PURCHASE AGREEMENT
AMONG
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ COMPANY,
CAPITAL CIGAR COMPANY
AND
CERTAIN SHAREHOLDERS
AND
CORE-▇▇▇▇ INTERNATIONAL, INC.
Dated January 31, 1997
TABLE OF CONTENTS
PAGE
----
1. Sale and Transfer of Assets............................................. 1
2. Purchase Price.......................................................... 3
3. Incentive Payments...................................................... 4
4. Assumption of Liabilities............................................... 5
5. Representations and Warranties of Seller................................ 5
(a) Organization and Good Standing...................................... 6
(b) Execution and Effect of Agreement.................................. 6
(c) No Contravention................................................... 6
(d) Title to Assets.................................................... 6
(e) Contracts.......................................................... 6
(f) Absence of Certain Changes or Events............................... 7
(g) Compliance with Laws............................................... 7
(h) Financial Statements............................................... 7
(i) Litigation: Consents............................................... 8
(j) Insurance.......................................................... 8
(k) Employees.......................................................... 8
(l) Environmental Matters.............................................. 8
(m) Taxes.............................................................. 9
(n) Permits and Approvals............................................. 10
(o) Affiliate Transactions............................................. 10
(p) Inventory.......................................................... 10
(q) Accounts Receivable................................................ 10
(r) Fixed Assets....................................................... 10
(s) Employee Benefit Plans............................................. 10
(t) Customers.......................................................... 11
6. Representations and Warranties of Buyer................................. 12
7. Covenants of Seller..................................................... 12
8. Covenants of Buyer...................................................... 14
9. Conditions Precedent to Buyer's Obligations............................. 14
10. Conditions Precedent to Seller's Obligations............................ 15
11. The Closing............................................................. 16
12. Further Assurances...................................................... 19
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13. Use of Name............................................................. 19
14. Use of Facilities....................................................... 19
15. Labor and Employment Matters............................................ 19
16. Non-Competition Covenants............................................... 21
17. Survival of Representations, Warranties and Covenants................... 22
18. Certain Definitions..................................................... 22
19. Indemnification......................................................... 23
20. Defense of Claims....................................................... 24
21. Bulk Sales Compliance................................................... 24
22. Termination............................................................. 24
23. Brokerage and Finder's Fees............................................. 25
24. Notices................................................................. 25
25. Entire Agreement........................................................ 26
26. Successors.............................................................. 26
27. Section Headings........................................................ 26
28. Applicable Law.......................................................... 27
29. Expenses................................................................ 27
30. Severability............................................................ 27
31. Counterparts............................................................ 27
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EXHIBITS AND SCHEDULES
----------------------
Exhibit A - Fixed Assets
Exhibit B - Customer Sales
Exhibit C - Contracts, Agreements and Personal Property Leases
Exhibit D - Opinion of Seller's Counsel
Exhibit E - Non-Competition Agreement
Exhibit F - Employment Agreement
Exhibit G - Escrow Agreement
Schedule 5(d) - Liens
Schedule 5(e) - Contracts
Schedule 5(i) - Litigation
Schedule 5(k) - Employees
Schedule 5(l) - Environmental Matters
Schedule 5(n) - Permits
Schedule 5(o) - Affiliate Transactions
Schedule 5(s) - Employee Benefit Plans
Schedule 5(t) - Customers
iii
PURCHASE AGREEMENT
AGREEMENT, made this 31st day of January, 1997, by and among ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Company, a California corporation ("MSC"), Capital Cigar Company, a California
corporation ("CCC", and together with "MSC", "Seller"), and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇,
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇ Trust,
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇, and ▇▇▇▇ ▇▇▇▇▇▇▇ (the
"Shareholders"), and Core-▇▇▇▇ International, Inc., a Delaware corporation
("Buyer").
W I T N E S S E T H:
WHEREAS, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇ Trust, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, and ▇▇▇▇ ▇▇▇▇▇▇▇
own all the outstanding capital stock of MSC;
WHEREAS, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇▇▇ Trust, ▇▇▇▇▇ ▇▇▇▇▇▇▇, and ▇▇▇▇ ▇▇▇▇▇▇▇ own all the outstanding capital
stock of CCC;
WHEREAS, Seller is engaged in the business of distribution of tobacco,
confectionery, groceries and other consumer items to the convenience retail
industry (the "Business");
WHEREAS, Buyer desires to purchase and acquire from Seller, and Seller
desires to sell, assign and transfer to Buyer, substantially all of the assets,
properties and business as a going concern, of the Business, in consideration
for the purchase price, the assumption of certain liabilities and obligations of
Seller, and upon the terms and subject to the conditions hereinafter set forth;
WHEREAS, the Boards of Directors and shareholders of MSC and CCC have
approved the sale of the Business on the terms and conditions hereinafter set
forth; and
WHEREAS, the Board of Directors of Buyer has approved the acquisition of
the Business on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
hereinafter contained, the parties hereto agree as follows:
1. SALE AND TRANSFER OF ASSETS. On the Closing Date (as hereinafter
defined), subject to the terms and conditions hereinafter set forth, Seller
agrees to sell, convey, assign, transfer and deliver to Buyer, and Buyer agrees
to purchase from Seller, all of the right, title and interest of Seller in and
to all of the following assets and properties of the Business, other than the
Excluded Assets (as defined below) (the assets sold, conveyed, assigned and
transferred by Seller to Buyer are hereinafter collectively referred to as the
"Assets") including:
(a) all the furniture, fixtures, machinery, vehicles, equipment and
spare parts (hereinafter collectively referred to as the "Fixed Assets") of
Seller listed on Exhibit A hereto;
(b) all inventories of cigarettes, affixed and unaffixed tax stamps,
confections, cigars, tobacco, candies, health and beauty care products, general
merchandise, groceries, frozen foods and other finished goods of the Business
(the "Inventory"), and all warranties and warranty claims relating thereto and
rights of return with respect thereto;
(c) all packaging materials and other supplies of Seller (the
"Supplies");
(d) each of the contracts, agreements and personal property leases,
listed on Exhibit C hereto and marked with an asterisk, including leases of
equipment and vehicles used in the Business, as to which mutually acceptable
arrangements shall be made for such equipment and vehicles to be leased by or
otherwise transferred to Buyer, and copies of which have previously been
delivered to Buyer;
(e) all unfilled sales orders with customers relating to the
Business, in existence on the Closing Date and entered into in the ordinary
course of Seller's business;
(f) all unfilled purchase orders with suppliers relating to the
Business, in existence on the Closing Date and entered into in the ordinary
course of Seller's business;
(g) all customer and client lists, including all route and price
information and customer correspondence, and merchandise and sales promotion
materials of Seller relating to the Business;
(h) all trade accounts receivable of the Business (the "Accounts
Receivable") in existence on the Closing Date;
(i) all of Seller's books and records pertaining to the Business,
including, without limitation, all books of account, together with all files,
contracts, instruments, data (including, without limitation, data stored on
electronic media), correspondence and other documents pertaining to the assets,
properties and business being acquired by Buyer hereunder; provided, however,
that Buyer shall preserve such books and records and Seller shall have the right
of reasonable access to and examination of such books and records, including the
right to make copies thereof, for a period of five (5) years from the Closing
Date upon reasonable notice to Buyer and during normal business hours; and
(j) all federal, state, local and other governmental licenses,
permits, approvals and authorizations associated with or necessary for conduct
of the Business as conducted on the Closing Date, other than those which are not
transferable.
Notwithstanding anything to the contrary contained herein, it is understood
that Seller is not selling and Buyer is not buying (i) any real property or
leasehold interests or leasehold improvements in real property of Seller;
(ii) computer software of Seller from ▇.▇. ▇▇▇▇▇▇▇ or any obligations of Seller
for computer software development from ▇.▇. ▇▇▇▇▇▇▇; (iii) any cash or cash
equivalents of Seller; (iv) the names "▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Company" or "Capital Cigar
Company" or any simulations or variations thereof or any trademarks, trade names
or service marks connected therewith; or (v) the minute books, stock record
books, stock ledgers and tax records of Seller (collectively, the "Excluded
Assets").
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2. PURCHASE PRICE.
(a) The aggregate purchase price ("Purchase Price") for the Assets
sold, transferred and conveyed to Buyer by Seller hereunder shall be an amount
equal to the sum of (i) the book value, as reflected on the books and records of
the Business on the Closing Date, of the Accounts Receivable (net of reserves);
(ii) the book value, as reflected on the books and records of the Business on
the Closing Date, of the Inventory, based on (x) Seller's normal, consistently
used costing policy for such items which generally represents the most recent
invoice cost therefor less manufacturers' cash discounts, and (y) a physical
inventory taken jointly by Seller and Buyer as of the close of business on the
Friday immediately prior to the Closing Date; (iii) the depreciated book value,
as reflected on the books and records of the Business on the Closing Date, of
the Fixed Assets of the Business; (iv) $3,000,000 to be paid to Seller; and
(v) any amounts to be paid pursuant to Section 3. The Purchase Price minus the
Reserve Amount specified in Section 2(b), minus the Escrow Amount specified in
Section 2(c) and minus the Employee Credit Amount specified in Section 15(e)
shall be paid to Seller on the Closing Date by wire transfer of federal funds to
an account or accounts specified by Seller prior to the Closing Date. The
parties hereto shall mutually agree on the calculation of the Purchase Price to
be paid on the Closing Date as of the close of business on the Friday
immediately prior to the Closing Date. ▇▇▇▇▇▇ & Co., independent public
accountants for Seller, and Buyer shall jointly prepare a balance sheet of
Seller as of the Closing Date with separate line items for Accounts Receivable,
Inventory and Fixed Assets, and Buyer and Seller shall mutually sign a
certificate setting forth the aggregate Purchase Price.
The Purchase Price shall be allocated pursuant to a schedule to be
furnished to Seller by Buyer and agreed upon by Seller and Buyer prior to the
Closing.
(b) An amount equal to twenty percent (20%) of the book value of both
the Accounts Receivable and Inventory, as calculated and agreed in accordance
with Section 2(a), shall be held in reserve by Buyer and not paid to Seller on
the Closing Date (the "Reserve Amount"). For a period of 90 days from and after
the Closing Date (the "Adjustment Period"), Buyer and Seller shall use
commercially reasonable efforts in the ordinary course of their business to
collect the Accounts Receivable purchased hereunder. During the Adjustment
Period, Buyer shall use commercially reasonable efforts to sell the oldest
saleable Inventory from a particular location of Buyer prior to selling any
newer Inventory from such location. In the event that during the Adjustment
Period, Seller receives or otherwise collects any amounts in respect of the
Accounts Receivable, Seller shall segregate and promptly remit such amounts to
Buyer, and if such amounts are in the form of a check, Seller agrees to endorse
such checks and deliver them to Buyer. If and to the extent that the amount of
the Accounts Receivable collected by Buyer during the Adjustment Period exceeds
an amount equal to 80% of the book value of the Accounts Receivable (as
calculated and agreed in accordance with Section 2(a)), Buyer shall pay such
excess amount (after collection of an amount equal to 80% of the book value of
the Accounts Receivable) to Seller out of the Reserve Amount on a weekly basis
during the Adjustment Period. At the conclusion of the Adjustment Period, if
any Accounts Receivable have not been collected by Buyer, all rights of
collection with respect to such Accounts Receivable will be promptly returned to
Seller at Seller's cost and expense. At the conclusion of the Adjustment
Period, Buyer shall pay Seller out of the Reserve Amount an amount, if any,
equal to the Inventory sold by Buyer during the Adjustment Period less an amount
equal to 80% of the book value of the Inventory (as calculated and agreed in
accordance with Section 2(a)). Buyer shall be entitled to any portion of the
Reserve Amount remaining after payments have been made to Seller pursuant to
this Section 2(b). Any Inventory remaining unsold at the conclusion of the
Adjustment Period which is determined by Buyer, in good faith, to not be
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saleable within 12 months of the Closing Date in the ordinary course of Buyer's
business ("Non-Saleable Inventory") shall be either sold to Buyer at a mutually
agreed price or promptly returned to Seller in accordance with Seller's
directions and at Seller's cost and expense. If requested by Seller, Buyer
agrees to use commercially reasonable efforts to return any Non-Saleable
Inventory to the supplier thereof and all amounts or credits received by Buyer
from suppliers for the return of such Inventory, less any costs incurred by
Buyer, shall be promptly remitted to Seller.
(c) At the Closing, $1,500,000, which amount shall constitute the
Escrow Amount, shall be delivered by Buyer to the Escrow Agent for deposit in
accordance with the terms of the Escrow Agreement. All funds deposited with the
Escrow Agent shall be applied by the Escrow Agent in accordance with the terms
of the Escrow Agreement to pay to Buyer any amounts owing under Section 19(a).
Except as otherwise provided in the Escrow Agreement, any amounts remaining in
the Escrow Account shall be paid by the Escrow Agent to Seller.
3. INCENTIVE PAYMENTS
Attached as Exhibit B is a list of total gross sales (including all taxes)
by Seller for the six-month period ended July 31, 1996 ("1996 Seller Gross
Sales") to selected customers of Seller who continued to be customers of Seller
as of December 31, 1996, including Chevron ("Seller's Current Customers"), which
list separately includes the gross sales during that period for each such
customer. On or prior to the Closing, Buyer will prepare a comparable list
(separately showing sales to each Seller's Current Customer) which shows the
total gross sales (including all taxes) by Buyer and its subsidiaries for the
six-month period ended July 31, 1996 ("1996 Buyer Gross Sales") to the Seller's
Current Customers. The sum of the 1996 Seller Gross Sales and the 1996 Buyer
Gross Sales shall be referred to as the "1996 Combined Gross Sales". Buyer will
prepare a comparable list (separately showing sales to each Seller's Current
Customer) which shows the total gross sales (including all taxes) by Buyer and
its subsidiaries for the six-month period ended July 31, 1997 ("1997 Gross
Sales") to the Seller's Current Customers; provided that 1997 Gross Sales shall
also include total gross sales (including all taxes) by Buyer and its
subsidiaries during the six-month period ended July 31, 1997 to customers of
Buyer (other than chain accounts) which (a) were not customers of Buyer as of
January 31, 1997 and (b) were generated by employees of Buyer who were
previously employees of Seller as of the date hereof. To the extent that the
total amount of the 1997 Gross Sales exceeds 90% of the total amount of the 1996
Combined Gross Sales, Buyer shall be obligated to pay Seller at the rate of
$100,000 for each one per cent (1%) increase above 90% of 1996 Combined Gross
Sales. Buyer shall pay Seller for fractional percentages above 90% on a pro
rata basis. Buyer agrees to make this payment to Seller by no later than
August 31, 1997; provided that the amount of any such payment to which Seller is
entitled shall be decreased by the amount of any Indemnifiable Losses of Buyer
and its affiliates under Section 19 arising prior to such payment.
4. ASSUMPTION OF LIABILITIES.
(a) Buyer hereby agrees that as of the Closing it will assume and
agree to pay, perform and discharge the following liabilities and obligations of
the Business: all unperformed and unfulfilled obligations which are required to
be performed and fulfilled from and after the Closing Date under (x) the
contracts, agreements and personal property leases assigned to Buyer pursuant to
Section 1(d) hereof, and listed on Exhibit C hereto and marked with an asterisk
and (y) the unfilled sales and purchase orders assigned to Buyer pursuant to
Sections 1(e) and (f) hereof.
4
(b) Notwithstanding any provision in this Agreement or any other
writing to the contrary, Buyer shall not assume and shall not be liable for any
liabilities and obligations of Seller or the Business of whatever nature whether
presently in existence or arising hereafter (including without limitation
outstanding customer rebates and allowances), other than as expressly provided
in Section 4(a) hereof. All such other liabilities and obligations shall be
retained by and remain liabilities and obligations of Seller (collectively, the
"Excluded Liabilities"). Without limiting the generality of the foregoing,
Buyer shall not assume and shall not be liable for any of the following
liabilities or obligations of Seller or any Shareholder: (i) any and all taxes
levied by and owing to any foreign, federal, state or local taxing authority
with respect to the ownership or use of the Assets or the conduct of the
Business by Seller, including amounts owed to Yolo County; (ii) any liabilities
or obligations related to the Excluded Assets or which are not directly incident
to or arising out of or incurred with respect to the Business; (iii) all
lawsuits, claims and other liabilities or obligations arising in connection with
all actions, suits, claims, investigations or proceedings to the extent relating
to the conduct of the Business or the ownership of the Assets by Seller;
(iv) except as otherwise expressly provided in Section 15(a), all liabilities or
obligations relating to the employment, failure to employ or termination of
employment of any individual with respect to the Business by Seller or relating
to or under any labor agreements or employee benefit or compensation
arrangements, plans, programs, policies, practices or agreements, including,
without limitation, severance or accrued vacation pay, of Seller or for the
benefit of employees of Seller; (v) any liability arising under Environmental
Laws (as such term is defined in Section 5(1) hereof) with respect to the
conduct of the Business by Seller; (vi) any indebtedness for borrowed money or
otherwise; (vii) any amounts payable to Seller's affiliates; (viii) any workers'
compensation claims relating to employees of Seller; and (ix) any and all
accounts payable.
5. REPRESENTATIONS AND WARRANTIES OF SELLER. Seller represents and
warrants to Buyer as follows:
(a) ORGANIZATION AND GOOD STANDING. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
California, and Seller is qualified to transact business and is in good standing
as a foreign corporation in the State of Nevada and is not required to be so
qualified in any other state. Seller has the full corporate power and authority
to own its properties, to carry on its business as presently conducted and to
sell and convey the Assets to Buyer.
(b) EXECUTION AND EFFECT OF AGREEMENT. Seller and each Shareholder
has the requisite power and authority to enter into this Agreement and to
perform its obligations hereunder, and the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby and the
performance of Seller's and each Shareholder's obligations hereunder have been
duly authorized by all necessary corporate and shareholder action on the part of
Seller. This Agreement has been duly executed and delivered by Seller and each
Shareholder and constitutes the legal, valid and binding obligation of Seller
and each Shareholder, enforceable against them in accordance with its terms,
subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws affecting creditors' rights and
remedies generally and subject, as to enforceability, to general principles of
equity (the "Enforceability Exceptions"). The Shareholders own all outstanding
shares of capital stock of Seller and no other equity interests of Seller are
authorized, issued or outstanding and there are no outstanding options with
voting rights, warrants or agreements and no preemptive rights relating to the
equity interests of Seller.
(c) NO CONTRAVENTION. Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby will
(i) violate or conflict with any provision of Seller's Articles of Incorporation
or By-Laws, (ii) (with or without the giving of notice or the lapse of time or
both) violate, or result in a breach of, or constitute a default under, or
conflict with, or give rise to a right
5
of termination of, or accelerate the performance required by, any of the terms
of any agreement, lease, mortgage, indenture or other instrument to which Seller
or any Shareholder is a party or by which they are bound, or (iii) violate or
conflict with any judgment, decree, order or award of any court, governmental
body or arbitrator, or, to the knowledge of the management employees, officers
and directors of Seller ("Seller's Knowledge"), any law, rule or regulation
applicable to Seller or any Shareholder, nor will the same result in the
creation of any Liens (as such term is defined in Section 5(d) hereof) upon any
of the Assets.
(d) TITLE TO ASSETS. Seller is the owner of the Assets, and, by the
execution and delivery on the Closing Date of the instruments of transfer
provided for herein and such other documents as may reasonably be requested by
Buyer or its counsel, Buyer will be vested with good and valid title to each of
the Assets, free and clear of all liens, mortgages, pledges, imperfections of
title, security interests, restrictions, prior assignments, encumbrances and
claims of any kind or nature whatsoever (collectively, "Liens"). Except as set
forth on Schedule 5(d) hereto, there are no Liens on any of the Assets as of the
date hereof.
(e) CONTRACTS. Exhibit C hereto lists or describes in reasonable
detail all written contracts, agreements and personal property leases (other
than the Seller's real property leasehold interests and Seller's contracts with
respect to computer software from ▇. ▇. ▇▇▇▇▇▇▇) which relate to the Business as
of the date hereof.
The descriptions on Exhibit C hereto of contracts, agreements and
personal property leases, copies of which have been delivered to Buyer as of the
date hereof, are accurate and such contracts, agreements and personal property
leases were entered into in the ordinary course of business of the Business.
Except as set forth on Schedule 5(e) hereto, no consent of any third party is
required for the assignment of such contracts, agreements and personal property
leases to Buyer. Except as set forth in Schedule 5(e) hereto, each contract to
be assumed by Buyer is in full force and effect, is valid and enforceable, there
are no outstanding disputes thereunder, and Seller is not in breach of any
provision thereof where such breach, with or without the giving of notice or the
passing of time or both, is reasonably likely to have a material adverse effect
on the Assets of the Business or to result in a material loss of customers or a
material decrease in net sales of the Business (a "Material Adverse Effect").
Each of Seller's sales orders with customers, comprising part of the Assets, was
entered into, and is capable of being filled, in the ordinary course of business
of the Business and was executed at prices in conformity with then existing
sales prices of Seller. Each of Seller's purchase orders with suppliers,
comprising part of the Assets, was entered into in the ordinary course of
business of the Business.
(f) ABSENCE OF CERTAIN CHANGES OR EVENTS. Since September 30, 1996,
the Business has been conducted only in the ordinary course, consistent with
past practice and there has not been: (i) any Material Adverse Effect, (ii) any
damage, destruction, or casualty loss, whether or not covered by insurance, to
any Assets, (iii) any disposition by Seller of any assets relating to the
Business other than in the ordinary course of business consistent with past
practice, (iv) any Lien created on any Asset, other than the Liens referenced on
Schedule 5(d) hereto, (v) except in the ordinary course of business consistent
with past practice, any increase in, or commitment or plan adopted to increase,
the wages, salaries, compensation, pension, severance or other benefits or
payments to employees of the Business, (vi) any change in accounting methods,
principles or practices of Seller relating to the Business, (vii) any loss or
threatened or prospective loss by the Business of all or a significant portion
of a significant customer's business, or (viii) the agreement of Seller or any
of its affiliates to do any of the foregoing.
6
(g) COMPLIANCE WITH LAWS. The business and activities of the
Business are presently being conducted in compliance with all applicable
requirements of laws, ordinances, regulations and rules and all applicable
requirements of governmental bodies and agencies having jurisdiction over
Seller, except for such non-compliance as is not reasonably likely to have a
Material Adverse Effect.
(h) FINANCIAL STATEMENTS. Seller has previously delivered to Buyer a
copy, which has been certified by the Chief Financial Officer of Seller, of the
audited financial statements of Seller as of and for the period ended
September 30, 1996 and the unaudited financial reports "Sales Gross Profit by
Month" of Seller as of October 26, 1996, November 23, 1996 and December 29,
1996, respectively (collectively, the "Financial Statements"). The Financial
Statements present fairly in all material respects the financial position and
results of operations of Seller as of the respective dates thereof and for the
periods covered thereby in accordance with generally accepted accounting
principles applied on a consistent basis, except in the case of the interim
statements for normal year-end audit adjustments.
(i) LITIGATION: CONSENTS. Except as set forth in Schedule 5(i)
hereto, there is no action, suit, litigation, administrative or arbitration
proceeding or formal governmental inquiry or investigation pending or, to
Seller's Knowledge, threatened against Seller with respect to the Business or
which seeks to restrain or prohibit or otherwise challenges the consummation,
legality or validity of the transactions contemplated hereby. Seller is not in
violation of any term of any judgment, decree, injunction or order entered by
any court or governmental authority and outstanding against it relating to or
with respect to the Business or any Asset. Except as set forth in
Schedules 5(d) and 5(e) hereto, no consent, approval or authorization of or
filing with any governmental authority or other third party on the part of
Seller is required in connection with the execution, delivery and performance of
this Agreement or the consummation of any of the transactions contemplated
hereby.
(j) INSURANCE. Seller maintains adequate policies of fire,
liability, workers' compensation and other forms of insurance which relate to
the Business. Such policies cover risks customarily insured by businesses
similar to the Business. All such policies are in full force and effect, the
premiums due thereon have been paid, Seller has complied in all material
respects with the provisions of such policies and no notice of cancellation or
termination has been received with respect to any such policy (except for the
lapse of any thereof at the end of its term), it being understood, however, that
Seller may terminate all such policies as to the Business as of the Closing
Date.
(k) EMPLOYEES. Schedule 5(k) hereto sets forth the name of each
current employee of Seller and each such employee's title, employment date and
compensation rate and any labor agreement to which such employee is subject.
Except as set forth on Schedule 5(k) hereto, there are no pending or, to
Seller's Knowledge, threatened strikes, work stoppages, slowdowns, grievances or
other labor disputes with respect to individuals employed by Seller, and Seller
has not experienced any such labor controversy within the past two years.
Except as set forth on Schedule 5(k) hereto, there are no pending or, to
Seller's Knowledge, threatened complaints or charges with any federal, state or
local governmental agency or court with respect to any individual or group of
individuals employed by Seller alleging employment discrimination, wrongful
termination, any unfair labor practice charges or any other employment-related
claim. Except as set forth on Schedule 5(k), no individuals employed by Seller
are represented by any labor organization, and no group of such individuals or
labor organization with respect to such individuals have made a demand for
recognition or have filed a petition seeking a representation proceeding with
the National Labor Relations Board within the past two years. Complete copies
of all labor agreements which apply to any employees of Seller have been
provided to Buyer.
7
(l) ENVIRONMENTAL MATTERS. To Seller's Knowledge, except as set
forth on Schedule 5(1) hereto:
(i) the operations of the Business are in compliance in all
material respects with all applicable federal, state, local or other
governmental statutes, codes, rules, regulations, ordinances, decrees, orders or
other requirements of law relating to the protection of human health and safety
or the environment (collectively, "Environmental Laws") and all permits issued
pursuant to Environmental Laws;
(ii) the Business has obtained all permits required under all
applicable Environmental Laws necessary to operate as it currently operates, and
all such permits are in full force and effect;
(iii) within the two years prior to the date hereof, the
Business has not received any written communication alleging, asserting or
otherwise indicating that the Business may be in violation of, or may have
liability under, any Environmental Laws or any permit issued pursuant to
Environmental Laws;
(iv) the Business has not assumed by contract any material
liabilities, contingent or otherwise, under Environmental Laws; and
(v) complete copies of all reports, studies, recommendations,
or assessments that address any issues of compliance with or liability under
Environmental Laws ("Environmental Assessments") that could affect the Business
have been provided to Buyer.
(m) TAXES. Seller has accurately prepared and duly and timely filed
all tax returns required to be filed by Seller or on behalf of Seller on or
prior to the date hereof for all taxes, including cigarette excise tax returns
filed with any state authority. All taxes shown to be payable on such tax
returns have been paid in full. There are no tax Liens upon any of the assets
and all written assessments of taxes due and payable by, on behalf of or with
respect to Seller, which if unpaid might result in a Lien upon any of the Assets
after giving effect to the transactions contemplated hereby, have been paid by
or on behalf of Seller. All amounts required to be withheld by Seller
(including from employees of the Business for income taxes, social security and
other payroll taxes) have been collected and withheld and have been paid to the
respective governmental agencies. None of the Assets is required to be treated
as being owned by a person other than Seller pursuant to section 168(f)(8) of
the Internal Revenue Code of 1954, as amended and in effect immediately prior to
the enactment of the Tax Reform Act of 1986.
For purposes of this Agreement, the term (i) "tax" shall mean all
taxes, levies or other like assessments, charges or fees, including, without
limitation, income, gross receipts, excise (including cigarette excise taxes),
value added, real or personal property, withholding, asset, sales, use, license,
payroll, transaction, capital, business, corporation, employment, net worth and
franchise taxes, or other governmental taxes imposed by or payable to the United
States of America or any State, local or foreign governmental entity, whether
computed on a separate, consolidated, unitary, combined or any other basis; and
in each instance such term shall include any interest, penalties or additions to
tax attributable to any such tax; and (ii) "tax return" shall mean any return,
declaration, report, claim for refund, information return or statement relating
to taxes, including any schedules or attachments thereto, and including any
amendment thereof.
8
(n) PERMITS AND APPROVALS. Schedule 5(n) hereto lists all licenses,
permits, consents, approvals, authorizations, qualifications and orders of
governmental authorities of the Business (collectively, the "Permits"). The
Permits represent all Permits necessary or required for the conduct of the
Business as presently conducted by Seller. Within the past eighteen months,
except as set forth on Schedule 5(n) hereto, Seller has not received a written
notice alleging a violation or probable violation or notice of revocation or
other written communication from or on behalf of any governmental entity, which
violation has not been corrected or otherwise settled, alleging (i) any
violation of any Permit or (ii) that Seller requires any Permit not currently
held by Seller.
(o) AFFILIATE TRANSACTIONS. Except as set forth on Schedule 5(o)
hereto, Seller has not engaged in any transaction with any affiliate or any
Shareholder which was (i) material to the business or operations of the Business
or (ii) undertaken in contemplation of the sale of the Business.
(p) INVENTORY. The Inventory relating to the Business was acquired
by Seller in the ordinary course of business, and Seller has good and valid
title to the Inventory. The Inventory is useable and saleable in a manner
consistent with past practices, subject to appropriate reserves in accordance
with generally accepted accounting principles applied on a consistent basis.
(q) ACCOUNTS RECEIVABLE. The Accounts Receivable of the Business
represent valid obligations arising from sales actually made in the ordinary
course of business and are fully collectible, without offset or other deduction,
subject to appropriate reserves in accordance with generally accepted accounting
principles applied on a consistent basis.
(r) FIXED ASSETS. The Fixed Assets are in good condition and working
order (normal wear and tear excepted), suitable for the purposes for which they
are used in the Business, except for those instances which would not materially
and adversely affect the operations of the Business.
(s) EMPLOYEE BENEFIT PLANS. Except as set forth in Schedule 5(s),
neither Seller nor any entity under common control with Seller, within the
meaning of section 414(b), (c), (m) or (o) of the Internal Revenue Code of 1986,
as amended (the "Code") or section 4001(a)(14) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA") (a "Plan Affiliate"), maintains, is
required to contribute to, or is required to provide benefits under, any plan,
fund or program providing any pension, profit sharing, deferred compensation,
severance pay, bonuses, incentive compensation, stock options, stock purchases,
or any other form of retirement or deferred benefit, or any health, accident,
dependent care, or other welfare benefit (a "Plan").
(i) Seller and all Plan Affiliates are in material compliance
with all laws and regulations relating to the Plans, including but not limited
to material compliance with all provisions of the Code and ERISA relating to the
Plans. Neither Seller nor any Plan Affiliate is in default in performing its
obligations under any Plan or related agreement and all contributions and other
payments required to be made under any Plan with respect to the period prior to
the Closing have been made (or reserves adequate for such payments have been set
aside). Neither Seller nor any Plan Affiliate has engaged in any non-exempt
"prohibited transaction" (as defined in section 4975 of the Code or section 406
of ERISA) with respect to any Plan.
(ii) Seller has not agreed to any future increases in benefit
levels or the creation of new benefits with respect to any Plan.
9
(iii) Except as set forth in Schedule 5(s), (A) no Plan is a
multiemployer plan (as defined in section 4001(a)(3) of ERISA) (a "Multiemployer
Plan"), (B) neither Seller nor any Plan Affiliate has ever been obligated to
contribute to a Multiemployer Plan, and (C) no Plan is subject to Title IV of
ERISA, and neither Seller nor any Plan Affiliate has ever been obligated to
contribute to a Plan which is or was subject to Title IV of ERISA. Neither
Seller nor any of its Plan Affiliates has incurred or will incur any liability
under Title IV of ERISA arising in connection with the sponsorship of,
termination of, or complete or partial withdrawal from, any Plan covered or
previously covered by Title IV of ERISA which will become, on or after the
Closing Date, an obligation of the Buyer. Neither Seller nor any of its Plan
Affiliates has incurred or will incur any liability under any Multiemployer Plan
providing welfare benefits which will become, on or after the Closing Date, an
obligation of the Buyer.
(iv) With respect to each Plan which is intended to be a
qualified plan under section 401(a) of the Code (a "Qualified Plan"), Seller has
received a determination letter from the Internal Revenue Service ("IRS")
stating that the Plan does qualify in form with section 401(a) of the Code, as
amended by the Tax Reform Act of 1986 and subsequent legislation, and Seller has
no reason to believe that any events have occurred since the issuance of such
letter which would cause the Plan not to be so qualified. All contributions
required to be made to any Qualified Plan have been so made within the time
period provided under sections 404(a)(6) and 412 of the Code, and no accumulated
funding deficiency (as defined in section 412 of the Code) exists, whether or
not waived, with respect to any Qualified Plan.
(v) Seller has provided to Buyer complete and correct copies
of all Plans, related trust agreements, insurance contracts or other related
agreements, the current summary plan description for each Plan subject to ERISA,
and any similar description of any other Plan, the most recent Form 5500 for
each Plan subject to ERISA reporting requirements, and the most recent
accountings for any Plan funded through a trust. Seller has provided to Buyer
letters signed by (i) an authorized representative of each Plan described in
Section 5(s)(iii) above confirming that Buyer will incur no liability or
obligation described in Section 5(s)(iii) or (ii) Seller's counsel describing
the steps that such counsel has undertaken to confirm that Buyer will incur no
liability or obligation described in Section 5(s)(iii). Seller has provided to
Buyer complete and correct copies of the latest actuarial report for its single
employer defined benefit pension plan prepared by a fully-qualified actuarial
firm.
(t) CUSTOMERS. Except as set forth in Schedule 5(t), to Seller's
Knowledge, it has no reason to believe that any current customer of Seller will
not continue to do business with Buyer after the Closing upon substantially the
same terms and at such volumes as such customer did business with Seller prior
to the Closing. Exhibit B hereto is a complete and accurate list of 1996 Seller
Gross Sales to customers of Seller who continued to be customers of Seller as of
December 31, 1996.
6. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer hereby represents and
warrants to Seller as follows:
(a) ORGANIZATION AND GOOD STANDING. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has full corporate power and authority to own, lease and operate
its properties and carry on its business as it is now being conducted.
(b) EXECUTION AND EFFECT OF AGREEMENT. Buyer has the requisite
corporate power and authority to enter into this Agreement and to perform its
obligations hereunder, and the execution and
10
delivery of this Agreement and the consummation of the transactions contemplated
hereby and the performance of Buyer's obligations hereunder have been duly
authorized by all necessary corporate action on the part of Buyer. This
Agreement has been duly executed and delivered by Buyer and constitutes the
legal, valid and binding obligation of Buyer, enforceable against it in
accordance with its terms, subject to the Enforceability Exceptions.
(c) NO CONTRAVENTION. Neither the execution and delivery of this
Agreement nor the consummation of the transactions effected hereby will
(i) violate or conflict with any provision of Buyer's Certificate of
Incorporation or By-Laws, (ii) (with or without the giving of notice or the
lapse of time or both) violate, or result in a breach of, or constitute a
default under, or conflict with, or give rise to a right of termination of, or
accelerate the performance required by, any of the terms of any agreement,
lease, mortgage, indenture or other instrument to which Buyer is a party or by
which it is bound, or (iii) violate or conflict with any judgment, decree, order
or award of any court, governmental body or arbitrator, or any law, rule or
regulation applicable to Buyer.
7. COVENANTS OF SELLER. From and after the date hereof and until the
Closing Date, Seller hereby covenants and agrees that:
(a) It shall make available for inspection by Buyer or its
representatives, during normal business hours, corporate records, books of
accounts, contracts, personnel records, price lists, route information, customer
lists, correspondence files and all other documents and data reasonably
requested by Buyer, upon reasonable advance written notice by Buyer to Seller,
relating to the Business, in order to permit Buyer and such representatives to
make reasonable inspection and examination of the business and affairs of the
Business. They shall further cause the managerial employees, counsel and
regular independent certified public accountants of the Business to be available
upon reasonable notice to answer questions of Buyer's representatives concerning
the business and affairs of the Business, and shall further cause them to make
available all relevant books and records in connection with such inspection and
examination.
(b) It shall cause the Business to maintain in full force and effect
all of its presently existing insurance coverage, or insurance comparable to
such existing coverage, except that all such insurance coverage may be cancelled
by Seller with respect to the Business as of the Closing Date.
(c) It shall (i) cause the business of the Business to be conducted
in the ordinary course, consistent with the present conduct of its business,
(ii) use its best efforts to maintain, preserve and protect the Assets and the
relationships of the Business with its customers and suppliers, (iii) use its
good faith efforts to maintain the employees of the Business, and shall not hire
any new employees of the Business outside the ordinary course of business nor
provide for any increase in the wages, salaries, compensation or other benefits
payable to existing employees of the Business, (iv) maintain the books and
records relating to the Business in the usual and ordinary manner, on a basis
consistent with past practice, including maintaining appropriate reserves and
accruals with respect to the Accounts Receivable, Inventory and Fixed Assets,
(v) refrain from entering into any new contract or renewing any lease relating
to the Business and refrain from modifying any material contract or lease
relating to the Business other than purchase and sales orders entered into in
the ordinary course of business, without the prior written approval of Buyer or
except as otherwise contemplated hereby, (vi) comply with all applicable laws,
including, but not limited to, Environmental Laws, (vii) refrain from making any
dividend or distribution in respect of the capital stock of Seller or making any
disposition of any assets relating to the Business other than in the ordinary
course of business consistent with past practice, (viii) not voluntarily permit
any of the Assets to become subject to any
11
Lien, other than existing Liens, (ix) not agree to do any of the foregoing, and
(x) not take any action which would cause any of the representations and
warranties made by Seller in this Agreement not to be true and correct in all
material respects on and as of the Closing Date with the same force and effect
as if such representations and warranties had been made on and as of the Closing
Date.
(d) It shall use commercially reasonable efforts to obtain any
required consents to the transactions contemplated hereby and to cause the
conditions precedent to the consummation of the transactions contemplated hereby
to be satisfied.
(e) It shall notify Buyer and keep it advised as to (i) any
litigation or administrative proceeding pending or, to Seller's Knowledge,
threatened against Seller which challenges or seeks to restrain or enjoin the
consummation of any of the transactions contemplated hereby; (ii) any damage or
destruction of any material Assets; (iii) any loss or prospective or threatened
loss by the Business of all or a significant portion of a significant customer's
business; and (iv) any event which might reasonably be expected to result in a
Material Adverse Effect.
(f) It shall not, and shall cause its shareholders, affiliates,
directors, officers and employees not to, directly or indirectly, solicit,
authorize the solicitation of or continue or enter into any negotiations or
discussions with or furnish any information to any third party concerning any
offer or possible offer from such third party to acquire in any manner all or
any portion of the Business or the Assets, whether by way of merger, stock sale,
asset sale or otherwise, other than sales of Inventory in the ordinary course of
business, or rights to acquire any of the foregoing.
(g) It shall not, and shall cause its shareholders, affiliates,
directors, officers, employees and representatives not to, disclose any
confidential, nonpublic information concerning Buyer, this Agreement or the
transactions contemplated hereby, unless required to do so by law or legal
process or unless mutually agreed upon by Buyer and Seller. In the event that
Seller is required to make such disclosures by law or legal process, Seller
shall immediately notify Buyer of the existence, terms and circumstances
surrounding such a request so that Buyer may seek an appropriate protective
order prior to the disclosure of such information. Notwithstanding the
foregoing, Seller may disclose such information to its shareholders, directors,
officers, employees, representatives and agents who need to know such
information for purposes of evaluating and assisting in the transactions
contemplated hereby, provided that such persons are advised of the confidential
nature thereof.
8. COVENANTS OF BUYER. From and after the date hereof, and until the
Closing Date, Buyer hereby covenants and agrees that:
(a) It shall not take any action which would cause any of the
representations and warranties made by it in this Agreement not to be true and
correct in all material respects on and as of the Closing Date with the same
force and effect as if such representations and warranties had been made on and
as of the Closing Date.
(b) It shall use commercially reasonable efforts to cause the
conditions precedent to the consummation of the transactions contemplated hereby
to be satisfied.
(c) It shall not, and shall cause its affiliates, directors,
officers, employees and representatives not to, disclose any confidential,
non-public information concerning Seller, the Business, this
12
Agreement or the transactions contemplated hereby, unless required to do so by
law or legal process or unless mutually agreed upon by Seller and Buyer. In the
event that Buyer is required to make such disclosures by law or legal process,
Buyer shall immediately notify Seller of the existence, terms and circumstances
surrounding such a request so that Seller may seek an appropriate protective
order prior to the disclosure of such information. Notwithstanding the
foregoing, Buyer may disclose such information to its directors, officers,
employees, representatives and agents who need to know such information for
purposes of evaluating and assisting in the transactions contemplated hereby and
to their lenders, provided that such persons are advised of the confidential
nature thereof. The restrictions contained in this Section 8(c) shall not apply
to information concerning the Business after the Closing.
9. CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS. The obligation of Buyer
to consummate the transactions contemplated hereby on the Closing Date is, at
the option of Buyer, subject to the satisfaction of the following conditions:
(a) Each of the representations and warranties of Seller contained in
Section 5 hereof shall be true and correct in all material respects on and as of
the Closing Date with the same force and effect as though the same had been made
on and as of the Closing Date (except that representations and warranties that
are made as of a specific date need to be true and correct in all material
respects only as of such date).
(b) Seller shall have performed and complied, in all material
respects, with the covenants and provisions in this Agreement required to be
performed or complied with by it between the date hereof and the Closing Date.
(c) Seller shall have obtained all required consents to the
transactions contemplated hereby, including, without limitation, those set forth
on Schedule 5(e) hereto, and shall have arranged for the release of all Liens
which encumber any of the Assets.
(d) Since September 30, 1996, no event shall have occurred which has
resulted in or is reasonably likely to result in a Material Adverse Effect.
(e) No order of any court or other governmental or regulatory body
restraining, prohibiting or enjoining the consummation of the transactions
contemplated hereby shall be in effect or be threatened or sought by any
governmental or regulatory body. No litigation shall be pending which if
adversely determined could have a material adverse effect on the Assets or the
Business or Buyer as the owner thereof.
(f) Buyer shall have received each of the certificates, documents,
agreements and other instruments set forth in Section 11(c) hereof.
(g) All authorizations, consents, orders or approvals of, or
declarations or filings with, or expiration of waiting periods imposed by, any
governmental or regulatory body necessary for the consummation of the
transactions contemplated by this Agreement shall have been filed, occurred or
been obtained.
10. CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS. The obligation of
Seller to consummate the transactions contemplated hereby on the Closing Date
is, at the option of Seller, subject to the satisfaction of the following
conditions:
13
(a) Each of the representations and warranties of Buyer contained in
Section 6 hereof shall be true and correct in all material respects as of the
Closing Date with the same force and effect as though the same had been made on
and as of the Closing Date.
(b) Buyer shall have performed and complied in all material respects
with the covenants and provisions in this Agreement required herein to be
performed or complied with by it between the date hereof and the Closing Date.
(c) No order of any court or other governmental or regulatory body
restraining, prohibiting or enjoining the consummation of the transactions
contemplated hereby shall be in effect.
(d) Seller shall have received each of the certificates, documents,
agreements and other instruments set forth in Section 11(d) hereof.
(e) All authorizations, consents, orders or approvals of, or
declarations or filings with, or expiration of waiting periods imposed by, any
governmental or regulatory body necessary for the consummation of the
transactions contemplated by this Agreement shall have been filed, occurred or
been obtained.
11. THE CLOSING.
(a) The Closing of the sale of the Assets pursuant to this Agreement
(herein referred to as the "Closing") shall take place at the offices of ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
on February 3, 1997, or if later, on the first Monday following the first day on
which all of the conditions set forth in Sections 9 and 10 hereof have been
satisfied or waived, unless otherwise mutually agreed upon in writing by Buyer
and Seller, but in no event later than February 28, 1997. The close of business
on the date of Closing is referred to in this Agreement as the "Closing Date".
(b) All corporate actions and proceedings to be taken and all
documents to be executed and delivered by Seller in connection with the
consummation of the transactions contemplated hereby shall be reasonably
satisfactory in form and substance to Buyer and its counsel. All corporate
actions and proceedings to be taken and all documents to be executed and
delivered by Buyer in connection with the consummation of the transactions
contemplated hereby shall be reasonably satisfactory in form and substance to
Seller and its counsel. All corporate actions and proceedings taken and all
documents to be executed and delivered by the parties at the Closing shall be
deemed to have been taken and executed simultaneously and no proceedings shall
be deemed taken nor any documents executed or delivered until all have been
taken, executed and delivered.
(c) At the Closing, Seller shall deliver to Buyer the following:
(i) Such bills of sale, titles to vehicles, endorsements,
assignments, including assignments and assumptions of leases and other good and
sufficient instruments of transfer and conveyance to vest in Buyer title to the
Assets, free and clear of all Liens, in accordance herewith;
(ii) Recent certificates of good standing for Seller issued by
the Secretary of State of California and the Franchise Tax Board;
14
(iii) An incumbency and specimen signature certificate, dated
the Closing Date, from Seller with respect to the officers of Seller executing
this Agreement and any other document delivered hereunder by or on behalf of
Seller;
(iv) A certificate of Seller, dated the Closing Date, signed by
an executive officer of Seller, certifying as to the matters set forth in
Sections 9(a) and (b) hereof;
(v) A copy of the resolutions adopted by the Board of
Directors and shareholders of Seller authorizing the execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby,
certified by a duly authorized officer of Seller, as of the Closing Date;
(vi) All required consents to the transactions contemplated
hereby and releases for all Liens which encumber the Assets;
(vii) An opinion of Jeffer, Mangels, ▇▇▇▇▇▇ & Marmaro LLP,
counsel to Seller, in substantially the form attached hereto as Exhibit D;
(viii) The Purchase Price certificate contemplated by
Section 2(a) hereof;
(ix) A Non-Competition Agreement executed by the Shareholders
(other than ▇▇▇▇▇ ▇▇▇▇▇▇▇) in substantially the form of Exhibit E hereto;
provided that the term of such agreement shall be: (a) with respect to ▇▇▇▇▇▇
▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, the period commensurate with their employment with
Buyer, plus two years; (b) with respect to ▇▇▇▇▇ ▇▇▇▇▇▇▇, the period
commensurate with his employment with Buyer, plus one year; (c) with respect to
▇▇▇▇ ▇▇▇▇▇▇▇, the period commensurate with his employment with Buyer; and (d)
with respect to all other Shareholders, the period two years after the Closing
Date;
(x) A UCC-1 Financing Statement against Seller listing Buyer
as the secured party with respect to the Assets; and
(xi) Such other documents and instruments as may be reasonably
requested by Buyer or its counsel to effectuate the terms of this Agreement.
(d) At the Closing, Buyer shall deliver to Seller the following:
(i) A wire transfer of federal funds to accounts designated by
Seller in the amount of the Purchase Price minus the Reserve Amount, the
Employee Credit Amount and the Escrow Amount;
(ii) An assumption agreement pursuant to which Buyer shall
assume the liabilities referred to in Section 4(a) hereof;
(iii) A recent certificate of good standing for Buyer issued by
the Secretary of State of Delaware;
15
(iv) An incumbency and specimen signature certificate, dated
the Closing Date, from Buyer with respect to the officers of Buyer executing
this Agreement and any other document delivered hereunder by or on behalf of
Buyer;
(v) A certificate of Buyer, dated the Closing Date, signed by
an executive officer of Buyer, certifying as to the matters set forth in
Sections 10(a) and (b) hereof;
(vi) A copy of the resolutions adopted by the Board of
Directors of Buyer authorizing the execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby, certified by a duly
authorized officer of Buyer, as of the Closing Date;
(vii) Employment Agreements with ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇,
▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇▇ executed by Buyer in substantially the form of
Exhibit F hereto;
(viii) An Escrow Agreement with Seller executed by Buyer in
substantially the form of Exhibit G hereto;
(ix) The Purchase Price certificate contemplated by
Section 2(a) hereof; and
(x) Such other documents and instruments as may be reasonably
requested by Seller or its counsel to effectuate the terms of this Agreement.
(e) Buyer and Seller shall make appropriate adjustments,
apportionments, and prorations as of the Closing Date (a) with respect to
accrued and unpaid amounts as of the Closing Date under the contracts to be
assumed hereunder by Buyer, which accrued and unpaid amounts shall be deducted
from amounts owed to Seller hereunder and paid when due by Buyer, (b) in order
that Buyer is reimbursed by Seller for the cost of the salaries of Buyer's
employees (who were formerly Seller's employees) who assist Seller in tracking
the Inventory on or after February 1, 1997, (c) with respect to advance payments
or prepaid expenses paid by Seller that relate to the Assets after the Closing
and that benefit Buyer after the Closing, which proportionate amounts shall be
paid by Buyer with respect to the post-Closing period and (d) with respect to
Seller's January vendor incentive payments for the ▇▇▇▇▇▇ ▇▇▇▇▇▇ "Masters"
Program and the ▇.▇. ▇▇▇▇▇▇▇▇ "Partners" Program, which amounts shall be paid to
Seller after receipt by Buyer. The net amount owing to or due from Buyer
hereunder shall be deducted from or added to any amounts owed to Seller pursuant
to Section 2(b).
(f) Buyer shall have the right to begin removing Inventory which is
part of the Assets from Seller's facilities beginning on the Friday night prior
to the Closing. In the event that the Closing does not occur on the following
Monday, Buyer shall return such Inventory or pay Seller for such Inventory at
cost not later than Wednesday. Buyer and Seller acknowledge that The CIT
Group/Credit Finance, Inc. will have a security interest in the Assets until
such time as the amounts set forth in Section 11(d)(i) have been paid.
(g) Seller will apply the amounts received by Seller pursuant to
Section 11(d)(i) to pay Seller's creditors, and Seller represents and warrants
that amounts to be paid to Seller under this Agreement will be sufficient to
allow Seller to pay off all of Seller's creditors, except amounts owed to trade
creditors which are not then past due. Seller agrees that (a) Seller will use
commercial best efforts to arrange for a mortgage loan within 30 days of the
Closing with respect to the Santa ▇▇▇▇▇ facility owned by Seller in order to
provide sufficient funds for Seller to timely pay off all of Seller's creditors,
(b) Seller will not make any
16
distributions to its shareholders or pay off any notes held by its shareholders
prior to paying off all of Seller's creditors and (c) MSC and CCC will not make
any intercompany cash distributions or transfers between the two companies prior
to paying off all of Seller's creditors, without the consent of Buyer.
12. FURTHER ASSURANCES. Seller and Buyer shall, whenever and as often as
reasonably requested to do so by the other, do, execute, acknowledge and deliver
any and all such other and further acts, assignments and transfers and any
instruments of further assurance, approvals and consents as are necessary or
proper in order to complete, ensure and perfect the sale, transfer and
conveyance to Buyer contemplated hereby.
13. USE OF NAME. Seller agrees that for a period of four (4) months from
and after the Closing Date, Buyer may use packaging materials purchased by Buyer
hereunder which contain the name "▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Company" or "Capital Cigar
Company" or derivations thereof and otherwise use such names, solely in
connection with the sale of products of the Business. Thereafter, Buyer agrees
to cease using such names and to cease using or distributing any such packaging
materials in any manner.
14. USE OF FACILITIES. On and after the Closing Date, Buyer shall have
the right to use the Sacramento and San Leandro, California and the Reno, Nevada
facilities of Seller (the "Facilities"): (i) to store the Assets pending
transfer to Buyer's facilities; (ii) dismantle equipment which is part of the
Assets, and (iii) in the case of the San Leandro Facility, to operate Buyer's
business out of such Facility while Buyer's Hayward facility is being renovated.
Buyer shall not operate or make any use of the underground storage tank system
presently located at the San Leandro and Sacramento Facilities ("UST Systems").
The UST Systems shall remain permitted in Seller's name and Seller is solely
responsible for maintaining the UST Systems and for complying with any
applicable rules or regulations. Buyer shall occupy and have all necessary
access to the Facilities for the period of Buyer's use, and Buyer shall
reimburse Seller for all reasonable out-of-pocket expenses of Seller associated
with Buyer's use of the Facilities, including without limitation, utilities,
property taxes, insurance and guard services (the "Costs"). No rent or lease
payment shall be payable by Buyer with respect to the Facilities for such period
of use; provided that if Buyer does not vacate a Facility by the date which is
three (3) months after the Closing, Buyer may occupy such Facility up to an
additional three (3) months in which case Buyer shall pay reasonable rent during
such additional period in an amount to be agreed upon by Buyer and Seller.
Seller shall provide Buyer with an itemization of the Costs on a monthly basis
which shall be paid by Buyer within fifteen (15) days of receipt thereof.
Seller agrees to maintain adequate insurance on the Facilities (but not on the
contents) during the time such Facilities are occupied by Buyer. Buyer shall
indemnify and hold harmless Seller against any loss arising directly out of
Buyer's use of the Facilities pursuant to this Section 14 to the extent any such
loss is not covered by insurance.
15. LABOR AND EMPLOYMENT MATTERS.
(a) On and after the Closing Date, all hiring and staffing decisions
in connection with the use of the Assets purchased by Buyer shall be within
Buyer's sole and exclusive discretion and control. Buyer agrees to offer
employment to at least 200 employees of Seller as of the Closing Date. Those
employees of Seller to whom Buyer shall not offer employment or who decline the
employment offer of Buyer shall remain in the employ of Seller, or at its
option, may be terminated by Seller in accordance with its personnel policies
and at its expense. Seller agrees that to the extent the foregoing triggers any
notice obligations under the Worker Adjustment and Retraining Notification Act
(WARN), Seller shall be responsible for providing, and shall be liable to any
persons or entities who do not receive, any required
17
notices. Employees of Seller who become employees of Buyer by accepting Buyer's
offer of employment shall be subject to all rules, regulations, requirements and
policies applicable to new hires of Buyer.
(b) Buyer shall not assume any employment contracts of whatever
nature or any obligations arising out of any employment contracts, express or
implied, oral or written, individual or collective, between Seller and any of
Seller's employees. Nor shall Buyer assume any obligations arising out of any
pension benefit, employee welfare benefit, bonus, deferred compensation, stock
purchase, stock option, severance, fringe benefit, medical insurance, life
insurance or similar plan, policy or program of Seller, whether or not covered
or excluded from coverage under ERISA. Seller shall be solely responsible for
complying with all of its obligations, if any, to its employees, including
compliance with the provisions of ERISA, the Multi-Employer Pension Plan
Amendments Act of 1980 (MPPAA), and WARN. Buyer and Seller agree that effective
as of the first day on which Buyer employs any of Seller's employees,
sponsorship of plan numbers 3 through 5, inclusive, on Schedule 5(s) shall be
transferred to Buyer, provided that Seller shall have all liability for any
claims incurred (or premiums owing for periods) prior to the date of transfer.
Buyer and Seller each shall take all actions determined by Buyer to be necessary
or appropriate to effect such transfer.
(c) Buyer shall not be bound by any labor agreements between Seller
and any labor organizations, nor shall Buyer assume any obligations or
liabilities whatsoever resulting from any such labor agreements. Buyer shall
have no obligation to arbitrate any disputes that may have arisen or may arise
in the future under such labor agreements. Buyer shall have no duty to continue
or maintain in effect any of the pension, health and welfare or other fringe
benefit plans or agreements to which Seller may be a party with any labor
organizations. Seller shall assume any and all withdrawal liability under the
Multi-Purpose Employer Pension Plan Amendments Act of 1980.
(d) Seller shall give appropriate and sufficient notification, as may
be required by both law and contract, to all of its employees and any of their
bargaining representatives of this transaction and of the termination of their
employment. Prior to the Closing Date, Seller shall make no promises,
representations or guarantees to its employees or their bargaining
representatives about the possibility of their being hired or employed by Buyer
or Buyer's agents.
(e) Buyer agrees that those employees of Seller who are hired by
Buyer as of the Closing Date shall be credited with one vacation day with
respect to their employment with Buyer for each earned and unused PTO or
vacation day such employees have with respect to their employment with Seller,
up to a maximum credit of 15 vacation days. Seller agrees to pay Buyer at the
Closing for each such employee, an amount equal to the number of vacation days
to be credited by Buyer to such employee multiplied by such employee's daily
rate of salary with Buyer as of the Closing Date, plus an amount equal to
Buyer's employment taxes (including FICA, OASDI, FICA-HI, and Nevada SUI) on
such salary (collectively, the "Employee Credit Amount"). Buyer shall apply and
deduct the Employee Credit Amount owed to Buyer against the Purchase Price to be
paid at the Closing. Seller represents that it has provided Buyer with a true
and accurate list of the number of earned and unused PTO or vacation days of
Seller's employees who are hired by Buyer.
18
16. NON-COMPETITION COVENANTS.
(a) From and after the Closing Date until the fourth anniversary of
the Closing Date, Seller shall not, and shall cause their affiliates and
subsidiaries not to, directly or indirectly, (i) within the States of California
or Nevada, engage in the business of distribution of tobacco, confectionery,
groceries or other consumer items to the convenience retail industry, including,
without limitation, mass merchandisers (a "Competitive Business"), (ii) within
the States of California or Nevada, render any services to or otherwise assist
any person that is engaged in a Competitive Business, (iii) sell, assign or
otherwise transfer the names "▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Company" or "Capital Cigar Company"
to a Competitive Business, or (iv) invest in, as principal, partner or
stockholder (otherwise than through the ownership of less than 4% of the
outstanding voting securities of any corporation which are listed on a national
securities exchange or accepted for quotation on The Nasdaq Stock Market), any
person, partnership, firm, corporation or other business entity which is engaged
in a Competitive Business; provided that Seller may sell any Non-Saleable
Inventory or collect any Accounts Receivable returned to Seller pursuant to
Section 2(b). From and after the Closing Date and until the fourth anniversary
of the Closing Date, Seller shall not, and shall cause its affiliates and
subsidiaries not to, directly or indirectly, solicit for hire any employee,
officer, director, executive or consultant currently employed in the Business
who thereafter receives an offer of employment from Buyer, or becomes employed
by Buyer, after the Closing Date or encourage any such employee, officer,
director, executive or consultant to leave such employment; provided that, if
Buyer terminates the employment of any such person, Seller may subsequently hire
such person in a business which is not a Competitive Business. Following the
Closing, Seller shall not, and shall cause its affiliates and subsidiaries not
to, directly or indirectly, disclose, divulge, communicate, use to the detriment
of Buyer or the Business or for the benefit of any other person or persons, any
confidential, proprietary or sensitive information or trade secrets of the
Business, including, without limitation, any and all personnel information,
know-how, customer lists, route information, price lists or other financial and
operating data relating to the Assets and Business being transferred to Buyer,
unless required to do so by law or legal process. In the event that such
disclosure is required by law or legal process, Seller shall immediately notify
Buyer of the existence, terms and circumstances surrounding such disclosure so
that Buyer may seek an appropriate protective order prior to the disclosure of
such information.
(b) Seller expressly agrees and understands that the remedy at law
for any breach by it or its affiliates or subsidiaries of this Section 16 will
be inadequate and that the damages flowing from such breach are not readily
susceptible to being measured in monetary terms. Accordingly, Seller
acknowledges that upon a violation of any provision of this Section 16, Buyer
shall be entitled to immediate injunctive relief and may obtain a temporary
restraining order restraining any threatened or further breach and Buyer shall
be further entitled to require Seller to account for and pay over to Buyer all
compensation, profits, monies, accruals, or other benefits derived or received
by Seller during the period of, and resulting from, the breach of any of the
provisions of this Section 16. Nothing contained in this Section 16 shall be
deemed to limit Buyer's remedies at law or in equity for any breach of the
provisions of this Section 16 by Seller or its affiliates or subsidiaries. Any
covenant on Seller's part contained in this Section 16 which may not be
specifically enforceable shall nevertheless, if breached, give rise to a cause
of action for monetary damages.
(c) The covenants contained in this Section 16 shall be construed to
extend to the separate counties of the States of California and Nevada and to
the extent that they shall be illegal and/or unenforceable with respect to any
one of such counties, such covenants shall not be affected thereby with respect
to each other county, as such covenants are severable and independent with
respect to each county.
19
(d) The parties hereto acknowledge that the covenants contained in
this Section 16 are independent covenants and shall not be affected by
performance or nonperformance of any other provision of this Agreement. Seller
has carefully considered the nature and extent of the restrictions upon them and
their affiliates and subsidiaries and the rights and remedies conferred upon
Buyer under this Section 16, and Seller has independently consulted with their
counsel and after such consultation acknowledges and agrees that the covenants
set forth in this Section 16 are reasonable in time and territory, are designed
to eliminate competition that would otherwise be inequitable to Buyer and the
Business, are fully required to protect the legitimate interests of Buyer and do
not confer a benefit upon Buyer disproportionate to the detriment to Seller and
their affiliates and subsidiaries. It is the desire and intent of the parties
that the provisions of this Section 16 shall be enforced to the fullest extent
permissible under applicable law.
17. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS.
(a) Each of the representations and warranties contained in Sections
5 and 6 hereof shall survive the Closing and remain in full force and effect for
a period of two years following the Closing Date, except that the
representations and warranties contained in Sections 5(d), 5(g), 5(1) and 5(m)
hereof shall survive until the expiration of the applicable statutes of
limitations periods. Any claim for an Indemnifiable Loss (as hereinafter
defined) asserted within such period of survival as herein provided will be
timely made for purposes hereof.
(b) Unless a specified period is set forth in this Agreement (in
which event such specified period will control), the covenants contained in this
Agreement will survive the Closing and remain in effect indefinitely.
18. CERTAIN DEFINITIONS. For purposes of this Agreement, (i) "Indemnity
Payment" means any amount of Indemnifiable Losses required to be paid pursuant
to this Agreement, (ii) "Indemnitee" means any person or entity entitled to
indemnification under this Agreement, (iii) "Indemnifying Party" means any
person or entity required to provide indemnification under this Agreement,
(iv) "Indemnifiable Losses" means any and all damages, losses, liabilities,
obligations, costs and expenses, and any and all claims, demands or suits (by
any person or entity including, without limitation, any governmental entity)
including, without limitation, the costs and expenses of any and all actions,
suits, proceedings, demands, assessments, judgments, settlements and compromises
relating thereto and including reasonable attorneys' fees and expenses in
connection therewith, and (v) "Third Party Claim" means any claim, action or
proceeding made or brought by any person or entity who or which is not a party
to this Agreement or an affiliate of a party to this Agreement.
19. INDEMNIFICATION.
(a) Subject to Sections 17 and 20 hereof, Seller shall indemnify,
defend and hold harmless Buyer and its affiliates and subsidiaries and their
respective directors, officers, partners, employees, agents and representatives
from and against any and all Indemnifiable Losses to the extent relating to,
resulting from or arising out of:
(i) any breach by Seller of any of the representations,
warranties or covenants on the part of Seller contained in this Agreement;
20
(ii) the conduct of the Business or any portion thereof or the
ownership of the Assets on or prior to the Closing Date; and
(iii) any and all liabilities or obligations of Seller or the
Business relating to the Excluded Assets or the Excluded Liabilities or which
are not otherwise expressly assumed by Buyer under Section 4(a) hereof or as
otherwise provided in this Section 19.
(b) Subject to Sections 17 and 20 hereof, Buyer shall indemnify,
defend and hold harmless Seller and its affiliates and subsidiaries and its
directors, officers, partners, employees, agents and representatives from and
against any and all Indemnifiable Losses to the extent relating to, resulting
from or arising out of:
(i) any breach by Buyer of any of the representations,
warranties or covenants on the part of Buyer contained in this Agreement; and
(ii) the conduct of the Business or any portion thereof or the
ownership of the Assets following the Closing Date.
(c) Any claims for indemnification pursuant to Section 19(a) shall be
satisfied first from the Escrow Amount prior to satisfying claims for
indemnification directly from Seller, and any claims for indemnification
pursuant to Section 19(a)(i) with respect to any breach of Section 5(p) or 5(q)
shall be satisfied first from the Reserve Amount prior to satisfying claims for
indemnification directly from Seller.
(d) Seller shall have no liability under Section 19(a) with respect
to Third Party Claims unless and only to the extent that the aggregate amount of
Indemnifiable Losses for which indemnification is claimed thereunder exceeds
$100,000. Buyer shall have no liability under Section 19(b) with respect to
Third Party Claims unless and only to the extent that the aggregate amount of
Indemnifiable Losses for which indemnification is claimed thereunder exceeds
$100,000.
20. DEFENSE OF CLAIMS.
(a) If any Indemnitee receives notice of the assertion or
commencement of any Third Party Claim against such Indemnitee with respect to
which an Indemnifying Party is obligated to provide indemnification under this
Agreement, the Indemnitee will give such Indemnifying Party reasonably prompt
written notice thereof. Such notice will describe the Third Party Claim in
reasonable detail, will include copies of all material written evidence thereof
and will indicate the estimated amount, if reasonably practicable, of the
Indemnifiable Loss that has been or may be sustained by the Indemnitee. The
Indemnifying Party will have the right to participate in, or, by giving written
notice to the Indemnitee, to assume, the defense of any Third Party Claim at
such Indemnifying Party's own expense and by such Indemnifying Party's own
counsel (reasonably satisfactory to the Indemnitee), and the Indemnitee will
cooperate in good faith in such defense.
(b) If, within 30 calendar days after giving notice of a Third Party
Claim to an Indemnifying Party pursuant to Section 20(a), an Indemnitee receives
written notice from the Indemnifying Party that the Indemnifying Party has
elected to assume the defense of such Third Party Claim as provided in the last
sentence of Section 20(a), the Indemnifying Party will not be liable for any
legal expenses subsequently incurred by the Indemnitee in connection with the
defense thereof; provided, however, that if
21
the Indemnifying Party fails to take reasonable steps necessary to defend
diligently such Third Party Claim within 30 calendar days after receiving
written notice from the Indemnitee that the Indemnitee believes the Indemnifying
Party has failed to take such steps or if the Indemnifying Party has not
undertaken fully to indemnify the Indemnitee in respect of all Indemnifiable
Losses relating to the matter, the Indemnitee may assume its own defense, and
the Indemnifying Party will be liable for all reasonable costs or expenses paid
or incurred in connection therewith. Without the prior written consent of the
Indemnitee, which shall not be unreasonably withheld, the Indemnifying Party
will not enter into any settlement of any Third Party Claim.
21. BULK SALES COMPLIANCE. Seller and Buyer shall each use their
respective commercially reasonable efforts to assure compliance with the
provisions of applicable state law relating to bulk transfers in connection with
the transactions contemplated by this Agreement. Notwithstanding the foregoing,
nothing herein shall estop or prevent either Buyer or Seller from asserting, as
a bar or defense to any action or proceeding brought under any law relating to
bulk transfers that such law is not applicable to the transactions contemplated
by this Agreement. Seller shall indemnify Buyer from and hold it harmless
against any liabilities, damages, costs and expenses resulting from or arising
out of the parties' failure to comply with the so-called "bulk sales law" or any
other similar laws in any jurisdiction in respect of the transactions
contemplated by this Agreement. In addition, Seller will indemnify and hold
Buyer and its successors and assigns harmless on an after-tax basis against any
and all damages, claims, losses, liabilities and expenses, including, without
limitation, reasonable legal, accounting and other expenses, arising from the
failure by Seller to make any required payments to Seller's creditors.
22. TERMINATION. Anything contained in this Agreement to the contrary
notwithstanding, this Agreement may be terminated: (a) at any time on or prior
to the Closing Date, by the mutual consent in writing of Buyer and Seller, (b)
by either Buyer or Seller, if there has been a material misrepresentation or
breach of any covenant or agreement in this Agreement on the part of the other
and such breach has not been cured within a reasonable period after notice
thereof, or (c) automatically if the Closing does not occur on or prior to
February 28, 1997. In the event that this Agreement shall be terminated
pursuant to this Section 22, (i) Buyer and Seller shall promptly return any and
all confidential, nonpublic information concerning the other, and neither party
shall retain any copies thereof, and (ii) all further obligations of the parties
under this Agreement (other than Sections 7(g), 8(c) and 29 hereof) shall
terminate without further liability of either party to the others; provided that
nothing herein shall relieve any party from liability for breach of this
Agreement.
23. BROKERAGE AND FINDER'S FEES. Seller represents and warrants to Buyer
that no person is or will be entitled to any brokerage commissions or finder's
fees in connection with the transactions described in this Agreement as a result
of any action taken by Seller or any Shareholder, except for Eagle Partners,
whose fees and expenses will be solely the responsibility of Seller. Buyer
represents and warrants that no such commissions or fees are or will be due to
any person in connection with such transaction as a result of any action taken
by Buyer. Each of the parties hereto agrees to indemnify and hold harmless the
others from and against any claims or causes of action asserted by any third
persons for brokerage commissions or finder's fees (including any reasonable
attorneys' fees and expenses incurred in connection therewith) in connection
with the transactions described in this Agreement as a result of any action or
alleged action taken by or on behalf of the indemnifying party.
24. NOTICES. Any notices or communications required or permitted
hereunder shall be sufficiently given if in writing and personally delivered,
telecopied or sent by registered or certified mail, postage
22
prepaid, return receipt requested, or sent by a nationally recognized overnight
courier service, addressed as follows or to such other address as any party
shall have specified in conformity with the foregoing:
(a) If to Buyer, to:
Core-▇▇▇▇ International, Inc.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ - ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇
Telecopy No.: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Telecopy No.: ▇▇▇-▇▇▇-▇▇▇▇
(b) If to Seller or any Shareholder to:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Company
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Telecopy No.: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to:
Jeffer, Mangels, ▇▇▇▇▇▇ & Marmaro LLP
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇, Esq.
Telecopy No.: 415-398-5584
Jeffer, Mangels, ▇▇▇▇▇▇ & Marmaro LLP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇, Esq.
Telecopy No.: ▇▇▇-▇▇▇-▇▇▇▇
25. ENTIRE AGREEMENT. This Agreement, including the Exhibits and
Schedules hereto represents the entire understanding and agreement between the
parties hereto with respect to the subject matter hereof and supersedes all
prior agreements, including that certain letter agreement, dated December 20,
1996, between Seller and Buyer. This Agreement shall be a valid and binding
agreement whether or not it is executed by ▇▇▇▇▇ ▇▇▇▇▇▇▇. This Agreement cannot
be amended, supplemented or changed, nor can any
23
provision hereof be waived, except by a written instrument signed by the party
against whom enforcement of any such amendment, supplement, modification or
waiver is sought.
26. SUCCESSORS. This Agreement shall be binding upon and shall inure to
the benefit of the parties hereto and their respective successors and assigns.
No assignment of this Agreement or of any rights or obligations hereunder may be
made by any party (by operation of law or otherwise) without the prior written
consent of the other and any attempted assignment without the required consent
shall be void, except that Buyer may without such consent assign this Agreement
or any of its rights or obligations hereunder to one or more affiliates of
Buyer; provided, that no such assignment by Buyer shall relieve Buyer of any of
its obligations hereunder.
27. SECTION HEADINGS. The section headings contained in this Agreement
are for convenience of reference only and shall not affect in any way the
meaning or interpretation of this Agreement.
28. APPLICABLE LAW. This Agreement shall be governed by, construed and
enforced in accordance with the laws of the State of California, without regard
to the principles thereof relating to conflict of laws.
29. EXPENSES. Whether or not the transactions contemplated hereby are
consummated, each of the parties hereto shall pay its own expenses in connection
with this Agreement and the transactions contemplated hereby. Any and all
conveyance, deed, excise, stamp, sales, use, recording, transfer or similar
taxes or fees with respect to the sale of the Assets hereunder shall be paid by
Seller and the parties hereto shall cooperate to obtain any applicable exemption
certificates.
30. SEVERABILITY. If at any time subsequent to the date hereof, any
provision of this Agreement shall be held by any court of competent jurisdiction
to be illegal, void or unenforceable, such provision shall be of no force and
effect, but the illegality or unenforceability of such provision shall have no
effect upon and shall not impair the enforceability of any other provision of
this Agreement.
31. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
24
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement,
as of the date first written above.
CORE-▇▇▇▇ INTERNATIONAL, INC.
By /S/ ▇▇▇▇ ▇. ▇▇▇▇▇
-------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇
Title: Chairman and CEO
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ COMPANY
By /S/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
--------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: CEO
CAPITAL CIGAR COMPANY
By /S/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
--------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: CEO
SHAREHOLDERS:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
As a Shareholder and a Trustee of
the ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Voting Trust and
the Capital Cigar Voting Trust
/S/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
--------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
As a Shareholder and a Trustee of
the ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Voting Trust and
the Capital Cigar Voting Trust
/S/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
--------------
25
▇▇▇▇▇ ▇▇▇▇▇▇▇
As a Shareholder and a Trustee of
the ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Voting Trust and
the Capital Cigar Voting Trust
/S/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
-------------
▇▇▇▇ ▇▇▇▇▇▇▇
/S/ ▇▇▇▇ ▇▇▇▇▇▇▇
------------
▇▇▇▇▇ ▇▇▇▇▇
/S/ ▇▇▇▇▇ ▇▇▇▇▇
-----------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
As the Trustee of the ▇▇▇▇▇ ▇▇▇▇▇▇▇
Trust
/S/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
--------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
/S/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
--------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
/S/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
---------------
▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇
/S/ ▇▇▇▇ ▇▇▇▇▇▇▇
26