<PAGE>
As filed with the Securities and Exchange Commission on February 20, 1998
Registration No. 333-43555
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
POST EFFECTIVE AMENDMENT NO. 1 TO FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
WHOLE FOODS MARKET, INC.
(Exact name of registrant as specified in its charter)
Texas 74-1989366
(State of incorporation) (I.R.S. employer identification no.)
601 N. Lamar Boulevard, Suite 300
Austin, Texas 78703
512-477-4455
(Address, including zip code, and telephone number, including area
code, of registrant's principal executive offices)
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Glenda J. Flanagan
Chief Financial Officer
Whole Foods Market, Inc.
Austin, Texas 78703
512-477-4455
(Name, address including zip code, and telephone number, including area
code, of agents for service)
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Copy to:
Bruce H. Hallett
Crouch & Hallett, L.L.P.
717 N. Harwood St., Suite 1400
Dallas, Texas 75201
(214) 953-0053
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Approximate date of commencement of proposed sale to the public: As soon
as practicable after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [x]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
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<PAGE>
EXPLANATORY NOTE
This Post-Effective Amendment No. 1 to Form S-3 is being filed to
include Exhibit Nos. 2.1 and 2.2 in the registrant's Registration Statement on
Form S-3 (File No. 333-43555).
Item 16. Exhibits.
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2.1* --- Agreement and Plan of Merger, among the registrant, WFM
Colorado Acquisition, Inc., Allegro Coffee Company, Inc. and
the shareholders of Allegro Coffee Company, Inc.
2.2* Agreement and Plan of Merger, among the registrant, Whole Foods
Market Group, Inc., the Merchant of Vino companies, and the
stockholders of the Merchant of Vino companies.
3.1 --- Restated Articles of Incorporation of the registrant. (2)
3.2 --- Amended and Restated Bylaws of the registrant. (3)
5.1 --- Opinion of Crouch & Hallett, L.L.P. (1)
23.1 --- Consent of KPMG Peat Marwick LLP. (1)
23.2 --- Consent of Crouch & Hallett, L.L.P. (included in opinion filed
as Exhibit 5.1).
24 --- Power of Attorney (included on p. II-3).
- - ----------------
* Filed herewith
(1) Filed as an exhibit to Registration Statement No. 333-43555 and
incorporated herein by reference.
(2) Filed as an exhibit to Registration Statement No. 33-63824 on Form S-4 and
incorporated herein by reference.
(3) Filed as an exhibit to the registrant's annual report on Form 10-K for the
fiscal year ended September 24, 1995, and incorporated herein by reference.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized in the City of Austin and State of Texas on the 20th day of February,
1998.
WHOLE FOODS MARKET, INC.
By /s/ Glenda Flanagan
--------------------------------------
Glenda Flanagan, Vice President and
Chief Financial Officer
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, as amended,
this registration statement has been signed below by the following persons in
the capacities and on February , 1998.
Signature Title
- - --------- -----
* Chairman of the Board
- - ---------------------------------- and Director
John Mackey (Principal Executive Officer)
/s/ Glenda Flanagan Vice President and Chief Financial
- - ---------------------------------- Officer (Principal Financial Officer
Glenda Flanagan and Accounting Officer)
* Director
- - ----------------------------------
Dr. Cristina G. Banks
* Director
- - ----------------------------------
David W. Dupree
* Director
- - ----------------------------------
Dr. John B. Elstrott
* Director
- - ----------------------------------
Avram J. Goldberg
* Director
- - ----------------------------------
Fred "Chico" Lager
* Director
- - ----------------------------------
Linda A. Mason
* Director
- - ----------------------------------
Dr. Ralph Z. Sorenson
* /s/ Glenda Flanagan
--------------------------------
Attorney-In-Fact
<PAGE>
EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (the "Agreement") is made as of the 16th
day of December, 1997, by and among Whole Foods Market, Inc., a Texas
corporation (the "Parent"); WFM Colorado Acquisition, Inc., a Colorado
corporation (the "Subsidiary"); Allegro Coffee Company, Inc., a Colorado
corporation (the "Company"); and the individuals listed on Schedule I hereto
(the "Shareholders").
In consideration of the mutual covenants and agreements contained herein,
the parties hereto covenant and agree as follows:
1. THE MERGER.
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1.1. Merger. In accordance with the provisions of the business
------
corporation laws of the State of Colorado at the Effective Date (as hereinafter
defined), the Subsidiary shall be merged (the "Merger") with and into the
Company, and the Company shall be the surviving corporation (the "Surviving
Corporation") and as such shall continue to be governed by the laws of the State
of Colorado.
1.2. Continuing of Corporate Existence. Except as may otherwise be set
---------------------------------
forth herein, the corporate existence and identity of the Company, with all its
purposes, powers, franchises, privileges, rights and immunities, shall continue
unaffected and unimpaired by the Merger, and the corporate existence and
identity of the Subsidiary, with all its purposes, powers, franchises,
privileges, rights and immunities, at the Effective Date shall be merged with
and into that of the Company, and the Surviving Corporation shall be vested
fully therewith and the separate corporate existence and identity of the
Subsidiary shall thereafter cease except to the extent continued by statute.
1.3. Effective Date. The Merger shall become effective upon the filing on
--------------
the Closing Date (as defined herein) of the Articles of Merger with the
Secretary of State of the State of Colorado pursuant to the provisions of the
Colorado Business Corporation Act. The date and time when the Merger shall
become effective is hereinafter referred to as the "Effective Date".
1.4. Corporate Government.
--------------------
(a) The Articles of Incorporation of the Company, as in effect on the
Effective Date, shall continue in full force and effect and shall be the
Certificate of Incorporation of the Surviving Corporation.
(b) The Bylaws of the Company, as in effect as of the Effective Date,
shall continue in full force and effect and shall be the Bylaws of the
Surviving Corporation.
<PAGE>
(c) The members of the Board of Directors and the officers of the
Surviving Corporation shall be the persons holding such offices in the
Subsidiary as of the Effective Date. None of the members of the Board of
Directors or the officers of the Company as of the date hereof shall become
members of the Board of Directors or executive officers of the Surviving
Corporation upon the Effective Date.
1.5. Rights and Liabilities of the Surviving Corporation. The Surviving
---------------------------------------------------
Corporation shall have the following rights and obligations:
(a) The Surviving Corporation shall have all the rights, privileges
immunities and powers and shall be subject to all the duties and
liabilities of a corporation organized under the laws of the State of
Colorado.
(b) The Surviving Corporation shall possess all of the rights,
privileges immunities and franchises, of either a public or private nature,
of the Company and the Subsidiary and all property, real, personal and
mixed, and all debts due on whatever account, including subscription to
shares, and all other choses in action, and every other interest of or
belonging or due to the Company and the Subsidiary shall be taken and
deemed to be transferred or invested in the Surviving Corporation without
further act or deed.
(c) At the Effective Date, the Surviving Corporation shall thenceforth
be responsible and liable for all liabilities and obligations of the
Company and the Subsidiary, and any claim existing or action or proceeding
pending by or against the Subsidiary or the Company may be prosecuted as if
the Merger had not occurred, or the Surviving Corporation may be
substituted in its place. Neither the rights of creditors nor any liens
upon the property of the Subsidiary or the Company shall be impaired by the
Merger.
1.6. Closing. Consummation of the transactions contemplated by this
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Agreement (the "Closing") shall take place at the offices of Parent in Austin,
Texas commencing as soon as possible after the execution of this Agreement when
each of the other conditions set forth in Articles 6 and 7 have been satisfied
or waived, and shall proceed promptly to conclusion, or at such other place,
time and date as shall be fixed by mutual agreement between Parent and the
Company. The day on which the Closing shall occur is referred to herein as the
"Closing Date." Each party will cause to be prepared, executed and delivered
Articles of Merger to be filed with the Secretary of State of Colorado and all
other appropriate and customary documents as any party or its counsel may
reasonably request for the purpose of consummating the transactions contemplated
by this Agreement. All actions taken at the Closing shall be deemed to have
been taken simultaneously at the time the last of any such actions is taken or
completed.
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1.7. Tax Consequences. It is intended that the Merger shall constitute a
----------------
reorganization within the meaning of Section 368 of the Internal Revenue Code of
1986, as amended (the "Code"), and that this Agreement shall constitute a "plan
of reorganization" for the purposes of Section 368 of the Code.
1.8. Pooling of Interests. It is the intention of the parties hereto that
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the Merger will be treated for financial reporting purposes as a pooling of
interests.
2. CONVERSION OF SHARES.
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2.1. Conversion of Shares. At the Effective Date, by virtue of the Merger
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and without any action on the part of the holder thereof:
(a) The outstanding shares of common stock, no par value, of the
Company ("Company Common Stock") in the aggregate and on a fully diluted
basis (assuming the exercise of the "Convertible Securities" (defined
hereinafter)) immediately prior to the Effective Date, shall at the
Effective Date, by virtue of the Merger and without any action on the part
of the holders thereof, be converted into such number of shares of common
stock, no par value, of Parent ("Parent Common Stock") as is equal to
$7,862,500 divided by the average closing price (the "Determination
Price") of Parent Common Stock (as reported by the Southwest Edition of The
Wall Street Journal) on the Nasdaq National Market System for the 30
trading days ended two trading days prior to the Closing Date. The
foregoing number of shares of Parent Common Stock shall be referred to
hereinafter as the "Merger Consideration".
(b) The Shareholders owning Convertible Securities hereby exercise
their respective Convertible Securities, provided that such exercise shall
be effective as of the Effective Date. As set forth in paragraph (a)
above, the shares of Company Common Stock to be issued upon the exercise of
the Convertible Securities shall be included in the shares of Company
Common Stock that are to be converted into Parent Common Stock as set forth
therein. The ownership percentages of the Shareholders, as set forth on
Schedule 1 to this Agreement, have been adjusted so that the Merger
Consideration to be received by holders of the Convertible Securities is
reduced by the exercise price of such Convertible Securities. The term
"Convertible Securities" shall mean all outstanding options, warrants or
other securities of the Company convertible into Common Stock immediately
prior to the Effective Date.
(c) Each share of common stock, $.01 par value, of Subsidiary which
shall be outstanding immediately prior to the Effective Date, shall at the
Effective Date, by virtue of the Merger and without any action on the part
of the holder thereof, be converted into one share of newly issued Company
Common Stock.
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(d) The Merger Consideration shall be allocated among the
Shareholders in accordance with the ownership percentages set forth
opposite their names on Schedule 1 to this Agreement. No scrip or
fractional shares of Parent Common Stock shall be issued in the Merger. All
fractional shares of Parent Common Stock to which a Shareholder of the
Company would otherwise be entitled with respect to each certificate
representing Company Common Stock issued pursuant to this Agreement shall
be aggregated. If a fractional share results from such aggregation, such
Shareholder shall be entitled to receive from Parent an amount in cash in
lieu of such fractional share, based on a per share price equal to the
Determination Price.
2.2. Closing Procedure. At the Closing, the Parent shall issue the shares
-----------------
of Parent Common Stock representing the Merger Consideration to the Shareholders
in exchange for certificates representing 100% of the Company Common Stock and
the documents evidencing the Convertible Securities; provided, however, that the
Parent and the Shareholders shall jointly deposit such nearest whole number of
shares of Parent Common Stock as is equal to $500,000 divided by the
Determination Price with an escrow agent (the "Post Closing Escrow Agent") to be
held pursuant to the terms of the Post-Closing Escrow Agreement of even date
herewith in the form attached hereto as Exhibit C (the "Post-Closing Escrow
Agreement"). The Post-Closing Escrow Agent shall hold such escrowed shares of
Parent Common Stock for a period of one year, after which the escrowed amount
shall be delivered to the Shareholders, subject to earlier claims in favor of
Parent as set forth in the Post-Closing Escrow Agreement.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SHAREHOLDERS. Except
------------------------------------------------------------------
as set forth on the Company Disclosure Schedule, the Company, each of the Core
Shareholders (as designated on Schedule 1) and each of the Non-Core Shareholders
(as designated on Schedule 1), hereby represent and warrant to Parent as
follows; provided, however, that (a) none of the Non-Core Shareholders are
-------- -------
hereby making any of the representations and warranties contained in this
Section 3 other than the representations and warranties set forth in Sections
3.3, 3.4, 3.5, 3.6 and 3.17 to the extent such representations and warranties
relate to such Shareholder, and (ii) notwithstanding the foregoing, each
Shareholder remains subject to his indemnification obligations set forth in
Section 8 hereof.
3.1. Organization and Good Standing of the Company. The Company is a
---------------------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the State of Colorado.
3.2. Subsidiaries, Investments. The Company has no equity, profit
-------------------------
sharing, participation or other ownership interest in any corporation or
partnership.
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3.3. Corporate Power and Authority; Binding Effect. The Company has the
---------------------------------------------
corporate power and authority and, to the best of its knowledge, all material
licenses and permits required by governmental authorities to own, lease and
operate its properties and assets, to carry on its business as currently being
conducted, and to execute, deliver and perform this Agreement. This Agreement
has been or will have been duly authorized, executed and delivered by the
Company and the Shareholders and is the legal, valid and binding obligation of
the Company and the Shareholders enforceable in accordance with its terms,
except that (a) enforceability may be limited by bankruptcy, insolvency or other
similar laws affecting creditors' rights and (b) the availability of equitable
remedies may be limited by equitable principles of general applicability.
3.4. Compliance with Other Instruments. Neither the execution and
---------------------------------
delivery by the Company or the Shareholders of this Agreement nor the
consummation by them of the transactions contemplated hereby will violate,
breach, be in conflict with, or constitute a default under, or permit the
termination or the acceleration of maturity of, or result in the imposition of
any lien, claim or encumbrance upon any property or asset of the Company
pursuant to (a) the Company's articles of incorporation or bylaws or (b) any
note, bond, indenture, mortgage, deed of trust, evidence of indebtedness, loan
or lease agreement, other agreement or instrument that is material to the
business of the Company, judgment, order, injunction or decree by which the
Company or a Shareholder is bound, to which any of them is a party or to which
any of their assets are subject.
3.5. Consents. No approval, authorization, consent, order or other action
--------
of, or filing with, any governmental authority or administrative agency is
required in connection with the execution and delivery by the Company or the
Shareholders of this Agreement or the consummation of the transactions
contemplated hereby. No approval, authorization or consent of any other third
party is required in connection with the execution and delivery by the Company
or the Shareholders of this Agreement and the consummation of the transactions
contemplated hereby.
3.6. Capitalization. Schedule 3.6 sets forth the authorized capital stock
--------------
of the Company. All of the issued and outstanding shares of the Company Common
Stock have been duly authorized and validly issued and are fully paid and
nonassessable and are owned of record and beneficially by the Shareholders, free
and clear of all liens, claims and encumbrances. As of the Closing, there will
be no voting trusts, shareholder agreements or other voting arrangements by the
shareholders of the Company. Other than the Convertible Securities, there is no
outstanding subscription, contract, convertible or exchangeable security,
option, warrant, call or other right obligating the Company to issue, sell,
exchange, or otherwise dispose of, or to purchase, redeem or otherwise acquire,
shares of, or securities convertible into or exchangeable for, capital stock of
the Company.
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<PAGE>
3.7. Financial Statements and Records of the Company.
-----------------------------------------------
(a) The Company has delivered to Parent true, correct and complete
copies of the following financial statements (collectively, the "Company
Financial Statements"): (i) the unaudited balance sheet of the Company as
of December 31, 1996, and the related statement of income for the year then
ended, and (ii) the unaudited balance sheet of the Company as of October
31, 1997, and the related statement of income for the ten months then
ended.
(b) The Company Financial Statements present fairly the assets,
liabilities and financial position of the Company as of the dates thereof
and the results of operations thereof for the periods then ended and have
been prepared in conformity with generally accepted accounting principles
applied on a consistent basis with prior periods. The books and records of
the Company have been and are being maintained in accordance with good
business practice, reflect only valid transactions, are complete and
correct in all material respects, and present fairly in all material
respects the basis for the financial position and results of operations of
the Company set forth in the Company Financial Statements.
(c) As of the Closing Date, the Closing Value of the Company, as
determined in accordance with Section 5.7 of this Agreement, will be no
less than $1,500,000.
3.8. Absence of Certain Changes. Since October 31, 1997, the Company has
--------------------------
not (except (a) as may result from the transactions contemplated by this
Agreement, (b) as set forth on the Company Financial Statements, or (c) as set
forth on Schedule 3.8):
(i) suffered any change in its business, results of operations,
working capital, assets, liabilities or condition (financial or otherwise)
or the manner of conducting its business other than changes in the ordinary
course of business that, individually or in the aggregate, have not had a
material adverse effect on the Company;
(ii) suffered any damage or destruction to or loss of its assets not
covered by insurance, or any loss of suppliers, that has a material adverse
effect on the business, results of operations, assets or condition
(financial or otherwise) of the Company;
(iii) acquired or disposed of any asset, or incurred, assumed,
guaranteed, endorsed, paid or discharged any indebtedness, liability or
obligation, or subjected or permitted to be subjected any material amount
of assets to any lien, claim or encumbrance of any kind, except in the
ordinary
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<PAGE>
course of business or pursuant to agreements in force at the date of this
Agreement;
(iv) forgiven, compromised, canceled, released, waived or permitted
to lapse any material rights or claims;
(v) entered into or terminated any material agreement, commitment
or transaction, or agreed or made any changes in material leases or
agreements, other than renewals or extensions thereof and leases,
agreements, transactions and commitments entered into in the ordinary
course of business;
(vi) written up, written down or written off the book value of any
material amount of assets;
(vii) declared, paid or set aside for payment any dividend or
distribution with respect to its capital stock;
(viii) redeemed, purchased or otherwise acquired, or sold, granted
or otherwise disposed of, directly or indirectly, any of its capital stock
or securities or any rights to acquire such capital stock or securities, or
agreed to changes in the terms and conditions of any such rights
outstanding as of the date of this Agreement;
(ix) increased the compensation of or paid any bonuses to any
employees or contributed to any employee benefit plan, other than in
accordance with established policies, practices or requirements;
(x) entered into any employment, consulting, compensation or
collective bargaining agreement with any person or group; or
(xi) entered into, adopted or amended any employee benefit plan.
3.9. No Material Undisclosed Liabilities. There are no material
-----------------------------------
liabilities or obligations of the Company of any nature, whether absolute,
accrued, contingent or otherwise, other than (a) the liabilities and obligations
that are fully reflected, accrued, or reserved against on the Company Financial
Statements, for which the reserves are appropriate and reasonable, or incurred
in the ordinary course of business and consistent with past practices since
October 31, 1997, or (b) liabilities or obligations not required to be disclosed
in financial statements prepared in accordance with generally accepted
accounting principles.
3.10. Tax Liabilities. The Company has filed all federal, state, county
---------------
and local tax returns and reports required to be filed by it, including those
with respect to income, payroll, property, withholding, social security,
unemployment, franchise,
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excise and sales taxes; has either paid in full all taxes that have become due
as reflected on any return or report and any interest and penalties with respect
thereto or has fully accrued on its books or has established adequate reserves
for all taxes payable but not yet due; and has made required cash deposits with
appropriate governmental authorities representing estimated payments of taxes,
including income taxes and employee withholding tax obligations. No extension or
waiver of any statute of limitations or time within which to file any return has
been granted to or requested by the Company with respect to any tax. No
unsatisfied deficiency, delinquency or default for any tax, assessment or
governmental charge has been assessed (or, to the knowledge of the Company,
claimed or proposed) against the Company, nor has the Company received notice of
any such deficiency, delinquency or default.
3.11. Title to Properties.
-------------------
(a) The Company has good and marketable fee or leasehold title to
the assets reflected in its books and records as being owned or leased,
including (except as they have since been affected by transactions in the
ordinary course of business) the real and personal properties reflected in
the Company Financial Statements (except for assets subject to financing
leases required to be capitalized under generally accepted accounting
principles, all of which are so reflected in the Company Financial
Statements or notes thereto), and all assets purchased by the Company since
the date of the Company Financial Statements (except for such assets as
have been disposed of by the Company in the ordinary course of business),
free and clear of any lien, claim or encumbrance, except as reflected in
the Company Financial Statements or notes thereto and except for:
(i) liens for taxes, assessments or other governmental charges
not yet due and payable;
(ii) statutory liens incurred in the ordinary course of
business with respect to liabilities that are not yet due and payable;
(iii) landlord liens contained in leases in the ordinary course
of business; and
(iv) such imperfections of title and/or encumbrances as are not
material in character, amount or extent and do not materially detract
from the value or interfere with the use of the properties and assets
subject thereto or affected thereby.
(b) The Company does not own, nor has it ever owned, any real
property. With respect to the Company's leased real property (the "Real
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Estate"), to the Company's knowledge, (i) applicable zoning ordinances
permit the operation of the Company's business at the Real Estate; (ii) the
Company has all easements and rights, including easements for all
utilities, services, roadways and other means of ingress and egress,
necessary to operate its business on the Real Estate; (iii) the Real Estate
is not located within a flood or lakeshore erosion hazard area; and (iv)
neither the whole nor any portion of the Real Estate has been condemned,
requisitioned or otherwise taken by any public authority, and no notice of
any such condemnation, requisition or taking has been received; except in
each case where the failure of such provisions to be true and correct would
not have a material adverse effect on the business and operations of the
Company. No such condemnation, requisition or taking is threatened or
contemplated to the Company's knowledge, and there are no pending public
improvements which may result in special assessments against or which may
otherwise materially and adversely affect the Real Estate. To the knowledge
of the Company, the Real Estate has not been used for deposit or disposal
of hazardous wastes or substances in violation of any past or current law
in any material respect and there is no material liability under past or
current law with respect to any hazardous wastes or substances which have
been deposited or disposed of on or in the Real Estate.
(c) The Company has received no notice of, and has no actual
knowledge of, any material violation of any zoning, building, health, fire,
water use or similar statute, ordinance, law, regulation or code in
connection with the Real Estate.
(d) To the knowledge of the Company, no hazardous or toxic material
(as hereinafter defined) exists in any structure located on, or exists on
or under the surface of, the Real Estate which is, in any case, in material
violation of applicable environmental law. For purposes of this Section,
"hazardous or toxic material" shall mean waste, substance, materials,
smoke, gas or particulate matter designated as hazardous, toxic or
dangerous under any environmental law. For purposes of this Section,
"environmental law" shall include the Comprehensive Environmental Response
Compensation and Liability Act, the Clean Air Act, the Clean Water Act and
any other applicable federal, state or local environmental, health or
safety law, rule or regulation relating to or imposing liability or
standards concerning or in connection with hazardous, toxic or dangerous
waste, substance, materials, smoke, gas or particulate matter.
3.12. Condition of Assets. All of the assets of the Company viewed as a
-------------------
whole and not on an asset by asset basis are in good condition and working
order, ordinary wear and tear excepted, and are suitable for the uses for which
intended, free from any known defects, except such minor defects, as do not
substantially interfere with the continued use thereof.
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<PAGE>
3.13. Contracts. Set forth on Schedule 3.13 are complete and accurate
---------
lists of all of the following categories of contracts and commitments (including
summaries of oral contracts) to which the Company is a party or bound:
(a) contracts with any labor union; employee benefit plans or
contracts; and employment, consulting or similar contracts, including
confidentiality agreements;
(b) leases, whether as lessor or lessee; loan agreements, mortgages,
indentures, instruments of indebtedness or commitments in each case
involving indebtedness for borrowed money or money loaned to others; and
guaranty or suretyship, performance bond, indemnification or contribution
agreements involving obligations;
(c) contracts with third parties that involve aggregate payments by
the Company of more than $25,000;
(d) insurance policies material to the business of the Company; and
(e) other contracts that are material to the operations, business or
financial condition of the Company.
To the extent requested, the Company has furnished or made available accurate
and complete copies of the foregoing contracts and agreements to Parent. All
such contracts are valid, binding, subsisting and enforceable obligations of the
Company. No contracts or commitments have been made by the Company granting any
person any right to develop, franchise, license, own, manage or operate the
Supermarkets or any future store. The Company has not entered into any
commitment or understanding for the lease of real property other than the Real
Estate.
3.14. Litigation and Government Claims. There is no pending suit, action
--------------------------------
or litigation, or administrative, arbitration or other proceeding or
governmental investigation or inquiry, to which the Company is a party or to
which its assets are subject which would, if decided against the Company,
individually or in the aggregate, have a material adverse effect on the
business, results of operations, assets or the condition, financial or
otherwise, of the Company. To the knowledge of the Company, there are no such
proceedings threatened, contemplated or any basis for any unasserted claims
(whether or not the potential claimant may be aware of the claim) which would,
if decided against the Company, individually or in the aggregate, have a
material adverse effect on the business, results of operations, assets or the
condition, financial or otherwise, of the Company.
3.15. No Violations or Defaults. To the knowledge of the Company and the
-------------------------
Shareholders, the Company is not in violation of or default under nor has any
event
10
<PAGE>
occurred that, with the lapse of time or the giving of notice or both, would
constitute a violation of or default under, or permit the termination or the
acceleration of maturity of, or result in the imposition of a lien, claim or
encumbrance upon any property or asset of the Company pursuant to, the articles
of incorporation or bylaws of the Company or any loan or lease agreement, other
agreement or instrument, judgment, order, injunction or decree to which the
Company is a party, by which it is bound, or to which any of its assets is
subject, except where such violation or default would not have a material
adverse effect on the business, results of operations, assets or the condition,
financial or otherwise, of the Company. To the knowledge of the Company, there
are no existing violations of any law applicable to the Company's business that
have a material adverse effect on the Company's business, operations,
properties, assets or condition.
3.16. Labor Matters.
-------------
(a) The Company is not party to any collective bargaining agreements
with any union, and no collective bargaining agreement is currently being
negotiated by the Company.
(b) There are no discrimination charges against the Company
(relating to sex, age, race, national origin, handicap or veteran status)
pending before any federal or state agency or authority.
(c) There is no labor strike or similar material dispute pending or,
to the best knowledge of the Company, threatened against or involving the
Company.
(d) There is no arbitration proceeding under any collective
bargaining agreement pending or, to the knowledge of the Company,
threatened involving any employees of the Company.
(e) For the past two years, the Company has followed the practices
outlined in its employee policy manuals in all material respects with
regard to conditions and terms of employment and termination benefits with
respect to its employees.
3.17. Investment Representations. Each of the Shareholders acknowledges
--------------------------
receipt of the SEC Reports described in Section 4.7 from Parent and the
opportunity to ask questions of and receive answers from representatives of the
management of Parent concerning an investment in Parent Common Stock, and
acknowledges and agrees that (a) the shares of Parent Common Stock to be
received by virtue of the Merger are being acquired for investment purposes and
not with a view to the distribution or resale thereof in violation of the
Securities Act of 1933, as amended (the "1933 Act"), and cannot be resold unless
they are registered under the 1933 Act
11
<PAGE>
and applicable state securities laws or an exemption from registration is
available therefor and (b) either such Shareholder is an "accredited investor"
as such term is used in Regulation D under the 1933 Act or such Shareholder has
appointed Clarence Peterson to act as a "purchaser representative" in accordance
with Regulation D.
3.18. Transaction with Affiliates. Upon the occurrence of the Closing,
---------------------------
neither the Shareholders nor any Affiliate of the Shareholders will have any
interest in or will own any property or right used principally in the conduct of
the Company's business. The term "Affiliate" shall mean the Shareholders, or
any member of the immediate family (including brother, sister, descendant,
ancestor or in-law) of the Shareholders, or any corporation, partnership, trust
or other entity in which the Shareholders or any such family member has a
substantial interest or is a director, officer, partner or trustee.
3.19. Brokers and Finders. Other than McCabe & Associates (whose fees
-------------------
and expenses incurred in connection with the transactions contemplated by this
Agreement shall equal no more than $230,000), the Company has not engaged any
person to act or render services as a broker, finder or similar capacity in
connection with the transactions contemplated herein and no person has, as a
result of any agreement or action by the Company, any right or valid claim
against the Company, Parent or any of Parent's affiliates for any commission,
fee or other compensation as a broker or finder, or in any similar capacity in
connection with the transactions contemplated herein.
3.20. Renewal Notes. As of the Closing Date, each of the persons (the
-------------
"Obligors") that has issued a note (the "Note") to the Company as consideration
for their purchase of Company Common Stock that was formerly owned by another
shareholder of the Company shall execute a renewal promissory note (in the form
attached as Exhibit D hereto, each a "Renewal Note") to the Company in the
amount of the outstanding balance under the original Note. Pursuant to a
Renewal Note, each Obligor has pledged to Parent as security for the repayment
of his obligations thereunder an amount of Parent Common Stock as is equal to
the product of (a) 1.25 and (b) the principal amount of the Renewal Note divided
by the Determination Price. The Obligors and the principal amount of the
Renewal Notes are designated on Schedule 1 hereto.
4. REPRESENTATIONS AND WARRANTIES OF PARENT AND SUBSIDIARY. Parent and
-------------------------------------------------------
Subsidiary, jointly and severally, represent and warrant to the Company and the
Shareholders as follows:
4.1. Organization and Good Standing. Parent is a corporation duly
------------------------------
organized, validly existing and in good standing under the laws of the State of
Texas. Subsidiary is a corporation duly organized, validly existing and in good
standing under the laws of the State of Colorado and is a wholly-owned
subsidiary of Parent.
12
<PAGE>
4.2. Foreign Qualification. Each of Parent and Subsidiary is duly
---------------------
qualified or licensed to do business and in good standing as a foreign
corporation in every jurisdiction where the failure so to qualify could have a
material adverse effect on its business, operations, assets or financial
condition.
4.3. Corporate Power and Authority. Each of Parent and Subsidiary has the
-----------------------------
corporate power and authority and all licenses and permits required by
governmental authorities to own, lease and operate its properties and assets, to
carry on its business as currently being conducted, and each has the corporate
power and authority and all licenses and permits required by governmental
authorities to execute, deliver and perform this Agreement.
4.4. Binding Effect. This Agreement has been or will have been duly
--------------
authorized, executed and delivered by Parent and Subsidiary and is the legal,
valid and binding obligations of each of them, enforceable in accordance with
its terms except that (a) enforceability may be limited by bankruptcy,
insolvency, or other similar laws affecting creditors' rights and (b) the
availability of equitable remedies may be limited by equitable principles of
general applicability.
4.5. Compliance with Other Instruments. Neither the execution and
---------------------------------
delivery by Parent or Subsidiary of this Agreement nor the consummation by them
of the transactions contemplated hereby will violate, breach, be in conflict
with, or constitute a default under, or permit the termination or the
acceleration of maturity of, or result in the imposition of any lien, claim or
encumbrance upon any property or asset of Parent or Subsidiary pursuant to,
their respective certificates of incorporation or bylaws, or any note, bond,
indenture, mortgage, deed of trust, evidence of indebtedness, loan or lease
agreement, other agreement or instrument, judgment, order, injunction or decree
by which Parent or Subsidiary is bound, to which either is a party, or to which
their assets are subject.
4.6. Parent Shares. The Parent Common Stock to be issued by virtue of the
-------------
Merger (the "Parent Shares"), when issued and delivered, will be duly
authorized, validly issued, fully paid, and nonassessable, free and clear of all
liens, claims and encumbrances. Parent does not make any representation as to
the market price which the Shareholders will realize upon the ultimate
disposition of the Parent Shares, it being acknowledged by the Shareholders that
the market price of publicly traded securities will be affected by many factors
which are outside the control of Parent and as to which it can offer no
assurance.
4.7. Parent Reports to SEC. Parent has furnished to the Shareholders true
---------------------
and complete copies of (a) the Parent's Annual Report to Stakeholders for the
year ended September 29, 1996 and (b) the Parent's Quarterly Report on Form 10-Q
for the first three fiscal quarters of fiscal 1997 (collectively the "SEC
Reports"). The SEC Reports did not, on their respective dates of filing,
contain an untrue statement of a material
13
<PAGE>
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading. Parent has filed on a timely basis all documents
required to be filed by it with the Securities and Exchange Commission (the
"SEC") and all such documents complied as to form with the applicable
requirements of law. All financial statements included in such documents,
including without limitation, the SEC Reports, (i) complied as to form in all
material respects with the applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto, (ii) were prepared in
accordance with generally accepted accounting principles applied on a consistent
basis throughout the periods covered thereby (except as may be indicated
therein), (iii) fairly present the financial position, results of operations and
cash flows of Parent as of the respective dates thereof and for the periods
referred to therein, and (iv) are consistent with the books and records of
Parent. Since the date of the most recent SEC Reports, there has not been any
material adverse change in the assets, business, financial condition or results
of operations of Parent.
4.8. No Material Undisclosed Liabilities. There are no material
-----------------------------------
liabilities or obligations of Parent of any nature, whether absolute, accrued,
contingent or otherwise, other than (a) the liabilities and obligations that are
fully reflected in the SEC Reports, or incurred in the ordinary course of
business and consistent with past practices since the date of such SEC Reports,
(b) liabilities or obligations not required to be disclosed in financial
statements prepared in accordance with generally accepted accounting principles
and (c) liabilities incurred in connection with this Agreement and the
transactions contemplated hereby.
4.9. Brokers and Finders. Neither Parent nor Subsidiary has engaged any
-------------------
person to act or render services as a broker, finder or similar capacity in
connection with the transactions contemplated herein and no person has as a
result of any agreement or action by Parent or Subsidiary any right or valid
claim against the Company or any of the Company's affiliates for any commission,
fee or other compensation as a broker or finder, or in any similar capacity in
connection with the transactions contemplated herein.
5. CERTAIN COVENANTS.
-----------------
5.1. Cooperation. Each of the parties hereto shall, and shall cause each
-----------
of its affiliates to, use its best efforts to (a) obtain at the earliest
practicable date and, in any event, before the Closing Date, any approvals,
authorizations and consents necessary to consummate the transactions
contemplated by this Agreement; (b) as reasonably requested by the other,
cooperate with and keep the other informed in connection with this Agreement;
and (c) take such actions as the other parties may reasonably request to
consummate the transactions contemplated by this Agreement and diligently
attempt to satisfy, to the extent within its control, all conditions precedent
to its obligations to close the transactions contemplated by this Agreement;
provided,
14
<PAGE>
however, that nothing in this Section 5.1 shall require a party to expend any
monies to obtain the consent of a third party except as otherwise specifically
required under this Agreement.
5.2. Maintenance of Company Business and Assets. The Shareholders
------------------------------------------
covenant that between the date hereof and the Closing, except as contemplated
hereby or with the prior consent of Parent, they will cause the Company to
refrain from doing any of the following: (a) entering into any transaction other
than in the ordinary course of business, (b) permitting any encumbrance,
mortgage or pledge on any asset of the Company, (c) disposing of any material
asset of the Company, (d) effecting any change in the capitalization of the
Company or (e) incurring any indebtedness not reflected on the Company Financial
Statements.
5.3. Registration of Parent Common Stock.
-----------------------------------
(a) As soon as practicable, Parent shall prepare and file with the
SEC a Registration Statement on Form S-3 (the "Registration Statement")
registering the Parent Shares for resale to the public. Parent shall use
its best efforts to cause the Registration Statement (i) to become
effective as soon as practicable after the filing thereof (but in any event
prior to the "Pooling Publication Date" (defined herein) and (ii) to remain
effective so that such Parent Shares may be offered and sold on a
continuous or delayed basis in accordance with Rule 415 under the 1933 Act,
until the earlier of one year after the Closing Date or such time as all of
the Parent Shares have been sold by the Shareholders.
(b) Based upon the written opinion of Parent's securities law
counsel, Parent may, by written notice to the Shareholders, for a period
not to exceed 60 days, suspend or withdraw the Registration Statement and
require that the Shareholders cease sales of the Parent Shares thereunder,
if (i) Parent is engaged in negotiations or preparations for any
transaction that Parent desires to keep confidential for valid business
reasons, and (ii) Parent determines in good faith that the public
disclosure requirements imposed on Parent as a result of the Registration
Statement would require public disclosure of such negotiations or
preparations; provided, however, that Parent may not exercise this right on
more than one occasion.
(c) Parent agrees to indemnify and hold harmless the Shareholders,
and any broker or agent selling the Parent Shares on behalf of the
Shareholders, against any losses, claims, damages or liabilities to which
any such person may become subject under the 1933 Act, or otherwise,
insofar as such losses, claims, damages or liabilities arise from any
untrue statement or alleged untrue statement of a material fact contained
in the Registration Statement or prospectus included therein, or any
supplemental filings, or other documents, incident to the Registration
Statement, or arise out of or are based upon the
15
<PAGE>
omission to state therein a fact required to be stated therein or necessary
to make the statements therein not misleading (except insofar as such
losses, claims, damages or liabilities arise out of or are based upon
information furnished in writing to Parent by or on behalf of the
Shareholders specifically for use in such registration statement or
prospectus).
(d) Parent shall bear all expenses of the Registration Statement
filed hereunder, which shall include, without limitation, all registration
and filing fees and the reasonable fees and disbursements of counsel and
accountants for Parent; but which shall not include any selling commissions
or underwriting discounts or stock transfer taxes for the Shareholders or
their brokers or underwriters or of any counsel or accountants retained by
the Shareholders.
5.4. Pooling. From and after the date hereof and until the Effective
-------
Date, the Parent, the Company, the Shareholders and their respective
subsidiaries or other affiliates shall not, to the best of their knowledge, (a)
take any action, or fail to take any action, that would jeopardize the treatment
of the Merger as a "pooling of interest" for accounting purposes or (b) take any
action, or fail to take any action, that would jeopardize qualification of the
Merger as a reorganization within the meaning of Section 368 of the Code. The
Shareholders that are "affiliates" of the Company , as such term is used in
Regulation D promulgated under the 1933 Act, which affiliates are designated on
Schedule 1 as "Affiliated Shareholders", have agreed that, until such time (the
"Pooling Publication Date") as financial results of Parent covering at least
thirty days of combined operations of Parent and the Company subsequent to the
Closing Date have been published (it being understood that Parent will use its
best efforts to cause such publication as promptly as practicable after the
Closing consistent with the federal securities laws and accounting requirements
but in no event later than the 60th day after the Closing Date), they will not
sell or otherwise dispose of any Parent Shares. Parent will give instructions
to its transfer agent with respect to the Parent Shares to the effect that no
transfer of such shares by an Affiliated Shareholder shall be effected until the
Pooling Publication Date.
5.5. Shareholder Action. Each of the Shareholders hereby represents that
------------------
they will vote all shares of Company Common Stock held directly or indirectly by
them in favor of the adoption and approval of this Agreement and the
transactions contemplated hereby, and the Company shall provide to Parent
evidence of such agreements, in form and substance reasonably satisfactory to
the Parent.
5.6. Employee Benefits. As soon as practicable after the Effective Date,
-----------------
all employees of the Company, other than Jeffrey Cohn and Clarence Peterson,
shall be included in the Parent's employee benefit plans (if such plans have
replaced the existing Company employee benefit plans) and shall be given credit
for their periods of service with the Company as if such service were with the
Parent in determining
16
<PAGE>
their eligibility for inclusion in, and the level of benefits granted after the
Effective Date under, such plans.
5.7. Post-Closing Financial Examination. Parent and the Shareholders
----------------------------------
shall undertake the following procedure with respect to an examination of the
financial condition of the Company as of the Closing:
(a) Not later than 100 days after the Closing, the Parent, at its own
cost, shall prepare and deliver to the Shareholders an unaudited balance
sheet of the Company as of the Closing Date (the "Closing Balance Sheet"),
prepared in accordance with generally accepted accounting principles,
applied consistently with the Company's past practices. The Shareholders
shall conduct a complete physical inventory of the Company's product
inventory and fixed assets as of the Closing Date for the purpose of
preparing the Closing Balance Sheet and shall permit Parent and its
accountants to participate in such audit.
(b) In connection with preparing the Closing Balance Sheet, Parent
shall determine the Net Book Value (as defined herein) of the Company as of
the Closing Date (the "Closing Date Value"), which shall be set forth on
the Closing Balance Sheet. For purposes of this Agreement, "Net Book
Value" shall mean the difference of (i) total assets of the Company less
(ii) total liabilities of the Company (including Bank Debt (as defined
hereinafter)), as computed in accordance with generally accepted accounting
principles consistently applied.
(c) Within 60 days after the Closing Balance Sheet is delivered to
the Shareholders pursuant to clause (a) above, the Shareholders, at their
own cost, shall complete their examination thereof, and provide for the
examination thereof by their accountants, if necessary, and shall deliver
to the Parent either (i) a written acknowledgment accepting the Closing
Balance Sheet, including the determination of the Closing Date Value, or
(ii) a written report of a Big Six accounting firm engaged by Shareholders
setting forth in reasonable detail any proposed adjustments to the Closing
Balance Sheet or the Closing Date Value ("Adjustment Report"). A failure by
the Shareholders to deliver the Adjustment Report within the required 60
day period shall constitute their acceptance of the Closing Balance Sheet
and the Closing Date Value.
(d) During a period of 30 days following the receipt by the Parent of
the Adjustment Report, the Shareholders and Parent shall attempt to resolve
any difference they may have with respect to the matters raised in the
Adjustment Report. In the event Shareholders and Parent fail to agree on
all of the proposed adjustments contained in the Adjustment Report within
such 30 day period, then Shareholders and Parent mutually agree that the
Boulder, Colorado office of [independent Big Six firm] (the "Independent
Auditors") shall make the final
17
<PAGE>
determination with respect to the correctness of the proposed adjustments
in the Adjustment Report in light of the terms and provisions of this
Agreement. The decision of the Independent Auditors shall be final and
binding on the Shareholders and Parent, and may be used in a court of law
by either the Shareholders or Parent for the purpose of enforcing such
decision. The costs and expenses of the Independent Auditors and their
services rendered pursuant to this clause (d) shall be borne by the non-
prevailing party or, if neither party prevails, equally by Shareholders and
Parent.
5.8. Bank Debt. On the Closing Date, Parent shall repay all of the
---------
Company's bank indebtedness outstanding as of such date (the "Bank Debt") which
amount shall not exceed approximately $2,208,560.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY AND THE SHAREHOLDERS.
-----------------------------------------------------------------------
The obligations of the Company and the Shareholders to consummate the
transactions contemplated by this Agreement shall be subject to the satisfaction
on or before the Closing Date of each of the following conditions:
6.1. Compliance. Parent and Subsidiary shall have, or shall have caused
----------
to be, satisfied or complied with and performed in all material respects, all
terms, covenants and conditions of this Agreement to be complied with or
performed by them on or before the Closing Date.
6.2. Representations and Warranties. All of the representations and
------------------------------
warranties made by Parent and Subsidiary in this Agreement and in all
certificates and other documents delivered by them to the Company pursuant
hereto, shall have been true and correct in all material respects as of the date
hereof, and shall be true and correct in all material respects at the Closing
Date with the same force and effect as if such representations and warranties
had been made at and as of the Closing Date, except for changes permitted or
contemplated by this Agreement.
6.3. Legal Opinion. The Company shall have received the opinion of Crouch
-------------
& Hallett, L.L.P., counsel to Parent and Subsidiary, dated the Closing Date, in
the form reasonably acceptable to the Shareholders.
6.4. Employment Agreements. Parent shall have entered into the Employment
---------------------
and Non-Competition Agreements in the forms of Exhibits A-1 and A-2 hereto (the
"Employment Agreements") with Terry Tierney and Kevin Knox, respectively.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF PARENT AND SUBSIDIARY. Except as
------------------------------------------------------------
may be waived by Parent and Subsidiary, the obligations of Parent and Subsidiary
to consummate the transactions contemplated by this Agreement shall be subject
to the satisfaction, on or before the Closing Date, of each of the following
conditions:
18
<PAGE>
7.1. Compliance. The Company and the Shareholders shall have, or shall
----------
have caused to be, satisfied or complied with and performed in all material
respects all terms, covenants, and conditions of this Agreement to be complied
with or performed by the Company or the Shareholders (as the case may be) on or
before the Closing Date.
7.2. Representations and Warranties. All of the representations and
------------------------------
warranties made by the Company and Shareholders in this Agreement, the exhibits
attached hereto and in all certificates and other documents delivered by the
Company pursuant hereto, shall have been true and correct in all material
respects as of the date hereof, and shall be true and correct in all material
respects at the Closing Date with the same force and effect as if such
representations and warranties had been made at and as of the Closing Date,
except for changes permitted or contemplated by this Agreement.
7.3. Legal Opinion. Parent and Subsidiary shall have received the opinion
-------------
of Stuart A. Cohn, Ltd., counsel for the Company, Jeffrey Cohn, Clarence
Peterson and William McReynolds, dated as of the Closing Date, in form
reasonably acceptable to the Parent and Subsidiary.
7.4. Employment Agreements. Messrs. Tierney and Knox shall have entered
---------------------
into the Employment Agreements with Parent.
7.5. Non-Competition Agreements. Parent and each of Jeffrey Cohn and
--------------------------
Clarence Peterson shall have entered into the Non-Competition Agreements in the
form of Exhibit B hereto (the "Non-Competition Agreements").
7.6. Receipt of Pooling Letters. Parent shall have received (i) a letter
--------------------------
from KPMG Peat Marwick LLP, dated the Effective Date and addressed to Parent,
stating substantially to the effect that, based on such firm's review of this
Agreement and the other procedures set forth in such letter, such firm concurs
that the Merger will qualify as a pooling of interests transaction under Opinion
16 of the Accounting Principles Board; and (ii) a letter from Arthur Andersen
LLP, independent auditors for the Company, that the Company qualifies as an
entity such that the Merger will qualify as a pooling of interests transaction.
7.7. Renewal Notes. Each of the Obligors has executed and delivered to
-------------
Purchaser a renewal note in the form of Exhibit D and pledged a certain number
of shares of Parent Common Stock as set forth therein.
7.8. Third Party Consents. Parent shall have received the approval from
--------------------
any other required governmental bodies or third parties to the consummation of
the transactions contemplated by the Merger effective as of the Closing Date.
19
<PAGE>
8. INDEMNIFICATION.
---------------
8.1. Indemnification of Parent and Subsidiary. Subject to the limitations
----------------------------------------
set forth in Sections 8.3 and 8.4, the Shareholders, jointly and severally,
shall indemnify and hold Parent and Subsidiary harmless from, against, for and
in respect of (a) any and all damages, losses, settlement payments, obligations,
liabilities, claims, actions or causes of action and encumbrances suffered,
sustained, incurred or required to be paid by Parent or Subsidiary, net of any
resulting income tax benefits to Parent or Subsidiary, because of (i) the breach
of any written representation, warranty, agreement or covenant of the Company or
any Shareholder contained in this Agreement, or (ii) any outstanding lawsuits,
proceedings or actions pending or threatened against the Company that relate to
periods prior to the Closing (the "Litigation Claims"); and (b) all reasonable
costs and expenses (including, without limitation, attorneys' fees, interest and
penalties) incurred by Parent or Subsidiary in connection with any action, suit,
proceeding, demand, assessment or judgment incident to any of the matters
indemnified against in this Section 8.1. In order to secure the indemnification
obligations of the Shareholders hereunder, the Shareholders have entered into
the Post-Closing Escrow Agreement.
8.2. Indemnification of Shareholders. Subject to the limitations set
-------------------------------
forth in Sections 8.3 and 8.4, Parent and Subsidiary, jointly and severally,
shall indemnify and hold the Shareholders harmless from, against, for and in
respect of: (a) any and all damages, losses, settlement payments, obligations,
liabilities, claims, actions or causes of action and encumbrances suffered,
sustained, incurred or required to be paid by the Shareholders, net of any
resulting income tax benefits to the Shareholders, because of the breach of any
written representation, warranty, agreement or covenant of Parent or Subsidiary
contained in this Agreement; (b) any and all liabilities, obligations, claims
and demands arising out of the ownership or operation of the Company on and
after the Closing Date, except to the extent the same arises from a breach of
any written representation, warranty, agreement or covenant of the Company or
the Shareholders contained in this Agreement (other than agreements or covenants
of the Company to be performed after the Closing); and (c) all reasonable costs
and expenses (including, without limitation, attorneys' fees, interest and
penalties) incurred by the Shareholders in connection with any action, suit,
proceeding, demand, assessment or judgment incident to any of the matters
indemnified against in this Section 8.2.
8.3. Survival of Representations, Warranties and Covenants. All
-----------------------------------------------------
representations, warranties, covenants and agreements made by any party to this
Agreement or pursuant hereto shall be deemed to be material and to have been
relied upon by the parties hereto, and shall survive for one year following the
Closing Date. Notice of any claim, whether made under the indemnification
provisions hereof or otherwise, based on a breach of a representation, warranty,
covenant or agreement must be given prior to the expiration of such
representation, warranty, covenant or agreement; and any claim not made within
such period shall be of no force or effect.
20
<PAGE>
The representations and warranties hereunder shall not be affected or diminished
by any investigation at any time by or on behalf of the party for whose benefit
such representations and warranties were made. All statements contained herein
or in any certificate, exhibit, list or other document delivered pursuant hereto
shall be deemed to be representations and warranties.
8.4. General Rules Regarding Indemnification. The obligations and
---------------------------------------
liabilities of each indemnifying party hereunder with respect to claims
resulting from the assertion of liability by the other party shall be subject to
the following terms and conditions:
(a) The indemnified party shall give prompt written notice (which in
no event shall exceed 30 days from the date on which the indemnified party
first became aware of such claim or assertion) to the indemnifying party of
any claim which might give rise to a claim by the indemnified party against
the indemnifying party based on the indemnity agreements contained in
Sections 8.1 or 8.2 hereof, stating the nature and basis of said claims and
the amounts thereof, to the extent known.
(b) If any action, suit or proceeding is brought against the
indemnified party with respect to which the indemnifying party may have
liability under the indemnity agreements contained in Sections 8.1 or 8.2
hereof, the action, suit or proceeding shall, at the election of the
indemnifying party, be defended (including all proceedings on appeal or for
review which counsel for the indemnified party shall deem appropriate) by
the indemnifying party. The indemnified party shall have the right to
employ its own counsel in any such case, but the fees and expenses of such
counsel shall be at the indemnified party's own expense unless the
employment of such counsel and the payment of such fees and expenses both
shall have been specifically authorized in writing by the indemnifying
party in connection with the defense of such action, suit or proceeding.
Notwithstanding the foregoing, (i) if there are defenses available to the
indemnified party which are inconsistent with those available to the
indemnifying party to such extent as to create a conflict of interest
between the indemnifying party and the indemnified party, the indemnified
party shall have the right to direct the defense of such action, suit or
proceeding insofar as it relates to such inconsistent defenses, and the
indemnifying party shall be responsible for the reasonable fees and
expenses of the indemnified party's counsel insofar as they relate to such
inconsistent defenses, and (ii) if such action, suit or proceeding involves
or could have an effect on matters beyond the scope of the indemnity
agreements contained in Sections 8.1 and 8.2 hereof, the indemnified party
shall have the right to direct (at its own expense) the defense of such
action, suit or proceeding insofar as it relates to such other matters. The
indemnified party shall be kept fully informed of such action, suit
21
<PAGE>
or proceeding at all stages thereof whether or not it is represented by
separate counsel.
(c) The indemnified party shall make available to the indemnifying
party and its attorneys and accountants all books and records of the
indemnified party relating to such proceedings or litigation and the
parties hereto agree to render to each other such assistance as they may
reasonably require of each other in order to ensure the proper and adequate
defense of any such action, suit or proceeding.
(d) The indemnified party shall not make any settlement of any claims
without the written consent of the indemnifying party.
(e) Parent shall be entitled to assert a claim against the Parent
Shares escrowed pursuant to the Post-Closing Escrow Agreement in respect of
any amounts to which it is entitled to receive by virtue of this Article 8.
(f) The indemnification obligations of the Shareholders shall be
joint and several; provided, however, that no Non-Core Shareholder shall be
required to indemnify the Parent or Subsidiary for any amounts in excess of
the Merger Consideration received by such Non-Core Shareholder.
9. MISCELLANEOUS.
-------------
9.1. Termination. This Agreement and the transactions contemplated hereby
-----------
may be terminated at any time on or before the Closing Date:
(a) by mutual consent of the Company and Parent.
(b) by Parent or Subsidiary if there has been a material
misrepresentation or breach of warranty in the representations and
warranties of the Company or the Shareholders set forth herein or if there
has been any material failure on the part of the Company or the
Shareholders to comply with its obligations hereunder;
(c) by the Company or the Shareholder Representative (as defined in
the Post-Closing Escrow Agreement) if there has been a material
misrepresentation or breach of warranty in the representations and
warranties of Parent or Subsidiary set forth herein or if there has been
any material failure on the part of Parent or Subsidiary to comply with its
obligations hereunder;
(d) by the Company or Parent if the transactions contemplated by this
Agreement have not been consummated by January 15, 1998, unless the parties
otherwise agree or unless such failure of consummation is due to the
22
<PAGE>
failure of the terminating party to perform or observe the covenants and
agreements hereof to be performed or observed by it at or before the
Closing Date; and
(e) by the Company or Parent if the transactions contemplated hereby
violate any order, decree or judgment of any court or governmental body or
agency having competent jurisdiction.
In the event of the termination of this Agreement pursuant to this Section 9.1,
this Agreement shall forthwith become null and void and of no further force or
effect; provided, however, that the parties hereto shall remain liable for any
breach of this Agreement prior to its termination.
9.2. Expenses. Parent shall pay the reasonable expenses incurred by
--------
Parent, Subsidiary, the Company and the Shareholders in connection with this
Agreement and the transactions contemplated hereby; provided that, the aggregate
-------------
amount of reasonable expenses incurred by the Company and the Shareholders that
are to be paid by the Parent shall not exceed $ 287,500.
9.3. Entire Agreement. This Agreement and the exhibits hereto contain the
----------------
complete agreement among the parties with respect to the transactions
contemplated hereby and supersede all prior agreements and understandings, oral
or written, among the parties with respect to such transactions. Section and
other headings are for reference purposes only and shall not affect the
interpretation or construction of this Agreement. The parties hereto have not
made any representation or warranty except as expressly set forth in this
Agreement or in any certificate or schedule delivered pursuant hereto.
9.4. Remedies of the Surviving Corporation. After the Closing, the
-------------------------------------
Surviving Corporation shall have the same rights and benefits under this
Agreement as does Parent and Subsidiary with respect to the representations,
warranties and covenants of the Shareholders contained herein, as fully as if
such representations, warranties and covenants had been made to or with the
Surviving Corporation in lieu of Parent and Subsidiary. In any proceedings by
Parent or Subsidiary to assert or prosecute any claims under, or to otherwise
enforce, this Agreement or any other agreement contemplated hereby or any
transaction contemplated hereby or thereby, each of the Shareholders agrees that
he shall not assert as a defense or bar to recovery by the Surviving Corporation
and hereby waives any right so to assert such defense or bar such recovery, that
(a) before the date of this Agreement the Company (as opposed to Parent and
Subsidiary) had knowledge of the circumstances giving rise to the claim being
pursued by it; (b) before the date of this Agreement the Company engaged in
conduct or took action that caused or brought about the circumstances giving
rise to its claim or otherwise contributed thereto; (c) the Surviving
Corporation is estopped from asserting or recovering upon its claim by reason of
having joined in the
23
<PAGE>
representations, warranties, and covenants made by Shareholders in this
Agreement; or (d) Shareholders have a right of contribution from or
indemnification by the Surviving Corporation to the extent that there is any
recovery against him. Each of the Shareholders further agrees that he shall not
under any circumstances whatsoever affirmatively seek any contribution from or
indemnification by the Surviving Corporation for any losses, damages, expenses
or other claims, regardless of form, suffered by him arising out of, related to
or in connection with this Agreement or any other agreement contemplated hereby
(except pursuant to Section 8.2) or any transaction contemplated hereby or
thereby.
9.5. Public Announcements. No party to this Agreement shall issue any
--------------------
press release relating to, or otherwise publicly disclose, the transactions
contemplated by this Agreement without the prior approval of the other parties.
Notwithstanding the foregoing, any party may make such disclosure as may be
required by law, provided the disclosing party obtains from the other party
prior approval of the substance of the proposed disclosure (such as the content
of a proposed press release), which approval may not be unreasonably withheld or
delayed.
9.6. Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which when so executed and delivered shall be deemed an
original, and such counterparts together shall constitute only one original.
9.7. Notices. All notices, demands, requests or other communications that
-------
may be or are required to be given, served or sent by any party to any other
party pursuant to this Agreement shall be in writing and shall be mailed by
first-class, registered or certified mail, return receipt requested, postage
prepaid, or transmitted by a reputable overnight courier service, facsimile
transmission or by hand delivery, addressed as follows:
(i) If to the Shareholders:
c/o Clarence Peterson, as the
Shareholder Representative
1930 Central Avenue
Boulder, Colorado 80301
Fax (303) 449-5259
24
<PAGE>
with a copy to:
Stuart Cohn
Xerox Centre
Suite 3330
55 West Monroe Street
Chicago, Illinois 60603
Fax (312) 704-4489
(ii) If to the Company (after the Closing), Parent or
Subsidiary:
Whole Foods Market, Inc.
601 N. Lamar Blvd.
Suite 300
Austin, Texas 78703-5413
Attention: John Mackey, Chairman
Fax: 512-477-1069
with a copy to:
Crouch & Hallett, L.L.P.
717 N. Harwood, Suite 1400
Dallas, Texas 75201
Attention: Bruce H. Hallett
Fax: 214-953-0576
Each party may designate by notice in writing a new address to which any notice,
demand, request or communication may thereafter be so given, served or sent.
Each notice, demand, request or communication that is mailed, delivered or
transmitted in the manner described above shall be deemed sufficiently given,
served, sent and received for all purposes at such time as it is delivered to
the addressee (with the return receipt, fax confirmation, the delivery receipt
or the affidavit of courier or messenger being deemed conclusive evidence of
such delivery) or at such time as delivery is refused by the addressee upon
presentation.
9.8. Assignment; Successors and Assigns. This Agreement may not be
----------------------------------
assigned by any of the parties hereto without the written consent of all the
other parties. Subject to the preceding sentence, this Agreement and the
rights, interests and obligations hereunder shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors and
assigns.
9.9. Governing Law. This Agreement shall be construed and enforced in
-------------
accordance with the laws of the State of Texas.
25
<PAGE>
9.10. Waiver and Other Action. This Agreement may be amended, modified or
-----------------------
supplemented only by a written instrument executed by the parties against which
enforcement of the amendment, modification or supplement is sought.
9.11. Severability. If any provision of this Agreement is held to be
------------
illegal, invalid, or unenforceable, such provision shall be fully severable, and
this Agreement shall be construed and enforced as if such illegal, invalid or
unenforceable provision were never a part hereof; the remaining provisions
hereof shall remain in full force and effect and shall not be affected by the
illegal, invalid or unenforceable provision or by its severance; and in lieu of
such illegal, invalid or unenforceable provision, there shall be added
automatically as part of this Agreement, a provision as similar in its terms to
such illegal, invalid or unenforceable provision as may be possible and be
legal, valid and enforceable.
9.12. Third-Party Beneficiaries. This Agreement and the rights,
-------------------------
obligations, duties and benefits hereunder are intended for the parties hereto,
and no other person or entity shall have any rights, obligations, duties and
benefits pursuant hereto.
9.13. Arbitration. Any controversy or dispute among the parties arising
-----------
in connection with this Agreement shall be submitted to a panel of three
arbitrators and finally settled by arbitration in accordance with the commercial
arbitration rules of the American Arbitration Association. Each of the
disputing parties shall appoint one arbitrator, and these two arbitrators shall
independently select a third arbitrator. Arbitration shall take place in
Austin, Texas or such other location as the arbitrators may select. The
prevailing party in such arbitration shall be entitled to the award of all costs
and attorneys' fees in connection with such action as determined by such
arbitration panel. Any award for monetary damages resulting from nonpayment of
sums due hereunder shall bear interest from the date on which such sums were
originally due and payable. Judgment upon the award rendered may be entered in
any court having jurisdiction or application may be made to such court for
judicial acceptance of the award and an order of enforcement, as the case may
be.
9.14. Access To Records. Following the Closing and for a period of four
-----------------
years thereafter, the Company shall afford the Shareholder Representative (as
defined in the Post-Closing Escrow Agreement), during normal business hours and
with no less than three days advance notice, reasonable access to the financial
books and records of the Company then in the Company's possession that
specifically relate to the period prior to the Closing Date in order to
facilitate the preparation or examination of any tax returns relating to such
period; provided that, the Shareholders shall (a) bear any and all expenses
incurred in connection with such access and (b) maintain the confidentiality of
all information obtained by such access
26
<PAGE>
(other than disclosure to governmental agencies required in connection with any
tax return preparation or examination) and shall not use such information to the
detriment or competitive disadvantage of the Company.
[signature page to follow]
27
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
WFM COLORADO ACQUISITION, INC.
By: /s/ Glenda Flanagan
----------------------------------------------
Name:
Title:
WHOLE FOODS MARKET, INC.
By: /s/ Glenda Flanagan
----------------------------------------------
Name:
Title:
ALLEGRO COFFEE COMPANY, INC.
By: /s/ Terrence P. Tierney
---------------------------------------------
Name: Terrence P. Tierney
Title: President and C.E.O.
SHAREHOLDERS:
/s/ Jeffrey Cohn
------------------------------------------------
Jeffrey Cohn
/s/ Clarence Peterson
------------------------------------------------
Clarence Peterson
/s/ William McReynolds
------------------------------------------------
William McReynolds
/s/ Barnet Feinblum
------------------------------------------------
Barnet Feinblum
/s/ Julie A. Feinblum
------------------------------------------------
Julie A. Feinblum
/s/ Joshua Feinblum by Barnet Feinblum.
Custodian
------------------------------------------------
Joshua Feinblum
28
<PAGE>
/s/ Daniel Feinblum, by Barnet Feinblum,
Custodian
------------------------------------------------
Daniel Feinblum
/s/ Michael Wilkins
------------------------------------------------
Michael Wilkins
/s/ Stuart Cohn
------------------------------------------------
Stuart Cohn
/s/ Terry Tierney
------------------------------------------------
Terry Tierney
/s/ Anil Arora
------------------------------------------------
Anil Arora
/s/ Kevin Knox
------------------------------------------------
Kevin Knox
/s/ Patricia McCarthy
------------------------------------------------
Patricia McCarthy
/s/ Lynne Vickerstaff
------------------------------------------------
Lynne Vickerstaff
/s/ Jeff Schoolmaster
------------------------------------------------
Jeff Schoolmaster
/s/ Karen Knoll
------------------------------------------------
Karen Knoll
/s/ Joan Hillsten
------------------------------------------------
Joan Hillsten
/s/ Richard Kessler
------------------------------------------------
Richard Kessler
/s/ Wendy Goldner
------------------------------------------------
Wendy Goldner
/s/ Charles M. Patnoi for
Charles M. Patnoi Trust
------------------------------------------------
Charles M. Patnoi Trust
29
<PAGE>
EXHIBIT 2.2
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (the "Agreement") is made as of the 4th
day of November, 1997, by and among Whole Foods Market, Inc., a Texas
corporation (the "Parent"); Whole Foods Market Group, Inc., a Delaware
corporation (the "Subsidiary"); the entities listed on Schedule I hereto
(collectively the "Companies"); and the individuals listed on Schedule II hereto
(the "Shareholders").
In consideration of the mutual covenants and agreements contained herein,
the parties hereto covenant and agree as follows:
1. THE MERGER.
----------
1.1. Merger. In accordance with the provisions of the business
------
corporation laws of the States of Michigan and Delaware at the Effective Date
(as hereinafter defined), each of the Companies shall be merged (the "Merger")
into the Subsidiary, and the Subsidiary shall be the surviving corporation (the
"Surviving Corporation") and as such shall continue to be governed by the laws
of the State of Delaware.
1.2. Continuing of Corporate Existence. Except as may otherwise be set
---------------------------------
forth herein, the corporate existence and identity of the Subsidiary, with all
its purposes, powers, franchises, privileges, rights and immunities, shall
continue unaffected and unimpaired by the Merger, and the corporate existence
and identity of the Companies, with all its purposes, powers, franchises,
privileges, rights and immunities, at the Effective Date shall be merged with
and into that of the Subsidiary for the purpose of continuing the business of
the Companies, and the Surviving Corporation shall be vested fully therewith and
the separate corporate existence and identity of the Companies shall thereafter
cease except to the extent continued by statute.
1.3. Effective Date. The Merger shall become effective upon the issuance
--------------
of a certificate of merger (the "Effective Date") by each of the Secretary of
State of the State of Delaware and the Department of Consumer and Industry
Services of the State of Michigan subsequent to the filing on the Closing Date
(as defined herein) of Certificates of Merger with the Secretary of State of the
State of Delaware pursuant to the Delaware General Corporation Law and with the
Department of Consumer and Industry Services of the State of Michigan pursuant
to the business corporation laws of the state of Michigan.
1.4. Corporate Government.
--------------------
(a) The Certificate of Incorporation of the Subsidiary, as in effect
on the Effective Date, shall continue in full force and effect and shall be the
Certificate of Incorporation of the Surviving Corporation.
<PAGE>
(b) The Bylaws of the Subsidiary, as in effect as of the Effective
Date, shall continue in full force and effect and shall be the Bylaws of the
Surviving Corporation.
(c) The members of the Board of Directors and the officers of the
Surviving Corporation shall be the persons holding such offices in the
Subsidiary as of the Effective Date. None of the members of the Board of
Directors or the officers of the Companies as of the date hereof shall become
members of the Board of Directors or executive officers of the Surviving
Corporation upon the Effective Date.
1.5. Rights and Liabilities of the Surviving Corporation. The Surviving
---------------------------------------------------
Corporation shall have the following rights and obligations:
(a) The Surviving Corporation shall have all the rights, privileges
immunities and powers and shall be subject to all the duties and liabilities of
a corporation organized under the laws of the State of Delaware.
(b) The Surviving Corporation shall possess all of the rights,
privileges immunities and franchises, of either a public or private nature, of
the Companies and the Subsidiary and all property, real, personal and mixed, and
all debts due on whatever account, including subscription to shares, and all
other choses in action, and every other interest of or belonging or due to the
Companies and the Subsidiary shall be taken and deemed to be transferred or
invested in the Surviving Corporation without further act or deed.
(c) At the Effective Date, the Surviving Corporation shall
thenceforth be responsible and liable for all liabilities and obligations of the
Companies and the Subsidiary, and any claim existing or action or proceeding
pending by or against the Subsidiary or the Companies may be prosecuted as if
the Merger had not occurred, or the Surviving Corporation may be substituted in
its place. Neither the rights of creditors nor any liens upon the property of
the Subsidiary or the Companies shall be impaired by the Merger.
1.6. Closing. Consummation of the transactions contemplated by this
-------
Agreement (the "Closing") shall take place at the offices of counsel to the
Companies in Birmingham, Michigan commencing as soon as possible after the
execution of this Agreement when each of the other conditions set forth in
Articles 6 and 7 have been satisfied or waived (but in no event more than five
business days after satisfaction or waiver of the last of such conditions), and
shall proceed promptly to conclusion, or at such other place, time and date as
shall be fixed by mutual agreement between Parent and the Companies. The day on
which the Closing shall occur is referred to herein as the "Closing Date." Each
party will cause to be prepared, executed and delivered Certificates of Merger
to be filed with the Secretary of State of Delaware and the Michigan Department
of Consumer and Industry Services and all other appropriate and
2
<PAGE>
customary documents as any party or its counsel may reasonably request for the
purpose of consummating the transactions contemplated by this Agreement. All
actions taken at the Closing shall be deemed to have been taken simultaneously
at the time the last of any such actions is taken or completed.
1.7. Tax Consequences. It is intended that the Merger shall constitute a
----------------
reorganization within the meaning of Section 368 of the Internal Revenue Code of
1986, as amended (the "Code"), and that this Agreement shall constitute a "plan
of reorganization" for the purposes of Section 368 of the Code.
1.8. Pooling of Interests. It is the intention of the parties hereto that
--------------------
the Merger will be treated for financial reporting purposes as a pooling of
interests.
2. CONVERSION OF SHARES.
--------------------
2.1. Conversion of MOV Common Stock. The manner and basis of converting
------------------------------
the common stock of the Companies (the "MOV Common Stock") into common stock, no
par value, of Parent ("Parent Common Stock") at the time of the Closing, shall
be as follows:
(a) The outstanding shares of MOV Common Stock in the aggregate and
on a fully diluted basis shall at the Effective Date, by virtue of the Merger
and without any action on the part of the holder thereof, be converted into
1,013,340 shares (the "Merger Consideration") of Parent Common Stock. The shares
of Parent Common Stock issued as the Merger Consideration shall be identical in
rights to other outstanding shares of Parent Common Stock and shall be listed
for trading on the Nasdaq National Market.
(b) The Merger Consideration shall be allocated among the
Shareholders in accordance with their ownership percentages of the Companies set
forth opposite their names on Schedule II to this Agreement. No scrip or
fractional shares of Parent Common Stock shall be issued in the Merger. All
fractional shares of Parent Common Stock to which a Shareholder of the Companies
would otherwise be entitled with respect to each certificate representing MOV
Common Stock issued pursuant to this Agreement shall be aggregated. If a
fractional share results from such aggregation, such Shareholder shall be
entitled to receive from Parent an amount in cash in lieu of such fractional
share, based on a per share price of $39.28.
2.2. Closing Procedure. At the Closing, the Parent shall issue the shares
-----------------
of Parent Common Stock representing the Merger Consideration to the Shareholders
in exchange for certificates representing 100% of the MOV Common Stock;
provided, however, that the Parent and the Shareholders shall jointly deposit
50,916 shares of Parent Common Stock with an escrow agent (the "Post Closing
Escrow Agent") to be held pursuant to the terms of the Post-Closing Escrow
Agreement of even date
3
<PAGE>
herewith in the form attached hereto as Exhibit C (the "Post-Closing Escrow
Agreement"). The Post-Closing Escrow Agent shall hold such escrowed shares of
Parent Common Stock for a period of one year, after which the escrowed shares
shall be delivered to the Shareholders, subject to earlier claims in favor of
Parent as set forth in the Post-Closing Escrow Agreement. The Shareholders
hereby appoint Mr. Edward Jonna to act as their representative under the Post-
Closing Escrow Agreement.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANIES AND THE SHAREHOLDERS. The
--------------------------------------------------------------------
Companies and the Shareholders, jointly and severally, hereby represent and
warrant to Parent as follows.
3.1. Organization and Good Standing of the Companies. Each of the
-----------------------------------------------
Companies is a corporation duly organized, validly existing and in good standing
under the laws of the State of Michigan.
3.2. Subsidiaries, Investments. Except as set forth in the Companies'
-------------------------
Disclosure Schedule delivered to Parent in connection herewith (the "Disclosure
Schedule"), none of the Companies has any equity, profit sharing, participation
or other ownership interest in any other corporation or partnership.
3.3. Corporate Power and Authority; Binding Effect. Each of the Companies
---------------------------------------------
has the corporate power and authority and all material licenses and permits
required by governmental authorities to own, lease and operate its properties
and assets, to carry on its business as currently being conducted, and to
execute, deliver and perform this Agreement. This Agreement has been or will
have been duly authorized, executed and delivered by the Companies and the
Shareholders and is the legal, valid and binding obligation of the Companies and
the Shareholders enforceable in accordance with its terms, except that (i)
enforceability may be limited by bankruptcy, insolvency or other similar laws
affecting creditors' rights and (ii) the availability of equitable remedies may
be limited by equitable principles of general applicability.
3.4. Compliance with Other Instruments. Except as set forth in the
---------------------------------
Disclosure Schedule, neither the execution and delivery by the Companies or the
Shareholders of this Agreement nor the consummation by them of the transactions
contemplated hereby will violate, breach, be in conflict with, or constitute a
default under, or permit the termination or the acceleration of maturity of, or
result in the imposition of any lien, claim or encumbrance upon any property or
asset of the Companies pursuant to (i) the articles of incorporation or bylaws
of any of the Companies or (ii) any note, bond, indenture, mortgage, deed of
trust, evidence of indebtedness, loan or lease agreement, other agreement or
instrument, judgment, order, injunction or decree by which any of the Companies
or a Shareholder is bound, to which any of them is a party or to which any of
their assets are subject.
4
<PAGE>
3.5. Consents. Except as set forth in the Disclosure Schedule or as
--------
contemplated by this Agreement, no approval, authorization, consent, order or
other action of, or filing with, any governmental authority or administrative
agency is required in connection with the execution and delivery by the
Companies or the Shareholders of this Agreement or the consummation of the
transactions contemplated hereby. No approval, authorization or consent of any
other third party is required in connection with the execution and delivery by
the Companies or the Shareholders of this Agreement and the consummation of the
transactions contemplated hereby.
3.6. Capitalization. Schedule 3.6 sets forth the authorized capital stock
--------------
of each of the Companies. All of the issued and outstanding shares of the MOV
Common Stock have been duly authorized and validly issued and are fully paid and
nonassessable and are owned of record and beneficially by the Shareholders, free
and clear of all liens, claims and encumbrances. As of the Closing, there will
be no voting trusts, shareholder agreements or other voting arrangements by the
shareholders of the Companies. There is no outstanding subscription, contract,
convertible or exchangeable security, option, warrant, call or other right
obligating the Companies to issue, sell, exchange, or otherwise dispose of, or
to purchase, redeem or otherwise acquire, shares of, or securities convertible
into or exchangeable for, capital stock of the Companies.
3.7. Financial Statements and Records of the Companies.
-------------------------------------------------
(a) The Companies has delivered to Parent true, correct and complete
copies of (i) the combined unaudited balance sheets of the Companies as of
December 31, 1996, and the related combined statements of income for the year
then ended and (ii) the combined unaudited balance sheets of the Company as of
September 30, 1997, and the related combined statements of income for the nine
months then ended (collectively the "MOV Financial Statements").
(b) Except as set forth on the Disclosure Schedule, the MOV Financial
Statements present fairly the assets, liabilities and financial position of the
Companies as of the dates thereof and the results of operations thereof for the
periods then ended and have been prepared in conformity with generally accepted
accounting principles. The books and records of the Companies (which have been
reviewed in part by representatives of the Parent and Subsidiary) have been and
are being maintained in accordance with good business practice, reflect only
valid transactions, are complete and correct in all material respects, and
present fairly in all material respects the basis for the financial position and
results of operations of the Companies set forth in the MOV Financial
Statements.
(c) The Closing Date Value, as determined in accordance with Section
5.6 of this Agreement, will be no less than $800,000.
5
<PAGE>
3.8. Absence of Certain Changes. Since September 30, 1997, except as set
--------------------------
forth in the Disclosure Schedule, none of the Companies has (except as may
result from the transactions contemplated by this Agreement or as set forth on
the MOV Financial Statements):
(i) suffered any change in its business, results of operations,
working capital, assets, liabilities or condition (financial or otherwise)
or the manner of conducting its business other than changes that,
individually or in the aggregate, have not had a material adverse effect on
the Companies;
(ii) suffered any damage or destruction to or loss of its assets
not covered by insurance, or any loss of suppliers, that has a material
adverse effect on the business, results of operations, assets or condition
(financial or otherwise) of the Companies;
(iii) acquired or disposed of any material asset, or incurred,
assumed, guaranteed, endorsed, paid or discharged any material
indebtedness, liability or obligation, or subjected or permitted to be
subjected any material amount of assets to any lien, claim or encumbrance
of any kind, except in the ordinary course of business or pursuant to
agreements in force at the date of this Agreement;
(iv) forgiven, compromised, canceled, released, waived or
permitted to lapse any material rights or claims;
(v) entered into or terminated any material agreement, commitment
or transaction, or agreed or made any changes in material leases or
agreements, other than renewals or extensions thereof and leases,
agreements, transactions and commitments entered into in the ordinary
course of business;
(vi) written up, written down or written off the book value of any
material amount of assets;
(vii) declared, paid or set aside for payment any dividend or
distribution to the Shareholders or otherwise with respect to its capital
stock;
(viii) redeemed, purchased or otherwise acquired, or sold, granted
or otherwise disposed of, directly or indirectly, any of its capital stock
or securities or any rights to acquire such capital stock or securities, or
agreed to changes in the terms and conditions of any such rights
outstanding as of the date of this Agreement;
6
<PAGE>
(ix) increased the compensation of or paid any bonuses to any
employees or contributed to any employee benefit plan, other than in
accordance with established policies, practices or requirements;
(x) entered into any employment, consulting, compensation or
collective bargaining agreement (other than employment arrangements
terminable at will or with 30 days or less notice) with any person or
group; or
(xi) entered into, adopted or amended any employee benefit plan.
3.9. No Material Undisclosed Liabilities. Except as set forth on the
-----------------------------------
Disclosure Schedule, there are no uninsured material liabilities or obligations
of the Companies of any nature, whether absolute, accrued, contingent or
otherwise, other than (i) the liabilities and obligations that are fully
reflected, accrued, or reserved against on the MOV Financial Statements, for
which the reserves are appropriate and reasonable, or incurred in the ordinary
course of business and consistent with past practices since September 30, 1997,
or (ii) liabilities or obligations not required to be disclosed in financial
statements prepared in accordance with generally accepted accounting principles.
3.10. Tax Liabilities. Each of the Companies has filed all federal,
---------------
state, county and local tax returns and reports required to be filed by it,
including those with respect to income, payroll, property, withholding, social
security, unemployment, franchise, excise and sales taxes; has either paid in
full all taxes that have become due as reflected on any return or report and any
interest and penalties with respect thereto or has fully accrued on its books or
has established adequate reserves for all taxes payable but not yet due; and has
made required cash deposits with appropriate governmental authorities
representing estimated payments of taxes, including income taxes and employee
withholding tax obligations. No extension or waiver of any statute of
limitations or time within which to file any return has been granted to or
requested by any of the Companies with respect to any tax. No unsatisfied
deficiency, delinquency or default for any tax, assessment or governmental
charge has been assessed (or, to the knowledge of the Companies, claimed or
proposed) against the Companies, nor has any of the Companies received notice of
any such deficiency, delinquency or default.
3.11. Title to Properties.
-------------------
(a) Except as set forth in the Disclosure Schedule, each of the
Companies has good and marketable title to the assets reflected in its books and
records as being owned or leased, including (except as they have since been
affected by transactions in the ordinary course of business) the real and
personal properties reflected in the MOV Financial Statements (except for assets
subject to financing leases required to be capitalized under generally accepted
accounting principles, all of
7
<PAGE>
which are so reflected in the MOV Financial Statements or notes thereto), and
all assets purchased by the Companies since the date of the MOV Financial
Statements (except for such assets as have been disposed of by the Companies in
the ordinary course of business), free and clear of any lien, claim or
encumbrance, except as reflected in the MOV Financial Statements or notes
thereto and except for:
(i) liens for taxes, assessments or other governmental charges
not yet due and payable;
(ii) statutory liens incurred in the ordinary course of business
with respect to liabilities that are not yet due and payable;
(iii) landlord liens contained in leases in the ordinary course of
business; and
(iv) such imperfections of title and/or encumbrances as are not
material in character, amount or extent and do not materially detract from
the value or interfere with the use of the properties and assets subject
thereto or affected thereby.
(b) To the knowledge of the Companies and Shareholders, (i)
applicable zoning ordinances permit the operation of the Merchant of Vino stores
(the "Stores") at the sites set forth on Schedule 3.11(collectively the "Real
Estate"); (ii) each of the Companies has all easements and rights, including
easements for all utilities, services, roadways and other means of ingress and
egress, necessary to operate the Stores; and (iii) neither the whole nor any
portion of the Real Estate has been condemned, requisitioned or otherwise taken
by any public authority, and no notice of any such condemnation, requisition or
taking has been received; except in each case where the failure of such
provisions to be true and correct would not have a material adverse effect on
the business and operations of the Companies. To the knowledge of the Companies
and the Shareholders, no such condemnation, requisition or taking is threatened
or contemplated, and there are no pending public improvements which may result
in special assessments against or which may otherwise materially and adversely
affect the Real Estate. To the knowledge of the Companies and the Shareholders,
(i) the Real Estate has not been used for deposit or disposal of hazardous
wastes or substances in violation of any past or current law in any material
respect and (ii) there is no material liability under past or current law with
respect to any hazardous wastes or substances which have been deposited or
disposed of on or in the Real Estate.
(c) None of the Companies has received any notice of, and none of
the Shareholders has actual knowledge of, any material violation of any zoning,
building, health, fire, water use or similar statute, ordinance, law, regulation
or code in connection with the Real Estate.
8
<PAGE>
(d) To the knowledge of the Companies and Shareholders, no hazardous
or toxic material (as hereinafter defined) exists in any structure located on,
or exists on or under the surface of, the Real Estate which is, in any case, in
material violation of applicable environmental law. For purposes of this
Section, "hazardous or toxic material" shall mean waste, substance, materials,
smoke, gas or particulate matter designated as hazardous, toxic or dangerous
under any environmental law. For purposes of this Section, "environmental law"
shall include the Comprehensive Environmental Response Compensation and
Liability Act, the Clean Air Act, the Clean Water Act and any other applicable
federal, state or local environmental, health or safety law, rule or regulation
relating to or imposing liability or standards concerning or in connection with
hazardous, toxic or dangerous waste, substance, materials, smoke, gas or
particulate matter.
3.12. Condition of Assets. To the knowledge of the Companies and
-------------------
Shareholders, all of the assets of the Companies viewed as a whole and not on an
asset by asset basis are in good condition and working order, ordinary wear and
tear excepted, and are suitable for the uses for which intended, free from any
known defects, except such minor defects, as do not substantially interfere with
the continued use thereof.
3.13. Contracts. Set forth on Schedule 3.13 are, to the knowledge of the
---------
Companies and Shareholders, complete and accurate lists of all of the following
categories of contracts and commitments (including summaries of oral contracts)
to which the Companies is a party or bound:
(i) contracts with any labor union; employee benefit plans or
contracts; and employment, consulting or similar contracts, including
confidentiality agreements;
(ii) leases, whether as lessor or lessee; loan agreements,
mortgages, indentures, instruments of indebtedness or commitments in each
case involving indebtedness for borrowed money or money loaned to others;
and guaranty or suretyship, performance bond, indemnification or
contribution agreements involving obligations;
(iii) contracts with third parties that involve aggregate payments
by the Companies of more than $25,000;
(iv) insurance policies material to the business of the Companies;
and
(v) other contracts that are material to the operations, business
or financial condition of the Companies.
9
<PAGE>
To the extent requested, the Companies has furnished or made available accurate
and complete copies of the foregoing contracts and agreements to Parent. All
such contracts are valid, binding, subsisting and enforceable obligations of the
Companies. No contracts or commitments have been made by the Companies granting
any person any right to develop, franchise, license, own, manage or operate the
Stores or any future store. The Companies have not entered into any commitment
or understanding for the lease of real property other than the Real Estate,
other than a month-to-month lease for the office occupied by Merchant Management
Affiliates, Inc.
3.14. Litigation and Government Claims. Except as set forth on the
--------------------------------
Disclosure Schedule, there is no pending suit, action or litigation, or
administrative, arbitration or other proceeding or governmental investigation or
inquiry, to which the Companies is a party or to which its assets are subject
which would, if decided against the Companies, individually or in the aggregate,
have a material adverse effect on the business, results of operations, assets or
the condition, financial or otherwise, of the Companies. Except as set forth on
the Disclosure Schedule, to the knowledge of the Companies and the Shareholders,
there are no such proceedings threatened, contemplated or any basis for any
unasserted claims (whether or not the potential claimant may be aware of the
claim) which would, if decided against the Companies, individually or in the
aggregate, have a material adverse effect on the business, results of
operations, assets or the condition, financial or otherwise, of the Companies.
3.15. No Violations or Defaults. Except as set forth on the Disclosure
-------------------------
Schedule, to the knowledge of the Companies and the Shareholders, none of the
Companies is in violation of or default under nor has any event occurred that,
with the lapse of time or the giving of notice or both, would constitute a
violation of or default under, or permit the termination or the acceleration of
maturity of, or result in the imposition of a lien, claim or encumbrance upon
any property or asset of the Companies pursuant to, the articles of organization
or bylaws of any of the Companies or any loan or lease agreement, other
agreement or instrument, judgment, order, injunction or decree to which any of
the Companies is a party, by which it is bound, or to which any of its assets is
subject, except where such violation or default would not have a material
adverse effect on the business, results of operations, assets or the condition,
financial or otherwise, of the Companies. Except as set forth on the Disclosure
Schedule, to the knowledge of the Companies, there are no existing violations of
any law applicable to the business of the Companies that have a material adverse
effect on the business, operations, properties, assets or condition of the
Companies.
3.16. Labor Matters.
-------------
(a) None of the Companies is party to any collective bargaining
agreements with any union, and no collective bargaining agreement is currently
being negotiated by the Companies.
10
<PAGE>
(b) There are no discrimination charges against any of the Companies
(relating to sex, age, race, national origin, handicap or veteran status)
pending before any federal or state agency or authority.
(c) There is no labor strike or similar material dispute pending or,
to the knowledge of the Companies, threatened against or involving the
Companies.
(d) There is no arbitration proceeding under any collective
bargaining agreement pending or, to the knowledge of the Shareholders,
threatened involving any employees of the Companies.
(e) To the knowledge of the Companies and Shareholders, for the past
two years, the Companies have substantially followed the practices outlined in
its employee policy manuals in all material respects with regard to conditions
and terms of employment and termination benefits with respect to its employees.
3.17. Investment Representations. Each of the Shareholders acknowledges
--------------------------
receipt of the SEC Reports described in Section 4.8 from Parent and the
opportunity to ask questions of and receive answers from representatives of the
management of Parent concerning an investment in Parent Common Stock, and
acknowledges and agrees that (i) the shares of Parent Common Stock to be
received by virtue of the Merger are being acquired for investment purposes and
not with a view to the distribution or resale thereof in violation of the
Securities Act of 1933, as amended (the "1933 Act"), and cannot be resold unless
they are registered under the 1933 Act and applicable state securities laws or
an exemption from registration is available therefor and (ii) either such
Shareholder is an "accredited investor" as such term is used in Regulation D
under the 1933 Act or such Shareholder has appointed Edward Jonna to act as
"Purchaser representative" in accordance with Regulation D.
3.18. Transaction with Affiliates. Except as set forth on the Disclosure
---------------------------
Schedule, upon the occurrence of the Closing, neither the Shareholders nor any
Affiliate of the Shareholders will have any interest in or will own any property
or right used principally in the conduct of the business of the Companies. The
term "Affiliate" shall mean the Shareholders, or any member of the immediate
family (including brother, sister, descendant, ancestor or in-law) of the
Shareholders, or any corporation, partnership, trust or other entity in which
the Shareholders or any such family member has a substantial interest or is a
director, officer, partner or trustee. The Companies constitute all of the
legal entities under common control of the Shareholders which operate the
business and assets of the Stores and any other retail business of the
Shareholders and their affiliates related thereto.
3.19. Brokers and Finders. None of the Companies or the Shareholders has
-------------------
engaged any person to act or render services as a broker, finder or similar
capacity in connection with the transactions contemplated herein and no person
has, as a result
11
<PAGE>
of any agreement or action by the Companies, any right or valid claim against
the Companies, Parent or any of Parent's affiliates for any commission, fee or
other compensation as a broker or finder, or in any similar capacity in
connection with the transactions contemplated herein.
4. REPRESENTATIONS AND WARRANTIES OF PARENT AND SUBSIDIARY. Parent and
-------------------------------------------------------
Subsidiary, jointly and severally, represent and warrant to the Companies and
the Shareholders as follows:
4.1. Organization and Good Standing. Parent is a corporation duly
------------------------------
organized, validly existing and in good standing under the laws of the State of
Texas. Subsidiary is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and is a wholly-owned
subsidiary of Parent.
4.2. Foreign Qualification. Each of Parent and Subsidiary is duly
---------------------
qualified or licensed to do business and in good standing as a foreign
corporation in every jurisdiction where the failure so to qualify could have a
material adverse effect on its business, operations, assets or financial
condition.
4.3. Corporate Power and Authority. Each of Parent and Subsidiary has the
-----------------------------
corporate power and authority and all licenses and permits required by
governmental authorities to own, lease and operate its properties and assets, to
carry on its business as currently being conducted, and each has the corporate
power and authority and all licenses and permits required by governmental
authorities to execute, deliver and perform this Agreement.
4.4. Binding Effect. This Agreement has been or will have been duly
---------------
authorized, executed and delivered by Parent and Subsidiary and is the legal,
valid and binding obligations of each of them, enforceable in accordance with
its terms except that (i) enforceability may be limited by bankruptcy,
insolvency, or other similar laws affecting creditors' rights and (ii) the
availability of equitable remedies may be limited by equitable principles of
general applicability.
4.5. Compliance with Other Instruments. Neither the execution and
---------------------------------
delivery by Parent or Subsidiary of this Agreement nor the consummation by them
of the transactions contemplated hereby will violate, breach, be in conflict
with, or constitute a default under, or permit the termination or the
acceleration of maturity of, or result in the imposition of any lien, claim or
encumbrance upon any property or asset of Parent or Subsidiary pursuant to,
their respective certificates of incorporation or bylaws, or any note, bond,
indenture, mortgage, deed of trust, evidence of indebtedness, loan or lease
agreement, other agreement or instrument, judgment, order, injunction or decree
by which Parent or Subsidiary is bound, to which either is a party, or to which
their assets are subject.
12
<PAGE>
4.6. Consents. Except as contemplated by this Agreement, no approval,
--------
authorization, consent, order or other action of, or filing with, any
governmental authority or administrative agency is required in connection with
the execution and delivery by the Parent or the Subsidiary of this Agreement or
the consummation of the transactions contemplated hereby. No approval,
authorization or consent of any other third party is required in connection with
the execution and delivery by the Parent or the Subsidiary of this Agreement and
the consummation of the transactions contemplated hereby.
4.7. Parent Shares. The Parent Common Stock to be issued by virtue of the
-------------
Merger (the "Parent Shares"), when issued and delivered, will be duly
authorized, validly issued, fully paid, and nonassessable, free and clear of all
liens, claims and encumbrances. The Parent Shares shall be identical in rights
to outstanding shares of Parent Common Stock and shall be listed for trading on
the Nasdaq National Market. Parent does not make any representation as to the
market price which the Shareholders will realize upon the ultimate disposition
of the Parent Shares, it being acknowledged by the Shareholders that the market
price of publicly traded securities will be affected by many factors which are
outside the control of Parent and as to which it can offer no assurance.
4.8. Parent Reports to SEC. Parent has furnished to the Shareholders true
---------------------
and complete copies of (i) the Parent's Annual Report to Stakeholders for the
year ended September 29, 1996 and (ii) the Parent's Quarterly Report on Form 10-
Q for the first three fiscal quarters of fiscal 1997 (collectively the "SEC
Reports"). The SEC Reports did not, on their respective dates of filing,
contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. Parent
has filed on a timely basis all documents required to be filed by it with the
Securities and Exchange Commission (the "SEC") and all such documents complied
as to form with the applicable requirements of law. Parent is not aware of any
reason that would delay or prevent such timely filing in the future. All
financial statements included in such documents, including without limitation,
the SEC Reports, (i) complied as to form in all material respects with the
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto, (ii) were prepared in accordance with generally
accepted accounting principles applied on a consistent basis throughout the
periods covered thereby (except as may be indicated therein), (iii) fairly
present the financial position, results of operations and cash flows of Parent
as of the respective dates thereof and for the periods referred to therein, and
(iv) are consistent with the books and records of Parent. Since the date of the
most recent SEC Reports, there has not been any material adverse change in the
assets, business, financial condition or results of operations of Parent.
4.9. No Material Undisclosed Liabilities. There are no material
-----------------------------------
liabilities or obligations of Parent of any nature, whether absolute, accrued,
contingent or
13
<PAGE>
otherwise, other than (i) the liabilities and obligations that are fully
reflected in the SEC Reports, or incurred in the ordinary course of business and
consistent with past practices since such date, (ii) liabilities or obligations
not required to be disclosed in financial statements prepared in accordance with
generally accepted accounting principles and (iii) liabilities incurred in
connection with this Agreement and the transactions contemplated hereby.
4.10. Brokers and Finders. Other than Bank America Robertson Stephens
-------------------
(the fees and expenses of which will be paid by Parent), neither Parent nor
Subsidiary has engaged any person to act or render services as a broker, finder
or similar capacity in connection with the transactions contemplated herein and
no person has as a result of any agreement or action by Parent or Subsidiary
any right or valid claim against the Companies or any of the affiliates of the
Companies for any commission, fee or other compensation as a broker or finder,
or in any similar capacity in connection with the transactions contemplated
herein.
5. CERTAIN COVENANTS.
-----------------
5.1. Cooperation. Each of the parties hereto shall, and shall cause each
-----------
of its affiliates to, use its reasonable best efforts to (i) obtain at the
earliest practicable date and, in any event, before the Closing Date, any
approvals, authorizations and consents necessary to consummate the transactions
contemplated by this Agreement and releases of all guarantees by the
Shareholders of liabilities of the Companies (it being understood that Parent
shall have the principal responsibility for attempting to obtain the same and
the Companies will assist Parent as reasonably required); (ii) as reasonably
requested by the other, cooperate with and keep the other informed in connection
with this Agreement; and (iii) take such actions as the other parties may
reasonably request to consummate the transactions contemplated by this Agreement
and diligently attempt to satisfy, to the extent within its control, all
conditions precedent to its obligations to close the transactions contemplated
by this Agreement.
5.2 Maintenance of Business and Assets. The Shareholders covenant that
----------------------------------
between the date hereof and the Closing, except as contemplated hereby, as set
forth on the MOV Financial Statements or with the prior consent of Parent, they
will cause the Companies to refrain from doing any of the following: (i)
entering into any transaction other than in the ordinary course of business,
(ii) permitting any encumbrance, mortgage or pledge on any asset of the
Companies other than in the ordinary course of business, (iii) disposing of any
material asset of the Companies other than in the ordinary course of business,
(iv) effecting any change in the capitalization of the Companies or (v) paying
or incurring any indebtedness (other than accounts payable or changes in
existing lines of credit, in each case in the ordinary course of business).
14
<PAGE>
5.3. Registration of Parent Common Stock.
-----------------------------------
(a) As soon as practicable, Parent shall prepare and file with the
SEC a Registration Statement on Form S-3 (the "Registration Statement")
registering the Parent Shares for resale to the public. Parent shall cause the
Registration Statement (i) to become effective as soon as practicable after the
filing thereof (but in any event prior to the "Pooling Publication Date"
(defined herein) and (ii) to remain effective so that such Parent Shares may be
offered and sold on a continuous or delayed basis in accordance with Rule 415
under the 1933 Act, until the earlier of two years after the Closing Date or
such time as all of the Parent Shares have been sold by the Shareholders.
(b) Based upon the written opinion of Parent's securities law
counsel, Parent may, by written notice to the Shareholders, for a period not to
exceed 30 days, suspend or withdraw the Registration Statement and require that
the Shareholders cease sales of the Parent Shares thereunder, if (i) Parent is
engaged in negotiations or preparations for any transaction that Parent desires
to keep confidential for valid business reasons, and (ii) Parent determines in
good faith that the public disclosure requirements imposed on Parent as a result
of the Registration Statement would require public disclosure of such
negotiations or preparations; provided, however, that Parent may not exercise
this right on more than one occasion.
(c) Parent agrees to indemnify and hold harmless the Shareholders,
and any broker or agent selling the Parent Shares on behalf of the Shareholders,
against any losses, claims, damages or liabilities to which any such person may
become subject under the 1933 Act, or otherwise, insofar as such losses, claims,
damages or liabilities arise from any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement or
prospectus included therein, or any supplemental filings, or other documents,
incident to the Registration Statement, or arise out of or are based upon the
omission to state therein a fact required to be stated therein or necessary to
make the statements therein not misleading (except insofar as such losses,
claims, damages or liabilities arise out of or are based upon information
furnished in writing to Parent by or on behalf of the Shareholders specifically
for use in such registration statement or prospectus).
(d) Parent shall bear all expenses of the Registration Statement
filed hereunder, which shall include, without limitation, all registration and
filing fees and the reasonable fees and disbursements of counsel and accountants
for Parent; but which shall not include any selling commissions or underwriting
discounts or stock transfer taxes for the Shareholders or their brokers or
underwriters or of any counsel or accountants retained by the Shareholders.
5.4 Pooling. From and after the date hereof, the Parent, the Companies,
-------
the Shareholders and their respective subsidiaries or other affiliates shall
not, to the best
15
<PAGE>
of their knowledge, (i) take any action, or fail to take any action, that would
jeopardize the treatment of the Merger as a "pooling of interest" for accounting
purposes or (ii) take any action, or fail to take any action, that would
jeopardize qualification of the Merger as a reorganization within the meaning of
Section 368 of the Code. The Shareholders have agreed that, until such time (the
"Pooling Publication Date") as financial results of Parent covering at least
thirty days of combined operations of Parent and the Companies subsequent to the
Closing Date have been published (Parent agreeing that it will cause such
publication as promptly as practicable after the Closing consistent with the
federal securities laws and accounting requirements but in no event later than
the 60th day after the Closing Date), they will not sell or otherwise dispose of
any Parent Shares. Parent will give instructions to its transfer agent with
respect to the Parent Shares to the effect that no transfer of such shares shall
be effected until the Pooling Publication Date.
5.5. Shareholder Action. Each of the Shareholders hereby represents that
------------------
they will vote all shares of MOV Common Stock held directly or indirectly by
them in favor of the adoption and approval of this Agreement and the
transactions contemplated hereby, and the Companies shall provide to Parent
evidence of such agreements, in form and substance reasonably satisfactory to
the Parent.
5.6. Post Acquisition Financial Examination. Parent and the Shareholders
--------------------------------------
shall undertake the following procedure with respect to an examination of the
financial condition of the Companies as of the Closing:
(a) Not later than 150 days after the Closing, the Parent, at its own
cost, shall prepare and deliver to the Shareholders an unaudited combined
balance sheet of the Companies as of the Closing Date (the "Closing Balance
Sheet"), prepared in accordance with generally accepted accounting principles.
The Companies shall conduct a complete physical inventory of each of the Stores
as of the Closing Date for the purpose of preparing the Closing Balance Sheet
and shall permit Parent and its accountants to participate in such conduct. To
the extent that a claim under the Post-Closing Escrow Agreement would result
from the Closing Balance Sheet, Parent will deliver to the Shareholders a copy
of any accounting work papers relating to the Closing Balance Sheet.
(b) In connection with preparing the Closing Balance Sheet, and in
accordance with the standards set forth in clause (a) above, Parent shall
determine the Net Book Value (as defined herein) of the Companies as of the
Closing Date (the "Closing Date Value"), which shall be set forth on the Closing
Balance Sheet. For purposes of this Agreement, "Net Book Value" shall mean the
difference of (i) total assets of the Companies less (ii) total liabilities of
the Companies, as computed in accordance with generally accepted accounting
principles consistently applied.
16
<PAGE>
(c) Within 30 days after the Closing Balance Sheet is delivered to
the Shareholders pursuant to clause (a) above, the Shareholders, at their own
cost, shall deliver to the Parent either (i) a written acknowledgment accepting
the Closing Balance Sheet, including the determination of the Closing Date
Value, or (ii) a written report of a Big Six accounting firm or the firm of
Follmer Rudzewicz & Co., P.C. setting forth in reasonable detail any proposed
adjustments to the Closing Balance Sheet or the Closing Date Value ("Adjustment
Report"). A failure by the Shareholders to deliver the Adjustment Report within
the required 30 day period shall constitute their acceptance of the Closing
Balance Sheet and the Closing Date Value.
(d) During a period of 30 days following the receipt by the
Shareholders of the Adjustment Report, the Shareholders and Parent shall attempt
to resolve any difference they may have with respect to the matters raised in
the Adjustment Report. In the event Shareholders and Parent fail to agree on
all of the proposed adjustments contained in the Adjustment Report within such
30 day period, then Shareholders and Parent mutually agree that the Detroit
office of Coopers & Lybrand (the "Independent Auditors") shall make the final
determination with respect to the correctness of the proposed adjustments in the
Adjustment Report in light of the terms and provisions of this Agreement. The
decision of the Independent Auditors shall be final and binding on the
Shareholders and Parent, and may be used in a court of law by either the
Shareholders or Parent for the purpose of enforcing such decision. The costs
and expenses of the Independent Auditors and their services rendered pursuant to
this clause (d) shall be borne by the non-prevailing party or, if neither party
prevails, equally by Shareholders and Parent.
5.7 Continuation of Business. Parent will continue the business of the
------------------------
Companies to the extent necessary to conform to Sections 1.7 and 1.8 of this
Agreement.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANIES AND THE SHAREHOLDERS.
-------------------------------------------------------------------------
The obligations of the Companies and the Shareholders to consummate the
transactions contemplated by this Agreement shall be subject to the satisfaction
or waiver, on or before the Closing Date, of each of the following conditions:
6.1. Compliance. Parent and Subsidiary shall have, or shall have caused
----------
to be, satisfied or complied with and performed in all material respects, all
terms, covenants and conditions of this Agreement to be complied with or
performed by them on or before the Closing Date.
6.2. Representations and Warranties. All of the representations and
------------------------------
warranties made by Parent and Subsidiary in this Agreement and in all
certificates and other documents delivered by them to the Companies pursuant
hereto, shall have been true and correct in all material respects as of the date
hereof, and shall be true and
17
<PAGE>
correct in all material respects at the Closing Date with the same force and
effect as if such representations and warranties had been made at and as of the
Closing Date, except for changes permitted or contemplated by this Agreement.
6.3. Employment and Non-Competition Agreements. Parent shall have entered
-----------------------------------------
into the Employment Agreements in the forms of Exhibits A-1 and A-2 hereto (the
"Employment Agreements") with each of Marc Jonna and Matthew Jonna.
6.4. Consulting and Non-Competition Agreements. Parent shall have entered
-----------------------------------------
into the Consulting Agreements in the form of Exhibit B-1, B-2 and B-3 hereto
(the "Consulting Agreements") with each of Edward Jonna, Juliette Jonna and
Monica George.
6.5. HSR Act. All applicable waiting periods under the Hart-Scott-Rodino
-------
Antitrust Improvements Act ("HSR Act") shall have been terminated or shall have
expired without objection or action which would prevent the consummation of the
Merger.
6.6. Third Party Consents. The Companies shall have received the approval
--------------------
from alcoholic beverage commissions and any other required governmental bodies
or third parties to the consummation of the transactions contemplated by the
Merger.
6.7. Retirement of Debt. Parent shall have arranged for the retirement as
------------------
of the Closing Date of the indebtedness of the Companies listed on Schedule 6.7
hereto.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF PARENT AND SUBSIDIARY. Except as
------------------------------------------------------------
may be waived by Parent and Subsidiary, the obligations of Parent and Subsidiary
to consummate the transactions contemplated by this Agreement shall be subject
to the satisfaction or waiver, on or before the Closing Date, of each of the
following conditions:
7.1. Compliance. The Companies and the Shareholders shall have, or shall
----------
have caused to be, satisfied or complied with and performed in all material
respects all terms, covenants, and conditions of this Agreement to be complied
with or performed by the Companies or the Shareholders (as the case may be) on
or before the Closing Date.
7.2. Representations and Warranties. All of the representations and
------------------------------
warranties made by the Companies and Shareholders in this Agreement, the
exhibits attached hereto and in all certificates and other documents delivered
by the Companies pursuant hereto, shall have been true and correct in all
material respects as of the date hereof, and shall be true and correct in all
material respects at the Closing Date with the same force and effect as if such
representations and warranties had been made
18
<PAGE>
at and as of the Closing Date, except for changes permitted or contemplated by
this Agreement.
7.3. Employment and Consulting Agreements. The applicable Shareholders
------------------------------------
shall have entered into the Employment Agreements and Consulting Agreements set
forth in Sections 6.3 and 6.4.
7.4. HSR Act. All applicable waiting periods under the HSR Act shall have
-------
been terminated or shall have expired without objection or action which would
prevent the consummation of the Merger.
7.5. Estoppel Certificates. Parent shall have received certificates from
---------------------
the lessors of the Real Estate, indicating the absence of any default by the
Companies under such leases, confirming the terms of such leases and (to the
extent required under the terms of the respective leases) consenting to the
Merger.
7.6. Third Party Consents. Parent shall have received the approval from
--------------------
alcoholic beverage commissions and any other required governmental bodies or
third parties to the consummation of the transactions contemplated by the Merger
and to the operation of the Stores, effective as of the Closing Date, by the
Parent and/or the Subsidiary. The consents from third party lessors of the
Stores shall also contain the matters set forth in Schedule 7.6.
8. INDEMNIFICATION/ CLAIMS ASSERTION.
---------------------------------
8.1. Indemnification of Parent and Subsidiary. Subject to the limitations
----------------------------------------
set forth in Sections 8.3 and 8.4, the Shareholders shall indemnify and hold
Parent and Subsidiary harmless from, against, for and in respect of (i) any and
all damages, losses, settlement payments, obligations, liabilities, claims,
actions or causes of action and encumbrances suffered, sustained, incurred or
required to be paid by Parent or Subsidiary, net of any resulting income tax
benefits to Parent or Subsidiary, because of (A) the breach of any written
representation, warranty, agreement or covenant of the Companies or the
Shareholders contained in this Agreement, or (B) any outstanding lawsuits,
proceedings or actions pending or threatened against the Companies that relate
to periods prior to the Closing (the "Litigation Claims") other than those set
forth on the Disclosure Schedule; and (ii) all reasonable costs and expenses
(including, without limitation, attorneys' fees, interest and penalties)
incurred by Parent or Subsidiary in connection with any action, suit,
proceeding, demand, assessment or judgment incident to any of the matters
indemnified against in this Section 8.1. In order to secure the indemnification
obligations of the Shareholders hereunder, the Shareholders have entered into
the Post-Closing Escrow Agreement.
19
<PAGE>
8.2. Indemnification of Shareholders. Subject to the limitations set
-------------------------------
forth in Sections 8.3 and 8.4, Parent and Subsidiary, jointly and severally,
shall indemnify and hold the Shareholders harmless from, against, for and in
respect of: (i) any and all damages, losses, settlement payments, obligations,
liabilities, claims, actions or causes of action and encumbrances suffered,
sustained, incurred or required to be paid by the Shareholders, net of any
resulting income tax benefits to the Shareholders, because of the breach of any
written representation, warranty, agreement or covenant of Parent or Subsidiary
contained in this Agreement; (ii) any and all liabilities, obligations, claims
and demands arising out of the ownership or operation of the Companies on and
after the Closing Date or in respect of any Shareholder's guaranty of a
liability of the Companies, except to the extent the same arises from a breach
of any written representation, warranty, agreement or covenant of the Companies
or the Shareholders contained in this Agreement (other than agreements or
covenants of the Companies to be performed after the Closing); (iii) any and all
liabilities, obligations, claims and demands arising out of the failure of any
Shareholder's guaranty of a liability of the Companies to have been released;
and (iv) all reasonable costs and expenses (including, without limitation,
attorneys' fees, interest and penalties) incurred by the Shareholders in
connection with any action, suit, proceeding, demand, assessment or judgment
incident to any of the matters indemnified against in this Section 8.2.
8.3. Survival of Representations, Warranties and Covenants. All
-----------------------------------------------------
representations, warranties, covenants and agreements made by any party to this
Agreement or pursuant hereto shall be deemed to be material and to have been
relied upon by the parties hereto, and shall survive the Closing Date; provided,
however, that the representations and warranties of the Companies and the
Shareholders shall expire on the 12 month anniversary of the Closing Date (six
month anniversary for breaches of representations and warranties not involving a
third party claim). Notice of any claim, whether made under the indemnification
provisions hereof or otherwise, based on a breach of a representation, warranty,
covenant or agreement must be given prior to the expiration of such
representation, warranty, covenant or agreement; and any claim not made within
such period shall be of no force or effect. The representations and warranties
hereunder shall not be affected or diminished by any investigation at any time
by or on behalf of the party for whose benefit such representations and
warranties were made; provided, however, that matters disclosed to an
indemnified party in writing at any time prior to the Closing shall be deemed
disclosed and shall modify the representations and warranties accordingly.
8.4. General Rules Regarding Indemnification/ Claims Assertion. The
---------------------------------------------------------
obligations and liabilities of each party hereunder with respect to claims
resulting from the assertion of liability by the other party shall be subject to
the following terms and conditions as the party's sole and exclusive remedy
after the Closing:
(a) The indemnified party shall give prompt written notice (which in
no event shall exceed 30 days from the date on which the indemnified party first
became
20
<PAGE>
aware of such claim or assertion) to the indemnifying party of any claim which
might give rise to a claim by the indemnified party against the indemnifying
party based on the indemnity agreements contained in Sections 8.1 or 8.2 hereof,
stating the nature and basis of said claims and the amounts thereof, to the
extent known.
(b) If any action, suit or proceeding is brought against the
indemnified party with respect to which the indemnifying party may have
liability under the indemnity agreements contained in Sections 8.1 or 8.2
hereof, the action, suit or proceeding shall, at the election of the
indemnifying party, be defended (including all proceedings on appeal or for
review which counsel for the indemnified party shall deem appropriate) by the
indemnifying party. The indemnified party shall have the right to employ its
own counsel in any such case, but the fees and expenses of such counsel shall be
at the indemnified party's own expense unless the employment of such counsel and
the payment of such fees and expenses both shall have been specifically
authorized in writing by the indemnifying party in connection with the defense
of such action, suit or proceeding. Notwithstanding the foregoing, (A) if there
are defenses available to the indemnified party which are inconsistent with
those available to the indemnifying party to such extent as to create a conflict
of interest between the indemnifying party and the indemnified party, the
indemnified party shall have the right to direct the defense of such action,
suit or proceeding insofar as it relates to such inconsistent defenses, and the
indemnifying party shall be responsible for the reasonable fees and expenses of
the indemnified party's counsel insofar as they relate to such inconsistent
defenses, and (B) if such action, suit or proceeding involves or could have an
effect on matters beyond the scope of the indemnity agreements contained in
Sections 8.1 and 8.2 hereof, the indemnified party shall have the right to
direct (at its own expense) the defense of such action, suit or proceeding
insofar as it relates to such other matters. The indemnified party shall be
kept fully informed of such action, suit or proceeding at all stages thereof
whether or not it is represented by separate counsel.
(c) The indemnified party shall make available to the indemnifying
party and its attorneys and accountants all books and records of the indemnified
party relating to such proceedings or litigation and the parties hereto agree to
render to each other such assistance as they may reasonably require of each
other in order to ensure the proper and adequate defense of any such action,
suit or proceeding.
(d) The indemnified party shall not make any settlement of any claims
without the written consent of the indemnifying party. The indemnified party
shall have no right to object to any settlement offer involving only the payment
of money by an indemnifying party.
(e) Parent shall be entitled to assert a claim against the Parent
Shares escrowed pursuant to the Post-Closing Escrow Agreement in respect of any
amounts to which it is entitled to receive by virtue of this Article 8.
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(f) An indemnified party shall not make any claim hereunder
unless and until it has incurred damages and expenses of a cumulative aggregate
of $150,000 (the "Floor") and shall thereafter be entitled to make a claim only
for amounts incurred in excess of such Floor (it being understood that the Floor
shall not be applicable to claims made pursuant to a breach of Section 3.7(c)
hereof). An indemnified party shall not make cumulative aggregate claims for
indemnification hereunder in excess of $10 million (the "Ceiling"); provided,
however, that such Ceiling shall not be applicable to claims against Parent or
Subsidiary in the event that either is in material breach of Sections 5.3 or 5.4
hereof.
(g) The indemnification obligations of the Shareholders shall be
joint and several; provided, however, that (i) Parent and Subsidiary shall not
make any claim against Monica George or Juliette Jonna, except in respect of a
breach of a representation as to matters involving such Shareholder and (ii) no
Shareholder shall be liable in respect of a breach of a representation as to
matters involving another Shareholder.
9. MISCELLANEOUS.
-------------
9.1. Termination. This Agreement and the transactions contemplated hereby
-----------
may be terminated at any time on or before the Closing Date:
(i) by mutual consent of the Companies and Parent;
(ii) by Parent or Subsidiary if there has been a material
misrepresentation or breach of warranty in the representations and
warranties of the Companies or the Shareholders set forth herein or if
there has been any material failure on the part of the Companies or the
Shareholders to comply with its obligations hereunder;
(iii) by the Companies or the Shareholders if there has been a
material misrepresentation or breach of warranty in the representations and
warranties of Parent or Subsidiary set forth herein or if there has been
any material failure on the part of Parent or Subsidiary to comply with its
obligations hereunder;
(iv) by the Companies or Parent if the transactions contemplated
by this Agreement have not been consummated by December 31, 1997 (which
date shall be extended to no later than January 31, 1998 if approvals with
respect to the HSR Act or liquor control authorities have not been obtained
by December 31, 1997), unless the parties otherwise agree or unless such
failure of consummation is due to the failure of the terminating party to
perform or observe the covenants and agreements hereof to be performed or
observed by it at or before the Closing Date; or
22
<PAGE>
(v) by the Companies or Parent if the transactions contemplated
hereby violate any order, decree or judgment of any court or governmental
body or agency having competent jurisdiction.
In the event of the termination of this Agreement pursuant to this Section 9.1,
this Agreement shall forthwith become null and void and of no further force or
effect. Upon any such termination, Parent and Subsidiary shall, within five
days of the date of termination, return to the Companies all proprietary
documents and materials supplied by the Companies and/or the Shareholders and
shall thereafter maintain in strict confidence the matters contained therein (it
being understood that the confidentiality agreement previously entered into by
the parties shall thereafter continue in full force and effect notwithstanding
the termination of this Agreement).
9.2. Expenses. Each of Parent, Subsidiary, the Companies and the
--------
Shareholders shall pay its own reasonable expenses incurred in connection with
this Agreement and the transactions contemplated hereby; provided, however, that
Parent shall pay all of the filing fees incurred in connection with obtaining
approvals under the HSR Act.
9.3. Entire Agreement. This Agreement and the exhibits hereto contain the
----------------
complete agreement among the parties with respect to the transactions
contemplated hereby and supersede all prior agreements and understandings, oral
or written, among the parties with respect to such transactions. Section and
other headings are for reference purposes only and shall not affect the
interpretation or construction of this Agreement. The parties hereto have not
made any representation or warranty except as expressly set forth in this
Agreement or in any certificate or schedule delivered pursuant hereto.
9.4. Remedies of the Surviving Corporation. After the Closing, the
-------------------------------------
Surviving Corporation shall have the same rights and benefits under this
Agreement as does Parent and Subsidiary with respect to the representations,
warranties and covenants of the Shareholders contained herein, as fully as if
such representations, warranties and covenants had been made to or with the
Surviving Corporation in lieu of Parent and Subsidiary. In any proceedings by
Parent or Subsidiary to assert or prosecute any claims under, or to otherwise
enforce, this Agreement or any other agreement contemplated hereby or any
transaction contemplated hereby or thereby, each of the Shareholders agrees that
he shall not assert as a defense or bar to recovery by the Surviving Corporation
and hereby waives any right so to assert such defense or bar such recovery, that
(a) before the date of this Agreement the Companies (as opposed to Parent and
Subsidiary) had knowledge of the circumstances giving rise to the claim being
pursued by it; (b) before the date of this Agreement the Companies engaged in
conduct or took action that caused or brought about the circumstances giving
rise to its claim or otherwise contributed thereto; (c) the Surviving
Corporation is estopped from asserting or recovering upon its claim by reason of
having joined in the
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representations, warranties, and covenants made by Shareholders in this
Agreement; or (d) Shareholders have a right of contribution from or
indemnification by the Surviving Corporation to the extent that there is any
recovery against him. Each of the Shareholders further agrees that he shall not
under any circumstances whatsoever affirmatively seek any contribution from or
indemnification by the Surviving Corporation for any losses, damages, expenses
or other claims, regardless of form, suffered by him arising out of, related to
or in connection with this Agreement or any other agreement contemplated hereby
(except pursuant to Section 8.2) or any transaction contemplated hereby or
thereby.
9.5. Public Announcements. No party to this Agreement shall issue any
--------------------
press release relating to, or otherwise publicly disclose, the transactions
contemplated by this Agreement without the prior approval of the other parties.
Notwithstanding the foregoing, any party may make such disclosure as may be
required by law, provided the disclosing party obtains from the other party
prior approval of the substance of the proposed disclosure (such as the content
of a proposed press release), which approval may not be unreasonably withheld or
delayed.
9.6. Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which when so executed and delivered shall be deemed an
original, and such counterparts together shall constitute only one original.
9.7. Notices. All notices, demands, requests or other communications that
-------
may be or are required to be given, served or sent by any party to any other
party pursuant to this Agreement shall be in writing and shall be mailed by
first-class, registered or certified mail, return receipt requested, postage
prepaid, or transmitted by a reputable overnight courier service, facsimile
transmission or by hand delivery, addressed as follows:
(i) If to the Shareholders:
c/o Edward Jonna
4754 West Wickford
Bloomfield Hills, Michigan 48302
Fax: 248-644-3651
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with a copy to:
Robert M. Carson
Carson Fischer, P.L.C.
Third Floor, 300 East Maple Road
Birmingham, Michigan 48009-6317
Fax: 248-644-1832
(ii) If to the Companies (after the Closing), Parent or
Subsidiary:
Whole Foods Market, Inc.
601 N. Lamar Blvd.
Suite 300
Austin, Texas 78703-5413
Attention: John Mackey, Chairman
Fax: 512-477-1069
with a copy to:
Crouch & Hallett, L.L.P.
717 N. Harwood, Suite 1400
Dallas, Texas 75201
Attention: Bruce H. Hallett
Fax: 214-953-0576
Each party may designate by notice in writing a new address to which any notice,
demand, request or communication may thereafter be so given, served or sent.
Each notice, demand, request or communication that is mailed, delivered or
transmitted in the manner described above shall be deemed sufficiently given,
served, sent and received for all purposes at such time as it is delivered to
the addressee (with the return receipt, fax confirmation, the delivery receipt
or the affidavit of courier or messenger being deemed conclusive evidence of
such delivery) or at such time as delivery is refused by the addressee upon
presentation.
9.8. Assignment; Successors and Assigns. This Agreement may not be
----------------------------------
assigned or transferred (voluntarily or by operation of law) by any of the
parties hereto without the written consent of all the other parties. Subject to
the preceding sentence, this Agreement and the rights, interests and obligations
hereunder shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and assigns.
9.9. Governing Law. This Agreement shall be construed and enforced in
-------------
accordance with the laws of the State of Michigan.
25
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9.10. Waiver and Other Action. This Agreement may be amended, modified or
-----------------------
supplemented only by a written instrument executed by the parties against which
enforcement of the amendment, modification or supplement is sought.
9.11. Severability. If any provision of this Agreement is held to be
------------
illegal, invalid, or unenforceable, such provision shall be fully severable, and
this Agreement shall be construed and enforced as if such illegal, invalid or
unenforceable provision were never a part hereof; the remaining provisions
hereof shall remain in full force and effect and shall not be affected by the
illegal, invalid or unenforceable provision or by its severance; and in lieu of
such illegal, invalid or unenforceable provision, there shall be added
automatically as part of this Agreement, a provision as similar in its terms to
such illegal, invalid or unenforceable provision as may be possible and be
legal, valid and enforceable.
9.12. Third-Party Beneficiaries. This Agreement and the rights,
-------------------------
obligations, duties and benefits hereunder are intended for the parties hereto,
and no other person or entity shall have any rights, obligations, duties and
benefits pursuant hereto.
9.13. Arbitration. Any controversy or dispute among the parties arising
-----------
in connection with this Agreement shall be submitted to a panel of three
arbitrators and finally settled by arbitration in accordance with the commercial
arbitration rules of the American Arbitration Association. Each of the
disputing parties shall appoint one arbitrator, and these two arbitrators shall
independently select a third arbitrator. Arbitration shall take place in
Southfield, Michigan or such other location as the arbitrators may select. The
prevailing party in such arbitration shall be entitled to the award of all costs
and attorneys' fees in connection with such action but, in such action or
otherwise in respect to any claim or liabilities, shall in no event be entitled
to the receipt of any consequential or punitive damages. Any award for monetary
damages resulting from nonpayment of sums due hereunder shall bear interest from
the date on which such sums were originally due and payable. Judgment upon the
award rendered may be entered in any court having jurisdiction or application
may be made to such court for judicial acceptance of the award and an order of
enforcement, as the case may be.
[signatures on following pages]
26
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
WHOLE FOODS MARKET GROUP, INC.
By: /s/ James P. Sud
------------------------------------------------
Name: James P. Sud
Title: Vice President - Operations
WHOLE FOODS MARKET, INC.
By: /s/ James P. Sud
------------------------------------------------
Name: James P. Sud
Title: Vice President - Operations
MERCHANT OF VINO A/2/, INC.
By: /s/ Edward Jonna
------------------------------------------------
Name: Edward Jonna
Title: President
MERCHANT OF VINO ROCHESTER HILLS, INC.
By: /s/ Edward Jonna
------------------------------------------------
Name: Edward Jonna
Title: President
MERCHANT OF VINO BIRMINGHAM, INC.
By: /s/ Edward Jonna
------------------------------------------------
Name: Edward Jonna
Title: President
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MERCHANT OF VINO SOMERSET, INC.
By: /s/ Edward Jonna
------------------------------------------------
Name: Edward Jonna
Title: President
MERCHANT OF VINO SOUTHFIELD, INC.
By: /s/ Edward Jonna
------------------------------------------------
Name: Edward Jonna
Title: President
BEVERAGE BROKER-ANN ARBOR, INC.
By: /s/ Edward Jonna
------------------------------------------------
Name: Edward Jonna
Title: President
MERCHANT MANAGEMENT AFFILIATES, INC.
By: /s/ Edward Jonna
------------------------------------------------
Name: Edward Jonna
Title: President
MERCHANT MARKETING GROUP INCORPORATED.
By: /s/ Edward Jonna
------------------------------------------------
Name: Edward Jonna
Title: President
28
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SHAREHOLDERS:
/s/ Edward Jonna
---------------------------------------------------
Edward Jonna
/s/ Juliette Jonna
---------------------------------------------------
Juliette Jonna
/s/ Marc Jonna
---------------------------------------------------
Marc Jonna
/s/ Matthew Jonna
---------------------------------------------------
Matthew Jonna
/s/ Monica George
---------------------------------------------------
Monica George
29
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Schedule I
THE COMPANIES
Merchant of Vino A/2/, Inc.
Merchant of Vino Rochester Hills, Inc.
Merchant of Vino Birmingham, Inc.
Merchant of Vino Somerset, Inc.
Merchant of Vino Southfield, Inc.
Beverage Broker-Ann Arbor, Inc.
Merchant Management Affiliates, Inc.
Merchant Marketing Group Incorporated
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Schedule II
SHAREHOLDERS
Name Ownership Percentage
- - ---- --------------------
Edward Jonna 29.43*
Juliette Jonna 29.43*
Marc Jonna 14.73
Matthew Jonna 13.23
Monica George 13.18
* Includes shares owned by the two indicated shareholders as joint tenant
with right of survivorship (it being understood that shares of Parent Common
Stock shall be issued in such manner, per issuance instructions of such
holders).
31
