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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of the earliest event reported): December 23, 1996
(December 6, 1996)
NEW YORK BAGEL ENTERPRISES, INC
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(Exact name of Registrant as specified in its charter)
0-21205
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(Commission file number)
KANSAS 73-1369185
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
300 I.M.A. Plaza
250 North Water Street
Wichita, Kansas 67202-1213
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(Address of principal executive offices, including zip code)
316-267-7373
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(Registrant's telephone number, including area code)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On November 25, 1996, New York Bagel Enterprises, Inc. (the "Company,"
which term shall be deemed to include its subsidiaries, unless the context
indicates otherwise) entered into an Asset Purchase Agreement (the
"Agreement") with Lots A' Bagels, Inc. ("Lots A' Bagels") and Mr. Stephen K.
Goldstone and Mrs. Linda F. Goldstone to acquire through the Company's wholly
owned subsidiary, LAB Acquisition Corporation ("LAB"), certain of the assets
and assume certain of the liabilities of Lots A' Bagels (the "Acquisition").
On December 6, 1996, the Company completed the Acquisition. Under the terms
of the Agreement, the Company acquired substantially all of the operating
assets, business operations and facilities of Lots A' Bagels, including seven
restaurants and a bagel commissary located in Colorado Springs and Monument,
Colorado for $2.1 million in cash, a promissory note in the principal amount
of $563,000, which is subject to offset, and the assumption of certain
liabilities of Lots A' Bagels, primarily restaurant, equipment and vehicle
leases. LAB has entered into a consulting agreement with Mr. Goldstone, a
former executive officer of Lots A' Bagels. In connection with the
acquisition, Lots A' Bagels, Mr. Goldstone and Mrs. Goldstone executed
noncompete agreements in favor of the Company. In addition, the Company
issued a Warrant to Purchase Common Stock entitling Lots A' Bagels to
purchase a to be determined number of shares of the Company's common stock at
a price per share equal to the total amount of debt issued to Lots A' Bagels
times sixty percent (60%) divided by the average final "close" price per
share of the Company's Common Stock for the ten trading days ending three
trading days prior to December 6, 1996.
Pursuant to the Agreement, the Company acquired from Lots A' Bagels' seven
leased restaurants, a leased bagel commissary and substantially all of Lots A'
Bagels' inventory, property, operating equipment, intellectual property and
certain other assets. In connection with the Acquisition, all lease agreements
for the restaurants were assigned to and assumed by the Company. The Company
intends to operate the restaurants in substantially the same manner as they were
operated by Lots A' Bagels. The intellectual property acquired from Lots A'
Bagels consists principally of the trademarks and logos of Lots A' Bagels.
As part of the consideration for the Acquisition, Lots A' Bagels received a
$563,000 Promissory Note from the Company. The principal amount and accrued
interest payable under the Promissory Note are subject to offset for (i) certain
adjustments to be made upon the completion of a final statement of operations
for the period from July 1, 1996 through March 30, 1997 (the "Final Statement of
Operations") and (ii) any amounts required to be paid by Lots A' Bagels pursuant
to the indemnification provisions of the Agreement. In addition, depending upon
adjustments which may result from the Final Statement of Operations, the Company
may be required to pay up to an additional $325,000 in cash and issue to Lots A'
Bagels a promissory note in the amount, if any, by which the Final Statement of
Operations adjustment exceeds $325,000.
The Company's source of the cash portion of the purchase price was a
portion of the net proceeds from the Company's initial public offering of Common
Stock during August 1996.
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ITEM 7. FINANCIAL STATEMENTS, FINANCIAL INFORMATION AND EXHIBITS.
(a) Financial Statements of Business Acquired.
Since it is impracticable to include the required financial
statements, such financial information will be filed in an amendment
to this Form 8-K as soon as practicable, but no later than February
19, 1997.
(b) Pro Forma Financial Information.
Since it is impractical to include the required financial statements,
such financial information will be filed in an amendment to this Form
8-K as soon as practicable, but no later than February 19, 1997.
(c) Exhibits.
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
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2 Asset Purchase Agreement dated November 25, 1996 by and among LAB
Acquisition Corporation, New York Bagel Enterprises, Inc., Lots
A' Bagels, Inc., and Stephen K. Goldstone and Linda F. Goldstone.
4 New York Bagel Enterprises, Inc. Warrant to Purchase Common
Stock.
99.1 Financial Statements of business acquired. *
99.2 Pro forma financial information. *
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* To be filed as soon as practical, but no later than February 19, 1997.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, hereunto duly authorized.
NEW YORK BAGEL ENTERPRISES, INC.
/s/ JON H. CRAMER
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Jon H. Cramer
CHIEF FINANCIAL OFFICER, TREASURER
AND SECRETARY
Dated: December 20, 1996
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT ("Agreement") is made and entered into as
of this 25th day of November, 1996, by and among LAB ACQUISITION CORPORATION,
a Kansas corporation ("Buyer"), NEW YORK BAGEL ENTERPRISES, INC., a Kansas
corporation and the parent corporation of Buyer ("NYBE"), LOTS A' BAGELS,
INC., a Colorado corporation ("Seller"), and STEPHEN K. GOLDSTONE AND LINDA
F. GOLDSTONE, who are owners of all of the issued and outstanding capital
stock of Seller (collectively "Stockholders").
W I T N E S S E T H:
WHEREAS, Seller is engaged in the business of operating retail bagel
restaurants and delicatessens and a commercial bakery, and has its principal
offices at 4325 Northpark Drive, Colorado Springs, Colorado 80907;
WHEREAS, Seller owns and/or leases, as the case may be, all of the
tangible and intangible assets, including, INTER ALIA, all of the
inventories, lands and buildings, machinery and equipment, fixtures and other
operating assets used in the business of Seller;
WHEREAS, Buyer desires to acquire substantially all of the tangible and
intangible assets of Seller and to assume only those certain debts,
liabilities and obligations of Seller as specified herein, all in accordance
with the terms and conditions hereof; and
WHEREAS, Seller desires to sell substantially all of its tangible and
intangible assets and to transfer only those certain debts, liabilities and
obligations of Seller as specified herein, all in accordance with the terms
and conditions hereof.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties
hereto, intending to be legally bound, hereby agree as follows:
ARTICLE I.
PURCHASE AND SALE OF ASSETS
1.01 ASSETS TO BE ACQUIRED. Subject to and upon the terms and
conditions of this Agreement, Seller shall transfer, sell, convey, assign and
deliver to Buyer and Buyer shall purchase, accept and acquire on the date
referred to in Section 3.01 hereof, the following business and assets of
Seller free and clear of all liens and encumbrances except as specifically
provided in this Agreement:
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A) The ownership or leasehold interest, as the case may be, in and to the
parcels of real estate, improvements, buildings and fixtures
comprising the restaurants and bakery facility of Seller in Colorado
Springs, Colorado and Monument, Colorado (singularly a "LAB Facility"
and collectively the "LAB Facilities"), the legal descriptions for
which are set forth in Schedule 1.01(A) hereto, together with all
rights and appurtenances thereto, subject only to the title exceptions
referred to in said Schedule 1.01(A);
B) The machinery, equipment, office equipment, vehicles, furniture,
fixtures, leasehold improvements, computers, software, smallwares,
prototypes, samples, telephone numbers, and other personal property,
whether located at the LAB Facilities or otherwise (including all such
properties and assets that have been fully depreciated or expended),
whether or not any of the foregoing are or were recorded as assets of
Seller on the books of Seller, including, without limitation, those
listed or described in Schedule 1.01(B) hereto;
C) Subject to a Ten Thousand Dollar ($10,000.00) proration in favor of
Seller pursuant to Section 4.07, all inventories of raw materials and
ingredients, goods, supplies, paper goods, and packaging materials, as
of the Closing Date (whether located in or about the LAB Facilities or
otherwise, provided that title has not passed to a customer of
Seller);
D) All trademarks, service marks, trade names and applications relating
thereto, including all right, title and interest of Seller in and to
the corporate name "Lots A' Bagels, Inc.-TM-" (which Seller shall
cease to use after the Closing Date and change to a name which is in
no way similar to "Lots A' Bagels, Inc.-TM-" within two (2) business
days after the Closing Date), the trade names "Lots A' Bagels, Inc.-
TM-," "BAGEL FACTORY-TM-," "Lots A' Bagels/OLD WORLD/WATER BOILED-TM-"
and "BAGELFAX-TM-," common law and registered copyright applications,
patents, patent applications, discoveries, recipes, improvements and
all other licenses, processes, formulae, trade secrets, customer
lists, mailing lists, blueprints, specifications, equipment plans,
drawings, sketches, know-how, advertising materials, marketing and
product information and inventions, whether patentable or
unpatentable, owned or held by Seller, which relate to Seller, as well
as all books and records relating to the foregoing and to the
business, assets and properties of Seller;
E) The leases of personal property as listed and described in Schedule
1.01(E) hereto;
F) The full benefit of all agreements or contracts with licensors,
suppliers, customers, sales representatives, distributors and other
third parties relating to the business of Seller, including, without
limitation, all open purchase orders to vendors and suppliers or from
customers of Seller and including all of those agreements and
contracts and bids and quotations set forth in Schedule 1.01(F)
hereto;
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G) Subject to proration pursuant to Section 4.07, all items carried as
prepaid expenses (other than prepaid insurance), prepaid rent, and
deferred charges of Seller, deposits with suppliers, deposits with
landlords and lessors, utility deposits, and all other deposits and
advances made in connection with Seller's operations;
H) To the extent assignable, all approvals, authorizations, consents,
licenses, orders, franchises and other permits of all governmental
agencies, whether foreign, federal, state or local, owned, held or
utilized by Seller in connection with its business and operations;
I) All assets included in the Financial Statements (as hereinafter
defined) and similar assets of Seller acquired in the course of
business from and after the dates of said Financial Statements which
exist as of the Closing Date;
J) The exclusive right of Buyer to represent itself as carrying on the
business of Seller in continuation thereof; and
K) All other property, assets and rights of Seller directly or indirectly
relating to the conduct of the business of Seller, whether tangible or
intangible, owned or held by Seller, including, without limitation,
the full benefit of all, to the extent assignable, representations,
warranties, guarantees, indemnities, undertakings, certificates,
covenants, agreements and the like and all security therefor received
by Seller for the purchase or other acquisition of any part of the
Purchased Assets.
The assets, properties and rights which are described in Sections
1.01(A) through 1.01(K) above which are to be transferred, sold, conveyed and
assigned by Seller to Buyer hereunder, are collectively referred to as the
"Purchased Assets."
1.02 ASSETS EXCLUDED. Anything contained in Section 1.01 hereof or in
this Agreement to the contrary notwithstanding, there are expressly excluded
from the Purchased Assets the following:
A) The corporate minute books and stock records of Seller;
B) Books and records (tax and accounting);
C) The shares of capital stock of Seller;
D) All assets held in trust or otherwise in connection with any profit
sharing or retirement plan maintained and established by Seller or
otherwise held by Seller in any similar fiduciary capacity;
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E) All accounts receivable and notes receivable owed to Seller by any
officer, director and/or employee of Seller, which are estimated to be
less than $1,000.00 as of November 15, 1996;
F) Prepaid insurance;
G) Those additional "personal" assets listed in Schedule 1.02(G) hereto;
H) All accounts and notes receivable arising out of the business prior to
Closing, including trade accounts receivable, invoices for which will
be issued no later than two (2) days after the Closing Date;
I) Cash on hand in each restaurant; and
J) (1) Shopping Center Lease dated January 23, 1992, between Joseph
Felix Realty Co. and Seller for premises known as 445-A&B, East
Cheyenne Mountain Boulevard, Colorado Springs, Colorado, as
modified, and the Sublease of such premises from Seller to Noir
Blanc Enterprises, Inc. d/b/a Wild Bill's Buffalo Wings; and
(2) Country Club Corners Lease dated September 1, 1996, between
Country Club Corners Ltd. and Seller for premises known as Suite
H, 202 East Cheyenne Mountain Boulevard, Colorado Springs,
Colorado.
The assets, properties and rights which are described in Sections
1.02(A) through 1.02(J) above which are not to be transferred, conveyed and
assigned by Seller to Buyer are hereinafter collectively referred to as the
"Excluded Assets."
1.03 INSTRUMENTS OF CONVEYANCE AND TRANSFER. At the Closing, Seller
shall deliver to Buyer such warranty deeds, bills of sale and other good and
sufficient instruments of assignment, conveyance and transfer as shall be
effective to vest in Buyer ownership of the Purchased Assets being
transferred, conveyed and assigned hereunder. Simultaneously therewith,
Seller shall take all steps as may be requisite to put Buyer in possession
and operating control of all the Purchased Assets.
1.04 ASSIGNMENT OF CONTRACTS AND RIGHTS. Anything contained in this
Agreement to the contrary notwithstanding, this Agreement shall not
constitute an agreement to assign any contract, license, commitment, sales
order, purchase order or any claim or right of any benefit arising thereunder
or resulting therefrom if an attempted assignment thereof, without the
consent of a third party thereto, would constitute a breach thereof or in any
way affect the rights of Buyer or Seller thereunder. Seller, at Seller's
expense solely for the processing fee called for pursuant to the real
property leases and Seller's related attorneys fees, shall use its best
efforts to obtain the consent of the other party to any of the foregoing to
the assignment thereof to Buyer in all cases in which such consent is
required for assignment or transfer. If such consent is not obtained or if
an attempted
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assignment would be ineffective or would affect the rights thereunder so that
Buyer would not receive all such rights, Seller agrees to cooperate with
Buyer in any reasonable arrangements acceptable to Buyer, in its sole
discretion, designed to provide for Buyer the benefits thereunder, including,
without limitation, enforcement for the benefit of Buyer of any and all
rights of Seller against the other party thereto arising out of the
cancellation by such other party or otherwise. Notwithstanding the
foregoing, any transfer or assignment to Buyer of any property or property
rights or any contract or agreement which shall require the consent or
approval of any third party shall be made subject to such consent or approval
being obtained in a form satisfactory to Buyer and its counsel.
1.05 ACCESS BY BUYER AND NYBE. Seller and Stockholders shall, for a
period of seven (7) years after the Closing, give to Buyer and NYBE and their
authorized representatives such access, at any time, to the books and records
of Seller that are the subject matter of the transactions contemplated
herein. Seller shall, at its own expense, make copies of all such books and
records and deliver the same to Buyer at Closing. Anything contained herein
to the contrary notwithstanding, Seller shall not be obligated to give Buyer,
NYBE or any such authorized representatives access to any proprietary or
technical information relating to any period subsequent to the Closing or
developed by Seller at its expense or for their benefit, including, without
limitation, tax returns for such subsequent periods. Seller agrees that it
will not, during such seven (7) year period, destroy or cause to be destroyed
any books or records without first advising Buyer and NYBE and giving Buyer
and NYBE reasonable opportunity to take possession, and, if Buyer desires,
Seller shall deliver such books and records to Buyer.
1.06 INSTRUMENTS GIVING CERTAIN ADDITIONAL POWERS AND RIGHTS; FURTHER
ASSURANCES; ETC. At the Closing, Seller shall constitute and appoint Buyer,
its successors and assigns, the true and lawful attorneys of Seller with full
power of substitution, in the name of Buyer or the name of Seller, on behalf
of and for the benefit of Buyer, to collect all items being transferred,
conveyed and assigned to Buyer as provided herein, to institute and
prosecute, in the name of Seller or otherwise, all proceedings which Buyer
may deem proper in order to collect, assert or enforce any claim, right or
title of any kind in or to the Purchased Assets being transferred, conveyed
and assigned as provided herein, to defend and compromise any and all
actions, suits or proceedings in respect of any of such Purchased Assets and
Assumed Liabilities and to do all such acts and things in relation thereto as
Buyer may deem advisable. Seller acknowledges and agrees that the foregoing
powers are coupled with an interest and shall be irrevocable. Seller further
agrees that Buyer shall retain for its own account any amounts collected
pursuant to the foregoing powers, and Seller shall pay to Buyer, if and when
received, any amounts which shall be received by Seller after the Closing in
respect of the Purchased Assets to be transferred, conveyed and assigned to
Buyer as provided herein. Seller further agrees that, at any reasonable time
and from time to time after the Closing, Seller shall, upon the request of
Buyer and at the expense of Seller, do, execute, acknowledge and deliver or
will cause to be done, executed, acknowledged and delivered, all such further
acts, deeds, assignments, transfers, conveyances, powers of attorney or
assurances as may be required for the better transferring, assigning,
conveying, granting, assuring and confirming to Buyer, or for aiding and
assisting in the collection of or reducing to possession by Buyer, the
Purchased Assets, or to vest in Buyer good, indefeasible and marketable title
to the Purchased Assets.
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1.07 COLLECTION AND REMITTANCE. Buyer shall remit to Seller, within
five (5) business days of receipt, if any, any amounts received by Buyer
after Closing with respect to any of Seller's accounts receivable or other
items not included in the Purchased Assets. The parties acknowledge that
Buyer has no duty to collect or attempt to collect. Seller shall utilize
reasonable collection efforts consistent with prior practices.
ARTICLE II.
ASSUMPTION OF LIABILITIES
2.01 LIABILITIES ASSUMED. Simultaneously with the transfer, conveyance
and assignment to Buyer of the Purchased Assets, Buyer shall assume only
those liabilities and obligations of Seller pursuant to executory contracts
and other commitments specifically described in Schedule 2.01, and including,
without limitation, open purchase orders to vendors and suppliers or from
customers of Seller described in Schedule 2.01, provided such agreements are
effectively assigned or benefits thereof provided to Buyer and provided such
liabilities and obligations do not involve, arise out of or relate to any
misrepresentation or breach of warranty hereunder or defaults by Seller prior
to Closing.
The liabilities and obligations of Seller described in Section 2.01
which are being assumed by Buyer are hereinafter collectively referred to as
the "Assumed Liabilities." The value assigned to each Assumed Liability on
Schedule 2.01 shall be the value established for purposes of determining the
Purchase Price herein.
2.02 EXCLUDED LIABILITIES. Buyer shall not be obligated with respect to
any Assumed Liabilities except to the extent that it constitutes a valid and
legally enforceable claim against Seller. Except for the Assumed Liabilities
specifically assumed by Buyer as aforesaid, Buyer is not assuming any other
debts, liabilities or obligations of Seller or Stockholders, including,
without limitation, the following:
A) All trade and other accounts payable and accrued expenses whether or
not reflected and reserved for in the Financial Statements;
B) All debts, liabilities and obligations of Seller payable to lenders,
vendors and other third parties other than those agreed upon as
Assumed Liabilities;
C) All liabilities and obligations of Seller for foreign, federal, state
and local taxes including, without limitation, interest and penalties
relating thereto, relating to the operation of the business of Seller
prior to the Closing or related to the transfer, conveyance and
assignment of the Purchased Assets contemplated by this Agreement,
including, without limitation, sales, use, property, franchise, gross
receipts, excise and income taxes. This provision, notwithstanding,
Buyer acknowledges that Buyer shall be liable for, and shall timely
pay, sales and use taxes
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associated with the transfer of the Purchased Assets, and will further
indemnify and hold Seller and Stockholders harmless therefrom;
D) All liabilities and obligations to Seller's customers with respect to
alleged shortages and defects in products delivered to customers or in
transit to customers prior to the Closing and shipped to customers
after the Closing seeking return or replacement of products pursuant
either to product warranties extended by Seller prior to the Closing
or product warranties or obligations implied or provided by law;
E) All liabilities and obligations of Seller and/or Stockholders under
this Agreement or with respect to or arising out of the transactions
contemplated hereby;
F) All liabilities and obligations of Seller and/or Stockholders which
violate any representation, warranty, covenant or agreement of Seller
or Stockholders contained herein;
G) All liabilities and obligations (other than the Assumed Liabilities),
including damages, fines and penalties, with respect to pending or
threatened litigation, suits, claims, demands or governmental
proceedings;
H) Any obligation or liability arising out of or resulting from Seller's
non-compliance with any federal, state, local or foreign law,
regulation, order or administrative or judicial determination,
including, without limitation, those relating to the environment and
Environmental Matters (as hereinafter defined), employment practices
or the health and safety standards applicable to employees of Seller,
which arise out of or relate to an occurrence, condition, facts or
circumstances existing on, before or as of the Closing Date;
I) All claims, demands, liabilities or obligations of any nature
whatsoever which arise out of or which are based on events occurring
or material known conditions existing on or before the Closing Date or
which relate to products sold or services performed by Seller on or
before the Closing Date whether founded upon negligence, breach of
warranty, strict liability in tort and/or other legal theory, seeking
compensation or recovery for or relating to injury to person or damage
to property, notwithstanding that the date on which the injury, claim,
demand, liability or obligation was or is either before or after the
Closing Date;
J) Subject to Section 4.06, all claims, demands, obligations or
liabilities including cost and expense of defense or whether arising
out of, based upon or related to workers' compensation or employer's
liability claims, negligence, strict liability in tort and/or other
legal theory seeking compensation and/or recovery and arising out of
injuries and occupational diseases identifiably sustained by employees
of Seller on or before the Closing Date;
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K) All liabilities and obligations arising from the breach or default of
Seller, prior to or on the Closing Date, of any lease, contract,
engagement or commitment, including, without limitation, those
referred to in Sections 1.01(E) or 1.01(F);
L) All liabilities and obligations of Seller and Stockholders in
connection with the conduct of any business of Seller and Stockholders
other than the present business of Seller;
M) Liabilities for claims for severance and termination and for payments
in lieu of notice of termination made by employees of Seller who are
terminated by Seller prior to or on the Closing Date or by reason of
Seller's failure to comply with the Worker Adjustment and Retraining
Notification Act;
N) All liabilities, debts and obligations relating to any employee profit
sharing plans and savings and stock ownership plans and pension or
retirement plans, health, welfare and other employee entitlement
plans; provided, however, that Seller shall set forth vested accrued
employee vacation time on Schedule 2.02(N), which Seller shall pay in
full to said employees within two (2) business days following
termination of employment which termination shall occur at the end of
business on the Closing Date;
O) Any liabilities imposed under law, whether now existing or hereafter
enacted, relating to the environment, health or safety and arising out
of any act or event occurring prior to or on the Closing Date; and
P) Any agreement, understanding or commitment to which Seller and any
Stockholder or any Affiliate (as hereinafter defined) of Seller are
presently a party to that relates to any aspect of the business of
Seller, including, without limitation, any contract, agreement or
other arrangement (i) providing for the furnishing of services by,
(ii) providing for lease, management, rental or purchase of real or
personal property to or from, or (iii) otherwise requiring payments to
any such person, any member of the family of any such person or any
corporation, limited liability company, limited partnership,
partnership, trust or other entity in which any such person has an
interest or is an officer, director, trustee or partner, including,
without limitation, all accounts payable and notes payable owed by
Seller to any officer, director and/or employee of Seller.
The debts, liabilities and obligations of Seller referred to in Sections
2.02(A) through 2.02(P) which are not being assumed by Buyer as aforesaid are
hereinafter collectively referred to as the "Excluded Liabilities."
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ARTICLE III.
CLOSING DATE
3.01 CLOSING DATE. The closing of the transactions contemplated herein
(the "Closing") shall be held on the later to occur of (i) December 5, 1996,
or (ii) the date of completion of the conditions to Closing referred to in
ARTICLE VII hereof (the "Closing Date") and shall be effective as of the
close of business on the Closing Date; provided, however, the parties hereto
agree that time is of the essence and in no event shall the Closing Date be
later than December 20, 1996. The Closing shall be held at the offices of
Kraemer, Kendall & Benson, P.C., 430 North Tejon, Suite 300, Colorado
Springs, Colorado, at 10:00 o'clock A.M. on the Closing Date.
ARTICLE IV.
PURCHASE PRICE
4.01 PURCHASE PRICE. The aggregate purchase price for the Purchased
Assets as of the Closing Date shall be (i) the Cash Purchase Price (as
defined below) in the manner provided in Sections 4.02 and 4.04 herein, (ii)
the assumption by Buyer of the Assumed Liabilities set forth in Section 2.01
herein, (iii) the delivery of the Initial Promissory Note, subject to offset
as set forth herein and therein, in the face amount of Five Hundred
Sixty-Three Thousand Dollars ($563,000.00) in the form attached hereto as
Exhibit "A" (the "Initial Promissory Note"), (iv) the delivery of the Final
Promissory Note, if any, in the form attached hereto as Exhibit "B" (the
"Final Promissory Note") plus (v) the issuance of the Warrant (as hereinafter
defined) in the form attached hereto as Exhibit "C," (collectively, (i),
(ii), (iii), (iv) and (v) the "Purchase Price").
4.02 PAYMENT OF PURCHASE PRICE. The purchase price shall be paid as
follows:
A) CLOSING. At the Closing, contemporaneously with delivery of those
documents and instruments in the manner provided in ARTICLE VII
herein, Buyer shall (i) pay to Seller cash in the amount of Two
Million One Hundred Thousand Dollars ($2,100,000.00) (the "Initial
Cash") and (ii) deliver to Seller the Initial Promissory Note.
B) POST-CLOSING ADJUSTMENT. Within ten (10) days after acceptance of the
Final Statement of Operations or resolution of all disputes, if any,
regarding the Final Statement of Operations under the provisions of
this Agreement, Buyer shall pay to Seller in cash an amount equal to
the Adjustment (as hereinafter defined), if any. The first Three
Hundred Twenty-Five Thousand Dollars ($325,000.00) of the Adjustment,
if any, shall be paid in cash, and the remainder, if any, shall be in
the form of the Final Promissory Note. In addition, Buyer shall
deliver to Seller the "Warrant," if any, which will be a warrant to
purchase a to-be-determined number of the shares of restricted NYBE
Common Stock in a number equal to the sum of the Initial Promissory
Note, as adjusted by set off, and the Final Promissory Note times
sixty percent (60%) which product is divided by the average final
"close" price per share
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of NYBE Common Stock as reflected in the Southwest Edition of THE
WALL STREET JOURNAL, for the ten (10) trading days ending three (3)
trading days prior to the Closing Date. The amounts paid to Seller
in cash hereunder are referred to herein as the "Cash Purchase Price."
Seller agrees to the set off of the Initial Promissory Note, if any,
as set forth therein and herein. Examples of the purchase price
calculation are set forth in Schedule 4.02(B) hereto.
4.03 ADJUSTMENT TO PURCHASE PRICE. The Adjustment will be determined as
follows:
A) FINAL STATEMENT OF OPERATIONS. Promptly after March 30, 1997, Buyer,
at its cost will, by May 15, 1997, prepare and deliver a statement of
operations for the period July 1, 1996 through the day of Closing and
for the period from the day after Closing through March 30, 1997 (the
"Final Statement of Operations") stating the aggregate operating
income before interest, income taxes, depreciation and amortization as
adjusted in accordance with the supplemental accounting principles
described in Section 4.03(C).
B) REVIEW BY SELLER. Following receipt of the Final Statement of
Operations, Seller shall have fifteen (15) days to review the Final
Statement of Operations. Seller, if it so elects, shall have the
right, at its expense, to have its independent certified public
accountants perform an audit of the matters relating to the Final
Statement of Operations. At or before the end of such fifteen (15)
day period, Seller will either (i) accept the Final Statement of
Operations in its entirety, in which case the aggregate operating
income will be deemed to be as set forth on the Final Statement of
Operations, or (ii) deliver to Buyer written notice and a detailed
written explanation of those items in the Final Statement of
Operations which Seller disputes, in which case the aggregate
operating income not affected by the disputed items will be deemed to
be as set forth on the Final Statement of Operations. Within a
further period of fifteen (15) days from the end of the aforementioned
review period, the parties will attempt to resolve in good faith any
disputed items. Failing such resolution, the unresolved disputed
items will be referred for final binding resolution to a nationally
recognized firm of certified public accountants mutually acceptable to
Seller and Buyer, the expense of which shall be shared equally by
Seller and Buyer. The aggregate operating income affected by such
unresolved disputed items will be deemed to be as determined by such
accounting firm in accordance with the supplemental accounting
principles described in Section 4.03(C) within thirty (30) days of
such reference.
C) OPERATING INCOME. The aggregate operating income before interest,
income taxes, depreciation and amortization will be determined in
accordance with the Supplemental Accounting Principles set forth in
Schedule 4.03(C) hereto.
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D) BASE-LINE PURCHASE VALUE. The Base-Line Purchase Value will be an
amount equal to Two Million Six Hundred Sixty-Three Thousand Dollars
($2,663,000.00) plus the Assumed Liabilities described in Section 2.01
herein.
E) DETERMINATION OF FINAL PURCHASE VALUE. The Final Purchase Value will
be an amount equal to the product of the aggregate operating income as
determined pursuant to Sections 4.03(A) through 4.03(C) as reflected
in the Final Statement of Operations times seven and 33/100 (7.33).
F) AMOUNT OF ADJUSTMENT. If the Final Purchase Value is less than or
equal to the Base-Line Purchase Value, then the amount of the
Adjustment will equal the same and the principal amount due pursuant
to the Initial Promissory Note shall be reduced by such amount as an
offset to such note and no interest shall have accrued on or be
payable due to such offset principal amount. If the Final Purchase
Value is greater than the Base-Line Purchase Value, then the amount of
the Adjustment will be a positive number equal to the amount by which
the Final Purchase Value is greater than the Base-Line Purchase Value.
If the Adjustment is positive, the first Three Hundred Twenty-Five
Thousand Dollars ($325,000.00) shall be paid in cash and the balance,
if any, will be paid in the form of the Final Promissory Note.
4.04 METHOD OF PAYMENT. All payments of the Cash Purchase Price, or any
portion thereof, and all payments remitted under this Agreement shall be made
in the following manner:
A) Upon the prior written request of the party entitled to receive such
payments, by depositing, by bank wire transfer, the required amount
(in immediately available funds) in an account of such party
designated in writing by such party for such purpose on the date such
payment is due, or by delivery to the party entitled to receive such
payment of one or more bank checks payable to the order of such party;
and
B) Of the Two Million One Hundred Thousand Dollars ($2,100,000.00) cash
payment to Seller under Section 4.02, a portion, estimated at One
Million Three Hundred Thousand Dollars ($1,300,000.00), will be paid
by Buyer to BANK ONE COLORADO N.A. ("Bank") for the benefit of Seller
at the Closing, in order to repay the debt owed by Seller to Bank and
Seller shall obtain the release of Bank's security interest in the
Purchased Assets.
4.05 ALLOCATION OF PURCHASE PRICE. Buyer, Seller and Stockholders covenant
and agree with each other that the Purchase Price shall be allocated among the
Purchased Assets in accordance with Schedule 4.05 hereto. Buyer and Seller
covenant to file all tax returns on the basis consistent with such allocation.
Seller and Buyer shall agree to the allocations required under Section 1060 of
the Internal Revenue Code of 1986, as amended (the "Code"). Buyer will prepare
the initial draft of the Form 8594 and transmit the same to Seller by March 1,
1997 for Seller's review. Seller and Buyer will each file such Internal Revenue
Service Form 8594 reflecting the final agreed upon
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Purchase Price allocation with their respective 1996 federal income tax
returns. All assets listed in Schedule 1.01(B) shall be paid for in cash.
4.06 EMPLOYEE MATTERS. With respect to each employee of Seller which
Buyer in its discretion employs from and after the Closing Date in
conjunction with the operation of the business, Buyer shall employ such
employees at such level of compensation (including salaries, wages and
benefits) and on such terms and conditions as Buyer may determine in its sole
discretion. Seller shall pay to its prior employees at the end of the pay
period next succeeding the Closing the accrued salary, related payroll taxes
and accrued vacation pay through the Closing Date, due to each employee hired
by Buyer. With respect to claims under workers' compensation coverage,
Seller will be responsible for injuries that occurred on or prior to the
Closing and Buyer will be responsible for injuries that occur after the
Closing. Claims for injuries resulting from occupational diseases shall be
deemed to have occurred the day the employee ceases working as a result of
the disease.
4.07 PRORATIONS.
A) The prepaid expenses, rent and utility deposits and other fees listed
in Schedule 4.07 relating to the business of Seller shall be prorated
as of the Closing Date and paid or credited at the Closing. The
amounts of proration shall be set forth in a post-closing settlement
sheet to be prepared by Seller and Buyer at the Closing. Prorations
shall include any deposits under any contracts and other agreements
not refunded to Seller.
B) With respect to real estate and personal property taxes and
assessments accrued but unpaid on the Purchased Assets (other than
those which are delinquent) proration shall be made as of the Closing
based upon most recent tax bills and most recent assessment and mill
levy. Subsequent adjustment of such proration shall be made, if
necessary, upon receipt of the actual tax bill for the current period.
Any other proratable items that cannot be determined or estimated to
the satisfaction of the parties prior to or on the Closing shall be
prorated and payment made by the appropriate party as soon after the
Closing as practicable.
C) Any cash transferred to Buyer by Seller in the form of a store "change
fund" shall be payable to the Seller as part of the prorations at
Closing. Cash in excess of the stores "change fund" including
receipts through midnight on the Closing Date, shall remain the
property of the Seller.
D) A fixed and agreed upon Ten Thousand Dollar ($10,000.00) proration for
inventory shall be payable to Seller as part of these prorations.
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ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF
SELLER AND STOCKHOLDERS
Seller and Stockholders hereby, jointly and severally, represent and
warrant to Buyer and NYBE as follows:
5.01 ORGANIZATION AND QUALIFICATION. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Colorado, has all requisite corporate power and authority to own, lease and
operate its property, and to carry on its business as it is now being conducted,
and is duly qualified and in good standing to do business in every jurisdiction
where failure to qualify would have an adverse effect on the business conducted
by Seller.
5.02 EQUITY INVESTMENTS. There are no corporations, partnerships, joint
ventures or other entities in which Seller has directly, or indirectly, any
equity or other interest.
5.03 ARTICLES OF INCORPORATION AND BYLAWS. Seller has delivered to Buyer
copies of the Articles of Incorporation, as amended, of Seller (certified as of
a recent date by the Secretary of State of Colorado), and the Bylaws, as
amended, of Seller (certified as of the date hereof by its Secretary), all of
which copies are true and correct. All corporate actions respecting Seller and
amendments to Seller's Articles of Incorporation or Bylaws have been duly and
formally authorized by appropriate corporate action and the board of directors
and Stockholders have ratified all prior actions taken by the board of directors
of Seller.
5.04 FINANCIAL STATEMENTS. Seller and Stockholders have delivered to Buyer
copies of the Balance Sheets of Seller as of December 31, 1993, 1994 and 1995,
and the related Statements of Income and Retained Earnings and Statements of
Cash Flows, including the notes thereto, for each of the three years ended
December 31, 1995, each of which (except financial statements for the year ended
December 31, 1993 which were internally compiled) has been reviewed by Melton &
Associates, P.C., certified public accountants, and each of which is true,
accurate and complete in all material respects and presents fairly the financial
position of Seller as of the dates stated and the results of the operations of
Seller for the periods stated in accordance with generally accepted accounting
principles, consistently applied (hereinafter collectively referred to as the
"Financial Statements"). Seller and Stockholders have also delivered to Buyer
copies of the unaudited Balance Sheet of Seller as of October 31, 1996, and the
related Income Statement for the period ended October 31, 1996, each of which is
true, accurate and complete and presents fairly the financial position of Seller
as of the dates stated and the results of the operations of Seller for the
period stated in accordance with generally accepted accounting principles,
consistently applied.
5.05 ABSENCE OF CERTAIN CHANGES AND EVENTS. Since December 31, 1995,
except as disclosed in Schedule 5.05 hereto, elsewhere in this document, the
attached schedules or otherwise herein, there have not been:
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A) Any changes in the affairs, business, prospects, condition (financial
or otherwise or arising as a result of any legislative or regulatory
change), operations, liabilities, earnings or business of Seller which
had been or, to the best knowledge and belief of Seller and
Stockholders, will be, individually or in the aggregate with other
changes materially adverse;
B) Any damage, destruction or casualty loss in excess of Ten Thousand
Dollars ($10,000.00) in the aggregate (whether or not covered by
insurance) adversely affecting the business, operations, properties,
assets or condition (financial or otherwise) of Seller;
C) Any changes in the Articles of Incorporation or Bylaws of Seller;
D) Any increase in the compensation payable or to become payable by
Seller to any officers, employees or agents of Seller other than
routine increases made in the ordinary course of business consistent
with the past practice of Seller, or any bonus, incentive
compensation, service awards in excess of One Hundred Dollars
($100.00) or other like benefit, granted, made or accrued,
contingently or otherwise, to or to the credit of, any of such
officers, employees or agents, or any employee welfare, pension,
retirement or similar payment or arrangement made or agreed to by
Seller with respect to any such officer, employee or agent;
E) Any pending or threatened labor trouble, or any controversies or
unsettled grievances between Seller and any of its employees or a
collective bargaining organization representing or seeking to
represent such employees, or any entrance into any collective
bargaining agreement by Seller with respect to any such employees;
F) Any sale, assignment or transfer of any asset, property or right of
Seller or any conducting of the business of Seller other than in the
ordinary course of business;
G) Any cancellation of any debts owed to, or claims of, Seller (except to
the extent that such debt or claim constitutes Excluded Liabilities);
H) Any borrowing of money by Seller, any increase in any existing
indebtedness of Seller or the incurrence of any obligation or
liability in the aggregate (whether absolute or contingent) in excess
of Ten Thousand Dollars ($10,000.00) other than in the ordinary course
of business;
I) Any occurrence of any losses or knowing waiver of any rights of value
by Seller in connection with any aspect of its business whether or not
in the ordinary course of business which could materially adversely
affect the business of Seller;
J) Any cancellation, termination or material amendment of any contract,
agreement, license or other instrument to which Seller is a party or
any waiver of any rights of
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value to the business of Seller which materially adversely affect
the business of Seller;
K) Any failure on the part of Seller to use its reasonable best efforts
to operate its business in the ordinary course so as to preserve its
business organizations intact, including the services of its present
officers and employees and the goodwill of Seller's suppliers,
customers and others having business relations with Seller;
L) Any agreement by, or commitment of, Seller to do any of the foregoing;
or
M) Any other event or fact which, in any one case or in the aggregate,
had materially or adversely affected, or, to the best knowledge and
belief of Seller and Stockholders, any event or fact which might
reasonably be expected, in any one case or in the aggregate, to
materially or adversely affect the condition (financial or otherwise),
assets, organization, operations, properties, liabilities, earnings,
prospects or businesses of Seller.
5.06 REAL PROPERTY. Seller owns no real estate. Seller leases the LAB
Facilities set forth in Schedule 5.06 hereto under valid and existing leases.
Except as set forth in Schedule 5.06 hereto, (i) to the best knowledge and
belief of Seller and Stockholders, the LAB Facilities are in compliance with all
applicable federal, state and local laws and regulations (including, without
limitation, those relating to environmental protection, conservation, and
occupational safety and health), with all applicable zoning ordinances and
building codes, and with the Americans with Disabilities Act, (ii) there are no
pending or, to the best knowledge and belief of Seller and Stockholders,
threatened legal proceedings affecting the LAB Facilities other than those
disclosed elsewhere herein or in the Schedules attached hereto, (iii) except for
current taxes which are not yet due or payable, there are no public assessments
or similar charges on the LAB Facilities, (iv) there are no pending or, to the
best knowledge and belief of Seller and Stockholders, threatened eminent domain
proceedings which could affect the LAB Facilities, nor are there, to the best
knowledge and belief of Seller and Stockholders, any facts which might give rise
to such a proceeding, (v) to the best knowledge and belief of Seller and
Stockholders, there are no plans or studies to alter any street or highway
contiguous to the LAB Facilities, (vi) Seller has all utilities necessary for
the proper and continued operation of the LAB Facilities, (vii) all necessary
permits and licenses for the construction of improvements at the LAB Facilities
and for the operation, use and occupancy thereof by Seller have been obtained
and are in full force and effect, (viii) there is no written or oral agreement
of Seller affecting the LAB Facilities with any governmental agency or private
person, and (ix) there are no leases, subleases, occupancies or tenancies in
effect pertaining to the LAB Facilities.
5.07 PERSONAL PROPERTY - OWNED. To the best knowledge and belief of Seller
and Stockholders, except as set forth in Schedule 5.07 hereto, all personal
property included within the Purchased Assets materially conforms to all
applicable federal, state and local laws and regulations (including, without
limitation, those relating to environmental protection, conservation and
occupational safety and health). Except as set forth in Schedule 5.07 hereto,
all personal property included with the Purchased Assets, including, without
limitation, the personal property identified
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in Schedule 1.01(B) hereto and all buildings and improvements included within
the real property to be conveyed hereunder are, to the best knowledge and
belief of Seller and Stockholders, structurally sound, without material
defects and are in good operating condition and repair, normal wear and tear
excepted, and there does not exist any condition that materially interferes
or could interfere with the economic value or use thereof.
5.08 PERSONAL PROPERTY - LEASED OR NOT OWNED. There are no leases or other
agreements under which Seller is lessee of or holds or operates any items of
machinery, equipment, vehicles, furniture or fixtures, except as shown in
Schedule 1.01(E) hereto.
5.09 TRADE ACCOUNTS RECEIVABLES. Schedule 5.09 hereto contains a
materially true aged list of unpaid trade accounts receivable (including names
and addresses) owing to Seller from unrelated third parties as of October 31,
1996, which shall be updated as of the Closing Date. Except as set forth in
Schedule 5.09 hereto, all of the foregoing arose in the ordinary course of
business and are, to the best knowledge and belief of Seller and Stockholders,
good and collectible; and, except as specifically identified in Schedule 5.09
hereto, as of such respective dates, there was and will be (i) no trade account
or trade debtor more than ninety (90) days past its billing date, (ii) no trade
account or trade debtor who has refused or threatened to refuse to pay its
obligations for any reason, (iii) no trade account or trade debtor who is known
or suspected to be insolvent or in bankruptcy, and (iv) no trade account pledged
to any third party.
5.10 TITLE TO ASSETS. Seller has good, marketable and indefeasible title
to all of the Purchased Assets with the exception of those properties and assets
reflected as leased by Seller in the Schedules hereto. With the exception of
(i) liens for taxes accrued but not yet payable, (ii) liens arising as a matter
of law in the ordinary course of business as to which there is no known default,
(iii) that certain security interest held by BANK ONE COLORADO N.A. as described
in the Financial Statements, and (iv) that certain security interest held by The
Galley Company and/or McCaulley Real Estate Interests, L.L.C. relating to the
landlord's lien at 1025 North Academy, Colorado Springs, Colorado, and other
security interests reserved by landlord in the leases for certain of the LAB
Facilities, none of such properties or assets are subject to any lease, lien,
security interest, mortgage, charge, easement or encumbrance. Except as set
forth herein, none of the assets, buildings, structures and appurtenances of
Seller or the operation or maintenance thereof as now operated and maintained,
contravenes in any material respect any applicable zoning ordinance or other
administrative regulation or violates any restrictive covenant or any provision
of law, the enforcement of which could in any respect interfere with the
continued operation of the businesses of Seller in substantially the manner in
which such business is presently being conducted or could affect the value of
properties and assets of Seller.
5.11 INVENTORIES. All inventories of raw materials and ingredients are of
a quality and quantity useable in the ordinary course of Seller's business.
Seller holds no materials or inventories on consignment, and no materials or
inventories are in the possession of others. The level of inventories of raw
materials and ingredients, goods, supplies, paper goods and packaging materials
(whether located in or about the LAB Facilities or otherwise, provided that
title has not passed to
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a customer of Seller) as of the Closing Date shall be the level that has been
maintained by Seller in Seller's ordinary course of business.
5.12 SUPPLIERS AND CUSTOMERS. The relationship of Seller with its
licensors, suppliers, customers and creditors is good and there is no indication
of any intention to terminate or modify any of such relationships.
5.13 OTHER AGREEMENTS. Except as disclosed in Schedule 5.13 hereto, as of
the Closing Date, Seller is not a party to or bound by (whether written or
oral): (i) any employment contracts or agreements, consulting or other similar
formal agreements or any collective bargaining or labor agreements or any other
agreements or arrangements with any officer, employee, sales representative,
distributor, agent, food broker, manufacturer's representative or consultant or
person serving in a similar capacity, with respect to compensation; (ii) any
contract for the purchase of any materials, supplies, equipment or inventory, or
for sale of any products (whether formal or informal, written or oral), except
contracts entered into in the ordinary course of business which do (as to
contracts for purchase by Seller) involve an unperformed commitment; (iii) any
lease or license to use any real or personal property (whether formal or
informal, written or oral); (iv) any license to use, manufacture, distribute or
produce bagels and other items distributed by Seller (whether formal or
informal, written or oral); or (v) any contract, agreement or other commitment
(except those entered into in the ordinary course of business, or other than
those listed in Schedule 5.13 hereto), requiring a payment by Seller after the
date hereof (whether formal or informal, written or oral). Except as disclosed
in Schedule 5.13 hereto, Seller is not a party to or bound by any notes, loan
agreements, capitalized leases, letters of credit, commitments, guarantees,
agreements or other arrangements relating to any indebtedness. There are no
breaches or defaults nor any basis therefor by any of the parties to the
agreements described in Schedule 5.13 hereto.
5.14 CONFLICT OF INTEREST. Except as disclosed in Schedule 5.14 hereto,
neither Stockholders nor any officer or director of Seller nor any person
controlling, controlled by or under common control with Seller ("Affiliate")
will immediately after the Closing Date have any direct or indirect interest
whether through ownership of securities or otherwise in (i) any entity which
does business with Seller or is competitive with its business, or (ii) any
property, asset or right which is used by Seller in the conduct of such
business.
5.15 ADEQUATE FACILITIES AND RIGHTS. Buyer will, on the Closing Date, have
all of the rights to sell the same items and perform the same services as
presently are being sold or performed by Seller and without incurring any
liability for royalties, or for any claim of any noncompetition obligation or
any infringement of patent or trademark rights.
5.16 PATENTS AND TRADEMARKS. Except as disclosed in Schedule 5.16 hereto,
there are no (i) licenses held by Seller, or (ii) any patents, trademarks, trade
names, service marks, assumed names, or copyrights presently held by Seller.
Except as disclosed in Schedule 5.16 hereto, Seller pays no royalty to anyone
under any patent or license; and no product manufactured, marketed or sold by
Seller violates any license or infringes any patent, trademark, service mark,
know-how,
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proprietary process, formulae, assumed name, trade name, license, recipe or
copyright of another. There is no pending or threatened claim or litigation
against Seller or any basis therefor contesting the right to use or the
validity of any of the items contemplated in this Section 5.16 or set forth
in Schedule 5.16 hereto.
5.17 AUTHORIZATION. Seller has the full corporate power to enter into this
Agreement and to carry out its obligations hereunder. The execution, delivery
and performance of this Agreement by Seller has been duly and effectively
authorized and approved by all requisite corporate action of Seller (certified
copies of which actions have been or prior to the Closing will have been
delivered to Buyer) and no other corporate acts or proceedings on the part of
Stockholders or Seller are necessary to authorize this Agreement or the
transactions contemplated hereby. This Agreement constitutes a valid and
legally binding obligation of Seller and Stockholders except as enforceability
may be affected by bankruptcy, insolvency, moratorium or other laws governing
the enforcement of creditors' rights. Neither Seller nor Stockholders has any
legal obligation, absolute or contingent, to any person or firm to sell any of
Seller's assets (other than in the ordinary course of business) or to effect any
merger, consolidation or other reorganization of Seller or to enter into any
agreement with respect thereto. Except as disclosed in Schedule 5.17 hereto,
neither the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby nor compliance by Seller or Stockholders with
any of the provisions hereof will, (i) violate, or conflict with, or result in a
breach of any provision of, or constitute a default (or an event which, with
notice or lapse of time or both, would constitute a default) under, or result in
the termination of, or accelerate the performance required by, or result in the
creation of any lien, security interest, charge or encumbrance upon any of the
properties or assets of Seller under any of the terms, conditions or provisions
of the Articles of Incorporation or Bylaws of Seller or any note, bond,
mortgage, indenture, deed of trust, lease, license, agreement (whether oral or
written) or other instrument or obligation to which Seller or Stockholders are
bound, or by which Seller or Stockholders or any of their properties or the
Purchased Assets may be bound, or (ii) violates any order, writ, injunction,
decree, statute, rule or regulation applicable to Stockholders, Seller or any of
their properties or the Purchased Assets. Except as disclosed in Schedule 5.17
hereto, no consent or approval by, notice to or registration with any
governmental authority, is required on the part of Stockholders or Seller in
connection with the execution and delivery of this Agreement or the consummation
by Stockholders or Seller of the transactions contemplated hereby.
5.18 LOSS CONTRACTS; DISCOUNTS. Except as disclosed in Schedule 5.18
hereto, Seller is not a party to any contract, bid or offer to sell products or
to provide services to parties other than in the ordinary course of business and
at rates which will not result in a loss. Except as disclosed in Schedule 5.18
hereto, there are no outstanding discount and/or no value certificates, coupons
or cards issued by Seller.
5.19 PURCHASE COMMITMENTS. Except as disclosed in Schedule 5.19 hereto,
all purchase commitments for products, materials, supplies, raw materials or
other items to which Seller is a party are not in excess of or below the
customary requirements of its business or at a price in excess of current market
prices for similar items deliverable at the same time. Except as disclosed in
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Schedule 5.19 hereto, Seller is not a party to any service contract or
commitment which is not cancelable on thirty (30) days' notice or less,
without penalty.
5.20 NO BREACH OF STATUTE, DECREE OR ORDER. Seller, to the best knowledge
and belief of Seller and Stockholders, is not in default under, or materially in
violation in any respect of any applicable statute, law, ordinance, decree,
order, rule or regulation of any governmental body, and the consummation of this
Agreement and the transactions contemplated hereby will not constitute or result
in any such default, breach or violation.
5.21 LITIGATION. Except as disclosed in Schedule 5.21 hereto, there is no
suit, claim, action, proceeding or governmental investigation now pending or, to
the best knowledge and belief of Seller and Stockholders, threatened, nor, to
the best knowledge and belief of Seller and Stockholders, is there any condition
or set of facts which will or could give rise to any litigation against Seller
before any court, administrative or regulatory body or any governmental agency
(i) arising out of or relating to any aspect of the business, or any part of the
properties or Purchased Assets, of Seller, or (ii) concerning the transactions
contemplated by this Agreement, nor is there any basis for any such litigation.
There are no decrees, injunctions or orders of any court or governmental
department or agency outstanding against Seller relating to any aspect of its
business or any part of its properties.
5.22 EMPLOYEE BENEFIT PLANS. Except as disclosed in Schedule 5.22, neither
Seller nor any trade or business, whether or not incorporated (an "ERISA
Affiliate"), which together with Seller would be deemed a "single employer"
within the meaning of Section 4001 of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), has any other written or oral incentive
compensation, deferred compensation, profit sharing, stock option, stock bonus,
bonus plan, stock purchase, savings, retirement, pension or other "fringe
benefit" plan, policy, agreement or arrangement with or for the benefit of any
Affiliate, officer, director, employee, agent or other person ("Plans"). A copy
of each Plan listed in Schedule 5.22 as currently in effect has been delivered
to Buyer. None of the Plans is a "multiemployer plan," as such term is defined
in Section (3)(37) of ERISA; each of the Plans that are subject to ERISA is in
compliance with ERISA; each of the Plans intended to be "qualified" within the
meaning of Section 401(a) of the Code is so qualified; no Plan has an
accumulated or waived funding deficiency within the meaning of Section 412 of
the Code; neither Seller nor an ERISA Affiliate has incurred, directly or
indirectly, any liability (including any contingent liability) to or on account
of a Plan pursuant to Title IV of ERISA; no proceedings have been instituted to
terminate any Plan that is subject to Title IV of ERISA; no "reportable event,"
as such term is defined in Section 4043(b) of ERISA, has occurred with respect
to any Plan; and no condition exists that presents a material risk to Seller or
an ERISA Affiliate of incurring a liability to or on account of a Plan pursuant
to Title IV of ERISA. The current value of the assets of each of the Plans that
are subject to Title IV of ERISA exceeds the present value of the accrued
benefits under each such Plan, taking into account projected salary increases
and based upon the actuarial assumptions used for funding purposes in the most
recent actuarial report prepared for such Plans; and all contributions or other
amounts payable by Seller as of the Closing Date with respect to each Plan in
respect of current or prior plan years have been or will be (prior to the
Closing Date) paid. There are no pending or, to the best knowledge and
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belief of Seller and Stockholders, threatened or anticipated claims (other
than routine claims for benefits) by, on behalf of or against any of the
Plans or any trust related thereto. Except for the Plans described in
Schedule 5.22 hereto (which include plans providing post-retirement, death,
medical and retirement income benefits) heretofore administered by Seller, no
other Plan maintained by Seller provides benefits with respect to current or
former employees for periods extending beyond their retirement or other
termination of service.
5.23 DISCRIMINATION, OCCUPATIONAL SAFETY AND OTHER STATUTES AND
REGULATIONS. Except as disclosed in Schedule 5.23 hereto, to the best knowledge
and belief of Seller and Stockholders, no person, party or labor organization
(including, without limitation, governmental agencies of any kind) has any
claim, action or proceeding or basis for any such claim, action or proceeding
against Seller arising out of any statute, ordinance or regulation relating to
the payment of wages or benefits, discrimination in employment or employment
practices, or occupational safety and health standards (including, without
limitation, any applicable state statute, the Fair Labor Standards Act, as
amended, National Labor Relations Act, as amended, Title VII of the Civil Rights
Act of 1964, as amended, the Age Discrimination in Employment Act of 1967, as
amended, or the Family and Medical Leave Act). Seller has no employees who are
on leave of absence for active duty in the uninformed services within the
meaning of the Uniformed Services Employment and Reemployment Rights Act of
1994. Seller has given, or will give prior to the Closing Date, all notices, if
any, required by the Worker Adjustment and Retraining Notification Act.
5.24 LABOR RELATIONS; EMPLOYEES. (i) Seller has paid in full or (subject
to the provisions of Section 4.06) will have provided for the payment of same to
the extent required by law that may properly accrue as of the date of Closing,
all wages, salaries, commissions, bonuses, vacations, holiday pay and other
direct and indirect compensation for all services performed by employees through
the end of business on the Closing Date, (ii) upon termination of the employment
of any said employees, Seller will not by any reason or anything done prior to
or simultaneously with the Closing be liable to any of said employees for so-
called "severance pay" or any other payments except as set forth in this Section
5.24 herein, (iii) to the best knowledge and belief of Seller and Stockholders,
Seller is in material compliance with all federal, state and local laws and
regulations respecting employment and employment practices, terms and conditions
of employment and wages and hours, (iv) there is no unfair labor practice
complaint against Seller pending before the National Labor Relations Board, (v)
there is no labor strike, known or suspected dispute, slowdown, stoppage or
organizational attempt pending or known or suspected, threatened against or
involving Seller, (vi) to the best knowledge and belief of Seller and
Stockholders, no representation question or petitions for election of
representatives exists respecting the employees of Seller, (vii) no grievance
which might have an adverse effect on Seller or the conduct of its business nor
any arbitration proceeding arising out of or under any collective bargaining
agreement is pending, and no claim therefor has been asserted, and (viii) no
collective bargaining agreement is currently being negotiated by Seller.
5.25 INSURANCE POLICIES. Set forth in Schedule 5.25 hereto is a list of
all insurance policies and bonds in force covering Seller or its properties,
operations and personnel. Each of said policies, together with, to the extent
reasonably available, all records and documents relating to insured losses and
claims (other than under any health or major medical insurance policy) paid or
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made during the past two (2) years will be furnished or otherwise will be made
available to Buyer for its review. No notice has been received from any
insurance carrier that Seller now is, or will prior to the Closing Date be,
liable, for any retroactive premium adjustments. Except as disclosed in
Schedule 5.25 hereto, all policies are valid and enforceable and in full force
and effect and neither Seller nor Stockholders has, since January 1, 1996,
received any notice of premium increases or cancellations with respect to any of
their insurance policies and bonds. Neither Seller nor Stockholders has any
reason to believe or suspect that any underwriters of any insurance policies and
bonds currently or previously issued to Seller are unable to make required
payments under such policies or bonds.
5.26 PRODUCT WARRANTIES, PRODUCT RETURN POLICIES AND SERVICE WARRANTIES.
Except as listed in Schedule 5.26 hereto, Seller does not utilize any product
warranties, guarantees or product return policies. Schedule 5.26 hereto also
describes all pending, threatened and suspected claims or demands seeking return
or replacement of products pursuant to warranties extended by Seller prior to
the Closing.
5.27 ENVIRONMENTAL. Except as disclosed in Schedule 5.27, to the best
knowledge and belief of Seller and Stockholders, there are no conditions
existing or resulting from activities associated with Seller's activities,
including, without limitation, matters relating to air, soil contamination and
water pollution, solid wastes, toxic substances, occupational health studies,
matters relating to waste disposal practices, groundwater and soil monitoring,
written communications with federal, state and local environmental agencies and
all existing, pending or anticipated violations, citations, claims, and
complaints relating to or resulting from activities associated with the business
of Seller or conditions existing at the LAB Facilities ("Environmental
Matters"). To the best knowledge and belief of Seller and Stockholders, the
disclosure set forth in Schedule 5.27 reveals all Environmental Matters,
materials so deposited, and all such violations, citations, claims, as well as a
description of the size, location, contents, capacity, age and construction of
each underground storage tank located on the LAB Facilities. To the best
knowledge and belief of Seller and Stockholders, Schedule 5.27 hereto discloses
all Toxic or Hazardous Substances or Wastes which have been generated, treated,
stored, disposed of or otherwise deposited by Seller or deposited by others in
or on or allowed to emanate or be released or discharged from the LAB
Facilities, including, without limitation, the surface waters and subsurface
waters thereof, and, to the best knowledge and belief of Seller and
Stockholders, there are no other substances or conditions, in, on, under or
emanating from the LAB Facilities, including, without limitation, surface waters
and subsurface waters thereof, which could support a claim or cause of action
under any federal, state, or local environmental statutes, ordinances,
regulations or guidelines. "Toxic or Hazardous Substances or Waste" for
purposes of this Agreement shall include, without limitation: (i) hazardous
substances or hazardous wastes, as those terms are defined by the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. Subsection
9601, ET SEQ.; the Resource Conservation and Recovery Act, 42 U.S.C. Subsection
6901, ET SEQ., and/or any other applicable federal, state or local law,
regulation, ordinance or requirement, all as amended or hereafter amended; (ii)
petroleum, including, without limitation, crude oil or any fraction thereof;
(iii) asbestos in any form or condition; and (iv) any radioactive material,
including, without limitation, any source, special nuclear or by-product
material as defined at 42 U.S.C.
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Subsection 2011, ET SEQ., as amended or hereafter amended. Seller hereby
waives, releases and agrees not to make any claim or bring any cost recovery
action against Buyer under the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. Subsection 9601, ET SEQ., or any
state equivalent or any similar law now existing or hereafter enacted, except
to the extent that the condition or circumstance giving rise to such claim or
action was in no manner related to any condition or circumstance existing (to
the extent determined by a court of competent jurisdiction) as of or prior to
the Closing Date. The parties agree that the burden of proving that such a
condition or circumstance did not exist at or prior to the Closing Date shall
be on Seller. Neither Seller nor Stockholders shall be responsible for acts
or omissions caused solely by Buyer after the Closing Date.
5.28 COMPLIANCE WITH LAWS. To the best knowledge and belief of Seller and
Stockholders (i) Seller has materially complied with and currently is in
material compliance with all applicable statutes, regulations, orders,
ordinances and other laws of the United States and all foreign, state and local
governments, and agencies of any of the foregoing, to which any aspect of its
business or any part of its properties is subject; (ii) the hours worked by, and
payment made to, employees of Seller have not been in material violation of the
Fair Labor Standards Act or any applicable state, foreign or local laws dealing
with such matters; (iii) there is not presently pending any proceeding, or
suspected investigation with respect to the adoption by any state, county or
municipality where the LAB Facilities are located, of amendments or
modifications to existing local or municipal laws, ordinances, regulations or
restrictions with respect to such matters which, if adopted, could adversely
affect the present business and operations of Seller; and (iv) except as
disclosed in Schedule 5.28 hereto, Seller has not violated any rules,
regulations or other similar standards of the Occupational Safety and Health
Administration.
5.29 GOVERNMENTAL APPROVALS. To the best knowledge and belief of Seller
and Stockholders, the business of Seller as presently conducted does not require
any approval of any governmental body, whether federal, state, local or foreign,
which has not been obtained or which has not been expressly waived by another
provision of this Agreement. Except as may be expressly permitted by the terms
hereof or otherwise disclosed in this Agreement or any Schedule hereto, the
business of Seller as presently conducted in any jurisdiction meets all material
known and suspected applicable legal requirements of such jurisdiction and all
known and suspected requisite governmental approvals have been duly obtained and
are in full force and effect, and there is no basis for any governmental body to
deny or rescind any approval for the conduct of the business of Seller or the
contemplated conduct of Buyer. There is no known or suspected action or
proceeding by any governmental body, including, without limitation, safety or
environmental investigations, pending or threatened against Seller relating to
the conduct of its business, and there is no basis for any such action or
proceeding.
5.30 TRADE ACCOUNTS PAYABLE. Schedule 5.30 hereto contains a materially
true and complete list as of October 31, 1996, and which shall be updated at
Closing, of all trade creditors and suppliers of Seller, all of whom are
unrelated third parties. As of such date, Seller is not the payor of any note
payable to a trade creditor. To the best knowledge and belief of Seller and
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Stockholders, Seller enjoys a satisfactory ongoing relationship with all such
creditors and suppliers and Seller is unaware of any fact or event that might
result in a disruption of any such relationship.
5.31 POWERS OF ATTORNEY AND GUARANTEES. There are no persons, firms,
associations, corporations, limited liability companies, partnerships, limited
liability partnerships or other business organizations holding general or
special powers of attorney or guarantees from Seller.
5.32 INCURRING OF LIABILITY. To the best knowledge and belief of Seller
and Stockholders, except with respect to liabilities or obligations specifically
disclosed to Buyer in this Agreement or the Schedules hereto, Seller has not
taken any action or failed to take any action prior to the Closing which will
cause Seller to incur any material liability or obligations to any third party
arising out of or relating to the conduct of its business prior to the Closing
Date.
5.33 ACCURACY OF BOOKS AND RECORDS. The books and records, financial and
otherwise, of Seller, in all material respects, accurately set out and disclose
the financial position of Seller and all transactions of Seller relating to the
Purchased Assets and Assumed Liabilities have been accurately recorded in such
books and records.
5.34 INVESTMENT REPRESENTATION. Seller is acquiring the Warrant to acquire
shares of NYBE Common Stock to be issued as part of the Purchase Price for
investment and not with the intent or view to the further distribution thereof.
Seller is sufficiently experienced and sophisticated in investment matters, or
has consulted with and is relying on an advisor that is so experienced and
sophisticated, so as to be able to evaluate and understand this Agreement and
the risks associated with an investment in the Warrant and NYBE Common Stock.
Seller understands that it may be required to continue to own the Warrant and
the underlying shares of NYBE Common Stock being acquired pursuant to the terms
of this Agreement and the Warrant for an indefinite period of time and has
sufficient other assets and income so as to be able to do so. Seller further
understands and agrees that it may sell the Warrant and/or the underlying shares
only pursuant to an effective registration statement, the provisions of Rule 144
of the Securities and Exchange Commission as the same may then be in effect, or
any other then applicable exemption from the registration requirements of the
Securities Act of 1933, as amended (the "Securities Act"). Seller acknowledges
and understands that neither the Warrant nor the underlying shares of NYBE
Common Stock will be registered under the Securities Act and, therefore, cannot
be resold unless they are registered under the Securities Act or unless an
exemption from registration under the Securities Act is available. Seller
acknowledges that NYBE is relying on the representations and warranties
contained in this ARTICLE V in issuing the Warrant as part of the Purchase Price
and Seller agrees to indemnify NYBE and its affiliates from any loss, liability,
damage, or expense sustained by any of them by reason of any breach of Seller's
representations and warranties contained in this ARTICLE V.
5.35 COMPLETENESS OF STATEMENTS. No representation by Seller or
Stockholders in this Agreement or in any statement (including financial
statements), exhibit, schedule, certificate, document or instrument provided to
Buyer or NYBE pursuant to or in connection with this Agreement and the
transactions contemplated by this Agreement contains any untrue statement of
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a material fact or omits to state a material fact necessary to make any such
statements not misleading.
5.36 ENVIRONMENTAL SURVEYS. There are no, and to the best knowledge and
belief of Sellers and Stockholders there have never been any, Phase I or other
environmental assessments with respect to the LAB Facilities.
5.37 DUE DILIGENCE DOCUMENTS. Seller and Stockholders have delivered to
Buyer copies of the due diligence matters as requested in the certain October 9,
1996 correspondence. A copy of such correspondence and due diligence response
documents are set forth in Schedule 5.37 hereto. Seller and Stockholders hereby
represent and warrant that, to the best knowledge and belief of Sellers and
Stockholders, such due diligence response documents are true, accurate and
complete in all material respects.
5.38 TO THE BEST KNOWLEDGE AND BELIEF. The term "to the best knowledge and
belief of Seller and Stockholders" shall mean the actual knowledge of current
officers and managerial employees of Seller, and the actual knowledge of
Stockholders, as such knowledge has been obtained in the normal conduct of the
business of Seller and without requiring that Seller or Stockholders conduct an
investigation for the express purpose of making such representations and
warranties.
5.39 BAGEL STOP. Seller is not in violation of, nor does performance under
this Agreement violate, any of the Bagel Stop Agreements, as defined herein.
ARTICLE VI.
REPRESENTATIONS AND WARRANTIES OF BUYER AND PARENT
Buyer and NYBE represent and warrant to Seller and Stockholders as follows:
6.01 ORGANIZATION AND GOOD STANDING. Buyer and NYBE are corporations, duly
organized, validly existing and in good standing under the laws of the State of
Kansas and have the corporate power to own their respective properties and to
carry on their businesses as now conducted. Buyer, as of the Closing Date but
not as of the date of this Agreement, is qualified to do business and is in good
standing under the laws of the State of Colorado.
6.02 AUTHORIZATION. Buyer and NYBE have the full corporate power to enter
into this Agreement and to carry out their obligations hereunder. The
execution, delivery and performance of this Agreement by Buyer and NYBE have
been duly and effectively authorized and approved by all requisite corporate
action of Buyer and NYBE and no other corporate acts or proceedings on the part
of Buyer or NYBE are necessary to authorize this Agreement or the transactions
contemplated hereby. This Agreement constitutes a valid and legally binding
obligation of Buyer and NYBE. No consent or approval by, notice to or
registration with any governmental authority, is required on
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the part of Buyer or NYBE in connection with the execution and delivery of
this Agreement or the consummation by Buyer or NYBE of the transactions
contemplated hereby.
6.03 RELEASE. Buyer and NYBE will, at Seller's expense, use their
reasonable best efforts to assist Seller and Stockholders in obtaining the
release of all personal guarantees of the Stockholders and Seller on any leases
or other Assumed Liabilities.
6.04 CONTINUED COURSE OF NYBE BUSINESS. Subject to Schedule 6.04 hereto,
Buyer and NYBE shall operate the business acquired hereunder pursuant to NYBE's
normal business practices through March 30, 1997.
6.05 NO VIOLATION. The execution, delivery and performance of this
Agreement by Buyer does not and will not conflict with or result in any material
breach or default of any of the terms or provisions of any material agreement to
which Buyer is a party or by which any of Buyer's assets or property is bound,
or violate any statute or law or any judgment, decree, order, regulation, or
rule of any court or governmental authority.
6.06 SUFFICIENT FUNDS. Buyer has available funds sufficient to consummate
the purchase contemplated by this Agreement. Buyer has provided Seller a copy
of NYBE's Form 10-Q report for the period ended September 29, 1996.
6.07 COMPLETENESS OF STATEMENTS. No representation by Buyer in this
Agreement or in any statement (including financial statements), exhibit,
schedule, certificate, document or instrument provided to Seller pursuant to or
in connection with this Agreement and the transactions contemplated by this
Agreement contains any untrue statement of a material fact or omits to state a
material fact necessary to make any such statements not misleading.
ARTICLE VII.
CONDITIONS TO AND EVENTS AT CLOSING
The obligations of Buyer, NYBE, Seller and Stockholders to consummate this
Agreement and to effect the transactions contemplated hereby shall be subject to
fulfillment on the Closing Date of each of the following express respective
conditions precedent hereinafter stated in Sections 7.01 through 7.24:
AS TO BUYER AND NYBE:
7.01 CONTINUED TRUTH OF WARRANTIES. The representations and warranties of
Stockholders and Seller herein contained shall be true and complete in all
respects on and as of the Closing Date.
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7.02 PERFORMANCE OF COVENANTS. Stockholders and Seller shall have
performed all covenants and obligations and complied with all conditions
required by this Agreement to be performed or complied with by them on or
prior to the Closing Date.
7.03 CERTIFICATE. The Chief Executive Officer of Seller and each
Stockholder shall have executed and delivered to Buyer a certificate dated
the Closing Date, certifying that the conditions set forth in Sections 7.01
and 7.02 of this Agreement have been fulfilled.
7.04 PERMITS. Any and all permits and consents from any regulatory
authority having jurisdiction required for the lawful consummation of the
transactions contemplated hereby shall have been obtained.
7.05 LEGAL OPINION. Buyer shall have received the favorable opinion of
Kraemer, Kendall & Benson, P.C., counsel for Stockholders and Seller, dated
as of the Closing Date, in the form of Exhibit "D" hereto.
7.06 REGULATORY AGENCY APPROVAL. The parties hereto shall have secured
all appropriate orders, consents, approvals and clearances, in form and
substance reasonably satisfactory to Buyer, by and from all regulatory
agencies and other governmental authorities and agencies whose order,
consent, approval or clearance is required by law for the consummation of the
transactions herein contemplated.
7.07 CONSULTING AGREEMENTS. Buyer and Stephen K. Goldstone shall have
executed and delivered that certain Consulting Agreement in the form of
Exhibit "E" hereto.
7.08 BILL OF SALE AND ASSIGNMENT. Seller shall have executed and
delivered a bill of sale and such assignments and other instruments of
transfer with respect to the personal property, real and personal property
leases, motor vehicles, bids, quotes and contracts and commitments included
within the Purchased Assets in such form and substance attached hereto as
Exhibit "F."
7.09 RESOLUTIONS. Seller and Stockholders shall have delivered to Buyer
certified copies of resolutions of the board of directors and stockholders of
Seller authorizing the transactions contemplated herein.
7.10 ESTOPPEL CERTIFICATES. Seller shall have delivered to Buyer, at
Seller's cost, estoppel certificates from the lessors of the LAB Facilities,
each in a form satisfactory to Buyer and its counsel.
7.11 GUARANTEES. Stockholders shall have executed and delivered to
Buyer that certain Guaranty agreement in the form of Exhibit "G" hereto,
whereby Stockholders will guarantee all of the payment and performance
obligations of Seller herein.
7.12 CONFIDENTIALITY AND COVENANT NOT TO COMPETE AGREEMENTS. Seller and
Stockholders shall have executed and delivered to Buyer those certain
Confidentiality and Covenant
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Not to Compete Agreements in the forms of Exhibits "H," "I" and "J" hereto,
whereby Seller and Stockholders will agree that they will not compete with
Buyer or NYBE in accordance with the terms set forth therein.
7.13 DUE DILIGENCE. Seller and Stockholders shall have allowed
representatives of Buyer to make physical inspections of the Purchased
Assets, the Assumed Liabilities and the LAB Facilities, and to review all of
the books, contracts, agreements, tax returns and other records of Seller,
and shall have furnished Buyer with such additional information as Buyer may
have reasonably requested. The results of such due diligence investigation
shall be satisfactory to Buyer and its counsel.
7.14 DELIVERY OF CERTAIN CONSENTS. Seller shall have delivered those
consents required under this Agreement, in a form satisfactory to Buyer and
its counsel.
7.15 FINANCIAL STATEMENTS AUDITABILITY. The Financial Statements and
the 1996 unaudited financial statements of Seller shall have been determined
by Buyer to be auditable for SEC (as defined herein) rules and regulations
purposes.
7.16 REAL PROPERTY LEASE ASSIGNMENT. Seller shall have obtained the
consents of Seller's landlords of land and buildings to the assignment of all
of the related leases.
7.17 TRADE SECRETS AGREEMENT. Stockholders, Seller, NYBE and Buyer
shall have executed and delivered to each other that certain Trade Secrets
Agreement in the form of Exhibit "K" hereto.
AS TO SELLER AND STOCKHOLDERS:
7.18 CONTINUED TRUTH OF WARRANTIES. The representations and warranties
of Buyer and NYBE herein contained shall be true and complete on and as of
the Closing Date.
7.19 PERFORMANCE OF COVENANTS. Buyer and NYBE shall have performed all
covenants and obligations and complied with all conditions required by this
Agreement to be performed or complied with by them prior to the Closing Date.
7.20 CERTIFICATE. The President of Buyer and NYBE shall have delivered
to Seller a certificate executed by him, dated the Closing Date, certifying
that the conditions set forth in Sections 7.18 and 7.19 hereto have been
fulfilled.
7.21 DELIVERY OF PURCHASE PRICE. Buyer shall have paid to Seller the
Initial Cash and delivered to Seller the Initial Promissory Note as provided
in Section 4.02 herein.
7.22 REAL PROPERTY LEASE ASSIGNMENT. Seller shall have obtained the
consents of Seller's landlords of land and buildings to the assignment of all
of the related leases.
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7.23 TRADE SECRETS AGREEMENT. Stockholders, Seller, NYBE and Buyer
shall have executed and delivered to each other that certain Trade Secrets
Agreement in the form of Exhibit "K" hereto.
7.24 LEGAL OPINION. Seller shall have received the favorable opinion of
Klenda, Mitchell, Austerman & Zuercher, L.L.C., counsel for NYBE and Buyer,
dated as of the Closing Date in the form of Exhibit "L" hereto.
ARTICLE VIII.
INDEMNIFICATION BY SELLER AND STOCKHOLDERS
8.01 GENERAL INDEMNIFICATION. Subject to the provisions of this ARTICLE
VIII (including the limitations hereinafter set forth), by adoption of this
Agreement, Seller and Stockholders, jointly and severally, agree to defend,
indemnify and hold harmless Buyer and NYBE, their respective officers,
directors, employees, representatives, subsidiaries, affiliates and parent
corporations against and in respect of:
A) Any and all loss, liability, cost, expense and damage arising in
connection with, relating to or resulting from (i) any
misrepresentation, breach, non-performance or inaccuracy of any
representation, including any warranty contained in ARTICLE V or this
Agreement, by Stockholders or Seller hereunder, (ii) any Excluded
Liability, (iii) breach by Stockholders or Seller of any covenant by
Stockholders or Seller made or contained in this Agreement or in any
Exhibit, Schedule, certificate or document executed and delivered to
Buyer by or on behalf of Seller or Stockholders in connection with
this Agreement or the transactions contemplated herein, (iv) matters
relating to or resulting from any liability, damage, loss, claim,
cost or expense (including attorneys' fees) relating to matters which
occurred or arose prior to or on the Closing, and (v) matters relating
to or resulting from that certain Stock Purchase Agreement dated
January 29, 1991, by and among Stockholders, Les Liess-Mayr, Carole S.
Van Hoose, Steven J. Barr and Bagel Stop, Inc., and the related
Noncompetition Covenant and Trade Secrets Agreement (the "Bagel Stop
Agreements"); provided, however, Buyer and NYBE shall not be
indemnified for Buyer's or NYBE's breach of the Trade Secrets
Agreement, a form of which is attached hereto as Exhibit "K."
B) Any and all costs, expenses (including settlement payments made as
provided in this Agreement), actions, suits, proceedings, claims,
demands, assessments and judgments, incident to or arising in
connection with, relating to or resulting from any breach,
misrepresentation, non-performance or inaccuracy described in Sub-
Paragraph (A) of this Section 8.01; and
C) Any and all costs, expenses and all other damages incurred by Buyer or
NYBE in claiming, contesting or remedying any breach,
misrepresentation, non-performance
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or inaccuracy described above, including, by way of illustration and
not limitation, all reasonable legal and accounting fees, other
professional expenses and all filing fees, and collection costs
incident thereto and all such fees, costs and expenses incurred in
defending such matters which, if successfully prosecuted, would have
been indemnifiable hereunder.
8.02 INDEMNIFICATION NOTICE. No claim, demand, suit or cause of action
shall be brought against Stockholders or Seller hereunder unless Buyer or
NYBE shall have given Stockholders and Seller prior written notice of the
existence of any such claim, demand, suit or cause of action or commencement
of any environmental corrective actions or other corrective actions related
to Seller's non-compliance, if any, with applicable laws; provided, however,
that upon the giving of such notice, Buyer, NYBE, Stockholders and Seller or
any of them, shall have the right to commence legal proceedings for the
enforcement of their respective rights as contained herein; and, provided,
further, that the failure of Buyer or NYBE to provide such notice promptly
shall not relieve Stockholders or Seller of their respective obligations
hereunder, except to the extent that such failure actually prejudices
Stockholders or Seller. Upon receipt of such notice, Seller and Stockholders
shall have the right, at their expense, to resolve, settle or defend against
any such third party claims, demands, suits, causes of action or corrective
actions. Buyer or NYBE shall not have the right to seek payment from Seller
or Stockholders unless they have failed to resolve, settle, defend against or
pay such third party claims in a timely manner.
In the event of any claim by Buyer or NYBE against Seller or
Stockholders for a matter not relating to a third party, Seller and
Stockholders shall be given the opportunity to correct, repair or remedy the
misrepresentation, breach, non-performance or inaccuracy before being
required to indemnify Buyer or NYBE as set forth herein.
8.03 DEFENSE OF THIRD PARTY LITIGATION. In the event that a claim for
potential indemnity for damages against Seller or Stockholders hereunder
pertains to an action involving a third party, Buyer and NYBE shall give
Seller and Stockholders prompt written notice thereof and such claim shall
not be paid or settled by Buyer or NYBE if Seller or Stockholders undertakes
in good faith the defense thereof as hereinafter provided, unless (i) such
claim has matured by court judgment or decree, and no appeal has been taken
therefrom and no proper appeal bond is posted by Seller or Stockholders, or
(ii) failure by Buyer or NYBE to make payment would result in the foreclosure
of a lien upon any of the properties or assets then held by Buyer or NYBE, or
an order enjoining or restraining Buyer or NYBE, temporarily or permanently,
from the operation of their respective businesses in the normal course, or
would constitute a default in a lease, loan agreement or other contract of
any nature whatsoever except a contract which is the subject of the dispute.
If Seller or Stockholders assumes the responsibility for defending any
contested action involving a third party in accordance with the terms of this
Section, Buyer and NYBE shall each cooperate fully to make available to
Seller and Stockholders all pertinent information under their control.
Stockholders, Buyer, NYBE and Seller shall cooperate with each other in
resolving or attempting to resolve any such actions, and shall permit each
other access to their books and records, during normal business hours and at
the place where the same are normally kept, with full right to make copies
thereof or extracts therefrom.
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8.04 REMEDIES CUMULATIVE; OFFSET. The remedies provided herein shall be
cumulative and shall not preclude assertion by any party hereto of any other
rights or the seeking of any other remedies against any other party hereto.
Without limiting the generality of the foregoing and the provisions of
ARTICLE IV herein, Buyer shall have the right to effect an offset against the
Initial Promissory Note and the Final Promissory Note, if any, to the extent
necessary to preserve its rights under this ARTICLE VIII. Provided, however,
Seller shall be subject to compliance with the other provisions of this
ARTICLE.
ARTICLE IX.
INDEMNIFICATION BY BUYER
9.01 GENERAL PROVISIONS. By adoption of this Agreement, Buyer agrees to
defend and indemnify Stockholders and Seller and hold them harmless against
and in respect of:
A) Any and all loss, liability, cost, expense or damage resulting from
any (i) misrepresentation, breach, non-performance or inaccuracy of
any representation, indemnity, warranty or any covenant by Buyer made
or contained in this Agreement or in any certificate or document
executed and delivered to Stockholders or Seller by or on behalf of
Buyer under or in connection with this Agreement or the transactions
contemplated herein, and (ii) any Assumed Liabilities;
B) Any and all costs, expenses (including settlement payments made as
provided in this Agreement), actions, suits, proceedings, claims,
demands, assessments and judgments, incident to or arising as a result
of any breach, misrepresentation, non-performance or inaccuracy
described in Subparagraph (A) of this Section 9.01; and
C) Any and all costs, expenses and all other actual damages incurred by
Seller or Stockholders in claiming, contesting or remedying any
breach, misrepresentation, nonperformance or inaccuracy described
above, including, by way of illustration and not limitation, all legal
and accounting fees, other professional expenses and all filing fees,
and collection costs incident thereto and all such fees, costs and
expenses incurred in defending claims which, if successfully
prosecuted would have been indemnifiable hereunder.
D) Acts or omissions caused solely by Buyer after Closing with respect to
those matters set forth in Section 5.27.
9.02 INDEMNIFICATION NOTICE. No claim, demand, suit or cause of action
shall be brought against Buyer hereunder unless the Stockholders and Seller
shall have given Buyer prior written notice of the existence of any such
claim, demand, suit or cause of action or commencement of any environmental
corrective actions, other than corrective actions related to Buyer's
non-compliance, if any, with applicable laws; provided, however, that upon
the giving of such notice, Buyer, NYBE, Stockholders and Seller or any of
them, shall have the right to commence legal proceedings for the
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enforcement of their respective rights as contained herein; and, provided,
further, that the failure of Stockholders and Seller to provide such notice
promptly shall not relieve Buyer of its obligations hereunder, except to the
extent that such failure actually prejudices Buyer or NYBE. Upon receipt of
such notice, Buyer and NYBE shall have the right, at their expense, to
resolve, settle or defend against any such third party claims, demands,
suits, causes of action or corrective actions. Seller shall not have the
right to seek payment from Buyer or NYBE unless they have failed to resolve,
settle, defend against or pay such third party claims in a timely manner.
In the event of any claim by Seller or Stockholders against Buyer for a
matter not relating to a third party, Buyer and NYBE shall be given the
opportunity to correct, repair or remedy the misrepresentation, breach,
non-performance or inaccuracy before being required to indemnify Seller or
Stockholders as set forth herein.
9.03 DEFENSE OF THIRD PARTY LITIGATION. In the event that a claim for
potential indemnity for damages against Buyer hereunder pertains to an action
involving a third party, Stockholders and Seller shall give Buyer prompt
written notice thereof and such claim shall not be paid or settled by
Stockholders or Seller if Buyer undertakes in good faith the defense thereof
as hereinafter provided, unless (i) such claim has matured by court judgment
or decree, and no appeal has been taken therefrom and no proper appeal bond
is posted by Buyer, or (ii) failure by Stockholders or Seller to make payment
would result in the foreclosure of a lien upon any of the properties or
assets then held by Stockholders or Seller, or an order enjoining or
restraining Stockholders or Seller, temporarily or permanently, from the
operation of their respective businesses in the normal course, or would
constitute a default in a lease, loan agreement or other contract of any
nature whatsoever except a contract which is the subject of the dispute. If
Buyer assumes the responsibility for defending any contested action involving
a third party in accordance with the terms of this Section, Stockholders and
Seller shall each cooperate fully to make available to Buyer all pertinent
information under their control. Stockholders, Buyer and Seller shall
cooperate with each other in resolving or attempting to resolve any such
actions, and shall permit each other access to their books and records,
during normal business hours and at the place where the same are normally
kept, with full right to make copies thereof or extracts therefrom.
9.04 REMEDIES CUMULATIVE. The remedies provided herein shall be
cumulative and shall not preclude assertion by any party hereto of any other
rights or the seeking of any other remedies against any other party hereto.
ARTICLE X.
MISCELLANEOUS
10.01 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. The
representations and warranties of Buyer, NYBE, Stockholders and Seller
contained in this Agreement or contained in any agreement, certificate or
other document delivered to or given pursuant to this Agreement shall survive
the completion of the transactions contemplated by this Agreement and,
notwithstanding such completion or any investigation (including any
environmental report) made by or on behalf of either Buyer, NYBE,
Stockholders or Seller, as the case may be.
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10.02 ACCESS TO RECORDS. From and after the Closing and subject to
Sections 1.02(B) and 1.05, Seller and Stockholders agree that they will
retain accounting and tax records of Seller, relating to fiscal years and
such shorter periods prior to and as of Closing, for a period which shall be
for no less than the period then required by law or seven years. Seller
shall also retain those records constituting "Excluded Assets," as provided
in Section 1.02(B), for a period which shall be no less than the period
required by law or seven years. Upon the written request of Buyer and/or
NYBE, Seller and Stockholders shall permit the Buyer and NYBE or their agents
to inspect and make copies of such records, at Buyer and NYBE's expense and
during normal business hours, for the purposes of tax return preparation,
financial statement closing, response to tax audit inquiries of the IRS and
any state and local tax authorities and other proper business purposes.
Buyer shall provide Seller and Stockholders access to Buyer's monthly
internal financial information, which Buyer shall keep strictly confidential.
The parties will each also furnish reasonable assistance of their respective
personnel in connection therewith. If any party so requests, within sixty
(60) days prior to the time of proposed destruction of any records according
to the respective records retention policy of any other party, the party
holding same will turn over such records to the requesting party.
10.03 COVENANT TO MAINTAIN INSURANCE. In the event that Seller's
general liability or product liability coverage is a "claims-made" based
policy under which claims are insurable only if brought during the term of
such policy, then in such event, Seller shall maintain in effect, for a
period of one (1) year following the Closing Date, one (1) or more liability
policies to insure against the Excluded Liabilities set forth under Sections
2.02(I) and (J) retained by Seller pursuant to this Agreement, to the extent
such risks are currently insured against, in the form and substance of the
policies now in effect. Certificates and executed copies of such insurance
shall be submitted to Buyer at the Closing. The certificates shall certify
that no alteration, modification or termination of such coverage shall be
effective without at least thirty (30) days' prior notice to Buyer.
Notwithstanding, under no circumstances, however, shall Seller be required to
provide liability insurance for any acts, omissions, or operations of Buyer
or of Buyer's agents, employees, or servants.
10.04 BROKER FOR SELLER AND STOCKHOLDERS. Seller and Stockholders
represent and warrant that other than fees to The Will Hoover Company, which
are the responsibility and shall be paid by Stockholders or Seller, no
person, firm or corporation has acted in the capacity of broker or finder on
their behalf to bring about the negotiation or consummation of this
Agreement, and Stockholders and Seller agree to indemnify and hold harmless
Buyer and NYBE against any claims or liabilities asserted against them by any
person acting or claiming to act as a broker or finder on behalf of Seller or
Stockholders.
10.05 BROKER FOR BUYER. Buyer and NYBE represent and warrant that no
person, firm or corporation has acted in the capacity of broker or finder on
its behalf to bring about the negotiation or consummation of this Agreement,
and agree to indemnify and hold Stockholders and Seller harmless against any
claims or liabilities asserted against it by any person acting or claiming to
act as a broker or finder on behalf of Buyer or NYBE.
10.06 NOTICES. Any notices or other communications required or
permitted hereunder (including, by way of illustration and not limitation,
any notice permitted or required under
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ARTICLE VIII hereof) to Buyer, NYBE, Stockholders or Seller shall be
sufficiently given if delivered in person or sent by registered mail, postage
prepaid, addressed as follows:
If to Buyer or NYBE: New York Bagel Enterprises, Inc.
300 I.M.A. Plaza
250 North Water Street
Wichita, Kansas 67202-1213
ATTN: Paul R. Hoover
Vice President - Strategic Planning
With a copy to: Klenda, Mitchell, Austerman & Zuercher, L.L.C.
1600 Epic Center
301 North Main Street
Wichita, Kansas 67202-4888
ATTN: Gregory B. Klenda, Esq.
If to Seller: Lots A' Bagels, Inc.
202 East Cheyenne Mountain, Suite H
Colorado Springs, Colorado 80906
ATTN: Stephen K. Goldstone
Chief Executive Officer
With a copy to: Kraemer, Kendall & Benson, P.C.
430 North Tejon, Suite 300
Colorado Springs, Colorado 80903
ATTN: Phillip A. Kendall, Esq.
If to Stockholders: Mr. and Mrs. Stephen K. Goldstone
202 East Cheyenne Mountain, Suite H
Colorado Springs, Colorado 80906
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With a copy to: Kraemer, Kendall & Benson, P.C.
430 North Tejon, Suite 300
Colorado Springs, Colorado 80903
ATTN: Phillip A. Kendall, Esq.
or such substituted address as any party shall have given notice to the other
in writing.
10.07 AMENDMENT. This Agreement may be amended or modified in whole or
in part only by an agreement in writing executed in the same manner as this
Agreement and making specific reference thereto.
10.08 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which taken together shall constitute one instrument.
10.09 BINDING ON SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon, inure to the benefit of, and be enforceable by and against, the parties
hereto and their respective heirs, personal representatives, successors and
assigns; provided, however, that nothing contained in this Agreement shall
confer upon any other person not a party to this Agreement any rights or
remedies hereunder. This is not a third party beneficiary contract. In
particular, without limitation, it is not the intention of the parties that
this Agreement be a contract of which any governmental entity is a third
party beneficiary. No one shall be entitled to enforce any provision of this
Agreement except the parties hereto, their successors and assigns.
10.10 SEVERABILITY. In the event that any one or more of the provisions
contained in this Agreement or any application thereof shall be invalid,
illegal or unenforceable in any respect, the validity, legality or
enforceability of the remaining provisions of this Agreement and any other
application thereof shall not in any way be affected or impaired thereby;
provided, however, that to the extent permitted by applicable law, any
invalid, illegal, or unenforceable provision may be considered for the
purpose of determining the intent of the parties in connection with the other
provisions of this Agreement.
10.11 WAIVERS. The parties may, by written agreement, (i) extend the
time for the performance of any of the obligations or other acts of the
parties hereof, (ii) waive any inaccuracies in the representations contained
in this Agreement, (iii) waive compliance with, or modify, any of the
covenants or conditions contained in this Agreement, and (iv) waive or modify
performance of any of the obligations of any of the parties hereto; provided,
that no such waivers or failure to insist upon strict compliance with such
obligation, covenant, agreement or condition shall operate as a waiver of, or
an estoppel with, respect to, any subsequent or other failure.
10.12 HEADINGS AND DEFINITIONS. The headings in the sections of this
Agreement are inserted for convenience only and in no way alter, amend,
modify, limit or restrict the contractual obligation of the parties.
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10.13 SCHEDULES AND EXHIBITS. The Schedules and Exhibits hereto form an
integral part of this Agreement and are incorporated herein by reference and
expressly made a part hereof.
10.14 EXPENSES.
A) Seller shall be responsible for any debt, liability or obligation,
cost, expense or fee of any nature whatsoever including, without
limitation, any and all legal, accounting and other professional fees
and expenses incurred by Seller in connection with the negotiation,
execution or performance of this Agreement through the Closing Date.
B) Except as provided to the contrary herein, neither the Stockholders
nor Seller shall be responsible for any debt liability or obligation,
cost, expense or fee of any nature whatsoever, including, without
limitation, any and all legal, accounting and other professional fees
and expenses incurred by Buyer or NYBE in connection with the
negotiation, execution or performance of this Agreement.
10.15 PUBLIC ANNOUNCEMENTS. The parties agree that all statements and/or
public announcements, including those to the media, concerning this
transaction shall be subject to Buyer's and NYBE's prior written approval.
Buyer and NYBE may make any statement and/or public announcement concerning
this transaction in their sole discretion.
10.16 ENTIRE AGREEMENT; LAW GOVERNING. All prior negotiations and
agreements between the parties hereto are superseded by this Agreement, and
there are no representations, warranties, understandings or agreements other
than those expressly set forth herein or in any Schedule or Exhibit delivered
pursuant hereto, except as modified in writing concurrently herewith or
subsequent hereto. This Agreement shall be governed and construed and
interpreted according the laws of the State of Kansas.
10.17 GUARANTY. Realizing that Seller may be dissolved shortly after
Closing, whether or not such dissolution takes place, and in addition to the
specific representations, warranties, obligations, indemnifications,
covenants and agreements of Stockholders herein, Stockholders, jointly and
severally, hereby agree to perform and/or pay after Closing, as applicable,
any and all representations, warranties, obligations, indemnifications,
covenants and agreements of Seller herein.
10.18 AUDITS. Seller acknowledges that Buyer, pursuant to United States
Securities and Exchange Commission ("SEC") Rules and Regulations, will
conduct an audit of the Financial Statements and the 1996 unaudited financial
statements of Seller, during which audit Seller and Stockholders agree that
they will participate and use their best efforts to assist Buyer in such
audits at their respective expense (the "Audits"). Seller agrees to request
Seller's outside accountants to assist Buyer's outside accountants in the
Audits.
10.19 ACTIONABLE BREACHES. Any breach of a representation or warranty
herein by a party hereto shall be actionable when such breach is material and
adverse to the nonbreaching party.
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IN WITNESS WHEREOF, this Agreement has been duly executed by Buyer,
NYBE, Stockholders and Seller as of and on the date first above written.
LAB ACQUISITION CORPORATION
ATTEST: By /s/ ROBERT J. GERESI
--------------------------------
By /s/ PAUL R. HOOVER Robert J. Geresi, President
----------------------------- "Buyer"
Paul R. Hoover, Secretary
NEW YORK BAGEL ENTERPRISES, INC.
ATTEST: By /s/ ROBERT J. GERESI
--------------------------------
By /s/ J. CHRIS DENNIS Robert J. Geresi,
----------------------------- Chief Executive Officer
J. Chris Dennis, Secretary "NYBE"
LOTS A' BAGELS, INC.
ATTEST: By /s/ STEPHEN K. GOLDSTONE
--------------------------------
By /s/ LINDA F. GOLDSTONE Stephen K. Goldstone,
----------------------------- Chief Executive Officer
Linda F. Goldstone, Secretary "Seller"
/s/ STEPHEN K. GOLDSTONE
--------------------------------
STEPHEN K. GOLDSTONE
/s/ LINDA F. GOLDSTONE
--------------------------------
LINDA F. GOLDSTONE
"Stockholders"
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EXHIBIT INDEX
Exhibit "A" Promissory Note
Exhibit "B" Promissory Note
Exhibit "C" Warrant to Purchase Common Stock
Exhibit "D" Opinion of Kraemer, Kendall & Benson, P.C.
Exhibit "E" Consulting Agreement
Exhibit "F" Bill of Sale
Exhibit "G" Guaranty
Exhibit "H" Confidentiality and Covenant Not to Compete
Agreement with Lots A' Bagels, Inc.
Exhibit "I" Confidentiality and Covenant Not to Compete
Agreement with Stephen K. Goldstone
Exhibit "J" Confidentiality and Covenant Not to Compete
Agreement with Linda F. Goldstone
Exhibit "K" Trade Secrets Agreement
Exhibit "L" Opinion of Klenda, Mitchell, Austerman & Zuercher,
L.L.C.
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EXHIBIT "C"
WARRANT TO PURCHASE
COMMON STOCK
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED. THEY MAY NOT BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF A
REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH
ACT OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED, OR UNLESS THE COMPANY IS OTHERWISE SATISFIED
THAT A SALE, TRANSFER OR ASSIGNMENT OF SUCH SECURITIES MAY BE MADE WITHOUT
REGISTRATION AND WITHOUT COMPLIANCE WITH ANY RESTRICTION SUCH AS UNDER RULE
144 OF SUCH ACT.
NEW YORK BAGEL ENTERPRISES, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF KANSAS
THIS CERTIFIES THAT, for value received, Lots A' Bagels, Inc., a Colorado
corporation ("Lots A' Bagels"), is entitled to purchase, on the terms hereof,
up to _________ shares of common stock, $0.01 par value per share (the
"Common Stock"), of New York Bagel Enterprises, Inc., a Kansas corporation
(the "Company"), at a per share purchase price of $_______, subject to
adjustment as provided herein (this "Warrant").
This Warrant is issued pursuant to the provisions of that certain Asset
Purchase Agreement dated as of November ___, 1996, entered into by and among
the Company, Lots A' Bagels, LAB Acquisition Corporation, a Kansas
corporation, Stephen K. Goldstone and Linda F. Goldstone (the "Agreement"),
and shall be subject to all of the terms, conditions and provisions of the
Agreement. Additionally, the following terms shall apply to this Warrant:
1. EXERCISE OF WARRANT.
The terms and conditions upon which this Warrant may be exercised, and
the Common Stock covered hereby (the "Warrant Stock"), may be purchased, are
as follows:
1.1 VOLUNTARY EXERCISE. This Warrant may be exercised in full or in
part at any time and from time to time after one (1) year from the date
hereof, or earlier in connection with an exercise of the holder's rights
under Section 6 below, but in no case may this Warrant be exercised later
than two (2) years from the date hereof. This Warrant may be exercised only
twice and each exercise shall be for a minimum of one thousand (1,000) shares
of Common Stock.
1.2 NUMBER OF SHARES. The number of shares of Common Stock for
which this Warrant is initially exercisable is _________ shares, which number
is subject to adjustment pursuant to Section 2 of this Warrant.
1.3 PURCHASE PRICE. The per share purchase price for the shares of
Common Stock to be issued upon exercise of this Warrant shall be $_________,
subject to adjustment as provided herein.
<PAGE>
1.4 METHOD OF EXERCISE. The exercise of this Warrant shall be
effected by (a) the surrender of this Warrant, together with a duly executed
copy of a Subscription in the form attached hereto as Exhibit "A," to the
Company at its principal offices, and (b) the delivery of the purchase price
by certified or cashier's check payable to the Company's order or by wire
transfer to the Company's account for the number of shares for which the
purchase rights hereunder are being exercised or any other form of
consideration approved by the Company's Board of Directors.
1.5 ISSUANCE OF SHARES. Upon the exercise of this Warrant, a
certificate or certificates for the purchased shares of Common Stock shall be
issued to Lots A' Bagels, its permitted successors or assigns, as soon as
practicable. The certificate shall contain appropriate legends regarding
restrictions upon transfer of the Warrant Stock and compliance with
applicable securities laws.
2. CERTAIN ADJUSTMENTS.
2.1 COMMON STOCK DIVIDENDS. If the Company at any time prior to the
expiration of this Warrant shall pay a dividend with respect to Common Stock
payable in shares of Common Stock, or make any other distribution with
respect to Common Stock, then an appropriate adjustment (as determined by
good faith by the Company's Board of Directors) shall be made to the purchase
price per share and the number of shares of Warrant Stock in proportion to
such dividend.
2.2 MERGERS, CONSOLIDATIONS OR SALE OF ASSETS. If at any time there
shall be a capital reorganization (other than a combination or subdivision of
Warrant Stock otherwise provided for herein), or a merger or consolidation of
the Company with or into another corporation, or the sale of the Company's
properties and assets as, or substantially as, an entirety to any other
person, then, as a part of such reorganization, merger, consolidation or
sale, lawful provision shall be made so that Lots A' Bagels shall thereafter
be entitled to receive upon exercise of this Warrant, during the period
specified in this Warrant and upon payment of the purchase price, the number
of shares of stock or other securities or property of the Company or the
successor corporation resulting from such reorganization, merger,
consolidation or sale, to which a holder of the Common Stock deliverable upon
exercise of this Warrant would have been entitled under the provisions of the
agreement in such reorganization, merger, consolidation or sale if this
Warrant had been exercised immediately before that reorganization, merger,
consolidation or sale. In any such case, appropriate adjustment (as
determined in good faith by the Company's Board of Directors) shall be made
in the application of the provisions of this Warrant with respect to the
rights and interests of Lots A' Bagels after the reorganization, merger,
consolidation or sale to the end that the provisions of this Warrant
(including adjustment of the purchase price then in effect and the number of
shares of Warrant Stock) shall be applicable after that event, as near as
reasonably may be, in relation to any shares or other property deliverable
after that event upon exercise of this Warrant.
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<PAGE>
2.3 SPLITS AND SUBDIVISIONS. In the event the Company should at any
time or from time to time fix a record date for the effectuation of a split
or subdivision of the outstanding shares of its Common Stock or the
determination of the holders of Common Stock entitled to receive a
distribution payable in additional shares of Common Stock or other securities
or rights convertible into, or entitling the holder thereof to receive
directly or indirectly, additional shares of Common Stock other than a
dividend as provided in subsection 2.1 above (hereinafter referred to as the
"Common Stock Equivalents") without payment of any consideration by such
holder for the additional shares of Common Stock or Common Stock Equivalents
(including the additional shares of Common Stock issuable upon conversion or
exercise thereof), then, as of such record date (or the date of such
distribution, split or subdivision, if no record date is fixed), if
appropriate, the per share purchase price shall be appropriately decreased
and the number of shares of Warrant Stock shall be appropriately increased in
proportion to such increase of outstanding shares.
2.4 COMBINATION OF SHARES. If the number of shares of Common Stock
outstanding at any time after the date hereof is decreased by a combination
of the outstanding shares of Common Stock, if appropriate, the per share
purchase price shall be appropriately increased and the number of shares of
Warrant Stock shall be appropriately decreased in proportion to such decrease
in outstanding shares.
2.5 ADJUSTMENTS FOR OTHER DISTRIBUTIONS. In the event the Company
shall declare a distribution payable in securities of other persons,
evidences of indebtedness issued by the Company or other persons, assets
(excluding cash dividends) or options or rights not referred to in Subsection
2.3, then, in each such case for the purpose of this Subsection 2.5, upon
exercise of this Warrant the holder hereof shall be entitled to a
proportionate share of any such distribution as though such holder was the
holder of the number of shares of Common Stock of the Company into which this
Warrant may be exercised as of the record date fixed for the determination of
the holders of Common Stock of the Company entitled to receive such
distribution.
2.6 CERTIFICATE AS TO ADJUSTMENTS. In the case of each adjustment
or readjustment of the purchase price pursuant to this Section 2, the Company
will promptly compute such adjustment or readjustment in accordance with the
terms hereof and cause a certificate setting forth such adjustment or
readjustment and showing in detail the facts upon which such adjustment or
readjustment is based to be delivered to the holder of this Warrant. The
Company will, upon the written request at any time of the holder of this
Warrant, furnish or cause to be furnished to such holder a certificate
setting forth:
(a) Such adjustments and readjustments;
(b) The purchase price at the time in effect; and
(c) The number of shares of Warrant Stock and the amount, if
any, of other property at the time receivable upon the exercise of this
Warrant.
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2.7 NOTICES OF RECORD DATE, ETC. In the event of:
(a) Any taking by the Company of a record of the holders of
any class of securities of the Company for the purpose of determining the
holders thereof who are entitled to receive any dividend (other than a cash
dividend payable out of profits or earned surplus) or other distribution, or
any right to subscribe for, purchase or otherwise acquire any shares of stock
of any class or any other securities or property, or to receive any other
right;
(b) Any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the Company or
any transfer of all or substantially all of the assets of the Company to any
other person or any consolidation or merger involving the Company; or
(c) Any voluntary or involuntary dissolution, liquidation or
winding-up of the Company, the Company will mail to the holder of this
Warrant at least five (5) days prior to the earliest date specified therein,
a notice specifying:
(i) The date on which any such record is to be taken for
the purpose of such dividend, distribution or right, and the amount
and character of such dividend, distribution or right; and
(ii) The date on which any such reorganization,
reclassification, transfer, consolidation, merger, dissolution,
liquidation or winding-up is expected to become effective and the
record date for determining stockholders entitled to vote thereon.
3. RESERVATION OF COMMON STOCK. The Company shall at all times reserve
and keep available out of its authorized but unissued shares of Common Stock,
solely for the purpose of effecting the exercise of this Warrant such number
of shares of its Common Stock as shall from time to time be sufficient to
effect the exercise of this Warrant; and if at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to
effect the exercise of this Warrant in its entirety, in addition to such
other remedies as shall be available to the holder of this Warrant, the
Company will use its reasonable best efforts to take such corporate action as
may, in the opinion of its counsel, be necessary to increase its authorized
but unissued shares of Common Stock to such number of shares as shall be
sufficient for such purposes.
4. PRIVILEGE OF STOCK OWNERSHIP. Prior to the exercise of this Warrant,
Lots A' Bagels shall not be entitled, by virtue of holding this Warrant, to any
rights of a stockholder of the Company, including, without limitation, the right
to vote, receive dividends or other distributions, to exercise preemptive rights
or to be notified of stockholders' meetings, and such holder shall not be
entitled to any notice of other communication concerning the business or affairs
of the Company. Nothing in this Section 4, however, shall limit the right of
Lots A' Bagels to be provided the notices described
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in Section 2 hereof or to participate in distributions described in Section 2
hereof as if Lots A' Bagels ultimately exercised this Warrant.
5. LIMITATION OF LIABILITY. Except as otherwise provided herein, in
the absence of affirmative action by the holder hereof to purchase the
Warrant Stock, no mere enumeration herein of the rights or privileges of the
holder hereof shall give rise to any liability of such holder for the
purchase price or as a stockholder of the Company, whether such liability is
asserted by the Company or by creditors of the Company.
6. REGISTRATION RIGHTS.
6.1 DEFINITIONS. As used in this Section 6, the following terms
shall have the following respective meanings:
(a) "Commission" shall mean the United States Securities and
Exchange Commission or any other federal agency at the time administering the
Act.
(b) "Act" shall mean the Securities Act of 1933, as amended,
or any similar federal statute and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
(c) "Transfer" shall mean any disposition of the Warrant Stock
which would constitute a sale thereof within the meaning of the Act.
6.2 "PIGGYBACK" REGISTRATIONS. If at any time within the two-year
period from the date of this Warrant the Company proposes to register any of
its Common Stock under the Act (except with respect to Registration
Statements filed on Form S-4 or S-8 or such other similar form then in effect
under the Act) in an underwritten offering, it will each such time give
written notice to the holder or holders of this Warrant of its intention to
do so and, upon the written request of the holder or holders hereof given
within five (5) days after the Company's giving of such notice (which request
shall state the intended method of disposition of such securities), the
Company will use its reasonable best efforts to cause all or a portion of the
shares of Warrant Stock to be included in the securities to be covered by the
registration statement proposed to be filed by the Company, all to the extent
requisite to permit their sale or other disposition. The right of any holder
hereof to include all of its Warrant Stock in any such offering shall,
individually and in the aggregate, be pro rata with any other outstanding
rights of any other stockholder of the Company to include any such shares in
any such offering. Notwithstanding any other respective provision of this
Subsection 6.2, if the managing underwriter(s) determine(s) that marketing
factors require a limitation of the number of shares to be underwritten, the
Company shall only be required to include in the offering and the
registration so many of the shares of the Warrant Stock, if any, as the
underwriter believes in good faith would not adversely affect the offering.
In the event that any registration pursuant to this Subsection 6.2 shall be,
in whole or in part, a firm commitment underwritten offering of Common Stock
of the Company, any request by any holder pursuant to this Subsection 6.2 to
register Common Stock will be subject
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to a requirement that such shares are to be included in the underwriting on
the same terms and conditions as the shares of securities otherwise being
sold through underwriters under such registration. Notwithstanding the
foregoing, the rights of the holder to participate in an offering of the
securities of the Company under this Section 6 shall immediately terminate if
an offering under an applicable registration statement is completed and the
holder was given the opportunity to participate (and at the time were
entitled hereunder to participate) in such offering without having the number
of shares of Common Stock such holder desired to include therein reduced.
6.3 REGISTRATION PROCEDURES AND EXPENSES. If and whenever the
Company is required by the provisions of this Section 6 to use its reasonable
best efforts to effect the registration of any of the shares of Warrant Stock
under the Act, the holder will:
(a) furnish the Company all material information requested by
the Company concerning the holder and any relevant affiliate of the holder
and the proposed method of sale or other disposition of the Common Stock and
such other information and undertakings as shall be reasonably required in
connection with the preparation and filing of any such registration statement
covering all or part of the Common Stock and in order to ensure full
compliance with the Act and the rules and regulations of the Commission
promulgated thereunder;
(b) enter into an underwriting agreement in customary form
with the same underwriter or underwriters who are parties to an underwriting
agreement with the Company, provided that the sales of Common Stock by the
holder and the Company thereunder are at the same price and upon the same
terms and conditions;
(c) cooperate in good faith with the Company and its
underwriters in connection with such registration, including, without
limitation, placing the shares of Common Stock to be included in such
registration statement in escrow or custody to facilitate the sale and
distribution thereof; and
(d) if requested by the managing underwriter of an applicable
offering on the grounds that sales of Common Stock would adversely affect the
public offering of Common Stock in such offering, agree not to sell or
otherwise dispose of the shares of Common Stock to be included in the
registration statement not exceeding the shortest period of time after the
effective date of such registration statement during which any other person
or entity whose securities are included in such registration statement has
agreed not to sell or otherwise dispose of shares of common stock of the
Company.
The Company will:
(e) furnish to the holder such number of prospectuses and
preliminary prospectuses in conformity with the requirements of the Act and
such other documents as the holder may reasonably request in order to
facilitate the public sale or other disposition of its Common Stock; and
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(f) use its reasonable best efforts to register or qualify the
Warrant Stock covered by such registration statement under such other
securities or blue sky laws of such jurisdictions as the holder shall
reasonably request and do any and all other acts and things which may be
necessary or desirable to enable such seller to consummate the public sale or
other disposition in such jurisdiction of the Warrant Stock owned by the
holder.
All expenses incurred by the Company in complying with Subsections 6.2
and 6.3 hereof, including, without limitation, all registration and filing
fees, printing expenses, fees and disbursements of counsel for the Company,
blue sky fees and expenses and the expense of any special audits incident to
or required by any registrations (but excluding the compensation of regular
employees of the Company which shall be paid in any event by the Company) are
herein called "Registration Expenses;" and all underwriting discounts and
selling commissions applicable to the sales are herein called "Selling
Expenses." All Registration and Selling Expenses in connection with each
registration pursuant to Subsection 6.2 shall be borne by the Company and the
selling stockholders pro rata in proportion to the securities covered thereby
being sold by them. All fees and disbursements of the holders' counsel, if
any, shall be borne and paid by the holders.
6.4 INDEMNIFICATION AND CONTRIBUTION In the event of a
registration of any securities under the Act pursuant to this Section 6, the
Company will hold harmless the holder of such Common Stock against any
losses, claims, damages or liabilities (any such losses, claims, damages or
liabilities, or actions in respect thereof are referred to in this Section as
"Losses") to which the holder may become subject under the Act or otherwise,
insofar as such Losses are caused by any untrue statement or alleged untrue
statement of any material fact made by the Company contained, on the
effective date thereof, in any registration statement under which the Common
Stock were registered under the Act, any prospectus contained therein, or any
amendment or supplement thereto, or arise out of or are based upon the
omission or alleged omission of the Company to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading; provided, however, that the Company will not be liable in any
such case to the extent that any such Losses arise out of or are based upon
an untrue statement or alleged untrue statement or omission or alleged
omission so made in conformity with information furnished by the holder or
underwriter in writing specifically for use in the preparation thereof; and
will reimburse any legal or other expenses reasonably incurred by the holder
in connection with investigating or defining any such Losses. Each holder
will indemnify and hold harmless the Company, each of its directors, each of
its officers who have signed the registration statement, the underwriter and
each person, if any, who controls the Company, within the meaning of the Act,
against any Losses to which the Company, or any such director, officer,
underwriter or controlling person may become subject under the Act or
otherwise, insofar as such Losses are caused by any untrue statement or
alleged untrue statement of any material fact made by the holder contained,
on the effective date thereof, in any registration statement under which the
Common Stock were registered under the Act, any prospectus contained therein,
or any amendment or amendments or supplement or supplements thereto, or arise
out of or are based upon the omission or the alleged omission of the holder
to state therein a material fact required to be stated therein or necessary
to make the statements therein not misleading; provided, however, that the
holder will not be liable in any case to the extent, but only to the extent,
that such
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untrue statement or alleged untrue statement or omission or alleged omission
was so made in reliance upon and in conformity with information furnished to
the holder in writing by the Company for use in the preparation thereof; and
will reimburse any legal or other expenses reasonably incurred by the Company
or any such director, officer, underwriter or controlling person in
connection with investigating or defending any such Losses.
7. TRANSFERS AND EXCHANGES.
7.1 Subject to compliance with applicable federal and state
securities laws, this Warrant and all rights hereunder are permitted to be
transferred twice, in whole or in part, by Lots A' Bagels to Stephen K.
Goldstone, Linda F. Goldstone (collectively the "Goldstones"), the
Goldstone's children and/or the Goldstone's parents; provided, that this
Warrant may not be transferable in part in an amount less than 1,000 shares
issuable upon exercise hereunder, as adjusted for stock splits, dividends and
other recapitalizations. Holder will provide written notice of such proposed
transfer to the Company at least ten (10) days in advance of the intended
transfer, and if no written objection is received by holder within seven (7)
business days after the date the notice is received by the Company, then such
transfer shall be deemed accepted. The transfer shall be recorded on the
books of the Company upon the surrender of this Warrant, properly endorsed,
to the Company at its principal offices and the payment to the Company of all
transfer taxes and other governmental charges imposed on such transfer. In
the event of a partial transfer, the Company shall issue to the several
holders one or more appropriate new warrants. Lots A' Bagels hereby agrees,
and any Holder hereof shall be deemed to have agreed, not to make any sale or
other disposition of either this Warrant, the Warrant Stock, the Common Stock
or the Common Stock Equivalents except pursuant to a registration statement
which has become effective under the Act, setting forth the terms of such
offering, the underwriting discount and the commissions and any other
pertinent data with respect thereto, unless the holder has provided the
Company with an opinion of counsel acceptable to the Company that such
registration is not required.
7.2 In the event of a partial exercise of this Warrant, the Company
shall issue an appropriate new warrant to the Holder for the balance of the
portion of the Warrant not exercised.
7.3 All new warrants issued in connection with permitted transfers,
exchanges or partial exercises shall be identical in form and provision to
this Warrant except as to the number of shares.
8. NOTICES. All notices, requests, demands and other communications
which are required to be or may be given under this Warrant shall be in
writing and shall be deemed to have been duly given when delivered in person
or transmitted by facsimile or on receipt 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.
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If to the Company, to:
NEW YORK BAGEL ENTERPRISES, INC.
300 IMA Plaza
250 North Water
Wichita, Kansas 67202-1213
Attn: Paul R. Hoover
Vice President - Strategic Planning
With a copy to:
KLENDA, MITCHELL, AUSTERMAN & ZUERCHER, L.L.C.
1600 Epic Center
301 North Main Street
Wichita, Kansas 67202-4888
Attn: Gregory B. Klenda, Esq.
if to the holder, to the address set forth below such holder's
signature block
With a copy to:
LOTS A' BAGELS, INC.
202 East Cheyenne Mountain Blvd., Suite H
Colorado Springs, Colorado 80906
Attn: Stephen K. Goldstone
Chief Executive Officer
or to such other address as any party may designate by giving notice to the
other parties hereto.
9. GOVERNING LAW. This Warrant shall be construed as to both validity
and performance and enforced in accordance with and governed by the laws of
the State of Kansas.
10. SUCCESSORS AND PERMITTED ASSIGNS. The terms and provisions of this
Warrant shall be binding upon the Company and Lots A' Bagels and their
respective successors and permitted assigns, subject at all times to the
restrictions set forth in the Agreement.
11. LOSS, THEFT, DESTRUCTION OR MUTILATION OF WARRANT. Upon receipt by
the Company of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant, and in case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to the Company,
and upon reimbursement to the Company of all reasonable expenses incidental
thereto, and upon surrender and cancellation of this Warrant, if mutilated,
the Company will make and deliver a new warrant of like tenor and dated as of
such original issuance date in lieu of this Warrant.
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12. SATURDAYS, SUNDAYS, HOLIDAYS, ETC. If the last or appointed day for
the taking of any action or the expiration of any right required or granted
herein shall be a Saturday or Sunday or shall be a legal holiday, then such
action may be taken or such right may be exercised, except as to the purchase
price, on the next succeeding day not a Saturday, Sunday or legal holiday.
13. AMENDMENTS AND WAIVERS. Any term of this Warrant may be amended and
the observance of any term of this Warrant may be waived (either generally or
in a particular instance and either retroactively or prospectively), only
with the written consent of the Company and the holders who hold a majority
of the shares issuable upon exercise of unexercised warrants issued pursuant
to the Agreement. Any such amendment or waiver shall be binding on each
holder. In the event that such amendment or waiver treats the holder of a
warrant issued pursuant to the Agreement in a manner materially different
from that of other holders of warrants issued pursuant to the Agreement, the
consent or waiver of the holder that is treated differently shall also be
required to be binding upon such holder.
NEW YORK BAGEL ENTERPRISES,
INC.
By
------------------------------
Name
------------------------------
Title
------------------------------
Dated: , 1997
------------
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<PAGE>
EXHIBIT "A"
SUBSCRIPTION
NEW YORK BAGEL ENTERPRISES, INC.
300 IMA Plaza
250 North Water
Wichita, Kansas 67202-1213
Sir/Madam:
The undersigned, ________________________, hereby elects to purchase,
pursuant to the provisions of the Warrant to Purchase Common Stock dated
____________, 1997 (the "Warrant") held by the undersigned, ____________
shares of the Common Stock of New York Bagel Enterprises, Inc., a Kansas
corporation.
The undersigned hereby represents and warrants that it is acquiring the
Warrant Stock (as defined in the Warrant) for its own account and not with a
view to, or for resale in connection with, the sale or distribution thereof,
or the granting of any participation therein, and it has no present intention
of distributing or reselling to others any of the Warrant Stock or granting
any participation therein, except in compliance with all applicable federal
and state securities laws.
The undersigned is experienced in evaluating a company such as the
Company and has such knowledge, sophistication and experience in financial
and business matters that it is capable of evaluating the merits and risks of
the investment in the Company. The undersigned has had an opportunity to
discuss the Company's business, management and financial affairs and any
other matters with the Company's management and has received answers to its
questions posed to management.
The undersigned hereby represents and warrants that it understands that
each certificate representing the Warrant Stock shall be endorsed with a
legend as deemed appropriate by the Company restricting transferability
pursuant to the Act and compliance with applicable securities laws.
Dated: , 1997. -----------------------------------
--------------------
By
---------------------------------
Address:
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