EXHIBIT 10.5
ASSET ACQUISITION AGREEMENT
BY AND BETWEEN
TERRACE HOLDINGS, INC.
A DELAWARE CORPORATION,
AND
A ONE A WHOLESALE PRODUCE, INC.,
A FLORIDA CORPORATION
TABLE OF CONTENTS
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1. DEFINITIONS............................................... 1
1.1 Affiliate.......................................... 1
1.2 Ancillary Documents................................ 1
1.3 Assets............................................. 1
1.4 Code............................................... 3
1.5 Liabilities........................................ 3
1.6 Rights............................................. 3
2. SALE OF ASSETS AND ISSUANCE OF STOCK...................... 3
2.1 Purchase and Sale of Assets and Rights............. 3
2.2 Delivery of Possession and Instruments
of Transfer........................................ 4
3. CONSIDERATION............................................. 4
3.1 Cash Consideration................................. 4
3.2 Time and Mode of Cash Payment...................... 4
3.3 Issuance of THI Shares of Capital Stock............ 4
3.4 Other Consideration................................ 5
3.5 Acquisition Audit.................................. 5
3.6 Allocation of Consideration for Tax Purposes....... 6
3.7 Escrow Deposit and Uses Thereof.................... 6
4. CLOSING................................................... 6
4.1 Closing and Closing Date........................... 6
5. REPRESENTATIONS AND WARRANTIES OF A-1-A................... 7
5.1 Organization, Good Standing, Power, Etc............ 7
5.2 Capital Stock...................................... 7
5.3 Articles of Incorporation and By-Laws.............. 8
5.4 Subsidiaries, Divisions and Affiliates............. 8
5.5 Equity Investments................................. 8
5.6 Authorization of Agreement......................... 8
5.7 Effect of Agreement................................ 8
5.8 Restrictions; Burdensome Agreements................ 9
5.9 Governmental and Other Consents.................... 9
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5.10 Financial Statements.............................. 9
5.11 Absence of Certain Changes or Events.............. 10
5.12 Title to Assets; Absence of Liens
and Encumbrances.................................. 10
5.13 Equipment......................................... 11
5.14 Insurance......................................... 11
5.15 Agreements, Arrangements, Etc..................... 12
5.16 Patents, Trademarks, Copyrights, Etc.............. 15
5.17 Permits, Licenses, Etc............................ 16
5.18 Compliance with Applicable Laws................... 16
5.19 Litigation........................................ 17
5.20 No Interest in Competitors........................ 17
5.21 Customers, Suppliers, Distributors and Agents..... 18
5.22 Books and Records................................. 18
5.23 Employee Benefit Plans............................ 18
5.24 Powers of Attorney................................ 19
5.25 Sufficiency of Assets and Commitments............. 19
5.26 Labor Disputes, Unfair Labor Practices............ 19
5.27 Past Due Obligations.............................. 20
5.28 Environmental Compliance.......................... 20
5.29 Tax and Other Returns and Reports................. 21
5.30 Recent Dividends and Other Distributions.......... 21
5.31 Inventory......................................... 21
5.32 Purchase and Sale Obligations..................... 22
5.33 Other Information................................. 22
5.34 Knowledge of A-1-A and the Shareholders........... 22
6. REPRESENTATIONS AND WARRANTIES OF THI.................... 22
6.1 Organization...................................... 22
6.2 Authorization of Agreement........................ 22
6.3 Effect of Agreement............................... 23
6.4 Litigation........................................ 23
6.5 Possible Submission to Stockholder Vote........... 23
7. PRE-CLOSING COVENANTS OF A-1-A........................... 23
7.1 Conduct of Business Until Closing Date............ 24
7.2 Approvals, Consents and Further Assurances........ 25
7.3 Access to Properties, Records, Suppliers,
Agents, Etc....................................... 25
7.4 Advice of Changes................................. 25
7.5 Conduct........................................... 25
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7.6 Employee Benefit Plans............................. 26
7.7 Satisfaction of Conditions by A-1-A................ 26
7.8 Non-Disclosure of Negotiations and
Non-Usage of Documents of THI...................... 26
7.9 Purchase of Real Estate by Affiliate............... 26
8. PRE-CLOSING COVENANTS OF THI.............................. 27
8.1 Satisfaction of Conditions by THI.................. 27
8.2 Confidentiality.................................... 27
8.3 Real Estate Closing Penalty Advance................ 28
9. POST-CLOSING COVENANTS.................................... 28
9.1 Further Assurances................................. 28
9.2 Confidentiality.................................... 29
9.3 Cooperation........................................ 29
10. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THI............ 29
10.1 Accuracy and Representations and Warranties........ 29
10.2 Performance of Agreements.......................... 30
10.3 Litigation, Etc.................................... 30
10.4 Approvals and Consents............................. 31
10.5 Shareholders' Certificate.......................... 31
10.6 Officer's Certificate.............................. 31
10.7 Good Standing Certificates......................... 31
10.8 No Material Adverse Change......................... 31
10.9 Actions, Proceedings, Etc.......................... 32
10.10 Opinion of Counsel to A-1-A........................ 32
10.11 Licenses, Permits, Consents, Etc................... 32
10.12 Documentation of Rights............................ 32
10.13 Employment of Shareholders......................... 32
10.14 Officers' Financial Certificate.................... 32
10.15 Accountants Letter................................. 32
10.16 THI Financing Commitment........................... 33
10.17 Lease/Option on Real Property...................... 33
10.18 Simultaneous Closing of Affiliate Transaction...... 33
10.19 Completion of Due Diligence........................ 33
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11. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF A-1-A.......... 34
11.1 Accuracy of Representations and Warranties......... 34
11.2 Performance of Agreements.......................... 34
11.3 Secretary's Certificate............................ 34
11.4 Actions, Proceedings, Etc.......................... 34
11.5 No Injunction...................................... 34
11.6 Opinion of Counsel to Buyer........................ 34
12. SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATIONS.......................................... 35
12.1 Survival........................................... 35
12.2 Indemnification by A-1-A and its Shareholders...... 35
12.3 Indemnification by THI............................. 36
12.4 Right to Defend.................................... 36
12.5 Subrogation........................................ 37
13. MISCELLANEOUS............................................. 37
13.1 Expenses........................................... 37
13.2 Termination of Agreement........................... 37
13.3 Waivers............................................ 38
13.4 Binding Effect; Benefits........................... 38
13.5 Assignment......................................... 38
13.6 Notices............................................ 38
13.7 Entire Agreement................................... 39
13.8 Headings; Certain Terms............................ 39
13.9 Counterparts....................................... 40
13.10 Governing Law...................................... 40
13.11 Severability....................................... 40
13.12 Amendments......................................... 40
13.13 Transaction Taxes.................................. 40
13.14 Disclosures........................................ 40
13.15 Section References................................. 40
13.16 Brokers and Finders................................ 40
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SCHEDULE AND EXHIBIT INDEX
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1. Exhibit 1.3(b) Inventory
2. Exhibit 1.3(c) Equipment
3. Exhibit 1.3(d) Rights (Patents, Trademarks, Copyrights, etc.)
4. Exhibit 1.3(g) Accounts Receivable
5. Exhibit 1.3(h) Real Property (owned or leased)
6. Exhibit 1.3(j) Excluded Assets
7. Exhibit 2.1 Excluded Liabilities
8. Exhibit 3.1 Promissory Notes
9. Exhibit 3.4(a) ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ Employment Agreement
10. Exhibit 3.4(b) ▇▇▇▇▇ ▇▇▇▇▇ Employment Agreement
11. Exhibit 3.4(c) ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Employment Agreement
12. Exhibit 3.6 Allocation of Consideration
13. Exhibit 4.1 Form of Closing Memorandum
14. Exhibit 5.1 Good Standing Certificates - A-1-A
15. Exhibit 5.2 Outstanding Offers, Options, Warrants, Equity
Securities, Etc.
16. Exhibit 5.3 Articles of Incorporation and By-laws of A-1-A
17. Exhibit 5.4 Subsidiaries, Divisions and Affiliates of A-1-A
18. Exhibit 5.5 Equity Investments
19. Exhibit 5.10 Financial Statements of A-1-A
20. Exhibit 5.11 Material Adverse Changes
21. Exhibit 5.12 Liens and Encumbrances of A-1-A
22. Exhibit 5.14 Insurance Policies
23. Exhibit 5.15.1 Liabilities
24. Exhibit 5.16 Patents, Trademarks, Copyrights
25. Exhibit 5.17 Permits, Licenses, Etc.
26. Exhibit 5.19 Material Litigation
27. Exhibit 5.20 5% Interest Ownership Table
28. Exhibit 5.21 Interest in Competitors
29. Exhibit 5.23 Employee Benefit Plans
30. Exhibit 5.24 Powers of Attorney
31. Exhibit 5.25 Sufficiency of Assets & Liabilities
32. Exhibit 5.26 Material Labor Disputes
33. Exhibit 5.27 Past Due Obligations
34. Exhibit 5.28 Environmental Compliance
35. Exhibit 5.29.A Tax Examination Dates
36. Exhibit 5.29.B Examinations of Tax Returns by Governmental Agency
37. Exhibit 5.29.C Proposal by Governmental Entity of Deficiency,
Assessment or Claim of Taxes
38. Exhibit 5.31.A Inventory
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39. Exhibit 5.31.B Non-useable Inventory
40. Exhibit 10.10 Opinion of Counsel to A-1-A
41. Exhibit 10.14 Officer's Financial Certificate
42. Exhibit 10.15 Accountant's Letter
43. Exhibit 10.17 Lease/Option to Purchase Land and Building
44. Exhibit 11.3 Secretary's Certificate
45. Exhibit 11.6 Opinion of Counsel to THI
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PURCHASE AGREEMENT
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THIS AGREEMENT ("Agreement") is made and entered into as of the 23rd day of
June, 1997, by and among Terrace Holdings, Inc., a Delaware corporation, or its
assignee under Section 13.5 of this Agreement ("THI") and A One A Wholesale
Produce, Inc., a Florida corporation ("A-1-A"), and A-1-A.
RECITALS:
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WHEREAS, A-1-A owns and operates all the Assets (as hereinafter defined);
WHEREAS, THI desires to purchase from A-1-A, and A-1-A desires to sell to
THI, the Assets on the terms and conditions set forth in this Agreement;
NOW THEREFORE, in consideration of the foregoing the mutual covenants and
agreements of the parties hereinafter set forth, and for other good and valuable
considerations, the receipt and sufficiency of which are hereby acknowledged,
the parties agree as follows:
1. DEFINITIONS
1.1 "Affiliate". As used in this Agreement, the term "Affiliate" shall
mean, as applied to any person, any other person directly or indirectly
controlling, controlled by, or under common control with, that person. For
purposes of this definition, "control" (including with correlative meanings, the
terms "controlling", "controlled by", and "under common control with") as
applied to any person, means the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of that
person or entity, whether through the ownership of voting securities, by
contract, or otherwise.
1.2 "Ancillary Documents" shall have the meaning set forth in Section 9.1
hereof.
1.3 "Assets". As used in this Agreement, the term "Assets" shall mean the
assets of A-1-A (as of the Closing) as follows:
(a) the business of A-1-A as a going concern, the goodwill pertaining
thereto and all of A-1-A's right, title
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and interest in and to the names "A One A Wholesale Produce", "We ▇▇▇▇▇ the
Competition", and all other names and phrases used by A-1-A, as well as all
logos relating thereto;
(b) all items of inventory owned by A-1-A including, without
limitation, all raw materials, work-in-progress and finished products of A-
1-A (all of which are collectively referred to hereinafter as "Inventory"),
including those items of Inventory set forth in Exhibit 1.3(b);
(c) all vehicles, machinery, equipment (including equipment which has
previously been fully depreciated by A-1-A and all equipment loaned to
customers), furniture, fixtures and non-inventory supplies of A-1-A
(including containers, packaging and shipping material, tools and spare
parts and other similar tangible personal property owned by A-1-A, which
are listed on Exhibit 1.3(c), all of which are collectively referred to
hereinafter as the "Equipment");
(d) all of A-1-A's right, title and interest in and to the United
States and foreign rights of A-1-A currently owned or used by A-1-A (and
the rights proposed to be used) which are set forth on Exhibit 1.3(d), in
the conduct of the business of A-1-A, with respect to copyrights, licenses,
trademarks, trademark rights, service ▇▇▇▇ rights, and trade secrets, shop
rights, know-how, technical information, techniques, discoveries, designs,
proprietary rights and non-public information and registrations, reissues
and extensions thereof and applications and licenses therefor, including
the items listed on Exhibit 1.3(d) (all of such rights being collectively
referred to hereinafter as the "Rights");
(e) all books and records of A-1-A including all in-house mailing
lists, other customer and supplier lists, trade correspondence, production
and purchase records, promotional literature, data storage tapes and
computer disks, computer software, order forms, accounts payable records
(including invoices, correspondence and all related documents), accounts
receivable ledger from January 1, 1997 through the Closing Date, all
documents relating to uncollected invoices, and all shipping records from
January 1, 1997 through the Closing Date;
(f) all contracts, agreements and orders for goods;
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(g) all trade receivables of A-1-A ("Accounts Receivable") and all
advance payments, prepaid items, rights to offset and credits of all kinds
of A-1-A, including those items listed in Exhibit 1.3(g);
(h) all real property owned or leased or under contract for purchase
by A-1-A together with all fixtures attached thereto, including those items
listed in Exhibit 1.3(h) (the "Real Property");
(i) all real property and all tangible personal property owned by A-
1-A which is not specifically included in, or specifically excluded by, the
foregoing subsections (a) through (h); and
(j) all other assets of A-1-A, except as specifically excluded on
Exhibit 1.3(j) ("Excluded Assets").
1.4 "Code" shall mean the Internal Revenue Code of 1986, as amended,
and/or superseded.
1.5 "Liabilities" shall mean all agreements, indentures, mortgages, plans,
policies, arrangements, and other instruments, including all amendments thereto
(or where they are verbal, written summaries of the materials terms thereof),
fixed or contingent, required to be disclosed on Exhibit 5.15.1 and all trade
payables and liabilities related to the Assets incurred in the ordinary course
of business and disclosed on Exhibit 5.10 or incurred thereafter consistent with
the term of this Agreement, which remain outstanding at Closing.
1.6 "Rights" shall mean copyrights, licenses, patents, trademarks,
trademark rights, trade names, service marks, service ▇▇▇▇ rights, and trade
secrets, shop rights, know-how, technical information, techniques, discoveries,
designs, proprietary rights and non-public information of A-1-A and
registrations, reissues and extensions thereof and applications and license
therefor.
2. SALE OF ASSETS AND ISSUANCE OF STOCK
2.1 Purchase and Sale of Assets and Rights. In exchange for the
consideration specified herein, and upon and subject to the terms and conditions
of this Agreement, THI agrees to purchase and acquire from A-1-A, and A-1-A
agrees to sell, assign, transfer, convey and deliver to THI or its assignee
under Section 13.5 at the
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Closing, all rights, title and interest in and to the Assets, free and clear of
any lien, encumbrance, security agreement, equity, option, claim, charge or
restriction, subject to the Liabilities other than those specifically excluded
on Exhibit 2.1.
2.2 Delivery of Possession and Instruments of Transfer. At the Closing,
A-1-A shall deliver to THI warranty bills of sale and such other instruments of
transfer requested by and satisfactory to THI and its counsel for the
consummation of the transactions contemplated under this Agreement and as are
necessary to vest in THI all of A-1-A's rights, title and interest in and to the
Assets, free and clear of any lien, encumbrance, security agreement, equity,
option, claim, charge or restriction of any kind or nature.
3. CONSIDERATION
3.1 Cash Consideration. The aggregate cash consideration to be paid by
THI in full consideration for its purchase of the Assets and the other rights
provided herein shall be $3,130,000, payable in accordance with the provisions
of Section 3.2 and subject to adjustment as set forth in Section 3.5 hereof.
3.2 Time and Mode of Cash Payment. The cash consideration set forth in
Section 3.1 shall be payable at the Closing by cashiers' or certified check(s)
or by wire transfer of funds, provided good and marketable title to the Assets
is delivered, free and clear of any lien, or encumbrance in accordance with
Section 2.2 hereof and provided all other terms and conditions of this Agreement
have been complied with.
3.3 Issuance of THI Shares of Capital Stock. As additional consideration,
subject to the conditions precedent set forth in this Agreement, at the Closing,
THI shall issue to A-1-A such number of shares, not less than 500,000, of THI
common stock, par value $.001 per share, as are equal to $1,000,000 in value in
the aggregate; it being agreed and understood that for purposes of determining
such $1,000,000, each such share shall be valued at its average closing price
for the full trading week prior to the Closing, which shall be determined by
dividing the sum of the closing prices for each day of such week by the number
of days in such trading week. If, however, the average closing price per share
calculated in accordance with the foregoing is above $2.00 per share, THI shall
issue to A-1-A only 500,000 shares. Except as otherwise expressly provided for
in
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this Agreement, none of such shares shall be registered. Except as otherwise
expressly provided for in this Agreement, certificates evidencing the shares of
THI common stock to be issued hereunder shall have stop transfer orders placed
against them on the books of THI's transfer agent and each shall bear
substantially the following legend:
"The securities represented by this Certificate were acquired on
_________________________ without registration under the Securities Act of
1933, as amended, or any applicable state securities law. No transfer,
sale or other disposition of these securities or any interest therein may
be made except under an effective registration statement under said Act
covering such securities unless the Corporation has received an opinion of
counsel satisfactory to it that such transfer or resale does not require
registration under said Act."
3.4 Other Consideration. In further consideration of the sale by A-1-A,
and the purchase by THI, of the Assets, and as additional inducements to THI to
enter into this Agreement, the following shall be applicable:
(a) ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ shall, at the Closing, deliver to THI an
executed Employment Agreement in the form attached hereto as Exhibit
3.4(a).
(b) ▇▇▇▇▇ ▇▇▇▇▇ shall, at the Closing, deliver an executed Employment
Agreement in the form attached hereto as Exhibit 3.4(b).
(c) ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ shall, at the Closing, deliver to THI an
executed Employment Agreement in the form attached hereto as Exhibit
3.4(c).
3.5 Acquisition Audit. THI, at its expense, shall cause the firm of ▇▇▇▇▇
▇▇▇▇▇▇▇▇, P.C., independent certified public accountants, to conduct, within
three months following the Closing, an acquisition audit ("Acquisition Audit")
of the assets and liabilities of A-1-A. A-1-A shall direct the independent
certified public accounting firm it currently employs, to provide such
assistance as shall reasonably be requested by ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, P.C. in
performing the Acquisition Audit. The results of the Acquisition Audit shall be
delivered to THI, and shall be in such form as to satisfy all applicable rules
and regulations of the Securities and Exchange Commission. Specifically, the
Acquisition Audit shall cover not less than the A-1-A years ended December 31,
1996 and 1995, and may also cover an interim period or date in
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1997, as THI shall direct. The cash consideration provided for in Section 3.1
shall be adjusted, up or down, dollar for dollar, to the extent that the audited
Total Stockholders Equity of A One A Wholesale Produce, Inc. as of December 31,
1996, exceeds or is below $951,966. The adjusted cash consideration shall be
paid to A-1-A by THI or to THI by A-1-A, depending on whether the adjusted
amount exceeds or is below $951,966 within five days from the date such
Acquisition Audit is delivered to the parties. Any payments to be made pursuant
to the Acquisition Audit shall be paid with interest from Closing to be
calculated at a rate equal to the prime rate as announced by Sun Trust Bank N.A.
If A-1-A or THI shall disagree with the calculation of Total Stockholder
Equity pursuant to the Acquisition Audit to the extent of at least $25,000 and
such disagreement shall not have been resolved prior to 30 days following
delivery of the Acquisition Audit, all items in dispute shall be submitted to
any other independent accountant or firm jointly chosen by THI's independent
certified public accountants and A-1-A's certified public accountants for the
purpose of arbitrating the dispute. The Arbitrator must agree prior to
accepting the engagement to complete his determination within 30 days of the
date of his engagement. The determination of the Arbitrator shall be final,
binding and nonappealable. The fees of the Arbitrator shall be paid by the
losing party or as the Arbitrator shall apportion. Notwithstanding anything to
the contrary contained in this Section 3.5, THI agrees to forthwith pay to A-1-A
that portion of the consideration, if any, that THI in good faith does not
dispute. THI shall use its best efforts to make available to A-1-A and its
attorneys, accountants or other representatives, for examination, such of its
book of account, contracts, licenses, leases, instruments, commitments, sales
orders, purchase orders, records, accountants' work papers and other documents
as are relevant to the preparation of the Acquisition Audit.
3.6 Allocation of Consideration for Tax Purposes. The parties agree to
allocate the consideration paid pursuant to this Agreement in the manner and in
accordance with the values specified in Exhibit 3.6 for tax purposes. None of
the parties shall, at any time hereafter, in any tax or information return filed
with any state or federal agency or in any audit, other tax proceeding or
otherwise, take a position which is contrary to such allocation.
3.7 Escrow Deposit and Uses Thereof. Concurrent with or as immediately
subsequent to the execution of this Agreement as is
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practicable, THI shall deposit with counsel for A-1-A named in Section 13.6
hereof, as Informal Escrowee, the sum of $100,000, which sum shall form a part
of the cash consideration provided in Section 3.1 hereof. At the Closing, such
escrowed sum shall be paid to A-1-A as part of the cash consideration hereunder
and the interest thereon, if any, shall be paid over to THI. If the Closing does
not occur by reason of THI's material breach of the Agreement, then, such sum,
together with interest thereon, if any, shall be paid to A-1-A as liquidated
damages and not as a penalty, provided that if such liquidated damages are paid
to A-1-A they shall be in lieu of any obligations of THI under Section 8.3 of
this Agreement.
4. CLOSING
4.1 Closing and Closing Date. Subject to the provisions of this
Agreement, the consummation of the transactions contemplated by this Agreement
(the "Closing") shall be held at the offices of Terrace Holdings, Inc., ▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇-▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, at 10:00 a.m. (local
time), July 17, 1997, or at such later date, place or time as the parties shall
otherwise mutually agree upon (the date of the Closing being referred to herein
as the "Closing Date"), but shall be deemed effective as of June 30, 1997, or
such later month end as immediately precedes any Closing Date subsequent to July
17, 1997 ("Effective Date"). All Closing transactions shall be deemed to take
place simultaneously, and no Closing transaction shall be deemed consummated
until all transactions to take place at the Closing have been consummated. The
actions and documents necessary for the consummation of transactions
contemplated by this Agreement shall be set forth in the Closing Memorandum
attached hereto as Exhibit 4.1.
5. REPRESENTATIONS AND WARRANTIES OF A-1-A
As an inducement to THI to enter into this Agreement and perform its
obligations hereunder, A-1-A hereby represents and warrants to THI as follows,
each of which representation and warranty is material and is being relied upon
by THI, and each of which is true as of the date hereof and shall be true as of
the Closing, with the same effect as if said representations and warranties had
been made at and as of the Closing Date:
5.1 Organization, Good Standing, Power, Etc. A-1-A is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Florida. A-1-A is authorized or
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licensed to do business as a foreign corporation and is in good standing in each
jurisdiction (set forth in Exhibit 5.1) in which the character and location of
its Assets or the nature of the business transacted by A-1-A makes such
qualification necessary. A-1-A has all requisite corporate power and authority
to (i) execute, deliver and perform its obligations under this Agreement and to
consummate the transactions contemplated hereby and (ii) to own or lease and
operate its properties and assets, and carry on its business as it is presently
being conducted.
5.2 Capital Stock.
(a) A-1-A has authorized capital stock consisting of 1,000 shares of
common stock, $1.00 par value, of which 300 shares are issued and outstanding,
all of which are duly authorized, validly issued, fully paid, nonassessable,
free of preemptive rights, and were issued in compliance with all federal and
applicable state securities laws.
(b) Except as set forth in Exhibit 5.2 hereof, there are no outstanding
offers, options, warrants, rights, calls, commitments, obligations (verbal or
written), conversion rights, plans or other agreements (conditional or
unconditional) of any character providing for, requiring or permitting the
offer, sale, purchase or issuance of any shares of capital stock of A-1-A or any
other securities (as such term is defined in the Securities Act of 1933, as
amended). Except as set forth in Exhibit 5.2, there are no equity securities of
the Company that are reserved for issuance or are outstanding.
(c) The capital stock is owned by the shareholders of A-1-A free and clear
of all liens, charges, encumbrances or claims of any kind whatsoever.
5.3 Articles of Incorporation and By-Laws. Included in Exhibit 5.3 hereto
are correct and complete copies of the Articles of Incorporation of A-1-A, as
amended to date, and the By-Laws of A-1-A, as amended to date. Such Articles of
Incorporation and By-Laws are in full force and effect.
5.4 Subsidiaries, Divisions and Affiliates. Except as set forth on
Exhibit 5.4, there are no subsidiaries, divisions or Affiliates of A-1-A.
Except as set forth on Exhibit 5.4, the business of A-1-A has been conducted
solely by A-1-A and not
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through any Affiliate, joint venture or other entity, person or under any other
name.
5.5 Equity Investments. Except as set forth in Exhibit 5.5, A-1-A does
not own or have any rights to any equity interest, directly or indirectly, in
any corporation, partnership, joint venture, firm or other entity.
5.6 Authorization of Agreement. The execution, delivery and performance
of this Agreement has been, and the Ancillary Documents will be, duly and
validly executed and delivered by A-1-A. This Agreement constitutes a valid and
binding obligation of A-1-A enforceable in accordance with its terms, except
that such enforcement may be limited by bankruptcy, insolvency or other similar
laws affecting the enforcement of creditor's rights generally.
5.7 Effect of Agreement. The execution, delivery and performance of this
Agreement by A-1-A, and the consummation by A-1-A of the transactions
contemplated hereby, will not, with or without the giving of notice and the
lapse of time, or both, (a) violate any provision of law, statute, rule,
regulation or executive order to which A-1-A is subject; (b) violate any
judgment, order, writ or decree of any court applicable to A-1-A; or (c) result
in the breach of or conflict with any term, covenant, condition or provision of,
result in the modification or termination of, constitute a default under, or
result in the creation or imposition of any lien, security interest, charge or
encumbrance upon any of the Assets pursuant to, any corporate charter, by-law,
commitment, contract or other agreement or instrument, including any of the
Liabilities, to which A-1-A or any of its shareholders is a party or by which
any of the Assets is or may be bound or affected or from which A-1-A derives
benefit, which breach, conflict, modification, termination, default or
encumbrance described in this clause (c) would be material to the business of A-
1-A or any of the Assets.
5.8 Restrictions; Burdensome Agreements. A-1-A is not a party to any
contract, commitment or agreement, nor is A-1-A or the Assets subject to, or
bound or affected by, any provision of the Articles of Incorporation, By-laws or
other corporate restriction, or any order, judgment, decree, law, statute,
ordinance, rule, regulation or other restriction of any kind or character, which
would, individually or in the aggregate, materially adversely affect A-1-A's
business or any of the Assets.
9
5.9 Governmental and Other Consents. No consent, authorization or
approval of, or exemption by, any governmental or public body or authority is
required in connection with the execution, delivery and performance by A-1-A of
this Agreement or of any of the instruments or agreements herein referred to, or
the taking of any action herein contemplated.
5.10 Financial Statements. A-1-A has delivered to THI, and included in
Exhibit 5.10 hereto are, correct and complete copies of balance sheets of A-1-A
for the periods ended March 31, 1997 and March 31, 1996, and May 31, 1997, the
related statements of income for the three months ended March 31, 1997 and
March 31, 1996, and the ended May 31, 1997 (the "1997 Financial Statements") and
balance sheets for the years ended December 31, 1996 and 1995 and the related
statements of income for the years then ended (collectively, with the 1997
Financial Statements, the "Financial Statements"). None of the Financial
Statements have been audited. Except as set forth on the compilation report of
▇▇▇▇▇▇ & ▇▇▇▇▇▇, Certified Public Accountants, the Financial Statements are in
accordance with the books and records of A-1-A, have been prepared in accordance
with generally accepted accounting principles and practices consistently applied
and accurately present the financial position of A-1-A at their respective dates
and the results of operations for the respective periods covered thereby and all
items that could have a material adverse effect on the willingness of a
prospective purchaser to acquire A-1-A have been disclosed in the Financial
Statements or in the Exhibits to this Agreement.
5.11 Absence of Certain Changes or Events. Except as set forth on Exhibit
5.11, since January 1, 1997, A-1-A has not: (a) suffered any adverse change in,
or the occurrence of any events which, individually or in the aggregate, has or
have had, or might reasonably be expected to have, a material adverse effect on,
A-1-A's financial condition, results of operations or business or the value of
the Assets; (b) incurred damage to or destruction of any material Asset or
material portion of the Assets, whether or not covered by insurance; (c)
incurred any material obligation or liability (fixed or contingent) except (i)
current trade or business obligations incurred in the ordinary course of
business, none of which were entered into for inadequate consideration, (ii)
obligations or liabilities under the Liabilities to the extent required thereby,
and (iii) obligations and liabilities under this Agreement; (d) made or entered
into contracts or commitments to make any capital expenditures in excess of One
Thousand Dollars ($1,000.00); (e) mortgaged, pledged or subjected to lien or any
10
other encumbrance any of the Assets (except for purchase money liens used in the
acquisition of the Assets, as set forth on Exhibit 5.11); (f) sold, transferred
or leased any material Asset or material portion of the Assets, or canceled or
compromised any debt or material claims, except in each case, in the ordinary
course of business; (g) sold, assigned, transferred or granted any rights under
or with respect to any licenses, agreements, patents, inventions, trademarks,
trade names, copyrights or formulae or with respect to know-how or any other
intangible asset including, but not limited to, the Rights; (h) amended or
terminated any of the contracts, agreements, leases or arrangements which
otherwise would have been set forth on Exhibit 5.15.1 hereto; (i) waived or
released any other rights of material value; or (j) entered into any
transactions not in the ordinary course of business which would, individually or
in the aggregate, materially adversely affect the Assets or the business of
A-1-A.
5.12 Title to Assets; Absence of Liens and Encumbrances. Except as set
forth on Exhibit 5.12, (a) A-1-A has good title to, and owns outright, the
Assets, which include substantially all of A-1-A's assets reflected in the
Financial Statements (except (i) as sold, used or otherwise disposed of in the
ordinary course of business, and (ii) as disclosed in the Financial Statements),
free and clear of all mortgages, claims, liens, charges, encumbrances, security
interests, restrictions on use or transfer or other defects as to title; and (b)
immediately following the Closing, THI will have good and marketable title to
all Assets, free and clear of all mortgages, claims, liens, charges,
encumbrances, security interests, restrictions on use or transfer, or other
defects of any nature. The leases and other agreements or instruments under
which A-1-A holds, leases or is entitled to the use of any real or personal
property included in the Assets (a correct and complete list of such leases and
other agreements or instruments being set forth on Exhibit 5.15.1) are in full
force and effect and all rentals, royalties or other payments accruing
thereunder prior to the date hereof have been duly paid. A-1-A enjoys peaceable
and undisturbed possession under all such leases, and the change in ownership of
the Assets will not adversely affect such leases, other agreements and
instruments.
5.13 Equipment. Set forth on Exhibit 1.3(c) is a correct and complete
list as of May 31, 1997 of all of the Equipment (as defined in Section 1.3(c)),
indicating for each piece of Equipment whether it is owned or leased and setting
forth where it is located. None of the Equipment has been disposed of since May
31,
11
1997. Except as noted on Exhibit 1.3(c), all of the Equipment (a) is in good
working condition, with, to the knowledge of A-1-A, no material defects, and
generally has been suitable to A-1-A for the uses for which it was designed or
has been employed by A-1-A, and (b) conforms in all material respects with any
laws, ordinances, regulations, orders or other similar governmental requirements
relating to its use, as the same are currently in effect.
5.14 Insurance. There are no outstanding or unsatisfied written
requirements or repeated verbal recommendations imposed or made by any of
A-1-A's current insurance companies with respect to current policies covering
any of the Assets, or by any governmental authority requiring or recommending,
with respect to any of the Assets, that any repairs or other work be done on or
with respect to, or requiring or recommending any equipment or facilities be
installed on or in connection with, any of the Assets. A-1-A carries, and (with
respect to any period for which a claim against A-1-A may still arise) has
always carried product liability insurance, worker's compensation insurance in
reasonable amounts, and other insurance which is reasonably necessary to the
conduct of the A-1-A's business. On Exhibit 5.14 is set forth a correct and
complete list of (a) all currently effective insurance policies and bonds
covering the Assets or the business of A-1-A, and their respective annual
premiums (as of the last renewal or purchase of new insurance), and (b) for the
five-year period ending on the date hereof, (i) all accidents, casualties or
damage occurring on or to the Assets or relating to the business or products of
A-1-A which in the aggregate are in excess or One Thousand Dollars ($1,000.00),
and (ii) claims for product liability, damages, contribution or indemnification
and settlements (including pending settlement negotiations) relating thereto
which in the aggregate are in excess of one Thousand Dollars ($1,000.00). Except
as set forth on Exhibit 5.14, as of the date hereof there are no disputes with
underwriters of any such policies or bonds, and all premiums due and payable
have been paid. There are no pending or threatened terminations or premiums
increases with respect to any of such policies or bonds and there is no
condition or circumstance applicable to the business of A-1-A, other than the
sale of the Common Stock pursuant to this Agreement, which may result in such
termination or increase. A-1-A and the Assets are in compliance with all
conditions contained in such policies or bonds, except for non-compliance which,
individually or in the aggregate, would not have a material adverse affect on
the business of A-1-A or the Assets.
12
5.15 Agreements, Arrangements, Etc.
5.15.1 Except as set forth on Exhibit 5.15.1, A-1-A is not a party to, nor
are A-1-A or any of the Assets bound by any:
(a) lease agreement (whether as lessor or lessee) of the Assets;
(b) license agreement, assignment or contract (whether as licensor or
licensee, assignor or assignee) relating to trademarks, trade names,
patents, or copyrights (or applications therefor), unpatented designs or
processes, formulae, know-how or technical assistance, or other proprietary
rights;
(c) employment or other contract or agreement with an employee or
independent contractor which (i) may not be terminated without liability to
A-1-A upon notice to the employee or independent contractor of not more
than 30 days, or (ii) provides payments (contingent or otherwise) of more
than $10,000 per year (including all salary, bonuses and commissions);
(d) agreement, contract or order with any buying agent, supplier or
other individual or entity who assists, provides or is otherwise involved
in the acquisition, supplying or providing Assets or other goods to A-1-A;
(e) non-competition, secrecy or confidentiality agreements;
(f) agreement or other arrangement for the sale of goods or services
by A-1-A to any third party (including the government or any other
governmental authority);
(g) agreement with any labor union;
(h) policy of insurance (including bonds) in force with respect to
A-1-A or any of its operations, properties, assets or executive officers;
(i) agreement, contract or order with any distributor, dealer, sales
agent or representative, other than contracts or orders for the purchase,
sale or license of goods made in the usual and ordinary course of business
at an aggregate price
13
per contract or more than $1,000 and a term of more than six months under
any such contract or order;
(j) agreement, contract or order with any manufacturer, supplier or
customer (including those agreements which allow discounts or allowances or
extended payment terms);
(k) agreement with any food distributor or brokerage company,
management company or any other individual or entity who assists, places,
brokers or otherwise is involved with the marketing or distribution of
A-1-A's products to its customers;
(l) joint venture or partnership agreement with any other person;
(m) agreement guaranteeing, indemnifying or otherwise becoming liable
for the obligations or liabilities of another;
(n) agreement with any banks or other persons, other than its
employees, for the borrowing or lending of money or payment or repayment of
draws on letters of credit or currency swap or exchange agreements (other
than purchase money security interests which may, under the terms of
invoices from its suppliers, be granted to suppliers with respect to goods
so purchased);
(o) agreement with any bank, finance company or similar organization
which acquires from A-1-A receivables or contracts for sales on credit;
(p) agreement granting any person a lien, security interest or
mortgage on any of the Assets, including, without limitation, any factoring
or agreement for the assignment of receivables or inventory;
(q) agreement for the incurrence of any capital expenditure in excess
of $1,000;
(r) advertising, publication or printing agreement;
(s) agreement which restricts A-1-A from doing business anywhere in
the world;
14
(t) agreement or statute or regulation giving any party the right to
renegotiate or require a reduction in prices or the repayment of any amount
previously paid; or
(u) other agreement or contract, not included in or expressly
excluded from the terms of the foregoing clauses (a) through (t),
materially affecting the Assets or A-1-A's business, including trade and
other payables and liabilities related to the Assets incurred in the
ordinary course of business (all of which are set forth in the 1997
Financial Statements on Exhibit 5.10), except contracts or purchase orders
for the purchase or sale of goods or services made in the usual and
ordinary course of business.
Correct and complete copies of all Liabilities required to be shown on Exhibit
5.15.1 (or Exhibit 5.10) have been separately delivered to THI prior to the date
hereof.
5.15.2 Each of the Liabilities is valid, in full force and effect and
enforceable by A-1-A in accordance with its terms.
5.15.3 Except as set forth on Exhibit 5.15.1, A-1-A has fulfilled, or has
taken all action reasonably necessary to enable it to fulfill when due, all of
its obligations under the Liabilities, except where the failure to do so would
not, individually or in the aggregate, have a material adverse affect on the
business of A-1-A or the Assets. Furthermore, there has not occurred any
default by A-1-A or any event which, with the lapse of time or the election of
any person other than A-1-A, will become a default, nor has there occurred any
default by others or any event which, with the lapse of time or the election of
A-1-A, will become a default under any of the Liabilities, except for such
defaults, if any, which (a) have not resulted and will not result in any
material loss to or liability of A-1-A or any of its successors or assigns or
(b) have been indicated on Exhibit 5.15.1. A-1-A is not in arrears in any
material respect with respect to the performance of satisfaction of the terms or
conditions to be performed or satisfied by it under any of the Liabilities and
no waiver or variance has been granted by any of the parties hereto.
5.15.4 The accounts receivable of A-1-A at June 30, 1997 and as reflected
on its balance sheet of that date, are true, complete and collectible except for
$1,000 thereof, which may be deemed to be a reasonable reserve for unpaid debts.
If on or about December 31, 1997, any of such accounts, to the extent of them
remaining
15
unpaid, are not paid in full on demand when due, except as otherwise then agreed
by THI, A-1-A forthwith upon notice from THI to that effect, will pay the full
amount thereof to THI against delivery to A-1-A of an assignment of the
defaulted account or accounts less the $1,000 as aforesaid, which is deemed to
be the full reserve against unpaid accounts receivable of A-1-A.
5.15.5 After the Closing, except as set forth on Exhibit 5.15.1, each of
the Liabilities included in the Assets does not require the consent of the other
parties thereto and, with respect to any of the Liabilities which do require the
consent of the other parties thereto, A-1-A has obtained such consent and has
provided or will provide THI with copies thereof.
5.16 Patents, Trademarks, Copyrights, Etc. Exhibit 1.3(d) sets forth (i)
the registered and beneficial owner and the expiration date, to the extent
applicable, for each of the Rights set forth on such Exhibit and (ii) the
product, service, or products or services of A-1-A which make use of, or are
sold, licensed or made under, each such Right. All of the Rights are included
in the Assets and constitute all Rights necessary for the conduct of the
business of A-1-A, as such business is currently being conducted. Except as set
forth on Exhibit 5.16, A-1-A has not sold, assigned, transferred, licensed, sub-
licensed or conveyed the Rights, or any of them, or any interest in the Rights,
or any of them, to any person, and has the entire right, title and interest
(free and clear of all security interests, liens and encumbrances of every
nature) in and to the Rights necessary to the conduct of the business of A-1-A
as currently being conducted; neither has the validity of such items been, nor
is the validity of such items, nor the use thereof by A-1-A, the subject of any
pending or threatened opposition, interference, cancellation, nullification,
conflict, concurrent use, litigation or other proceeding. The conduct of the
business of A-1-A as currently operated, and the use of the Assets does not and
will not conflict with, or infringe, legally enforceable rights of third
parties. Except as set forth on Exhibit 5.16, the Rights owned by or licensed to
A-1-A have not been used, and no use is now being made, by any entity except
A-1-A and other entities duly licensed to use the same. Except as set forth on
Exhibit 5.16, there is no infringement of any proprietary right owned or
licensed by A-1-A.
5.17 Permits, Licenses, Etc. There are no permits, licenses,
registrations, memberships, orders or approvals of governmental or
administrative authorities or required to permit A-1-A to carry on
16
its business as currently conducted (other than (i) permits, licenses,
registrations, trade memberships, orders or approvals which are set forth on
Exhibit 5.17, all of which are in full force and effect, and (ii) other permits,
licenses, orders or approvals, the failure to obtain which would not,
individually or in the aggregate, have a material adverse affect on the Assets
or on A-1-A's business).
5.18 Compliance with Applicable Laws. The conduct of A-1-A of its
business does not violate or infringe, and there is no basis for any claims of
violation or infringement of, any law, statute, ordinance, regulation or
executive order (including, without limitation, the Federal Food, Drugs and
Cosmetics Act, as amended, the Occupational Safety and Health Act, the National
Environmental Policy Act, any federal agriculture law, or the Foreign Corrupt
Practices Act and the respective regulations thereunder and similar applicable
state laws and regulations, including but not limited to agriculture laws and
regulations) currently in effect, except in each case for violations or
infringements which do not and will not, individually or in the aggregate, have
a material adverse affect on the Assets or A-1-A's business. A-1-A is not in
default under any governmental or administrative registration, membership or
license issued to it, under any governmental or administrative order or demand
directed to it, or with respect to any order, writ, injunction or decree of any
court which, in any case, materially adversely affects the financial condition,
results of operations or business of A-1-A or the value of the Assets.
5.19 Litigation. Except as set forth on Exhibit 5.19, there is no claim,
action, suit, proceeding, arbitration, reparation, investigation or hearing or
notice of hearing, pending or threatened, before any court or governmental,
administrative or other competent authority or private arbitration tribunal
against or relating to or affecting (directly or indirectly, including by way of
indemnification) the business of A-1-A or any of the Assets, or the transactions
contemplated by this Agreement; nor are any facts known to A-1-A, which it
believes could reasonably give rise to any such claim, action, suit, proceeding,
arbitration, investigation or hearing, which may have any adverse affect,
individually or in the aggregate in excess of One Thousand Dollars ($1,000) upon
the business of A-1-A, the value of the Assets or the transactions contemplated
by this Agreement. A-1-A has not waived any statute of limitations or other
affirmative defense with respect to any of its obligations. There is no
continuing order, injunction or decree of any court, arbitrator or governmental,
17
administrative or other competent authority to which A-1-A is a party, or to
which the Company is subject. Neither A-1-A nor any of its shareholders or
current officer, director, partner or employee of A-1-A or any Affiliate of
A-1-A has been permanently or temporarily enjoined or barred by order, judgment
or decree of any court or other tribunal or any agency or other body from
engaging in or continuing any conduct or practice in connection with the
business engaged in by A-1-A. A-1-A's worker's compensation experience rating
for the five-year period ending on the Closing Date is set forth in Exhibit
5.19.
5.20 No Interest in Competitors. Set forth on Exhibit 5.20 is a list
describing the extent to which A-1-A, any of the shareholders or any officer or
director of A-1-A or any Affiliate of any of the foregoing, directly or
indirectly, owns more than a five percent (5%) interest in or controls or is an
employee, officer, director, or partner of or participant in (but only to the
extent such a participation exceeds one percent), or consultant to any
corporation, partnership, company, limited partnership, joint venture,
association or other entity which is a competitor, supplier or customer of A-1-A
or has any type of business or professional relationship with A-1-A.
5.21 Customers, Suppliers, Distributors and Agents. Except as set forth
on Exhibit 5.21, A-1-A has no knowledge or reason to believe that any customer,
client, distributor, supplier or any other person or entity with material
business dealings with A-1-A, will or may cease to continue such relationship
with A-1-A, or will or may substantially reduce the extent of such relationship,
at any time prior to or after the Closing Date. Except for such common public
information, A-1-A has no knowledge of (1) any other existing or contemplated
modification or change in the business relationship of A-1-A with, or (2) any
existing condition or state of facts or circumstances which has affected
adversely, will adversely affect (in more than a minimal manner), or has a
reasonable likelihood of adversely affecting the business of A-1-A with its
customers, clients, suppliers or other persons or entities with material
business dealings with A-1-A or which has prevented or will prevent such
business from being carried on by A-1-A under its new ownership after the
Closing in essentially the same manner as it is currently carried on.
5.22 Books and Records. The books of account and other financial and
corporate records of A-1-A are in all material respects complete, correct and up
to date, with all necessary
18
signatures, and are in all material respects accurately reflected in the
Financial Statements.
5.23 Employee Benefit Plans. Except as described in Exhibit 5.23, A-1-A
does not have any hospitalization, health insurance, pension, retirement, profit
sharing, stock option or similar plans. Exhibit 5.23 sets forth a correct and
complete list of each and every employee benefit plan, including each pension,
profit sharing, stock bonus, bonus, deferred compensation, severance, stock
option or purchase plan, or other retirement plan or arrangement, covering
employees of A-1-A (the "Employee Benefit Plans"). For each such employee
pension plan, multi-employer plan or welfare plan as those terms are defined in
Section 3 of the Employee Retirement Income Security Act of 1974 ("ERISA") and
for each Employee Benefit Plan with respect to which A-1-A is a "party in
interest" as defined in Section 3 of ERISA, or a "disqualified person" as
defined in Section 4975 of the Code, A-1-A has delivered to THI complete and
accurate copies of (i) all Employee Benefit Plans and all amendments thereto;
(ii) the trust instrument or insurance contract, if any, forming a part of the
plans, and all amendments thereto; (iii) the most recent and preceding year's
Internal Revenue Service Form 5500 and all schedules thereto; (iv) the most
recent Internal Revenue Service determination letter, or if no letter has been
issued, any pending application to the Internal Revenue Service for a
determination letter regarding qualified status; (v) any bond required by
Section 412 of ERISA; and (vi) the summary plan description. A-1-A has complied
with all of the rules and regulations governing each of the Employee Benefit
Plans maintained for the benefit of A-1-A's employees, including, without
limitation, rules and regulations promulgated pursuant to ERISA and the Code, by
the Department of Treasury, Department of Labor, and the Pension Benefit Plans
Guaranty Corporation, and each of the Employee Benefit Plans now operated has
since its inception been operated in accordance with its provisions and is in
compliance with such rules and regulations. Neither A-1-A nor any Employee
Benefit Plans maintained by A-1-A or any fiduciaries thereof have engaged in any
prohibited transaction, as that term is defined in Section 406 of ERISA or
Section 4975 of the Code, nor have any of them committed any breach of fiduciary
responsibility with respect to any of the Employee Benefit Plans, and A-1-A does
not have any knowledge that any other person has not complied with these rules
and regulations.
5.24 Powers of Attorney. Except as set forth on Exhibit 5.24, no person has
any power of attorney to act on behalf of A-1-A
19
in connection with any of A-1-A's properties or business affairs other than such
powers to so act as normally pertain to the officers of A-1-A.
5.25 Sufficiency of Assets and Liabilities. Except as set forth in Exhibit
5.25, the Assets and the Liabilities, taken in the aggregate, are sufficient,
and constitute all of the property and Rights necessary, for the continuation of
the business and operations of A-1-A on a basis consistent with past operations.
5.26 Labor Disputes, Unfair Labor Practices. Except as set forth on Exhibit
5.26, A-1-A is not engaged in any labor practice which would have a material
adverse affect on the Assets or A-1-A's business. There is no pending or
affirmatively threatened (i) unfair labor practice complaint, charge, labor
dispute, strike, slowdown, walkout or work stoppage before the National Labor
Relations Board or any other authority or (ii) grievance or arbitration
proceeding arising out of or under a collective bargaining agreement involving
employees of A-1-A. There have been no strikes, labor disputes, slow-downs,
walkouts, or work stoppages involving employees of A-1-A during the last five
(5) years. No union representation question exists with respect to the employees
of A-1-A and no union organizing activities are taking place. A-1-A has not
received notice from any of its employees of such employee's intent to terminate
his or her employment or bring any action against A-1-A for any reason related
to the transactions contemplated by this Agreement or for any other reason.
5.27 Past Due Obligations. Except as set forth on Exhibit 5.27, no past due
obligations of A-1-A over $500 have given rise or shall give rise within 6
months after the Closing Date (except as such will be performed by A-1-A prior
to the Closing so as to relieve THI of all liability therefor) to any additional
liability to THI on account of their being past due.
5.28 Environmental Compliance. Except as set forth in Exhibit 5.28, (i)
A-1-A has not generated, used, transported, treated,,stored, released or
disposed of, nor has suffered or permitted anyone else to generate, use,
transport, treat, store, release or dispose of any Hazardous Substance in
violation of any laws or governmental regulation; (ii) there has not been any
generation, use, transportation, treatment, storage, release or disposal of
any Hazardous Substance in connection with the conduct of the business of A-1-A
or the use of any property, facility or Assets of A-1-A or to the knowledge of
A-1-A any nearby or adjacent
20
properties or facilities, which has created or might reasonably be expected to
create any liability under any laws or governmental regulation or which would
require reporting to or notification of any governmental entity; (iii) no
asbestos or polychlorinated biphenyl or underground storage tank is contained in
or located at any facility of A-1-A; and (iv) any Hazardous Substance handled or
dealt with in any way in connection with the business of A-1-A has been and his
being handled or dealt with in all respects in compliance with applicable local,
state and federal laws. For purposes of this Section, "Hazardous Substance"
means (but shall not be limited to) substances that are defined or listed in, or
otherwise classified pursuant to, any applicable Laws as "hazardous substances",
"hazardous materials', "hazardous wastes" or "toxic substances", or any other
formulation intended to define, list or classify substances by reason of
deleterious properties such as ignitability, corrosivity, toxicity or "EP
toxicity", and petroleum and drilling fluids, produced waters and other wastes
associated with the exploration, development, or production or crude oil,
natural gas or geothermal energy.
5.29 Tax and Other Returns and Reports. A-1-A has timely filed or will file
all federal, state and local tax returns and information returns ("Tax Returns")
required to be filed by them and have paid all taxes due for all periods ending
on or before December 31, 1996. Adequate provision has been made in the books
and records of A-1-A and in the Financial Statements referred to in Section 5.10
above for all taxes whether or not due and payable and whether or not disputed.
Exhibit 5.29.A lists the date or dates through which the IRS and any other
governmental entity have examined the United States federal income tax returns
or information returns and any other Tax Returns of A-1-A and of its
shareholders as it may affect A-1-A. All required Tax Returns, including
amendments to date, have been prepared in good faith without negligence or
willful misrepresentation and are complete and accurate and in all material
respects. Except as set forth in Exhibit 5.29.B, no governmental entity has,
during the past three years, examined or is in the process of examining any Tax
Returns of A-1-A or of any of its shareholders as it may affect A-1-A. Except as
set forth on Exhibit 5.29.C, no Governmental Entity has proposed (tentatively or
definitively), asserted or assessed or threatened to propose or assert, any
deficiency, assessment, lien, or other claim for taxes and there would be no
basis for any such delinquency, assessment, lien or claim. There are no
agreements, waivers or other arrangements providing for an extension of time
with respect to the assessment of any tax or deficiency against ▇-
▇▇
1-A or any of its shareholders as it may affect A-1-A or with respect to any Tax
Return filed or to be filed by A-1-A.
5.30 Recent Dividends and Other Distributions. There has been no dividend
or other distribution of assets or securities by A-1-A, whether consisting or
money, property or any other thing of value, declared, issued or paid to or for
the benefit of A-1-A's shareholders subsequent to the date of the most recent
financial statements described in Section 5.10.
5.31 Inventory. Except as set forth in Exhibits 5.31A and B, all of the
Inventory has been received within four months of June 30, 1997 and is of a
quantity and quality saleable at regular prices or usable in the ordinary course
of business during 1997. Exhibit 5.31A shall specify all Inventory that was
received more than four months before the Closing Date, including the calendar
month in which such Inventory was received, by quantity and product family.
Exhibit 5.31B shall specify all Inventory which is not of a quality or quantity
saleable or usable in the ordinary course of business.
5.32 Purchase and Sale Obligations. All purchase, sales and orders and all
other commitments for purchases, sales and orders made by or on behalf of A-1-A
have been made in the usual and ordinary course of its business in accordance
with normal practices. On the Closing Date, A-1-A shall deliver to THI a
schedule of all such uncompleted purchase and sale orders and other commitments
with respect to any of A-1-A's obligations as of a date not earlier than ten
(10) days prior to the Closing.
5.33 Other Information. None of the information which has been or may be
furnished by A-1-A or any of its representatives to THI or any of its
representatives in connection with the transactions contemplated hereby, which
is contained in this Agreement (including the Exhibits hereto) or any Ancillary
Document or any certificate or instrument delivered or to be delivered by or on
behalf of A-1-A in connection with the transactions contemplated hereby, does or
will contain any untrue statement of a material fact or omit a material fact
necessary to make the information contained herein or therein not misleading.
5.34 Knowledge of A-1-A and its Shareholders. As to each representation and
warranty made by A-1-A under this Article 5, any fact or information known to
any shareholder of A-1-A or notice received by any shareholder of A-1-A, shall
be imputed to A-1-A as
22
if such fact or information were known to A-1-A or such notice received by
A-1-A.
6. REPRESENTATIONS AND WARRANTIES OF THI
-------------------------------------
THI hereby represents and warrants to A-1-A as follows, each of which
representation and warranty shall be true as of the Closing Date:
6.1 Organization. THI is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware. THI has all requisite
corporate power and authority to execute, deliver and perform its obligations
under this Agreement and to consummate the transactions contemplated hereby.
6.2 Authorization of Agreement. The execution, delivery and performance of
this Agreement by THI, and the consummation of the transactions contemplated
hereby have been duly and effectively authorized by THI's Board of Directors.
Subject to Section 6.5, this Agreement has been duly and validly authorized,
executed and delivered on behalf of THI. Subject to Section 6.5, this Agreement
constitutes a valid and binding obligation of THI, enforceable in accordance
with its terms, except that such enforcement may be limited by bankruptcy,
insolvency or other similar laws affecting the enforcement of creditors, rights
generally.
6.3 Effect of Agreement. The execution, delivery and performance of this
Agreement by THI and consummation by THI of the transactions contemplated hereby
will not, with or without the giving or notice and the lapse of time, or both,
(a) violate any provision of law, statute, rule, regulation or executive order
to which the THI is subject; (b) violate any judgment, order, writ or decree of
any court applicable to THI; or (c) result in the breach of or conflict with any
term, covenant, condition or provision of the Certificate of Incorporation of
THI or any commitment, contract or other agreement on instrument to which THI is
a party.
6.4 Litigation. To the best knowledge of THI, there are no actions, suits,
proceedings or governmental investigations or inquiries pending or threatened
against it which, in its reasonable judgment, would prevent the consummation of
the transactions contemplated hereby.
6.5 Possible Submission to Stockholder Vote. THI has been advised that the
transactions contemplated herein need not be
23
submitted to its stockholders for approval. If, prior to Closing, THI is
otherwise advised by counsel, it will so notify A-1-A forthwith. As soon as is
practicable thereafter, and consistent with applicable state corporate and
federal securities law and regulation, the transactions contemplated in this
Agreement shall be disclosed and submitted to the Terrace stockholders to
consider and vote thereon. A-1-A hereby agrees fully to cooperate with THI and
provide all reasonable assistance and documentation as may be necessary for THI
full to comply with the applicable requirements under the proxy rules
promulgated by the Securities and Exchange Commission under the Securities
Exchange Act of 1934, as amended, and under the applicable requirements of the
NASDAQ Stock Market.
7. PRE-CLOSING COVENANTS OF A-1-A
A-1-A hereby covenants and agrees with THI that A-1-A shall do, or cause to
be done, the following, between the date of this Agreement and the Closing Date
or date of termination of this Agreement, as the case may be:
7.1 Conduct of Business Until Closing Date. Except as permitted or
required hereby or as THI may otherwise consent in writing, A-1-A shall:
7.1.1 operate the business of A-1-A only in the usual, regular and
ordinary manner, and use its best efforts to (a) preserve the present
business organization of A-1-A intact, (b) keep available the services of
the present employees of A-1-A, and (c) preserve the current business
relationships of A-1-A with customers, clients, suppliers, distributors and
others having business dealings with it;
7.1.2 bear the risk of loss or damage to the Assets on and prior to
the Closing where such risk of loss is not the legal obligation of another,
and maintain all properties necessary for the conduct of the business of A-
1-A, whether owned or leased;
7.1.3 maintain the books, records and accounts of A-1-A in the usual,
regular and ordinary manner, on the basis consistent with prior periods;
7.1.4 duly comply with all laws, rules and regulations applicable to
A-1-A and to the conduct of its business;
24
7.1.5 perform all of the obligations of A-1-A without default, unless
such default is of no significance to A-1-A and could have no adverse
impact on A-1-A, its Assets or business;
7.1.6 neither (a) amend A-1-A's Articles of Incorporation or By-Laws;
(b) merge with or into, consolidate, amalgamate or otherwise combine with,
any other entity; nor (c) change the character of the business of A-1-A;
7.1.7 neither (a) encumber, mortgage, or voluntarily subject to lien
any of the existing Assets; (b) transfer, sell, lease, license or otherwise
dispose of any of, or any part of, the Assets (other than in the ordinary
course of business); (c) convey, transfer or acquire any material Asset or
property to, for or on behalf of A-1-A other than in the ordinary course of
business; (d) enter into any arrangement, agreement or undertaking, with
respect to any of the employees relating to the payment of bonus,
severance, profit-sharing or special compensation or any increase in the
compensation payable or to become payable to any such employee; nor (e)
incur any material fixed or contingent obligation or enter into any
agreement, commitment, contract or other transaction or arrangement
relating to the business of A-1-A or the Assets;
7.1.8 not make any distributions or dividends of Assets or
securities, nor any changes to the capital structure of A-1-A except such
distributions which will not cause the Stockholders' Equity to fall below
$951,966; and
7.1.9 neither modify, change or terminate any of its material
obligations other than in the ordinary course of business, nor grant any
power of attorney with respect to the business of A-1-A or the Assets to
any party except THI.
7.2 Approvals, Consents and Further Assurances. A-1-A shall use its best
efforts to obtain in writing as promptly as possible all approvals, consents and
waivers required in order to effectuate the transactions contemplated hereby,
and shall deliver to THI copies, reasonably satisfactory in form and substance
to counsel to THI, of such approvals and consents. A-1-A shall also use its best
efforts to assure that the other conditions set forth in Article 10 hereof are
satisfied by the Closing Date.
25
7.3 Access to Properties, Records, Suppliers, Agents, Etc. A-1-A shall
give to THI and to THI's counsel, financiers, accountants and other
representatives access to and copies of such of A-1-A's properties, personnel,
books, tax returns, contracts, commitments and records as relate to the Assets,
suppliers, agents, distributors, etc. or other aspects of the business of A-1-A;
and shall furnish to THI and such representatives all such additional
instruments, contracts, documents or other written obligations (certified by
officers of A-1-A, if so requested) and financial and other information
concerning such business, Assets, suppliers, agents, etc. as THI or its
representatives may from time to time request.
7.4 Advice of Changes. If A-1-A becomes aware of any fact or facts which,
if known at the date hereof, would have been required to be set forth or
disclosed in or pursuant to this Agreement or which, individually or in the
aggregate, could materially adversely affect the business or Assets of A-1-A, it
shall promptly advise THI in writing thereof.
7.5 Conduct. Except as permitted or required hereby or as THI may
otherwise consent in writing, neither A-1-A nor any of its shareholders shall
enter into any transaction or take any action which would result in any of the
representations and warranties of A-1-A contained in this Agreement or in any
Ancillary Document not being true and correct as of the time immediately after
such transaction has been entered into or such event has occurred and on the
Closing Date.
7.6 Employee Benefit Plans. Except for payment of A-1-A's current
obligations, A-1-A shall not incur any additional obligations or liabilities,
including (i) all liabilities for all claims incurred, whether or not reported,
on or before the Closing Date under all "employee welfare benefit plans," within
the meaning of Section 3(l) of ERISA, (ii) all liabilities or obligations for
vacations or sick leave or retiree, medical or life benefits to employees or
former employees of A-1-A, and (iii) all liabilities of A-1-A for all benefits
accrued under any "employee pension benefit plan," within the meaning of Section
3(2) of ERISA under each Employee Benefit Plan.
7.7 Satisfaction of Conditions by A-1-A. A-1-A hereby covenants and agrees
with THI that, between the date of this Agreement and the Closing Date or date
of termination of this Agreement, as the case may be, it shall use its best
efforts to
26
assure that the conditions set forth in Article 10 hereof are satisfied by the
Closing Date.
7.8 Non-Disclosure of Negotiations and Non-Usage of Documents of THI. A-1-
A hereby covenants and agrees with THI that it shall not use, show, display,
describe or otherwise disclose, directly or indirectly, in any manner, this
Agreement, any Exhibits hereto or any other document created by THI's counsel,
in whole or in part, which was the subject of negotiations between THI and A-1-
A, or any of the terms or other aspects of the negotiations between THI and A-1-
A, in the event that the Closing shall not occur for any reason. A-1-A further
agrees that it will return and cause all of its advisors, representatives and
other parties, over which it has control, to return to THI all documents or
other written materials regarding this transaction that were obtained from THI
or its counsel during the course of the negotiations (including all drafts of
all documents).
7.9 Purchase of Real Estate by Affiliate.
7.9.1 A-1-A has provided THI with a copy of a Deposit Receipt and
Contract for Sale and Purchase of certain real estate and building located
at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇, which land and
building has been or is about to be purchased by an Affiliate of A-1-A for
an aggregate purchase price of $1,975,000 and an aggregate total "project
cost" of approximately $2,200,000. Said land and building is to be used and
utilized for the sole purpose of operating the business of A One A
Wholesale Produce, Inc. A-1-A hereby covenants and agrees with THI that it
shall cause the completion and consummation of said purchase simultaneously
with or prior to the consummation of the transactions contemplated by this
Agreement and to cause said Affiliate to enter into the Lease and Option to
Purchase attached hereto as Exhibit 10.17.
7.9.2 To the extent that the aggregate "Project Costs" for the above
land and building exceed $2,200,000 and such excess is the result of non-
fixture type improvements to the building (e.g., exterior painting, etc.),
then the amount of such excess costs shall be added to the rent to be paid
by THI under the Lease and Option to Purchase attached hereto as Exhibit
10.17, provided that such excess shall be divided into thirty equal
installments and paid over the first thirty months of said lease. Should
THI purchase the real estate and
27
building, any unpaid monthly installments of such excess shall be added to
its purchase price therefor.
8. PRE-CLOSING COVENANTS OF THI
8.1 Satisfaction of Conditions by THI. THI hereby covenants and agrees
with A-1-A that, between the date of this Agreement and the Closing Date or date
of termination of this Agreement, as the case may be, THI shall use its best
efforts to assure that the conditions set forth in Article 11 hereof are
satisfied by the Closing Date.
8.2 Confidentiality. Prior to the Closing, THI shall keep confidential any
and all information furnished to it by A-1-A in the course of negotiations,
except (i) to the extent any such information must be disclosed to any lenders
interested in the transaction, (ii) to the extent such information must be
disclosed to comply with the applicable securities laws, rules and regulations,
and (iii) for information that is available to THI from sources other than A-1-A
without violating the law. If for any reason the Closing shall not occur, THI,
to the extent such information has not then already been publicly disclosed,
will continue to keep such information confidential, to the extent that it is
protectable by law, and will not use it and will return and cause all of its
advisors, representatives and other parties over which it has control to return
to A-1-A all documents or other written materials regarding A-1-A and any copies
thereof obtained from A-1-A or made by it through A-1-A during the course of the
negotiations.
8.3 Real Estate Closing Penalty Advance. THI hereby covenants and agrees,
in addition to the consideration to be paid under Section 3.5, to advance to and
pay A-1-A the amount of the penalty required under Special Clause 2 of that
certain Deposit Receipt and Contract for Sale and Purchase dated February 24,
1997 by and between A One A Wholesale Produce, ▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
and A.M. ▇▇▇▇▇ Mercantile Company for the purchase of ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇, for the days commencing with June 5, 1997
through the Closing Date of this Agreement. If, for any reason, the acquisition
transactions contemplated by this Agreement are not consummated, the provisions
of Section 3.7 shall apply and THI shall be deemed to have paid such penalty
advance by reason of the liquidated damages paid as therein provided.
28
9. POST-CLOSING COVENANTS
9.1. Further Assurances. After the Closing hereunder, A-1-A shall take all
necessary actions to formally change its names and to deliver to THI any
necessary documents to enable THI to fully utilize such names as part of the
Rights. A-1-A, at the request of THI, also shall execute, acknowledge and
deliver to THI, without further consideration, all such further assignments,
conveyances, endorsements, deeds, powers of attorney, consents and other
documents (together with the instruments referred to in Section 1.3, referred to
herein collectively as the "Ancillary Documents") and take such other action as
THI may reasonably request (a) to transfer to and fully vest in THI, and protect
THI's right, title and interest in and to all of A-1-A's right, title and
interest in and to the Assets, and (b) otherwise to consummate the transactions
contemplated by this Agreement.
9.1.1 THI will provide to the shareholders of A-1-A reasonable access
to any records of A-1-A's business which is in THI's possession and which
will assist said shareholders in responding to or complying with any tax
audit or other governmental inquiry or which may be necessary in connection
with any litigation by or against said shareholders and relating thereto.
9.1.2 THI will use its best efforts to maintain licenses in good
standing under the Perishable Agricultural Commodity Act, 1930, as amended.
Notwithstanding the foregoing, A-1-A's current shareholders, as employees
of THI's subsidiaries, shall have primary responsibility for the foregoing.
9.1.3 After the Closing, THI shall not acquire or establish a
business which competes with that of A-1-A, unless such business is made a
part of A-1-A, during the term of the Employment Agreements of ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇.
9.1.4 After the Closing, THI will use its best efforts to secure the
release of any personal guarantees which ▇▇▇▇▇ ▇▇▇▇▇ or ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
have given directly related to any of the Liabilities. If, notwithstanding
its best efforts, THI is unable to secure the release of any such personal
guarantees, THI agrees to indemnify and hold ▇▇▇▇▇ and ▇▇▇▇▇▇▇▇▇▇ harmless
from any claims arising under such personal guarantees under Section 12.3.
29
9.2 Confidentiality. A-1-A shall use its best efforts to keep confidential
any and all information concerning THI and its principals and Affiliates, except
for information that may be available from sources generally available to the
public. If for any reason the Closing shall not occur, A-1-A will continue to
use its best efforts to keep the information concerning THI and its principals
and Affiliates confidential and will not use it for any purpose and will return
to THI all documents or other written materials and any copies thereof obtained
or made by it during the course of the negotiations concerning THI and its
principals and Affiliates.
9.3 Cooperation. A-1-A shall cooperate with THI in arranging or
participating in meetings between THI and employees, suppliers, customers,
agents, distributors and others who have or have had a business relationship
with A-1-A, at times that are non-injurious in a material way to the operations
of A-1-A.
10. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THI
The obligations of THI pursuant to this Agreement are subject to the
satisfaction at the Closing of each of the following conditions, any or all of
which conditions may be waived by THI in its sole discretion:
10.1 Accuracy of Representations and Warranties. All representations and
warranties made by A-1-A (contained in this Agreement, any Exhibit or Schedule
hereto, or any certificate or instrument delivered to THI or its representatives
by A-1-A or its representatives) shall be true on and as of the Closing Date
with the same force and effect as though made on and as of the Closing Date
(i.e., with respect to representations that a state of facts exists on or as of
the date hereof, it is a condition that such state of facts exists on or as of
the Closing Date; and with respect to a representation that a state of facts has
or has not changed between a date prior to the date hereof and the date hereof,
it is a condition that such state of facts has or has not changed between such
prior date and the Closing Date), except as affected by transactions
contemplated hereby.
10.2 Performance of Agreements. A-1-A shall have performed and complied
with all covenants, obligations and agreements, including but not limited to
those set forth in Section 3.4 of this Agreement, to be performed or complied
with by them on or before the Closing Date pursuant to this Agreement.
30
10.3 Litigation, Etc.
10.3.1 Except as set forth on Exhibit 5.19A, no claim, action, suit,
proceeding, arbitration, investigation or hearing or note of hearing shall
be pending or threatened against or affecting THI, A-1-A or any of the
Assets, which (a) might result either in an action or enjoin or prevent the
consummation of the transactions contemplated by this Agreement; (b) in the
reasonable judgment of THI would materially adversely affect the business
of A-1-A or the ability of THI to consummate the transactions contemplated
by this Agreement or to own the Assets or to operate the business of A-1-A.
10.3.2 A-1-A shall not be in violation of any law, statute,
ordinance, rule, regulation or executive order, the enforcement of which
would, individually or in the aggregate, materially adversely affect the
Assets or the business of A-1-A; or which would individually or in the
aggregate, materially adversely affect the ability of THI to consummate the
transactions contemplated by this Agreement or to own the Common Stock or
to operate the business of A-1-A.
10.3.3 No law, regulation or decree shall have been proposed, adopted
or promulgated, or have become effective, the enforcement of which would
materially adversely affect the ability of THI to consummate the
transactions contemplated by this Agreement or to own the Common Stock or
to operate any such business.
10.4 Approvals and Consents. A-1-A shall have obtained, and THI shall have
received copies of, all of the approvals and consents referred to in Section
7.2, each of which approvals and consents shall be in full force and effect and
reasonably satisfactory in form and substance to THI and its counsel.
10.5. Shareholders' Certificate. THI shall have received an accurate
certificate of the shareholders of A-1-A, dated the Closing Date, satisfactory
in form and substance to THI and its counsel, certifying (a) as to the
fulfillment of the matters specified in Sections 10.1 through 10.3, and (b) any
changes that THI is required to be notified of pursuant to Section 7.4, or that
previously had not been disclosed to THI.
31
10.6 Officer's Certificate. THI shall have received an accurate
certificate, dated the Closing Date, of the President of A-1-A, dated as of the
Closing Date, stating, among other things, that he is not aware of any material
omissions or facts that would materially alter any of the Financial Statements,
nor is he aware of any facts or factors that are reasonably likely to occur, or
if known to other parties, that could have a material adverse effect on the
financial condition, business, operations, Assets, liabilities, management or
prospects of A-1-A.
10.7 Good Standing Certificates. THI shall have received (a) a certificate
of the Secretary of State of Florida, dated within 30 days before the Closing
Date, certifying that the records of such state regarding A-1-A incorporated in
such state reflect neither a certificate of dissolution, a court order declaring
dissolution, a merger or consolidation which terminated its existence, nor
suspension of its corporate powers, rights and privileges, and that in
accordance with the records of such state, such corporation is authorized to
exercise all of its corporate powers, rights and privileges in such state and
(b) a telegram or other document from one or more appropriate officials of the
State of Florida or an affidavit of counsel with respect to telephone
conversations with such officials, dated within two days before the Closing
Date, to the same effect.
10.8 No Material Adverse Change. THI shall confirm to its sole
satisfaction that there have been no material adverse changes in the financial
condition, business, operations, assets, liabilities, management or prospects of
A-1-A, and that the unaudited Total Stockholders' Equity of A-1-A as of June 30,
1997 is no less than its audited Total Stockholders' Equity as of December 31,
1996.
10.9 Actions, Proceedings, Etc. All actions, proceedings, instruments and
documents required to carry out the transactions contemplated by this Agreement
shall have been completed in a manner reasonably satisfactory to THI, such
approval not to be unreasonably withheld.
10.10 Opinion of Counsel to A-1-A. THI shall have received an opinion of
Messrs. ▇▇▇▇ and ▇▇▇▇▇▇, counsel to A-1-A, addressed to THI, dated the Closing
Date, to the effect set forth in, and substantially in the form, of Exhibit
10.10.
32
10.11 Licenses, Permits, Consents, Etc. THI shall have received evidence,
in form and substance reasonably satisfactory to counsel for THI, that such
licenses, permits, consents, approvals, authorizations or orders of governmental
authorities as are necessary to the consummation of the transactions
contemplated by this Agreement and the continued operation of the business of A-
1-A have been obtained.
10.12 Documentation of Rights. A-1-A shall have delivered to THI true and
complete copies of all of the documentation held by A-1-A relating to each of
the Rights.
10.13 Employment of Shareholders and Employee. THI shall have entered into
Employment Agreements with ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, and ▇▇▇▇▇ ▇▇▇▇▇ in the forms
attached hereto as Exhibits 3.4(a) and 3.4(b) respectively.
10.14 Officers' Financial Certificate. THI shall have received an accurate
certificate as set forth in Exhibit 10.14 from the President and Secretary of A-
1-A, dated as of the Closing Date, satisfactory in form and substance to THI and
its counsel, certifying that the 1996 Financial Statements are true and correct,
and accurately present the financial position of A-1-A during that interim
period.
10.15 Accountants Letter. THI shall have received to THI's sole
satisfaction a "comfort" letter as set forth in Exhibit 10.15 from ▇▇▇▇▇▇ &
▇▇▇▇▇▇, independent certified public accountants for A-1-A, dated as of the
Closing Date, stating, among other things, that such accountants are not aware
of any material omissions or facts that would materially alter any of the
Financial Statements, nor are they aware of any as of the Closing Date, or the
breach of any agreement, covenant or condition required by this Agreement to be
performed or complied with by A-1-A prior to the Closing Date.
10.16 THI Financing Commitment. One day prior to the Closing Date, THI
shall have secured binding commitments, satisfactory to it for not less than
$3,200,000 principal amount of equity, loans or other financing, the proceeds of
which will fund at Closing some or all the cash consideration to A-1-A provided
in Section 3.1. Upon receipt prior to Closing of such binding commitments, THI
shall so notify A-1-A.
10.17 Lease/Option on Real Property. THI shall have received a duly
executed triple net Lease and Option to Purchase the
33
building and real estate located at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇, in the form attached hereto as Exhibit 10.17 and providing for a term
of not less than ten years with not less than two-five year renewal options at
an annual base rent of $209,000, together with an irrevocable right of first
refusal in THI to purchase said land and building at any time after December 31,
1997 and during the term or any extension thereof, at a purchase price equal to
the amount bid therefor by a bona fide independent third party bidder.
Notwithstanding the foregoing, THI shall have an irrevocable option to purchase
said land and building, at any time within 1997 following the Closing Date
hereof, and during such time the purchase price for said land and building shall
be $2,200,000, subject to a adjustment as provided in Section 7.9.2, and the
seller shall provide THI with a purchase money mortgage therefor bearing
interest at 9.5% with repayments based on a twenty year amortization rate and a
loan term of ten years. In any purchase of said land and building on or before
June 30, 1998, as a result of its exercise of its option or its right of first
refusal to purchase, THI shall receive from the seller a credit of $300,000
toward said purchase price. If THI exercises its option to purchase, THI will
bear the expense for title insurance, documentary stamps, recording fees, and
any due diligence it requires.
10.18 Simultaneous Closing of Affiliate Transaction. THI, simultaneously
with the Closing hereunder, shall have closed and consummated that certain asset
acquisition with Fresh, Inc., an Affiliate of A-1-A, which closing is scheduled
for the same time and place as the Closing hereunder.
10.19 Completion of Due Diligence.. To THI's sole satisfaction, THI shall
have received sufficient information and access to such information on a timely
basis regarding A-1-A.
11. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF A-1-A
The obligations of A-1-A under this Agreement are subject to the
satisfaction at the Closing of each of the following conditions, any or all of
which conditions may be waived by A-1-A in its sole discretion.
11.1 Accuracy of Representations and Warranties. All representations and
warranties by THI in this Agreement shall be
34
true as of the Closing Date with the same force and effect as though made on and
as of the Closing Date.
11.2 Performance of Agreements. THI shall have performed and complied in
all material respects with all covenants, obligations and agreements to be
performed or complied with by it on or before the Closing Date pursuant to this
Agreement.
11.3 Secretary's Certificate. A-1-A shall have received a certificate from
THI, substantially in the form of Exhibit 11.3, dated the Closing Date.
11.4 Actions, Proceedings, Etc. All actions, proceedings, instruments and
documents required to carry out the transactions contemplated by this Agreement
shall have been completed in a manner reasonably satisfactory to A-1-A and
approved by its counsel, including but not limited to (i) securing the
appropriate approval(s) and/or license(s) under the Perishable Agricultural
Commodities Act, 1930, as amended, and (ii) the affirmative vote of a majority
of the THI shareholders voting at a meeting called for such purpose, if required
under advice from THI's counsel; and such counsel to A-1-A shall have been
furnished with such other instruments and documents as they shall have
reasonably requested.
11.5 No Injunction. No third party injunction, stay or restraining order
shall be in effect prohibiting the consummation of the transactions contemplated
hereby.
11.6 Opinion of Counsel to Buyer. A-1-A shall have received an opinion of
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, P.C., counsel to THI, addressed to A-1-A, dated as of the
Closing Date, to the effect set forth in, and substantially in the form, of
Exhibit 11.6.
12. SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION
12.1 Survival. The representations and warranties set forth in this
Agreement, in any Exhibit or Schedule hereto and in any certificate or
instrument delivered in connection herewith shall survive for a period of two
(2) years after the Closing Date and shall thereupon terminate and expire and
shall be of no force or effect thereafter, except (i) with respect to any
material claim, written notice of which shall have been delivered to THI or
A-1-A, as the case may be, such claim shall survive the termination of
35
such period and shall survive for as long as such claim is unsettled, and (ii)
with respect to any litigation which shall have been commenced to resolve such
claim on or prior to such date. Notwithstanding the foregoing, with respect to
taxes, the period shall be the applicable statute of limitations, and with
respect to customer claims, the period shall be five (5) years. For purposes
hereof, a material claim shall mean a claim or claims aggregating $25,000 or
more, individually or in the aggregate.
12.2 Indemnification by A-1-A. Subject to the limitations set forth in the
last sentence of Section 12.1, A-1-A hereby covenants and agrees with THI that,
regardless of any investigation made at any time by or on behalf of THI or any
information THI may have and, regardless of the Closing hereunder, A-1-A shall
indemnify THI and A-1-A and its respective directors, officers, employees,
representatives and Affiliates of THI, and each of their successors and assigns
(individually, a "THI Indemnified Party"), and hold them harmless from, against
and in respect of any and all costs, losses, claims, liabilities, fines,
penalties, damages and expenses (including interest which may be imposed in
connection therewith, court costs and reasonable fees and disbursements of
counsel) incurred by any of them resulting from (i) A-1-A, or the conduct of its
operations prior to the Closing, except for Liabilities specifically assumed by
THI under the provisions hereof, and (ii) any misrepresentation, breach of
warranty or nonfulfillment of any agreement, covenant or obligation by A-1-A
made in this Agreement (including without limitation any Exhibit hereto and any
certificate or instrument delivered in connection herewith) any taxes of any
kind whatsoever, or expenses, interest or penalties relating thereto, including
those that arise out of or result from the transactions contemplated by this
Agreement, other than taxes relating to the conduct of the business of A-1-A
after the Closing Date. If THI exercises its option to purchase pursuant to
Section 10.17, A-1-A shall have the option to indemnify THI pursuant to this
Section by reducing the principal amount of the purchase money mortgage given to
THI.
If, by reason of the claim of any third party relating to any of the
matters subject to indemnification under this Section 12.2, a lien, attachment,
garnishment or execution is placed upon any of the property or assets of any THI
Indemnified Party, A-1-A shall promptly furnish an indemnity bond reasonably
satisfactory to THI to obtain the prompt release of such lien, attachment,
garnishment or execution. THI shall be entitled to reduce any amounts it owes to
A-1-A in the amount owed to it by A-1-A under this Section 12.2.
36
12.3 Indemnification by THI. Subject to the limitations set forth in the
last sentence of Section 12.1, THI hereby covenants and agrees with A-1-A that
THI shall indemnify A-1-A and hold it harmless from, against and in respect of
any and all costs, losses, claims, liabilities, fines, penalties, damages and
expenses (including interest which may be imposed in connection therewith and
court costs and reasonable fees and disbursements of counsel) incurred by any of
them resulting from (i) the conduct of the operations of A-1-A subsequent to the
Closing, and (ii) any misrepresentation, breach of warranty or the
nonfulfillment of any agreement, covenant or obligation by THI made in this
Agreement (including without limitation any Exhibit hereto and any certificate
or instrument delivered in connection herewith).
If, by reason of the claim of any third party relating to any of the
matters subject to indemnification under this Section 12.3, a lien, attachment,
garnishment or execution is placed upon any of the property or assets of any
A-1-A Indemnified Party, THI shall promptly furnish an indemnity bond reasonably
satisfactory to A-1-A to obtain the prompt release of such lien, attachment,
garnishment or execution. A-1-A shall be entitled to reduce any amounts it owes
to THI in the amount owed to it by THI under this Section 12.3.
12.4 Right to Defend. If the facts giving rise to any such indemnification
shall involve any actual claim or demand by any third party against a THI
Indemnified Party or A-1-A (referred to hereinafter as an "Indemnified Party"),
the indemnifying parties shall be entitled to notice of and entitled (without
prejudice to the right of any Indemnified Party to participate at its own
expense through counsel of its own choosing) to defend or prosecute such claim
at their expense and through counsel of their own choosing if they give written
notice of their intention to do so no later than the time by which the interest
of the Indemnified Party would be materially prejudiced as a result of its
failure to have received such notice; provided, however, that if the defendants
in any action shall include both the indemnifying parties and an Indemnified
Party, and the Indemnified Party shall have reasonably concluded that counsel
selected by the indemnifying parties has a conflict of interest because of the
availability of different or additional defenses to the Indemnified Party, the
Indemnified Party shall cooperate fully in the defense of such claim and shall
make available to the indemnifying parties pertinent information under its
control relating thereto, but shall be entitled to be
37
reimbursed, as provided in this Article 12, for all costs and expense incurred
by it in connection therewith.
12.5 Subrogation. If the Indemnified Party receives payment or other
indemnification from the indemnifying party hereunder, the indemnifying party
shall be subrogated to the extent of such payment or indemnification to all
rights in respect of the subject matter of such claim to which the Indemnified
Party may be entitled, to institute appropriate action for the recovery thereof,
and the Indemnified Party agrees reasonably to assist and cooperate with the
indemnifying party at no expense to the Indemnified Party in enforcing such
rights.
13. MISCELLANEOUS
13.1 Expenses. Except as and to the extent otherwise provided in this
Agreement, whether or not the transactions contemplated by this Agreement are
consummated, A-1-A and THI shall each pay their own respective expenses and the
fees and expenses of their respective counsel and other experts.
13.2 Termination of Agreement. This Agreement may be terminated and the
transaction contemplated hereby may be abandoned at any time, but not later than
the Closing Date:
(a) by mutual consent of the parties; or
(b) by A-1-A or THI if, through no material fault of such party so
electing to terminate, the Closing shall not have occurred on or prior to
July 31, 1997.
In the event of the termination of this Agreement by any party as above
provided, without material fault of any party, no party shall have any liability
hereunder, including any liability for damages. In the event that a condition
precedent to a party's obligation is not met, nothing contained herein shall be
deemed to require any party to terminate this Agreement rather than to waive
such condition precedent and proceed with the Closing.
13.3 Waivers. No action taken pursuant to this Agreement, including any
investigation by or on behalf of any party, shall be deemed to constitute a
waiver by the party taking such action of compliance with any representation,
warranty, covenant or agreement contained herein or in any other documents. The
waiver by any party hereto of a breach of any provision of this Agreement shall
38
not operate or be construed as a waiver of any subsequent breach. Any party
hereto may, at or before the Closing, waive any conditions to its obligations
hereunder which are not fulfilled.
13.4 Binding Effect; Benefits. This Agreement shall inure to the benefit
of the parties hereto and shall be binding upon the parties hereto and their
respective successors and assigns. Except as otherwise set forth herein, nothing
in this Agreement, expressed or implied, is intended to confer on any person
other than the parties hereto or their respective successors and assigns any
rights, remedies, obligations, or liabilities under or by reason of this
Agreement.
13.5 Assignment. Without limitation, and without the consent, prior,
written or otherwise, of A-1-A, this Agreement and all of the rights and
obligations hereunder may be assigned by THI to any entity owned or controlled
by, or affiliated with it. A-1-A shall consent in writing to any such
assignment. Immediately upon such assignment, THI shall be released from any
obligation, of any kind or nature, under this Agreement.
13.6 Notices. All notices, requests, demands and other communications
which are required to be or may be given under this Agreement shall be in
writing and shall be deemed to have been duly given when delivered in person or
upon receipt when transmitted by facsimile or telex or after dispatch by
certified or registered first class mail, postage prepaid, return receipt
requested, to the party to whom the same is so given or made:
If to THI, to:
Terrace Holdings, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇-▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
39
With a copy to:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, P.C.
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to A-1-A, to:
A One A Wholesale Produce, Inc.
▇▇▇▇ ▇.▇. ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Facsimile:
With a copy to:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
▇▇▇▇ & ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
13.7 Entire Agreement. This Agreement (including the Exhibits hereto) and
the Ancillary Documents constitute the entire agreement and supersede all prior
agreements and understandings, oral and written, among the parties hereto with
respect to the subject matter hereof and supersede all prior agreements,
representations, warranties, statements, promises and understandings, whether
written or oral, with respect to the subject matter hereof. No party hereto
shall be bound by or charged with any written or oral arguments,
representations, warranties, statements, promises or understandings no
specifically set forth in this Agreement or in any Exhibit hereto or any
Ancillary Documents, or in certificates and instruments to be delivered pursuant
hereto on or before the Closing.
13.8 Headings; Certain Terms. The section and other headings contained in
this Agreement are for reference purposes only and shall not be deemed to be a
part of this Agreement or to affect the meaning or interpretation of this
Agreement. As used in this Agreement, the term "including" means "including, but
not limited
40
to" unless otherwise specified; the word "or" means "and/or," and the word
"person" means and refers to any individual, corporation, trust, partnership,
joint venture, government or governmental authority, or any other entity; and
the plural and singular forms are used interchangeably.
13.9 Counterparts. This Agreement may be executed in any number of
counterparts, each of which when executed, shall be deemed to be an original and
all of which together shall be deemed to be one and the same instrument.
13.10 Governing Law. This Agreement shall be construed in accordance with
the laws of the State of Florida, without giving effect to the choice of law
principles or rules thereof.
13.11 Severability. If any term or provision of this Agreement shall to
any extent be invalid or unenforceable, the remainder of this Agreement shall
not be affected thereby, and each term and provision of the agreement shall be
valid and enforced to the fullest extent permitted by law.
13.12 Amendments. This Agreement may not be modified or changed except by
an instrument or instruments in writing signed by the party or parties against
whom enforcement of any such modification or amendment is sought.
13.13 Transaction Taxes. THI shall pay any and all taxes imposed upon the
initial issuance, and A-1-A shall pay any and all taxes imposed upon any
subsequent sale and exchange of the Common Stock and transfer of ownership
thereof.
13.14 Disclosures. Any disclosure by either party hereto pursuant to any
specific provision of this Agreement shall be deemed a disclosure for all other
purposes of this Agreement.
13.15 Section References. All references contained in this Agreement to
any section number are references to sections of this Agreement unless otherwise
specifically stated.
13.16 Brokers and Finders. Each party represents and warrants there are no
brokers, finders or similar persons to whom compensation will be due or owing as
a result of consummation of the transactions contemplated by this Agreement and
each party hereby agrees to indemnify and hold the other party harmless against
any such claims.
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IN WITNESS WHEREOF, the parties hereto have signed this Agreement, or have
caused this Agreement to be signed in their respective names by an officer
thereunder duly authorized, as of the date first above written.
TERRACE HOLDINGS, INC.
By:______________________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, President
A ONE A WHOLESALE PRODUCE, INC.
By:______________________________________
_________________________, President
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