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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
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CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (date of earliest event reported) December 7, 1998
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ARCHIBALD CANDY CORPORATION
(Exact name of registrant as specified in its charter)
ILLINOIS 333-33751 36-0743280
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File No.) Identification No.)
1137 WEST JACKSON BOULEVARD,
CHICAGO, ILLINOIS 60607
(Address, including Zip Code,
of Principal Executive Offices)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (312) 243-2700
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No Change
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(Former name or former address, if changed since last report)
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ARCHIBALD CANDY CORPORATION
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On December 7, 1998, Archibald Candy Corporation (the "Company")
acquired Sweet Factory Group, Inc. ("Sweet Factory") for $18 million in cash and
the assumption of approximately $10 million of indebtedness and other
obligations of Sweet Factory pursuant to the merger of Sweet Factory Acquisition
Corp., a wholly owned subsidiary of the Company ("Acquisition Corp."), with and
into Sweet Factory (the "Acquisition"). The Acquisition was effected pursuant
to an Agreement and Plan of Reorganization dated as of November 24, 1998 by and
among the Company, Acquisition Corp., Sweet Factory, Sweet Factory, Inc., SF
Candy Company, SF Properties, Inc. and certain stockholders of Sweet Factory.
The Company funded the Acquisition through the issuance of $30 million of senior
secured debt. Sweet Factory is a bulk candy retailer with 256 stores in 36
states.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
A. Financial Statements of Businesses Acquired.
The financial information required by this item will be filed by
amendment to this Current Report on Form 8-K not later than 60 days after
the date that the initial report on this Form 8-K must be filed.
B. Pro Forma Financial Information.
The pro forma financial information required by this item will be
filed by amendment to this Current Report on Form 8-K not later than
60 days after the date that the initial report on this Form 8-K must be
filed.
C. Exhibits. The following exhibits are filed as part of this report:
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
2.1 Agreement and Plan of Reorganization dated as of November
24, 1998 by and among the Company, Acquisition Corp., Sweet
Factory, Sweet Factory, Inc., SF Candy Company, SF
Properties, Inc. and certain stockholders of Sweet Factory
party thereto.
4.1 First Supplemental Indenture dated as of December 7, 1998
among the Company, Sweet Factory, Sweet Factory, Inc., SF
Properties, Inc., SF Candy Company and The Bank of New York,
as Trustee.
</TABLE>
1
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SIGNATURES
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.
ARCHIBALD CANDY CORPORATION
(Registrant)
Dated: December 22, 1998 By: /s/ Ted A. Shepherd
---------------------------------------------
Name: Ted A. Shepherd
Title: President and Chief Operating Officer
2
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EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Description
- ------- -----------
<S> <C>
2.1 Agreement and Plan of Reorganization dated as of November 24,
1998 by and among the Company, Acquisition Corp., Sweet Factory,
Sweet Factory, Inc., SF Candy Company, SF Properties, Inc. and
certain stockholders of Sweet Factory party thereto.
4.1 First Supplemental Indenture dated as of December 7, 1998 among
the Company, Sweet Factory, Sweet Factory, Inc., SF Properties,
Inc., SF Candy Company and The Bank of New York, as Trustee.
</TABLE>
3
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AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
ARCHIBALD CANDY CORPORATION,
SWEET FACTORY ACQUISITION CORP.,
SWEET FACTORY GROUP, INC.,
SWEET FACTORY, INC.,
SF CANDY COMPANY,
SF PROPERTIES, INC.
AND
THE CERTAIN STOCKHOLDERS OF
SWEET FACTORY GROUP, INC. PARTY HERETO
DATED AS OF
NOVEMBER 24, 1998
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TABLE OF CONTENTS
PAGE
ARTICLE I CERTAIN DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . 2
1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE II THE MERGER. . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.1 The Merger. . . . . . . . . . . . . . . . . . . . . . . . . 9
2.2 Effective Time; Closing . . . . . . . . . . . . . . . . . . 9
2.3 Effect of the Merger. . . . . . . . . . . . . . . . . . . . 9
2.4 Articles of Incorporation; Bylaws . . . . . . . . . . . . . 10
2.5 Officers and Directors. . . . . . . . . . . . . . . . . . . 10
2.6 Effect on Capital Stock . . . . . . . . . . . . . . . . . . 10
2.7 Surrender of Certificates . . . . . . . . . . . . . . . . . 11
2.8 Taking of Necessary Action: Further Action. . . . . . . . . 11
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER . . . . . . . . . . 12
3.1 Corporate Existence of Seller . . . . . . . . . . . . . . . 12
3.2 Authority . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.3 Capital Stock . . . . . . . . . . . . . . . . . . . . . . . 12
3.4 Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . 13
3.5 No Conflicts. . . . . . . . . . . . . . . . . . . . . . . . 13
3.6 Governmental Approvals and Filings. . . . . . . . . . . . . 14
3.7 Financial Statements and Condition. . . . . . . . . . . . . 14
3.8 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . 15
3.9 Intentionally Omitted.. . . . . . . . . . . . . . . . . . . 17
3.10 Compliance With Laws and Orders . . . . . . . . . . . . . . 17
3.11 Employee Benefit Matters. . . . . . . . . . . . . . . . . . 17
3.12 Real Property . . . . . . . . . . . . . . . . . . . . . . . 18
3.13 Personal Property . . . . . . . . . . . . . . . . . . . . . 19
3.14 Intellectual Property Rights. . . . . . . . . . . . . . . . 19
3.15 Contracts . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.16 Permits . . . . . . . . . . . . . . . . . . . . . . . . . . 21
3.17 Affiliate Transactions. . . . . . . . . . . . . . . . . . . 21
3.18 Environmental Matters . . . . . . . . . . . . . . . . . . . 21
3.19 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . 22
3.20 Health and Safety Requirements. . . . . . . . . . . . . . . 23
3.21 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . 23
3.22 Undisclosed Liabilities . . . . . . . . . . . . . . . . . . 23
3.23 Capital Expenditures. . . . . . . . . . . . . . . . . . . . 23
3.24 Broker's or Consultant's Fees . . . . . . . . . . . . . . . 23
3.25 Suppliers . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.26 Banking Arrangements. . . . . . . . . . . . . . . . . . . . 24
3.27 Powers of Attorney. . . . . . . . . . . . . . . . . . . . . 24
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TABLE OF CONTENTS
(continued)
PAGE
3.28 No Alternative Transaction. . . . . . . . . . . . . . . . . 24
3.29 Year 2000 Issue . . . . . . . . . . . . . . . . . . . . . . 24
3.30 Full Disclosure . . . . . . . . . . . . . . . . . . . . . . 24
3.31 No Other Representations. . . . . . . . . . . . . . . . . . 24
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF
THE INDEMNIFYING STOCKHOLDERS . . . . . . . . . . . . . . . . 25
4.1 Ownership.. . . . . . . . . . . . . . . . . . . . . . . . . 25
4.2 Authority . . . . . . . . . . . . . . . . . . . . . . . . . 25
4.3 No Violations; Consents and Approvals.. . . . . . . . . . . 25
4.4 Governmental Approvals and Filings. . . . . . . . . . . . . 26
4.5 Additional Indemnifying Stockholder Representations . . . . 26
4.6 Brokers/Alternative Transaction . . . . . . . . . . . . . . 26
4.7 No Other Representations. . . . . . . . . . . . . . . . . . 26
ARTICLE V REPRESENTATIONS AND WARRANTIES
OF PURCHASER AND MERGER SUB . . . . . . . . . . . . . . . . . 26
5.1 Corporate Existence of Purchaser. . . . . . . . . . . . . . 26
5.2 Authority . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.3 No Conflicts. . . . . . . . . . . . . . . . . . . . . . . . 27
5.4 Governmental Approvals and Filings. . . . . . . . . . . . . 27
5.5 Legal Proceedings . . . . . . . . . . . . . . . . . . . . . 27
5.7 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . 28
ARTICLE VI COVENANTS OF SELLERS AND INDEMNIFYING STOCKHOLDERS. . . . . . 28
6.1 Regulatory and Other Approvals. . . . . . . . . . . . . . . 28
6.2 HSR and Foreign Antitrust Filings . . . . . . . . . . . . . 28
6.3 Investigation by Purchaser. . . . . . . . . . . . . . . . . 29
6.4 Conduct of Business . . . . . . . . . . . . . . . . . . . . 29
6.5 Certain Restrictions. . . . . . . . . . . . . . . . . . . . 29
6.6 Affiliate Transactions. . . . . . . . . . . . . . . . . . . 31
6.7 Fulfillment of Conditions . . . . . . . . . . . . . . . . . 31
6.8 Interim Financial Information . . . . . . . . . . . . . . . 31
6.9 Notification of Material Adverse Events . . . . . . . . . . 31
6.10 Supplemental Disclosures. . . . . . . . . . . . . . . . . . 31
6.11 Exclusivity . . . . . . . . . . . . . . . . . . . . . . . . 31
6.12 Agreement to Approve Merger . . . . . . . . . . . . . . . . 32
6.13 Release by Indemnifying Stockholders. . . . . . . . . . . . 32
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TABLE OF CONTENTS
(continued)
PAGE
ARTICLE VII COVENANTS OF PURCHASER . . . . . . . . . . . . . . . . . . . . 32
7.1 Regulatory and Other Approvals. . . . . . . . . . . . . . . 32
7.2 HSR and Foreign Antitrust Filings . . . . . . . . . . . . . 33
7.3 Indemnification of Directors and Officers . . . . . . . . . 33
7.4 Fulfillment of Conditions . . . . . . . . . . . . . . . . . 33
ARTICLE VIII ADDITIONAL AGREEMENTS. . . . . . . . . . . . . . . . . . . . 33
8.1 Stock Plans and Options; SARs . . . . . . . . . . . . . . . 33
8.2 Sellers Employees . . . . . . . . . . . . . . . . . . . . . 34
8.3 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE IX CONDITIONS TO OBLIGATIONS OF THE PARTIES . . . . . . . . . . 34
9.1 Conditions to Obligations of Each Party to Effect the
Merger. . . . . . . . . . . . . . . . . . . . . . . . . . . 34
9.2 Obligations of Purchaser. . . . . . . . . . . . . . . . . . 35
9.3 Obligations of Group. . . . . . . . . . . . . . . . . . . . 38
ARTICLE X TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . 39
10.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . 39
10.2 Effect of Termination and Abandonment . . . . . . . . . . . 39
10.3 Exclusive Remedy. . . . . . . . . . . . . . . . . . . . . . 40
ARTICLE XI INDEMNIFYING STOCKHOLDERS' REPRESENTATIVE. . . . . . . . . . 40
11.1 Appointment . . . . . . . . . . . . . . . . . . . . . . . . 40
11.2 Authorization . . . . . . . . . . . . . . . . . . . . . . . 40
11.3 Irrevocable Appointment . . . . . . . . . . . . . . . . . . 41
11.4 Resignation . . . . . . . . . . . . . . . . . . . . . . . . 41
11.5 Purchaser's Reliance. . . . . . . . . . . . . . . . . . . . 41
11.6 Exculpation and Indemnification . . . . . . . . . . . . . . 41
ARTICLE XII SURVIVAL OF REPRESENTATIONS, WARRANTIES AND
COVENANTS, LIMITATION OF LIABILITY . . . . . . . . . . . . . 42
12.1 Indemnification by Indemnifying Stockholders. . . . . . . . 42
12.2 Indemnification by Purchaser. . . . . . . . . . . . . . . . 42
12.3 Procedure for Indemnification . . . . . . . . . . . . . . . 42
12.4 Limitations on Indemnity. . . . . . . . . . . . . . . . . . 43
12.5 Payment . . . . . . . . . . . . . . . . . . . . . . . . . . 43
ARTICLE XIII MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . 44
13.1 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . 44
13.2 Contribution. . . . . . . . . . . . . . . . . . . . . . . . 45
13.3 Entire Agreement. . . . . . . . . . . . . . . . . . . . . . 45
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TABLE OF CONTENTS
(continued)
PAGE
13.4 Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . 45
13.5 Public Announcements. . . . . . . . . . . . . . . . . . . . 45
13.6 Further Assurances; Post-Closing Cooperation. . . . . . . . 46
13.7 Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . 46
13.8 Transfer Taxes. . . . . . . . . . . . . . . . . . . . . . . 47
13.9 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . 47
13.10 No Third Party Beneficiary. . . . . . . . . . . . . . . . . 47
13.11 No Assignment; Binding Effect . . . . . . . . . . . . . . . 47
13.12 Invalid Provisions. . . . . . . . . . . . . . . . . . . . . 47
13.13 Governing Law . . . . . . . . . . . . . . . . . . . . . . . 48
13.14 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . 48
13.15 Construction. . . . . . . . . . . . . . . . . . . . . . . . 48
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AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION ("Agreement") is made and
entered into as of November 24, 1998, among Archibald Candy Corporation, an
Illinois corporation ("Purchaser"), Sweet Factory Acquisition Corp., a
Delaware corporation and a wholly-owned subsidiary of Purchaser ("Merger
Sub"), Sweet Factory Group, Inc., a Delaware corporation (the "Group"), Sweet
Factory, Inc., a Delaware corporation ("SFI"), SF Candy Company, a Delaware
corporation ("Candy Co."), SF Properties, Inc., a Delaware corporation ("SF
Properties"), and those stockholders of Group that are signatories hereto
(the "Indemnifying Stockholders"), as listed on SCHEDULE B hereto.
RECITALS
A. Under the terms and subject to the conditions of this
Agreement, Purchaser, Merger Sub and Group intend to enter into a business
combination transaction.
B. The Boards of Directors of Group and Purchaser (i) have
determined that the Merger (as defined in SECTION 2.1) is consistent with and
in furtherance of their respective long-term business strategies and fair to,
and in the best interest of, their respective stockholders, (ii) have
approved this Agreement, the Merger and the other transactions contemplated
by this Agreement and (iii) have, in the case of the Group, subject to the
provisions of this Agreement, determined to recommend that the Stockholders
of Group adopt and approve this Agreement and approve the Merger.
C. The Board of Directors of Merger Sub has approved this
Agreement, the Merger and the other transactions contemplated by this
Agreement.
D. The stockholders of Group (the "Stockholders") are the
beneficial and record owners of Twelve Million Seven Hundred Forty-Five
Thousand (12,745,000) shares of convertible Series A Preferred Stock, par
value $.001 per share ("OUTSTANDING SERIES A PREFERRED STOCK"), Six Million
One Hundred Seventy-Nine Thousand Five Hundred Sixty-Six (6,179,566) shares
of convertible Series B Preferred Stock, par value $.001 per share
("OUTSTANDING SERIES B PREFERRED STOCK"), Two Hundred Twelve Thousand Eight
Hundred Fifty-Nine (212,859) shares of convertible Series C Preferred Stock,
par value $.001 per share ("OUTSTANDING SERIES C PREFERRED STOCK"), and One
Million Two Hundred Ninety-Four Thousand Nine Hundred (1,294,900) shares of
Common Stock, par value $.001 per share ("OUTSTANDING COMMON STOCK"), of
Group, constituting all of the issued and outstanding shares of common and
preferred stock of Group (such Outstanding Series A Preferred Stock,
Outstanding Series B Preferred Stock, Outstanding Series C Preferred Stock
and Outstanding Common Stock collectively being referred to herein as the
"GROUP STOCK").
E. Group owns all of the issued and outstanding capital and voting
stock of SFI, Candy Co., and SF Properties (SFI, Candy Co. and SF Properties
being collectively referred to herein as the "SUBSIDIARIES"; Group and
Subsidiaries being collectively referred to herein as the "SELLERS") (such
stock being referred to herein as the "SUBSIDIARY STOCK"; Group Stock and
Subsidiary Stock being collectively referred to herein as the "STOCK").
<PAGE>
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
1.1 DEFINITIONS.
(a) DEFINED TERMS. As used in this Agreement, the following
defined terms have the meanings indicated below:
"ACTIONS OR PROCEEDINGS" means any action, suit,
proceeding, arbitration or publicly disclosed Governmental or Regulatory
Authority investigation.
"ADVERSE CONSEQUENCES" means all allegations, charges,
complaints, actions, suits, proceedings, hearings, investigations, claims,
demands, judgments, orders, decrees, stipulations, injunctions, damages, dues,
penalties, fines, costs, amounts paid in settlement, Liabilities, Taxes,
interest, Encumbrances and other Losses.
"AFFILIATE" means any Person that directly, or indirectly
through one or more intermediaries, controls or is controlled by or is under
common control with the Person specified. For purposes hereof, "control" of a
Person means the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of such Person through the
ownership of voting securities, partnership interests or beneficial interests or
the contractual right to direct such management and policies or the voting of
such securities or interests. Without limiting the foregoing, with regard to
each Seller, the term "Affiliate" shall be deemed to include the stockholders,
directors and officers thereof and their respective Affiliates and family
members.
"ALTERNATIVE TRANSACTION" has the meaning assigned in
SECTION 1.0.
"BEST EFFORTS" means that the obligated party is required
to make a diligent, expeditious and good-faith effort to accomplish the
applicable objective. Such obligation, however, does not require any
extraordinary expenditure of funds or the incurrence of any significant
liability on the part of the obligated party. The fact that the objective is
not actually accomplished does not, without more, establish that the obligated
party did not in fact utilize its Best Efforts in attempting to accomplish the
objective.
"BUSINESS" means the business conducted by the Sellers.
"BUSINESS DAY" means a day that is not a Saturday, a Sunday
or a statutory or civic holiday in the State of California, or any other day on
which the principal offices of either Sellers or Purchaser are closed or become
closed prior to 2 p.m. local time whether in accordance with established company
policy or as a result of unanticipated events, including adverse weather
conditions.
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"CANDY CO." has the meaning assigned in the forepart of
this Agreement.
"CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, and the rules and
regulations promulgated thereunder.
"CERCLIS" means the CERCLA Information System, as provided
by 40 C.F.R. Section 300.5.
"CLOSING" has the meaning assigned in SECTION 2.2.
"CLOSING DATE" has the meaning assigned in SECTION 2.2.
"CODE" means the Internal Revenue Code of 1986, as amended,
and the rules and regulations promulgated thereunder.
"CONTRACTS" means any contract, agreement or other document
setting forth an agreement between two or more parties.
"DISCLOSURE SCHEDULE" has the meaning assigned in the
forepart of ARTICLE III.
"DISSENTER RIGHTS" means the right of a stockholder to
elect to exercise its appraisal rights with respect to a merger, as provided in
the Delaware General Corporation Law.
"DLJ" means Donaldson, Lufkin & Jenrette Securities
Corporation.
"EBITDA" means Sellers' consolidated net earnings before
interest, taxes, depreciation and amortization, as reflected in financial
statements prepared in accordance with GAAP.
"ENCUMBRANCES" means any mortgage, pledge, assessment,
security interest, lease, lien, adverse claim, levy, charge or other encumbrance
of any kind, or any conditional sale contract, title retention contract or other
contract to give any of the foregoing.
"ENVIRONMENTAL CLAIM" means any and all claims, actions,
proceedings, Losses, costs, damages (actual and consequential), judgments,
Liabilities, obligations, causes of action, fines, penalties or expenses
(including attorneys' fees and expenditures for investigation and remediation)
incurred by reason of the presence, Release, threatened Release, handling or
transportation of Hazardous Substances or otherwise related to a violation or
alleged violation of Environmental Laws.
"ENVIRONMENTAL LAW" means any Permit, Law or Order at any
time in force or effect relating to (i) the regulation or protection of the
environment, or the regulation or protection of human health or safety from (ii)
emissions, discharges, generation, spills, Releases or threatened Releases of
Hazardous Substances into the environment (including ambient air, soil, surface
water, ground water, wetlands, land or subsurface strata), (iii) the
manufacture,
3
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processing, distribution, use, treatment, storage, disposal, transport or
handling of Hazardous Substances, or (iv) the regulation of storage tanks.
"ERISA" means the Employee Retirement Income Security Act
of 1974, as amended, and the rules and regulations promulgated thereunder.
"FINANCIAL STATEMENTS" means the consolidated financial
statements of Group and the Subsidiaries delivered to Purchaser pursuant to
SECTION 3.7.
"FINANCIAL STATEMENT DATE" means the last day of the most
recent fiscal year of Group for which Financial Statements are delivered to
Purchaser pursuant to SECTION 3.7.
"GAAP" means United States generally accepted accounting
principles as consistently applied by Sellers throughout the specified period
and in the immediately prior comparable period.
"GOVERNMENTAL OR REGULATORY AUTHORITY" means any court,
tribunal, arbitrator, authority, agency, commission, official or other
instrumentality of the United States, any foreign country or any domestic or
foreign state, county, city or other political subdivision.
"GROUP" has the meaning assigned in the forepart of this
Agreement.
"GROUP STOCK" has the meaning assigned in the forepart of
this Agreement.
"GROUP STOCK OPTION PLANS" means the Group 1992 Stock
Option Plan and the Group 1996 Stock Option Plan.
HAZARDOUS SUBSTANCES" means (i) all substances, wastes,
pollutants, contaminants, chemicals and materials ("SUBSTANCES") regulated or
defined or designated as hazardous, extremely or unusually hazardous, dangerous
or toxic under the following statutes and their state counterparts, as well as
the regulations implementing those statutes: CERCLA, the Federal Insecticide,
Fungicide & Rodenticide Act, the Atomic Energy Act and the Hazardous Materials
Transportation Act; (ii) any petroleum or petroleum products, including crude
oil and any fractions thereof, flammable explosives, radioactive materials,
asbestos, urea formaldehyde foam insulation; polychlorinated biphenyls (PCBs),
natural gas, synthetic gas and any mixtures thereof, radon; and (iii) any other
chemical or other material or Substance with respect to which any Governmental
or Regulatory Authority otherwise requires environmental investigation,
monitoring, reporting or remediation.
"HSR ACT" means Section 7A of the Clayton Act (Title II of
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended) and the
rules and regulations promulgated thereunder.
"IRS" means the United States Internal Revenue Service.
"INDEBTEDNESS" of any Person means, without duplication,
(a) all amounts owed by Group to Imperial Bank; (b) all obligations with respect
to capital leases; (c) all
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obligations evidenced by notes, bonds, debentures or similar instruments,
including obligations so evidenced incurred in connection with the
acquisition of property, assets or businesses; (d) all other indebtedness for
borrowed money; (e) all obligations issued, undertaken or assumed as the
deferred purchase price of property or services (other than trade payables
entered into in the ordinary course of business on ordinary terms); (f) all
reimbursement or payment obligations with respect to surety instruments,
including reimbursement obligations regarding letters of credit and
performance bonds; (g) all indebtedness created or arising under any
conditional sale or other title retention agreement, or incurred as
financing, in either case with respect to property acquired by the Person
(even though the rights and remedies of the seller or bank under such
agreement in the event of default are limited to repossession or sale of such
property); (h) all net indebtedness referred to in clauses (a) through (g)
above secured by (or for which the holder of such Indebtedness has an
existing right, contingent or otherwise, to be secured by) any Encumbrance
upon or in property (including accounts and contracts rights) owned by such
Person, even though such Person has not assumed or become liable for the
payment of such indebtedness; and (i) all guarantees in respect of
indebtedness or obligations of others of the kinds referred to in clauses (a)
through (h) above. FOR PURPOSES OF INDEMNIFYING STOCKHOLDERS'
REPRESENTATIONS AND WARRANTIES UNDER ARTICLE IV AND SECTIONS 12.1 AND 12.4,
"INDEBTEDNESS" SHALL MEAN ONLY CLAUSES (a), (b) AND (d) ABOVE.
"INDEMNIFYING STOCKHOLDERS" has the meaning assigned in the
forepart of this Agreement.
"INTELLECTUAL PROPERTY" means all patents and patent
rights, trademarks and trademark rights, trade names and trade name rights,
service marks and service mark rights, service names and service name rights,
brand names, inventions, copyrights and copyright rights, trade dress, business
and product names, logos, slogans, trade secrets, industrial models, and all
applications for and registrations of patents, trademarks, service marks and
copyrights and all technical know-how and other intellectual property rights or
intangibles used by the Sellers in the Business, and all goodwill associated
therewith, all licenses and sublicenses granted and obtained with respect
thereto and rights thereunder, remedies against infringement thereof and rights
to protection of interests therein under all Laws.
"KNOWLEDGE OF SELLERS" means the knowledge of the members
of the Boards of Directors of Sellers and the executive officers of Sellers
after due inquiry and reasonable investigation.
"KNOWLEDGE OF PURCHASER" means the knowledge of the members
of the Board of Directors or executive officers of Purchaser after due inquiry
and reasonable investigation.
"LAWS" means all laws, statutes, constitutional provisions,
codes, rules, regulations, ordinances, Orders, rulings or other legal
requirements of any Governmental or Regulatory Authority, in each case
applicable to or binding upon a Person or any of its properties or to which such
Person or its properties is subject.
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"LIABILITIES" means all Indebtedness, obligations and other
liabilities of a Person (whether absolute, accrued, contingent, fixed or
otherwise, or whether due or to become due).
"LOSS" means any and all damages, fines, penalties,
deficiencies, losses and expenses (including without limitation interest, court
costs, reasonable fees of attorneys, accountants and other experts or other
reasonable expenses of litigation or other proceedings or of any claim, default
or assessment, but excluding any costs of compliance resulting from the granting
of injunctive relief).
"MATERIAL ADVERSE EFFECT" with respect to any Person means
a material adverse effect on the business, prospects, financial condition or
results of operations of such Person and any subsidiaries of such Person taken
as a whole.
"MERGER" has the meaning assigned in SECTION 2.1
"NET OBLIGATIONS" has the meaning assigned in
SECTION 9.2((o))
"NET REVENUES" means Sellers' consolidated gross revenues
less any sales returns or refunds.
"NPL" means the National Priorities List under CERCLA.
"ORDER" means any writ, judgment, decree, injunction or
similar order of any Governmental or Regulatory Authority (in each such case
whether preliminary or final).
"ORDINARY COURSE OF BUSINESS" means the ordinary course of
business of the Sellers in accordance with past custom and practice (including
with respect to quantity and frequency) including typical variances related to
seasonality.
"OUTSTANDING SERIES A PREFERRED STOCK," OUTSTANDING
SERIES B PREFERRED STOCK," "OUTSTANDING SERIES C PREFERRED STOCK" and
"OUTSTANDING COMMON STOCK" have the meaning assigned in the forepart of this
Agreement.
"PERCENTAGE INTEREST" means, for any Stockholder, the
percentage indicated next to such Seller Stockholder's name under the heading "%
Total Shares" in SECTION 3.3 of the Disclosure Schedule.
"PERMITS" means all permits, licenses, certificates of
authority, authorizations, approvals, registrations, franchises and similar
consents granted or issued by any Governmental or Regulatory Authority that are
material to the conduct and operation of the Business.
"PERMITTED ENCUMBRANCE" means any of the following:
(i) any Encumbrance for Taxes not yet due or delinquent or being contested in
good faith by appropriate proceedings for which adequate reserves have been
established in accordance with GAAP, and
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(ii) any statutory Encumbrance arising in the Ordinary Course of Business by
operation of law with respect to a Liability that is not yet due or
delinquent.
"PERSON" means any natural person, corporation, limited
liability company, partnership, firm, joint venture, joint-stock company, trust,
association, Governmental or Regulatory Authority, unincorporated entity or
organization of any kind.
"PLAN" means any bonus, incentive compensation, deferred
compensation, pension, profit sharing, retirement, stock purchase, stock option,
stock ownership, stock appreciation rights, phantom stock, restricted stock,
savings, termination, fringe benefit, supplemental benefit, medical, education
reimbursement, leave of absence, layoff, vacation, day or dependent care, legal
services, cafeteria, life, health, accident, disability, workmen's compensation
or other insurance, severance, separation or other employee benefit plan,
program, practice, policy, agreement or arrangement of any kind, whether written
or oral, including, but not limited to, any "employee benefit plan" as defined
in Section 3(3) of ERISA sponsored, maintained or contributed to by the Sellers
for the benefit of current or former employees of the Sellers at the date
hereof, at the Closing or at any time during the six years preceding the date
hereof.
"PRIME RATE" means the prime rate as reported from time to
time in the WALL STREET JOURNAL.
"PURCHASE PRICE" has the meaning assigned in SECTION 2.7.
"PURCHASER" has the meaning assigned in the first paragraph
of this Agreement.
"PURCHASER WARRANTY CLAIMS" means any claim described in
SECTION 12.1(a)(i) or 12.1(b).
"REFERENCE BALANCE SHEET" means the Sellers' audited,
consolidated balance sheet as of January 4, 1998, as delivered to Purchaser by
Sellers in accordance with SECTION 3.7(a).
"REFERENCE BALANCE SHEET DATE" means January 4, 1998.
"RELEASE" means any release, spill, emission, leaking,
pumping, injection, deposit, disposal, discharge, dispersal, leaching or
migration into the indoor or outdoor environment, including, without limitation,
the movement of Hazardous Substances through ambient air, soil, surface water,
ground water, wetlands, land or subsurface strata.
"REPRESENTATIVE" has the meaning assigned in ARTICLE XI.
"SELLERS" has the meaning assigned in the forepart of this
Agreement.
"SFI" has the meaning assigned in the forepart of this
Agreement.
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"SF PROPERTIES" has the meaning assigned in the forepart of
this Agreement.
"STOCK" has the meaning assigned in the forepart of this
Agreement.
"STOCKHOLDERS" has the meaning assigned in the forepart of
this Agreement.
"SUBSIDIARIES" has the meaning assigned in the forepart of
this Agreement.
"SUBSIDIARY STOCK" has the meaning assigned in the forepart
of this Agreement.
"SWEET FACTORY LICENSE AGREEMENT" means that certain
License Agreement dated July 12, 1991 between United Sweet Factory Limited (as
assignee of The Sweet Factory (UK) Limited), as licensor, and Group (as assignee
of Sweet Factory California Partners, Inc.), as licensee, as amended by
Amendment No. 1 thereto dated April 7, 1993.
"TAX RETURNS" means a report, return or other information
required to be supplied to a governmental entity with respect to Taxes including
combined or consolidated returns for any group of entities that includes
Sellers.
"TAXES" has the meaning assigned in SECTION 3.8.
"WORKING CAPITAL" means the difference between the Sellers'
consolidated current assets (consisting of cash on hand, cash in bank, accounts
receivable, inventory and prepaid expenses and the Sellers' current consolidated
operating liabilities (consisting of trade payables, accrued expenses, accrued
payroll and payroll taxes payable).
"YEAR 2000 COMPLIANT" has the meaning assigned in SECTION
3.29.
(b) CONSTRUCTION OF CERTAIN TERMS AND PHRASES. Unless the
context of this Agreement otherwise requires: (i) words of any gender include
each other gender; (ii) words using the singular or plural number also include
the plural or singular number, respectively; (iii) the terms "hereof," "herein,"
"hereby" and derivative or similar words refer to this entire Agreement;
(iv) the terms "Article" or "Section" refer to the specified Article or Section
of this Agreement; (v) whenever the words "include," "includes" or "including"
are used in this Agreement they shall be deemed to be followed by the words
"without limitation;" (vi) whenever this Agreement refers to a number of days,
such number shall refer to calendar days unless Business Days are specified;
(vii) the phrases "the date of this Agreement," "the date hereof," and terms of
similar import, unless the context otherwise requires, shall be deemed to refer
to November 24, 1998; (viii) all accounting terms used herein and not expressly
defined herein shall have the meanings given to them under GAAP; (ix) any
representation or warranty contained herein as to the enforceability of a
Contract shall be subject to the effect and limitations of any bankruptcy,
insolvency, reorganization, moratorium or other similar law affecting the
enforcement of creditors' rights generally and to general equitable principles
(regardless of whether such enforceability is considered in a proceeding in
equity or at law); and (x) the table of contents and
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headings contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this Agreement.
ARTICLE II
THE MERGER
2.1 THE MERGER. The acquisition of Group by Purchaser shall be
effected through the merger (the "Merger") of Merger Sub with and into Group
pursuant to which the separate existence of Merger Sub shall cease and Group
shall continue as the surviving corporation and become a directly, wholly-owned
subsidiary of Purchaser under the corporate name "Sweet Factory Group, Inc."
(the "SURVIVING Corporation"). At the Effective Time (as defined below) and
subject to and upon the terms and conditions of this Agreement, the Certificate
of Merger and the applicable provisions of Delaware General Corporation Law
("Delaware Law"), Merger Sub shall be merged with and into Group, the separate
corporate existence of Merger Sub shall cease and Group shall continue as the
surviving corporation.
2.2 EFFECTIVE TIME; CLOSING. Subject to the provisions of this
Agreement the parties hereto shall cause the Merger to be consummated by filing
a Certificate of Merger, in the form of EXHIBIT A hereto, with the Secretary of
State of the State of Delaware in accordance with the relevant provisions of
Delaware Law (the "Certificate of Merger") (the time of the acceptance of such
filing by the Secretary of State of the State of Delaware (or such later time as
may be agreed in writing by Group, Purchaser and specified in the Certificate of
Merger) being the "Effective Time," which shall be as soon as practicable on or
after the Closing Date (as herein defined)). The closing of the Merger (the
"Closing") shall take place at the office of Purchaser's counsel, Winston &
Strawn, 35 W. Wacker Drive, Chicago, Illinois, at 10:00 a.m. (Chicago time) on
the later of (i) December 7, 1998 or (ii) the date that is two business days
following the termination of the applicable waiting period under the HSR Act and
the satisfaction of the other conditions to the Merger, or at such other time
and place as the parties may agree (the "Closing Date"). Subject to ARTICLE X,
failure to consummate the transactions provided for in this Agreement on date
and time and at the place determined pursuant to this SECTION 2.2 will not
result in the termination of this Agreement and will not relieve any party of
any obligation under this Agreement.
2.3 EFFECT OF THE MERGER. At the Effective Time, the effect of the
Merger shall be as provided in this Agreement, the Certificate of Merger and the
applicable provisions of Delaware Law. Not limiting the generality of the
foregoing, and subject thereto, at the Effective Time all the property, rights,
privileges, powers and franchises of Group and Merger Sub shall vest in the
Surviving Corporation, and all debts, liabilities and duties of Group and Merger
Sub shall become the debts, liabilities and duties of the Surviving Corporation.
2.4 CERTIFICATE OF INCORPORATION; BYLAWS.
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(a) At the Effective Time, the Certificate of Incorporation of
Merger Sub, as in effect immediately prior to the Effective Time, shall be the
Certificate of Incorporation of the Surviving Corporation, until thereafter
amended.
(b) The Bylaws of Merger Sub, as in effect immediately prior to
the Effective Time, shall be, at the Effective Time, the Bylaws of the Surviving
Corporation until thereafter amended.
2.5 OFFICERS AND DIRECTORS. The officers of Merger Sub immediately
prior to the Effective Time shall be the officers of the Surviving Corporation
as of the Effective Time. The directors of Merger Sub immediately prior to the
Effective Time shall be the directors of the Surviving Corporation as of the
Effective Time.
2.6 EFFECT ON CAPITAL STOCK. At the Effective Time, by virtue of the
Merger and without any action on the part of Merger Sub, Purchaser or Group:
(a) any and all shares of Stock which are held in Group's
treasury or held by and Subsidiary immediately prior to the Effective Time shall
be canceled;
(b) each share of Merger Sub's common stock that is outstanding
immediately prior to the Effective Time shall be converted into one share of
Group's common stock;
(c) each share of Outstanding Series A Preferred Stock that is
outstanding immediately prior to the Effective Time (except for shares, if any,
with respect to which the holder thereof shall have perfected Dissenter Rights)
shall be converted into, and become a right to receive, at the Effective Time,
upon surrender of the certificate representing such share, $0.6506 cash;
(d) each share of Outstanding Series B Preferred Stock that is
outstanding immediately prior to the Effective Time (except for shares, if any,
with respect to which the holder thereof shall have perfected Dissenter Rights)
shall be converted into, and become a right to receive, at the Effective Time,
upon surrender of the certificate representing such share, $1.4639 cash;
(e) each share of Outstanding Series C Preferred Stock that is
outstanding immediately prior to the Effective Time (except for shares, if any,
with respect to which the holder thereof shall have perfected Dissenter Rights)
shall be converted into, and become a right to receive, at the Effective Time,
upon surrender of the certificate representing such share, $1.4639 cash;
(f) each share of Outstanding Common Stock that is outstanding
immediately prior to the Effective Time (except for shares, if any, with respect
to which the holder thereof shall have perfected Dissenter Rights) shall be
converted into, and become a right to receive, at the Effective Time, upon
surrender of the certificate representing such share, $0.25 cash; and
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(g) each outstanding stock appreciation right that is
outstanding immediately prior to the Effective Time shall be converted into, and
become a right to receive, at the Effective Time, $0.25 cash.
2.7 SURRENDER OF CERTIFICATES; CONVERSION OF GROUP STOCK FOR CASH. At
the Effective Time, Purchaser shall make available for exchange in accordance
with this SECTION 2, cash in an amount sufficient for payment under SECTION 2.6,
which shall total, in the aggregate, not more than $18,000,000.00 (the "PURCHASE
PRICE"). All amounts payable by Purchaser pursuant to this SECTION 2.7 shall be
paid by wire transfer of immediately available federal funds for credit to a
bank account designated in writing by the Representative and established for the
benefit of all holders of Group's Stock. Representative shall distribute to
each Stockholder (other than any Stockholder that has perfected its Dissenter
Rights) its respective portion of the Purchase Price as determined pursuant to
SECTION 2.6, but only upon the Representative's receipt from such Stockholder of
(i) an acknowledgment, in form and substance satisfactory to Purchaser, from
such Stockholder that no Indebtedness is owed to it by any Seller and (ii) an
agreement, in form and substance satisfactory to Purchaser, by such Stockholder
to be bound by the terms and conditions of this Agreement as if it were named
herein as an Indemnifying Stockholder (each a "Stockholders Acknowledgment and
Indemnification Agreement"). Purchaser shall have no liability to Stockholders
in the event Representative fails to properly distribute the Purchase Price to
the Stockholders.
2.8 CERTIFICATE OF MERGER. As soon as practicable after the execution
of this Agreement, but prior to the Effective Time, Merger Sub and Group shall
execute the Certificate of Merger and any and all other documents or instruments
required by Delaware Law. If this Agreement is terminated, the Certificate of
Merger shall be deemed to have been terminated and abandoned.
2.9 TAKING OF NECESSARY ACTION: FURTHER ACTION. If, at any time after
the Effective Time, any further action is necessary or desirable to carry out
the purposes of this Agreement and to vest the Surviving Corporation with full
right, title and possession to all assets, property, rights, privileges, powers
and franchises of Group and Merger Sub, the officers and directors of Group and
Merger Sub will at Purchaser's expense take all such lawful and necessary
action. Purchaser shall cause Merger Sub to perform all of its obligations
relating to this Agreement and the transactions contemplated thereby.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLERS
Except as set forth in this Agreement or the disclosure schedule of Group
delivered to Purchaser herewith (the "DISCLOSURE SCHEDULE"), Group does hereby
represent and warrant to Purchaser as follows:
3.1 CORPORATE EXISTENCE OF SELLERS. Sellers are corporations duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware. Sellers have full corporate power and authority to execute and
deliver this Agreement and to perform their obligations hereunder and to
consummate the transactions contemplated hereby. Sellers have delivered to
Purchaser true and complete copies of the charter documents and all amendments
thereto of each Seller to the date hereof and the By-Laws of each Seller as in
effect on the date hereof. Sellers have delivered the stock transfer books of
Seller to Purchaser and such stock transfer books are complete and accurate in
all material respects.
3.2 AUTHORITY. The execution and delivery by Sellers of this
Agreement, and the performance by Sellers of their obligations hereunder, have
been duly and validly authorized by the Board of Directors of each of the
Sellers and by Group as the sole stockholder of each other Seller, no other
corporate action on the part of Sellers or their stockholders being necessary.
This Agreement has been duly and validly executed and delivered by Sellers and
constitutes a legal, valid and binding obligation of Sellers enforceable against
Sellers in accordance with its terms.
3.3 CAPITAL STOCK.
(a) The authorized capital stock of Group consists of
Twenty-One Million Eight Hundred Eighteen Thousand Three Hundred Eighty-Five
(21,818,385) shares of Common Stock ("COMMON STOCK"), and Nineteen Million
One Hundred Forty-Five Thousand (19,145,000) shares of Preferred Stock
("PREFERRED STOCK"). (i) One Million Two Hundred Ninety-Four Thousand Nine
Hundred (1,294,900) of the authorized Common Stock and Nineteen Million One
Hundred Thirty-Seven Thousand Four Hundred Twenty-Five (19,137,425) shares of
Preferred Stock are issued and outstanding, all of which are duly authorized,
validly issued, fully paid and nonassessable; (ii) 6,000 shares of Common
Stock and no shares of Preferred Stock are held in the treasury of Group; and
(iii) 3,550,000 shares of Common Stock are reserved for issuance under the
Group Stock Option Plans, 2,967,846 shares of which are subject to
outstanding options and 582,154 shares of which are available for future
grants. All such options, the recipient of the option, the grant date,
exercise price, vesting and other material terms which are inconsistent with
the standard option form delivered to Purchaser are described in SECTION
3.3(a) of the Disclosure Schedule. Except as contemplated by this Agreement
or as set forth in SECTION 3.3(a) of the Disclosure Schedule, there is no
option, commitment or understanding of any nature whatsoever that directly or
indirectly (A) calls for the issuance, sale, pledge or other disposition of
any shares of capital stock of any of the Sellers or securities convertible
into, or other rights to
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acquire, any shares of capital stock of any of the Sellers immediately, upon
the passage of time, upon the occurrence of any event or upon the payment of
money, (B) obligates any of the Sellers to grant, offer or enter into any of
the foregoing or (C) relates to the voting or control of such capital stock,
securities or rights, in each case to which any of the Sellers is a party.
(b) SECTION 3.3(b) of the Disclosure Schedule contains a
complete and accurate list of each stockholder of Group and the number of shares
owned of record by each such stockholder. Each such stockholder owns the number
of shares of capital stock of Group set forth in SECTION 3.3(b) of the
Disclosure Schedule, free and clear of any Encumbrances. The Group Stock
constitutes all of the issued and outstanding shares of capital stock of Group.
(c) Except as described in SECTION 3.3(c) of the Disclosure
Schedule, no Seller owns any Indebtedness, shares or other equity interest or
securities in any Person (other than other Sellers), and has no agreement or
commitment to purchase any of the same. The authorized Capital Stock of each of
SFI, Candy Co. and SF Properties consists of One Thousand (1,000) shares of
common stock. One Hundred (100) shares of common stock of each of SFI, Candy
Co. and SF Properties are issued and outstanding, all of which are validly
issued, fully paid and non-assessable, representing all of the Subsidiary Stock.
Group owns the Subsidiary Stock, beneficially and of record, free and clear of
all Encumbrances other than Permitted Encumbrances. No Seller has violated any
law in connection with the offer for sale or sale and issuance of its
outstanding shares of capital stock or any other securities.
3.4 SUBSIDIARIES. Each Seller has full corporate power and authority
to conduct its business as and to the extent now conducted and to own, use and
lease its assets and properties. Each Seller is duly qualified, licensed and is
in good standing in those jurisdictions in which the ownership, use or leasing
of its assets and properties makes such qualification, licensing or admission
necessary, except where the failure to be so qualified, licensed or admitted and
in good standing could not reasonably be expected to have a Material Adverse
Effect on Group. SECTION 3.4 of the Disclosure Schedule sets forth a true and
complete list of each jurisdiction in which each Seller is qualified to transact
business and in good standing. All of the outstanding shares of capital stock
of each Subsidiary have been duly authorized and validly issued, are fully paid
and nonassessable, and are owned, directly, by Group free and clear of all
Encumbrances other than Permitted Encumbrances.
3.5 NO CONFLICTS. The execution and delivery by Sellers of this
Agreement, the performance by the Sellers of their obligations hereunder and
the consummation of the transactions contemplated hereby will not (a)
conflict with or result in a violation or breach of the certificates of
incorporation or by-laws of Sellers; (b) subject to obtaining the consents,
approvals and actions, making the filings and giving the notices described in
SECTION 3.6 and SECTION 5.4, conflict with or result in a violation or breach
of any Law or Order applicable to Sellers or any of their respective assets
and properties (other than such conflicts, violations or breaches as would
occur solely as a result of the legal or regulatory status of Purchaser or
any of its Affiliates); or (i) conflict with or result in a violation or
breach of, (ii) constitute (with or without notice or lapse of time or both)
a default under, (iii) require Sellers to obtain any consent, approval or
action of, make any filing with or give any notice to any Person as a result
or under the terms of, (iv) result in or give to any Person any right of
termination, cancellation, acceleration or modification in or
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with respect to, or (v) result in the creation or imposition of any
Encumbrance upon the Stock or any of Sellers' respective assets and
properties under, any Contract to which any Seller is a party or by which any
of their respective assets or properties is bound.
3.6 GOVERNMENTAL APPROVALS AND FILINGS. No consent, approval or
action of, filing with or notice to any Governmental or Regulatory Authority on
the part of Sellers is required in connection with the execution, delivery and
performance of this Agreement or the consummation of the transactions
contemplated hereby, except (i) the filing of a Notification and Report Form
pursuant to the HSR Act and the expiration or early termination of the waiting
period thereunder; (ii) any required filings under any applicable foreign
antitrust laws and the expiration or termination of waiting periods thereunder;
and (iii) where required solely as a result of the legal or regulatory status of
Purchaser or any of its Affiliates.
3.7 FINANCIAL STATEMENTS AND CONDITION.
(a) Prior to the execution of this Agreement, Group has
delivered to Purchaser true and complete copies of the unaudited consolidated
balance sheet of Group and the Subsidiaries as of October 3, 1998 and the
audited consolidated balance sheets of Group and the Subsidiaries as of January
4, 1997 and January 3, 1998, and the related unaudited consolidated statements
of operations, stockholders' equity and cash flows for the nine months ended
October 3, 1998 and audited consolidated statements of operations, stockholders'
equity and cash flows for the fiscal years ended January 4, 1997 and January 3,
1998, together with a true and correct copy of each report on such audited
information by KPMG Peat Marwick. Except as set forth in the notes thereto, all
such financial statements were prepared in accordance with GAAP and fairly
present the consolidated financial condition and results of operations of Group
and the Subsidiaries as of the respective dates thereof and for the respective
periods covered thereby, except that the unaudited financial statements do not
contain footnotes and are subject to normal year end adjustments.
(b) Except for the execution and delivery of this Agreement and
the transactions to take place pursuant hereto on or prior to the Closing Date,
since January 3, 1998 (i) there has been no Material Adverse Effect on Sellers
and no event has occurred which is reasonably expected to result in a Material
Adverse Effect on Sellers (ii) the Business has been conducted only in the
Ordinary Course of Business; (iii) Sellers have not sustained or incurred any
loss or damage with respect to the Business (whether or not insured against) on
account of fire, flood, accident or other calamity which has interfered with or
affected, or may interfere with or affect, the operation of the Business; (iv)
there has been no material adverse change in Sellers' relations with any
Governmental or Regulatory Authorities or their employees, creditors,
advertisers, suppliers, distributors, customers or others having business
relationships with Sellers; (v) except for equipment, inventory, and supplies
purchased, sold or otherwise disposed of in the Ordinary Course of Business
(including the opening or renovation of retail stores, carts or kiosks), Sellers
have not purchased, sold, leased, mortgaged, pledged or otherwise acquired or
disposed of any properties or assets; (vi) Group has not made any declaration,
setting aside or payment of any dividend or distribution, whether in cash, stock
or property with respect to the Group Stock, or any redemption or other
acquisition of such stock; (vii) except with Purchaser's prior written consent,
there has been no increase in the compensation payable or to become
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payable by Sellers to their directors, officers or key employees or any
adoption of or increase in any Plan made to, for or with any such party;
(viii) there has been no adoption or amendment of any collective bargaining
or Plans; (ix) Sellers have not changed any accounting methods or practices
(including any change in depreciation or amortization policies or rates); (x)
except as described in SECTION 3.7 of the Disclosure Schedule, Sellers have
not entered into or canceled any Contracts; (xi) Sellers have not made
capital expenditures or commitments for additions to property, plant or
equipment constituting capital assets in excess of $50,000 other than as
described in SECTION 3.23 of the Disclosure Schedule; and (xii) Sellers have
not agreed to take any of the actions described in paragraphs (v) - (xi)
above.
(c) Since January 3, 1998, neither Group nor any of the
Subsidiaries has incurred any Liabilities other than Liabilities incurred in the
Ordinary Course of Business.
(d) The Sellers' Net Revenues for the twelve month period
ending on the last day of the month immediately preceding the month in which
this Agreement is executed was in excess of $78,000,000.
(e) The Sellers' EBITDA for the twelve-month period ending on
the last day of the month immediately preceding the month in which this
Agreement is executed was in excess of $4,600,000.
3.8 TAX MATTERS. The term "Taxes" means all net income, capital
gains, gross income, gross receipts, sales, use, transfer, ad valorem,
franchise, profits, license, capital, withholding, payroll, employment, excise,
goods and services, severance, stamp, occupation, premium, property, windfall
profits, customs, duties or other taxes, fees or assessments, or other
governmental charges of any kind whatsoever, together with any interest, fines
and any penalties, additions to tax or additional amounts incurred or accrued
under applicable Law or assessed, charged or imposed by any Governmental or
Regulatory Authority, provided that any interest, penalties, additions to tax or
additional amounts that relate to Taxes for any taxable period (including any
portion of any taxable period ending on or before the Closing Date) shall be
deemed to be Taxes for such period, regardless of when such items are incurred,
accrued, assessed or imposed. For the purposes of this SECTION 3.8, Sellers
shall be deemed to include any subsidiary of the Sellers, any predecessor of the
Sellers or any Person from which the Sellers incur a liability for Taxes as a
result of any transferee liability. Except as otherwise described in
SECTION 3.8 of the Disclosure Schedule:
(a) Each Seller has duly and timely filed true, correct and
complete tax returns, reports or estimates, all prepared in accordance with
applicable Laws, for all years and periods (and portions thereof) and for all
jurisdictions (whether federal, state, local or foreign) in which any such
returns, reports or estimates were due. All Taxes shown as due and payable on
such returns, reports and estimates have been paid, and there is no current
liability for any Taxes due and payable in connection with any such returns.
All Taxes not yet due and payable have been fully accrued on the books of the
Sellers in accordance with GAAP and adequate reserves have been established
therefor; the charges, accruals and reserves for Taxes provided for on the
financial statements delivered pursuant to SECTION 3.7(a) are adequate; and
there are no unpaid assessments for additional Taxes for any period nor is there
any basis therefor. True and
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complete copies of all federal, state and foreign tax returns filed by the
Sellers for the past three years have been provided by Sellers to Purchaser.
(b) No Seller has been a member of any consolidated, combined
or unitary group for federal, state, local or foreign tax purposes. No Seller
has been party to any joint venture, partnership or other arrangement that could
be treated as a partnership for federal income tax purposes.
(c) Each Seller has (i) withheld all required amounts from its
employees, agents, contractors and nonresidents and remitted such amounts to the
property agencies; (ii) paid all employer contributions and premiums due and
payable; and (iii) filed all required federal, state, local and foreign returns
and reports with respect to employee income tax withholding, and social security
and unemployment taxes and premiums, all in compliance with the withholding tax
provisions of the Code, as in effect for the applicable year or any prior
provision thereof and other applicable Laws.
(d) The federal income tax returns of Sellers have been
examined by the IRS, or have been closed by the applicable statute of
limitations, for all periods through fiscal year 1994; the state tax returns of
Sellers have been examined by the relevant state agencies or such returns have
been closed by the applicable statute of limitations for all periods through
fiscal year 1993 or fiscal year 1994 depending on the state; and no deficiencies
or reassessments for any Taxes have been proposed, asserted or assessed against
Sellers by any federal, state, local or foreign taxing authority.
(e) No federal, state, local or foreign tax audits or other
administrative proceedings, discussions or court proceedings are presently
pending with regard to any Taxes or tax returns of Sellers, and no additional
issues are being asserted against Sellers in connection with any existing audits
or proceedings.
(f) No Seller has executed or filed any agreement or other
document extending the period for assessment, reassessment or collection of any
Taxes, and no power of attorney granted by any Seller with respect to any Taxes
is currently in force.
(g) No Seller has entered into any closing or other agreement
which affects any Taxes of any Seller for any taxable year ending after the
Closing Date. No Seller is a party to any tax sharing agreement or similar
arrangement for the sharing of Tax liabilities or benefits.
(h) No Seller has agreed or is required to make any adjustment
by reason of a change in accounting methods that affects any taxable year ending
after the Closing Date. Neither the IRS nor any other agency has proposed to
any Seller any such adjustment or change in accounting methods that affects any
taxable year ending after the Closing Date. No Seller has an application
pending with any taxing authority requesting permission for any changes in
accounting methods that relate to its business or operations and that affects
any taxable year ending after the Closing Date.
(i) No Seller has consented to the application of Code
Section 341(f).
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(j) There is no Contract covering any employee or former
employee of any Seller that, individually or collectively, could give rise to
the payment by such Seller of any amount that would not be deductible by reason
of Code Section 280G.
(k) No asset of any Seller is tax exempt use property under
Code Section 168(h). No portion of the cost of any asset of any Seller has been
financed directly or indirectly from the proceeds of any tax exempt state or
local government obligation described in Code Section 103(a).
(l) None of the assets of any Seller is property that such
Seller is required to treat as being owned by any other Person pursuant to the
safe harbor lease provision of former Code Section 168(f)(8).
(m) No Seller has or has had a permanent establishment in any
foreign country or engages or has been engaged in a trade or business in any
foreign country. None of the Seller Stockholders or the Sellers is a foreign
person or entity within the meaning of Code Section 1445.
(n) Neither the Code nor any provision of any other Law
requires Purchaser to withhold any portion of the Purchase Price.
3.9 [INTENTIONALLY OMITTED.]
3.10 COMPLIANCE WITH LAWS AND ORDERS. No Seller is in violation of or
in default under any Law, including laws governing the minimum wage payable to
Sellers' employees, applicable to it or any of its assets, properties or
employees.
3.11 EMPLOYEE BENEFIT MATTERS.
(a) SECTION 3.11 of the Disclosure Schedule contains a true,
complete and correct list of each Plan.
(b) True, complete and correct copies of the following items
relating to each Plan, where applicable, have been delivered to Purchaser:
(i) the plan document and related trust agreement and
insurance contracts, including any amendments (including descriptions of
vacation and severance policies);
(ii) the most recent determination letter received from
the IRS with respect to each such Plan that is intended to be qualified under
Section 401 of the Code;
(iii) the most recent summary plan description, summary of
material modifications and all material communications to participants; and
(iv) the most recent annual report (5500 series) and
schedules.
(c) Each Plan has been operated and administered in accordance
with the applicable provisions of ERISA and the Code, including COBRA, and all
other applicable Laws,
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and there are no actions, suits or claims pending or threatened against any
Plan or any administrator or fiduciary thereof, nor do any facts exist which
could give rise to any such action, suit or claim.
(d) Each of the Plans that is intended to be "qualified" within
the meaning of Section 401(a) of the Code is so qualified.
(e) None of the Sellers has any liability with respect to a
plan termination under Title IV of ERISA, a funding deficiency under Section 412
of the Code or Section 302 of ERISA or a withdrawal from a "multiemployer plan"
as defined in (f) below or under Section 4063 of ERISA or any contingent
liability under Section 4069 of ERISA.
(f) None of the Plans is a plan subject to Title IV of ERISA or
a multiemployer plan within the meaning of Section 4001(a)(3) of ERISA. No Plan
which is a "welfare plan" within the meaning of Section 3(2) of ERISA provides
benefits with respect to employees beyond termination of employment other than
coverage required by law.
(g) None of the Sellers is, and has never been, a member of a
"controlled group of corporations" within the meaning of Section 414(b) of the
Code, a member of a group under "common control" within the meaning of Section
414(c) of the Code, or a member of an "affiliated service group" within the
meaning of Section 414(m) of the Code (other than the group of Sellers existing
on the date hereof).
3.12 REAL PROPERTY.
(a) SECTION 3.12((a)) of the Disclosure Schedule contains a
complete and accurate description of (i) each parcel of real property owned by
Sellers, (ii) each parcel of real property leased by Sellers (as lessor or
lessee), and (iii) all Encumbrances (other than Permitted Encumbrances) on any
parcel of real property referred to in clause (i) or (ii).
(b) Sellers have good and marketable title to each parcel of
real property described in clause (i) of paragraph (a) above, and have valid and
subsisting leasehold estates in the respective real properties leased by them as
lessee under leases referred to in clause (ii) of paragraph (a) above, in each
case, free and clear of all Encumbrances (other than Permitted Encumbrances).
Each such lease is a legal, valid and binding agreement, enforceable in
accordance with its terms. There does not exist any default or event that with
notice or lapse of time, or both, would constitute a default under any such
lease. Except as set forth in SECTION 3.12b of the Disclosure Schedule, the
continuation, validity and effectiveness of all such leases under the current
rentals and other current terms thereof will in no way be affected by the
transactions contemplated by this Agreement or, if any would be affected,
Sellers shall cause any consents required under such leases to be delivered to
Purchaser prior to the Closing Date at no cost or other adverse consequences to
any Seller or Purchaser.
3.13 PERSONAL PROPERTY. Sellers are in possession of and have good and
marketable title to, or valid and subsisting leasehold interests in or valid
rights to use, all assets used by it or
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necessary to the conduct of the Business free and clear of all Encumbrances
(other than Permitted Encumbrances).
3.14 INTELLECTUAL PROPERTY RIGHTS.
(a) SECTION 3.14 of the Disclosure Schedule contains a true and
complete list of all Intellectual Property owned by the Sellers or in which the
Sellers have any rights or licenses. Except as described in SECTION 3.14 of the
Disclosure Schedule, the Sellers are not a party to any license, agreement or
arrangement, whether as licensor, licensee, franchisor, franchisee or otherwise,
with respect to any Intellectual Property.
(b) The Sweet Factory License Agreement is in full force and
effect and constitutes a legal, valid and binding agreement, enforceable in
accordance with its terms of SFI, and, to the Knowledge of Sellers, constitutes
a legal, valid and binding agreement, enforceable in accordance with its terms,
of United Sweet Factory Limited; and neither the Sellers nor, to the Knowledge
of Sellers, any other party to the Sweet Factory License Agreement is in
violation of or default under such contract (or with notice or lapse of time or
both, would be in violation of or default under such contract). To the
Knowledge of Sellers, the Sellers' rights under the Sweet Factory License
Agreement are not being infringed by any other Person.
(c) The Sellers have good and marketable title to or valid
rights under contract to use all Intellectual Property used in or necessary to
the conduct of the Business as it has been conducted prior to and as of the date
of this Agreement (the "IP RIGHTS"), subject in each case to any rights held by
third parties pursuant to licenses granted to Sellers. No Seller is in default
(or with the giving of notice or lapse of time or both, would be in default) in
any material respect under any license to use the IP Rights. To the Knowledge
of Sellers, the IP Rights are not being infringed by any Person. Neither Group
nor any of the Subsidiaries has infringed or is infringing any Intellectual
Property of any other Person. No claim is pending or has been made to such
effect that has not been resolved.
3.15 CONTRACTS.
(a) SECTION 3.15((a)) of the Disclosure Schedule (with
paragraph references corresponding to those set forth below) contains a list of
each of the following Contracts to which Group or any of the Subsidiaries is a
party or by which any of their respective assets and properties is bound:
(i) all Contracts with any Person containing any
provision or covenant prohibiting or limiting the ability of Group or any of the
Subsidiaries to engage in any business activity or compete with any Person or
prohibiting or limiting the ability of any Person to compete with Group or any
of its Subsidiaries;
(ii) all partnership or joint venture Contracts;
(iii) all Contracts relating to Indebtedness of Group or
any of the Subsidiaries;
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(iv) all Contracts providing for (A) the future
disposition or acquisition of any assets and properties material to the business
or condition of Group and the Subsidiaries individually or taken as a whole,
other than dispositions or acquisitions in the Ordinary Course of Business, and
(B) any merger or other business combination;
(v) all Contracts between or among Group or any of the
Subsidiaries;
(vi) all Contracts (other than this Agreement) that
(A) limit or contain restrictions on the ability of Group or any of the
Subsidiaries to declare or pay dividends on, to make any other distribution in
respect of or to issue or purchase, redeem or otherwise acquire its capital
stock, to incur Indebtedness, to incur or suffer to exist any Encumbrance, to
purchase or sell any assets and properties, to change the lines of business in
which it participates or engages or to engage in any merger or other business
combination or (B) require Group or any of the Subsidiaries to maintain
specified financial ratios or levels of net worth or other indicia of financial
condition;
(vii) all leases and similar arrangements for the use by
any of the Sellers of real property (including all store leases and kiosk
agreements);
(viii) all collective bargaining agreements and employment
Contracts of any kind with any officer, director, employee or consultant of any
of the Sellers by which such Seller is bound and any Contracts that contain any
severance or termination pay, liabilities or obligations; and
(ix) all other Contracts that (A) involve the payment or
potential payment, pursuant to the terms of any such Contract, by or to Group or
any of the Subsidiaries of more than one hundred thousand dollars ($100,000)
annually or (B) cannot be terminated within thirty (30) days after giving notice
of termination without resulting in any material cost or penalty to Group or any
of the Subsidiaries.
(b) Sellers have delivered to Purchaser true and complete
copies of all Contracts disclosed in SECTION 3.15(a) of the Disclosure Schedule.
Each Contract disclosed in Section 3.15((a)) of the Disclosure Schedule is in
full force and effect and, constitutes a legal, valid and binding agreement,
enforceable in accordance with its terms, of each Seller party thereto and, to
the knowledge of Sellers, of each other party thereto; and neither Group or any
of the Subsidiaries nor, to the Knowledge of Sellers, any other party to such
contract is in violation of or default under any such Contract (or with notice
or lapse of time or both, would be in violation of or default under any such
Contract).
(c) Sellers have not received notice that any party to any of
the Sellers' Contracts intends to cancel or terminate any of such agreements or
to exercise or not exercise any options under any of such agreements.
(d) None of the Sellers' Contracts contains any provisions
which would require Sellers to sell products and services to any third party
other than on the same or substantially similar terms as Sellers sell in the
Ordinary Course of Business.
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(e) The legal enforceability after the Closing of the rights of
Sellers under the Contracts will not be affected in any manner by the execution
and delivery of this Agreement or the consummation of the transactions
contemplated hereby.
(f) All payment of rent and other charges under each Seller's
Contracts have been properly accrued and reflected in Sellers' books, records
and financial statements in accordance with GAAP.
3.16 PERMITS. Group and the Subsidiaries have all Permits (including
all Permits required under Environmental Laws) required for the conduct of the
Business of Group and the Subsidiaries as presently conducted. Each such Permit
is valid, binding and in full force and effect; and neither Group nor any of the
Subsidiaries is in default (or with the giving of notice or lapse of time or
both, would be in default) under or in violation of any such Permit.
3.17 AFFILIATE TRANSACTIONS.
(a) Except as described in SECTION 3.17(a) of the Disclosure
Schedule, there is no Indebtedness between any Seller and any Affiliate thereof.
(b) All purchases and sales or other transactions, if any,
between any Seller, on the one hand, and any other Seller, any officer,
director, shareholder or key employee or Affiliate thereof, on the other hand,
within the three (3) years immediately preceding the date hereof are described
in SECTION 3.17(b) of the Disclosure Schedule and have been made on the basis of
then-prevailing market rates and terms such that from the prospective of such
Seller, all such transactions have been made on terms no less favorable than
those which would have been available from unrelated third parties.
3.18 ENVIRONMENTAL MATTERS.
(a) No written notification of a Release of a Hazardous
Substances has been filed by or on behalf of Group or any of the Subsidiaries
and no site (defined as "Site(s)" for the purposes of this SECTION 3.18),
property or facility now or previously owned, operated, occupied or leased by
Group or any of the Subsidiaries is listed or to the Knowledge of Sellers is
proposed for listing on the NPL, CERCLIS or any similar state or local list of
sites requiring investigation or clean-up.
(b) There have been no environmental investigations, studies,
audits, tests, reviews or other analyses conducted by, or that are in the
possession of Group or any of the Subsidiaries in relation to any Site which
have not been made available to Purchaser prior to the execution of this
Agreement.
(c) The Sites and the Business conducted thereon are not in
material violation of any Environmental Laws or notices or demands with respect
thereto.
(d) No Hazardous Substances have been used, stored,
manufactured, treated, processed on, or transported to or from the Sites except
as necessary to the conduct of the Business and in material compliance with all
Environmental Laws.
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(e) There has been no disposal, Release, or threatened Release
of Hazardous Substances from or to the Sites.
(f) Group and the Subsidiaries have not received nor do they
expect to receive any notice of potential responsibility or letter of inquiry
from any private party or Governmental or Regulatory Authority for any off-site
facility under CERCLA or state or local counterpart thereof. Group and the
Subsidiaries have not received nor do they reasonably expect to receive any
notice, letter, citation, order, warning, complaint, inquiry, claim or demand
alleging or asserting that: they have violated, or are about to violate, any
Environmental Laws; there has been a Release or there is a threat of a Release
of any Hazardous Substances at, from or onto any of the Sites; they may be or
are liable, in whole or in part, for the costs of cleaning up, remediating,
removing or responding to a Release or threat of a Release and/or operation of
the Sites, at, from or onto any other property wherever located; the Sites are
subject to a lien in favor of any governmental entity for any liability, costs
or damages, under Environmental Laws, arising from costs incurred by such
governmental entity. In the event of any such notice prior to the Closing,
Group and the Subsidiaries shall immediately provide a copy thereof to
Purchaser.
(g) There are no past, pending or, to the Knowledge of Sellers,
threatened Environmental Claims against them or the Sites, nor does any valid
basis for such a lawsuit, Claim, action, or proceeding exist.
(h) Group and the Subsidiaries have not transported or arranged
for the transportation of any Hazardous Substances to any location that is
listed or proposed for listing on the National Priorities List or on the CERCLIS
or any analogous state list, or which is the subject of any Environmental Claim.
(i) There are and were no aboveground or underground storage
tanks currently or formerly located at or on the Sites used or formerly used for
the storage of any Hazardous Substance. There is no asbestos-containing
building material on the Sites, and no asbestos abatement or remediation work
has been performed on the Sites. There is no PCB-containing equipment or
PCB-containing material located at the Sites.
3.19 LITIGATION. There is no action, suit, proceeding, claim,
arbitration or known investigation pending before any Governmental or Regulatory
Authority or, to the Knowledge of Sellers, threatened against the Sellers or any
of their properties or officers or directors (in their capacities as such).
There is no Order against the Sellers or, to the Knowledge of Sellers, any of
the Sellers' directors or officers (in their capacities as such) that could
prevent, enjoin or alter or delay any of the transactions contemplated by this
Agreement. All Actions or Proceedings to which Group or any of the Subsidiaries
is a party (or, to the Knowledge of Sellers, threatened to become a party) is
disclosed in SECTION 3.19 of the Disclosure Schedule. SECTION 3.19 of the
Disclosure Schedule includes a list of all Actions or Proceedings against Group
or the Subsidiaries which have been settled or otherwise concluded in the last
five years for amounts in excess of $25,000.
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3.20 HEALTH AND SAFETY REQUIREMENTS.
(a) Sellers are in compliance with all Laws applicable to
Sellers with respect to the Americans with Disabilities Act and similar state
laws and occupational health and safety Laws.
(b) No Seller has received any notice, citation, claim,
assessment or proposed assessment as to or alleging any violation of any
federal, state or local occupational safety and health Law nor has any Seller
been subject to any investigation by any federal, state or local occupational
safety and health agency within the three (3) years preceding the date hereof,
and no such violation exists. No Seller is a party to any pending dispute with
respect to compliance with any federal, state or local occupational safety and
health Law.
3.21 INSURANCE. SECTION 3.21 of the Disclosure Schedule sets forth a
list and brief description of all insurance policies maintained by Sellers; all
such insurance policies provide coverage for all incidents occurring prior to
the Closing Date regardless of when claims for such events are brought forth.
No Seller is in default with respect to any provision contained in any such
insurance policy, nor has any Seller failed to give any notice or present any
claim thereunder in a due and timely fashion. No Seller has received notice
from any insurance carrier that material alterations to Sellers' real property,
the facilities located thereon or the Business are required by such carrier.
3.22 UNDISCLOSED LIABILITIES. On the Reference Balance Sheet Date, no
Seller had any Liability with respect to the Business of the type which should
be reflected in balance sheets (including the notes thereto) prepared in
accordance with GAAP which was not fully disclosed, reflected or reserved
against in the Reference Balance Sheet; and, except for liabilities which have
been incurred since the Reference Balance Sheet Date in the Ordinary Course of
Business, since the Reference Balance Sheet Date, no Seller has incurred any
Liability.
3.23 CAPITAL EXPENDITURES. Set forth in SECTION 3.23 of the Disclosure
Schedule is a description of (a) all capital expenditures made by Sellers since
January 4, 1998 and (b) all outstanding commitments of Sellers for capital
expenditures.
3.24 BROKER'S OR CONSULTANT'S FEES. No Seller has dealt with any
broker, finder or consultant (other than DLJ) in connection with the
transactions contemplated by this Agreement, and no Person is entitled to any
commission or finder's fee in connection with the sale of the Group Stock to
Purchaser (other than DLJ, whose fees and expenses are to be paid by the
Surviving Corporation to the extent disclosed to Purchaser prior to the
Closing).
3.25 SUPPLIERS. No supplier of goods or services to any Seller that
has made sales or provided services representing, individually or in the
aggregate, more than $250,000 in payments or commitments by Sellers within the
last twelve full months preceding the date hereof has (i) ceased, or indicated
any intention to cease, doing business with such Seller, or (ii) changed or
indicated any intention to change any terms or conditions for future supply or
sale of products or services from the terms or conditions that existed with
respect to the supply or sale of such products or services during such
twelve-month period.
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3.26 BANKING ARRANGEMENTS. Except as set forth in SECTION 3.26 of the
Disclosure Schedule, no Seller has any banking, borrowing or depository
relationship, or accounts or deposits of funds, and all persons authorized as
signatories on each such account are listed in SECTION 3.26 of the Disclosure
Schedule.
3.27 POWERS OF ATTORNEY. No Person holds any power of attorney from
any Seller.
3.28 NO ALTERNATIVE TRANSACTION. No Seller is a party to or otherwise
bound by any agreement contemplating or providing for any Alternative
Transaction.
3.29 YEAR 2000 ISSUE. The Sellers have (i) undertaken a detailed
review and assessment of all areas within their respective business and
operations that could be adversely affected by the potential problem caused by
computer applications being unable to properly perform date sensitive functions
on or after January 1, 2000 due to an inability to distinguish the year 2000
from the year 1900 (the "Year 2000 Issue"), (ii) developed a detailed plan and
time line for addressing the Year 2000 Issue on a timely basis, and (iii) to
date, implemented that plan in accordance with the timetable; the Sellers
reasonably anticipate that all computer applications that are material to their
business and operations and the performance of their obligations hereunder will
on a timely basis be able to perform properly date sensitive functions for all
dates before and after January 1, 2000 ("Year 2000 Compliant"); the Sellers have
made inquiry of each of their key suppliers, vendors and customers as to whether
such persons will on a timely basis be Year 2000 Compliant in all material
respects and believe that all such persons will be Year 2000 Compliant.
3.30 FULL DISCLOSURE. None of the representations and warranties made
by the Sellers in this Agreement or in any letter, certificate or memorandum
furnished or to be furnished by the Sellers, or on their behalf, contains or
will contain any untrue statement of a material fact, or omits any material fact
the omission of which would make the statements made therein misleading.
3.31 NO OTHER REPRESENTATIONS. Notwithstanding anything to the
contrary contained in this Agreement, it is the explicit intent of each party
hereto that Sellers are making no representation or warranty whatsoever, express
or implied, except those representations and warranties contained in this
ARTICLE III and in any certificate delivered pursuant to SECTION 9.2(c). In
particular, Sellers make no representations or warranty to Purchaser with
respect to any financial projection or forecast relating to the business or
condition of Sellers. With respect to any projection or forecast delivered by
or on behalf of Sellers to Purchaser, Purchaser acknowledges that (i) there are
uncertainties inherent in attempting to make such projections and forecasts,
(ii) it is familiar with such uncertainties, (iii) it is taking full
responsibility for making its own evaluation of the adequacy and accuracy of all
such projections and forecasts furnished to it, and (iv) it shall have no claim
against Sellers or any of their representatives or Affiliates with respect
thereto.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF THE INDEMNIFYING STOCKHOLDERS
Each Indemnifying Stockholder severally represents and warrants to
Purchaser with respect to SECTIONS 4.1, 4.2, 4.3, 4.4, AND 4.6 and jointly and
severally represents and warrants to Purchaser with respect to the
representation contained in SECTION 4.5.
4.1 OWNERSHIP. Such Indemnifying Stockholder is the record and
beneficial owner of the Group Stock to be sold by such Indemnifying Stockholder
pursuant to this Agreement and identified in SECTION 3.3(b) of the Disclosure
Schedule as being owned by it and has, and on the Closing Date, will have, good
and valid title to such Group Stock, free and clear of all Encumbrances. No
Indebtedness is owed to such Indemnifying Stockholder or any Affiliate thereof
by any Seller.
4.2 AUTHORITY. The execution and delivery by the Indemnifying
Stockholders of this Agreement, and the performance by each Indemnifying
Stockholder of his/her obligations hereunder, have been duly and validly
authorized by each of the Indemnifying Stockholders, no other action on the part
of such Indemnifying Stockholders being necessary. This Agreement has been duly
and validly executed and delivered by each of the Indemnifying Stockholders and
constitutes a legal, valid and binding obligation of the Indemnifying
Stockholders enforceable against the Indemnifying Stockholders in accordance
with its terms.
4.3 NO CONFLICTS. None of the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby nor
performance by such Indemnifying Stockholder of such Indemnifying Stockholder's
obligations hereunder will (i) violate or conflict with any provision of the
certificate or incorporation, bylaws or the organizational documents, if any, of
such Indemnifying Stockholder, (ii) subject to obtaining the consents, approvals
and actions, making the filings and giving the notices described in SECTION 4.4,
result in a violation or breach of, or constitute (with or without due notice or
lapse of time or both) a default, or give rise to any right of termination,
cancellation or acceleration or any right that becomes effective upon the
occurrence of a merger, consolidation or change in control, under, any of the
terms, conditions or provisions of any note, bond, mortgage, indenture, other
instrument of indebtedness for money borrowed, license, franchise, permit or
agreement to which such Indemnifying Stockholder is a party, or by which any of
its respective properties is bound, or (iii) violate any Law or Order of any
Governmental or Regulatory Authority by which such Indemnifying Stockholder or
any of its properties is bound.
4.4 GOVERNMENTAL APPROVALS AND FILINGS. No consent, approval or
action of, filing with or notice to any Governmental or Regulatory Authority on
the part of any Indemnifying Stockholder is required in connection with the
execution, delivery and performance of this Agreement or the consummation of the
transactions contemplated hereby, except (i) the filing of a Notification and
Report Form pursuant to the HSR Act and the expiration or early termination of
the waiting period thereunder; (ii) any required filings under any applicable
foreign antitrust laws
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and the expiration or termination of waiting periods thereunder; and (iii)
where required solely as a result of the legal or regulatory status of
Purchaser or any of its Affiliates.
4.5 ADDITIONAL INDEMNIFYING STOCKHOLDER REPRESENTATIONS. Each of the
representations and warranties set forth in SECTIONS 3.3, (OTHER THAN THE SECOND
SENTENCE OF SECTION 3.3(b) AND THE LAST SENTENCE OF SECTION 3.3(c)),
3.15((a))((iii)) AND 3.17((a)) are true and complete.
4.6 BROKERS/ALTERNATIVE TRANSACTION. No Stockholder is a party to or
otherwise bound by any agreement contemplating or providing for any Alternative
Transaction. No Stockholder has dealt with any broker, finder or consultant
(other than DLJ) in connection with the transactions contemplated by this
Agreement.
4.7 NO OTHER REPRESENTATIONS. Notwithstanding anything to the
contrary contained in this Agreement, it is the explicit intent of each party
hereto that the Indemnifying Stockholders are making no representation or
warranty whatsoever, express or implied, except those representations and
warranties contained in this ARTICLE IV.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PURCHASER AND MERGER SUB
Purchaser hereby represents and warrants to Sellers as follows:
5.1 CORPORATE EXISTENCE OF PURCHASER. Each of Purchaser and Merger
Sub is a corporation duly incorporated, validly existing and in good standing
under the laws of its respective jurisdiction of organization with full
corporate power and authority to execute and deliver this Agreement and to
perform its respective obligations hereunder.
5.2 AUTHORITY. Each of Purchaser and the Merger Sub has the requisite
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. This Agreement and the
consummation by each of Purchaser and the Merger Sub of the transactions
contemplated hereby have been duly and validly authorized by the respective
Board of Directors of Purchaser and the Merger Sub, and no other corporate
proceedings on the part thereof are necessary to authorize the execution and
delivery of this Agreement and to consummate the transactions contemplated
hereby. This Agreement has been duly and validly executed and delivered by each
of Purchaser and the Merger Sub and, assuming that this Agreement constitutes
the valid and binding agreement of the Sellers, constitutes the valid and
binding agreement of each of Purchaser and the Merger Sub, enforceable against
each of them in accordance with its terms.
5.3 NO CONFLICTS. The execution and delivery by each of Purchaser and
the Merger Sub of this Agreement, the performance by each of Purchaser and
Merger Sub of its respective obligations under this Agreement and the
consummation of the transactions contemplated hereby will not: (a) conflict
with or result in a violation or breach of any of the terms, conditions or
provisions of the certificate of incorporation or by-laws (or other comparable
corporate charter
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document) of Purchaser or Merger Sub; (b) subject to obtaining the consents,
approvals and actions, making the filings and giving the notices disclosed on
EXHIBIT 5.3 hereto, conflict with or result in a violation or breach of any
term or provision of any Law or Order applicable to each of Purchaser or
Merger Sub or any of its respective assets and properties (other than such
conflicts, violations or breaches which could not in the aggregate reasonably
be expected to have a Material Adverse Effect on the validity or
enforceability of this Agreement or the ability of each of Purchaser or
Merger Sub to perform its respective obligations hereunder and to consummate
the transactions contemplated hereby); or (c) except as could not reasonably
be expected to have a Material Adverse Effect on the ability of each of
Purchaser or Merger Sub to consummate the transactions contemplated hereby or
to perform any of its respective obligations hereunder, (i) conflict with or
result in a violation or breach of, (ii) constitute (with or without notice
or lapse of time or both) a default under, (iii) require Purchaser or Merger
Sub to obtain any consent, approval or action of, make any filing with or
give any notice to any Person as a result or under the terms of, or (iv)
result in the creation or imposition of any Encumbrance upon Purchaser or any
of its assets or properties under, any contract or license to which Purchaser
is a party or by which any of its assets and properties is bound.
5.4 GOVERNMENTAL APPROVALS AND FILINGS. No consent, approval or
action of, filing with or notice to any Governmental or Regulatory Authority on
the part of each of Purchaser or Merger Sub is required in connection with its
respective execution, delivery and performance of this Agreement, except (i) the
filing of a Notification and Report Form pursuant to the HSR Act and the
expiration or early termination of the waiting period thereunder, (ii) where
required solely as a result of the identity or the legal or regulatory status of
Indemnifying Stockholders, Sellers or any of their respective Affiliates or
(iii) where the failure to obtain any such consent, approval or action, to make
any such filing or to give any such notice could not reasonably be expected to
delay or have a Material Adverse Effect on the ability of each of Purchaser and
Merger Sub to consummate the transactions contemplated by this Agreement or to
perform any of its respective obligations hereunder.
5.5 LEGAL PROCEEDINGS. There are no Orders outstanding and no Actions
or Proceedings pending or, to the Knowledge of Purchaser, threatened against,
relating to or affecting Purchaser or Merger Sub or any of their respective
assets and properties which could reasonably be expected to delay or to result
in the issuance of an Order restraining, enjoining or otherwise prohibiting or
making illegal the consummation of any of the transactions contemplated by this
Agreement or otherwise to impair the ability of Purchaser or Merger Sub to
perform their respective obligations under this Agreement and to consummate the
transactions contemplated hereby.
5.6 BROKERS. There is no investment banker, broker or finder or other
intermediary which has been retained by or is authorized to act on behalf of
Purchaser or Merger Sub who might be entitled to any fee or commission in
connection with the origin, negotiation or execution of this Agreement or any of
the transactions contemplated herein.
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ARTICLE VI
COVENANTS OF SELLERS AND INDEMNIFYING STOCKHOLDERS
Sellers and Indemnifying Stockholders, jointly and severally, covenant
and agree with Purchaser that, at all times from and after the date hereof until
the Closing, Sellers and Indemnifying Stockholders will comply with all
covenants and provisions of this ARTICLE VI, except to the extent Purchaser may
otherwise consent in writing.
6.1 REGULATORY AND OTHER APPROVALS. Sellers will (a) take
commercially reasonable steps necessary or desirable, and proceed diligently and
in good faith and use all commercially reasonable efforts, as promptly as
practicable to obtain all consents, approvals or actions of, make all filings
with and to give all notices to Governmental or Regulatory Authorities or any
other Person required of Sellers to consummate the transactions contemplated
hereby, (b) provide such other information and communications to such
Governmental or Regulatory Authorities or other Persons as such Governmental or
Regulatory Authorities or other Persons may reasonably request in connection
therewith, and (c) provide reasonable cooperation to Purchaser in obtaining all
consents, approvals or actions of, making all filings with and giving all
notices to Governmental or Regulatory Authorities or other Persons required of
Purchaser to consummate the transactions contemplated hereby. Sellers will
provide prompt notification to Purchaser when any such consent, approval,
action, filing or notice referred to in clause (a) above is obtained, taken,
made or given, as applicable, and will advise Purchaser of any communications
(and, unless precluded by law, provide copies of any such communications that
are in writing) with any Governmental or Regulatory Authority or other Person
regarding any of the transactions contemplated by this Agreement.
6.2 HSR AND FOREIGN ANTITRUST FILINGS. On November 13, 1998, Group
caused to be filed a Notification and Report Form under the HSR Act regarding
the transactions contemplated hereby. Group agrees that, in the event this
Agreement is terminated in accordance with ARTICLE X, it shall promptly
thereafter pay to Purchaser $22,500 in cash as reimbursement of Purchaser for
50% of the fee paid by Purchaser on November 12, 1998 in connection with
Purchaser's filing of a Notification and Report Form under the HSR Act regarding
the transactions contemplated hereby. In addition to and not in limitation of
Sellers' and Indemnifying Stockholders' covenants contained in SECTION 6.1,
Sellers will (a) take promptly all actions necessary to make the filings, if
any, required of Sellers or any of their Affiliates under all applicable foreign
antitrust laws, (b) comply as promptly as practicable with any request, if any,
for additional information received by Sellers or their Affiliates from the
Federal Trade Commission or the Antitrust Division of the U.S. Department of
Justice pursuant to the HSR Act or any foreign Governmental or Regulatory
Authority pursuant to any foreign antitrust law, and (c) reasonably cooperate
with Purchaser in connection with Purchaser's filings under the HSR Act and all
applicable foreign antitrust laws and in connection with resolving any
investigation or other inquiry concerning the transactions contemplated by this
Agreement commenced by either the Federal Trade Commission or the Antitrust
Division of the U.S. Department of Justice, state attorneys general, or any
foreign Governmental or Regulatory Authority pursuant to any foreign antitrust
law.
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6.3 INVESTIGATION BY PURCHASER. Sellers will (a) provide
(i) Purchaser and (ii) the officers, employees, counsel, accountants, financial
advisors, consultants and other representatives of Purchaser with access, upon
reasonable prior notice and during normal business hours, to all suppliers,
landlords, officers, employees, agents and accountants of Sellers and Sellers'
assets, properties, books and records, but only to the extent that such access
does not unreasonably interfere with the business and operations of Sellers and
(b) make available to Purchaser and such other persons all such information and
data concerning the business and operations of Sellers as Purchaser or any of
such other persons reasonably may request in connection with such investigation,
except to the extent that furnishing any such information or data would violate
any Law, Order, Contract or Permit applicable to Sellers or by which any of
their respective assets or properties is bound. No such access, examination or
review shall in any way affect, diminish or terminate any of the
representations, warranties or covenants of Sellers or Indemnifying Stockholders
set forth herein.
6.4 CONDUCT OF BUSINESS. Sellers will conduct business only in the
Ordinary Course of Business. Without limiting the generality of the foregoing,
Sellers will use commercially reasonable efforts to (a) preserve intact the
present business organization, prospects and reputation of Sellers in all
material respects, (b) keep available (subject to dismissals and retirements in
the Ordinary Course of Business) the services of the key officers and employees
of Sellers, (c) maintain the assets and properties of Sellers in good working
order and condition, subject to ordinary wear and tear, and repair and replace
any assets that may be worn out, lost, stolen or destroyed and (d) maintain the
goodwill of landlords, customers, suppliers and lenders and other Persons with
whom Sellers otherwise have significant business relationships.
6.5 CERTAIN RESTRICTIONS. Except as expressly contemplated by this
Agreement, Sellers will refrain from:
(a) amending their certificates of incorporation or by-laws (or
other comparable corporate charter documents) in any respect or taking any
action with respect to any such amendment or any recapitalization,
reorganization, liquidation or dissolution of any such corporation; provided,
however, that Group may amend its certificate of incorporation at any time prior
to the Effective Time consistent with the terms of this Agreement;
(b) authorizing, issuing, selling or otherwise disposing of any
shares of capital stock of or any option with respect to Sellers, or modifying
or amending any right of any holder of outstanding shares of capital stock of or
options with respect to Sellers;
(c) declaring, setting aside or paying any dividend or other
distribution in respect of the capital stock of Sellers or directly or
indirectly redeeming, purchasing or otherwise acquiring any capital stock of or
any option with respect to Sellers;
(d) other than in the Ordinary Course of Business, acquiring or
disposing of, or incurring any Encumbrance (other than a Permitted Encumbrance)
on, any assets and properties which individually or in the aggregate are
material to the business or condition of Sellers taken as a whole;
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(e) other than in the Ordinary Course of Business, entering
into, amending, modifying, terminating (partially or completely), granting any
waiver under or giving any consent with respect to any Contract or license;
(f) other than in the Ordinary Course of Business
(i) voluntarily incurring Indebtedness (other than Indebtedness existing on the
date hereof), or (ii) purchasing, canceling, prepaying or otherwise providing
for a complete or partial discharge in advance of a scheduled payment date with
respect to, or waiving any right under, any Indebtedness;
(g) making capital expenditures or commitments for additions to
property, plant or equipment constituting capital assets in an aggregate amount
exceeding $100,000;
(h) except to the extent required by applicable Law making any
material change in (A) any investment, accounting, financial reporting,
inventory, credit, allowance or Tax practice or policy, or (B) any method of
calculating any bad debt, contingency or other reserve for accounting, financial
reporting or Tax purposes;
(i) adopting, entering into or becoming bound by any material
Benefit Plan or material Contract, or amending, modifying or terminating
(partially or completely) any such Benefit Plan or material Contract.
(j) making any change in its fiscal year;
(k) increasing or otherwise changing the rate or nature of the
compensation (including wages, salaries, bonuses and benefits under any Benefit
Plan) which is paid or payable to any officer, employee or other representative
of the Business, except in the Ordinary Course of Business or with the
Purchaser's prior consent.
(l) making, or committing to make, any payment, contribution or
award under or into any Plan;
(m) entering into any transaction between Sellers, or between
Sellers and any officer, director, or affiliate of Sellers;
(n) entering into any new lease for carts or kiosks; or
(o) entering into any Contract to do or engage in any of the
foregoing.
6.6 AFFILIATE TRANSACTIONS. All Indebtedness and other amounts owing
between Sellers or between Seller and any officer, director, or Affiliate of
Sellers will be paid in full, and Sellers will terminate and will cause any such
officer, director, or Affiliate to terminate each contract relating thereto.
6.7 FULFILLMENT OF CONDITIONS. Sellers and Indemnifying Stockholders
will use their Best Efforts and proceed diligently and in good faith to satisfy
each condition to the obligations of Purchaser contained in this Agreement and
will not take or fail to take any action that could reasonably be expected to
result in the nonfulfillment of any such condition; provided, however,
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that no Seller or Indemnifying Stockholder by virtue of this SECTION 6.7
shall be required to cause SECTION 9.2(o) to be satisfied.
6.8 INTERIM FINANCIAL INFORMATION. Sellers shall deliver to Purchaser
within twenty-five (25) days after the end of each fiscal month, beginning with
the month ended October 31, 1998, an unaudited, consolidated balance sheet for
Sellers as of the end of such month and a statement of income for Sellers for
the portion of the calendar year then ended. All such financial statements
shall be accompanied by a certificate of the Chief Financial Officer of Group
certifying that such financial statements were prepared in accordance with GAAP,
except for footnote disclosures and subject to normal year-end adjustments.
6.9 NOTIFICATION OF MATERIAL ADVERSE EVENTS. Sellers or Indemnifying
Stockholders shall promptly notify Purchaser in writing of any event following
the date hereof of which Sellers or Indemnifying Stockholders are or become
aware that will or could reasonably be expected to have a material adverse
effect on the condition (financial or othersise), rights, properties, assets or
prospects of Sellers or the performance by Sellers or Indemnifying Stockholders
of their obligations under this Agreement.
6.10 SUPPLEMENTAL DISCLOSURES. Sellers and Indemnifying Stockholders
shall have the continuing obligation to supplement promptly and amend the
Disclosure Schedule as necessary or appropriate with respect to any matter
hereafter arising or discovered which, if existing or known at the date of this
Agreement, would have been required to be set forth or described in the
Disclosure Schedule; PROVIDED, HOWEVER, that for the purpose of the rights and
obligations of the parties hereunder, any such supplemental or amended
disclosure shall not, except as Purchaser may otherwise agree in writing, be
deemed to have cured any breach of any representations or warranty made in this
Agreement.
6.11 EXCLUSIVITY. Unless this Agreement has been terminated in
accordance with ARTICLE X, (a) Sellers and Indemnifying Stockholders shall not,
and shall not permit any of their respective Affiliates, directors, officers,
employees, agents or advisors to, initiate, pursue or encourage (by way of
furnishing information or otherwise) any inquiries or proposals, or enter into
any discussions, negotiations or agreements (whether preliminary or definitive)
with any Person (other than Purchaser and its representatives), contemplating or
providing for any merger, acquisition, purchase or sale of all or substantially
all of the assets or any business combination or change in control of Group or
any of the Subsidiaries (an "ALTERNATIVE TRANSACTION"), and (b) Sellers and
Indemnifying Stockholders shall deal exclusively with Purchaser with respect to
the Merger, the sale of the Business and the Group Stock.
6.12 AGREEMENT TO APPROVE MERGER.
(a) Each Indemnifying Stockholder hereby agrees to vote all of
the shares of Stock held by it and entitled to vote in favor of the Merger at
any meeting of stockholders (or adjournment thereof) convened to consider and
vote upon the Merger and in connection with any written consent solicited with
respect to the Merger.
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(b) Each Indemnifying Stockholder further agrees to vote all of
the shares of Stock held by it and entitled to vote against the approval of any
Alternative Transaction.
6.13 RELEASE BY INDEMNIFYING STOCKHOLDERS. Each Indemnifying
Stockholder hereby releases and discharges each Seller, its Affiliates
(including its officers and directors) and agents, as of the Effective Time,
from any and all Liabilities owed to such Indemnifying Stockholder by such
Seller or other Person.
ARTICLE VII
COVENANTS OF PURCHASER
Purchaser covenants and agrees with Group that, at all times from and
after the date hereof until the Closing, Purchaser will comply with all
covenants and provisions of this ARTICLE VII, except to the extent Group may
otherwise consent in writing.
7.1 REGULATORY AND OTHER APPROVALS. Purchaser will (a) take
commercially reasonable steps necessary or desirable, and proceed diligently and
in good faith and use all commercially reasonable efforts, as promptly as
practicable to obtain all consents, approvals or actions of, to make all filings
with and to give all notices to Governmental or Regulatory Authorities or any
other person required of Purchaser to consummate the transactions contemplated
hereby, (b) provide such other information and communications to such
Governmental or Regulatory Authorities or other Persons as such Governmental or
Regulatory Authorities or other Persons may reasonably request in connection
therewith, and (c) provide reasonable cooperation to Sellers in obtaining all
consents, approvals or actions of, making all filings with and giving all
notices to Governmental or Regulatory Authorities or other Persons required of
Sellers to consummate the transactions contemplated hereby. Purchaser will
provide prompt notification to Sellers when any such consent, approval, action,
filing or notice referred to in clause (a) above is obtained, taken, made or
given, as applicable, and will advise Sellers of any communications (and, unless
precluded by law, provide copies of any such communications that are in writing)
with any Governmental or Regulatory Authority or other Person regarding any of
the transactions contemplated by this Agreement.
7.2 HSR AND FOREIGN ANTITRUST FILINGS. On November 12, 1998,
Purchaser caused to be filed a Notification and Report Form under the HSR Act
regarding the transactions contemplated hereby. Purchaser paid the entire
$45,000 filing fee required under the HSR Act; provided, that if this Agreement
is terminated in accordance with ARTICLE X, Group shall promptly thereafter
reimburse Purchaser for 50% of such fee. In addition to and without limiting
Purchaser's covenants contained in SECTION 7.1, Purchaser will (a) take promptly
all actions necessary to make the filings required of Purchaser or its
Affiliates under the HSR Act and all applicable foreign antitrust laws,
(b) comply as promptly as practicable with any request, if any, for additional
information received by Purchaser or its Affiliates from the Federal Trade
Commission or the Antitrust Division of the U.S. Department of Justice pursuant
to the HSR Act or any foreign Governmental or Regulatory Authority pursuant to
any foreign antitrust law, and
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(c) cooperate with Sellers in connection with Sellers' filing, if such filing
is required, under the HSR Act and all applicable foreign antitrust laws and
in connection with resolving any investigation or other inquiry concerning
the transactions contemplated by this Agreement commenced by either the
Federal Trade Commission or the Antitrust Division of the U.S. Department of
Justice, state attorneys general, or any foreign Governmental or Regulatory
Authority pursuant to any foreign antitrust law. Purchaser shall pay
one-half of the filing fees required in connection with the HSR Act filings.
7.3 INDEMNIFICATION OF DIRECTORS AND OFFICERS. Until the sixth
anniversary of the Closing Date, Purchaser will not, nor will it permit any of
its subsidiaries or Affiliates to, take any action to amend any provision of the
certificate of incorporation or by-laws (or other comparable corporate charter
documents) of Group or any of the Subsidiaries (including an amendment effected
through a merger, consolidation, sale of all or substantially all the assets,
liquidation or dissolution of any such corporation), if the effect of such
amendment would be to have an adverse effect on any right provided thereby to
any person who shall have served as a director or officer of Group or any of the
Subsidiaries prior to the Closing Date in respect of actions taken in such
capacity on or prior to the Closing Date, unless such person would immediately
thereafter be entitled to indemnification by Purchaser or another subsidiary of
Purchaser comparable to that provided by the affected provision prior to any
such amendment.
7.4 FULFILLMENT OF CONDITIONS. Purchaser will use its Best Efforts
and proceed diligently and in good faith to satisfy each condition to the
obligations of Sellers contained in this Agreement and will not take or fail to
take any action that could reasonably be expected to result in the
nonfulfillment of any such condition.
ARTICLE VIII
ADDITIONAL AGREEMENTS
8.1 STOCK PLANS AND OPTIONS; SARS. At or prior to the Closing, (i)
Group will fully and finally terminate the Group Stock Option Plans; (ii) Group
will notify stock appreciation rights holders of the Merger and at or prior to
the Effective Time, pay such stock appreciation rights; and (iii) each
outstanding option to purchase Group Common Stock will be canceled in accordance
with its terms.
8.2 SELLERS EMPLOYEES. At the Closing, Purchaser may, but shall not
be obligated to, retain the employees of Sellers engaged full-time or part-time
in the conduct of the Business as Purchaser may determine, in its sole
discretion.
8.3 TAXES.
(a) Indemnifying Stockholders shall cause Sellers to prepare
and file all tax returns and reports of Sellers due on or prior to the Closing
Date, which returns and reports shall be prepared and filed timely and on a
basis consistent with existing procedures for preparing such
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returns and reports and in a manner consistent with prior practice with
respect to the treatment of specific items on the returns or reports;
provided, however, that if the treatment of any item on any such return or
report has not been provided by prior practice, Indemnifying Stockholders
shall cause Sellers to report such items in a manner that would result in the
least amount of Tax Liability to Sellers and Purchaser for periods ending
after the Closing Date.
(b) Purchaser, Sellers and Indemnifying Stockholders shall
provide each other with such assistance as may reasonably be requested by the
others in connection with the preparation of any return or report of Taxes, any
audit or other examination by any taxing authority, or any judicial or
administrative proceedings relating to liabilities for Taxes. Purchaser,
Sellers and Indemnifying Stockholders will retain for the full period of any
statute of limitations and provide the others with any records or information
which may be relevant to such preparation, audit, examination, proceeding or
determination.
ARTICLE IX
CONDITIONS TO OBLIGATIONS OF THE PARTIES
9.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY TO EFFECT THE MERGER. The
obligations of Purchaser and Group to effect the Merger shall be subject to the
satisfaction at or prior to the Effective Time of the following conditions:
(a) STOCKHOLDER APPROVAL. This Agreement shall have been
approved and adopted, and the Merger shall have been duly approved, by the
requisite vote under applicable law and Group's certificate of incorporation and
bylaws, by the Stockholders of Group.
(b) ORDERS AND LAWS. There shall not be in effect on the
Closing Date any Order or Law restraining, enjoining or otherwise prohibiting or
making illegal the consummation of any of the transactions contemplated by this
Agreement.
(c) REGULATORY CONSENTS AND APPROVALS. All consents, approvals
and actions of, filings with and notices to any Governmental or Regulatory
Authority necessary to permit Group and Purchaser to perform their obligations
under this Agreement and to consummate the transactions contemplated hereby
shall have been duly obtained, made or given and shall be in full force and
effect, and all waiting periods imposed, if any, by any Governmental or
Regulatory Authority necessary for the consummation of the transactions
contemplated by this Agreement, including the waiting period under the HSR Act,
if applicable, and any applicable waiting periods under foreign antitrust laws,
shall have expired or been terminated.
(d) FILING OF CERTIFICATE OF MERGER. The executed Certificate
of Merger shall be filed with the Secretary of State of the State of Delaware.
9.2 OBLIGATIONS OF PURCHASER. The obligations of Purchaser to effect
the Merger shall be subject to the satisfaction at or prior to the Effective
Time of the following conditions (all or any of which may be waived in whole or
in part by Purchaser in its sole discretion):
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(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties made by Sellers in this Agreement shall be true and correct in all
material respects (provided, that any representation or warranty that is
qualified by materiality shall be deemed to not include such materiality
qualifier for purposes of determining whether this condition has been satisfied)
on and as of the Closing Date as though made on and as of the Closing Date or,
in the case of representations and warranties made as of a specified date
earlier than the Closing Date, on and as of such earlier date.
(b) PERFORMANCE. Sellers in all material respects shall have
performed and complied with, the agreements, covenants and obligations required
by this Agreement to be so performed or complied with by Sellers at or before
the Closing.
(c) OFFICERS' CERTIFICATES. Group and each of the Subsidiaries
shall have delivered to Purchaser (i) a certificate, dated the Closing Date and
executed by the President, certifying to the satisfaction of the conditions set
forth in SECTIONS 9.1((b)) AND ((c)) AND 9.2((a)), ((b)) AND (f) and (ii) a
certificate, dated the Closing Date and executed by the Secretary or any
Assistant Secretary, certifying as to the truth and accuracy of, and attaching
copies of the certificate of incorporation, by-laws and all board resolutions
adopted in connection with this Agreement of Sellers, in each case in a form
reasonably satisfactory to Purchaser.
(d) THIRD PARTY CONSENTS. The consents (or in lieu thereof
waivers) listed in SCHEDULE 9.2((D)) shall have been obtained and shall be in
full force and effect.
(e) OPINION OF COUNSEL. Purchaser shall have received the
opinions of counsel to Group, dated the Closing Date, with respect to the
matters described in SECTIONS 3.1, 3.2, 3.3, 3.5, 3.6 AND 3.21 in a form and
subject to such exceptions as are customary for transactions similar to those
contemplated by this Agreement, which form shall be reasonably acceptable to
Purchaser. Such opinions shall include an opinion that (i) this Agreement has
been approved and adopted, and the Merger shall have been duly approved, by the
requisite vote under all applicable Laws and Group's certificate of
incorporation and bylaws, by the Stockholders of Group and (ii) the Merger has
been duly and effectively consummated under applicable Laws. Such opinions
shall include a statement that Purchaser's lenders may rely on such opinions.
(f) INVESTIGATION. Each of Purchaser and Purchaser's agents
shall have been afforded access to Sellers' books and records, suppliers,
landlords, officers, employees, agents, facilities and personnel, as provided in
SECTION 6.3.
(g) NO MATERIAL ADVERSE CHANGE. There shall have occurred no
material adverse change in or with respect to the condition (financial or
otherwise), business, prospects, rights, properties or assets of the Business or
the Sellers' assets since the date hereof, and Purchaser shall be reasonably
satisfied that the legal matters disclosed in SECTION 3.19 of the Disclosure
Schedule will not have a Material Adverse Effect on Sellers or Purchaser.
(h) UCC, TAX LIEN AND JUDGMENT SEARCH RESULTS. Purchaser shall
have completed, at its sole cost and expense, a report, in form and substance
satisfactory to Purchaser, as to the results of an examination of financing
statements filed under the Uniform Commercial
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Code, and tax lien and judgment records, in each office in each jurisdiction
as Purchaser shall reasonably request, and such report shall indicate no
material security interests, tax liens, judgments or other Encumbrances not
previously disclosed in writing to Purchaser.
(i) LEASE AGREEMENTS. Purchaser shall have entered into a
letter agreement, in form and substance satisfactory to it, (i) with the
landlord of Sellers' headquarters and distribution facility in San Diego,
California and (ii) with the landlord of Sellers' manufacturing facility in San
Diego, California providing for the ability to terminate such leases on or
before April 30, 1999, at an aggregate cost of not more than $150,000.
(j) LANDLORD CONSENTS. Purchaser shall have reviewed an
executed landlord consent in connection with any Seller store lease that
requires, in the reasonable judgment of Purchaser (and except where the failure
to obtain a consent would not have a Material Adverse Effect on Sellers), a
landlord consent to the transactions contemplated by this Agreement.
(k) SEVERANCE PAYMENTS. Purchaser shall have received
assurance satisfactory to it that the costs associated with contractual
severance payments to Sellers' employees following termination through April 30,
1999 shall not be greater than $1,450,000 and Purchaser shall have entered into
employment agreements satisfactory to Purchaser with the employees set forth on
EXHIBIT 9.2(k) for continued employment through April 30, 1999, except where the
failure to enter into an employment agreement with any such employee or
employees could not be reasonably expected to have a Material Adverse Effect on
Purchaser.
(l) SWEET FACTORY TRADEMARK LICENSE. Purchaser shall have
received from United Sweet Factory Limited a letter substantially in the form of
EXHIBIT 9.2(l) hereto.
(m) CLOSING DOCUMENTS. Sellers shall have delivered all
reports, agreements, certificates, instruments, opinions and other documents
required to be delivered by Sellers on the Closing Date, and the form and
substance of all such reports, agreements, certificates, instruments, opinions
and other documents shall be reasonably satisfactory to Purchaser.
(n) FINANCIAL STATEMENTS AND REPORTS. Purchaser shall have
received from KPMG Peat Marwick, LLP, Sellers' auditor, each of the following
(i) KPMG Peat Marwick LLP's written consent to include
in Purchaser's financing offering circular (and in the subsequent exchange
registration statement contemplated thereby) Group's audited consolidated
financial statements for the year ended January 4, 1998, including KPMG Peat
Marwick LLP's audit opinion with respect thereto;
(ii) a "comfort letter" with respect to Group's
consolidated balance sheet and income statement as of August 29, 1998 and for
the twelve months then ended, in form and substance reasonably satisfactory to
Purchaser; and
(iii) a report, in form and substance reasonably
satisfactory to Purchaser, as to Group's (and the Subsidiaries') Indebtedness as
of the end of the calendar month preceding the calendar month in which the
Closing occurs.
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(o) NET OBLIGATIONS. Net Obligations (as defined below), as of
the Closing Date, shall not be in excess of $10,000,000. "NET OBLIGATIONS"
shall mean the aggregate of (i) all Indebtedness of Group and the Subsidiaries
as of the Closing Date PLUS (ii) the costs associated with discharging such
indebtedness PLUS (iii) the fees and expenses relating directly to the
transaction contemplated by this Agreement owing to DLJ, Gray Cary Ware &
Freidenrich LLP and KPMG Peat Marwick LLP (other than those fees and expenses of
KPMG Peat Marwick LLP that are attributable to its services rendered in
connection with (A) making Sellers' audited financial statements available for
inclusion in Purchaser's financing documents and (B) issuing a "comfort letter"
with respect to certain other financial information to be included in
Purchaser's financing documents (collectively, the "KPMG Financing Services
Fees")) (all of which it is anticipated will be paid at Closing) PLUS
(iv) $22,500, which equals Group's 50% share of the filing under the HSR Act for
the transactions contemplated hereby (v) PLUS (if the Working Capital is less
than $2,000,000) or MINUS (if the Working Capital is more than $2,000,000) the
amount by which Working Capital as of the closing date varies from an agreed
upon Working Capital target of $2,000,000. For purposes of the "Net
Obligations" calculation, working capital will include, as an asset,
approximately $590,000, which represents the federal tax loss generated by
Sellers during the period from January 4, 1998 to November 30, 1998 and which
Group may carry back, and, therefore, with respect to which Group may obtain a
cash refund in such amount. In performing the computation set forth above, there
shall be no duplicative counting. Group shall prepare and deliver to Purchaser
on the fifth (5) business day prior to the Effective Date, a calculation of Net
Obligations. Such calculation shall be accompanied by a certificate of the
Chief Financial Officer of Group that such calculation was prepared in
accordance with GAAP. Purchaser will be responsible for discharging at the
Closing: (A) the Net Obligations described in clause (i) of this
SECTION 9.2((o)) that are owed to Imperial Bank, (B) the Net Obligations
described in clauses (ii) and (iii) of this SECTION 9.2((o)) and (C) the KPMG
Financing Services Fees.
(p) TAX LETTER. Purchaser shall have received from Group an
executed letter in the form of EXHIBIT 9.2(p).
(q) WAIVERS OF PREEMPTIVE RIGHTS. Purchaser shall have
received from each Stockholder with preemptive rights under Group's certificate
of incorporation or otherwise a waiver of such rights, in form and substance
satisfactory to the Purchaser.
(r) DISSENTERS. Stockholders owning an aggregate Percentage
Interest of no more than five percent (5%) shall have perfected their respective
Dissenter Rights with respect to the Merger; provided, however, that no
Stockholder owning a Percentage Interest of more than two and one-half percent
(2-1/2%) shall have perfected its Dissenter Rights.
(s) STOCKHOLDERS ACKNOWLEDGMENT AND INDEMNIFICATION AGREEMENT.
Purchaser shall have received Stockholders Acknowledgments and Indemnification
Agreements from Stockholders owning an aggregate Percentage Interest of not less
than ninety-five percent (95%), and from each Stockholder owning a Percentage
Interest of at least two and one-half percent (2-1/2%).
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9.3 OBLIGATIONS OF GROUP. The obligations of Group to effect the
Merger shall be subject to, at or prior to the Effective Time of the following
conditions (all or any of which may be waived in whole or in part by Group in
its sole discretion):
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties made by Purchaser in this Agreement shall be true and correct in all
material respects (provided, that any representation or warranty that is
qualified by materiality shall be deemed to not include such materiality
qualifier for purposes of determining whether this condition has been satisfied)
on and as of the Closing Date as though made on and as of the Closing Date,
except where the failure of such representations and warranties to be true and
correct could not reasonably be expected to have a Material Adverse Effect on
the ability of Purchaser to consummate the transactions contemplated by this
Agreement and to perform its obligations under this Agreement.
(b) PERFORMANCE. Purchaser in all material respects shall have
performed and complied with the agreements, covenants and obligations required
by this Agreement to be so performed or complied with by Purchaser at or before
the Closing except where the failure to so perform and comply with such
agreements, covenants and obligations could not reasonably be expected to have a
Material Adverse Effect on the ability of Purchaser to consummate the
transactions contemplated by this Agreement and to perform its obligations under
this Agreement.
(c) OFFICER'S CERTIFICATES. Purchaser shall have delivered to
Group (i) a certificate, dated the Closing Date and executed by the President or
any Executive or Senior Vice President of Purchaser, certifying as to the
satisfaction of the conditions set forth in SECTIONS 9.3(a) AND (b) in a form
reasonably satisfactory to Group, and (ii) a certificate, dated the Closing Date
and executed by the Secretary or any Assistant Secretary of Purchaser,
certifying as to the truth and accuracy of, and attaching copies of, the
articles/certificate of incorporation, bylaws and all board resolutions adopted
in connection with this Agreement, of Purchaser, in a form reasonably
satisfactory to Group.
(d) OPINION OF COUNSEL. Group shall have received the opinion
of counsel to Purchaser, dated the Closing Date, with respect to the matters
described in SECTIONS 5.1, 5.2, 5.3, 5.4 AND 5.5 in a form and subject to such
exceptions as are customary for transactions similar to those contemplated
hereby, which form shall be reasonably acceptable to Group.
ARTICLE X
TERMINATION
10.1 TERMINATION. This Agreement may be terminated, and the
transactions contemplated hereby may be abandoned:
(a) at any time before the Closing, by mutual written agreement
of Group and Purchaser;
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(b) at any time before the Closing, by Group or Purchaser, in
the event that any Order or Law becomes effective restraining, enjoining or
otherwise prohibiting or making illegal the consummation of any of the
transactions contemplated by this Agreement, upon notice to the non-terminating
party by the terminating party;
(c) at any time after December 31, 1998, by Group, by notice to
Purchaser if the Closing shall not have occurred on or before such date and the
failure of the Closing to occur is not caused by a material breach of this
Agreement by Group;
(d) at any time after December 31, 1998, by Purchaser, by
notice to Group if the Closing shall not have occurred on or before such date
and the failure of the Closing to occur is not caused by a material breach of
this Agreement by Purchaser;
(e) at any time before the Closing, by Group, by notice to
Purchaser, in the event of a material breach of this Agreement by Purchaser
which if uncured would cause one or more of the conditions to Closing set forth
in ARTICLE IX not to be satisfied and which remains uncured for fifteen (15)
days after notice thereof is given to Purchaser by Group; and
(f) at any time before the Closing, by Purchaser, by notice to
Group, in the event of a material breach of this Agreement by Group which if
uncured would cause one or more of the conditions to Closing set forth in
ARTICLE IX not to be satisfied and which remains uncured for fifteen (15) days
after notice thereof is given to the Representative by Purchaser.
10.2 EFFECT OF TERMINATION AND ABANDONMENT. In the event of
termination of this Agreement pursuant to this ARTICLE X, no party hereto (or
any of its directors or officers) shall have any liability or further obligation
to any other party to this Agreement, except that in such event that nothing
herein shall relieve any party from liability for any breach of this Agreement
and provided that Group's obligation set forth in SECTION 6.2 to reimburse
Purchaser for 50% of the filing fees under the HSR Act shall survive such
termination.
10.3 EXCLUSIVE REMEDY. The exclusive remedy for any breach of a
representation or warranty made by any party in this Agreement, shall be
termination of this Agreement, except as otherwise provided in ARTICLE XII
hereof.
ARTICLE XI
INDEMNIFYING STOCKHOLDERS' REPRESENTATIVE
11.1 APPOINTMENT. Indemnifying Stockholders hereby irrevocably make,
constitute and appoint Weston Presidio Capital as their agent and representative
(the "REPRESENTATIVE") for all purposes under this Agreement. In the event of
the death, resignation or incapacity of the Representative, Indemnifying
Stockholders shall promptly designate another Person to act as their
representative under this Agreement so that at all times there will be a
Representative with the authority provided in this ARTICLE XI. Such successor
Representative shall be designated by the Indemnifying Stockholders by an
instrument in writing signed by the Indemnifying Stockholders
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(or their successors in interest) holding a majority of the capital stock of
Group, and such appointment shall become effective as to the successor
Representative when such instrument shall have been delivered to it and a
copy thereof delivered to Purchaser.
11.2 AUTHORIZATION. Indemnifying Stockholders hereby authorize the
Representative, on their behalf and in their name, to:
(a) receive all notices or documents given or to be given to
Indemnifying Stockholders by the Purchaser pursuant hereto or in connection
herewith and to receive and accept service of legal process in connection with
any suit or proceeding arising under this Agreement. The Representative shall
promptly forward a copy of such notice of process to each Indemnifying
Stockholder;
(b) deliver at the Closing the certificates for the Group Stock
of the Indemnifying Stockholders in exchange for their respective portion of the
consideration payable with respect to such securities;
(c) upon confirmation of the receipt of wire transfers or
certified or official bank check, sign and deliver to Purchaser at the Closing a
receipt for the Indemnifying Stockholders' portion of the consideration and
forward such amount to the Indemnifying Stockholders;
(d) deliver to Purchaser at the Closing all certificates and
documents to be delivered to Purchaser by the Indemnifying Stockholders pursuant
to this Agreement, together with any other certificates and documents executed
by the Indemnifying Stockholders and deposited with the Representative for such
purpose;
(e) engage counsel and such accountants and other advisors for
the Indemnifying Stockholders and incur such other expenses on behalf of the
Indemnifying Stockholders in connection with this Agreement and the transactions
contemplated hereby as the Representative may deem appropriate; and
(f) take such action on behalf of the Indemnifying Stockholders
as the Representative may deem appropriate in respect of:
(i) waiving any inaccuracies in the representations or
warranties of Purchaser contained in this Agreement or in any document delivered
by Purchaser pursuant hereto;
(ii) waiving the fulfillment of any of the conditions
precedent to the Indemnifying Stockholders' obligations hereunder, except with
respect to Purchaser's payment of the Purchase Price pursuant to SECTION 2.7;
(iii) taking such other action as the Representative is
authorized to take under this Agreement;
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(iv) receiving all documents or certificates and making
all determinations, on behalf of the Indemnifying Stockholders, required under
this Agreement;
(v) all such other matters as the Representative may
deem necessary or appropriate to consummate this Agreement and the transactions
contemplated hereby; and
(vi) taking all such action as may be necessary after the
Closing Date to carry out any of the transactions contemplated by this
Agreement.
11.3 IRREVOCABLE APPOINTMENT. The appointment of the Representative
hereunder is irrevocable and any action taken by the Representative pursuant to
the authority granted in this ARTICLE XI shall be effective and absolutely
binding on each Indemnifying Stockholder notwithstanding any contrary action of,
or direction from, an Indemnifying Stockholder, except for actions taken by the
Representative which are in bad faith or grossly negligent. The death,
incapacity or dissolution of a Indemnifying Stockholder shall not terminate the
prior authority and agency of the Representative.
11.4 RESIGNATION. The Representative may resign at any time by giving
notice to the Indemnifying Stockholders, and such resignation shall be effective
upon the appointment and qualification of a successor. The Representative may
be discharged, and replaced by another Person to act as its successor, by an
instrument in writing signed by the Indemnifying Stockholders (or their
successors in interest) holding a majority of the capital stock of Group.
11.5 PURCHASER'S RELIANCE. Purchaser shall not be obliged to inquire
into the authority of the Representative, and the Purchaser shall be fully
protected in dealing with the Representative in good faith.
11.6 EXCULPATION AND INDEMNIFICATION. In performing any of its duties
as Representative under this Agreement, the Representative shall not incur any
Liability to any Person, except for Liability caused by the Representative's
willful misconduct or gross negligence. Accordingly, the Representative shall
not incur any such Liability for (i) any action that is taken or omitted in good
faith regarding any questions relating to the duties and responsibilities of the
Representative under this Agreement, or (ii) any action taken or omitted to be
taken in reliance upon any instrument that the Representative shall in good
faith believe to be genuine, to have been signed or delivered by a proper person
or persons and to conform with the provisions of this Agreement. Indemnifying
Stockholders, jointly and severally, shall indemnify, defend and hold harmless
the Representative against, from and in respect of any Adverse Consequences
arising out of or resulting from the performance of its duties hereunder or in
connection with this Agreement (except for Liabilities arising from the gross
regligence or willful misconduct of the Representative).
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ARTICLE XII
SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS, LIMITATION OF LIABILITY
12.1 INDEMNIFICATION BY INDEMNIFYING STOCKHOLDERS. Each Indemnifying
Stockholder (a) jointly and severally shall indemnify, defend and hold harmless
Purchaser, Sellers and all of their respective officers, directors,
shareholders, Affiliates, employes and agents (the "PURCHASER INDEMNIFIED
PERSONS") after the Closing from and against any Adverse Consequence arising out
of or resulting from (i) the untruth, inaccuracy or incompleteness as of the
date hereof or on the Closing Date of any representation or warranty of the
Indemnifying Stockholders contained in SECTION 4.5 and (ii) any failure of Group
to perform its obligations under SECTION 8.1, and (b) severally shall indemnify,
defend and hold harmless the Purchaser Indemnified Persons after the Closing
from and against any Adverse Consequence arising out of or resulting from the
untruth, inaccuracy, or incompleteness as of the date hereof or on the Closing
Date of any representation or warranty of such Indemnifying Stockholder
contained in SECTION 4.1, 4.2, 4.3, 4.4 AND 4.6.
12.2 INDEMNIFICATION BY PURCHASER. Purchaser shall indemnify, defend
and hold harmless the Indemnifying Stockholders and all of their respective
officers, directors, shareholders, Affiliates, employees and agents (the
"INDEMNIFYING STOCKHOLDER INDEMNIFIED PERSONS") after the Closing from and
against any Adverse Consequences arising out of or resulting from the untruth,
inaccuracy or incompleteness as of the date hereof or on the Closing Date of any
representation or warranty of Purchaser contained in this Agreement (each a
"SELLER WARRANTY CLAIM").
12.3 PROCEDURE FOR INDEMNIFICATION. If any Person shall claim
indemnification (the "INDEMNIFIED PARTY") hereunder for any claim other than
a third party claim, the Indemnified Party shall promptly give written notice
to the party from whom indemnification is sought (the "INDEMNIFYING PARTY")
of the nature and amount of the claim. If an Indemnified Party shall claim
indemnification hereunder arising from any claim or demand of a third party,
the Indemnified Party shall promptly give written notice (a "THIRD-PARTY
NOTICE") to the Indemnifying Party of the basis for such claim or demand,
setting forth the nature of the claim or demand in detail. The failure by
any Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its indemnification obligation under this Agreement
except to the extent that such Indemnifying Party is materially prejudiced as
a result of such failure to give notice. The Indemnifying Party shall defend
at its own cost and through counsel of its own choosing, and shall have the
right to compromise, if appropriate, any claim or demand set forth in a
Third-Party Notice giving rise to such claim for indemnification. In the
event the Indemnifying Party undertakes to compromise or defend any such
claim or demand, it shall promptly (and in any event, no later than fifteen
(15) days after receipt of the Third-Party Notice) notify the Indemnified
Party in writing of its intention to do so and shall give the Indemnified
Party such security in that regard as the Indemnified Party reasonably may
request. The Indemnified Party shall, at the expense of the Indemnifying
Party, fully cooperate with the Indemnifying Party and its counsel in the
defense or compromise of such claim or demand. The Indemnified Party shall
not
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be liable for any legal or other expenses incurred by the Indemnifying Party
in connection with such defense, but the Indemnified Party may participate in
such defense at its own expense. No settlement of a third party claim or
demand defended by the Indemnifying Party shall be made without the written
consent of the Indemnified Party, such consent not to be unreasonably
withheld. The Indemnifying Party shall not, except with the written consent
of the Indemnified Party, consent to the entry of a judgment or settlement
which does not include as an unconditional term thereof, the giving by the
claimant or plaintiff to the Indemnified Party of an unconditional release
from all liability in respect of such third party claim or demand.
12.4 LIMITATIONS ON INDEMNITY.
(a) The indemnities contained in this ARTICLE XII with respect
to Purchaser Warranty Claims and Seller Warranty Claims shall expire on the
first anniversary of the Closing Date, except with respect to claims under
SECTIONS 4.1, 4.2, 4.5, (only with respect to SECTION 3.3) AND 4.6 and under
SECTION 5.2 which shall expire on the fourth (4th) anniversary of the Closing
Date; PROVIDED, that if at the stated expiration of any indemnification
obligation there shall then be pending any indemnification claim by a Person,
such Person shall continue to have the right to such indemnification with
respect to such claim notwithstanding such expiration.
(b) (i) Each Indemnifying Stockholder's maximum aggregate
liability to the Purchaser Indemnified Persons under SECTION 12.1 shall not
exceed the amount of the Purchase Price received by such Indemnifying
Stockholder; provided, however, that the maximum aggregate liability of all of
the Indemnifying Stockholders, collectively, with respect to claims under
SECTION 4.5 resulting from a breach of SECTION 3.15(a)(iii) shall not exceed
$1,000,000.
(ii) Purchaser's maximum aggregate liability to the
Indemnifying Stockholder Indemnified Persons for Seller Warranty Claims shall
not exceed $750,000.
12.5 PAYMENT. Except for third-party claims being defended in good
faith by the Indemnifying Party in accordance with SECTION 12.3, the
Indemnifying Party shall satisfy its obligations heruender within fifteen (15)
days after receipt of notice of a claim. Any amount not paid to the Indmnified
Party by such date shall bear interest at a rate equal to the Prime Rate from
the date due until the date paid.
ARTICLE XIII
MISCELLANEOUS
13.1 NOTICES. All notices, requests and other communications hereunder
must be in writing and will be deemed to have been duly given only if delivered
personally or by facsimile transmission or mailed (first class postage prepaid)
to the parties at the following addresses or facsimile numbers:
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If to Purchaser, to:
Archibald Candy Corporation
1137 West Jackson Blvd.
Chicago, IL 60607
Facsimile No: (312) 243-3992
Attn: President
with a copy to:
Winston & Strawn
35 W. Wacker Dr.
Chicago, IL 60601
Facsimile No: (312) 558-5700
Attn: Patrick O. Doyle, Esq.
If to Sellers, to:
Sweet Factory Group, Inc.
10343 Roselle Street
San Diego, CA 92121
Facsimile No.: (619) 558-0486
Attn.: Chief Executive Officer
with a copy to:
Gray Cary Ware & Freidenrich LLP
4365 Executive Drive, Suite 1600
San Diego, CA 92121
Facsimile No.: (619) 677-1477
Attn.: Cameron Jay Rains, Esq.
If to Representative, to:
Weston Presidio Capital
400 Sansome Street
San Francisco, CA 94111
Facsimile No.: (415) 398-0770
Attn: James B. McElwee
All such notices, requests and other communications will (i) if delivered
personally to the address as provided in this SECTION 13, be deemed given upon
delivery, (ii) if delivered by facsimile transmission to the facsimile number as
provided in this SECTION 13, be deemed given upon receipt, and (iii) if
delivered by mail in the manner described above to the address as provided in
this SECTION 13, be deemed given upon receipt (in each case regardless of
whether such notice, request or other communication is received by any other
person to whom a copy of such notice, request or other communication is to be
delivered pursuant to this SECTION 13). Any party from
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time to time may change its address, facsimile number or other information
for the purpose of notices to that party by giving notice specifying such
change to the other party hereto.
13.2 CONTRIBUTION. No Indemnifying Stockholder shall be entitled to
contribution from Group or any Subsidiary with respect to breaches of the
representations and warranties set forth in Article IV but nothing in this
Agreement shall prohibit any Indemnifying Stockholder from seeking contribution
against any other Indemnifying Stockholder with respect to such breaches.
13.3 ENTIRE AGREEMENT. This Agreement supersedes all prior discussions
and agreements between the parties with respect to the subject matter hereof and
thereof, and contain the sole and entire agreement between the parties hereto
with respect to the subject matter hereof and thereof.
13.4 EXPENSES. Except as otherwise expressly provided in this
Agreement, whether or not the transactions contemplated hereby are consummated,
Purchaser will pay its own costs and expenses, the Sellers will pay their own
costs and expenses, incurred in connection with the negotiation, execution and
closing of this Agreement and the transactions contemplated hereby.
13.5 PUBLIC ANNOUNCEMENTS. At all times at or before the Closing,
Sellers and the Indemnifying Stockholders will not issue or make any reports,
statements or releases to the public or generally to the employees, customers,
suppliers or other persons to whom Sellers sells goods or provides services or
with whom Sellers otherwise has significant business relationships with respect
to this Agreement, or the transactions contemplated hereby without the consent
of the other, which consent shall not be unreasonably withheld. If any party is
unable to obtain the approval of its public report, statement or release from
the other parties and such report, statement or release is, in the opinion of
legal counsel to such parties, required by law in order to discharge such
party's disclosure obligations, then such party may make or issue the legally
required report, statement or release and promptly furnish the other party with
a copy thereof. Sellers, the Indemnifying Stockholders, and Purchaser will also
obtain the other party's prior approval of any press release to be issued
immediately following the Closing announcing the consummation of the
transactions contemplated by this Agreement.
13.6 FURTHER ASSURANCES; POST-CLOSING COOPERATION.
(a) Subject to the terms and conditions of this Agreement, at
any time or from time to time after the Closing, each of the parties hereto
shall execute and deliver such other documents and instruments, provide such
materials and information and take such other actions as may reasonably be
necessary to fulfill its obligations under this Agreement.
(b) Following the Closing, each party will afford the other
party, its counsel and its accountants, during normal business hours, reasonable
access to the books, records and other data relating to Sellers in its
possession with respect to periods prior to the Closing and the right to make
copies and extracts therefrom, to the extent that such access may be reasonably
required by the requesting party in connection with (i) the preparation of Tax
Returns, (ii) the determination or enforcement of rights and obligations under
this Agreement, (iii) compliance with the requirements of any Governmental or
Regulatory Authority, or (iv) in connection with
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any actual or threatened Action or Proceeding. Further, each party agrees
for a period extending six (6) years after the Closing Date not to destroy or
otherwise dispose of any such books, records and other data unless such party
shall first offer in writing to surrender such books, records and other data
to the other party and such other party shall not agree in writing to take
possession thereof during the ten (10) day period after such offer is made.
(c) If, in order properly to prepare its Tax Returns, other
documents or reports required to be filed with Governmental or Regulatory
Authorities or its financial statements or to fulfill its obligations
hereunder, it is necessary that a party be furnished with additional
information, documents or records relating to the Business of Sellers not
referred to in paragraph (b) above, and such information, documents or
records are in the possession or control of the other party, such other party
agrees to use its Best Efforts to furnish or make available such information,
documents or records (or copies thereof) at the recipient's request, cost and
expense. Any information obtained in accordance with this paragraph shall be
held confidential.
(d) Notwithstanding anything to the contrary contained in
this Section, if the parties are in an adversarial relationship in litigation
or arbitration, the furnishing of information, documents or records in
accordance with any provision of this section shall be subject to applicable
rules relating to discovery.
13.7 WAIVER. Any term or condition of this Agreement may be waived
at any time by the party that is entitled to the benefit thereof, but no such
waiver shall be effective unless set forth in a written instrument duly
executed by or on behalf of the party against whom such waiver is asserted.
No waiver by any party of any term or condition of this Agreement, in any one
or more instances, shall be deemed to be or construed as a waiver of the same
or any other term or condition of this Agreement on any future occasion. All
remedies, either under this Agreement or by law or otherwise afforded, shall
be cumulative and not alternative.
13.8 TRANSFER TAXES. Any stock transfer or other like taxes or
recording fees payable as a result of the transactions contemplated hereby,
if any, shall be paid by the Purchaser. The Purchaser and Sellers agree to
cooperate with each other in the making of all filings required in connection
with any transfer taxes.
13.9 AMENDMENT. This Agreement may be amended, supplemented or
modified only by a written instrument duly executed by or on behalf of
Purchaser, the Representative and Sellers.
13.10 NO THIRD PARTY BENEFICIARY. The terms and provisions of this
Agreement are intended solely for the benefit of each party hereto the
Purchaser Indemnified Persons, the Indemnifying Stockholder Indemnified
Persons and their respective successors or permitted assigns, and it is not
the intention of the parties to confer third-party beneficiary rights upon
any other Person.
13.11 NO ASSIGNMENT; BINDING EFFECT. Neither this Agreement nor any
right, interest or obligation hereunder may be assigned by any party hereto
without the prior written consent of the other party hereto and any attempt
to do so will be void; PROVIDED, HOWEVER, that Purchaser may assign or
transfer all (but not less than all) of its rights and obligations under this
Agreement (a) to
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any Person that is wholly-owned, directly or indirectly, by Purchaser or (b)
after the Closing, to any Person to whom Purchaser sells the Business and
substantially all of the Sellers' assets; and PROVIDED, FURTHER, that
Purchaser may collaterally assign its rights hereunder to any Person or
Persons providing financing to Purchaser in connection with the transactions
contemplated hereby. Subject to the preceding sentence, this Agreement is
binding upon, inures to the benefit of and is enforceable by the parties
hereto and their respective successors and assigns.
13.12 INVALID PROVISIONS. If any provision of this Agreement is held
to be illegal, invalid or unenforceable under any present or future law, and
if the rights or obligations of any party hereto under this Agreement will
not be materially affected thereby, (a) such provision will be fully
severable, (b) this Agreement will be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised a part
hereof, (c) the remaining provisions of this Agreement will remain in full
force and effect and will not be affected by the illegal, invalid or
unenforceable provision or by its severance herefrom, and (d) in lieu of such
illegal, invalid or unenforceable provision, there will be added
automatically as a part of this Agreement a legal, valid and enforceable
provision as similar in economic and legal effect to such illegal, invalid or
unenforceable provision as may be possible.
13.13 GOVERNING LAW.
(a) This Agreement shall be governed by the laws of the
State of Delaware (regardless of the laws that might otherwise govern under
applicable principles of conflicts of law of the State of Delaware) as to all
matters including, but not limited to, matters of validity, construction,
effect, performance and remedies.
(b) Any dispute between any of the parties hereto or any
claim by a party against another party arising out of or relating to this
Agreement or relating to any alleged breach hereof shall be determined by
arbitration in accordance with the rules then in force of the American
Arbitration Association. The arbitration proceedings shall take place in
Denver, Colorado or such other location as the parties in dispute may agree
upon. The arbitration proceedings shall be subject to the substantive laws
of the State of Delaware. There shall be one arbitrator, as shall be agreed
upon by the parties in dispute, who shall be an individual skilled in the
legal and business aspects of the subject matter of this Agreement and of the
dispute. In the absence of such an agreement, each party in dispute shall
select one arbitrator and the arbitrators so selected shall select a third
arbitrator. In the event the arbitrators cannot agree upon the selection of
a third arbitrator, such third arbitrator shall be appointed by the American
Arbitration Association at the request of any of the parties in dispute. The
arbitrator shall be an individual skilled in the legal and business aspects
of the subject matter of this Agreement and of the dispute. The decision
rendered by the arbitrator shall be accompanied by a written opinion in
support thereof. Such decision shall be final and binding upon the parties
in dispute without right of appeal. Judgment upon any such decision may be
entered into any court having jurisdiction thereof, or application may be
made to such court for a judicial acceptance of the decision in an order of
enforcement. Costs of the arbitration shall be assessed by the arbitrator or
arbitrators against all or any of the parties in dispute and shall be paid
promptly by the party or parties so assessed.
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13.14 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
13.15 CONSTRUCTION. The parties hereby acknowledge and agree that
the drafting of this Agreement has been a collaborative effort and that no
party shall be deemed to be the sole or primary drafter. Any rule or
provision of law which provides that a contract or agreement is to be
construed against the author of the contract or agreement shall not apply to
this Agreement, any ancillary agreements or the documents attached hereto as
exhibits or schedules hereto or thereto.
[signature pages follow]
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IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the duly authorized officer of each party hereto as of the date
first above written.
ARCHIBALD CANDY CORPORATION
By: /s/ Ted A. Shepherd
------------------------
Name: Ted A. Shepherd
Title: President and Chief Operating Officer
SWEET FACTORY ACQUISITION CORP.
By: /s/ Ted A. Shepherd
------------------------
Name: Ted A. Shepherd
Title: President and Chief Operating Officer
SWEET FACTORY GROUP, INC.
By: /s/ T. Robert Bell
------------------------
Name: T. Robert Bell
Title: C.E.O.
SWEET FACTORY, INC.
By: /s/ T. Robert Bell
------------------------
Name: T. Robert Bell
Title: C.E.O.
SF CANDY COMPANY
By: /s/ T. Robert Bell
------------------------
Name: T. Robert Bell
Title: C.E.O.
SF PROPERTIES, INC.
By: /s/ T. Robert Bell
------------------------
Name: T. Robert Bell
Title: C.E.O.
49
<PAGE>
"INDEMNIFYING STOCKHOLDERS"
HOLDERS OF SERIES A PREFERRED STOCK
1991 BROTMAN CHILDREN'S TRUST
By: /s/ John Meisenbach
------------------------
John Meisenbach
BAYSIDE & CO., NOMINEE FOR T. ROWE
PRICE THRESHOLD FUND, II, L.P.
By: /s/
------------------------
Managing Director
CONSUMER VENTURE PARTNERS II, L.P.
By: CONSUMER VENTURE ASSOCIATES,
II, L.P.
Its General Partner
By: /s/ Pearson C. Cummin, III
--------------------------
Pearson C. Cummin, III
EDGAR F. BERNER TRUST
DATED FEBRUARY 17, 1989
By: /s/ Edgar F. Berner, Trustee
----------------------------
Edgar F. Berner, Trustee
50
<PAGE>
"INDEMNIFYING STOCKHOLDERS"
SHAW VENTURE PARTNERS IV, L.P.
By: /s/
--------------------------------
General Partner
/s/ Jeffrey H. Brotman
---------------------------
JEFFREY H. BROTMAN
BANKAMERICA VENTURES
(formerly First Small Business Investment Co.)
By: /s/ Jess R. Marzak
---------------------------
Its: Managing Director
TRINITY VENTURES II, L.P., a California
Limited Partnership
By: TRINITY TVL PARTNERS, L.P.,
Its General Partner
By: /s/ James G. Shennan, Jr.
---------------------------
James G. Shennan, Jr.,
General Partner
51
<PAGE>
TRINITY VENTURES III, L.P., a California
Limited Partnership
By: s TRINITY TVL PARTNERS, L.P.,
Its General Partner
By: /s/ James G. Shennan, Jr.
-----------------------------
James G. Shennan, Jr.,
General Partner
TRINITY VENTURES SIDE-BY-SIDE L.L.P.
a California Limited Partnership
By: /s/
-------------------------------
Its:__________________________
WESTON PRESIDIO OFFSHORE CAPITAL
C.V., a California Limited Partnership
By: WESTON PRESIDIO CAPITAL
MANAGEMENT, L.P.
By: /s/ James B. McElwee
---------------------------
James B. McElwee
General Partner
HOLDERS OF SERIES B PREFERRED STOCK
BAYSIDE & CO., NOMINEE FOR T. ROWE
PRICE THRESHOLD FUND, II, L.P.
By: /s/
----------------------------
Managing Director
52
<PAGE>
CONSUMER VENTURE PARTNERS I, L.P.
By: CONSUMER VENTURE ASSOCAITES,
I, L.P.
Its General Partner
By: /s/ Pearson C. Cummin, III
---------------------------
Pearson C. Cummin, III
CONSUMER VENTURE PARTNERS II, L.P.
By: CONSUMER VENTURE ASSOCIATES,
II, L.P.
Its General Partner
By: /s/ Pearson C. Cummin, III
---------------------------
Pearson C. Cummin, III
/s/ D. Michael Brotman
---------------------------
D. MICHAEL BROTMAN
Separate Property Account
/s/ D. Michael Brotman
---------------------------
D. MICHAEL BROTMAN
EDGAR F. BERNER TRUST
DATED FEBRUARY 17, 1989
By: /s/ Edgar F. Berner, Trustee
---------------------------
Edgar F. Berner, Trustee
/s/ Jacob M. (George) Plyser
---------------------------
JACOB M. (GEORGE) PLYSER
53
<PAGE>
/s/ Jeffrey H. Brotman
---------------------------
JEFFREY H. BROTMAN
KEY TRUST CO OF THE NORTHWEST
TTEE RALPH R. SHAW TR FBO
LORRAINE SHAW
By: /s/ Ralph R. Shaw
---------------------------
Ralph R. Shaw, Trustee
KEY TRUST CO OF THE NORTHWEST
TTEE RALPH R. SHAW TR FBO RENEE
SHAW
By: /s/ Ralph R. Shaw
---------------------------
Ralph R. Shaw, Trustee
KEY TRUST CO OF THE NORTHWEST
TTEE RALPH R. SHAW TR FBO RUSSELL
SHAW
By: /s/ Ralph R. Shaw
---------------------------
Ralph R. Shaw, Trustee
54
<PAGE>
OAK INVESTMENT PARTNERS V., L.P.
By: /s/ Gerald R. Gallagher
---------------------------
Gerald R. Gallagher
Title: General Partner of Oak
Investments V, Limited
Partnership, the General
Partner of Oak Investment
Partners V, Limited Partnership
OAK V AFFILIATES FUND, L.P.
By: /s/ Gerald R. Gallagher
---------------------------
Gerald R. Gallagher
Title: General Partner of Oak V
Affiliates, Limited Partnership,
the General Partner of Oak V
Affiliates Fund, Limited
Partnership
/s/ Ralph R. Shaw
---------------------------
RALPH R. SHAW
SHAW VENTURE PARTNERS IV, L.P.
By: /s/ Ralph R. Shaw
---------------------------
Its: General Partner
SHENNAN FAMILY PARTNERSHIP I
By: /s/ J.G. Shennan Jr.
---------------------------
J.G. Shennan Jr.
Managing G.P.
55
<PAGE>
TRINITY VENTURES IV, L.P., a California
Limited Partnership
By: TRINITY TVL PARTNERS, L.P.,
Its General Partner
By: /s/ James G. Shennan, Jr.
---------------------------
James G. Shennan, Jr.
General Partner
TRINITY VENTURES SIDE-BY-SIDE I, L.P.
a California Limited Partnership
By: /s/
---------------------------------
Its:_______________________
WESTON PRESIDIO OFFSHORE CAPITAL
C.V., a California Limited Partnership
By: WESTON PRESIDIO CAPITAL
MANAGEMENT, L.P.
By: /s/ James B. McElwee
---------------------------
James B. McElwee
General Partner
56
<PAGE>
HOLDERS OF SERIES C STOCK
BANKAMERICA CAPITAL
CORPORATION
By: /s/ James D. Murphy
---------------------------
James D. Murphy
Its: Managing Director
HOLDERS OF COMMON STOCK
BERNER COMMUNITY TRUST
By: /s/ Edgar F. Berner
---------------------------
Its: Trustee
/s/ Michael A. Slavens
---------------------------
MICHAEL A. SLAVENS
/s/ T. Robert Bell
---------------------------
T. ROBERT BELL
57
<PAGE>
SCHEDULES
Schedule A: Disclosure Schedule
Schedule B: Indemnifying Stockholders
EXHIBITS
EXHIBIT A: Certificate of Merger
EXHIBIT 5.3 Conflicts
EXHIBIT 9.2(k) Employees
Exhibit 9.2(1) Form of Sweet Factory Estoppel Certificate
EXHIBIT 9.2(p) Form of Tax Letter
58
<PAGE>
FIRST SUPPLEMENTAL INDENTURE
FIRST SUPPLEMENTAL INDENTURE, dated as of December 7, 1998, among
Archibald Candy Corporation, an Illinois corporation (the "Company"), the
Guarantors named herein and The Bank of New York, a New York banking
corporation, as trustee (the "Trustee").
WHEREAS, the Company has duly issued its 10-1/4% Senior Secured
Notes Due 2004 (the "Notes"), in the aggregate principal amount of
$100,000,000 pursuant to an Indenture between the Company and the Trustee
dated as of July 2, 1997 (the "Indenture"), and the Notes are outstanding on
the date hereof; and
WHEREAS, Section 9.2 of the Indenture provides that the Company and
the Trustee may amend certain provisions of the Indenture with the written
consent of the Holders of at least a majority of the principal amount of the
then outstanding Notes and execute a supplemental indenture to evidence such
amendment; and
WHEREAS, pursuant to a Consent Solicitation Statement, dated
November 23, 1998 and the accompanying consent letter, the Company solicited,
and has received, consents from Holders representing at least a majority in
aggregate principal amount of its outstanding Notes to the certain amendments
to the Indenture described therein; and
WHEREAS, Section 10.7 of the Indenture provides, among other
things, that the Company shall cause each Restricted Subsidiary that is
formed or acquired after the date of the Indenture to become a Guarantor
thereunder and to execute and deliver a supplemental indenture pursuant to
which such Restricted Subsidiaries shall unconditionally guarantee all of the
Company's Obligations as set forth in Section 10.7 of the Indenture; and
WHEREAS, Section 9.1 of the Indenture provides, among other things,
that the Company, the Guarantors and the Trustee may amend or supplement the
Indenture without the consent of any Holder to comply with Article 10.7
thereof and execute a supplemental indenture with respect thereto; and
WHEREAS, it is provided in Section 9.4 of the Indenture that a
supplemental indenture becomes effective in accordance with its terms and
thereafter binds every Holder; and
NOW, THEREFORE, the parties hereto agree as follows:
<PAGE>
SECTION 1 DEFINITIONS
Capitalized terms not defined herein shall have the meanings
given to such terms in the Indenture.
SECTION 2 AMENDMENTS TO THE INDENTURE
Section 2.1 AMENDMENT TO THE "EXECUTION AND AUTHENTICATION" COVENANT.
The third paragraph of Section 2.2 of the Indenture is hereby amended
and restated to read in its entirety as follows:
The Trustee shall, upon a Company Order, authenticate for original
issue up to $130,000,000 aggregate principal amount of the Notes.
The aggregate principal amount of Notes outstanding at any time may
not exceed $130,000,000 except as provided in Section 2.7 hereof.
Section 2.2 AMENDMENT TO THE "OPTIONAL REDEMPTION" PROVISION.
Section 3.7(b) of the Indenture shall be amended and restated in its
entirety as follows:
"(b) At any time or from time to time prior to July 1, 2000, the Company
may, at its option, redeem up to one-third of the aggregate principal
amount of Notes ever issued under this Indenture at a redemption price of
110.250% of the principal amount thereof, plus accrued and unpaid interest,
if any, to the applicable redemption date, with the net cash proceeds of
one or more Public Equity Offerings; PROVIDED that (i) such redemption
shall occur within 90 days of the date of closing of such public offering
and (ii) at least two-thirds aggregate principal amount of the Notes ever
issued under this Indenture remains outstanding immediately after giving
effect to each such redemption."
Section 2.3 CONFORMING CHANGES TO THE INDENTURE.
The Indenture is otherwise amended, to the extent necessary, to permit
the issuance of up to $130,000,000 in the aggregate of the Company's 10-1/4%
Senior Secured Notes due 2004.
SECTION 3 GUARANTEE BY RESTRICTED SUBSIDIARIES
2
<PAGE>
Each of Sweet Factory Group, Inc., Sweet Factory, Inc., SF Properties,
Inc. and SF Candy Company unconditionally guarantees all of the Company's
Obligations as set forth in Section 10.7 of the Indenture.
SECTION 4 MISCELLANEOUS
Section 4.1 GOVERNING LAW.
THIS FIRST SUPPLEMENTAL INDENTURE SHALL BE CONSTRUED, INTERPRETED AND
THE RIGHTS OF THE PARTIES DETERMINED IN ACCORDANCE WITH THE LAWS OF THE STATE
OF NEW YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF
NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. THE COMPANY
HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY NEW YORK STATE COURT
SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK OR ANY FEDERAL
COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK IN RESPECT
OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT, AND IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OR ITS PROPERTY,
GENERALLY AND UNCONDITIONALLY, JURISDICTION OF THE AFORESAID COURTS. THE
COMPANY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO
UNDER APPLICABLE LAW, TRIAL BY JURY AND ANY OBJECTION THAT IT MAY NOW OR
HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH SUIT, ACTION OR
PROCEEDING BROUGHT IN ANY SUCH COURT AND ANY CLAIM THAT ANY SUCH SUIT, ACTION
OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT
FORUM. THE COMPANY IRREVOCABLY CONSENTS, TO THE FULLEST EXTENT IT MAY
EFFECTIVELY DO SO UNDER APPLICABLE LAW, TO THE SERVICE OF PROCESS OF ANY OF
THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF
COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO THE
COMPANY AT ITS ADDRESS SET FORTH HEREIN, SUCH SERVICE TO BECOME EFFECTIVE 30
DAYS AFTER SUCH MAILING. NOTHING HEREIN SHALL AFFECT THE RIGHT OF ANY PERSON
TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL
PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE COMPANY IN ANY OTHER
JURISDICTION.
Section 4.2 CONTINUING AGREEMENT.
3
<PAGE>
Except as herein amended, all terms, provisions and conditions of the
Indenture, all Exhibits thereto and all documents executed in connection
therewith shall continue in full force and effect and shall remain
enforceable and binding in accordance with their terms.
Section 4.3 CONFLICTS.
In the event of a conflict between the terms and conditions of the
Indenture and the terms and conditions of this First Supplemental Indenture,
then the terms and conditions of this First Supplemental Indenture shall
prevail.
Section 4.4 COUNTERPART ORIGINALS.
The parties may sign any number of copies of this First Supplemental
Indenture. Each signed copy shall be an original, but all of them together
represent the same agreement.
Section 4.5 HEADINGS, ETC.
The Headings of the Sections of this First Supplemental Indenture have
been inserted for convenience of reference only, are not to be considered a
part hereof and shall in no way modify or restrict any of the terms or
provisions hereof.
[Signature pages follow]
4
<PAGE>
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have executed and
delivered this Supplemental Indenture as of the date first written above.
ARCHIBALD CANDY
CORPORATION
By: /s/ Ted A. Shepherd
Name: Ted A. Shepherd
Title: President and Chief Operating Officer
Attest:
/s/ Donna M. Snopek
Name: Donna M. Snopek
Title: Vice President Finance and Accounting
SWEET FACTORY GROUP, INC.
By: /s/ Ted A. Shepherd
Name: Ted A. Shepherd
Title: President and Chief Operating Officer
Attest:
/s/ Donna M. Snopek
Name: Donna M. Snopek
Title: Vice President Finance and Accounting
<PAGE>
SWEET FACTORY, INC.
By: /s/ Ted A. Shepherd
Name: Ted A. Shepherd
Title: President and Chief Operating Officer
Attest:
/s/ Donna M. Snopek
Name: Donna M. Snopek
Title: Vice President Finance and Accounting
SF PROPERTIES, INC.
By: /s/ Ted A. Shepherd
Name: Ted A. Shepherd
Title: President and Chief Operating Officer
Attest:
/s/ Donna M. Snopek
Name: Donna M. Snopek
Title: Vice President Finance and Accounting
SF CANDY COMPANY
By: /s/ Ted A. Shepherd
Name: Ted A. Shepherd
Title: President and Chief Operating Officer
Attest:
/s/ Donna M. Snopek
Name: Donna M. Snopek
Title: Vice President Finance and Accounting
<PAGE>
THE BANK OF NEW YORK, as Trustee
By: /s/ Mary LaGumina
Name: Mary LaGumina
Title: Assistant Vice President
