (v) to Sellers'
Knowledge, result in the creation or imposition of any Encumbrance on any of the
Assets.
4.4 Clear Title. On the Date of Closing, Sellers will convey to Purchaser
good, valid and marketable title to all of the Assets (whether real, personal or
mixed, and whether tangible or intangible), including, without limitation, all
of the properties and assets reflected on the Balance Sheets (except for
personal property sold since the date of the Opening Balance Sheet in the
10
Ordinary Course of Business), free and clear of any and all Encumbrances, of any
kind, nature or description whatsoever.
4.5 Condition of Assets. All of the Assets to be purchased and sold
hereunder (i) have been maintained in accordance with prudent business practice,
(ii) are in reasonably good operating condition and repair, subject only to
ordinary wear and tear, and (iii) are usable and fit for their intended purpose.
Sellers shall use their respective best efforts and shall cooperate with
Purchaser with respect to the transfer to Purchaser of all existing
manufacturers', vendors', installers' or other warranties for the Assets which
are in effect as of the Date of Closing.
4.6 Litigation. Except as described in Schedule 4.6 hereto or otherwise
disclosed by Sellers to Purchaser in writing prior to the Closing, neither the
Sellers nor the Shareholders have notice of any pending Proceeding (as
hereinafter defined):
a. that has been commenced by or against either Seller or that
otherwise relates to or may affect business of, or any of the assets owned
or used by, either Seller (other than any Proceeding which generally
affects the business of all Persons conducting business similar to the
Sellers' and in which neither Seller is a named defendant); or
b. that challenges, or that may have the effect of preventing,
delaying, making illegal, or otherwise interfering with, any of the
transactions contemplated hereby.
To Sellers' Knowledge, (1) no such Proceeding has been Threatened (as
hereinafter defined), and (2) no event has occurred or circumstance exists that
Sellers or the Shareholders, in exercise of reasonable judgment, believe may
five rise to, or serve as a basis for, the commencement of any such Proceeding.
The Sellers have delivered to Purchaser copies of all pleadings, correspondence,
and other documents relating to each Proceeding listed in Schedule 4.6 hereto.
Except as otherwise disclosed by Sellers to Purchaser in writing prior to the
Closing, the Proceedings listed in Schedule 4.6 hereto will not have a Material
Adverse Effect on either Seller or the Business. Sellers have provided to
Purchaser a statement of all material Proceedings commenced or Threatened by or
against either Seller within the last three (3) years and a description of the
outcome thereof. Except as provided in Schedule 4.6 hereto, neither Seller has
notice that it is a party to or subject to the provisions of any writ, ruling,
award, executive order, directive, requirement, injunction (whether temporary,
preliminary or permanent), judgment, decree or other issued, enacted, entered or
deemed applicable by any Governmental Body which could, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on either
Seller or the Purchaser or impair the ability of either Seller and/or the
Shareholders to consummate the transactions contemplated hereby.
11
4.7 Labor Matters. Except as described in Schedule 4.7 hereto, neither
Seller has ever been a party to any collective bargaining agreement or other
labor Contract. Except as described in Schedule 4.7 hereto, there has never
been, and there is not presently pending or existing and to the best of Sellers'
Knowledge there is not Threatened, any strike, slowdown, picketing, work
stoppage, labor arbitration or other Proceeding with respect to any grievance of
any employee, application or complaint filed by an employee or union with the
National Labor Relations Board, or any comparable Governmental Body,
organizational activity, or other labor dispute against or affecting either
Seller or the Business, and no application for certification of a collective
bargaining agreement is pending or, to the best of Sellers' Knowledge, is
Threatened. Except as described in Schedule 4.7 hereto, to the best of Sellers'
Knowledge, no event has occurred or circumstance exists could provide the basis
for any work stoppage or other labor dispute. Except as described in Schedule
4.7 hereto, there is no lockout of any employees by either Seller and no such
action is contemplated by either Seller. Except as described in Schedule 4.7
hereto, the Sellers have complied in all material respects with all Applicable
Laws relating to employment, equal employment opportunity, discrimination,
harassment, immigration, wages, hours, benefits, collective bargaining, the
payment of social security and similar taxes, occupational safety and health,
and plant closing, and Sellers have no notice of any allegations, charge,
complaint or Proceeding pending or to the best of Sellers' Knowledge Threatened
against either Seller or any of their respective officers, directors, or
employees relating to any such laws, and the Sellers have no written notice of
any basis for any such allegation, charge, complaint, or Proceeding.
4.8 Taxes.
a. Except as described in Schedule 4.8 hereto, all returns and
reports, including, without limitation, information and withholding returns
and reports ("Tax Returns") of or relating to any foreign, federal, state,
county, local or other Tax (as hereinafter defined) that are required to be
filed on or before the Date of Closing by or with respect to either Seller,
or any other corporation that is or was a member of an affiliated group
(within the meaning of Section 1504(a) of the Code) of corporations of
which either Seller was a member for any period ending on or prior to the
Date of Closing, have been or will be duly and timely filed, and all Taxes
(as hereinafter defined), including interest and penalties, due and payable
pursuant to such Tax Returns, have been paid or adequately provided for in
reserves established by the Sellers, except where the failure to file, pay,
or provide for do not, and insofar as reasonably can be foreseen will not
have, a Material Adverse Effect on either Seller or the Purchaser.
b. Except as described in Schedule 4.8 hereto, Sellers have no
notice of any material claim against either Seller with respect to any
Taxes, and no material
12
assessment, deficiency, or adjustment has been asserted or proposed with
respect to any Tax Return of or with respect to either Seller that has not
been adequately provided for in reserves established by the Sellers.
c. Except as described in Schedule 4.8 hereto, the total amounts set
up as liabilities for current and deferred Taxes on the books of the
Sellers have been prepared in accordance with GAAP and are sufficient to
cover the payment of all material Taxes, including any penalties or
interest hereon and whether or not assessed or disputed, that are, or are
hereafter found to be, or to have been, due with respect to the operations
of the Sellers through the periods covered thereby.
4.9 Employee Benefits.
a. Neither of the Sellers, or any current or former affiliate of
either Seller, has at any time maintained, contributed to, or
obligated itself, or otherwise had any debt, liability or obligation
with respect to any Benefit Plans (as hereinafter defined), with
respect to which the Purchaser will incur any debts, liabilities or
obligations as a result of the consummation of the transactions
contemplated hereby which are not expressly assumed by the Purchaser
pursuant to Section 3.2 hereof; and
b. the requirements related to the continuation of medical
benefit coverage for former employees of Sellers, their spouses, and
other dependents as required to be provided under Section 4980B of the
Code and Part 6 of Subtitle B of Title I of ERISA and the accompanying
proposed regulations and state continuation coverage laws ("COBRA")
have been satisfied and will be satisfied by Sellers following the
Date of Closing.
4.10 Full Disclosure. No representation or warranty made by Sellers or
Shareholders in this Agreement, including the documents, instruments and
agreements to be executed and/or delivered by either or both Sellers and/or
Shareholders pursuant to this Agreement, and no statement, certificate or other
document or instrument furnished or to be furnished by or on behalf of either or
both Sellers and/or Shareholders pursuant to this Agreement or in connection
with the consummation of the transactions contemplated hereby, contains or will
contain any untrue statement of a material fact or omits, to state a material
fact necessary to make the statements contained herein and therein not
misleading or any fact necessary to provide Purchaser with proper and adequate
information concerning the properties, Assets, revenues, Business, operations,
financial condition and prospects of Sellers. Neither Sellers nor Shareholders
has knowingly failed to fully disclose to Purchaser any and all facts and
information known to it/him/them that reasonably could be expected to have a
Material Adverse Effect on either Seller or the Business.
13
4.11 FINANCIAL STATEMENTS. Sellers have furnished true and correct copies
of the financial statements identified in Schedule 4.11 hereto to Purchaser.
Except as provided in Schedule 4.11 hereto, all of said financial statements,
including any notes thereto, are true and correct in all material respects and
fairly present the financial position and condition of Sellers, on a combined
basis, with elimination of all intercompany transactions, as of their respective
dates and the results of their respective operations for the periods covered in
accordance with GAAP, applied on a basis consistent with that of prior years
and periods, provided, however, that as to the unaudited quarterly financial
statement set forth on such Schedule, such financial statements do not have
the footnotes required by GAAP and such financial statements are subject to
ordinary year-end adjustments. To Sellers' Knowledge, subsequent to December
31, 1995, there have been no material adverse changes in the properties, Assets,
liabilities, revenues, expenses, operations, financial condition or prospects
of the Sellers and/or Business from that reflected in said financial statements.
Except for debts, liabilities and obligations (i) to be reflected or reserved
against in the Balance Sheets or in the notes thereto, (ii) current liabilities
incurred in the Ordinary Course of Business since the date of the Opening
Balance Sheet, and/or (iii) described on Schedule 4.11 hereto, neither Seller
has any debts, liabilities or obligations of any nature, whether secured,
unsecured, known, unknown, accrued, absolute, fixed, contingent or otherwise,
whether due or to become due, which, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect on either Seller or
the Business. Except as otherwise described herein, all debts, liabilities and
obligations incurred after the date of the Opening Balance Sheet have been
incurred in the Ordinary Course of Business, and are usual and ordinary in
amount both individually and in the aggregate.
4.12 ABSENCE OF CERTAIN DEVELOPMENTS. Except for the transactions
contemplated by this Agreement or as otherwise set forth on Schedule 4.12
hereto, since December 31, 1995, Sellers have conducted the Business only
in the Ordinary Course of Business and have not:
a. Sold, assigned or otherwise transferred any properties or assets
other than in the Ordinary Course of Business;
b. Suffered any material loss or waived or released any material
right or claim, whether or not in the Ordinary Course of Business;
c. Suffered, sustained or incurred any material damage, destruction
or casualty loss to any properties or assets, whether or not covered
by insurance;
d. Engaged in any transaction not in the Ordinary Course of
Business;
e. Made any capital expenditure exceeding $25,000;
f. Incurred any debts, liabilities or obligations, absolute or
contingent, known or unknown, except current liabilities incurred in the
Ordinary Course of Business and those incurred with respect to the
New Store, as described in Schedule 4.12;
14
g. Loaned money to any Person, or guaranteed any loan to any Person,
whether or not in the Ordinary Course of Business;
h. Except as described in Schedule 1.1(g) hereto, amended or
terminated any of the Operating Contracts or Licenses, except in the
Ordinary Course of Business;
i. Changed accounting methods or practices (including, without
limitation, any change in depreciation, amortization or cost accounting
policies or rates), except as disclosed to Purchaser by Sellers in writing
prior to the Closing;
j. Suffered, sustained or incurred any material adverse change in
the properties, Assets, revenues, Business, operations, financial condition
or prospects of the Sellers;
k. Received notice from any customer, franchisee, lessor, vendor
or any other Person which could reasonably be expected to have, give
rise to or result in a Material Adverse Effect on either Seller or the
Business; or
l. Entered into any Contract to do any of the foregoing.
4.13 PROPRIETARY RIGHTS. Schedule 1.1(b) hereto contains a list of all
of the federal, state, foreign and common law trademarks, trademark
registrations and applications therefor, service marks, service ▇▇▇▇
registrations and applications therefor, copyrights, copyright registrations and
applications therefor, trade names, assumed names, logos, patents, patent
applications, technology, know-how, trade secrets, processes, formulas,
drawings, designs and other similar intellectual property and/or proprietary
rights of any kind used by either Seller in the operation of the Business.
Schedule 1.1(n) hereto contains a list of all of the computer software and
software program documentation of any kind used by either Seller in the conduct
of the Business. Neither Seller has any knowledge of any asserted claim or any
reason to believe that the operations of the Business or the possession or use
in the Business of any of the Assets, including the Proprietary Rights and/or
Software, infringes any trademark, service ▇▇▇▇, copyright, trade name, assumed
name, logo, patent, technology, know-how, trade secret, process, formula,
drawing, design or other intellectual property or proprietary rights of any
other Person; except as provided in the franchise agreements and area franchise
development agreements included in the Operating Contracts, Sellers have the
right to use all of the Proprietary Rights and the sole and exclusive right to
use Sellers' trade names, trademarks, service marks and other intellectual
properties which have been registered with the U.S. Patent and Trademark Office;
neither Seller has entered into any Contract or license that would impair its
right to transfer its rights in and to the Proprietary Rights and/or Software to
Purchaser; Sellers have no reason to believe that any of the Proprietary Rights
are, or are claimed to be, invalid; and, except as provided in Schedule 1.1(n)
hereto, neither Seller is obligated under any license, Contract or otherwise to
pay royalties, fees or other payments with respect to any of the Proprietary
Rights
15
and/or Software. Except as provided in Schedule 4.3 hereto, the sale and
assignment of the Proprietary Rights and Software and the right to use the
same to Purchaser on the Date of Closing does not require any filing with,
permit from, consent or approval of, or the giving of any notice to, any
Person.
4.14 COMPLIANCE WITH LAWS. To Sellers' Knowledge, the Business has
been operated, and the assets and Sellers are in substantial compliance
with, all requirements of the Licenses, all Applicable Laws, and all
requirements of insurance carriers, and there exists no condition which
could give rise to a cancellation or nonrenewal of any insurance coverage or
License. Neither of the Sellers or Shareholders has notice of any presently
existing circumstances which are likely to result in any violation of a
material nature of any Applicable Laws respecting either Seller, the Assets
or the Business, except as disclosed in writing to Purchaser by Sellers prior
to the Closing.
4.15 OPERATING CONTRACTS. Except for the Contracts set forth in
Schedule 1.2 hereto, the Operating Contracts set forth on Schedule 1.1 (g)
hereto include all Contracts, commitments, leases, licenses and other
agreements, including franchise agreements and area franchise development
agreements which relate to, arise from or are used or are necessary for the
operation of the Business. All of the Operating Contracts are valid,
binding in all material respects and currently in full force and effect, and the
performance by the parties thereto will not, individually or in the aggregate,
have a Material Adverse Effect upon either Seller or the Business. Neither
Seller has been notified of or knows of any default in any material respect
under any of the Operating Contracts, and to Sellers' Knowledge, no event has
occurred which, through the passage of time or the giving of notice, or both,
would constitute a default or give rise to a right of termination or
cancellation under any of the Operating Contracts, or cause the acceleration
of an obligation of any Sellers, or result in the creation of any Encumbrance
whatsoever upon any of the Assets, except as disclosed in writing to Purchaser
by Sellers prior to the Closing. To the best of Sellers' Knowledge, no other
party is in default under any of the Operating Contracts, nor has any event
occurred which, through the passage of time or the giving of notice, or both,
would constitute a default or give rise to a right of termination or
cancellation under any of the Operating Contracts, or cause the acceleration
of any obligation owed to or by either Seller. Except as described on
Schedule 1.1(g) hereto, none of the Operating Contracts have been canceled,
terminated, amended or modified and, to the best of Sellers' Knowledge, all
parties to such Operating Contracts are in all material respects in compliance
therewith. Except as provided in Schedule 4.3 hereto, all of the Operating
Contracts are assignable by Sellers and assumable by Purchaser without giving
advance notice to or receiving the consent or approval of any Person and any
such required notices, consents and approvals, if any, as are required shall be
given or obtained by Sellers prior to the Date of Closing.
16
4.16 REAL ESTATE. With respect to the Leased Premises:
a. Schedule 1.1(g) contains a complete and accurate description
of all leases and any modifications, extensions and amendments thereto with
respect to the Leased Premises;
▇. ▇▇▇▇▇▇▇ have not been notified of any special assessments levied or
assessed on or against any Leased Premises (or any such special assessments
shall be paid by Sellers on or before the Date of Closing);
c. To Sellers' Knowledge, there are no public improvements affecting
any Leased Premises, including, but not limited to, water, sewer, sidewalk,
street, alley, curbing, landscaping or related improvements, which have
been commenced and/or completed and for which an assessment has not been
levied or, to the best of Sellers' Knowledge, which may be levied after the
date of this Agreement. To Sellers' Knowledge, there are no planned public
improvement which may result in an assessment against or otherwise
materially affect any Leased Premises;
d. There are no condemnation Proceedings pending or, to the best of
Sellers' Knowledge, Threatened with respect to all or any part of any
Leased Premises which are likely to adversely affect the Purchaser's
occupancy of such Leased Premises or the operation of the Business therein
by the Purchaser after the Closing;
e. Except as set forth in the leases for the Leased Premises, to
Sellers' Knowledge, there are no private restrictions, covenants,
reservations or agreements which affect the use or occupancy of any Leased
Premises;
f. To Sellers' Knowledge, there are no Applicable Laws issued,
enacted, entered or deemed applicable by any Governmental Body requiring
repair, alteration or correction of any existing condition on any Leased
Premises and there are no conditions that could give rise to the same;
g. To Sellers' Knowledge, there are no structural, mechanical or
other defects of material significance in any of the buildings,
improvements, fixtures and equipment, including the roof, heating,
ventilating, air conditioning, electrical, plumbing and sanitary disposal
systems, located on any Leased Premises which are likely to adversely
affect the Purchaser's occupancy of such Leased Premises or the operation
of the Business therein by the Purchaser after the Closing. To Sellers'
knowledge, all such Leased Premises, including the leasehold improvements,
fixtures, equipment, roof, and heating, ventilating, air conditioning,
electrical, plumbing and sanitary disposal systems, have been and will be
until the Date of Closing maintained in good repair, working order and
condition;
h. To Sellers' Knowledge, each of the Leased Premises has direct
legal access to, abuts, and is served by a publicly dedicated and
maintained road, which road
17
provides a valid means of ingress and egress to and from each Leased
Premises, without additional cost or expense to Purchaser, and to the best
of Sellers' Knowledge, there are no applications, ordinances, petitions,
resolutions or other matters pending before any Governmental Body in regard
to access routes, curb cuts, median strips, or other contemplated actions
which might tend to diminish or curtail the full flow of traffic by any
Leased Premises or access thereto; and
i. To Sellers' Knowledge, all utilities, including water, gas,
telephone, sanitary and storm sewers are currently available to each Leased
Premises at normal and customary rates.
4.17 RECEIVABLES. All accounts receivable of the Sellers that are
reflected on the Balance Sheets (collectively, the "Accounts Receivable")
represent, or will represent, valid obligations arising from sales actually made
or services actually performed in the Ordinary Course of Business. Unless paid
prior to the Date of Closing, to Sellers' Knowledge, the Accounts Receivable are
or will be as of the Date of Closing current and collectible net of the
respective reserves shown on the Closing Balance Sheet (which reserves are
reasonably adequate and calculated consistent with past practice and will not
represent a materially greater percentage of the Accounts Receivable as of the
Date of Closing than the reserve reflected in the Opening Balance Sheet with
respect to the Accounts Receivable reflected therein), the Accounts Receivable
reflected on the Closing Balance Sheet will not represent a material adverse
change in the composition of such Accounts Receivable in terms of aging from
those reflected in the Opening Balance Sheet. To the best of Sellers' Knowledge,
there is no contest, claim, or right of set-off in any Contract with any maker
of an Accounts Receivable, relating to the amount or validity of such Accounts
Receivable, except as disclosed on Schedule 4.6.
4.18 BOOKS AND RECORDS. All of Sellers' books of account and other
financial and corporate records relating to the Business have been made
available to Purchaser and its representatives (or will be so made available
prior to the Date of Closing). Such books of account and records are current,
complete, true and correct in all material respects and reflect in all material
respects all items of income and expense with respect to the Business and all
assets, liabilities and accruals with respect to the Business in accordance
with GAAP, consistently applied. To Sellers' Knowledge, Sellers have filed
all reports relating to the Business required by any and all Applicable Laws
to be filed, except for any failures or delinquencies in reporting which will
not have a Material Adverse Effect on the Business or the Sellers.
4.19 EMPLOYEES. Schedule 4.19 hereto contains a complete and accurate
list of the following information for each employee of the Sellers, including
each employee on leave of absence or layoff status: employer, name, job title,
current compensation paid or payable and any change in compensation since
January 1, 1995, vacation and sick leave accrued, and hire
18
date for purposes of determining vesting and eligibility to participate
under each Scheduled Plan. No current or former officer or director of
either Seller and, to the best of Sellers' Knowledge, no other current or
former employee of either Seller is a party to, or is otherwise bound by,
any agreement or arrangement, including any confidentiality, non-competition,
proprietary rights or other agreement, between such employee or officer of
director and any other Person ("Proprietary Rights Agreement") that in any way
materially adversely affected, affects, or will affect (i) the performance of
his or her duties as an employee or officer or director of either Seller, or
(ii) the ability of either Seller to conduct its business, including any
Proprietary Rights Agreement with either Seller by any such employee or
director.
4.20 LICENSES AND PERMITS. Sellers have obtained all licenses,
certificates, franchises, permits, consents and approvals of each and every
Governmental Body having jurisdiction over either Seller or any of its
respective properties assets or business necessary or appropriate to own
the Assets and to operate and carry on the Business as it is now being
conducted, except where the failure to do so would not have a Material Adverse
Effect on the Business or the Sellers. All such licenses, certificates,
franchises, permits, consents and approvals are described on Schedule 1.1(h)
hereto and are valid and in full force and effect.
4.21 SUFFICIENCY OF ASSETS. The Assets to be transferred by Sellers
to Purchaser on the Date of Closing will include all assets, whether owned or
leased, including intangible assets, properties, franchises, licenses, permits,
Contracts, operations and business that relate to, arise from, are used or held
by Sellers for the operation of the Business as presently operated by the
Sellers, except for the Excluded Assets. The instruments and documents to be
executed and/or delivered by Sellers to Purchaser pursuant to Section 11.2
hereof at or following the Closing shall be adequate and sufficient to vest in
Purchaser all of Sellers' rights, titles and interests in or to the Assets.
4.22 OTHER MATERIAL CONTRACTS AND OBLIGATIONS. Except for the
Operating Contracts, non-assignable insurance policies and the Contracts
disclosed on Schedule 4.22 hereto or in the financial statement or notes
thereto listed on Schedule 4.11 hereto, neither Seller is a party to or bound
by any Contract relating to the Business, including any:
a. Dealer, distributorship, franchise brokerage, or sales
agency agreements, excluding purchase orders with respect to the purchase
or sale of products or services in the Ordinary Course of Business;
b. Advertising Contracts;
c. Contract, commitment or arrangement for capital expenditures
having a remaining balance in excess of $25,000;
d. Leases with respect to any property, real or personal,
whether as lessor or lessee;
19
e. Contract containing covenants by any Seller not to compete
in any lines of business or with any Person, except for territorial
protections contained in Sellers' franchise agreements and area development
agreements listed on Schedule 1.1(g) hereto;
f. Franchise, license or area development agreements;
g. Guarantees;
h. Contract or purchase order for the purchase of any
services, raw materials, supplies or equipment involving payments of more
than $10,000 per annum or an aggregate of more than $25,000, excluding
purchase orders for the purchase of products or services entered into in
the Ordinary Course of Business; or
i. Contract for the sale of any properties, assets or services
involving a value estimated at more than $25,000, excluding purchase orders
for the sale of products or services in the Ordinary Course of Business.
4.23 SHAREHOLDERS. The Shareholders are the holders of all of the
issued and outstanding shares of each and every class and series of capital
stock of Sellers. There are no outstanding subscriptions, warrants, options,
agreements, convertible securities or other commitments pursuant to which
either Seller is or may be obligated to issue any shares of any class or series
of its capital stock or other securities to any other Person.
4.24 SUBSIDIARIES. Neither Seller has any subsidiaries or owns any
shares of stock or other securities or interests, directly or indirectly, in
any other Person. Neither Seller is subject to any obligation or requirement
to provide funds to, or invest in, any such Person.
4.25 PRODUCTS LIABILITY CLAIMS. All products which either Seller has
sold through the Business have been merchantable, free from defects and, where
applicable, fit for human consumption. Except as set forth on Schedule 4.25
hereto, during the last three (3) years neither Seller has received a claim
based upon an alleged breach of product warranty or defective product, arising
from such Seller's manufacture or sale of its products (hereafter collectively
referred to as "Product Liability Claims"). Sellers have no reasonable grounds
to believe that future Product Liability Claims with respect to products of any
Seller sold through the Business on or before the Date of Closing will be
different from such Sellers' past experience with respect thereto as set forth
herein.
4.26 INSURANCE. Schedule 4.26 hereto contains a complete and accurate
list of all insurance policies (including "self-insurance" programs) now
maintained by either Seller (the "Insurance Policies"). The Insurance Policies
are in full force and effect, neither Seller has notice that it is in default
under any Insurance Policy, and no claim for coverage under any Insurance
Policy has been denied. All of the Insurance Policies will be maintained in
full force and effect until the Date of Closing except for cancellations or
possible cancellations which do not, and insofar as reasonably can be foreseen
in the future, will not have a Material Adverse
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Effect on either Seller or the Purchaser. To Sellers' Knowledge, the Insurance
Policies are reasonably prudent and adequate for the business of the Sellers.
Sellers have promptly and adequately notified Sellers' insurance carriers of any
and all claims known to Sellers with respect to the operations or products of
Sellers for which Sellers are insured. Sellers have not been refused any
insurance coverage by any insurance carrier to which it has applied for
insurance during the past three (3) years with respect to the Assets or the
Business.
4.27 BROKERS. Except as set forth in Schedule 4.27 hereto, neither Sellers
nor Shareholders have employed or engaged any broker, finder, agent, banker or
third party, or otherwise dealt with anyone purporting to act in the capacity of
a finder or broker in connection with the transactions contemplated hereby.
Except as set forth in Schedule 4.27 hereto, no commissions, finder's fees or
like charges have been or will be incurred in connection with the execution and
delivery of this Agreement or the consummation of the transactions contemplated
hereby.
4.28 CERTAIN PAYMENTS. Neither of the Sellers nor any of their respective
directors or officers, and, to the best of Sellers' Knowledge, no other member
of management, no other agents, employees or any other Person associated with or
acting for or on behalf of either of the Sellers, has directly or indirectly (a)
made any contribution, gift, bribe, rebate, payoff, influence payment, kickback,
or other payment to any Person, private or public, regardless of form, whether
in money, property, or services (i) to obtain favorable treatment in securing
business, (ii) to pay for favorable treatment for business secured, (iii) to
obtain special concessions or for special concessions already obtained, for or
in respect of either Seller or any affiliate of the Sellers, or (iv) in
violation of any Applicable Laws, or (b) established or maintained any fund or
asset that has not been recorded in the books and records of the Sellers.
4.29 RELATIONSHIP WITH RELATED PERSONS. The shareholders, directors,
officers, and employees of the Sellers and their Related Persons (as hereinafter
defined) do not have any interest in any of the assets of the Sellers and, to
the best of Sellers' Knowledge, do not own, of record or as a beneficial owner,
an equity interest or any other financial or profit interest in any Person that
has had business dealings or a material financial interest in any transaction
with either Seller. Neither the Shareholders nor any of the executive officers
of Sellers have engaged or are engaged in competition with either Seller with
respect to any line of products or services of either Seller (a "Competing
Business") in any market presently served by either Seller or the Purchaser. No
shareholder or director of either Seller and none of their Related Persons is a
party to any Contract with, or has any claim or right against, the Sellers. All
money owed by the Sellers to the Shareholders or directors or their Related
Persons (other than for salary) are for bona fide debts, are set forth in
Schedule 4.29 hereto and will be reflected on the Closing Balance Sheet.
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4.30 Inventory. All inventory of the Sellers, as set forth on the Balance
Sheets, consists of a quality and quantity usable and salable at customary
prices in the Ordinary Course of Business, except for obsolete items and items
of below-standard quality, all of which have been written off or written down to
net realizable value in the Balance Sheets. All inventories not written off have
been priced at the lower of cost or market, in accordance with GAAP. The
quantities of each item of inventory (whether raw materials, work-in-process, or
finished goods) are not excessive but are reasonable in the present
circumstances of the Sellers. To Sellers' Knowledge, all work-in-process and
finished goods inventory is free of any materials defect or other material
deficiency.
4.31 Private Placement Memorandum. The information supplied by the Sellers
and Shareholders in writing for inclusion in the offering memorandum (the
"Private Placement Memorandum") for an offering (the "Offering") of securities
of BAB Holdings, Inc. for the purpose of financing the Purchase Price, among
other corporate purposes, shall not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein not misleading. If, at any
time prior to the closing of the Offering being made pursuant to the Private
Placement Memorandum, any event relating to either Seller, or any of their
respective affiliates, officers, or directors should be discovered by the
Sellers and Shareholders which should be set forth in an amendment to the
Private Placement Memorandum, the Sellers shall immediately inform Purchaser in
writing.
4.32 Environmental Matters. To the best of Sellers' Knowledge:
a. Neither Seller has ever generated, transported, treated, stored,
disposed, or otherwise handled any Hazardous Material at any site,
location, or facility in connection with the Assets, including the
Business, or its Leased Premises and neither Seller has notice in writing
that such Hazardous Materials are present on, in, under or near any Leased
Premises used in connection with the Business.
b. Each Seller is (i) in compliance with all applicable
Environmental and Safety Requirements (as hereinafter defined), and (ii)
possess all required permits, licenses, certifications, and approvals and
has filed all notices or applications required thereby or pertaining
thereto.
c. Neither Seller has ever received any notice (written or oral) of
any private, administrative, or judicial inquiry, investigation, order, or
action, or any notice (written or oral) or any intended or Threatened
private, administrative, or judicial inquiry, investigation, order, or
action relating to the presence, or alleged presence, of Hazardous
Materials on, in, under, or near any Leased Premises, and to Sellers'
Knowledge, there is no reasonable basis for any such inquiry,
investigation, order, action, or notice; and Sellers have no notice of any
pending or Threatened investigations, actions, orders, or
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Proceedings (or notices of potential investigations, actions, orders, or
Proceedings) from any Governmental Body, or any other Person, regarding any
matter relating to Environmental and Safety Requirements.
d. No facts, events, or conditions with respect to the past or
present operations or facilities of either Seller exist which could
reasonably be expected to interfere with, or prevent continued compliance
with, or could give rise to, any common law or statutory liability or
otherwise form the basis of any claim, action, suit, Proceeding, hearing,
or investigation against or involving the Assets, either Seller, the Leased
Premises under any Environmental and Safety Requirement, or related common
law theories based on any such fact, event, or circumstance, including,
without limitation, liability for investigation costs, cleanup costs,
personal injury, or property damage.
4.33 Franchise Operations. Except as disclosed by Sellers to Purchaser in
writing prior to Closing, to Sellers' Knowledge, Sellers have complied with all
Applicable Laws, including franchise and business opportunity laws, of every
Governmental Body, including the Federal Trade Commission (the "FTC"), in
offering and selling their "Chesapeake Bagel Bakery" franchises and area
franchises. Schedule 1.1(g) contains a complete list of all franchise
agreements, area franchise development agreements and other similar agreements
together with all amendments, modifications, renewals, extensions and addended
thereto to which either Seller is a party. The Sellers have not obtained a
federal copyright with respect to the "American Bagel's Operator Manual" and all
supplemental business manuals. Except as set forth in Schedule 4.33 hereto, no
franchisee or area franchisee of either Seller has commenced or, to the best of
Sellers' Knowledge Threatened to commence a Proceeding against either the Seller
or with respect any matter, cause or thing whatsoever. Except as set forth in
Schedule 4.33 hereto or as previously disclosed by Sellers to Purchaser in
writing prior to the execution hereof, all of the terms and conditions of all
franchises and all area franchises to which either Seller is a party are
contained in a written document identified on Schedule 1.1(g) hereto, and,
except as set forth in such Schedule, no such term or condition has been waived
by either Seller. Each jurisdiction in which Sellers have registered its
franchises and/or area franchises for offer and sale is listed on Schedule 4.33
hereto together with any conditions to registration imposed by any such
jurisdiction. Schedule 4.33 sets forth a description of all outstanding offers
by the Sellers to enter into franchise agreements and/or area franchise
development agreements which prospective franchisees and area franchisees. Such
Schedule also sets forth a description of all of franchise agreements and area
franchise development agreements terminated, canceled or revoked by the Sellers
at any time during the past three (3) years, including the respective dates of
termination or cancellation and the reasons therefor. Except as previously
disclosed by Sellers to Purchaser in writing prior to the execution hereof, the
Sellers' Franchise Offering Circulars in use in each
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jurisdiction have been maintained current in all material respects and fairly
disclose all matters required to be disclosed by Applicable Laws. Except as
otherwise disclosed by Sellers to Purchaser in writing prior to Closing, to
Sellers' Knowledge, all franchise agreements and area franchise development
agreements entered into by Sellers with their franchisees were entered into
accordance with the requirements of Applicable Laws.
ARTICLE 5: REPRESENTATIONS AND WARRANTIES OF PURCHASER
As an inducement for Sellers and Shareholders to enter into this
Agreement and consummate the transactions contemplated hereby, intending that
Sellers and Shareholders rely thereon in entering into and performing this
Agreement, Purchaser warrants and represents to Sellers and Shareholders that
each and all of the following are true and correct in all material respects as
of the date of this Agreement and will be true and correct in all material
respects at and as of the Closing:
5.1 Due Incorporation. Purchaser is a corporation duly organized, validly
existing and in good standing under the laws of the State of Illinois, and has
all requisite power and authority, corporate and otherwise, to own, operate and
lease its properties and assets and to conduct its business as it is now being
conducted. Purchaser is duly qualified to transact business as a foreign
corporation and is in good standing under the laws of every state or
jurisdiction in which the nature of its activities or of its properties owned,
leased or operated makes such qualification necessary and the failure to be so
qualified could reasonably be expected to have a Material Adverse Effect on the
Purchaser. Purchaser is not subject to any Contract which restricts or may
restrict the conduct of the Business in any jurisdiction or location except for
territorial restrictions in Purchaser's franchise and area development
agreements.
5.2 Due Authorization. The execution, delivery and performance of this
Agreement, including the documents, instruments and agreements to be executed
and/or delivered by Purchaser pursuant to this Agreement, and the consummation
of the transactions contemplated hereby and thereby have been, or will be on or
before the Date of Closing, duly and validly authorized by all necessary
corporate action on the part of Purchaser. This Agreement and the documents,
instruments and agreements to be executed by Purchaser pursuant to this
Agreement have been, or will be on or before the Date of Closing, duly and
validly authorized, executed and delivered by Purchaser and the obligations of
Purchaser hereunder and thereunder are or will be valid and legally binding, and
this Agreement and the documents, instruments and agreements to be executed and
delivered by Purchaser pursuant to this Agreement are or will be upon such
execution and delivery enforceable against Purchaser in accordance with their
respective terms, except as such enforcement may be limited by applicable
bankruptcy, reorganization, insolvency, moratorium or other similar laws
presently or hereafter in effect affecting the enforcement of
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creditors' rights generally and by general principles of equity (regardless of
whether such enforceability is considered in a proceeding at law or in equity),
including, among others, limitations on the availability of equitable remedies.
5.3 No Breach. Purchaser has full corporate power and authority to
purchase the Assets being purchased hereunder and to otherwise perform its
obligations under this Agreement and the documents, instruments and agreements
to be executed by the Purchaser pursuant hereto. The execution and delivery of
this Agreement, including the documents, instruments and agreements to be
executed by he Purchaser pursuant to this Agreement, and the consummation of the
transactions contemplated hereby and thereby will not: (i) violate any provision
of the Articles of Incorporation or Bylaws (or comparable governing documents or
instruments) of Purchaser; (ii) violate any Applicable Laws issued, enacted,
entered or deemed applicable by any Governmental Body having jurisdiction over
Purchaser or any of its properties or assets; (iii) require any filing with, or
permit, consent or approval of, or the giving of any notice to any Person; (iv)
result in a violation or breach of, or constitute (with or without due notice or
lapse of time or both) a default (or give another party any rights or
termination, cancellation or acceleration) under, any of the terms, conditions
or provisions of any note, bond, mortgage, indenture, license, franchise,
permit, lease, or Contract to which Purchaser is a party, or by which it or any
of its assets or properties may be bound; or (v) result in the creation or
imposition of any Encumbrance on any of the Purchaser's assets or properties.
5.4 Full Disclosure. No representation or warranty made by Purchaser
in this Agreement, including the documents, instruments and agreements to be
executed and/or delivered by Purchaser pursuant to this Agreement, and no
statement, certificate or other document or instrument furnished or to be
furnished to Sellers pursuant to this Agreement or in connection with the
consummation of the transactions contemplated hereby, contains or will contain
any untrue statement of a material fact or omits or will omit to state a
material fact necessary to make the statements contained herein and therein not
misleading. Purchaser has not knowingly failed to fully disclose to Sellers and
Shareholders facts or information known to it that reasonably could be expected
to have a Material Adverse Effect on the business of BAB Holdings, Inc.
5.5 Brokers. Except as disclosed on Schedule 5.5 hereto, Purchaser
has not employed or engaged any broker, finder, agent, investment banker or
third party nor has it otherwise dealt with anyone purporting to act in the
capacity of a finder or broker, in connection with the transactions contemplated
hereby. Except as disclosed in Schedule 5.5 hereto, no commissions, finder's
fees or like charges have been or will be incurred in connection with the
execution and delivery of this Agreement of the consummation of the transactions
contemplated hereby.
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5.6 BAB Shares. The BAB Shares to be issued and delivered to the Sellers
at the Closing, at the time said BAB Shares are issued and delivered, will be
duly authorized, valid issued, fully paid and nonassessable and Sellers shall
receive good title thereto free and clear of any Encumbrances of any nature
whatsoever.
5.7 Securities Laws Filings. Purchaser has made all filings required under
applicable securities laws. As of their respective dates, all such filings
complied in all material respects with applicable securities law requirements
and did not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein necessary to make the statements
therein, in light of the circumstances in which they were made, not misleading.
5.8 Compliance with Laws. To Purchaser's Knowledge, the business of
Purchaser has been operated in substantial compliance with all requirements of
insurance carriers, the terms of applicable licenses and all Applicable Laws,
and Purchaser has not received any notice of, or has no reason to anticipate
that any presently existing circumstances are likely to result in, any violation
of a material nature of any applicable laws respecting the existing business of
Purchaser as of the date of this Agreement.
5.9 Licenses and Permits. Purchaser has obtained all licenses,
certificates, franchises, permits, consents and approvals of each and every
Governmental Body having jurisdiction over Purchaser or any of its respective
properties, assets or business necessary or appropriate to own its assets and to
operate and carry on its business as it is now being conducted, except where
failure to do so would not have a Material Adverse Effect upon the business of
Purchaser.
ARTICLE 6: PERFORMANCE BY SELLERS AND SHAREHOLDERS PENDING CLOSING
Sellers and Shareholders, jointly and severally, covenant and agree that
from and after the date of this Agreement and until the earlier of Date of
Closing or the termination of this Agreement in accordance with Article 14
hereof:
6.1 Access to Information. At the request of Purchaser, Sellers shall,
from time to time, give or cause to be given to Purchaser, its officers,
employees, counsel, accountants, investment bankers and other representatives,
upon reasonable notice to Sellers, full and prompt access during normal business
hours to the Business, the Assets and all of the books, minute book, title
papers, records, files, Contracts, insurance policies, Licenses and documents of
every character of Sellers relating to the Business and Sellers shall promptly
furnish or cause to be furnished to Purchaser, its officers, employees, counsel,
accountants, investment bankers and other representatives all of the information
with respect to the Sellers, the Business and/or Assets as any of them may
reasonably request. Purchaser, its officers, employees, counsel, accountants,
26
investment bankers and other representatives shall have the authority to
interview all employees, customers, vendors, suppliers, franchisees and other
Persons having relationships with either Seller and/or the Business, and Sellers
shall make such introductions as may be reasonably requested. In addition,
Purchaser may, at its sole cost and expense, at any time prior to the Date of
Closing, through its officers, employees, counsel, accountants, investment
bankers and other representatives, conduct such investigations and examinations
of the Assets and/or Business as it deems necessary or advisable, and Sellers
will cooperate fully and reasonably in such investigations.
6.2 Business As Usual. Sellers shall carry on the Business diligently,
only in the usual and ordinary course and substantially in the same manner as
heretofore conducted and will keep and maintain the Assets in good and safe
repair and condition consistent with past practices.
6.3 Encumbrances. Sellers shall not, directly or indirectly, perform or
fail to perform any act which might reasonably be expected to result in the
creation or imposition of any Encumbrance whatsoever on any of the Assets, other
than in the Ordinary Course of Business, or otherwise adversely effect the
marketability of the Sellers' title to any of the Assets.
6.4 Pay Increases. Sellers shall not, without the prior written consent of
Purchaser, grant any general or uniform increase in the salaries or rate of pay
to their respective employees, grant any increase any benefits or establish,
adopt, enter into, make any new grants or awards under, or amend any collective
bargaining, employment, bonus, stock option, restricted stock, stock purchase,
profit-sharing, deferred compensation, severance, pension, retirement,
disability, medical, dental, health or life insurance, death benefit, incentive
or other compensation or retirement plan, arrangement, agreement, trust, fund,
policy or arrangement for the benefit of their respective employees, other than
in the Ordinary Course of Business; provided that no pay increases or increases
in benefits, as described above, shall be granted to the Shareholders, except as
permitted under Section 6.21 hereof.
6.5 Restrictions on New Contracts. Except with respect to the New Store,
as previously disclosed in writing by Sellers to Purchaser, Sellers shall not
enter into any Contract, incur any liability, absolute or contingent, assume,
guarantee or otherwise become liable or responsible for the obligations of any
other Person, make any loans, advances or capital contributions to any other
Person (except for extensions of credit to its customers in the Ordinary Course
of Business), or waive any right or enter into any other transaction, in each
case other than in the usual and Ordinary Course of Business and consistent with
Sellers, normal business practices.
6.6 Preservation of Business. Sellers shall use their respective best
efforts to preserve their respective business organizations intact, to keep
available to Purchaser the present employees of Sellers and to preserve for
Purchaser the Business and the present goodwill and
27
relationship of Sellers with their respective vendors, suppliers, customers,
franchisees and others having business relationships with the Business.
6.7 PAYMENT AND PERFORMANCE OF OBLIGATIONS. Sellers will timely pay and
discharge all invoices, bills and other monetary obligations and shall not
perform or fail to perform any act which will cause a material breach of any of
the Operating Contracts.
6.8 RESTRICTIONS ON SALE OF ASSETS. Sellers shall not sell, assign,
transfer, lease, sublease, pledge or otherwise encumber or dispose of any of the
properties or assets of the Business, except for the sale of inventory in the
Ordinary Course of Business and at regular prices. Without limiting the
generality of the foregoing, Sellers shall not permit any of the Proprietary
Rights to lapse or dispose of or otherwise lose the right to use any of the
Proprietary Rights. Notwithstanding the foregoing provisions of this Section to
the contrary, Almike may, with the prior written consent of the Purchaser, sell
up to five (5) of its company-owned Chesapeake Bagel Bakery stores, which
consent shall not be unreasonably withheld, provided that the proceeds of such
sales are included in the Assets purchased by Purchaser.
6.9 PROMPT NOTICE. Sellers shall promptly notify Purchaser in writing
upon becoming aware of any of the following: (i) any investigation, claim,
demand, action, suit or other Proceeding that may be brought, threatened,
asserted or commenced against either Seller, its officers or directors involving
in any way the Sellers, the Business or the Assets, (ii) any changes in accuracy
of the representations and warranties made by Sellers and/or Shareholders in
this Agreement, (iii) any order or decree or any complaint praying for an order
or decree restraining or enjoining the consummation of the transactions
contemplated hereby, or (iv) any notice from any Governmental Body of its
intention to institute an investigation into, or institute a Proceeding to
restrain or enjoin the consummation of the transactions contemplated hereby or
to nullify or render in effective this Agreement or such transactions if
consummated.
6.10 CONSENTS. As soon as reasonably practicable and in any event on or
before the Date of Closing, Sellers will obtain or cause to be obtained all of
the consents and approvals of all Persons necessary to assign and transfer to
the Purchaser of all of the Assets, including the Operating Contracts, Licenses
and Software, herein provided to be sold, assigned and transferred to Purchaser,
including the consents and approvals listed on Schedule 4.3 hereto.
6.11 COPIES OF DOCUMENTS. Sellers agree that as soon as reasonably
possible following the execution hereof, they shall furnish Purchaser with a
true, complete and accurate copy of each Operating Contract and any additional
Contract listed on Schedule 4.22 hereto; provided, however, the Sellers shall
not be required to furnish Purchaser with copies of all of their franchise
agreements but, rather, such agreements shall be made available for review and
inspection by Purchaser and its attorneys and other representatives.
28
6.12 NO SOLICITATION OF OTHER OFFERS. The Sellers and Shareholders will
not, and will not permit their respective directors, officers, employees,
representatives, investment bankers, agents and affiliates to, directly or
indirectly, (i) solicit or encourage submission or any inquiries, proposals or
offers by, (ii) participate in any negotiations with, (iii) afford any access to
the properties, books or records of either Seller to, (iv) accept or approve, or
(v) otherwise assist, facilitate or encourage, or enter into any agreement or
understanding with, any Person or group (other than Purchaser and its
Affiliates, agents and representatives), in connection with any Acquisition
Proposal (as hereinafter defined). In addition, from and after the date of this
Agreement until the Date of Closing or the earlier termination of this Agreement
in accordance with its terms, the Sellers and Shareholders will not, and will
not permit their respective directors, officers, employees, representatives,
investment bankers, agents and affiliates to, directly or indirectly, make or
authorize any statement, recommendation or solicitation in support of any
Acquisition Proposal made by any Person or group (other than Purchaser). The
Sellers and Shareholders will immediately cease all existing activities,
discussions or negotiations with any parties conducted heretofore with respect
to any of the foregoing.
6.13 INVENTORY. Sellers shall maintain the levels of inventory, materials
and supplies used in the Business consistent with past practice.
6.14 INSURANCE. Sellers will maintain in full force and effect all
insurance coverages for the Assets substantially comparable to coverages
existing on the date hereof.
6.15 FILING REPORTS AND MAKING PAYMENTS. Sellers shall timely file all
required reports and notices with each and every applicable Governmental Body
and timely make all payments due and owing to each such Governmental Body,
including, but not by way of limitation, any filings, notices and/or payments
required by reason of the transactions contemplated by this Agreement.
6.16 CAPITAL EXPENDITURES. Sellers shall not make any capital
expenditures in excess of $10,000 individually or $25,000 in the aggregate
without the Purchaser's prior written consent which will not be unreasonably
withheld or delayed. Notwithstanding the foregoing provisions of this Section
to the contrary, Almike may, with the prior written consent of the Purchaser,
open up to three (3) new company-owned Chesapeake Bagel Bakery stores, which
consent shall not be unreasonably withheld, provided that Purchaser shall be
fully apprised of the terms of financing of such stores.
6.17 MONTHLY FINANCIALS. Within fifteen (15) days of the close of each
month, Sellers shall deliver to Purchaser a balance sheet and income statement
for each Seller disclosing the financial position and results of operations of
each Seller for the preceding month and year-to-date which shall be prepared on
a basis consistent with the Sellers' internally generated financial statements
for the prior months. In addition, within fifteen (15) days of the close of
each
29
calendar quarter, Seller shall deliver to Purchaser a combined balance sheet and
income statement for Sellers disclosing the financial position and results of
operations of Sellers for the preceding quarter and year to date which shall be
prepared in accordance with GAAP and on a basis consistent with the quarterly
financial statements identified on Schedule 4.11 hereof; provided, however, that
such quarterly financial statements do not need to contain the footnotes
required by GAAP and such financial statements may be subject to ordinary
year-end adjustments.
6.18 COBRA. Sellers shall at their sole cost and expense supply their
respective employees employed in the operation of the Business with any and all
notices and other information with respect to such employees' rights to continue
their health and other insurance upon the termination of their employment upon
consummation of the transactions contemplated hereby, all in accordance with all
Applicable Laws.
6.19 CASH ON HAND. Sellers shall cause their aggregate cash on hand and
on deposit as of the Date of Closing to equal or exceed the sum of Five Hundred
Thousand and no/100 Dollars ($500,000.00) or the Purchase Price shall be reduced
as provided in Section 2.1 hereof.
6.20 LIMITATION ON TRANSACTIONS IN PURCHASERS' SECURITIES. Neither
Sellers nor any of their respective officers, directors, Shareholders or
employees shall acquire or dispose of, nor shall they permit any of their
respective affiliates to acquire or dispose of, directly or indirectly, any
interest in or right to acquire any securities of Purchaser, except for
distribution of the BAB Shares upon liquidation of Sellers.
6.21 DIVIDENDS. Neither Seller shall pay any dividend or make any
distribution with respect to any class or series of its capital stock; provided,
however, that notwithstanding the foregoing, the Sellers may make pro rata
distributions of money with respect to the Sellers' issued and outstanding
shares of capital stock to the Shareholders sufficient to enable the
Shareholders to pay the federal and state income taxes on the income that passes
through from the Sellers under Section 1366 of the Code net of any tax benefit
produced by losses, deductions and credits that pass through under Section 1366
of the Code and compensation in amounts not in excess of amounts distributed as
compensation in the past fiscal year.
ARTICLE 7: PERFORMANCE BY PURCHASER PENDING CLOSING
Purchaser covenants and agrees that from and after the date of this
Agreement and until the earlier of Date of Closing or the termination of this
Agreement in accordance with Article 14 hereof:
7.1 ACCESS TO INFORMATION. At the request of Sellers, Purchaser shall,
from time to time, give or cause to be given to Sellers, its officers,
employees, counsel, accountants, investment bankers and other representatives,
upon reasonable notice to Purchaser, full and
30
prompt access during normal business hours to minute books, title papers,
records, files, contracts, insurance policies, licenses and documents of every
character of Purchaser relating to its business to the extent such documents and
information would be available for inspection by shareholders of Purchaser under
applicable state corporation law, and Purchaser shall promptly furnish or cause
to be furnished to Sellers, their officers, counsel, accountants, and other
representatives such information with respect to the Purchaser and its business
as they may reasonably request; provided however, that nothing contained herein
shall require Purchaser to disclose information not publicly available to
shareholders, generally.
7.2 Business As Usual. Purchaser shall carry on its business diligently,
only in the usual and ordinary course and substantially in the same manner as
heretofore conducted and will keep and maintain its assets in good and safe
repair and condition consistent with past practices.
7.3 Preservation of Business. Purchaser shall use its best efforts to
preserve its present goodwill and relationship of Purchaser with its vendors,
suppliers, customers, franchisees and others having business relationships with
its business.
7.4 Prompt Notice. Purchaser shall promptly notify Sellers in writing
upon becoming aware of any of the following: (i) any investigation, claim,
demand, action, suit or other Proceeding that may be brought, threatened,
asserted or commenced against Purchaser, its officers or directors involving in
any way the Purchaser, provided that notice shall not be required prior to
public dissemination of such information, (ii) any changes in accuracy of the
representations and warranties made by Purchaser in this Agreement, (iii) any
order or decree or any complaint praying for an order or decree restraining or
enjoining the consummation of the transactions contemplated hereby, or (iv) any
notice from any Governmental Body of its intention to institute an investigation
into, or institute a Proceeding to restrain or enjoin the consummation of the
transactions contemplated hereby or to nullify or render ineffective this
Agreement or such transactions if consummated.
7.5 Insurance. Purchaser will maintain in full force and effect all
insurance coverages for its assets substantially comparable to coverages
existing on the date hereof. Purchaser shall cause Sellers to be added as
additional insured parties in any insurance policies covering product liability
for the Assets, for a period of two (2) years following the Date of Closing,
provided that Sellers shall pay any premium and any deductible associated with
such coverage.
7.6 Filing Reports and Making Payments. Purchaser shall timely file all
required reports and notices with each and every applicable Governmental Body
and timely make all payments due and owing to each such Governmental Body,
including, but not by way of limitation, any filings, notices and/or payments
required by reason of the transactions contemplated by this Agreement.
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ARTICLE 8: SECURITIES DISCLOSURES REGARDING BAB SHARES
8.1 UNREGISTERED SHARES; RESTRICTIONS ON TRANSFER. The Sellers and
Shareholders understand, acknowledge, represent and agree with the following
respect the BAB Shares:
(a) The BAB Shares have not been registered under the Securities Act
(as hereinafter defined) or any state securities law and Buyer is relying
upon exemptions from such registration in connection with the issuance of
the BAB Shares to the Sellers and/or the Shareholders.
(b) The Sellers and/or the Shareholders are acquiring the BAB Shares
for their own account for investment, with no present intention of
distributing, reselling, pledging or otherwise disposing of its interest in
the BAB Shares.
(c) The Sellers and/or the Shareholders have been provided with
access to all information with respect to the Purchaser and its business
(including the opportunity to meet with the Purchaser's officers, to
request additional information regarding Buyer's financial condition,
properties, management and material contracts, and ask questions of them),
and have utilized such access to make an informed decision to acquire the
BAB Shares.
(d) The Sellers and/or the Shareholders may not sell the BAB Shares
unless they are registered under the Securities Act and applicable state
securities laws or pursuant to an applicable exemption from such
registration requirements. Even if such shares are so registered or if
exemption from registration is available, there can be no assurance that
there will be a market for these shares.
(e) Any certificate representing the BAB Shares will bear a legend in
substantially the following form:
The securities evidenced by this certificate have not been registered
either under applicable federal law and rules or applicable state law
and rules. No sale, offer to sell, or transfer of these securities
may be made unless a registration statement under the Securities Act
of 1933, as amended, and any applicable state law with respect to such
securities is then in effect or an exemption from the registration
requirements of such laws is then, in fact, applicable to such
securities.
ARTICLE 9: CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATIONS
Unless waived by Purchaser in writing, each and every obligation of
Purchaser to be performed at the Closing shall be subject to the satisfaction at
or prior thereto of each and all of the following conditions precedent:
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9.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties made by Sellers and/or Shareholders in this Agreement, including the
documents, instruments and agreements to be executed and/or delivered by any of
the Sellers and/or Shareholders pursuant to this Agreement, shall be true and
correct in all material respects at and as of the Closing with the same force
and effect as though such representations and warranties had been made or given
at and as of the Closing.
9.2 COMPLIANCE WITH COVENANTS AND AGREEMENTS. Sellers and/or Shareholders
shall have performed and complied in all material respects with all of
its/his/their covenants, agreements and obligations under this Agreement which
are to be performed or complied with by it/him/them at or prior to the Closing,
including the execution and/or delivery of the documents, instruments and
agreement specified in Section 12.2 hereof or in such documents, instruments and
agreements, all of which shall be reasonably satisfactory in form and substance
to counsel for Purchaser.
9.3 NO ADVERSE CHANGE. As of the Date of Closing, nothing shall have
occurred which could, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect upon either Seller or the ability of either
Seller to conduct the Business on the same basis with the same earning power as
in the past.
9.4 PROCEEDINGS. Except for the proceedings of which Sellers have advised
Purchaser in writing prior to the execution of this Agreement, the obligations
of Purchaser under this Agreement are subject to there being no (i) proceedings
which have been brought, asserted, commenced or Threatened against the Purchaser
or either Seller by any Person involving or affecting in any way the Sellers,
the Business, the Assets, this Agreement or the consummation of the transactions
contemplated hereby, or (ii) Applicable Laws restraining or enjoining or which
may reasonably be expected to nullify or render ineffective this Agreement or
the consummation of the transactions contemplated hereby or which otherwise
could reasonably be expected to have a Material Adverse Effect on either Seller
or the Purchaser.
9.5 CONSENTS AND APPROVALS. All consents, waivers, releases,
authorizations, approvals, licenses, certificates, permits and franchises of
each Person as may be necessary to consummate the transactions contemplated by
this Agreement and for the Purchaser to carry on and continue the Business as it
is now conducted by Sellers shall have been obtained.
9.6 THE OFFERING. The Offering made pursuant to the Private Placement
Memorandum and/or other financing arranged by Purchaser, shall have closed with
the Purchaser receiving aggregate net proceeds of not less than Twenty-Five
Million and no/100 Dollars ($25,000,000).
9.7 FINANCIAL STATEMENTS. Sellers shall, at their expense, cause the
Auditor to promptly prepare, audit where necessary, issue an unqualified opinion
on, and deliver to
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Purchaser all financial statements and related financial information with
respect to the Sellers which the Purchaser may require for inclusion in the
Private Placement Memorandum. All such financial statements shall be prepared
in accordance with GAAP, consistently applied, and shall satisfy applicable
requirements under the Securities Act and the Exchange Act (as hereinafter
defined) in connection with the on-going periodic reporting requirements imposed
on Purchaser by Applicable Laws.
9.8 EMPLOYMENT CONTRACTS. Purchaser shall have reached Contracts of
continued employment or other arrangements reasonably satisfactory to Purchaser
with those current key employees of Sellers as Purchaser deems in its reasonable
discretion to be helpful or necessary in the continued operation of the Business
after the Closing.
9.9 DUE AUTHORIZATION. The execution and delivery of this Agreement,
including the documents, instruments and agreement to be executed and/or
delivered by Purchaser pursuant hereto and thereto, and the consummation of the
transactions contemplated hereby and thereby shall have been duly and validly
authorized by resolution of the Board of Directors of Purchaser and any other
necessary corporate action on the part of Purchaser; provided, however, unless
the Purchaser notifies the Sellers within thirty (30) days of the date of this
Agreement that the execution and delivery of this Agreement has not been
approved, this condition precedent shall be deemed to have been waived.
ARTICLE 10: CONDITIONS PRECEDENT TO SELLERS' AND SHAREHOLDERS' OBLIGATIONS
Unless waived by Sellers and Shareholders in writing, each and every
obligation of Sellers and Shareholders to be performed at the Closing shall be
subject to the satisfaction at or prior thereto of each and all of the following
conditions precedent:
10.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties made by Purchaser in this Agreement, including the documents,
instruments and agreements to be executed and/or delivered by Purchaser pursuant
to this Agreement, shall be true and correct in all material respects at and as
of the Closing with the same force and effect as though such representations and
warranties had been made or given at and as of the Closing.
10.2 COMPLIANCE WITH COVENANTS AND AGREEMENTS. Purchaser shall have
performed and complied in all material respects with all of its covenants,
agreements and obligations under this Agreement which are to be performed or
complied with by it at or prior to the Closing, including the execution and/or
delivery of the documents, instruments and agreements specified in Section 12.3
hereof or in such documents, instruments and agreements, all of which shall be
reasonably satisfactory in form and substance to counsel for Sellers.
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10.3 REGISTRATION RIGHTS. The Purchaser shall have granted the
Shareholders registration rights with respect to the BAB Shares by entering into
a Registration Rights Agreement with the Sellers at the Closing in substantially
the form of Exhibit C hereto (the "Registration Rights Agreement").
10.4 NO ADVERSE CHANGE. As of the Date of Closing, nothing shall have
occurred which could, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect upon the ability of Purchaser to conduct the
Business.
10.5 PROCEEDINGS. The obligations of Sellers and the Shareholders under
this Agreement are subject to there being no (i) proceedings which have been
brought, asserted, commenced or threatened against the Purchaser by any Person
involving or affecting this Agreement or the consummation of the transactions
contemplated hereby, or (ii) Applicable Laws restraining or enjoining or which
may reasonably be expected to nullify or render ineffective this Agreement or
the consummation of the transactions contemplated hereby or which otherwise
could reasonably be expected to have a Material Adverse Effect on the Purchaser.
10.6 CONSENTS AND APPROVALS. All consents, waivers, releases,
authorizations, approvals, licenses, certificates, permits and franchises of
each Person as may be necessary for Purchaser to consummate the transactions
contemplated by this Agreement and for the Purchaser to carry on and continue
the Business shall have been obtained.
10.7 THE OFFERING. The Offering, pursuant to the Private Placement
Memorandum, and/or other financing arranged by Purchaser shall have closed with
the Purchaser receiving aggregate net proceeds of not less than Twenty Five
Million and no/100 Dollars ($25,000,000.00).
ARTICLE 11: INDEMNIFICATION
11.1 INDEMNIFICATION BY SELLERS AND SHAREHOLDERS. Sellers and
Shareholders (including their respective heirs, personal representatives,
successors and assigns) jointly and severally covenant and agree to pay and
perform and indemnify and hold Purchaser, its officers, directors, employees,
affiliates, shareholders and agents, and each of their respective heirs,
personal representatives, successors and assigns, harmless from, against and in
respect of any and all losses, costs, expenses (including without limitation,
reasonable attorneys' fees and disbursements of counsel), liabilities, damages,
fines, penalties, charges, assessments, judgments, settlements, claims, causes
of action and other obligations of any nature whatsoever (collectively "Losses")
that any of them may at any time, directly or indirectly, suffer, sustain, incur
or become subject to, arising out of, based upon or resulting from or on account
of each and all of the following:
35
a. The breach or falsity of any representation, warranty, covenant or
agreement made by any Seller and/or the Shareholders in this Agreement,
including the documents, instruments and agreements to be executed and/or
delivered by any Seller and/or Shareholders pursuant hereto and thereto.
b. Any claims by or liabilities to Sellers' present or former
employees on account of all sums due to such employees or otherwise arising
from acts allegedly occurring on or before the Date of Closing, including,
but not limited to, salaries, pension or profit sharing benefits, wages,
vacation and sick pay and other employee benefits accrued as of the close
of business on the Date of Closing as well as all severance pay payable by
Sellers to its present and former employees, except to the extent that
Purchaser has assumed such claims, demands, liabilities, debts and/or
encumbrances under the provisions of Section 3.2 of this Agreement.
c. All claims, demands, liabilities, debts and/or Encumbrances which
may be asserted by creditors of Sellers, except to the extent that
Purchaser has assumed such liabilities under the provisions of Section 3.2
of this Agreement.
d. All claims, demands, liabilities, debts and/or Encumbrances that
may be asserted against Purchaser or any of the Assets at any time or from
time to time (excluding only any liability assumed by Purchaser under the
provisions of Section 3.2 of this Agreement) resulting from or arising out
of the ownership, use, maintenance or operation of the Assets or Business
with respect to any period of time prior to the Closing.
e. All other liabilities of or claims against either Seller of any
kind, to the extent not specifically assumed by the Purchaser under the
provisions of Section 3.2 of this Agreement.
f. The existence, use, handling, storage, transportation,
manufacture, release, discharge, spillage, leakage, pumping, pouring,
emitting, dumping or disposal of any Hazardous Materials in, about, under
or near any Leased Premises on or before the Date of Closing. The foregoing
indemnification includes, without limitation, indemnification against all
costs in law or in equity of removal, remediation of any kind, and disposal
of such Hazardous Materials, all costs of determining whether the Leased
Premises is in compliance with, and of causing the Leased Premises to be in
compliance with, all Environmental and Safety Requirements, all costs
associated with claims for damages to persons, property, or natural
resources, and the Purchaser's reasonable attorneys' and consultants' fees,
court costs and expenses incurred in connection with any thereof. This
indemnification shall remain in full force and effect, including, without
limitation, with respect to Hazardous Materials which are discovered or
released on, about, under or near
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the Leased Premises after the Date of Closing, but which were introduced or
released on, about, under or near the Leased Premises on or prior to the
Date of Closing, and with respect to the continuing migration or release of
any Hazardous Materials previously introduced on, about, under or near the
Leased Premises.
g. All fees, commissions and other sums which may be due and payable
to the brokers, finders, agents, bankers or third parties identified on
Schedule 4.27 hereof.
h. Any Losses incurred by the Purchaser with respect to any Benefit
Plans not expressly assumed by the Purchaser pursuant to Section 3.2
hereof.
11.2 INDEMNIFICATION BY PURCHASER. Purchaser (including its successors
and assigns) covenants and agrees to pay and perform and indemnify and hold
Sellers, their officers, directors, employees, affiliates, Shareholders and
agents, and each of their respective heirs, personal representatives, successors
and assigns, harmless from, against and in respect of any and all Losses that
any of them may at any time, directly or indirectly, suffer, sustain, incur or
become subject to, arising out of, based upon or resulting from or on account of
each and all of the following:
a. The breach or falsity of any representation, warranty, covenant
or agreement made by Purchaser in this Agreement, including the documents,
instruments and agreements to be executed and/or delivered by Purchaser
pursuant hereto and thereto.
b. The failure of Purchaser to pay and perform the debts,
liabilities and obligations it agreed to assume pursuant to Section 3.2
hereof.
c. All fees, commissions and other sums which may be due and
payable to the brokers, finders, agents, bankers or third parties
identified on Schedule 5.5 hereof.
d. Any liability, obligation or commitment of Purchaser arising
after the Date of Closing relating to Purchaser's ownership of the Assets,
the operation of the Business relating thereto, or franchises sold after
the Date of Closing, but expressly excluding any liabilities, obligations
or commitments arising from facts or circumstances existing prior to the
Date of Closing.
11.3 PROCEDURE FOR INDEMNIFICATION. In the event a party intends to seek
indemnification pursuant to the provisions of Sections 11.1 or 11.2 hereof (the
"Indemnified Party"), the Indemnified Party shall promptly give notice hereunder
to the other party (the "Indemnifying Party") after obtaining written notice of
any claim or the service of a summons or other initial legal process in any
action instituted against the Indemnified Party as to which recovery may be
sought against the Indemnifying Party because of the indemnification provided
for in Section 11.1 or 11.2 hereof, and, if such indemnity shall arise from the
claim of a third party, the Indemnified Party shall permit the Indemnifying
Party to assume the defense of any such claim and any litigation resulting from
such claim; provided, however, that the Indemnified
37
Party shall not be required to permit such an assumption of the defense of any
claim or litigation which, if not first paid, discharged or otherwise complied
with, would result in an interruption or disruption of the business of the
Indemnified Party or any material part thereof. Notwithstanding the foregoing,
the right to indemnification hereunder shall not be affected by any failure of
the Indemnified Party to give such notice (or by delay by the Indemnified Party
in giving such notice) unless, and then only to the extent that, the rights and
remedies of the Indemnifying Party shall have been prejudiced as a result of the
failure to give, or delay in giving, such notice. Failure by the Indemnifying
Party to notify the Indemnified Party of its election to defend any such claim
or action by a third party within twenty (20) days after notice thereof shall
have been given to the Indemnifying Party shall be deemed a waiver by the
Indemnifying Party of its right to defend such claim or action.
If the Indemnifying Party assumes the defense of such claim or litigation
resulting therefrom, the obligations of the Indemnifying Party hereunder as to
such claim or litigation shall include taking all steps necessary in the defense
or settlement of such claim or litigation and holding the Indemnified Party
harmless from and against any and all damages caused by or arising out of any
settlement approved by the Indemnifying Party or any judgment entered in
connection with such claim or litigation. The Indemnifying Party shall not, in
the defense of such claim or any litigation resulting therefrom, consent to
entry of any judgment (other than a judgment of dismissal on the merits without
costs) except with the written consent of the Indemnified Party or enter into
any settlement (except with the written consent of the Indemnified Party, which
shall not be unreasonably withheld) which does not include as an unconditional
term thereof the giving by the claimant or the plaintiff to the Indemnified
Party a release from all liability in respect to such claim or litigation.
If the Indemnifying Party assumes the defense of such claim or litigation
resulting therefrom, the Indemnified Party shall bear the fees and expenses of
any additional counsel retained by it to conduct its defense.
If the Indemnifying Party does not assume the defense of any such claim by
a third party or litigation resulting therefrom after receipt of notice from the
Indemnified Party, the Indemnified Party may defend against such claim or
litigation in such manner as it deems appropriate, and unless the Indemnifying
Party shall deposit with the Indemnified Party a sum equivalent to the total
amount demanded in such claim or litigation plus the Indemnified Party's
estimate of the cost (including attorneys' fees) of defending the same, the
Indemnified Party may settle such claim or litigation on such terms as it may
deem appropriate and the Indemnifying Party shall promptly reimburse the
Indemnified Party for the amount of such settlement and for all costs (including
attorneys' fees), expenses and damages incurred by the Indemnified Party in
connection with the defense against or settlement of such claim or litigation,
or if any such claim
38
or litigation is not so settled, the Indemnifying Party shall promptly reimburse
the Indemnified Party for the amount of any judgment rendered with respect to
any claim by a third party in such litigation and for all costs (including
attorneys' fees), expenses and damage incurred by the Indemnified Party in
connection with the defense against such claim or litigation, whether or not
resulting from, arising out of, or incurred with respect to, the act of a third
party.
11.4 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. The
representations and warranties contained in this Agreement and in any Exhibit,
Schedule, certificate, instrument or document delivered by or on behalf of any
of the parties hereto pursuant to this Agreement and the transactions
contemplated hereby and the indemnities with respect thereto contained in
Sections 11.1(a) and 11.2(a) hereof shall survive the Closing and shall expire
on the second annual anniversary of the Date of Closing, except that (i) the
representations and warranties of the Sellers and Shareholders and their related
indemnities concerning Taxes shall expire upon the expiration of the applicable
statute of limitations for each and any of the Taxes, (ii) the representations
and warranties and related indemnities under Sections 4.2, 4.27, 5.2 and 5.5
shall expire on the sixth-annual anniversary of the Date of Closing, and (iii)
the representations and warranties and related indemnities under Section 4.31
and 5.7 shall expire on the fourth annual anniversary of the Date of Closing.
After the expiration of such periods, no claim for the breach or falsity of any
such representation or warranty may be brought, and no litigation with respect
thereto may be commenced, and no party shall have any liability or obligation
with respect thereto, unless the indemnified party in good faith and having a
reasonable basis, gave written notice to the indemnifying party specifying with
particularity the breach or falsity of such representation or warranty claimed
on or before the expiration of such period, in which case a claim may be brought
under this Agreement with respect to that matter during a period corresponding
to the applicable statute of limitations.
11.5 LIMITATION ON INDEMNIFICATION OBLIGATIONS. Notwithstanding the
provisions of Section 11.1 or 11.2 hereof to the contrary:
a. No claim may be brought by Purchaser, Sellers or the Shareholders
pursuant to the provisions of Article 11 for any Losses or for any action
arising under or in connection with their respective representations,
warranties and covenants contained in this Agreement, unless and until the
aggregate amount of such claims exceeds $50,000, and then only to the
extent of such excess over $50,000.
b. No claim may be brought by Purchaser, Sellers, or the
Shareholders pursuant to the provisions of Article 11 for any Losses or for
any action arising under or in connection with their respective
representations, warranties and covenants contained in this Agreement to
the extent such claim is paid by insurance.
39
c. For purposes of evaluating the Loss related to claims under
Article 11, the amount of the Losses shall be determined on a net after-tax
basis, taking into account the value of any offsetting tax benefit (net of
any tax detriment) which may reasonably be expected to inure to the party
suffering the Losses as a result of such Losses as reasonably determined by
such party's independent public accountant.
d. The aggregate liability of the Sellers and the Shareholders, on
the one hand, and the Purchaser on the other hand, for all claims brought
pursuant to the provisions of this Article 11 for any Losses or for any
action arising under or in connection with the parties' respective
representations, warranties and covenants contained in this Agreement shall
be limited to an amount not to exceed the Purchase Price.
e. No claim may be brought by Purchaser, Sellers or Shareholders
pursuant to the provisions of Article 11 for any Losses or for any action
arising under or in connection with the breach of any of the
representations or warranties contained in this Agreement if such party had
actual knowledge of the breach of such representation and warranty prior to
the execution of this Agreement. The burden of proving such actual
knowledge shall rest on the party who asserts the provisions of this
Section 11.5(e) as a defense to a claim for indemnification or any other
action.
ARTICLE 12: CLOSING
12.1 DATE OF CLOSING. Subject to the satisfaction or waiver of the
conditions precedent contained in Articles 9 and 10 hereof, the closing of the
transactions contemplated by this Agreement (the "Closing") shall be held at the
Purchaser's offices in Chicago, Illinois, at 10:00 o'clock AM (local time) on
such date as may be mutually agreed upon in writing by Purchaser and Sellers but
not later than December 31, 1996 and shall be as of the close of business on
such day. Such date is referred to in this Agreement as the "Date of Closing."
12.2 DOCUMENTS TO BE DELIVERED BY SELLERS AND SHAREHOLDERS. At the
Closing, Sellers and Shareholders shall execute, where necessary or appropriate,
and deliver to Purchaser each and all of the following:
a. A certificate in the form of Exhibit D hereto signed by
Shareholders and a duly authorized officer of each Seller, and dated as of
the Date of Closing, to the effect that the representations and warranties
made by Sellers and Shareholders in this Agreement are true and correct in
all material respects at and as of the Closing with the same force and
effect as though such representations and warranties had been made on or
given at and as of the Closing and Sellers and Shareholders have performed
and complied with all of its/his/their covenants, agreements and
obligations under this Agreement
40
which are to be performed and complied with by Sellers and/or Shareholders
at or prior to the Closing;
b. A copy certified by the Secretary of each Seller of the duly
adopted resolutions of such Sellers' Board of Directors and Shareholders
approving this Agreement and authorizing the execution and delivery of this
Agreement, including the documents, instruments and agreements to be
executed and/or delivered by such Seller and/or Shareholders pursuant to
this Agreement, and the consummation of the transactions contemplated
hereby and thereby;
c. A ▇▇▇▇ of Sale to all of the Assets in the form of Exhibit E
hereto duly executed by Sellers;
d. Duly executed assignments by Sellers to Purchaser with respect
to the Proprietary Rights and Software in a form reasonably satisfactory to
counsel for Purchaser;
e. Releases, satisfactions, or terminations of all mortgages,
financing statements or other evidences of liens filed with a secretary of
state, any county recorder and/or any other similar office evidencing an
Encumbrance on any of the Assets;
f. All consents, releases, assignments and permissions of any kind
or nature, whether from a Governmental Body or otherwise, which reasonably
may be required to effectively sell, assign and transfer the Assets to
Purchaser, all in a form reasonably satisfactory to counsel for Purchaser;
g. The five-year Agreement Not To Compete duly executed by Sellers
and the Shareholders in the form attached hereto as Exhibit F;
h. Certificates of title and assignments thereof for all Vehicles;
i. The Assumption Agreement duly executed by Sellers and the
Shareholders;
j. The Registration Rights Agreement duly executed by Sellers and
the Shareholders;
k. The Escrow Agreement duly executed by Sellers and the Escrow
Agent;
l. Such other documents and items as are reasonably necessary or
appropriate to effect the consummation of the transactions contemplated
hereby or which may be customary under local law; and
m. A duly executed written opinion letter by Shulman, Rogers,
Gandal, Pordy, & ▇▇▇▇▇, PA, counsel for Sellers and Shareholders, dated as
of the Date of Closing, addressed to Purchaser, reasonably satisfactory in
form and substance to counsel for Purchaser, addressing the matters and
substantially in the form set forth on Exhibit G hereto and such other
matters as counsel for the Purchaser may reasonably request.
41
12.3 DOCUMENTS TO BE DELIVERED BY PURCHASER. At the Closing, Purchaser
shall execute, where necessary or appropriate, and deliver to Sellers each and
all of the following:
a. A certified or bank cashier's check (or wire transfer of
immediately available funds to Sellers' designated account) in the amount
provided for in Section 2.1 (b) hereof;
b. A certificate in the form of Exhibit H hereto signed by a duly
authorized officer of Purchaser, and dated as of the Date of Closing, to
the effect that the representations and warranties made by Purchaser in
this Agreement are true and correct in all material respects at and as of
the Closing with the same force and effect as though such representations
and warranties had been made on or given at and as of the Closing and the
Purchaser has performed and complied with all of its covenants, agreements
and obligations under this Agreement which are to be performed and complied
with by Purchaser at or prior to on the Closing;
c. A copy certified by the Secretary of Purchaser of the duly
adopted resolutions of the Board of Directors of Purchaser approving this
Agreement and authorizing the execution and delivery of this Agreement,
including the documents, instruments and agreements to be executed and/or
delivered by the Purchaser pursuant hereto, and the consummation of the
transactions contemplated hereby and thereby;
d. The Assumption Agreement hereto duly executed by Purchaser;
e. The Registration Rights Agreement duly executed by the
Purchaser;
f. The Escrow Agreement duly executed by the Purchaser and the
Escrow Agent;
g. A duly executed written opinion letter by ▇▇▇▇ & ▇▇▇▇▇▇▇, A
Professional Association, counsel for Purchaser, dated as of the Date of
Closing, addressed to the Sellers and Shareholders, reasonably satisfactory
in form and substance to counsel for Sellers addressing the matters and
substantially in the form set forth in Exhibit I hereto and such other
matters as counsel for the Sellers may reasonably request; and
h. Certificates representing 900,000 BAB Shares.
ARTICLE 13: PERFORMANCE FOLLOWING THE DATE OF CLOSING
The following covenants and agreements are to be performed after the
Closing by the parties and shall continue in effect for the periods respectively
indicated or, where no indication is made, until performed:
13.1 COLLECTION OF RECEIVABLES. After the Closing, Purchaser shall be
empowered to collect all Receivables and other items transferred to Purchaser
hereunder and to endorse with the names of Sellers any checks or other
instrument received on account of any such Receivables or
42
other items. Sellers agree to promptly transfer to Purchaser any cash, checks
or other property that Sellers may receive in respect of the Receivables or
other items. At the written request of Purchaser, Sellers and Shareholders
will cooperate, and will use their best efforts to have the officers, directors,
and other employees of Sellers cooperate, with Purchaser on and after the Date
of Closing in endeavoring to effect the collection of all Receivables and with
respect to other actions, proceedings, arrangements or disputes involving
Sellers or Purchaser based upon Contracts, arrangements or acts of Sellers which
were in effect or occurred on or prior to the Date of Closing.
13.2 FURTHER ACTS AND ASSURANCES. Sellers agree that their respective
officers, directors and Shareholders will, at any time and from time to time, on
and after the Date of Closing, upon the reasonable request of Purchaser, do all
such further acts and things and execute, acknowledge and deliver, or cause to
be executed, acknowledged and delivered to Purchaser any and all papers,
documents, instruments, agreements, deeds, assignments, transfers, assurances
and conveyances as may be reasonably necessary or desirable to vest, perfect and
confirm of record in Purchaser, its successors and assigns, the title to any of
the Assets or otherwise to carry out and give effect to the provisions and
intent of this Agreement. In addition, from and after the Date of Closing,
Sellers will afford to Purchaser and its attorneys, accountants, investment
bankers and other representatives access, during normal business hours, to such
personnel, books and records relating to the Assets and the Business as may
reasonably be required in connection with the preparation of financial
information or the filing of tax returns and will cooperate in all reasonable
respects with Purchaser in connection with claims and litigation asserted by or
against third parties, relating to the transactions contemplated hereby.
ARTICLE 14: TERMINATION
14.1 TERMINATION. This Agreement may be terminated and the transactions
contemplated herein may be abandoned after the date of this Agreement, but not
later than the Closing:
a. By mutual written consent of all parties hereto;
b. By Purchaser if any of the conditions provided for in Article 9
of this Agreement have not been met and have not been waived in writing by
Purchaser on or before the Closing Date;
c. By Sellers or Shareholders if any of the conditions provided
for in Article 10 of this Agreement have not been met and have not been
waived in writing by Sellers and Shareholders on or before the Closing
Date; and
e. By Purchaser pursuant to Section 15.1(b) hereof.
43
In the event of termination or abandonment by any party as provided in this
Section 14.1, written notice shall forthwith be given to the other party and
each party shall pay its own expenses incident to preparation for consummation
of this Agreement and the transactions contemplated hereunder and neither party
shall have any obligation or liability to the other hereunder except such
liability as may arise as a result of a breach hereof.
14.2 RETURN OF DOCUMENTS AND NONDISCLOSURE. If this Agreement is
terminated for any reason pursuant to Section 14.1 hereto, each party shall
return all documents and materials which shall have been furnished by or on
behalf of the other party, and each party hereby covenants and agrees that
except insofar as may be necessary to assert their respective rights hereunder,
the agreements concerning confidentiality and non-solicitation of employees
contained in those certain confidentiality agreements between the parties (dated
May 13, 1996 with respect to the agreement of the Purchaser in favor of the
Sellers and June 4, 1996 with respect to the agreement of the Sellers in favor
of the Purchaser) shall continue in full force and effect in accordance with
their terms.
ARTICLE 15: TITLE AND RISK OF LOSS
15.1 TITLE AND RISK OF LOSS
a. Sellers shall bear all costs and expenses and assume and bear
all risk of loss, damage or destruction of or to the Assets due to theft,
expropriation, seizure, destruction, damage, fire, earthquake, flood or
other cause or casualty until title thereto is passed to Purchaser at the
Closing.
b. If prior to the Date of Closing, any material Assets shall have
suffered, sustained or incurred any material loss, damage or destruction,
including, without limitation, any environmental contamination or
pollution, and Sellers shall not have elected at their sole option and
expense to wholly repair or replace the Assets which suffered, sustained or
incurred the material loss, damage or destruction with assets which are as
nearly identical as practicable in value, form and function, Purchaser
shall have the right, at its sole discretion and election, to either (i)
terminate this Agreement, or (ii) complete the purchase contemplated by
this Agreement, in which event:
1) Sellers shall assign and transfer to Purchaser and
Purchaser shall be entitled to receive all insurance proceeds and
other compensation collected by reason of such loss, damage or
destruction, together with any rights to receive any uncollected
insurance proceeds or other compensation relating to such loss, damage
or destruction and an amount equal to the sum of the aggregate amount
of any applicable deductibles under any insurance policies covering
the lost, damaged or destroyed Assets plus any self-insured
retentions; or
44
2) Purchaser shall be entitled to reduce the Purchase Price of
the Assets by an amount equal to the cost of repair, or if destroyed
or damaged beyond repair, or if expropriated, seized, lost or stolen,
by an amount equal to the replacement cost; or
3) Purchaser shall be entitled to utilize alternatives 1 and 2
concurrently, but not both with respect to any single Asset.
If Purchaser elects to complete the purchase contemplated hereby
notwithstanding any such loss, damage or destruction, and if Sellers assign such
insurance proceeds and other compensation and any other rights thereto to
Purchaser, then Sellers shall be released from any and all liability or
responsibility with respect to such loss, damage or destruction, but shall
cooperate with Purchaser, at no cost or expense to Purchaser, in collecting all
insurance proceeds and other compensation with respect thereto. The Purchase
Price hereunder in such event shall be reduced by the amount of any deductible
amounts under such insurance policies and self-insured retentions which are not
paid by Sellers to Purchaser.
ARTICLE 16: DEFINITIONS
For purposes of this Agreement, the following terms have the meanings
specified:
"Acquisition Proposal" - any proposal relating to the possible acquisition
of either or both Sellers whether by way of merger, purchase of capital stock of
either or both Sellers representing fifty percent (50%) or more of the voting
power or equity of such Seller(s), purchase of all or substantially all of the
assets of such Seller(s), or otherwise.
"Applicable Laws" - any and all federal, state, local, municipal, county,
foreign, or other laws, ordinances, constitutions, regulations, statutes,
treaties, rules, codes, licenses, certificates, franchises, permits, writs,
rulings, awards, executive orders, directive, requirements, injunctions
(whether temporary, preliminary, or permanent), judgment, decree, or other order
adopted, enacted, implemented, promulgated, issued, entered or deemed applicable
by or under the authority of any Governmental Body or by the eligible voters of
any jurisdiction.
"Benefit Plans" - any and all bonus, stock option, restricted stock, stock
purchase, profit-sharing, deferred compensation, severance, pension, retirement,
disability, medical, dental, health or life insurance, death benefit, incentive,
welfare and/or other benefit, compensation and/or retirement plan, policy,
arrangement and/or an agreement now or at any time heretofore maintained,
sponsored or participated in by either Seller or any of their respective
affiliates.
"Code" - the Internal Revenue Code of 1986, as amended, or any successor
law and regulations issued by the IRS pursuant to the Internal Revenue Code or
any successor law.
45
"Contract" -any agreement, contract, obligation, promise, commitment,
understanding or undertaking (whether written or oral and whether express
or implied) of any type, nature or description that is legally binding.
"BAB Shares" -the shares of Common Stock of BAB Holdings, Inc.
issuable to Sellers pursuant to Section 2.3(e) and Section 2.4 hereof.
"Encumbrance" -any claim, lien, pledge, charge, security interest,
encumbrance, mortgage, lease, license, equitable interest, option, right of
first refusal or preemptive right, condition, or other restriction of any
kind, including any restriction on use, voting (in the case of any
security), transfer, receipt of income, or exercise of any other attribute
of ownership, except to the extent that any such claim or other restriction
does not, and insofar as can reasonably be foreseen in the future will not,
have a Material Adverse Effect on either Seller or the Purchaser.
"Environmental and Safety Requirements" -all federal, state, and local
statutes, laws, rules, regulations, codes, ordinances, orders, standards,
permits, licenses, actions, policies and requirements (including consent
decrees, judicial decisions and administrative orders) relating to
protection, preservation or conservation of the environment and public or
worker health and safety, all as amended, hereafter amended, or
reauthorized.
"ERISA" -the Employee Retirement Income Security Act of 1974, as
amended.
"Exchange Act" -The Securities Exchange Act of 1934, as amended, or
any successor law.
"GAAP" -generally accepted accounting principles in the United
States.
"Governmental Body" -any:
(i) nation, state, county, city, town, village, district, or other
jurisdiction of any nature;
(ii) federal, state, local, municipal, foreign, or other government;
(iii) governmental or quasi-governmental authority of any nature
(including any governmental agency, branch, commission, department,
official, or other entity, and any court or other tribunal);
(iv) multi-national organization or body; or
(v) body exercising, or entitled or purporting to exercise, any
administrative, executive, judicial, legislative, police, regulatory, or
taxing authority or power of any nature.
"Hazardous Materials" -All (i) hazardous substances, as defined by the
Comprehensive Environmental Response, Compensation and Liability Act, 42
U.S.C. (S) 9601 et seq.; (ii) hazardous wastes as defined by the Resource
Conservation and Recovery Act, 42 U.S.C. (S) 6901 et seq.; (iii) petroleum,
including without limitation, crude oil or any fraction thereof which is
liquid at standard conditions of temperature and pressure (60) degrees
Fahrenheit and 14.7 pounds per square inch absolute); (iv) any radioactive
materials, including, without
46
limitation, any source, special nuclear, or by-product material as defined
in 42 U.S.C. (S) 2011 et seq.; (v) asbestos in any form or condition; (vi)
polychlorinated biphenyls ("PCB's"), and (vii) any other material,
substance, or waste to which liability or standards of conduct may be
imposed under any Environmental and Safety Requirements.
"IRS" - the United States Internal Revenue Service.
"Knowledge" - shall mean knowledge after such inquiry as is reasonable
under the circumstance.
"Material Adverse Effect" - in connection with any party, any event,
change, or effect that is materially adverse, individually or in the
aggregate, to the condition (financial or otherwise), properties, assets,
liabilities, businesses, operations, results of operations or prospects of
such party, taken as a whole.
"Ordinary Course of Business" - an action taken by a Person will be
deemed to have been taken in the "Ordinary Course of Business" only if:
(i) such action is consistent with the past practices of such person
and is taken in the ordinary course of the normal day-to-day operations of
such Person; and
(ii) such action is not required to be authorized by the board of
directors of such Person (or by any Person or group of Persons exercising
similar authority) and does not require any other separate or special
authorization of any nature.
"Person" - any individual, corporation (including any non-profit
corporation), general, limited or limited liability partnership, limited
liability company, joint venture, estate, trust, association, organization,
or other entity or Governmental Body.
"Proceeding" - any suit, litigation, arbitration, hearing, audit,
investigation, or other action (whether civil, criminal, administrative or
investigative) commencing, brought, conducted, or heard by or before, or
otherwise involving, any Governmental Body or arbitrator.
"Related Person" - with respect to a particular individual:
(i) each other member of such individual's Family (as hereafter
defined); and
(ii) any Person that is, directly or indirectly, controlled by any one
or more members of such individual's Family.
With respect to a specify Person other than an individual:
(i) any Person that, directly or indirectly, controls, is controlled
by, or is under common control with such Person; and
(ii) each Person that serves as a director, executive officer, general
partner, executor, or trustee of such specified Person (or in a similar
capacity);
For purposes of this definition, the "Family" of an individual includes (i)
such individual, (ii) the individual's spouse, (iii) any lineal ancestor or
lineal descendant of the individual, or (iv) a trust for the benefit of the
foregoing. A Person will be deemed to control another Person, for purposes
47
of this definition, if the first Person possesses, directly or indirectly,
the power to direct, or cause the direction of, the management policies of
the second Person, (A) through the ownership of voting securities, (B)
through common directors, trustee, or officers, or (C) by contract or
otherwise.
"SEC" -the Securities and Exchange Commission.
"Securities Act" -the Securities Act of 1933, as amended, or any
successor law.
"Sellers' Knowledge" -means the actual Knowledge of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
and ▇▇▇▇ ▇▇▇▇▇▇▇, after such inquiry as is reasonable under the
circumstances of (i) the executive officers and key employees of Sellers,
(ii) the current attorneys, accountants and other professional advisors of
either Seller or Shareholder, and (iii) the executive officers and key
employees of any franchise broker of either Seller.
"Tax or Taxes" -(i) any and all new income, gross income, gross
receipts, sales and use, ad valorem, franchise, profits, transfer, sales,
use, social security, unemployment, licenses, withholding, payroll,
excise, severance, stamp, occupation, property, customers duties and/or
other taxes, fees or charges of any kind whatsoever imposed by a foreign,
federal, state, country local and/or other taxing authority together with
any interest or penalty thereon, and/or (ii) the liability for the payment
of any consolidated tax, including penalty or interest thereon, of the type
described in the immediately preceding subsection (i), including any
federal, state, local and/or other consolidated income tax liability
including any penalty or interest thereon, as a result of being a member
of, and which may be imposed upon, as affiliated group (as defined in
Section 1504(a) of the Code, or other Applicable Law).
"Threatened" -a claim, Proceeding, dispute, action, or other matter
will be deemed to have been "Threatened" if any demand or statement has
been made in writing, or any notice has been given in writing, or if any
other event has occurred, or any other circumstances exist that would lead
a reasonably prudent Person to conclude that such a claim, proceeding,
dispute, action, or other matter is substantially likely to be asserted,
commenced, taken, or otherwise pursued in the future.
ARTICLE 17: MISCELLANEOUS
17.1 Preservation of and Access to Records. All books and records of
Sellers conveyed to Purchaser hereunder shall be preserved by Purchaser for
a period of six (6) years after the Date of Closing; provided, however,
Purchaser may destroy any part or parts of such records upon obtaining
written consent of Sellers for such destruction, which consent shall not be
unreasonably withheld or delayed. Such records shall be made available to
Sellers and Shareholders and their representatives at all reasonable times
during normal business hours of Purchaser during said six-year period with
the right at their expense to make abstracts from and
48
copies thereof. Purchaser may return such records to Sellers at any time and
Purchaser's obligation to preserve or make available such records shall
thereupon terminate.
17.2 COOPERATION PRIOR TO CLOSING. The parties hereto shall cooperate
with each other in all respects, including using their reasonable efforts to
assist each other in satisfying the conditions precedent to their respective
obligations under this Agreement, to the end that the transactions contemplated
hereby will be consummated. Without limiting the generality of the foregoing,
(a) the Shareholders will vote all of their stock in Sellers in favor of the
consummation of the transactions contemplated hereby, (b) the Purchaser and
Sellers shall consult with each other before they enter into any franchise
agreements and/or area franchise development agreements from and after the date
hereof to prevent, to the extent practicable, the Purchaser and the Sellers each
having franchisee and/or company-owned stores in close geographic proximity to
each other, (c) the Sellers and Shareholders shall, at their expense (except for
travel expenses incurred in connection with marketing the Offering), fully
cooperate with the Purchaser, and its counsel, auditors, investment bankers,
investment bankers' counsel and other representatives in preparing all
documentation necessary or appropriate for the Offering and shall participate in
all meetings, "road shows," and conferences (in person and otherwise) as may be
reasonably be requested from time to time by or on behalf of the Purchaser, (d)
the Sellers and the Shareholders shall assist the Purchaser's subsidiaries in
amending their franchise offering circulars in accordance with Applicable Laws
to reflect that following the Closing, the Purchaser and/or its subsidiaries or
other affiliates will be offering and selling Chesapeake Bagel Bakery franchises
and area franchises, (e) the Sellers and Shareholders shall assist and cooperate
with the Purchaser and its affiliates in preparing a franchise offering circular
for Chesapeake Bagel Bakery franchisees and in registering such franchises for
offer and sale in accordance with Applicable Laws so that the Purchaser and/or
its subsidiaries may offer and sell such franchises immediately following the
consummation of the transactions contemplated hereby; (f) Purchaser shall
cooperate with Sellers in promptly and adequately responding to all concerns
expressed by Sellers' franchisees relating to the transactions contemplated by
this Agreement; (g) from and after the execution of this Agreement, the parties
hereto acknowledge and agree that the parties and their respective affiliates
will discontinue offering and selling their respective franchises unless and
until they have amended their franchise offering circulars and applicable
franchise registrations to disclose the execution of this Agreement and the
proposed consummation of the transactions contemplated hereby; (h) each party
shall promptly supply the other with all information required by such party and
its affiliates to amend and/or prepare their franchise offering circulars and
franchise registrations as contemplated hereby; (i) Purchaser shall give
Sellers and their representatives a reasonable opportunity to review and comment
upon the Private Placement Memorandum before it is
49
finalized and circulated among prospective investors; and (j) the parties shall
negotiate in good faith the terms of Consulting Agreements to be entered into on
the Date of Closing between the Shareholders and the Purchaser providing for the
provision of consulting services by the Shareholders to the Purchaser after the
Closing for a reasonable period of time on commercially reasonable terms and
conditions.
17.3 COOPERATION FOLLOWING CLOSING. Purchaser shall consult with Sellers
with respect to the preparation of Purchaser's uniform franchise offering
circulars relating to the Chesapeake Bagel Bakery franchise system after the
Date of Closing and, subject to requirements of law, shall give consideration to
Sellers' reasonable recommendations in regard to the preparation of such uniform
franchise offering circulars. Further, purchase shall respond to inquiries of
Sellers' franchisees relating to the transactions contemplated by this Agreement
with reasonable promptness. In addition, following the Closing, the Purchaser
and Sellers shall use reasonable efforts to cause the former franchisees of
Sellers to enter into new franchise agreements with Purchaser to which neither
Seller is a party.
17.4 EMPLOYEES. Nothing contained in this Agreement shall constitute or
be construed as a contract of employment between Purchaser and such employees of
Sellers, and any such employee(s) hired by Purchaser shall remain subject to
discharge and lay-off by Purchaser at any time.
17.5 PUBLIC ANNOUNCEMENTS. The timing and content of all public
announcements relating to the execution of this Agreement and the consummation
of the transactions contemplated hereby shall be approved by both Purchaser and
Sellers prior to the release of such public announcements. Notwithstanding the
foregoing, the Purchaser may make such public disclosures as may be required by
Applicable Laws; provided, however, that the Purchaser agrees to provide the
Sellers with prior notice of press releases concerning (a) the execution of this
Agreement, (b) the closing of the Offering and the consummation of the
transaction contemplated hereby. Subsequent to the Date of Closing, Purchaser
may make such announcements and/or advertisements as Purchaser, in its sole
discretion, deems necessary to all customers, franchisees, and supplies and/or
potential customers, franchisees and suppliers of the Business.
17.6 WAIVER OF BULK TRANSFERS ACT. In view of the substantial doubt as
to its applicability, the provisions of this Agreement whereby Purchaser is
assuming certain liabilities of Sellers and Sellers' and Shareholders' ability,
intention and agreement to satisfy as they become due all liabilities not
expressly assumed by Purchaser hereunder, the parties hereby waive compliance
with the Bulk Transfers Act in effect in each state which is applicable to the
consummation of the transactions contemplated hereby.
50
17.7 SALES, USE AND DEED TAXES. Purchaser agrees to pay in full any and
all federal, state, local and foreign sales taxes, use taxes, deed taxes,
mortgage registrations, real estate transfer taxes or other similar taxes
(including any interest or penalty thereon), but specifically excluding any
income tax, as and when the same may be due, which may be imposed upon or arise
out of the sale of the Assets by the Sellers to the Purchaser or the
consummation of the transactions contemplated hereby.
17.8 NOTICES. All notices, demands and other communications provided for
hereunder shall be in writing and shall be given by personal delivery, via
facsimile transmission (receipt telephonically confirmed), by nationally
recognized overnight courier (prepaid), or by certified or registered first
class mail, postage prepaid, return receipt requested, sent to each party, at
its/his address as set forth below or at such other address or in such other
manner as may be designated by such party in written notice to each of the other
parties. All such notices, demands and communications shall be effective when
personally delivered, one (1) business day after delivery to the overnight
courier, upon telephone confirmation of facsimile transmission or upon receipt
after dispatch by mail to the party to whom the same is so given or made:
If to Sellers or Shareholders: Chesapeake Bagel Bakery
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇▇
With a copy to: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Shulman, Rogers, Gandal, Pordy & ▇▇▇▇▇, ▇▇
▇▇▇▇▇ Rockville Pike, ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
If to Purchaser: BAB Holdings, Inc.
▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, General Counsel
With a copy to: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
▇▇▇▇ & ▇▇▇▇▇▇▇ P.A.
4800 Norwest Center, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
17.9 ENTIRE AGREEMENT. This Agreement, including the documents,
instruments, and agreements to be executed by the parties pursuant hereto,
contains the entire agreement of the parties hereto and supersedes all prior or
contemporaneous agreements and understandings, oral or written, between the
parties hereto with respect to the subject matter hereof.
17.10 REMEDIES CUMULATIVE. Remedies herein provided are cumulative and
not exclusive of any other remedies provided by Applicable Law.
51
17.11 Specific Performance. The parties acknowledge and agree that the
Assets are unique and that an aggrieved party will have no adequate remedy at
law if a defaulting party shall fail to perform any of its/his/their obligations
hereunder. In such event, the aggrieved party shall have the right, in addition
to any other rights it may have, to specific performance of this Agreement.
17.12 Amendments. No purported amendment, modification or waiver of any
provision of this Agreement or any of the documents, instruments or agreements
to be executed by the parties pursuant hereto shall be effective unless in a
writing specifically referring to this Agreement and signed by all of the
parties.
17.13 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective heirs, personal
representatives, successors and permitted assigns, but except as hereinafter
provided in this Section, nothing in this Agreement is to be construed as an
authorization or right of any party to assign its rights or delegate its duties
under this Agreement without the prior written consent of the other parties
hereto. In its sole discretion, Purchaser may assign its rights in and/or
delegate its duties under this Agreement to one or more Persons that directly or
indirectly through one or more intermediaries, control, or are controlled by, or
are under common control with, the Purchaser (individually an "Affiliate" and
collectively "Affiliates"). In the event of such an assignment of rights and/or
delegation of duties, all references to the Purchaser in this Agreement shall
also be deemed to be references to the Affiliate(s) to which this Agreement is
assigned; provided that no such assignment and/or delegation shall relieve
Purchaser of any of its duties or obligations hereunder.
17.14 Costs. Except as otherwise provided for herein, each party hereto
shall pay its/his own costs and expenses incurred in connection with negotiating
and preparing this Agreement and consummating the transactions contemplated
hereby, including but not limited to fees and disbursements of their attorneys
and accountants.
17.15 Governing Law. This Agreement, including the documents, instruments
and agreements to be executed and/or delivered by the parties pursuant hereto,
shall be construed, governed by and enforced in accordance with the laws of the
State of Illinois, without giving effect to the principles of conflicts of laws
thereof.
17.16 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same Agreement .
17.17 Headings. The headings of the articles, sections and subsections of
this Agreement are intended for the convenience of the parties only and shall in
no way be held to explain, modify, construe, limit, amplify or aid in the
interpretation of the provisions hereof. The terms "this Agreement," "hereof,"
"hereunder," "hereto" and similar expressions refer
52
to this Agreement as a whole and not to any particular article, section,
subsection or other portion hereof and include the Schedules and Exhibits hereto
and any document, instrument or agreement executed and/or delivered by the
parties pursuant hereto.
17.18 Scope of Agreement. Unless the context otherwise requires, all
references in this Agreement or in any Schedule or Exhibit hereto, to the
assets, properties, operations, business, financial statements, employees, books
and records, accounts receivable, accounts payable, Contracts, agreements or
other attributes of the business of Sellers shall mean such items or attributes
as they are used in,apply to, or relate to Sellers' Business.
17.19 Number and Gender. Unless the context otherwise requires, words
importing the singular number shall include the plural and vice versa and words
importing the ▇▇▇ of any gender shall include all genders.
17.20 Severability. In the event that any provision of this Agreement is
declared or held by any court of competent jurisdiction to be invalid or
unenforceable, such provision shall be severable from, and such invalidity or
unenforceability shall not be construed to have any effect on, the remaining
provisions of this Agreement, unless such invalid or unenforceable provision
goes to the essence of this Agreement, in which case the entire Agreement may be
declared invalid and not binding upon any of the parties.
17.21 Parties in Interest. Nothing expressed or implied in this Agreement
is intended or shall be construed to confer any rights or remedies under or by
reason of this Agreement upon any Person or entity other than Purchaser, Sellers
or Shareholders or their respective heirs, personal representatives, successors
and permitted assigns. Nothing in this Agreement is intended to relieve or
discharge the obligations or liabilities of any third Person or entity to
Purchaser, Sellers or Shareholders.
17.22 Waiver. The terms, conditions, warranties, representations and
indemnities contained in this Agreement, including the documents, instruments
and agreements executed and/or delivered by the parties pursuant hereto, may be
waived only by a written instrument executed by the party waiving compliance.
Any such waiver shall only be effective in the specific instance and for the
specific purpose for which it was given and shall not be deemed a waiver of any
other provision hereof or of the same breach or default upon any recurrence
thereof. No failure on the part of a party hereto to exercise and no delay in
exercising any right hereunder shall operate as a waiver thereof nor shall any
single or partial exercise of any right hereunder preclude any other or further
exercise thereof or the exercise of any other right.
53
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by duly authorized representations as of the day, month and year first
above written.
PURCHASER:
BAB HOLDINGS, INC.
By
---------------------------------------
Its
------------------------------------
SELLERS:
THE AMERICAN BAGEL COMPANY
By
---------------------------------------
Its
------------------------------------
ALMIKE ENTERPRISES, INC.
By
---------------------------------------
Its
------------------------------------
SHAREHOLDERS:
-----------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-----------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇
54
LIST OF SCHEDULES AND EXHIBITS
Schedule 1.1(b) List of Proprietary Rights
Schedule 1.1(c) List of Tangible Personal Property
Schedule 1.1(d) List of Vehicles
Schedule 1.1(g) List of Operating Contracts
Schedule 1.1(h) List of Licenses, Certificates, Franchises, Permits,
Consents and Approvals
Schedule 1.1(i) Categories of Pre-Paid Expenses
Schedule 1.1(n) List of Computer Software
Schedule 1.2 List of Excluded Assets
Schedule 3.2 List of Liabilities to be Assumed
Schedule 4.1 List of Foreign Qualifications
Schedule 4.3 List of Required Filings, Permits, Consents, Approvals
and Notices
Schedule 4.6 List of Pending and Threatened Litigation
Schedule 4.7 Description of Certain Labor Matters
Schedule 4.8 List of Tax Matters
Schedule 4.11 List of Financial Statements and Certain Liabilities
Schedule 4.12 List of Certain Developments
Schedule 4.19 List Employment Terms
Schedule 4.22 List of Other Material Contracts
Schedule 4.25 Product Liability Claims
Schedule 4.26 List of Insurance
Schedule 4.27 Brokers - Sellers
Schedule 4.29 Relationship with Related Persons
Schedule 4.33 Franchise Matters
Schedule 5.5 Brokers - Purchaser
Exhibit A Form of Escrow Agreement
Exhibit B Form of Assumption Agreement
Exhibit C Form of Registration Rights Agreement
Exhibit D Form of Sellers' and Shareholders' Closing Certificate
Exhibit E Form of ▇▇▇▇ of Sale
Exhibit F Form of Agreement Not To Compete
Exhibit G Form of Opinion of Sellers' Counsel
Exhibit H Form of Purchaser's Closing Certificate
Exhibit I Form of Opinion of Purchaser's Counsel
55
Schedule 5.5
BROKERS - PURCHASERS
▇.▇. ▇▇▇▇▇▇▇ Group
EXHIBIT A
ESCROW AGREEMENT
THIS ESCROW AGREEMENT is made and entered into as of the ___ day of
____________, 19___, by and among BAB Holdings, Inc., an Illinois corporation
("Purchaser"), The American Bagel Company, a Maryland corporation, and Almike
Enterprises, Inc., a Maryland corporation (collectively the "Sellers"), and
LaSalle National Trust, N.A. ("Escrow Agent").
WHEREAS, Purchaser, Sellers, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ and ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ have
entered into an Asset Purchase Agreement dated August 30, 1996, pursuant to
which Sellers have sold and Purchaser has purchased substantially all of
Sellers' assets used in connection with the operation of Sellers' business of
franchising Chesapeake Bagel Bakery stores and owning and operating company-
owned Chesapeake Bagel Bakers stores ("Purchase Agreement");
WHEREAS, Section 2.3 of the Purchase Agreement provides for the escrow of
certain funds pending the preparation by Ernst & Young L.L.P. and the acceptance
by the Purchaser and the Sellers of the Balance Sheets (as that term is defined
in the Purchase Agreement); and
WHEREAS, Purchaser, Sellers and the Escrow Agent desire to enter into this
Agreement to set forth the terms and conditions of such escrow.
1. Deposit of Funds. The Purchaser warrants that it has deposited with
the Escrow Agent on the date hereof, the sum of Two Million and No/100 Dollars
($2,000,000.00 (the "Principal") pursuant to Section 2.3(a) of the Purchase
Agreement.
2. Purpose of Escrow. The Principal and any accrued interest thereon
(collectively the "Deposit") shall be held by the Escrow Agent to protect the
Purchaser against the possibility that the combined tangible net worth of the
Sellers as reflected on the Closing Balance Sheet (as that term is defined in
the Purchase Agreement) is less than the combined tangible net worth of the
Sellers reflected on the Opening Balance Sheet (as that term is defined in the
Purchase Agreement).
3. Investment of Funds. It is the intention of the parties that the
Principal deposited with the Escrow Agent pursuant to this Agreement be invested
for the benefit of the Purchaser and the Sellers during the time period that the
Principal is being held by the Escrow Agent. Subject to the provisions of any
law then in effect to the contrary, the Escrow Agent shall in its sole
discretion invest all funds that it receives pursuant to this Agreement,
provided that such investment is made in the name of the Escrow Agent, the
nominee of the Escrow Agent or in bearer form, either directly by the Escrow
Agent or at the Escrow Agent's discretion through a cash management fund, in any
of the following:
(a) A certificate of deposit issued by a National Banking Association with
offices in the state of Illinois;
(b) United States Treasury obligations; or
(c) Money market issues, commercial paper or some other comparable
investment which protects the principal invested;
provided that the maturity of any such investment is not more than thirty (30)
days. Upon request, the Escrow Agent shall give the Purchaser and Sellers an
accounting of all investments. At any time during the Escrow Agent's regular
business hours, the Purchaser and the Sellers may inspect the Escrow Agent's
records insofar as they relate to this Agreement, to determine whether the
Escrow Agent is complying with the provisions of this Agreement.
4. Disbursement of Escrowed Funds. The parties hereto acknowledge and
agree that the Deposit should be held by the Escrow Agent pursuant to this
Agreement unless and until directed by an original written notice signed by
officers of the Purchaser and the Sellers specifying whether all or part of the
Deposit shall be paid to the Sellers and/or returned to the Purchaser. If the
Purchaser and the Sellers do not agree as to the disbursement of the Deposit,
Sellers or Purchaser may submit the dispute to the American Arbitration
Association in Chicago, Illinois for resolution of any dispute in accordance
with its rules governing commercial disputes. Any decision of the American
Arbitration Association shall be binding and final on all parties. Use of the
arbitration procedure under this paragraph 4 shall be the exclusive method of
resolving disputes under this Agreement. The parties agree that courts of the
States of Illinois and Maryland may enter judgment upon any award made pursuant
to a decision of the American Arbitration Association.
5. Notices. All notices, instructions and other communications provided
for herein shall be deemed validly given, made or served, on the date of
delivery in the case of personal delivery, or forty-eight (48) hours after
deposit with the U.S. Postal Service if sent by certified mail, return receipt
requested, addressed as follows:
if to Purchaser: BAB Holdings, Inc.
▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
if to Sellers: Chesapeake Bagel Bakery
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇▇
if to Escrow Agent: ▇▇▇▇ ▇▇▇▇▇▇
LaSalle National Trust,N.A.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
or to such other address as the parties may designate.
6. Fees. The fees payable to the Escrow Agent for holding the Deposit in
escrow, investing the Principal, disbursing the Deposit and acting as escrow
agent hereunder shall be $2,000 and shall be paid upon execution of this
Agreement by Sellers and Purchaser in the amount of $1,000 each. The parties
acknowledge that if the term of the escrow exceeds one year, then an additional
fee of $2,000 shall be due and payable.
7. Duties of Escrow Agent. The Escrow Agent's duties and responsibilities
shall be limited to those expressly set forth in this Agreement and the Escrow
Agent shall not be subject to, nor obliged to recognize, any other agreement
between, or direction or instruction of, any of the parties hereto (other than
joint instructions made by Purchasers and Sellers) even though reference thereto
may be made herein; provided, however, with the Escrow Agent's written consent,
this Agreement may be amended at any time or times by an instrument in writing
signed by all of the then parties in interest. The duties and obligations of the
Escrow Agent hereunder shall be determined solely by the express provisions of
this Agreement and no implied duties or obligations shall be read into this
Agreement against the Escrow Agent. The Escrow Agent shall be under no
obligation to refer to the Purchase Agreement or any other documents between or
among the parties related in any way to this Agreement.
8. Limitation on Liability. The Escrow Agent shall not be liable to
anyone by reason of any error of judgment, or for any act done or step taken or
omitted by it in good faith, or for any mistake of fact of law, or for anything
which it may do or refrain from doing in connection herewith, unless caused by
or arising out of its own gross negligence or bad faith.
9. Reliance. The Escrow Agent shall be entitled to rely and shall be
protected in acting in reliance upon any writing furnished to it by any party
hereto in accordance with the terms hereof, and shall be entitled to treat as
genuine, and as the document it purports to be, any letter, paper or other
document, furnished to it by any party and believed by the Escrow Agent in good
faith to be genuine and to have been signed by the proper party. The Escrow
Agent may consult with counsel with respect to any question relating to its
duties or responsibilities hereunder and shall not be liable for any action
taken or omitted in good faith on advice of such counsel.
10. Conflicting Claims. In the event of any disagreement between the
parties hereto resulting in conflicting claims and demands being made in
connection with or against the Deposit, the Escrow Agent shall be entitled, at
its option, to refuse to comply with the claims or demands of any party until
such disagreement is finally resolved in the manner provided in paragraph 4
hereof, and in do doing the Escrow Agent shall not be or become liable to any
party.
11. Attachment, Garnishment, Etc. If all or any part of the Deposit is at
any time attached, garnished or levied upon, under any court order, or in case
the payment, assignment, transfer conveyance or delivery of all or any part of
the Deposit shall be stayed or enjoined by
3
any court order, or in case any order, judgment or decree shall be made or
entered by any court affecting all or any part of the Deposit, then in any of
such events, the Escrow Agent is authorized, in its sole discretion, to rely
upon and comply with any such order, writ, judgment or decree, which it believes
is binding upon it, and if it complies with any such order, writ, judgment or
decree, it shall not be liable to any of the parties hereto or to any other
person, firm or corporation by reason of such compliance, even though such
order, writ, judgment or decree may be subsequently reversed, modified,
annulled, set aside or vacated.
12. Governing Law. this Agreement shall be construed, governed, enforced
and administered in accordance with the laws of the State of Illinois.
13. Termination. The Escrow Agent's duties pursuant to this Agreement
shall be terminated upon the disbursement of the Deposit in accordance with the
provisions of this Agreement.
14. Resignation. The Escrow Agent may resign upon thirty (30) days advance
written notice to the parties hereto. If a successor escrow agent is not
appointed within the thirty-day period following such notice, Escrow Agent may
petition any court of competent jurisdiction to name a successor escrow agent.
Until a successor escrow agent is appointed and accepts such appointment, the
Escrow Agent's only duty shall be to hold and invest the Deposit in accordance
with the original instructions contained in this Agreement.
15. Successors and Assigns. Except as otherwise provided in this
Agreement, no party hereto shall assign this Agreement or any rights or
obligations hereunder without the prior written consent of the other parties
hereto and such attempt at assignment without such prior written consent shall
be void and of no force or effect. This Agreement shall inure to the benefit of
and be binding upon the parties hereto and their respective successors and
permitted assigns.
IN WITNESS WHEREOF, the parties hereto have executed this Escrow Agreement
as of the day, month and year first above written.
PURCHASER:
BAB HOLDINGS, INC.
By
---------------------------
Its
-------------------------
SELLERS:
THE AMERICAN BAGEL COMPANY
4
By
---------------------------
Its
-------------------------
ALMIKE ENTERPRISES, INC.
By
---------------------------
Its
-------------------------
ESCROW AGENT:
LASALLE NATIONAL TRUST, N.A.
-----------------------------
By
---------------------------
Its
-------------------------
5
EXHIBIT B
ASSUMPTION AGREEMENT
THIS AGREEMENT is made and entered into as of the _____ day of
____________, 19___, by and among The American Bagel Company, a Maryland
corporation, and Almike Enterprises, Inc., a Maryland corporation (collectively
the "Sellers"), and BAB Holdings, Inc., an Illinois corporation (the
"Purchaser").
WHEREAS, the Purchaser has purchased substantially all of the assets of the
Sellers used in connection with the operation of Sellers' business of
franchising Chesapeake Bagel Bakery stores and owning and operating company-
owned Chesapeake Bagel Bakery stores (the "Business"), pursuant to an Asset
Purchase Agreement made and entered into as of the _____ day of ___________,
19___, by and among the Sellers, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ and ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
(collectively the "Shareholders") and the Purchaser (the "Purchase Agreement");
WHEREAS, the Purchaser has taken over the operation of the Business as of
the close of business on the date hereof; and
WHEREAS, Purchaser and Sellers desire to enter into this Agreement to set
forth the terms and conditions on which Purchaser will assume certain of the
debts, liabilities and obligations of Sellers related to the Business.
NOW, THEREFORE, in consideration of the purchaser and sale of the Assets
(as that term is defined in the Purchase Agreement), and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
1. Assignment and Assumption of Operating Contracts. Sellers do hereby
sell, assign, transfer and convey to Purchaser all of their respective rights,
title and interest in and to those certain contracts, contracts in progress,
commitments, leases, franchise agreements, area franchise development agreements
and other agreements described on Schedule 1.1(g)(i) attached hereto and made a
part hereof (the "Operating Contracts"). Purchaser does hereby agree to be bound
by and to assume and discharge in accordance with their terms all of the
obligations and commitments of the Sellers arising with respect to periods of
time commencing after the date hereof under, with respect to and concerning the
Operating Contracts; provided, however, that Purchaser does not assume any
liabilities for (i) products sold or services rendered by the Business under
such Operating Contracts on or before the date hereof, or (ii) any debts,
liabilities or obligations arising as a result of a breach or default by either
Seller under any of such Operating Contracts occurring on or before the date
hereof or as a result of the consummation of the transactions contemplated by
the Purchase Agreement. Notwithstanding any provision of this Agreement to the
contrary, this Agreement shall not constitute an agreement to assign any of the
Operating Contracts, or any benefit arising thereunder or resulting therefrom,
if such an agreement to assign without a consent required or necessary for such
assignment would constitute a breach thereof or in any way adversely affect the
rights of the Sellers or the
Purchaser thereunder. If such consent is not obtained, or if an attempted
assignment would be ineffective and would adversely affect the rights of the
Sellers thereunder so that the Purchaser would not in fact receive all such
rights, the Sellers shall use their respective best efforts, and shall cooperate
in any arrangement which the Purchaser may reasonably request in writing, to
provide to the Purchaser the benefits under any such Operating Contract,
including (a) entering into subcontracts, subleases, sale and leasebacks, use
and occupancy agreements or other contractual arrangements which will provide
such benefits to the Purchaser; (b) agreeing with the person whose consent is
required to be obtained that the Sellers will remain liable under any such
Operating Contract to the same extent as if such assignment had not occurred;
and (c) enforcing, at the cost of the Sellers and for the benefit of the
Purchaser, any and all rights of the Sellers against any other party thereto
arising out of the breach thereof by such party. Any transfer or assignment to
the Purchaser of any of the Operating Contracts which shall require the consent
or approval of any other party shall be made subject to such consent or approval
being obtained; provided, however, that nothing contained in this paragraph 1
shall affect the rights of the Purchaser, pursuant to the Purchase Agreement or
otherwise, arising out of the Sellers' failure to have disclosed the need for
such consent or approval or for failing to have it obtained.
2. Assignment and Assumption of Licenses, Certificates, Franchises and
Permits. Sellers do hereby sell, assign, transfer and convey to Purchaser all of
their respective rights, title and interest in and to all of Sellers'
governmental licenses, certificates, franchises, permits, registrations,
concessions, consents and approvals related to the Business, including, but not
limited to, those described on Schedule 1(h) attached hereto and made a part
hereof (the "Licenses and Permits"), but excluding those described in Schedule
1.2 to the Purchase Agreement which by their terms are not transferable.
Purchaser does hereby agree to be bound by and to assume and discharge in
accordance with their terms all of the obligations and commitments of Sellers
arising with respect to periods of time commencing after the date hereof, with
respect to and concerning the Licenses and Permits.
3. Assumption of Other Liabilities. Purchaser does hereby assume and agree
to pay, perform and discharge in accordance with their terms, the following
debts, liabilities and obligations of Sellers:
(a) All of Sellers' trade accounts payable, deferred revenues from the
sale of franchises, and other current liabilities, in each case
arising out of the operation of the Business in the Ordinary Course of
Business (as that term is defined in the Purchase Agreement) which
remain unpaid on the date hereof, but only to the extent reflected on
the Closing Balance Sheet (as that term is defined in the Purchase
Agreement); provided that Purchaser expressly does not assume (i) any
accrued taxes of any nature, (ii) any liabilities to any Related
Person (as that term is defined in the Purchase Agreement), or (iii)
any long-term debt (including the current portions thereof), except as
set forth on Schedule 3.2 hereto; and
(b) All debts, liabilities and obligations of Sellers identified on
Schedule 3.2 hereto (including leases for the Leased Premises (as that
term is defined in the Purchase Agreement)).
2
4. Liabilities Not Assumed. Except as specifically set forth in herein,
Purchaser shall not, by virtue of its purchase of Assets, assume or become
responsible for any debts, liabilities or obligations of either of the Sellers
or either of the Shareholders, whether fixed, contingent, known, unknown or
otherwise. In furtherance, and not in limitation of the foregoing, Purchaser
expressly does not assume any liabilities for (i) products sold or services
rendered by the Business under any of the Operating Contracts on or prior to the
date hereof, (ii) for any debts, liabilities or obligations arising as a result
of a breach or default by either Seller under any of the Operating Contracts
occurring on or before the date hereof or as a result of the consummation of the
transactions contemplated by the Purchase Agreement, (iii) any long-term
indebtedness (including the current portion thereof), except as set forth on
Schedule 3.2 hereto; or (iv) any fees or commissions payable by Sellers or any
other person to brokers, consultants, finders or others with respect to the
offer or sale of Sellers' franchises or area development agreements, except as
reflected in the deferred revenues from the sale of franchises on the Closing
Balance Sheet.
This Agreement is intended to confirm, and not alter, the provisions of the
Purchase Agreement, including the provisions thereof governing indemnification.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day, month and year first above written.
SELLERS:
THE AMERICAN BAGEL COMPANY
By________________________
Its_____________________
ALMIKE ENTERPRISES, INC.
By________________________
Its_____________________
PURCHASER:
BAB HOLDINGS, INC.
By________________________
Its_____________________
3
EXHIBIT C
REGISTRATION RIGHTS AGREEMENT
DATED AS OF ____________, 1996
BETWEEN
BAB HOLDINGS, INC. (THE "COMPANY")
AND
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ AND ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ (THE "HOLDERS")
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement ("Agreement") is made as of
______________, 1996 between BAB Holdings, Inc., an Illinois corporation (the
"Company"), and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ and ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ (individually, a
"Holder" and, collectively, the "Holders").
RECITALS
--------
WHEREAS, pursuant to the terms of an Asset Purchase Agreement dated as of
________________, 1996 (the "Asset Purchase Agreement"), by and among the
Holders, The American Bagel Company, Almike Enterprises, Inc., and the Company,
Messrs. ▇▇▇▇▇▇▇▇ and Manstof, through their controlled corporations The American
Bagel Company and Almike Enterprises, Inc., have acquired an aggregate of
900,000 shares of Common Stock, no par value per share (the "Common Stock"), of
the Company, and may acquire additional shares of the Common Stock pursuant to
the Asset Purchase Agreement in connection with the opening of additional
franchised Chesapeake bagel stores under existing franchise and area development
agreements (collectively, the "Shares"); and
WHEREAS, the Company has agreed to register the Shares on the terms and
conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants, agreements,
representations and warranties herein set forth, it is hereby agreed among the
Company and the Holders as follows:
ARTICLE I
REGISTRATION RIGHTS
Section 1.1. Participation in Registration. (a) If, at any time or from
time to time after January 1, 1997, the Company shall determine to register any
of its securities, either for its own account or the account of a security
holder or holders exercising their respective demand registration rights, other
than (i) a registration relating solely to employee benefit plans on Form S-1 or
S-8 or similar forms which may be promulgated in the future, or (ii) a
registration on Form S-4 or similar form which may be promulgated in the future
relating to an SEC Rule 145 transaction, the Company will:
(i) promptly give to the Holders written notice thereof (which shall
include a list of the jurisdictions in which the Company intends to attempt to
qualify such securities under the applicable blue sky or other state securities
laws); and
(ii) include in such registration (and any related qualification under blue
sky laws or other compliance), and in any underwriting involved therein, all
Registrable Securities specified
in a written request or requests, made within 30 days after receipt of such
written notice from the Company, by the Holders.
(b) If the registration of which the Company gives notice is for a
registered public offering involving an underwriting, the Company shall so
advise the Holders as a part of the written notice given pursuant to Section
1.1(a)(i). In such event, the right of the Holders to registration pursuant to
Section 1.1 shall be conditioned upon the Holders' agreeing to participate in
such underwriting and in the inclusion of such Holders' Registrable Securities
in the underwriting to the extent provided herein. The Holders proposing to
distribute their securities through such underwriting shall (together with the
Company and the other holders distributing their securities through such
underwriting) enter into an underwriting agreement in customary form with the
underwriter or underwriters selected for such underwriting by the Company or by
other holders exercising their demand registration rights. Notwithstanding any
other provision of this Section 1.1, if the underwriter determines that
marketing factors require a limitation of the number of shares to be
underwritten, the underwriter may limit the number of Registrable Securities to
be included in the registration and underwritten public offering on a pro rata
basis based on the respective amounts of Registrable Securities owned by the
Holders and securities of the Company owned by each other holder seeking to
distribute his securities through the public offering; provided, however, that
the Company shall not exclude more than that number of shares which, in the
reasonable opinion of such underwriter, must reasonably be excluded in light of
such marketing factors. The Company shall so advise the Holders and the other
holders distributing their securities through such underwriting, and the number
of Registrable Securities and other securities that may be included in the
registration shall be allocated among all holders thereof (other than holders
who are exercising demand registration rights) in proportion, as nearly as
practicable, to the respective amounts of securities entitled to inclusion in
such registration held by such holders at the time of filing the registration
statement. If the Holders disapprove of the terms of any such underwriting, they
may elect to withdraw therefrom by written notice to the Company and the
underwriter, which notice, to be effective, must be received by the Company at
least two business days before the anticipated effective date of the
registration statement. The Company may at any time withdraw or abandon any
registration statement which triggers the provisions of this Section 1.1 without
any liability to the Holders. Any securities excluded or withdrawn from such
underwriting shall be withdrawn from such registration.
Section 1.2. Form S-3 Registration Rights. On and after the Eligibility
Date and for a period of two (2) years thereafter, the Holders, by written
notice signed by the Holders (or by permitted assignees who hold not less than
25% of the Registrable Securities) may demand that the Company file a
registration statement on Form S-3 to permit resale of the Registrable
Securities of the Holders during the period of effectiveness of such Form S-3
registration statement. Any such registration on Form S-3 shall be subject to
the following limitations:
(a) The Company shall not be required to maintain and keep any such
registration on Form S-3 effective for a period exceeding ninety (90) days from
the effective date thereof;
2
(b) The Company shall not be required to effect more than two (2)
registrations on Form S-3 pursuant to this Section 1.2;
(c) The Company shall not be required to prepare or effect any registration
pursuant to this Section 1.2 unless the Registrable Securities to be sold by the
Holders represent not less than 25% of the total Registrable Securities;
(d) If the Company shall furnish to the Holders a certificate, signed by
the Company's president or chief executive officer, stating that (i) the Company
is conducting or is about to conduct an offering of its securities and is
advised by its managing underwriter that such offering might be affected
adversely by the registration on behalf of the Holders or (ii) in the good faith
judgment of the Board of Directors of the Company the Form S-3 offering would
interfere with a pending or contemplated financing, merger, sale of assets,
recapitalization or other similar corporate action of the Company if such
registration statement would be filed on or before the date filing would be
required and it is therefore essential to defer the filing of such registration
statement, the Company shall have the right, exercisable only once during any
period of twelve consecutive months, to defer filing the registration statement
for a period of not more than 120 days; provided, however, that the time period
set forth in Section 1.2 with respect to the exercise by the Holders of their
Form S-3 Registration Rights shall be extended by the number of days by which
any registration is deferred under the terms of this paragraph (d);
(e) The Company may include in such Form S-3 registration statement
securities of other selling security holders, without limitation, and securities
offered for its own account, if the Company is eligible for use of Form S-3 for
its own account; and
(f) The Company hereby undertakes to use its best effort to meet the
criteria for use of Form S-3 at the earliest possible date and to continue to
qualify for such use for a period of two (2) years following the Eligibility
Date.
Section 1.3. Expense of Registration. All Registration Expenses incurred
in connection with any registration, qualification or compliance pursuant to
Article I shall be borne by the Company. All Selling Expenses relating to
securities registered by the Holders or other holders shall be borne by the
holders of such securities pro rata on the basis of the number of shares so
registered and to be sold by each.
Section 1.4. Registration Procedures. In the case of each registration,
qualification or compliance effected by the Company pursuant to this Article I,
the Company will keep the Holders advised in writing as to the initiation of
each registration, qualification and compliance and as to the completion
thereof. At its expense, the Company will:
(a) Keep such registration, qualification or compliance effective for a
period of ninety (90) days or until the Holders have completed the distribution
described in the registration statement relating thereto, whichever first
occurs.
3
(b) Furnish such number of prospectuses and other documents incident
thereto as Holders from time to time may reasonably request, but only during the
period that the Company would be required to keep the registration effective.
(c) Prepare and file with the SEC such amendments and supplements to such
registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
registration statement.
(d) Use its best efforts to register and qualify the securities covered by
such registration statement under such other securities or Blue Sky laws of such
jurisdictions as shall be reasonably requested by the Holders, provided that the
Company shall not be required in connection therewith or as a condition thereto
to qualify to do business or to file a general consent to service of process in
any such states or jurisdictions.
(e) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and customary
form, with the managing underwriter of such offering. The Holders participating
in such underwriting shall also enter into and perform their obligations under
such agreement.
(f) Notify the Holders of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of material fact or omits to state
a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing.
Section 1.5. Indemnification. (a) The Company will indemnify the Holders
with respect to which registration, qualification or compliance has been
effected pursuant to this Article I, and each underwriter, if any, and each
person who controls any underwriter within the meaning of Section 15 of the
Securities Act, against all expenses, claims, losses, damages and liabilities
(or actions in respect thereof), including any of the foregoing incurred in
settlement of any litigation, commenced or threatened, arising out of or based
on any untrue statement (or alleged untrue statement) of a material fact
contained in any registration statement, prospectus, offering circular or other
document, or any amendment or supplement thereto, incident to any such
registration, qualification or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances in
which they were made, not misleading, or any violation by the Company of any
rule or regulation promulgated under the Securities Act applicable to the
Company and relating to action or inaction required of the Company in connection
with any such registration, qualification or compliance, and will pay to such
Holders, each such underwriter and each person who controls any such
underwriter, as incurred, any legal and any other expenses reasonably incurred
in connection with investigating, preparing or defending any such claim, loss,
damage, liability or action, provided that the Company will not be liable in any
such case to the extent that any such claim, loss, damage, liability or expense
arises out of or is based on any untrue
4
statement or omission or alleged untrue statement or omission, made in reliance
upon and in conformity with written information furnished to the Company by an
instrument duly executed by such Holders or underwriter and stated to be
specifically for use therein.
(b) The Holders will, if Registrable Securities held by such Holders are
included in the securities as to which such registration, qualification or
compliance is being effected, indemnify the Company, each of its directors and
officers, each underwriter, if any, of the Company's securities covered by such
a registration statement, each person who controls the Company or such
underwriter within the meaning of Section 15 of the Securities Act, and each
other such holder, each of its officers, directors or partners and each person
controlling such holder within the meaning of Section 15 of the Securities Act,
against all expenses, claims, losses, damages and liabilities (or actions in
respect thereof) including any of the foregoing incurred in settlement of any
litigation commenced or threatened, arising out of or based on any untrue
statement (or alleged untrue statement) of a material fact contained in any such
registration statement, prospectus, offering circular or other document, or any
amendment or supplement thereto, incident to any such registration,
qualification or compliance or based on any omission (or alleged omission) to
state therein a material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances in which they were
made, not misleading, or any violation by the Holders of any rule or regulation
promulgated under the Securities Act applicable solely to the Holders (which is
not otherwise applicable to or violated by the Company) and relating to action
or inaction required solely of the Holders (and not relating to or required of
the Company) in connection with such registration, qualification or compliance,
and will pay to the Company, such holders, such directors, officers, partners,
persons, underwriters or control persons, as incurred, any legal or any other
expenses reasonably incurred in connection with investigating, preparing or
defending any such claim, loss, damage, liability or action, in each case to the
extent, but only to the extent, that such untrue statement (or alleged untrue
statement) or omission (or alleged omission) is made in such registration
statement, prospectus, offering circular or other document or any amendment or
supplement thereto in reliance upon and in conformity with written information
relating to such Holders which shall have been furnished to the Company by an
instrument duly executed by such Holders and stated to be specifically for use
therein; provided, however, that the obligations of such Holders hereunder shall
be limited to an amount equal to the net proceeds to such Holders of Registrable
Securities sold as contemplated herein.
(c) Each party entitled to indemnification under this Section 1.5 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not be unreasonably
withheld), and the Indemnified Party may participate in such defense at its own
expense, and provided, further, that the failure of any Indemnified Party to
give notice as provided herein shall not relieve the Indemnifying Party of its
obligations under this Article I unless such failure resulted in actual
detriment to the Indemnifying Party. Notwithstanding the above, however, if
representation of one or more
5
Indemnified Parties by the counsel retained by the Indemnifying Party would be
inappropriate due to actual conflicting interests between such Indemnified
Parties (the "Conflicting Indemnified Parties") and any other party represented
by such counsel in such proceeding, then such Conflicting Indemnified Parties
shall have the right to retain one separate counsel, chosen by the holders of a
majority of the Registrable Securities included in the registration, at the
expense of the Indemnifying Party. No Indemnifying Party, (i) in the defense of
any such claim or litigation, shall, except with the consent of each Indemnified
Party, consent to entry of any judgment or enter into any settlement which does
not include as an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified Party of a release from all liability in respect
to such claim or litigation, or (ii) shall be liable for amounts paid in any
settlement if such settlement is effected without the consent of the
Indemnifying Party.
Section 1.6. Information by Holders. The Holders of Registrable
Securities included in any registration shall furnish to the Company such
information regarding such Holders and the distribution proposed by such Holders
as the Company may reasonably request in writing and as shall be reasonably
required in connection with any registration, qualification or compliance
referred to in this Article I.
Section 1.7. Rule 144 Reporting. With a view to making available the
benefits of certain rules and regulations of the Commission which may at any
time permit the sale of the Restricted Securities to the public without
registration, the Company agrees to:
(a) Use its best efforts to make and keep public information available, as
those terms are understood and defined in Rule 144 under the Securities Act at
all times after the date hereof.
(b) Use its best efforts to file with the Commission in a timely manner all
reports and other documents required of the Company under the Securities Act and
the Securities Exchange Act of 1934, as amended (at any time it is subject to
such reporting requirements).
(c) So long as the Holders own any Restricted Securities, to furnish to the
Holders forthwith upon request a written statement by the Company as to its
compliance with the reporting requirements of said Rule 144 (at any time after
90 days after the effective date of the first registration statement filed by
the Company for an offering of its securities to the general public) and of the
Securities Act and the Securities Exchange Act of 1934 (at any time after it has
become subject to such reporting requirements) and a copy of the most recent
annual or quarterly report of the Company.
Section 1.8. Transfer of Registration Rights. The rights to cause the
Company to register securities granted under Article I may not be assigned
without the prior written consent of the Company in each instance, except
pursuant to will or the laws of descent and distribution. No transferee,
assignee or other person purporting to exercise rights under this Article I who
is not a signatory to this Agreement shall be entitled to do so unless and until
such person agrees to be bound by the terms of this Article I. The Company
shall not unreasonably withhold its consent to a request to transfer the
registration rights granted hereunder.
6
Section 1.9. "Market Stand Off" Agreement. The Holders hereby agree that
they shall not, to the extent required by the Company and an underwriter of
Common Stock (or other securities) of the Company, sell or otherwise transfer or
dispose (other than to donees who agree to be similarly bound) of any
Registrable Securities during the ninety (90) day period following the effective
date of a registration statement of the Company filed under the Securities Act;
provided, however, that such agreement shall not apply to Registrable Securities
being registered and sold pursuant to such registration statement.
In order to enforce the foregoing covenant, the Company may impose stop-
transfer instructions with respect to the Registrable Securities of the Holders
until the end of such ninety (90) day period.
Section 1.10. Plan of Distribution. To preserve an orderly market in any
publicly owned securities of the Company, in the event that the aggregate number
of shares of Registrable Securities to be registered pursuant to a Registration
Statement under Section 1.2 exceeds 5% of the Company's outstanding securities,
the Holders will provide advance notice to the Company of their intended
marketing and distribution arrangements in connection with the Form S-3
registration, including information with respect to any investment banking firm
or broker-dealer retained by the Holders to manage the distribution.
ARTICLE II
MISCELLANEOUS
-------------
Section 2.1. Governing Law. This Agreement shall be governed in all
respects by the laws of the State of Illinois.
Section 2.2. Successors and Assigns. Except as otherwise provided herein,
the provisions hereof shall inure to the benefit of, and be binding upon, the
successors and permitted assigns of the parties hereto. Except as otherwise
provided herein, no assignment of this Agreement may be made by either party at
any time, without the other party's prior written consent.
Section 2.3. Entire Agreement; Amendment. This Agreement constitutes the
full and entire understanding and agreement between the parties with regard to
the subjects hereof. Except as expressly provided herein, neither this Agreement
nor any term hereof may be amended, waived, discharged or terminated other than
by a written instrument signed by the party against whom enforcement of any such
amendment, waiver, discharge or termination is sought.
Section 2.4. Notices, Etc. All notices and other communications required
or permitted hereunder shall be in writing and shall be mailed by registered or
certified mail, postage prepaid, or otherwise delivered by hand or by messenger
addressed (a) if to the Company, at ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇, Attention: General Counsel, or at such other address as the Company
shall have furnished to the Holders in writing and (b) if to the Holders,
7
at such address as is set forth on the signature page hereto, or at such other
address as the Holders shall have furnished to the Company in writing. Each such
notice or other communication shall for all purposes of this Agreement be
treated as effective or having been given when delivered if delivered
personally, or, if sent by mail, at the earlier of its receipt or 72 hours after
the same has been deposited in a regularly maintained receptacle for the deposit
of the United States mail, addressed and postage prepaid as aforesaid.
Section 2.5. Delays or Omissions. Except as expressly provided herein, no
delay or omission to exercise any right, power or remedy accruing to the Company
or the Holders upon any breach or default of any party under this Agreement,
shall impair any such right, power or remedy of the Company or such Holders nor
shall it be construed to be a waiver of any such breach or default, or any
acquiescence therein, or of or in any similar breach or default thereafter
occurring; nor shall any waiver of any single breach or default be deemed a
waiver of any other breach or default theretofore or thereafter occurring. Any
waiver, permit, consent or approval of any kind or character on the part of the
Company or any Holders of any breach or default under this Agreement, or any
waiver on the part of any such party of any provisions or conditions of this
Agreement, must be in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, either under this
Agreement or by law or otherwise afforded to the Company or the Holders, shall
be cumulative and not alternative.
Section 2.6. Counterparts. This Agreement may be executed in any number
of counterparts, each of which may be executed by only one of the parties
hereto, each of which shall be enforceable against the party actually executing
such counterpart, and all of which together shall constitute one instrument.
Section 2.7. Severability. In the event that any provision of this
Agreement becomes or is declared by a court of competent jurisdiction to be
illegal, unenforceable or void, this Agreement shall continue in full force and
effect without said provisions; provided that no such severability shall be
effective if it materially changes the economic benefit of this Agreement to any
party.
Section 2.8. Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
Section 2.9. Definitions. As used in this Agreement, the following terms
have the meanings specified or referred to in this Section 2.9:
"Agreement" has the meaning specified in the first paragraph of this
Agreement.
"Commission" or "SEC" shall mean the Securities and Exchange Commission or
any other federal agency at the time administering the Securities Act.
"Company" has the meaning specified in the first paragraph of this
Agreement.
8
"Eligibility Date" shall mean the later of the first annual anniversary of
the date of this Agreement or the date on which the Company first meets the
criteria for use of Form S-3.
"Form ▇-▇," "▇▇▇▇ ▇-▇," "Form S-4" and "Form S-8" shall mean such forms, as
currently identified, for registration of securities under the Securities Act,
or any substantially similar, equivalent or successor forms under the Securities
Act.
"Holders" shall mean the persons named on the signature page hereof and any
permitted transferee of registration rights.
"Registrable Securities" means Shares which are issued and outstanding and
which have not been sold to the public, plus shares of the Company's Common
Stock issued with respect to the Shares upon any stock split, stock dividend,
recapitalization, or similar event, which have not been sold to the public,
which, in each case, are not eligible for resale in reliance upon Rule 144 under
the Securities Act.
"Registration Expenses" shall mean all expenses incurred by the Company in
complying with Article I hereof, including, without limitation, all
registration, qualification and filing fees, printing expenses, escrow fees,
fees and disbursements of counsel for the Company, blue sky fees and expenses,
and the expense of any special audits incident to or required by any such
registration (but excluding the compensation of regular employees of the
Company, which shall be paid in any event by the Company).
"Restricted Securities" shall mean any share certificate representing
Registrable Securities bearing a legend restricting further public distribution
thereof.
"Securities Act" shall mean the Securities Act of 1933, as amended, or any
similar federal statute and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Selling Expenses" shall mean all underwriting discounts and selling
commissions applicable to the sale and all fees and disbursements of counsel for
any holder.
9
IN WITNESS WHEREOF, the Company has caused the foregoing Agreement to be
executed by one of its duly authorized officers, and the Holders have each
executed the foregoing Agreement, each as of the date first above written.
BAB HOLDINGS, INC.
By
-----------------------------------
Its
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Address:
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▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Address:
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10
EXHIBIT D
SELLERS' AND SHAREHOLDERS' CLOSING CERTIFICATE
The undersigned, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ and ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ (collectively
the "Shareholders"), being duly acting, appointed and authorized officers of The
American Bagel Company, a Maryland corporation, and Almike Enterprises, Inc., a
Maryland corporation (collectively the "Sellers"), hereby certify to BAB
Holdings, Inc., an Illinois corporation (the "Purchaser"), pursuant to Section
12.2(a) of the Asset Purchase Agreement made and entered into as of the _____
day of __________, 199__, by and among the Purchaser, the Sellers and the
Shareholders (the "Purchase Agreement"), as follows:
1. All of the representations and warranties made by Sellers and/or
Shareholders in the Purchase Agreement, including the documents,
instruments and agreements to be executed and/or delivered by any
of the Sellers and/or Shareholders pursuant to the Purchase Agreement,
are true and correct in all material respects on and as of the date
hereof with the same force and effect as though such representations
and warranties had been made on or given on and as of the date hereof;
and
2. The Sellers and Shareholders have performed and complied in all
material respects with all of its/his/their covenants and obligations
under the Purchase Agreement which were to be performed and complied
with by it/him/them prior to or on the date hereof.
IN WITNESS WHEREOF, we have executed this Sellers' and Shareholders'
Closing Certificate as of the _____ day of __________, 199__.
THE AMERICAN BAGEL COMPANY
By____________________________
Its:________________________
ALMIKE ENTERPRISES, INC.
By_____________________________
Its:_________________________
_______________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
_______________________________
▇▇▇▇ ▇. ▇▇▇▇▇▇▇
1
NON-COMPETITION AGREEMENT
-------------------------
THIS AGREEMENT, is made and entered into as of the ____ day of __________,
199__, by and between BAB HOLDINGS, INC., an Illinois corporation (the
"Company"), and _________________________________________ (the "Selling
Shareholder").
WHEREAS, the Selling Shareholder has been a principal shareholder, officer,
director and employee of The American Bagel Company, a Maryland corporation, and
Amike Enterprises, Inc., a _______________ corporation (collectively the
"Sellers"), for many years and has developed and received special, unique and
extraordinary knowledge, information and goodwill in connection therewith;
WHEREAS, contemporaneously with the execution of this Agreement, the
Sellers have sold all of their respective property and assets to the Company
pursuant to an Asset Purchase Agreement dated ____________, 1996 by and among
the Sellers, the Company, _______________ and the Selling Shareholder (the
"Asset Purchase Agreement");
WHEREAS, in connection with the Asset Purchase Agreement, the Selling
Shareholder has agreed to provide certain consulting services to the Company
pursuant to a Consulting Agreement of even date herewith (the "Consulting
Agreement");
WHEREAS, the Selling Shareholder will receive, in the course of providing
consulting services to the Company, information concerning the operations,
products, services and customers of the Company not generally known to the
public or the industry, which information is confidential and of vital interest
to the Company; and
WHEREAS, the Company would not have entered into the Asset Purchase
Agreement and/or Consulting Agreement with the Selling Shareholder but for the
confidentiality and non-competition agreements contained herein.
NOW, THEREFORE, in consideration of the foregoing premises and for other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
1. Non-Competition Agreement. During the period of five (5) years from
and after the date hereof, the Selling Shareholder covenants and agrees that he
will not, without the Company's prior written consent, directly or indirectly,
at any location within the United States of America, lend his credit, advice or
assistance, or engage in any activity or act in any manner, including but not
limited to, as an individual, owner, sole proprietor, founder, associate,
promoter, partner, joint venturer, shareholder [other than as a less than five
percent (5%) shareholder of a publicly traded corporation], officer, director,
trustee, manager, employer, employee, licensor, licensee, principal, agent,
salesman, broker, representative, consultant, advisor, investor or otherwise,
for the purpose of establishing, operating or managing any business or entity
that is engaged in activities competitive with (i) the business of the Company
and its subsidiaries and affiliates as carried on as of the date of this
Agreement, or (ii) the business of the Sellers and its subsidiaries and
affiliates as carried on immediately prior to the date hereof; provided,
however, that notwithstanding the foregoing provisions of this paragraph 1, the
Selling Shareholder may act as a consultant to the Company pursuant to the
Consulting Agreement.
2. Non-Solicitation Agreement. As used in this Agreement, the term
"Person" means any individual, corporation, limited liability company, joint
venture, general, limited or limited liability partnership, association or other
entity. During the period of five (5) years from and after the date hereof, the
Selling Shareholder covenants and agrees that he will not, whether for his own
account or for the account of any other Person, directly or indirectly interfere
with the relationship of the Company and/or its subsidiaries and affiliates with
or endeavor to divert or entice away from the Company or its subsidiaries or
affiliates any Person who or which at any time while the Selling Shareholder was
a shareholder of either of the Sellers or during the time that the Selling
Shareholder provides consulting services to the Company pursuant to the
Consulting Agreement is or was an employee or customer of or in the habit of
dealing with either of the Sellers, the Company or any of their respective
subsidiaries or affiliates.
-2-
3. Confidential Information. The Selling Shareholder understands and
agrees that the respective businesses of the Sellers and the Company is based
upon specialized work and that as an officer, director, employee and shareholder
of the Sellers he received, had access to and/or contributed to Confidential
Information (as hereinafter defined) and that as a consultant to the Company
pursuant to the Consulting Agreement he will receive, have access to and/or
contribute to Confidential Information. The Selling Shareholder agrees that at
all times during the term of this Agreement and thereafter without limitation,
he shall keep secret all such Confidential Information and that he will not
directly or indirectly "Use" (as hereinafter defined) or "Disclose" (as
hereinafter defined) the same to any Person without first obtaining the written
consent of the Company. Upon the voluntary or involuntary termination of the
Consulting Agreement with or without cause, or at any time the Company may so
request, the Selling Shareholder shall turn over to the Company all books,
notes, memoranda, manuals, notebooks, tables, drawings, calculations, records
and other documents made, compiled by or delivered to the Selling Shareholder
containing or concerning any Confidential Information, including copies thereof,
in his possession, it being agreed that the same and all information contained
therein are at all times the exclusive property of the Company.
As used in this Agreement, the term "Confidential Information" means any
information or compilation of information not generally known to the public or
the industry, which was proprietary to the Sellers and/or is now proprietary to
the Company, relating to the Sellers' and/or the Company's procedures,
techniques, methods, concepts, ideas, affairs, products, processes and services,
including, but not limited to, information relating to marketing, merchandising,
selling, research, development, manufacturing, purchasing, accounting,
engineering, financing, costs, customers, plans, pricing, billing, needs of
customers and services used by customers. Confidential Information for purposes
of this Agreement shall also include all lists of customers, franchisees,
addresses, prospects, sales calls, suppliers, vendors, products, services,
prices and the like as well as any specifications, formulas, recipes, plans,
drawings,
-3-
accounts or sales records, sales brochures, books, code books, records, manuals,
trade secrets, knowledge, know-how, pricing strategies, operating costs, sales
margins, methods of operations, invoices or statements and the like. All
information disclosed to the Selling Shareholder during the term of his prior
employment by the Sellers or in the course of providing Consulting Services to
the Company pursuant to the Consulting Agreement which the Selling Shareholder
has a reasonable basis to believe to be Confidential Information or which is
treated by the Sellers and/or the Company as being Confidential Information,
shall be presumed to be Confidential Information.
As used in this Agreement, the term "Disclose" means to reveal, deliver,
divulge, disclose, publish, copy, communicate, show or otherwise make known or
available to any other Person, or in any way to copy, any of the Confidential
Information.
As used in this Agreement, the term "Use" means to appropriate any of the
Confidential Information for the benefit of oneself or any other Person other
than the Company.
4. Reasonableness of Covenants. The Selling Shareholder acknowledges and
agrees that the geographic scope and period of duration of the restrictive
covenants contained in this Agreement are both fair and reasonable and that the
interests sought to be protected by the Company are legitimate business
interests entitled to be protected. The Selling Shareholder further
acknowledges and agrees that the Company would not have agreed to purchase all
of the Sellers' property and assets pursuant to the Asset Purchase Agreement and
that the Company would not have agreed to engage the Selling Shareholder as a
consultant pursuant to the Consulting Agreement unless the Selling shareholder
entered into this Agreement.
5. Injunctive Relief. The parties agree that the remedy of damages at
law for the breach by the Selling Shareholder of any of the covenants contained
in this Agreement is an inadequate remedy. In recognition of the irreparable
harm that a violation by the Selling Shareholder of any of the covenants,
agreements or obligations arising under this Agreement would cause the Company,
the Selling Shareholder agrees that in addition to any other remedies
-4-
or relief afforded by law, an injunction against an actual or threatened
violation or violations may be issued against him and every other Person
concerned thereby, it being the understanding of the parties that both damages
and an injunction shall be proper modes of relief and are not to be considered
alternative remedies. In the event of any such actual or threatened violation,
the Selling Shareholder agrees to pay the costs, expenses and reasonable
attorneys' fees incurred by the Company in pursuing any of its rights or
remedies with respect to such actual or threatened violation, in addition to the
actual damages sustained by the Company as a result thereof.
6. Blue Pencil Doctrine. In the event that any of the restrictive
covenants contained in this Agreement shall be found by a court of competent
jurisdiction to be unreasonable by reason of its extending for too great a
period of time or over too great a geographic area or by reason of its being too
extensive in any other respect, then such restrictive covenant shall be deemed
modified to the minimum extent necessary to make it reasonable and enforceable
under the circumstances.
7. Compensation. The Selling Shareholder shall receive no separate
monetary consideration for the restrictive covenants contained in this
Agreement, but the Selling Shareholder acknowledges receipt of consideration in
the form of the purchase of the property and assets of the Sellers pursuant to
the Asset Purchase Agreement.
8. Entire Agreement. This Agreement contains the entire agreement of the
parties hereto and supersedes all prior or contemporaneous agreements and
understandings, oral or written, between the parties hereto with respect to the
subject matter hereof.
9. Amendment. No amendment or waiver of any provision of this Agreement
shall be effective unless the same shall be in writing and signed by all of the
parties and then such waiver shall only be effective in the specific instance
and for the specific purpose for which it was given.
10. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective heirs, personal
representative(s), successors and
-5-
permitted assigns, but nothing in this Agreement is to be construed as an
authorization or right of any party to assign its/his rights or delegate its/his
duties under this Agreement without the prior written consent of the other party
hereto.
11. Governing Law. This Agreement shall be construed, governed by and
enforced in accordance with the laws of the State of _______________.
12. Headings. The headings to the paragraphs of this Agreement are
intended for the convenience of the parties only and shall in no way be held to
explain, modify, amplify or aid in the interpretation of the provisions hereof.
13. Severability. The provisions of this Agreement shall be deemed
severable and if any portion hereof shall be held invalid, illegal or
unenforceable for any reason, the remainder shall not thereby be invalidated but
shall remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day, month and year first above written.
COMPANY:
BAB HOLDINGS, INC.
By:
---------------------------------
Its:
--------------------------------
SELLING SHAREHOLDER:
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-6-
EXHIBIT G
OPINION OF SELLER'S COUNSEL
1) Seller is a corporation duly organized, validly existing and in
good standing under the laws of the State of ____________, and has all requisite
power and authority, corporate and otherwise, to own, operate and lease the
Assets and to conduct the Business as it is now being conducted;
2) Seller is duly qualified to transact business as a foreign
corporation and is in good standing in every state or jurisdiction in which the
nature of its activities or of its properties owned, leased or operated makes
such qualification necessary and the failure to be so qualified could reasonably
be expected to have a Material Adverse Effect;
3) The execution, delivery and performance of this Agreement,
including the documents, instruments and agreements to be executed and/or
delivered by Seller and/or Shareholders pursuant hereto, and the consummation of
the transaction contemplated hereby and thereby have been duly and validly
authorized by all necessary corporate action on the part of Seller and
Shareholders. This Agreement and the documents, instruments and agreements to
be executed and/or delivered by Seller and/or Shareholders pursuant to this
Agreement have been duly and validly authorized, executed and delivered by
Seller and/or Shareholders and the obligations of Seller and Shareholders
hereunder and thereunder are valid and legally binding and enforceable in
accordance with their respective terms, except as such enforcement may be
limited by applicable bankruptcy, reorganization, insolvency, moratorium or
other similar laws presently or hereafter in effect affecting the enforcement of
creditors' rights generally and by general principals of equity (regardless of
whether such enforceability is considered under proceeding at law or in equity),
including, among others, limitations on the availability of equitable remedies,
and shall, to the best of such counsel's Knowledge, effectively vest in
Purchaser good and marketable title to the Assets and Business as contemplated
by this Agreement;
4) Seller has full corporate power and authority to sell, assign,
transfer, convey and deliver to Purchaser the Assets to be sold hereunder and to
otherwise perform its obligations under this Agreement and the documents,
instruments and agreements to be executed and/or delivered by the Seller
pursuant hereto. The execution and delivery of this Agreement, including the
documents, instruments and agreements to be executed and/or delivered by the
Seller pursuant to this Agreement, and the consummation of the transactions
contemplated hereby and thereby will not: (i) violate any provision of the
Articles of Incorporation or Bylaws (or comparable government documents or
instruments) of Seller; (ii) violate any Applicable Laws
1
issued, enacted, entered or deemed applicable by Governmental Body having
jurisdiction over Seller or any of its properties or assets; (iii) except as
provided in Schedule 5.3 hereto, require any filing with, permit from, consent
or approval of, or the giving of any notice to, any Governmental Body or any
third party; (iv) result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default (or give another party
any rights of termination, cancellation or acceleration) under any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, license,
franchise, permit, lease, contract, agreement or other instrument or obligation
to which Seller is a party, or by which it or any of its properties or assets
may be bound, including the Operating Contracts, and of which counsel has actual
Knowledge; or (v) result in the creation or imposition of any encumbrance on any
of the Assets;
5) There are no mortgages, pledges, liens, charges, restrictions,
claims, encumbrances or security interests of record or known by such counsel
that would prevent Purchaser from receiving by the execution and delivery of the
documents hereunder good and marketable title to all of the Assets other than
the Real Estate, free and clear from all mortgages, pledges, liens, charges,
restrictions, claims, encumbrances and security interests;
6) Except as described in Schedule 5.6 hereto, there are no
investigations, claims, demands, actions, suits or other proceedings at law or
in equity which are pending or, to the best of counsel's Knowledge, threatened
against or affecting the Seller, the Assets or the Business before or by any
court, Governmental Body or other Person or entity wherein an unfavorable
decision, ruling or finding could, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect or impair the ability of Seller
and/or Shareholders to consummate the transactions contemplated hereby. Except
as provided in Schedule 5.6 hereto, Seller is not a party to or subject to the
provisions of any writ, ruling, award, executive order, directive, requirement,
injunction, judgment, decree or other order (whether temporary, preliminary or
permanent) issued, enacted, entered or deemed applicable by Governmental Body
which could, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect or impair the ability of Seller and/or Shareholders to
consummate the transactions contemplated hereby;
7) Seller and Shareholders have the unrestricted corporate and other
power and authority to sell, convey, transfer, assign, and deliver to Purchaser
all of the Assets and Business to be sold hereunder and to otherwise perform
its/his/their obligations under this Agreement and the documents, instruments
and agreements to be executed and/or delivered by Seller and/or Shareholders
pursuant hereto;
8) To the best of counsel's Knowledge, Seller and the Business are
in compliance in all material respects with all Applicable Laws issued, enacted,
entered or deemed applicable by Governmental Body and, to the best of such
counsel's Knowledge, no authorization, consent or
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approval of any Governmental Body, which has not been obtained, is necessary for
the lawful sale of the Assets to the Purchaser or necessary for the lawful
consummation by the Seller and Shareholders of the transactions contemplated
hereby;
9) To the best of counsel's Knowledge, the representations and
warranties of Seller and Shareholders contained herein are true and correct in
all material respects;
10) The Bulk Transfers Act, as adopted in ______. Stat. (S) ______ et
seq., is not applicable to the transactions contemplated hereby; and
11) Seller has obtained all licenses, certificates, franchises,
permits, consents and approvals of each and every Governmental Body having
jurisdiction over Seller necessary to own the Assets and to operate and carry on
the Business, and all such licenses, certificates, franchises, permits, consents
and approvals are valid and in full force and effect.
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EXHIBIT H
PURCHASER'S CLOSING CERTIFICATE
The undersigned, being a duly acting, appointed and authorized officer of
BAB Holdings, Inc., an Illinois corporation (the "Purchaser"), hereby certifies
to The American Bagel Corporation, a Maryland corporation, and Almike
Enterprises, Inc., a Maryland corporation (collectively, the "Sellers"), and
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ and ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ (collectively, the "Shareholders"),
pursuant to Section 12.3(b) of the Asset Purchase Agreement made and entered
into as of the ____ day of ____________________, 199__, by and among the
Purchaser, the Sellers and the Shareholders (the "Purchase Agreement"), as
follows:
1. All of the representations and warranties made by Purchaser in the
Purchase Agreement, including the documents, instruments and
agreements to be executed and/or delivered by Purchaser pursuant to
the Purchase Agreement, are true and correct in all material respects
on and as of the date hereof with the same force and effect as though
such representations and warranties had been made on or given on and
as of the date hereof; and
2. The Purchaser has performed and complied in all material respects with
all of its covenants and obligations under the Purchase Agreement
which were to be performed and complied with by it prior to or on the
date hereof.
IN WITNESS WHEREOF, I have executed this Purchaser's Closing Certificate as
of the ____ day of ______________, 199___.
BAB HOLDINGS, INC.
By:____________________________
Its: _______________________
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