SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
Date of Report (Date of earliest event reported) May 23, 1996
------------
Manhattan Bagel Company, Inc.
(Exact Name of Company as Specified in its Charter)
New Jersey 0-24388 22-2981539
---------- ------- ----------
(State or other jurisdiction of (Commission File (IRS Employer
incorporation or Number) Identification Number)
organization)
246 Industrial Way West, Eatontown, New Jersey 07724
- ---------------------------------------------- -----
(Address of principal executive office) (Zip Code)
Company's telephone number, including area code (908) 544-0155
N/A
---
Former Name or Former Address, if Changed Since Last Report)
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ITEM 1. Acquisition or Disposition of Assets.
The closing of the transactions contemplated by the Agreement and Plan of
Merger dated as of May 22, 1996 (the "Merger Agreement") by and between
Manhattan Bagel Company, Inc. (the "Company"), SBI Acquisition Corp.
("Acquisition"), and Specialty Bakeries, Inc. ("SBI"), and Rocco Fiorentino,
John Gerber and Frank Guglielmo took place on May 23, 1996. Pursuant to the
terms of the Agreement, Acquisition, a newly created wholly-owned subsidiary of
the Company, was merged with and into SBI and 132,500 shares of common stock of
the Company were issued to the shareholders of SBI. Under the Merger
Agreement, the number of the shares was to be determined based on a closing date
balance sheet. The parties agreed to waive the closing balance sheet require-
ment and to fix the number of shares to be issued.
SBI was a private company which owned and franchised a total of 23
bagel bakery stores in the Southern New Jersey and Philadelphia areas operating
under the name Bagel Builders.
The former principals of SBI will remain employees of the Company in
various capacities.
This transaction was structured to be a tax-free reorganization and to be
accounted for as a "pooling of interests".
ITEM 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements of Businesses Acquired. It is impractical at this
time to provide the financial statements of Specialty Bakeries, Inc. for the
period specified in Rule 3-05(b) of Regulation S-X. The Registrant currently
expects to file such financial statements on or before August 6, 1996.
(b) Pro Forma Financial Information. It is impractical at this time to
provide pro forma financial information required by Article 11 of Regulation
S-X. The Registrant currently expects to file such pro forma information on or
before August 6, 1996.
(c) Exhibits:
10.22 - Agreement and Plan of Merger, dated as of May 22, 1996, by
and among the Registrant, SBI Acquisition Corp., and
Specialty Bakeries, Inc., and Rocco Fiorentino, John Gerber
and Frank Guglielmo.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereto duly authorized.
MANHATTAN BAGEL COMPANY, INC.
Registrant
Date: June 6, 1996 By: /s/ Jack Grumet
------------------------------------
Jack Grumet, Chairman
and Chief Executive Officer
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EXHIBIT INDEX
Exhibit No. Description Page
- ----------- ----------- ----
10.22 Agreement and Plan of Merger,
dated as of May 22, 1996, by and
among the Registrant, SBI
Acquisition Corp., and Specialty
Bakeries, Inc., and Rocco
Fiorentino, John Gerber and
Frank Guglielmo
EXHIBIT 10.22
MANHATTAN BAGEL COMPANY, INC.,
SBI ACQUISITION CORP.,
SPECIALTY BAKERIES, INC.
And
ROCCO FIORENTINO
JOHN GERBER
FRANK S. GUGLIELMO
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AGREEMENT AND PLAN
OF MERGER
May 22, 1996
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TABLE OF CONTENTS
Section Page
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1. The Merger; Effective Time; Surviving Corporation:.........................1
1.1. The Merger........................................................1
1.2. Effective Time of the Merger......................................1
1.3. Certificate of Incorporation......................................1
1. 4. By-Laws...........................................................2
1.5. Directors and Officers............................................2
2. Conversion of Shares At Effective Time.....................................2
2.1. Conversion of Shares of the Company Stock.........................2
2.2 Closing Balance Sheet; Calculation of Merger Consideration........2
2.3. Status of Securities After Effective Time.........................3
2.4. Dividends.........................................................4
2.5. Closing...........................................................4
2.6 Securities Representation.........................................5
2.7. Federal Income Tax Consequences of the Transaction................6
3. Representations and Warranties of the Company and the .....................6
3.1. Organization and Qualification....................................6
3.2. Subsidiaries......................................................7
3.3. Capitalization....................................................7
3.4. Agreement.........................................................7
3.5. Financial Statements..............................................8
3.6. Title to Property, Absence of encumbrances, etc...................8
3.7. Accounts Receivable...............................................9
3.8. Inventory.........................................................9
3.9. Patents, Trademarks, etc..........................................9
3.10. Employee Remuneration, etc.......................................10
3.11. Union Agreements.................................................10
3.12. Officers, Directors and Bank Accounts............................11
3.13. No Adverse Change................................................11
3.14 Absence of Certain Changes.......................................11
3.15. Environmental Matters............................................12
3.16. Litigation.......................................................14
3.17. Compliance with Other Instruments and Laws.......................14
3.18. Contracts, etc...................................................14
3.19. Taxes............................................................16
3.20. Permits..........................................................18
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3.21. Employee Benefit Plans and Arrangements and
Compliance with ERISA.........................................19
3.22. Insurance........................................................20
3.23. Other Liabilities................................................21
3.24. Brokers..........................................................21
3.25 Absence of Certain Payments......................................21
3.26. No Condemnation or Expropriation.................................21
3.27. Insider Interests................................................21
3.28. Disclosure.......................................................22
4. Representations and Warranties of Parent..................................22
4.1. Organization and Qualification...................................22
4.2. Agreement........................................................22
4.3. Capitalization...................................................23
4.4. Financial Statements.............................................23
4.5. No Adverse Change................................................23
4.6. Compliance with Other Instruments and Laws.......................23
4.7. Filings..........................................................24
4.8. Brokers..........................................................24
4.9. No Solicitation..................................................24
4.10. Company Franchise Agreements.....................................24
5. Covenants of the Company and Shareholders.................................24
5.1. Action to Closing................................................24
5.2. Access and Information...........................................25
5.3. Publicity; Confidentiality.......................................25
5.4. Best Efforts.....................................................26
5.5. Negotiation with Other Parties...................................26
5.6. Covenant Not to Compete; Injunctive Relief.......................26
5.7. Pooling..........................................................28
6. Covenants of Parent.......................................................28
6.1. Best Efforts.....................................................28
6.2. Publicity; Confidentiality.......................................28
6.3. Access to the Company............................................28
6.4. Tax Free Reorganization..........................................28
6.5. Current Filings..................................................28
7. Conditions to the Obligations of the Company..............................28
7.1. Representations and Warranties...................................28
7.2. Performance......................................................29
7.3. Closing Certificate..............................................29
7.4. Opinion of Counsel...............................................29
7.5. Employment Agreements............................................29
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7.6. No Order.........................................................29
8. Conditions to the Obligations of Parent...................................29
8.1. Representations and Warranties...................................29
8.2. Performance......................................................29
8.3. Closing Certificate..............................................29
8.4. Employment Agreements............................................30
8.5 Opinion of Counsel...............................................30
8.6. Consents; Permits................................................30
9. Indemnification...........................................................30
9.1. Survival of Representations and Warranties.......................30
9.2. Indemnification by the Shareholders..............................30
9.3. Indemnification by Parent........................................32
9.4. Limitations; Nonexclusivity......................................32
9.5. Indemnification Procedures.......................................32
9.6. Indemnification Arrangements Among the Shareholders..............33
10. Registration Rights.......................................................33
10.1. Demand Registration Rights.......................................33
10.2 Piggyback Registration Rights....................................35
10.3. Conditions to Registration.......................................36
10.4 Expenses of Registration.........................................36
10.5. Inclusion of Other Shares........................................36
11. General Provisions........................................................37
11.1. Modification; Waiver.............................................37
11.2. Entire Agreement, etc............................................37
11.3. Termination......................................................37
11.4. Expenses.........................................................37
11.5. Further Actions..................................................37
11.6. Notices..........................................................37
11.7. Assignment.......................................................39
11.8. Counterparts.....................................................39
11.9. Headings.........................................................39
11.10. Governing Law....................................................39
11.11. Severability.....................................................39
11.12. Remedies Cumulative..............................................40
11.13. Exclusivity......................................................40
11.14. Arbitration......................................................40
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EXHIBITS
Exhibit A - Certificate of Merger
Exhibit B - Employment Agreements
Exhibit C - Opinion of Counsel for Parent
Exhibit D - Opinion of Counsel for the Company
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of May 22, 1996, (the "Agreement"),
between and among Manhattan Bagel Company, Inc. a New Jersey corporation
("Parent" or "MBC"), and SBI Acquisition Corp., a New Jersey corporation
("Acquisition"), Specialty Bakeries, Inc., a New Jersey corporation d/b/a Bagel
Builders (the "Company"), and Rocco Fiorentino, an individual ("Fiorentino"),
John Gerber, an individual ("Gerber") and Frank T. Guglielmo, an individual
("Guglielmo"; Fiorentino, Gerber and Guglielmo being sometimes individually
referred to as a "Shareholder" and together as the "Shareholders").
WHEREAS, the Shareholders own all of the outstanding capital stock (the
"Shares") of the Company; and
WHEREAS, the Boards of Directors of Parent, Acquisition and the Company
have approved the merger of Acquisition with and into the Company (the "Merger")
pursuant to the terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises and the representations,
warranties, covenants and agreements contained herein, the parties hereto,
intending to be legally bound hereby, agree as follows:
1. The Merger; Effective Time; Surviving Corporation:
1.1. The Merger. Upon the terms and subject to the conditions of this
Agreement, at the Effective Time (as defined in Section 1.2 hereof) in
accordance with the Business Corporation Act of the State of New Jersey (the
"New Jersey BCA"), SBI Acquisition Corp., a New Jersey corporation, shall be
merged with and into Specialty Bakeries, Inc., a New Jersey corporation, in
accordance with this Agreement and the separate existence of Acquisition shall
thereupon cease. The Company shall be the surviving corporation in the Merger
(hereinafter sometimes referred to as the "Surviving Corporation"). The Merger
shall have all the effects provided in the New Jersey BCA.
1.2. Effective Time of the Merger. The Merger shall become effective at
such time (the "Effective Time") as Acquisition and the Company shall have filed
a copy of the duly executed Agreement of Merger with duly executed officer's
certificates attached thereto in the form of Exhibit A (the "Certificate of
Merger"), with, and the same shall have been accepted for filing by, the
Secretary of State of the State of New Jersey. The date on which the Effective
Time occurs shall be the "Effective Date." Acquisition and the Company shall
each take or cause to be taken all such action and do or cause to be done all
such things as are necessary, proper or advisable under the laws of the State of
New Jersey to make the Merger effective, subject to the terms and conditions of
this Agreement.
1.3. Certificate of Incorporation . The Certificate of Incorporation of
Acquisition shall be the Articles of Incorporation of the Surviving Corporation
after the Effective Time.
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1. 4. By-Laws. The By-Laws of Acquisition shall be the By-Laws of the
Surviving Corporation after the Effective Time.
1.5. Directors and Officers. The Board of Directors and Officers of
Acquisition shall be the Board of Directors and Officers of the Surviving
Corporation after the Effective Time to serve thereafter until their successors
are elected and qualified.
2. Conversion of Shares At Effective Time.
2.1. Conversion of Shares of the Company Stock.
(a) Each share of the Company Common Stock, issued and outstanding
immediately prior to the Effective Time shall, as of the Effective Time, by
virtue of the Merger and without any action on the part of the holder thereof,
be converted into such number of shares of Common Stock of Parent, no par value
(the "Parent Common Stock"), as determined by computing (x) the amount equal to
(i) 150,000 minus (ii) the amount computed by dividing the Adjusted Net Worth
(as hereinafter defined) of the Company as of the Effective Date by the closing
price of Parent Common Stock immediately prior to the Effective Date (the amount
so computed being referred to as the "Liabilities Adjustment"), and (y) dividing
the amount so computed under clause (x) by (y) the total number of shares of
Company Common Stock issued and outstanding immediately prior to the Effective
Time. For purposes hereof, the term Adjusted Net Worth shall mean the Current
Assets plus Other Assets less Current Liabilities less Long Term Liabilities
plus Deferred Franchise Fees, as shown on the Balance Sheet of the Company.
(b) No fraction of a share of Parent Common Stock shall be issued. Any
fractional share of Parent Common Stock which would be issued to a record holder
of shares of Company Common Stock issued and outstanding immediately prior to
the Effective Time (after taking into account all shares of Company Common Stock
then held by such holder) shall be rounded to the nearest whole share of Parent
Common Stock.
(c) The Parent Common Stock to be received upon the conversion of Company
Common Stock pursuant to the Merger shall be referred to herein as the "Merger
Consideration."
(d) Each share of Acquisition's Common Stock, no par value per
share, issued and outstanding immediately prior to the Effective Time, shall by
virtue of the Merger and without any action on the part of the Holder thereof be
converted into one share of Common Stock of the
Surviving Corporation.
2.2 Closing Balance Sheet; Calculation of Merger Consideration.
(a) The Company and Purchaser shall jointly take a physical count of the
inventory of the Company as of the close of business on the Effective Date.
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(b) Within five (5) days following the Effective Date, Shareholders shall
prepare and deliver to Parent and Acquisition (i) a balance sheet as of the
Effective Date (the "Closing Balance Sheet") for the company, which shall be
prepared in accordance with generally accepted accounting principles applied on
a consistent basis with prior periods, and (ii) a list of all accounts payable
and other liabilities of the Company, stating in each case the creditor and the
amount due as of the Effective Date (the "Liabilities List").
(c) The Closing Balance Sheet and Liabilities List shall be accompanied by
a certificate of the Shareholders certifying as to the accuracy of the Closing
Balance Sheet and the Liabilities List and setting forth the computation of the
Liabilities Adjustment pursuant to the formula set forth in Section 2.1(a)
hereof.
(d) The computation in the Certificate shall be final for the purpose
hereof unless Parent gives the Shareholders, written notice within ten (10) days
after delivery of the Closing Balance Sheet and the Certificate that Parent
objects thereto (the "Notice of Objection").
(e) Parent and the Shareholders shall endeavor in good faith to agree upon
a settlement of the Disputed Items. If such settlement is not agreed upon within
ten (10) days after the aforesaid notice is given, any remaining Disputed Items
will be submitted to a panel of three (3) independent public accountants, one of
which shall be designated by the Shareholders, one of which shall be an
accountant designated by Parent, and the third of which shall be a partner in a
Big Six public accounting firm (the "Arbitrating Accountant") selected by the
other two members of the panel. The Arbitrating Accountant shall be selected
within two weeks after the expiration of the said ten (10) day period and shall
be advised that it is the intention of Sellers and Purchaser that a decision be
rendered by the panel within thirty (30) days of the appointment of the
Arbitrating Accountant.
(f) The Shareholders shall pay the fees of the accountant designated by
them, Parent shall pay the fees of the accountant designated by it, and each of
the Shareholders and Parent shall pay one-half of the fee of the Arbitrating
Accountant. The decision rendered by such panel shall be final and binding upon
the parties.
2.3. Status of Securities After Effective Time.
(a) From and after the Effective Time, and until surrendered and exchanged,
each outstanding certificate formerly representing shares of Company Common
Stock shall be deemed for all purposes (other than the payment of dividends or
other distributions, if any, to shareholders of Parent) to represent the right
conferred upon such shares in accordance with Section 2.1 (a) above to receive
the number of shares of Parent Common Stock computed in accordance with said
Section 2.1(a). Upon surrender and exchange of each outstanding certificate
theretofore representing shares of Company Common Stock, there shall be paid to
the record holders of the certificate or certificates of Parent Common Stock
issued in exchange therefor the amount, without interest thereon, of dividends
and other distributions declared and paid to shareholders of record subsequent
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to the Effective Time with respect to the number of whole shares of Parent
Common Stock represented thereby.
(b) As soon as practicable after the calculation provided in Section 2.1(a)
is made, each former shareholder of record of the Company shall exchange his
certificates formerly representing shares of Company Common Stock for
certificates representing Parent Common Stock. Each Shareholder is aware that
the shares of Parent Common Stock to be issued as Merger Consideration at the
Closing are not registered under the Securities Act, or any securities law of
any state of the United States and may not be transferred without compliance
with (i) the registration provisions of the Securities Act of 1933 (the
"Securities Act") or the availability of an exemption therefrom and (ii)
applicable securities laws of any state of the United States. Each Shareholder
is aware that certificates representing such shares will contain a legend
written, printed or stamped on the face thereon stating that the shares are not
registered under the Securities Act or applicable state securities laws.
(c) Subject to the provisions of the next sentence, no transfer taxes shall
be payable by such holder of former Company Common Stock in connection with such
exchange. If any certificate evidencing Parent Common Stock is to be registered
in any name other than that in which the certificate surrendered in exchange
therefor is registered, it shall be a condition of such registration that the
certificate so surrendered shall be properly endorsed and otherwise in proper
form for transfer as determined by Parent, that any applicable securities laws
are complied with, and that the person requesting such exchange pay to Parent
any transfer or other taxes required by reason of the issuance of a certificate
for shares of Parent Common Stock in any name other than that of the registered
holder of the certificate surrendered or otherwise establish to the satisfaction
of Parent that such tax has been paid or is not payable.
(d) From and after the Effective Time, the stock transfer books of the
Company shall be closed and no transfer of shares of Company Common Stock shall
be made.
2.4. Dividends. If Parent shall, at any time after the date hereof but
before the Effective Time, (i) issue a dividend or make a distribution payable
in shares of Parent Common Stock, (ii) combine the outstanding Parent Common
Stock into a smaller number of shares, (iii) subdivide the outstanding Parent
Common Stock, or (iv) reclassify the Parent Common Stock, then, in such event,
the Merger Consideration to be delivered to holders of Parent Common Stock who
are entitled to receive Merger Consideration in exchange for Parent Common Stock
shall be adjusted so that each Shareholder shall be entitled to receive such
Merger Consideration as such Shareholder would have been entitled to receive if
the Effective Time had occurred prior to the happening of such event (or, if
applicable, the record date in respect thereof).
2.5. Closing. Subject to the satisfaction or waiver of the conditions set
forth herein, the Closing (the "Closing") of the transactions contemplated by
this Agreement shall take place promptly after the last to occur of the
satisfaction of all of the conditions set forth in Sections 7 and 8 and which
have not been waived, or on such other date, and at such time and place as may
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be agreed upon in writing by the parties hereto. The date of the Closing is
herein referred to as the Closing Date. At the Closing, the parties shall
exchange the certificates, opinions, and other documents contemplated by this
Agreement in order to ascertain whether the conditions to the parties'
obligations to consummate the Merger have been satisfied or any right or
condition exists that would permit or require this Agreement to be terminated.
The parties shall on the Closing Date or as soon thereafter as practicable cause
an executed copy of the Certificate of Merger, with appropriate officers'
certificates attached, to be filed in accordance with the laws of the State of
New Jersey.
2.6 Securities Representation. Each Shareholder understands that the shares
of Parent Common Stock constituting the Merger Consideration will not be
registered under the Securities Act of 1933 (the "Securities Act"), because the
issuance thereof is exempt pursuant to Section 4(2) of the Securities Act, and
that the reliance of Parent on such exemption is predicated on each
Shareholder's representations, warranties, covenants and acknowledgments set
forth in this Section 2.6.
(a) Each Shareholder represents and warrants to Parent that the address of
his principal residence is as set forth in Section 11.6 hereinbelow.
(b) Each Shareholder represents and warrants to Parent that the shares of
Parent Common Stock being acquired by such Shareholder are being acquired for
his own account, not as a nominee or agent, for investment and not with a view
to resale or distribution within the meaning of the Securities Act, and the
rules and regulations thereunder, and the Shareholder will not distribute the
Parent Common Stock in violation of the Securities Act.
(c) Each Shareholder (i) acknowledges that the shares of Parent Common
Stock are not registered under the Securities Act and must be held indefinitely
by him unless they are subsequently registered under the Securities Act or an
exemption from registration is available, (ii) is aware that any routine sales
of shares made under Rule 144 of the Securities and Exchange Commission under
the Securities Act may be made only in limited amounts and in accordance with
the terms and conditions of that Rule and that in such cases where the Rule is
not applicable, compliance with some other registration exemption will be
required, (iii) is aware that Rule 144 is not presently available for use by the
Purchaser for resale of the shares of Parent Common Stock to be acquired
pursuant to the Agreement, and (iv) is aware that except as provided in Section
10 hereinbelow, Parent is not obligated to register the Parent Common Stock
under the Federal or any state securities law so that they may be transferred or
otherwise disposed of by the Shareholder.
(d) Each Shareholder represents and warrants to Parent that he (i) is fully
capable of understanding the type of investment being made as a result of the
Merger and the risks involved in connection therewith, (ii) is financially able
to purchase and hold the Parent Common Stock for long-term investment, believes
that the nature and amount of the shares being acquired by him are consistent
with his overall investment program and financial position, and recognizes that
there are substantial risks involved in his acquisition of the Parent Common
Stock, (iii) is capable of bearing the economic risk of his investment in the
Parent Common Stock for an indefinite period of time and can afford a complete
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loss of his investment, (iv) has adequate means of providing for his current
liquidity needs, has no need for liquidity of his investment and is not
expecting any short term income from his investment, and (v) has no reason to
anticipate any change in personal circumstance, financial or otherwise, which
may cause or require any sale of the Parent Common Stock.
(e) Each Shareholder confirms that Parent has made available to him the
opportunity to ask questions of and receive answers from Parent's officers and
directors concerning the business and financial conditions of Parent, and to
acquire, and the Shareholder has received to his satisfaction, such additional
information about the business and financial condition of the Company as he has
requested.
2.7. Federal Income Tax Consequences of the Transaction. All parties to
this Agreement anticipate that the proposed merger transaction will qualify as a
"reorganization" pursuant to Section 368(a) of the Internal Revenue Code of
1986, as amended (the "Code"), and that Parent and Company will each be a party
to the reorganization within the meaning of Section 368(b) of the Code. Parent
and Company anticipate that no gain or loss will be recognized by Parent or
Company by reason of the Merger. It is further anticipated that no gain or loss
will be recognized by the Shareholders of Company who receive only Parent Common
Stock in exchange for Company Common Stock.
3. Representations and Warranties of the Company and the Shareholders. The
Company and each Shareholder, jointly and severally represent and warrant to
Parent and Acquisition as follows:
3.1. Organization and Qualification. (a) The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
New Jersey. The Company has all requisite power and authority to own, lease and
operate its properties and business as now being conducted. The Company is duly
qualified and in good standing as a foreign corporation authorized to do
business in each jurisdiction where the failure to so qualify would have a
material adverse effect on the business or assets of the Company.
(b) The copies of the Certificate of Incorporation and Bylaws of the
Company heretofore delivered by the Company to Parent are true, correct and
complete copies of such instruments as presently in effect. The minute books and
corporate records of the Company made available to Parent are the original
minute books and records of the Company and contain all proceedings (or
certified copies thereof) of the Shareholders and the board of directors of the
Company and there have been no other meetings, resolutions or proceedings of the
Shareholders or the directors of the Company to the date hereof not reflected in
such minute books and corporate records. Such minute books and corporate records
are true, correct and complete and there have been no changes, additions or
alternation thereto since the furnishing of such records to Parent.
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3.2. Subsidiaries. The Company does not own or control, directly or
indirectly, any shares of, or interest in, any corporation, business trust,
joint stock company, limited liability company, partnership, joint venture,
association or other business entity or venture.
3.3. Capitalization. The authorized capital stock of the Company consists
of 2,500 shares of common stock, no par value per share (the "Company Common
Stock"), of which 1,000 shares of Company Common Stock are issued and
outstanding and owned of record and beneficially by the Shareholders in such
amounts as are set forth opposite such Shareholder's name on Schedule 3.3., in
each case free and clear of any lien, pledge, hypothecation, mortgage or other
encumbrance or adverse claim thereon. All of the issued and outstanding shares
of Company Common Stock are duly authorized, validly issued, fully paid,
nonassessable and free of preemptive rights. Except as listed on Schedule 3.3,
other than the Company Common Stock, there are no other equity securities or
securities convertible into equity securities of the Company outstanding and
there are no options, warrants, calls, subscriptions, or other rights or other
agreements or commitments of any character whatsoever obligating the Company to
issue or sell any shares of its capital stock or any securities convertible into
or exchangeable or exercisable for, or otherwise evidencing a right to acquire,
any shares of its capital stock or other securities of any kind of the Company.
There are no shareholders agreements, voting trusts or other agreements or
understandings to which the Company or any Shareholder is a party, including,
without limitation, any agreements or understandings with respect to (i) the
voting of the capital stock of the Company, (ii) the relative rights and
obligations of the Shareholders of the Company, (iii) any buy-sell or rights of
first refusal regarding the Company and the interests of any Shareholder
therein, (iv) relations among the Shareholders, or (v) any other agreements
among the Shareholders relating to the conduct of the business and operations of
the Company.
3.4. Agreement. This Agreement, and all other agreements, documents,
instruments and certificates to be executed in connection herewith or
contemplated hereby have been duly authorized by all necessary corporate action,
including, without limitation, the directors of the Company and by the unanimous
approval of the Shareholders, and this Agreement has been duly executed and
delivered by each of the Company and each Shareholder and constitutes, and such
other agreements, documents, instruments and certificates when executed and
delivered will constitute, the legal and binding obligation of each of the
Company and each Shareholder, enforceable in accordance with its terms. The
execution and delivery by each of the Company and each Shareholder of this
Agreement, and all other agreements, documents, instruments, and certificates
contemplated hereby, the consummation of the transactions contemplated hereby,
and the performance by each of the Company and each Shareholder of its or his
obligations hereunder and thereunder will not conflict with or result in any
violation or termination of, or any default under (either immediately or with
notice or lapse of time), or any right to accelerate or the creation of any
lien, charge or encumbrance pursuant to, any provision of (a) the certificate of
incorporation or by-laws of the Company, (b) any agreement, contract, mortgage,
lease, license, note, bond, mortgage, indenture, deed of trust or other
instrument to which the Company, or any Shareholder is a party or by which any
of the properties or other assets of the Company, or any Shareholder is bound
(except that no representation is made with respect to the franchise agreements
listed on Schedul e 3.18), (c) any governmental franchise, license, permit
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or authorization, or any judgment or order of any tribunal or governmental body
applicable to the Company, or any Shareholder, or any of the properties or other
assets of the Company or any Shareholder, or (d) any law, statute, decree, rule
or regulation of any jurisdiction applicable to the Company or any Shareholder.
No authorization, consent or approval of, or declaration of, filing with or
notice to any governmental body or authority by the Company or any Shareholder
is required to be obtained or made by the Company or any Shareholder in
connection with the execution of this Agreement by the Company or any
Shareholder, the consummation by the Company or any Shareholder of the
transactions contemplated hereby or the performance by the Company or any
Shareholder of their obligations hereunder, other than the filing of the
Certificate of Merger with the Secretary of State of the State of New Jersey and
the filing of any necessary documents with the Franchise Tax Board of the State
of New Jersey.
3.5. Financial Statements. Attached hereto as Schedule 3.5 are the
unaudited consolidated balance sheet of the Company as of March 31, 1996,
including the notes thereto, and the related consolidated statement of income
and retained earnings and statements of cash flow for the three months then
ended (the "Unaudited 1996 Financial Statements"). The Company has furnished to
Parent true and complete copies of the audited consolidated balance sheets of
the Company as of December 31, 1995 and 1994, including the notes thereto, and
the related consolidated statements of income and retained earnings and changes
in financial position for the years then ended certified by Rainer & Company
(the "Audited Financial Statements," the Unaudited 1996 Financial Statements and
the Audited Financial Statements are together referred to as the "Financial
Statements"). The Financial Statements have been prepared from and are in
accordance with the books and records of the Company and present fairly the
financial position of the Company as at the respective dates thereof, the
related results of operations for the periods therein referred to, and the
related changes in financial position for such periods in accordance with
generally accepted accounting principles consistently followed throughout the
periods involved. All proper and necessary books of accounts and financial
records have been maintained by and are in the possession of the Company and are
accurate and complete, all in accordance with generally accepted accounting
principles and applicable legal requirements.
3.6. Title to Property, Absence of encumbrances, etc. Set forth in Schedule
3.6 is a complete and accurate list as of the date of this Agreement of (a) all
real property owned or leased by the Company, and (b) all machinery, equipment,
tools, furniture and fixtures owned or leased by the Company, and of all
mortgages, liens and encumbrances to which such real property, machinery,
equipment, tools, furniture and fixtures are subject. Except for leased property
and as specified in such Schedule 3.6, the Company has good, valid and
marketable title to all assets, real or personal, tangible or intangible, owned
or used by it, respectively, including, without limitation, all assets reflected
in the most recent balance sheet included in the Financial Statements (other
than any assets sold or otherwise disposed of in the ordinary course of business
since the date of such balance sheet), free and clear of all mortgages, pledges,
liens, security interests or encumbrances of any nature (other than liens for
taxes, assessments or other governmental charges not yet due and payable, or
presently payable without penalty or interest), including, without limitation,
any government restrictions on the operation of such assets, except as otherwise
disclosed in Schedule 3.6 or other Schedules to this Agreement. As of the date
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hereof, all buildings, including without limitation, the heating, ventilation,
air-conditioning, mechanical and electrical systems therein, other improvement
and leasehold improvements, and all machinery, equipment, tools, furniture and
fixtures listed on Schedule 3.6 owned or leased by the Company are in good
operating condition and repair and not a subject of deferred maintenance. All
real property owned or leased by the Company has been constructed and operated
in compliance with all applicable federal, state, county and municipal laws,
regulations, ordinances, standards and orders, including without limitation all
zoning and environmental laws, regulations, ordinances, standards and orders. As
of the date hereof, there are no outstanding enforcement actions or notices of
violation issued by any federal, state, county or municipal authority having
jurisdiction over any such property.
3.7. Accounts Receivable. All accounts receivable reflected on the most
recent balance sheet included in the Financial Statements (the "Balance Sheet")
and all accounts receivable arising subsequent to the date of such balance
sheet, have arisen in the ordinary course of business, represent valid
obligations to the Company, subject only to reserves for bad debts recorded in a
manner and in an amount consistent with past practice, and have been collected,
were collectible as of the date of the Balance Sheet or the date incurred if
subsequent thereto, in the aggregate recorded amounts thereof in accordance with
their terms.
3.8. Inventory. All of the Company's product inventories are currently
saleable in the ordinary course of business consistent with past practice. All
of the Company's raw materials and supplies inventory can be used or consumed in
the ordinary course of business as now conducted, and are not in amounts in
excess of normal requirements. Since December 31, 1995, there had been no change
in the amount of the Company's inventory except for changes as a result of the
purchase and sale of, or adjustment to, inventory in the ordinary course of
business consistent with past practice, including, but not limited to,
established seasonal patterns and general economic trends.
3.9. Patents, Trademarks, etc. Schedule 3.9 contains a complete and correct
list as of the date of this Agreement, including the number and date thereof, of
all patents, trademarks registered or claimed by the Company, trade names and
registered copyrights owned or used by, or registered in the name of, the
Company, and of all applications for patents or for registration of trademarks,
trade names or copyrights made by the Company, or by any of its employees for
the benefit of the Company. Except as otherwise indicated on Schedule 3.9, the
Company is the registered and beneficial owner of all such patents, trademarks,
trade names and registered copyrights, free and clear of any license, royalty,
lien, encumbrance or other interest of any third party. The Company owns or has
the right to use the name "Bagel Builders", all patents, patent applications,
trademarks, trade names, copyrights or other intellectual property rights,
including, without limitation, inventions, processes, designs, formulae, trade
secrets, technology and know-how, necessary for the conduct of its business as
now being conducted. Other than as set forth on Schedule 3.9, as of the date
hereof there is no existing, pending or to the knowledge of the Company or any
Shareholder, threatened claim by the Company against any third party for
infringement, misuse or misappropriation of any patent, trademark, trade name,
copyright or other intellectual property (including without limitation any trade
secrets or know-how) owned by the Company or in which the Company has an
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interest. As of the date hereof, there is no existing, pending or, to the
knowledge of the Company or any Shareholder, threatened action, suit, or
proceeding against the Company for infringement, misuse or appropriation by the
Company of any patent, trademark, trade name, copyright or other intellectual
property (including without limitation any trade secret or know-how) owned by
any third party or, to the knowledge of the Company or any Shareholder, any
basis therefor.
3.10. Employee Remuneration, etc.
(a) Schedule 3.10 lists the current salaries, bonuses, or any other form of
compensation paid (together with pending or anticipated increases therein) to
each director, officer, employee, agent, or consultant of the Company, including
any bonuses which the Company has promised or currently anticipates paying to
any such person. No officer or other key employee of the Company has as of the
date hereof indicated an intention to the Company, or any Shareholder to
terminate his or her employment with the Company.
(b) Schedule 3.10 also lists, as of the date of this Agreement, each
officer or employee of the Company who has entered into an employment contract,
consulting contract, or other special arrangement with the Company, and true and
complete copies of all such contracts and descriptions of all such arrangements
have been previously delivered to Parent.
(c) Except as set forth on Schedule 3.10, as of the date hereof, the
Company has not entered into any agreement or arrangement with any employees of
the Company to pay such employee any amount beyond such individual's regular
salary as an inducement to remain as an employee until, or contingent upon, the
execution of this Agreement or the consummation of the transactions contemplated
hereby.
3.11. Union Agreements. Except as disclosed in Schedule 3.11, as of the
date hereof, the Company is not a party to any collective bargaining agreement.
True and complete copies of any written agreements disclosed have been delivered
to Parent. Except as disclosed on Schedule 3.11 as of the date of this
Agreement, no attempts to organize the employees of the Company have been made,
nor to the knowledge of the Company or any Shareholder, are any such attempts
now threatened or being planned or has any such organization or representation
been discussed among the Company's employees within the two year period ending
on the date hereof. As of the date hereof, the Company is in compliance with all
applicable Federal, State and local laws, rules and regulations regarding
employment conditions and practices, has withheld all amounts required by law or
agreement to be withheld from the wages or salaries of its employees and is not
liable for any arrears of wages or any taxes or penalties for failure to comply
with any of the foregoing. As of the date hereof, the Company has not engaged in
any unfair labor practices and has not discriminated on the basis of age, sex or
other discrimination prohibited by law in its respective employment conditions
or practices. Except as set forth on Schedule 3.11, as of the date hereof, there
are no unfair labor practice or age or sex discrimination charges or complaints
or other charges or complaints alleging illegal discriminatory practices pending
or to the knowledge of the Company or any Shareholder threatened against the
Company before any Federal, state or local board, department, commission or
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agency nor to the knowledge of the Company or any Shareholder does any basis
therefore exist. As of the date hereof, there are no existing or to the
knowledge of the Company or any Shareholder threatened labor strikes, disputes,
grievances, or controversies affecting the Company. As of the date hereof, there
are no pending or to the knowledge of the Company or any Shareholder threatened
representation questions respecting the employees of the Company or any pending
arbitration proceedings. Except as set forth on Schedule 3.11, as of the date
hereof, the Company is not obligated to pay, and has not granted or promised in
writing or orally, to pay to any employee, officer, director or provider of
services, any compensation, and the Company is not a party to any special
arrangement for the payment of monies or provision of benefits pursuant to which
the Company could have any obligation to pay such persons compensation in the
event of, or as a consequence of, the severance of their employment or
relationship with the Company, or a change in control of the Company.
3.12. Officers, Directors and Bank Accounts. Schedule 3.12 lists as of
the date hereof (a) the names of all directors and officers of the Company and
(b) the name and location of each bank or other institution in which the Company
has any account or safe deposit box, the number or other identification thereof
and the names of all persons authorized to draw thereon or have access thereto.
3.13. No Adverse Change. From December 31, 1995 through the date hereof
there has not been any material adverse change in the financial condition,
operations, business or prospects of the Company.
3.14 Absence of Certain Changes. Except as set forth on Schedule 3.14, from
December 31, 1995 through the date hereof, the Company has not
(a) incurred any obligations or liabilities, whether absolute, accrued,
contingent or other, other than obligations and liabilities incurred in the
ordinary course of business,
(b) paid, discharged or satisfied any claims, liabilities or obligations,
whether absolute, accrue, contingent or otherwise, other than the payment,
discharge or satisfaction, in the ordinary course of business, of claims,
liabilities and obligations incurred in the ordinary course of business.
(c) mortgaged, pledged or subjected to any lien, lease, security interest
or other encumbrance (other than liens for taxes, assessments or other
governmental charges not yet due and payable, or presently payable without
penalty or interest) any of its assets, real or personal, tangible or
intangible,
(d) acquired or disposed of any assets or properties, or entered into any
agreement for any such acquisition or disposition, except in the ordinary course
of business,
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(e) suffered any material loss of, or adverse change in its
relationship with, any material supplier or customer or has knowledge that any
such supplier or customer intends or is contemplating any action which would
constitute or lead to such a loss or adverse change,
(f) suffered any damage, destruction or loss (whether or not covered by
insurance) which has a material adverse effect on its business,
(g) terminated or made any substantial revision of, or engaged in any
renegotiation of, any material contract,
(h) materially decreased the level of maintenance on, or its expenditures
for maintenance of, the real property, machinery, equipment, tools, furniture
and fixtures owned or leased by it,
(i) settled any dispute involving payment by the Company in excess of
$5,000, or canceled, forgiven or reduced any obligation of any person or entity
in an amount in excess of $5,000,
(j) made any loan or advance in excess of $5,000 to any person or entity
other than travel or expense advances in accordance with its normal policies
which have been accounted for or repaid, and extension of trade credit in
accordance with its normal business practices, or
(k) paid, loaned or advanced any amount to, or sold, transferred, or leased
any properties or assets (real, personal or mixed, tangible or intangible) to,
or entered into any agreement or arrangement with, directly or indirectly, any
of its officers, directors or stockholders or any affiliate or associate of any
of its officers, directors or stockholders, except customary and ordinary salary
payments to its officers.
(l) paid or set aside for payment any dividend or other distribution in
respect of its capital stock or redeemed, purchased or otherwise acquired,
directly or indirectly, any shares of its capital stock or other securities,
(m) made any change in any method of accounting or accounting practice, or
(n) entered into any material transaction other than in the ordinary course
of business.
3.15. Environmental Matters. (a) Except as set forth in Schedule 3.15, as
of the date of this Agreement, there is not with respect to any Environmental
Matter (as such term is defined below), related to or which affects or might
affect the Company or any of the transactions contemplated by this Agreement:
(i) any judicial or administrative action, suit, order, proceeding or
governmental investigation concerning or against the Company pending or to the
knowledge of the Company or any Shareholder threatened before any court or
tribunal or governmental instrumentality, (ii) any citation, summons, directive,
order or notice of violation of any law, decree, rule, regulation or
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order against the Company or to which the Company is a party, (iii) any lien on
the Company property arising from or related to Environmental Matters, or to the
knowledge of the Company or any Shareholder any governmental action resulting or
which is likely to result in the imposition of any such lien on any of the
properties owned or leased by the Company or (iv) to the best of the Company's
and each Shareholder's knowledge, any basis for any of the foregoing.
(b) Schedule 3.15 also lists, together with the date of expiration thereof,
all currently effective registrations, permits, licenses, authorizations and
approvals issued to the Company by or on behalf of any Federal, state or local
governmental body or agency with respect to Environmental Matters. True and
complete copies of all such registrations, permits, licenses, authorizations and
approvals have been previously delivered to Parent. Such registrations, permits,
licenses, authorizations and approvals constitute all those necessary for the
lawful conduct of the Company's business as presently conducted with respect to
Environmental Matters and as of the date hereof there is no administrative
action or other proceeding pending or, to the best of the Company's and each
Shareholder's knowledge, threatened to revoke or suspend any such registration,
permit, license, authorization or approval.
(c) As of the date hereof, no Hazardous Substances (as such term is defined
below) arising out of the operations of the Company have been generated,
treated, released, stored, discharged, disposed of or deposited on any of the
premises now or previously utilized by the Company (whether directly or
indirectly through a third party) or at any other location, except as permitted
by current applicable laws and regulations. As of the date hereof, all storage
facilities, whether above or below ground, and associated piping and equipment
located on the premises of the Company are in sound condition and free of leaks
which may result or have resulted in any release of Hazardous Substances.
(d) As used herein, the term "Environmental Matters" refers to all matters
relating to ground, air and water pollution or discharge, solid or hazardous
wastes, toxic, hazardous or polluting substances, transportation, occupational
health, product liability, the transport, storage, recycling or disposal of
waste (including, without limitation, garbage, refuse, sludge and other
discarded materials, whether solid, liquid, semisolid or gaseous and whether
on-site or off-site), ground water and soil monitoring, and discharge or
emission of pollutants, contaminants or by-products (including, without
limitation, dredged soil, solid wastes, incinerator residue, sewage, garbage,
sewage sludge, chemical wastes, biological materials, radioactive materials,
heat, wrecked or discarded equipment, industrial waste, chemicals, metals or
other substances), whether such pollution or discharge was caused by (i) the
Company, (ii) any third party arising from transport, storage, disposal or
treatment, whether on-site or off-site, on behalf of the Company, (iii) any
lessee or sublessee of any real property owned or leased by the Company, or (iv)
any partnership, joint venture or other similar business arrangement to which
the Company is a party.
(e) As used herein, the term "Hazardous Substances" shall have the meaning
assigned to such term in Section 101(14) of the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, 42 U.S.C. Section 9601 et
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seq., but shall also include petroleum hydrocarbons and any substance defined as
hazardous or toxic by any state or local regulatory agency having jurisdiction.
3.16. Litigation. Other than in regard to any Environmental Matter or as
set forth on Schedule 3.16, as of the date of this Agreement, there is no
judicial or administrative action, suit, proceeding or governmental
investigation pending or, to the knowledge of the Company or any Shareholder,
threatened before any court or tribunal or governmental instrumentality, or any
citation, order or notice of violation of any law, decree, rule or regulation,
by or against the Company, or any of the Company' s properties, which relates in
any way to the Company' s business, properties, assets or operations, or which
has or is likely to result in an imposition of a lien on any of the properties
or assets owned or leased by the Company, or which question the validity of this
Agreement or any action to be taken in connection herewith, nor is there any
such action, suit, proceeding or investigation, pending or to the knowledge of
the Company or any Shareholder, threatened, which involves any director,
officer, employee, consultant or independent contractor of the Company in its or
his or her capacity as a consultant or independent contractor of the Company.
Except as set forth in Schedule 3.16, as of the date hereof, neither the
Company, nor any property or assets of the Company is subject to any judicial or
administrative order, judgment, injunction or decree nor has the Company been a
party to any litigation, including without limitation any product or
professional liability litigation, within the last five years. As of the date
hereof, all accrued fees and expenses incurred by the Company in connection with
any matters set forth on Schedule 3.16 have been paid in full, no such amounts
remain due and payable, and there are no accrued fees and expenses with respect
to such matters for work performed prior to the date hereof for which the
Company has not been billed.
3.17. Compliance with Other Instruments and Laws. As of the date hereof,
the Company is not in violation of any provision of (a) its charter or by-laws,
or (b) any agreement, contract, mortgage, lease, license or other instrument,
governmental franchise, license, permit or authorization, judgment or order of
any tribunal or governmental body, or law, statute, decree, rule or regulation
applicable to it or any of its properties or to which it is a party or by which
it is bound which violation in any case would reasonably be expected to impair
the Company's ability to operate its business in a manner consistent with past
practice.
3.18. Contracts, etc.
(a) Schedule 3.18 contains complete and correct list, as of the date of
this Agreement, of each of the following contracts and agreements, oral or
written (each a "Contract"):
(i) contract for the employment of any person by the Company
(including any management or consulting agreement) not listed on Schedule
3.10,
(ii) profit sharing, bonus, deferred compensation, stock option,
severance pay, pension, retirement or similar plan, agreement or
arrangement of the Company,
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(iii) mortgage, debenture, note or installment obligation, or other
instrument or contract for the borrowing or lending of money by the
Company, including without limitation any agreement or arrangement relating
to the maintenance of compensating balances or the availability of a line
of credit,
(iv) franchise agreement, license agreement, sales agency agreement or
distribution agreement to which the Company is a party,
(v) guaranty of any obligation by the Company, including without
limitation any keep-well, make-whole or maintenance of working capital or
earnings or similar agreement,
(vi) agreement for the sale of any properties or assets by the Company
other than sales of products in the ordinary course of business,
(vii) contract, purchase order or other agreement, other than a
contract, purchase order or other agreement (i) for the purchase of
machinery, equipment, tools, furniture or fixtures with an aggregate
consideration of less than $5,000, made in the ordinary course of business,
or (ii) for the purchase of raw materials or other supplies made in the
ordinary course of business, pursuant to which the Company is or may be
obligated to make payments, contingent or otherwise, on account of or
arising out of the acquisition, prior, pending or future, of the shares,
business, or other assets of another enterprise,
(viii) secrecy or invention agreement under which the Company or any
Shareholder or, to the Company's or any Shareholder's knowledge, any of the
present officers or employees of the Company has any obligation and
relating to the business of the Company,
(ix) requirements contract with the Company as buyer or seller or
other agreement for the purchase or sale of goods or services not
terminable without liability by the Company on 60 days' (or less) notice
and involving payments by or to the Company in excess of $5,000,
(x) agreement or arrangement with a customer or supplier of the
Company for rebates, sharing of expenses or any similar device for the
effective reduction or increase of prices or other charges and involving
products with an aggregate value in excess of $5,000,
(xi) agreement of the Company with, or loan or advance by the Company
to or from, or other obligation of the Company to or from any officer or
director of the Company, or any affiliate of any such person,
(xii) lease of real or personal property with the Company as lessor or
lessee, involving rents of more than $5,000 per year,
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(xiii) agreement or arrangement limiting the freedom of any of the
Company or, to the knowledge of the Company or any Shareholder, any of the
present officers or employees of the Company to compete in any line of
business similar to the Company' s business, with any person or other
entity or in any geographical area,
(xiv) joint venture agreement or partnership, profit sharing or other
agreements to which the Company is a party,
(xv) agreement pursuant to which the Company has indemnified or shared
tax liability with any party, and
(xvi) contract, commitment or agreement not referred to above in this
Section 3.19 or in any other Schedule to this Agreement and any one of
which involves aggregate payments by or to the Company of $5,000 or more.
(b) All such contracts and agreements are, with respect to the Company, as
of the date hereof, valid, binding and in full force and effect, the Company is
not in any default thereunder which default could reasonably be expected to
cause termination of such Contract, and to the best knowledge of the Company and
each Shareholder, no event has occurred which, whether with notice, lapse or
time or otherwise, would constitute such a default by the Company thereunder (it
being understood that no representation or warranty is made with respect to the
effect of the transactions contemplated by this Agreement on the franchise
agreements listed on Schedule 3.18), and the Company has not received any notice
of cancellation or termination thereunder.
(c) Except as disclosed in Schedule 3.18 hereto, no consent of any party or
the payment of any penalty or incurrence of any additional obligation or change
of any terms is necessary so that all rights of the Company under contracts
extending beyond the Closing Date shall continue unimpaired on and after the
Closing Date (it being understood that no representation or warranty is made
with respect to consents, payments or additional obligations or changes of terms
which may arise or be necessary under the franchise agreements listed on
Schedule 3.18 by reason of the transactions contemplated by this Agreement).
3.19. Taxes. Except as set forth on Schedule 3.19 as of the date hereof:
(a) The Company has timely filed (giving due regard to permitted
extensions) all Tax returns (as defined below) and reports required to be filed
by it, which returns and reports were correct and complete in all aspects and
are consistent with the books and records of the Company. All Taxes owed by the
Company (whether or not shown in any Tax Return) have been paid in full. The
amounts accrued as liabilities for Taxes (whether accrued as currently payable
or deferred Taxes) on the books and records of the Company and reflected in the
Financial Statements are adequate to satisfy all unpaid liabilities for Taxes of
the Company through such date, including Taxes accruable upon income earned
through March 31, 1996. There is no tax lien upon any property or asset of the
Company except liens for current Taxes not yet due.
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(b) Adequate provision, including provision in the deferred tax account,
has been made in the Financial Statements for all deferred and accrued Taxes as
of their respective dates with respect to operations for periods ending on the
respective dates of the Financial Statements.
(c) The Company has delivered to Parent true and complete copies of all
federal, state and foreign income tax returns (together with any Revenue Agent's
Reports) filed by the Company relating to its operations for the taxable years
ended 1992, 1993, 1994 and 1995. The Federal income tax returns of the Company
have not been examined by the Internal Revenue Service for periods ended after
1992 and there are no outstanding proposed adjustments with respect to such
returns.
(d) No deficiency for any other Tax has been asserted or assessed against
the Company, and there are no unresolved claims concerning, or proceedings or
actions pending, which relate to either the Tax liability of the Company or the
collection or assessment of Tax for any period for which returns covering the
Company have been filed or were due. No issue has been raised in any examination
which, by application of the same or similar principles, reasonably could be
expected to result in a proposed deficiency for any other period through the
date hereof not so examined.
(e) There are no extensions of time in effect with respect to the dates on
which any Tax Returns were or are due to be filed. The Company has not entered
into any waivers or agreements for the extension of time for the assessment of
any Taxes or deficiencies thereof, nor are there any requests for rulings, nor
are there any outstanding subpoenas or requests for information, notices of
proposed reassessment of any property owned or leased by the Company or any
other matter pending between the Company and any taxing authority. There is no
outstanding agreement, extension or waiver extending the statutory period of
limitation applicable to any Tax or Tax Return.
(f) The Company has not agreed to, nor is the Company required to make, any
adjustment pursuant to Section 481(a) of the Internal Revenue Code of 1986, as
amended (the "Code") (or any predecessor provision) by reason of any change in
any accounting method of the Company, and the Company has no application pending
with any taxing authority requesting permission for any changes in its
accounting methods.
(g) The Company has not consented to the application of Section 341(f)(2)
of the Internal Revenue Code of 1986, as amended (or any predecessor provision).
(h) Through the date hereof the Company has duly and timely withheld all
Taxes from all salaries, wages and other compensation of its respective
employees' and has duly and timely paid over to the appropriate governmental
authorities all amounts required to be so withheld and paid over for all periods
under all applicable laws.
(i) Set forth in Schedule 3.19 is a list of (i) all examinations of Federal
income tax returns of the Company since its formation through the date hereof
and a summary of the adjustments thereto agreed to by the Company and (ii) all
deficiencies for other Taxes that have been assessed against and paid by the
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Company through the date hereof. No Tax claims have been or are being asserted
or proposed, and, to the knowledge of the Company or any Shareholders, no
proposals or deficiencies for any Taxes are being threatened, and no audit or
investigation of any return or report of Taxes is currently underway, pending or
threatened.
(j) The Company has not made any payment which constitutes an "excess
parachute payment" within the meaning of Section 280G of the Code, and no
payment by it required to be made under any contract or otherwise will, if made,
constitute an "excess parachute payment" within the meaning of Section 280G of
the Code.
(k) The Company has never been, and currently is not, bound by or subject
to any obligation under any agreement relating to the sharing of any liability
for, or payment of, Taxes with any other person or entity.
(l) "Tax" means any federal, state, local or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Section 59A of
the Code), customs duties, capital stock, franchise, profits, withholding,
social security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or add-on
minimum, estimated, or other tax or governmental charge of any kind whatsoever,
including any interest, penalty, or addition thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
(m) The Company has elected to be treated as an "S" Corporation for Federal
income tax purposes, effective as and from the date specified on Schedule 3.19,
which election continues and will continue through the Effective Date. The
Company has also elected to be taxed as an "S" Corporation for New Jersey state,
franchise or corporate income tax purposes, effective as and from the dates
specified on Schedule 3.19, which elections will continue through the Effective
Date. The Company has elected to be treated as a C corporation for Pennsylvania
state, franchise or corporate income tax purposes, effective as and from the
date specified on Schedule 3.19, which election will continue through the
Effective Date.
3.20. Permits. As of the date hereof, the Company has obtained and holds
all licenses, permits, authorizations, consents and orders or approvals of all
Federal, state or local governmental or regulatory bodies that are necessary for
the lawful conduct of its business (the "Permits"), including without limitation
permits to operate machinery, or to store, handle, utilize or dispose of raw
materials (including without limitation Hazardous Materials) and waste. As of
the date hereof, all of the Permits are listed on Schedule 3.20 and are validly
issued and in full force and effect and the Company is in compliance therewith.
As of the date hereof, no proceeding is pending or, to the best knowledge of the
Company and each Shareholder, threatened which seeks or may result in canceling,
suspending, restricting or modifying any Permit. As of the date hereof, the
business of the Company is being operated in all respects in accordance with the
terms and conditions of the Permits except where the failure to be so
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operated would not result in the cancellation, suspension, restriction or
modification of any Permit or require the Company to make payments in excess of
$5,000.
3.21. Employee Benefit Plans and Arrangements and Compliance with ERISA.
(a) Schedule 3.21 hereto sets forth, as of the date of this Agreement, all
employee benefit plans (within the meaning of Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")) and all bonus,
incentive, deferred compensation, retiree medical or life insurance,
supplemental retirement, severance or other benefit plans, programs or
arrangements, which are or have been maintained, contributed to or sponsored by
the Company for the benefit of any current or former employee, officer or
director of the Company or under which any current or former employee, officer
or director of the Company claims any benefits or rights (collectively, the
"Plans"). Each Plan is in writing and the Company has furnished Parent with a
true and complete copy of each Plan and a true and complete copy of each
material document prepared in connection with each such Plan including, without
limitation, (i) a copy of each trust or other funding arrangement, (ii) each
summary plan description and summary of material modifications, (iii) the most
recently filed Internal Revenue Service ("IRS") Form 5500, (iv) the most
recently received IRS determination letter for each such Plan, and (v) the most
recently prepared actuarial report and financial statement in connection with
each such Plan. As of the date hereof, the Company has no express or implied
commitment to modify, change or terminate any Plan, other than with respect to a
modification, change or termination required by ERISA or the Code.
(b) None of the Plans is as of the date hereof or at any time was, a
multiemployer plan (within the meaning of Section 3(37) or 4001(a)(3) of ERISA)
(a "Multiemployer Plan") or a single employer pension plan (within the meaning
of Section 4001(a)(15) of ERISA) for which the Company could incur liability
under Section 4063 or 4064 of ERISA (a "Multiple Employer Plan"). Except as
disclosed on Schedule 3.22(b)(1), none of the Plans provided as of the date
hereof or at any previous time provided, for the payment of separation,
severance, termination or similar-type benefits to any employee, officer,
director of the Company or obligates or obligated the Company to pay separation,
severance, termination or similar-type benefits to any such person solely as a
result of any transaction contemplated by this Agreement. Except as disclosed on
Schedule 3.21, none of the Plans provides as of the date hereof or at any
previous time provided, for or promises retiree medical, dental, disability or
life insurance benefits to any current or former employee, officer or director
of Company. None of the Plans is as of the date hereof or was at any time
subject to the laws of any jurisdiction outside of the United States.
(c) Each Plan is as of the date hereof and has been operated in all
respects in accordance with the requirements of all applicable laws, including,
without limitation, ERISA and the Code. No legal action, suit or claim is
pending or, to the knowledge of the Company or any Shareholder, threatened with
respect to any Plan (other than claims for benefits in the ordinary course) and,
no fact or event exists that could give rise to any such action, suit or claim.
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(d) Each Plan which is intended to be qualified under Section 401(a) of the
Code or Section 401(k) of the Code has received a favorable determination letter
from the IRS after 1985 that it is so qualified and each trust established in
connection with any Plan which is intended to be exempt from Federal income
taxation under Section 501(a) of the Code has received a determination letter
from the IRS after 1985 that it is so exempt, and no fact or event has occurred
since the date of such determination letter from the IRS through the date hereof
to adversely affect the qualified status of any such Plan or the exempt status
of any such trust. As of the date hereof, each such Plan has been properly
amended prior to the date of this Agreement in order to comply with the
provisions of the Tax Reform Act of 1986 and all other laws, rules and
regulations relating to tax-qualified benefit plans which are effective as of
the date of this Agreement.
(e) As of the date hereof, there has been no prohibited transaction (within
the meaning of Section 406 of ERISA or section 4975 of the Code) with respect to
any Plan. As of the date hereof, the Company has not incurred any liability for
any excise tax arising under Section 4971, 4972, 4979, 4980 or 4908B of the Code
with respect to any Plan, and no fact or event exists which could give rise to
any such liability. As of the date hereof, the Company has not incurred any
liability under, arising out of or by operation of Title IV of ERISA (other than
liability for premiums to the Pension Benefit Guaranty Corporation arising in
the ordinary course) with respect to any Plan, and no fact or event exists which
could give rise to any such liability. No complete or partial termination has
occurred within the five years preceding the date hereof with respect to any
Plan. No reportable event (within the meaning of Section 4043 of ERISA) has
occurred within the five years preceding the date hereof or is expected to occur
with respect to any Plan subject to Title IV of ERISA. No Plan had an
accumulated funding deficiency (within the meaning of Section 302 of ERISA or
Section 412 of the Code), whether or not waived, as of the most recently ended
plan year of such Plan. As of the date hereof, none of the assets of the Company
is the subject of any lien arising under Section 302(f) of ERISA or Section
412(n) of the Code; the Company has not been required to post any security under
Section 307 of ERISA or Section 401(a) of the Code; and to the knowledge of the
Company and each Shareholder, no fact or event exists which could give rise to
any such lien or requirement to post any such security.
(f) All contributions, premiums or payments required to be made, paid or
accrued with respect to any Plan have been made, paid or accrued on or before
their due dates. As of the Closing Date, no Plan which is subject to Title IV of
ERISA will have an "unfunded benefit liability" (within the meaning of Section
4001(a)(18) of ERISA).
(g) The termination of the Company Pension Plan shall not result in any
liability, cost, loss, damage, expense, claim or penalty to the Company, the
Surviving Corporation, Parent or Acquisition.
3.22. Insurance. Schedule 3.22 lists all insurance policies to which the
Company is, as of the date of this Agreement, a party or which relate to the
employees of the Company (the "Insurance Policies") and sets forth for each such
Insurance Policy the name of the insurer, the coverage limit, the amount and
frequency of payment of the premium, the term of the policy and a claims history
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for each Insurance Policy since January 1, 1993. As of the date hereof, the
Insurance Policies are in full force and effect, all premiums with respect
thereto covering all periods up to and including the date of the Closing have
been paid or will be paid when due, and no notice of cancellation or termination
has been received with respect to any Insurance Policy. The Insurance Policies
provide coverage that is in compliance with all material requirements of law and
of all material agreements to which the Company is a party, are valid,
outstanding and enforceable policies, and provide adequate insurance coverage
for the Company and the operations of its business.
3.23. Other Liabilities. As of the date hereof, the Company does not have
any liabilities or obligations (direct or indirect, contingent or absolute,
matured or unmatured) of whatever nature, whether arising out of contract, tort,
statute or otherwise, except liabilities and obligations (a) as reflected in the
Balance Sheet included as part of the Financial Statements, (b) disclosed in the
Schedules to this Agreement, or (c) incurred in the ordinary course of business
which do not singly or in the aggregate with respect to similar liabilities
involve an amount greater than $5,000.
3.24. Brokers. No finder, broker, agent or other intermediary has acted on
behalf of the Company or any Shareholder in connection with this Agreement or
the transactions contemplated hereby for whose fees the Company, Parent or
Acquisition are liable.
3.25 Absence of Certain Payments. As of the date hereof, neither the
Company nor to the best of the Company's and each Shareholder's knowledge, any
officers, directors, employees, agents, representatives, or independent
contractors of the Company has made, or arranged for the making of, any unlawful
payment to any official, officer or employee of any Federal, state, county,
municipal or other governmental or regulatory body or authority or any
self-regulatory body or authority, or made any payment to any customer or
supplier of the Company or any officer, director, partner, employee or agent of
any customer or supplier, for the unlawful sharing of fees or to any such
customer or supplier or any such officer, director, partner, employee or agent
for the unlawful rebating of charges, or engaged in any other unlawful
reciprocal practice, or made any other unlawful payment or given any other
unlawful consideration to any such customer or supplier or any such officer,
director, partner, employee or agent, in respect of the Company.
3.26. No Condemnation or Expropriation. Neither the whole nor any portion
of the leaseholds or any other assets of the Company is subject to any
governmental decree or order to be sold or is being condemned, expropriated or
otherwise taken by any public authority with or without payment of compensation
therefor, nor to the best knowledge of the Company and each Shareholder has such
condemnation, expropriation or taking been proposed.
3.27. Insider Interests. Except as set forth in Schedule 3.27, no officer,
director or Shareholder of the Company has any material interest in any
property, real or personal, tangible or intangible, pertaining to the business
of the Company. Since formation, the Company has not paid, loaned or advanced
any amount to, or made any dividend or distribution to, or sold, transferred, or
leased any property or assets (real, personal or mixed, tangible or intangible)
to, or entered into any agreement or arrangement with, directly or indirectly,
any of its officers, directors or shareholders or any affiliate or associate of
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any of its officers, directors or shareholders except customary and ordinary
salary payments to its officers. The Company is not indebted to any Shareholder
or any affiliate or associate of any Shareholder.
3.28. Disclosure. This Agreement, the Schedules hereto, the Financial
Statements and any other information furnished or to be furnished to Parent in
connection with this Agreement and the transactions contemplated hereby do not
contain any untrue statement of a material fact or omit to state any material
fact necessary to make the statements contained therein not false or misleading.
There is no fact known to the Company or any Shareholder which materially
affects or will materially affect the properties, assets, financial condition,
operations, prospects or business of the Company which has not been set forth in
this Agreement, the Schedules hereto or the Financial Statements.
4. Representations and Warranties of Parent. Parent represents and warrants to
the Company and the Shareholders as follows:
4.1. Organization and Qualification. Each of Parent and Acquisition is a
corporation duly organized, validly existing and in good standing under the laws
of its state of incorporation and has all requisite power and authority to own,
lease and operate its properties and business as it is now being conducted.
Parent is duly qualified and in good standing as a foreign corporation
authorized to do business in each jurisdiction where the failure to be so
qualified would have a material adverse effect on the business or assets of
Parent. Acquisition conducts no business activities and is not required to be
qualified to do business as a foreign corporation in any jurisdiction.
4.2. Agreement. The execution, delivery and performance of this Agreement,
and all other agreements, documents, instruments and certificates contemplated
hereby are within the corporate power and corporate authority of Parent and
Acquisition and have been authorized by all necessary corporate action by Parent
and Acquisition (no shareholder approval of Parent being required), and this
Agreement has been duly executed and delivered by Parent and Acquisition and
constitutes, and such other agreements, documents, instruments certificates when
executed and delivered will constitute the legal and binding obligation of
Parent and Acquisition enforceable in accordance with its terms. The execution
and delivery by Parent and Acquisition of this Agreement, and all other
agreements, documents, instruments and certificates contemplated hereby, the
consummation of the transactions contemplated hereby, and the performance by
Parent and Acquisition of their respective obligations hereunder and thereunder
will not conflict with or result in any violation or termination of (either
immediately or with notice or lapse of time), or any right to accelerate or the
creation of any lien, change or encumbrance pursuant to, any provision of (a)
the certificate of incorporation or by-laws of Parent or Acquisition, as
applicable, (b) any governmental franchise, license, permit or authorization, or
any judgment or order of any tribunal or governmental applicable to Parent or
Acquisition, or any of Parent's or Acquisition's properties or other assets, (c)
any law, statute, decree, rule or regulation of any jurisdiction or (d) any
agreement, contract, mortgage, lease, license, note, bond, indenture, deed of
trust or other instrument to which Parent or Acquisition is a party or by which
any of the properties or other assets of Parent or Acquisition is bound. The
issuance of the Parent Common Stock pursuant to this Agreement has been duly and
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validly authorized and the Parent Common Stock, when issued pursuant hereto,
will be validly issued, fully paid and non-assessable. Other than filings or
notices expressly contemplated by this Agreement, filings or notices which may
be necessary to comply with federal and state securities law and the filing of
any necessary documents with the Franchise Tax Board of the State of New Jersey,
no authorization, consent or approval of, or declaration of, filing or
registration with or notice to any governmental body or authority by Parent or
Acquisition is required to be obtained or made by Parent or Acquisition, in
connection with the execution of this Agreement by Parent and Acquisition, the
consummation by Parent and Acquisition of the transactions contemplated hereby,
or the performance by Parent or Acquisition of their obligations hereunder.
4.3. Capitalization. (a) The authorized capital stock of Parent consists of
10,000,000 shares of Common Stock, no par value, (the "Parent Common Stock"), of
which 7,238,548 shares are issued and outstanding; and 2,000,000 of Preferred
Stock, of which no shares are issued and outstanding. All of the issued and
outstanding shares of Parent's Common Stock are duly authorized, validly issued,
fully paid, nonassessable and free of preemptive rights.
(b) The authorized capital stock of Acquisition consists of 1000 shares of
Common Stock, no par value, (the "Acquisition Common Stock"), of which 100
shares are issued and outstanding and owned by Parent. All of the issued and
outstanding shares of Acquisition Common Stock are duly authorized, validly
issued, fully paid, nonassessable and free of preemptive rights. There are no
options, warrants, calls, subscriptions, or other rights or other agreements or
commitments of any character whatsoever obligating Acquisition to issue or sell
any shares of its capital stock or any securities convertible into or
exchangeable or exercisable for, or otherwise evidencing a right to acquire, any
shares of its capital stock or other securities of any kind of Acquisition.
4.4. Financial Statements. Parent has previously delivered to the Company
true and complete copies of the audited balance sheets of Parent as of December
31, 1995 and the related statements of income, retained earnings and cash flows
for such years then ended. Such statements, including the notes to all such
statements, if any, are referred to herein collectively as the "Parent's
Financial Statements". Parent's Financial Statements have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis throughout the periods specified, and present fairly the financial
position of Parent as of the respective dates specified and the results of
operations and changes in financial position of Parent for the respective
periods specified.
4.5. No Adverse Change. Since December 31, 1995 there has not been any
material adverse change in the financial condition, operations, business or
prospects of Parent.
4.6. Compliance with Other Instruments and Laws. Neither Parent nor
Acquisition is in violation of any provision of (a) its charter or by-laws, or
(b) any agreement, contract, mortgage, lease, license or other instrument,
governmental franchise, license, permit or authorization, judgment or order of
any tribunal or governmental body, or law, statute, decree, rule or regulation
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applicable to it or any of its properties or to which it is a party or by which
it is bound, which violation in any case would reasonably be expected to impair
the ability of Parent to operate its business in a manner consistent with past
practice.
4.7. Filings. Parent has filed all documents required to be filed with the
Securities and Exchange Commission (the "Commission") pursuant to the
requirements of the Securities Act, the Securities Exchange Act of 1934, and the
Rules and regulations promulgated thereunder (the "Filings"). The Filings did
not contain on the respective dates of filing thereof any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.
4.8. Brokers. No finder, broker, agent or other intermediary has acted on
behalf of Parent or Acquisition in connection with this Agreement or the
transactions contemplated hereby for whose fees the Company or any Shareholder
is liable.
4.9. No Solicitation. Parent is not now engaged in any activities,
discussions or negotiations with any parties (other than the Company) in respect
of a proposal or offer, for a tender or exchange offer, a merger, consolidation,
or other business combination involving Parent or its subsidiaries in which
Parent would not be the surviving corporation.
4.10. Company Franchise Agreements. Parent represents and warrants that it
has received and reviewed complete copies of all the Company's Franchise
Agreements and related assignments, and acknowledges that neither the Company
nor the Shareholders have made any representations or warranties with respect to
the Franchise Agreements and related assignments, except as specifically set
forth in this Agreement.
5. Covenants of the Company and Shareholders. The Company and the Shareholders
covenant as follows:
5.1. Action to Closing. From the date of this Agreement until the Effective
Time, the Company will, and the Shareholders, jointly and severally, will cause
the Company, to:
(a) conduct its business only in the ordinary course, in substantially the
manner as heretofore conducted and in accordance with all laws, rules,
regulations, orders, approvals, authorizations, exemptions, classifications and
registrations,
(b) maintain all of its assets in as good condition and repair as of the
date hereof, reasonable wear and tear excepted,
(c) maintain its inventories of raw materials and supplies, at a level at
least equivalent to that existing as of the date of this Agreement but in no
event at a level less than necessary for the normal business activities of the
Company,
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(d) perform in all material respects all of the respective obligations
under all Contracts listed in Schedule 3.18, and not amend, alter or modify any
provision of any such Contract or enter into any new Contract or transaction
involving consideration in excess of $5,000 or dispose, other than in the
ordinary course, of any assets having a value in excess of $5,000 in the
aggregate without the prior written consent of Parent,
(e) use its best efforts to maintain the existing relationships with all
suppliers, customers and others having business dealings with the Company,
(f) use its best efforts to keep available the services of the Company's
present officers and employees,
(g) deliver to Parent on Wednesday of each week a schedule of total sales
of the Company, including a breakdown of (i) retail sales by each store, and
(ii) wholesale sales, and interim financial statements as regularly prepared for
its internal use,
(h) confer on a regular and frequent basis with representatives of Parent
to report material operational matters and the general status of ongoing
operations,
(i) hire employees and other personnel only in the ordinary course of
business; and
(j) not, without the prior written consent of Parent, take any action or
engage in any transaction not expressly permitted by this Section 5.1 or
otherwise contemplated by this Agreement which would cause any of the
representations and warranties made by the Company and Shareholders herein to be
untrue as of the Effective Time or a breach of the terms and conditions of this
Agreement.
5.2. Access and Information. The Company and the Shareholders acknowledge
and agree that after the execution of this Agreement, Parent may conduct and
continue such accounting review, legal, audit and due diligence investigation or
other examinations of the Company as deemed desirable by parent. The Company
will, and the Shareholders will cause the Company to, afford Parent and Parent's
employees, accountants, counsel and other authorized representatives reasonable
access during business hours to the Company's plants, properties, employees,
books and records and the Company will, and the Shareholders will, cause the
Company to furnish to Parent and its representatives all additional financial
and operating data and other information as to the Company as Parent may from
time to time reasonably request.
5.3. Publicity; Confidentiality.
(a) Neither the Company nor any Shareholder will, without the consent of
Parent, issue or cause the publication of any press release or other public
announcement with respect to this Agreement after the date hereof.
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(b) Each of the Company and each Shareholder agrees, and shall cause each
shareholder, director, officer and key employee of the Company to agree, that
such person shall keep secret and retain in strictest confidence, and shall not
use for the benefit of himself or others, all confidential matters of the
Company, Parent or their affiliates, including, without limitation, "know-how",
trade secrets, customer lists, pricing policies, operational methods, marketing
plans or strategies, product development techniques or plans, business
acquisition plans, new personnel acquisition plans, methods of manufacture,
technical processes, designs and design projects, inventions and research
projects and other business affairs ("Confidential Information") of the Company,
Parent and their affiliates learned by such person, heretofore or hereafter and
which have not been publicly disclosed, and shall not disclose them to anyone
outside of the Company, Parent and their affiliates, without Parent's express
written consent.
5.4. Best Efforts. The Company and each Shareholder agrees to use its and
his best efforts respectively to satisfy the conditions to the obligations of
Parent hereunder set forth in Section 8.
5.5. Negotiation with Other Parties. Neither the Company, nor any
Shareholder, nor any director, officer or stockholder of the Company will
participate in any negotiations with any third party for Acquisition of all or
any part of the Company or its assets prior to the Effective Time or the prior
termination of this Agreement pursuant to Section 10.3. The Company and each
Shareholder will report to Parent any contacts from any third party with respect
to such acquisition.
5.6. Covenant Not to Compete; Injunctive Relief.
(a) As a condition to consummation by Parent of the Merger set forth herein
in accordance with which each Shareholder will each relinquish all of the
capital stock of the Company previously held by them, each Shareholder agrees
that until five (5) years from Closing Date, that he shall not (i) in any way,
directly or indirectly, whether for such person's account or for the account of
any other person, firm, corporation or other entity, engage in, represent,
furnish consulting services to, be employed by, or have any interest in (whether
as owner, principal, director, officer, partner, agent, consultant, stockholder
or otherwise) any business which manufactures bagels or sells them at retail or
wholesale (it being understood that a business for which the sale of bagels is
incidental to its primary business shall not be considered a business which
"sells them at retail or wholesale" for purposes of the foregoing restriction),
(ii) induce or attempt to induce any person or entity which is a customer or
franchisee of the Company, Parent or any of its affiliates to cease doing
business in whole or in part with Parent or such affiliate, or (iii) solicit,
entice or induce any person who shall then be an employee of Parent or of any
franchisee to become employed by any other person, firm or corporation or to
leave their employment with Parent or such affiliate, and no Shareholder shall
directly or indirectly approach any such employee for such purpose or authorize
or knowingly approve the taking of such actions by any other person. The
restrictions contained in this Section 5.6 shall apply in the specific
geographic areas and customer markets within such geographic areas served by the
Company, Parent or their respective affiliates or franchisees at the time an
alleged breach of this provision occurs. Nothing in the foregoing shall prohibit
a Shareholder from engaging in any business that is not in competition with
Parent, or investing in the securities of any corporation having securities
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listed on a national securities exchange, provided that such investment does not
exceed 5% of any class of securities of any corporation engaged in business in
competition with Parent, and provided that such ownership represents a passive
investment and that no Shareholder nor any group of persons including a
Shareholder, in any way, either directly or indirectly, manages or exercises
control of any such corporation, guarantees any of its financial obligations,
otherwise takes any part in its business, other than exercising such person's
rights as a shareholder, or seeks to do any of the foregoing.
(b) Each Shareholder acknowledges that the restrictions contained in this
Section 5.6 are reasonable and necessary to protect the legitimate business
interests of Parent and that Parent would not have entered into this Agreement
in the absence of such restrictions. By reason of the foregoing, each
Shareholder agrees that in the event of a breach or threatened breach by him of
the provisions of this Section 5.6, Parent would sustain irreparable harm and,
therefore, Shareholder irrevocably and unconditionally (i) agrees that in
addition to any other remedies which Parent may have under this Agreement or
otherwise, all of which remedies shall be cumulative, parent shall be entitled
to apply to any court of competent jurisdiction for preliminary and permanent
injunctive relief and other equitable relief, without the necessity of proving
actual damage, restraining such person from doing or continuing to do or perform
any acts constituting such breach or threatened breach, (ii) agrees that such
relief and any other claim by Parent pursuant hereto may be brought in the
United States District Court for the District of New Jersey, or if such court
does not have subject matter jurisdiction or will not accept jurisdiction, in
any court of general jurisdiction in the State of New Jersey, (iii) consents to
the non-exclusive jurisdiction of any such court in any such suit, action or
proceeding, and (iv) waives any objection which such person may have to the
laying of venue of any such suit, action or proceeding in any such court. In the
event that any of the provisions of this Section 5.7 hereof should ever be
adjudicated to exceed the duration, geographic area, product or service, or
other limitations permitted by applicable law in any jurisdiction, then such
provisions shall be deemed reformed in such jurisdiction to the maximum
duration, geographic area, product or service, or other limitations permitted by
applicable law, and each Shareholder hereby consents to this enforcement of such
restrictions as so modified.
(c) Each Shareholder agrees that the existence of any claim or cause of
action he may then have against Parent or any of its affiliates, whether
predicated on this Agreement or otherwise, shall not constitute a defense to the
enforcement by Parent of the provisions of this Section 5.6.
(d) In the event of any breach or violation of the restriction contained in
this Section 5.7, the period specified in Section 5.6(a) shall abate during the
time of any violation thereof and that portion remaining at the time of
commencement of any violation shall not begin to run until such violation has
been fully and finally cured.
(e) Each Shareholder acknowledges and agrees that the restrictions
contained in this Section 5.6 are entered into as an inducement to Parent to
consummate the merger, are not exclusive and are in addition to (and not a
limitation of) any restrictions contained in the Employment Agreements attached
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hereto as Exhibit B to be entered into by each Shareholder in connection with
consummation of the Merger. In the event of any inconsistencies between the
provisions of the Employment Agreement and this Agreement, the provisions of
this Section 5.6 shall govern.
5.7. Pooling. Each Shareholder understands and acknowledges that, in order
to preserve treatment of the Merger as a "pooling of interests" for accounting
purposes, none of the Shareholders is permitted to sell any shares of Parent
Common Stock until such time as the financial results covering at least 30 days
of combined operations of the Company and Parent after the Effective Date have
been publicly issued (the date of such issuance being the "Issuance Date"), and
accordingly, each Shareholder agrees that he will not directly or indirectly
sell any shares of Parent Common Stock until the Issuance Date.
6. Covenants of Parent. Parent covenants as follows:
6.1. Best Efforts. Parent will use its best efforts to satisfy the
conditions to the obligations of the Company and Shareholders hereunder set
forth in Section 7.
6.2. Publicity; Confidentiality. Prior to the Closing, or if this Agreement
is terminated, Parent agrees to maintain the confidentiality of any non-public
information furnished by the Company, or any Shareholder to it in connection
with the transactions contemplated by this Agreement in accordance with the
terms and provisions of that certain Confidentiality Agreement between Parent
and the Company signed November 22, 1995.
6.3. Access to the Company. Prior to the Effective Date, Parent shall give
the Company and the Shareholders full access to the executive officers of Parent
and shall direct such officers to respond fully and completely to any reasonable
requests for information regarding the business, finances and operations of
Parent.
6.4. Tax Free Reorganization. Parent shall not take any action which would
cause the transactions contemplated hereby not to be treated as a tax free
reorganization under the Code.
6.5. Current Filings. For a period of three years from the Effective Date,
Parent shall use its reasonable best efforts to file all reports required to be
filed under Section 13 of the Securities Exchange Act of 1934.
7. Conditions to the Obligations of the Company. The obligations of the Company
to effect the transactions contemplated hereby are subject to the fulfillment to
its satisfaction, prior to the Effective Time of the following conditions:
7.1. Representations and Warranties. The representations and warranties of
Parent and Acquisition contained in this Agreement shall have been true and
correct when made and shall be true and correct at and as of the Effective Time
as though such representations and warranties were made at and as of the
Effective Time (i.e. in each instance where a representation is limited by the
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words "as of the date hereof" or like phrase, such words or phrase shall be read
to mean as of the Effective Time for purposes of this condition).
7.2. Performance. Parent and Acquisition shall have performed and complied
with each covenant or condition required by this Agreement to be performed or
complied with by it before or at the Effective Time.
7.3. Closing Certificate. Parent and Acquisition shall have delivered
to the Company a certificate, dated the Effective Date and executed by a
principal executive or financial officer of each of Parent and Acquisition,
certifying that the conditions specified in Sections 7.1 and 7.2 have been
fulfilled.
7.4. Opinion of Counsel. The Company shall have received from counsel for
Parent an opinion, dated the Effective Date, addressed to the Company and
substantially in the form set forth as Exhibit C.
7.5. Employment Agreements. Parent shall have executed and delivered
employment agreements with each Shareholder in the form of Exhibit B.
7.6. No Order. No governmental entity or court of competent jurisdiction
shall have enacted, issued, promulgated, enforced or entered any law, rule,
regulation, order, decree or injunction which has the effect of preventing the
Merger or making the transactions contemplated hereby illegal.
8. Conditions to the Obligations of Parent. The obligations of Parent and
Acquisition to effect the transactions contemplated hereby are subject to the
fulfillment to their satisfaction, before or at the Effective Time, of the
following conditions:
8.1. Representations and Warranties. The representations and warranties of
the Company and Shareholders contained in this Agreement (including the
Schedules hereto) shall have been true and correct when made and shall be true
and correct at and as of the Effective Time as though such representations and
warranties were made at and as of the Effective Time (i.e. in each instance
where a representation is limited by the words "as of the date hereof" or like
phrase, such words or phrase shall be read to mean as of the Effective Time for
purposes of this condition).
8.2. Performance. The Company and each Shareholder shall have performed and
complied with each covenant and condition required by this Agreement to be
performed or complied with by them before or at the Effective Time.
8.3. Closing Certificate. The Company and each Shareholder shall have
delivered to Parent a certificate, dated the Effective Date and executed by each
of the Company and each Shareholder, certifying that the conditions specified in
Sections 8.1 and 8.2 have been fulfilled.
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8.4. Employment Agreements. Each Shareholder shall each have executed and
delivered employment agreements with Parent in the form of Exhibit B.
8.5 Opinion of Counsel. Parent shall have received from counsel for the
Company an opinion, dated the Effective Date, addressed to Parent and
substantially in the form set forth as Exhibit E.
8.6. Consents; Permits. The Company shall have obtained and Parent shall
have received, in form and substance reasonably satisfactory to Parent, all
consents which are required to consummate the transactions contemplated hereby
or to avoid the termination of any Permit or Contract upon such consummation
(including without limitation waivers of due-on-sale clauses contained in any
contracts and any consents to the change of ownership of the Company required
under the terms of any Permit or Contract including leases for the Company's
manufacturing facilities and stores), which consents are set forth in Schedule
3.16 and Schedule 3.18.
9. Indemnification.
9.1. Survival of Representations and Warranties. The representations and
warranties contained in Sections 3 and 4 of this Agreement shall survive any
investigation by either party and the Closing.
9.2. Indemnification by the Shareholders
(a) From and after the Closing, each Shareholder, jointly and severally,
agrees to indemnify and defend Parent, the Company, and Acquisition and hold
Parent, the Company and Acquisition harmless from and against any out-of-pocket
loss, liability, damage, penalty, claim or expense, including interest,
penalties, reasonable attorneys' and technical consultants' fees and other costs
and expenses (including such reasonable expenses incurred to defend a bona fide
third party claim which would constitute a breach of a representation, warranty
or covenant if the claim were successful, notwithstanding the ultimate outcome)
(collectively, "Losses") incurred or sustained by Parent or the Company as a
result of or arising out of:
(i) the non-fulfillment or breach of any covenant or agreement or the
breach of any representation or warranty of the Company or any Shareholder
set forth in this Agreement or in any instrument, certificate or other
document delivered pursuant thereto.
(ii) all tax liabilities (federal, state and local, including without
limitation, income, franchise, unemployment, withholding, sales, real and
personal property), and all other taxes required to be paid by the Company
or any of its affiliates (including tax liabilities resulting from any
distributions by the Company or its shareholders), in each case, for any
fiscal tax period ending on or before the Closing, as may be assessed and
found due after audit and review. In connection therewith, the
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Shareholders, jointly and severally, at their sole cost and expense, shall
be responsible for the representation, commencing at the audit level, with
regard to the tax liabilities of the Company or any of its affiliates for
all fiscal tax periods ending on or prior to the Closing Date using counsel
acceptable to Parent in its reasonable judgment; and Parent agrees that the
books and records of the Company for all such periods and such other
cooperation as shall be reasonably requested will be made available to the
accountants, attorneys and other representatives of the Shareholders for
his use in connection with any such audit and tax examination. Should
additional taxes be finally assessed for any period ending on or prior to
the Closing Date, the Shareholders will be jointly and severally
responsible for the payment of such taxes, together with any interest and
penalties due. Parent will keep all of the books and records of the Company
until the statute of limitations with respect to the applicable audit
periods shall have expired and any audits and tax proceedings shall have
completed.
(iii) any investigation, claim, lawsuit, injunction, arbitration, or
regulatory or administrative suit, proceeding, order or action with respect
to Environmental Matters arising out of or relating to the activities or
omissions of the Company through and including the Closing Date, whether or
not disclosed herein or in the Schedules hereto.
(iv) any and all debts, claims, liabilities and obligations of the
Company arising out of or relating in any way to any transactions,
occurrences, events, facts, or actions or omissions that shall have taken
place prior to the Effective Date, regardless of when the cause of action
thereof shall be deemed to have accrued or arisen or when the action is
instituted, to the extent not (A) disclosed and adequately provided for in
the Closing Balance Sheet, or (B) disclosed in any schedule hereto.
(b) Notwithstanding the foregoing Paragraph 9.2(a) and the subsections
thereto or anything contained herein deemed to be to the contrary, the Company
and the Shareholders shall have no indemnification obligation with respect to
any claim asserted by any party to the Company's existing Franchise Agreements
or related guarantees, which claims are a result of or arise out of the
execution or delivery of this Agreement or the consummation of the transactions
contemplated hereby.
(c) The maximum liability of the Shareholders in the aggregate pursuant to
Section 9.2(a) shall not exceed the lesser of (i) the maximum amount payable by
the Shareholders which will not impair treatment of the Merger for accounting
purposes as a "pooling of interests," and (ii) the total aggregate value of the
shares of Parent Common Stock received under this Agreement by all of the
Shareholders, based on the closing price of Parent Common Stock as of the day
prior to the Effective Date.
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9.3. Indemnification by Parent. Parent agrees to indemnify and hold
harmless the Shareholders from and against any out-of-pocket loss, liability,
damage, penalty, claim or expense, including interest, penalties, reasonable
attorneys' and technical consultants' fees and other costs and expenses
(including such reasonable expenses incurred to defend a bona fide third party
claim which would constitute a breach of a representation, warranty or covenant
if the claim were successful, notwithstanding the ultimate outcome)
(collectively, "Losses") incurred by any Shareholder as a result of or arising
out of:
(i) the nonfulfillment or breach of any covenant or agreement or the
breach of any representation or warranty of Parent in this Agreement; or
(ii) any claim against any Shareholder arising from the operation of
the Company from and after the Effective Date, including, without
limitation, any claims by franchisees of either Company or Parent arising
out of or related to any alleged conflict regarding franchisee territorial
or market rights in (a) Upper Darby, Pennsylvania, (b) Broomall,
Pennsylvania, and (c) Wilmington, Delaware;
provided, however, that fluctuations in the public trading price of Parent
Common Stock shall not be considered to be within the meaning of the term Losses
for purposes of the forgoing.
9.4. Limitations; Nonexclusivity. The indemnification provided for in
Sections 9.2 and 9.3 are subject to the limitation that Losses shall be computed
net of recoveries from third parties (it being understood that tax benefits, if
any, shall not be deemed to be recoveries from third parties), and net of
insurance recoveries (which issuance recoveries, if any, shall be deemed reduced
by estimated increases in insurance premiums resulting from the claims which
give rise to such recoveries).
9.5. Indemnification Procedures. (a) A party entitled to indemnification
hereunder shall herein be referred to as an "Indemnitee." A party obligated to
indemnify an Indemnitee hereunder shall herein be referred to as an
"Indemnitor." Promptly after receipt by an Indemnitee of notice of any claim or
the commencement of any action, or upon discovery of any facts which an
Indemnitee believes may give rise to a claim for indemnification from an
Indemnitor hereunder, such Indemnitee shall, if a claim in respect thereof is to
be made against an Indemnitor under this Section 9, notify such Indemnitor in
writing in reasonable detail of the claim or the commencement of such action. If
any third party claim shall be brought against such Indemnitee, it shall notify
such Indemnitor thereof, and the Indemnitor shall be entitled (i) to participate
therein, (ii) to assume the defense thereof with counsel reasonably satisfactory
to the Indemnitee, provided (A) the Indemnitor provides the Indemnitee with
evidence reasonably acceptable to the Indemnitee that Indemnitor will have the
financial resources to defend against the third party claim and fulfill its
indemnification obligations hereunder, (B) the third party claim seeks monetary
damages only and no injunctive or other equitable relief, (C) settlement of or
an adverse judgment with respect to the third party claim is not, in the good
faith judgment of Indemnitee, likely to establish a precedential custom or
practice adverse to the continuing business interests of Indemnitee; and (D) the
Indemnitor conducts the defense of the third party claim actively and
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diligently, and (iii) to settle or compromise any such claim or action; provided
that the terms of such settlement or compromise provide for the unconditional
release of the Indemnitee and require the payment of monetary damages only.
After notice to the Indemnitee of the Indemnitor's election to assume the
defense of such claim or action, the Indemnitor shall not be liable to the
Indemnitee under this Section 9 for any legal or other expenses subsequently
incurred by the Indemnitee in connection with the defense thereof; provided,
however, that the Indemnitee shall have the right to employ counsel to represent
it if, in the Indemnitee's reasonable judgment, it is advisable for the
Indemnitee to be represented by separate counsel, and in that event the fees and
expenses of such separate counsel shall be paid by the Indemnitee. If the
Indemnitor does not elect to assume the defense of such claim or action, the
Indemnitee shall act reasonably and in accordance with its good faith business
judgment with respect thereto, and shall not settle or compromise any such claim
or action without the consent of the Indemnitor, which consent shall not be
unreasonably withheld. The parties hereto agree to render to each other such
assistance as may reasonably be requested in order in insure the proper and
adequate defense of any such claim or proceeding. Except as specifically set
forth herein, the provisions of this Section 9.5 shall not affect an
Indemnitor's indemnification liability as otherwise provided in this Section 9.
(b) In the event that the Shareholders are required to incur any expenses
in connection with their indemnification obligations hereunder, Parent agrees to
lend the Shareholder the funds necessary to meet such obligations, which loan
shall be payable by the Shareholder with interest at the lowest rate then
applicable to loans to Parent by a financial institution, over a three year
period in equal annual installments, and shall be secured by shares of Parent
common stock then owned by the Shareholders.
9.6. Indemnification Arrangements Among the Shareholders. The provisions of
this Section 9 shall not affect any indemnification or other rights of the
Shareholders against each other on account of this Agreement or the transactions
contemplated hereby.
10. Registration Rights.
10.1. Demand Registration Rights. At any time commencing on the date
following the publication by Parent of results of operations which include the
combined results of Parent and the Company for at least thirty days, and ending
on the third anniversary of the Effective Date, the Shareholders shall have the
right by notice given to Parent to require Parent to prepare and file with the
Securities and Exchange Commission a Registration Statement under the Securities
Act with respect to the registration for sale by the Shareholders from time to
time of the Shares (the "Registration Statement"). In connection therewith,
Parent shall:
(a) use its reasonable best efforts to prepare and file the Registration
Statement under the Securities Act on such form as Parent may deem appropriate
(including Form S-3 or any successor form if available at the time) with respect
to the Shares within thirty days of receipt of such notice, and use its
reasonable best efforts to cause such Registration Statement to become
effective, advise the Shareholders of the effectiveness of such Registration
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<PAGE>
Statement and of the entry of any stop order suspending the effectiveness of
such Registration Statement or the initiation of any proceeding for that
purpose, and, if such stop order should be entered, use its reasonable best
efforts promptly to obtain the lifting or removal thereof;
(b) prepare and file such amendments and supplements to such Registration
Statement and the prospectus used in connection therewith as may be necessary to
comply with the provisions of the Securities Act, with respect to the offering
of the Common Stock covered by such Registration Statement and to keep such
Registration Statement current for a period of three years or until all Shares
shall have been sold by the Shareholders;
(c) furnish to the Shareholders promptly at the time of the filing thereof,
a copy of the Registration Statement as filed and any amendment to said
Registration Statement and all exhibits thereto and consents of experts filed or
to be filed therewith;
(d) furnish to the Shareholders such number of copies of such Registration
Statement and all amendments thereto and of such prospectuses (including each
preliminary or supplemented prospectus) as the Shareholders may reasonably
request in order to facilitate the sale or transfer of the Common Stock covered
thereby;
(e) use its reasonable best efforts to comply with all notification and
other requirements of the NASDAQ Stock Market or any securities exchange on
which other shares of Common Stock are then listed;
(f) use its reasonable best efforts to register or qualify such Common
Stock under the securities or Blue Sky laws in such jurisdictions within the
United States as the Shareholders may reasonably request; provided, however,
that the Parent shall not be obligated to execute or file any general consent to
service of process or to qualify as a foreign corporation to do business under
the laws of any such jurisdiction;
(g) agree in writing to, and failing such written agreement does hereby
indemnify and hold harmless the Shareholders and any underwriter or any person
who controls such Shareholder or such underwriter within the meaning of Section
15 of the Act or Section 20(a) of the Exchange Act (each of the Shareholders and
each such underwriter and each such controlling person being referred to herein
as an "Indemnified Person") from and against any and all out-of-pocket loss,
liability, damage, penalty, claim or expense, including interest, penalties,
reasonable attorneys' and technical consultants' fees and other costs and
expenses arising out of or based upon any violations of federal or state
securities laws or any omission or alleged omission of a material fact required
to be stated therein or necessary to make a statement therein not misleading,
except insofar as such losses, liabilities, damages, penalties, claims or
expenses arise out of or are based upon any such untrue statement or omission or
allegation thereof based upon information supplied in writing to the Company by
or on behalf of such Indemnified Person expressly for use therein; and
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<PAGE>
(h) promptly notify the Shareholders at such time as the Registration
Statement is no longer effective or may otherwise not be utilized to sell shares
of Common Stock owned by such persons.
10.2 Piggyback Registration Rights.
(a) If one or more Shareholders of Parent (the "Registering Shareholder")
proposes to sell any shares of Parent Common Stock in an offering pursuant to a
registration statement under the Securities Act (other than a negotiation
statement on Form S-4 or on Form S-8, or similar forms) proposed to be filed by
the Parent, which registration statement does not include securities to be sold
for the account of the Parent, the Parent shall notify each Shareholder of such
event and shall permit each Shareholder to include in such registration
statement such number of the Parent Common Stock as determined by multiplying
(i) the number of shares of Parent Common Stock beneficially owned by such
Shareholder; (ii) by the Highest Registering Shareholder Percentage. The Highest
Registering Shareholder Percentage shall mean the highest number determined by
comparing the numbers computed for each Registering Shareholder for whom shares
of Parent Common Stock are being registered in such registration statement, by
dividing (x) the number of shares of Parent Common Stock to be included in such
registration statement for the account of such Registering Shareholder by (y)
the total number of Stock beneficially owned by such Registering Shareholder.
(b) If Parent proposes to file a registration statement under the Act
relating to securities to be sold in an underwritten public offering by Parent
which includes a secondary offering of shares of Parent Common Stock by any
Registering Shareholder, (i) if the numbers of shares of Parent Common Stock to
be registered for the account of selling shareholders is not limited by the
underwriter, then Parent shall permit each Shareholder to include in such
registration statement such number of shares of Parent Common Stock determined
in accordance with the provisions of Section 6.2(a), and (ii) if the number of
shares of Parent Common Stock to be registered for the account of selling
shareholders is limited by the underwriter or otherwise, Parent shall permit
each Shareholder to include such number of shares of Parent Common Stock owned
by such Shareholder determined by multiplying (A) the total number of Parent
Shares to be registered for the account of the Shareholders and Registering
Shareholders desiring to have shares so registered; (B) by a fraction of which
the numerator shall be the total number of shares of Parent Common Stock
beneficially owned by such Shareholder and of which the denominator shall be the
total number of shares of Parent Common Stock beneficially owned by the
Shareholders and Registering Shareholders for whom shares of Parent Common Stock
are to be included in such registration statement.
(c) In all cases, Shareholders shall be subject to the same rights and
agree to be bound by the same restrictions, if any, as the Registering
Shareholders may be subject with respect to the sales pursuant to a registration
statement as provided herein.
(d) For purposes of the foregoing determination, ownership of Parent Common
Stock shall be determined by adding the number of shares owned directly by any
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<PAGE>
person together with the number of shares transferred by such person to another
person or entity and for which the transferor has beneficial ownership, as such
term is defined ln Rule 13d-3 promulgated under the Securities Exchange Act of
1934.
10.3. Conditions to Registration. Parent's obligations to file a
Registration Statement and the rights of the Shareholders to have the Shares
held by them to be included in the Registration Statement pursuant to the
provisions of Section 10.1 or 10.2, shall be subject to the following
conditions:
(a) The Shareholders participating in the Registration Statement (the
"Participating Shareholders") shall furnish to Parent upon request, in writing,
such information and documents as, in the opinion of counsel to Parent, may be
reasonably required to properly prepare and file such Registration Statement in
accordance with applicable provisions of the Act; and
(b) The Participating Shareholder shall agree to indemnify and hold
harmless Parent, its directors and officers, and each person, if any, who
controls Parent within the meaning of either Section 15 of the Securities Act or
Section 20 of the Exchange Act, to the same extent as the indemnity from Parent
to Indemnified Person set forth in subsection (g) of Section 10.1, but only with
respect to information furnished in writing by the Participating Shareholders to
Parent expressly for use in the Registration Statement or related prospectus
(preliminary or final) or any amendment or supplement thereto.
10.4 Expenses of Registration. In connection with any Registration
Statement filed pursuant to Section 10.1 of this Agreement, all expenses of such
registration shall be borne by the Shareholders if such registration is effected
through the use of a Registration Statement on Form S-3 or on any other Form at
the request of the Shareholders if Parent is then eligible to use Form S-3, and
one half by the Shareholders and one half by Parent if Parent is not then
eligible to effect such registration on Form S-3; and in connection with the
registration of Parent Common Stock being registered for sale by Shareholders in
any Registration Statement filed pursuant to Section 10.2, the expenses of such
registration shall be borne by Parent. Such expenses shall include, without
limitation, all SEC filing fees, National Association of Securities Dealers,
Inc. fees, all blue Sky filing and registration fees and expenses with respect
to such jurisdictions as the Participating Shareholders may reasonable deem
necessary, the cost of all printed material used by or on behalf of the
Participating Shareholders, and the legal and accounting fees and expenses
incurred by Parent in connection with the Registration Statement. The
Participating Shareholders shall, in all events, pay all underwriters'
commissions and discounts attributable to the Common Stock to be sold by the
Participating Shareholders and the fees and expenses of the Participating
Shareholders' counsel.
10.5. Inclusion of Other Shares. The Shareholders acknowledge and agree
that in connection with the Registration Statements described in this Section
10, Parent may, at its option, include shares of Common Stock in such
Registration Statement to be sold for the account of other shareholders of the
Company. The provisions of this Agreement shall not prohibit Parent from
otherwise registering any of its securities from time to time.
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11. General Provisions.
11.1. Modification; Waiver. This Agreement may be modified only by a
written instrument executed by the parties herein. Any of the terms and
conditions of this Agreement may be waived in writing at any time on or before
the Closing Date by the party entitled to the benefits thereof.
11.2. Entire Agreement, etc. This Agreement, together with the schedules
and exhibits hereto (including the Employment Agreements to be executed at the
Closing), constitutes the entire agreement among the parties pertaining to the
subject matters hereof and supersedes all prior agreements and understandings of
the parties in connection therewith; provided, however, that the terms of the
Confidentiality Agreement between Parent and the Company signed November 22,
1995 shall remain in effect subject to and in accordance with the provisions of
Section 6.2 hereinabove.
11.3. Termination. This Agreement may be terminated:
(a) at any time before the Effective Time by mutual consent of Parent and
the Company; or
(b) by either Parent or the Company in writing, if the Closing shall not
have occurred on or before 15 business days following the date on which all of
the conditions set forth in Sections 7 and 8 have been satisfied provided that
the non-occurrence of the Closing is not attributable to a breach of the terms
hereof by the party seeking termination.
11.4. Expenses. Whether or not the transactions contemplated herein shall
be consummated, each party shall pay its own expenses incident to the
preparation and performance of this Agreement. Notwithstanding anything to the
contrary contained herein, the Shareholders shall bear any expenses of the
Company, including, without limitation, legal and accounting expenses, incident
to the negotiation, preparation and performance of this Agreement and the other
documents contemplated hereby, including, without limitation, the cost of
preparation of the Financial Statements and the Closing Balance Sheet and the
fees and costs of counsel to the Company.
11.5. Further Actions. Each party shall execute and deliver such
certificates, agreements and other documents and take such other actions as may
reasonably be requested by the other party in order to consummate or implement
the transactions contemplated hereby.
11.6. Notices. All notices, requests, demands, and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
delivered, telecopied or mailed, registered mail, first-class postage paid,
return receipt requested, or any other delivery service with proof of delivery:
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If to the Company or a Shareholder prior to the Effective Date:
Specialty Bakeries, Inc. d/b/a Bagel Builders
1263 Glen Avenue, Suite 220
Moorestown, New Jersey 08057
FAX#: (609) 840-0808
with a copy to: ABRAHAM PRESSMAN & BAUER, P.C.
1818 Market Street, 35th Floor
Philadelphia, Pennsylvania 19103
Attention: Joseph Schumacher, Esq.
FAX#: (215) 569-4372
If to a Shareholder subsequent to the Effective Date:
Rocco Fiorentino
48 Downing Lane
Voorhees, New Jersey 08043
FAX#:
Frank Guglielmo
38 White Pine Drive
Sewell, New Jersey 08080
FAX#:
John E. Gerber, Jr.
36 Rickland Drive
Sewell, New Jersey 08080
FAX#:
with a copy to: ABRAHAM PRESSMAN & BAUER, P.C.
1818 Market Street, 35th Floor
Philadelphia, Pennsylvania 19103
Attention: Joseph Schumacher, Esq.
FAX#: (215) 569-4372
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If to Parent:
Manhattan Bagel Company, Inc.
246 Industrial Way West
Eatontown, NJ 07724
Attention: Jack Grumet, Chairman and
Chief Executive Officer
Howard P. Goldberg, General Counsel
FAX#.: (908) 544-1315
with a copy to: MORRISON, COHEN, SINGER & WEINSTEIN, LLP
750 Lexington Avenue
New York, New York 10022
Attention: Jack Levy, Esq.
FAX#.: (212) 735-8708
or to such other address or to such other person as either party hereto shall
have last designated by notice to the other party.
11.7. Assignment. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and permitted
assigns, but shall not be assignable, by operation of law or otherwise, by
either party hereto without the prior written consent of the other party.
11.8. Counterparts. This Agreement may be executed in several counterparts,
each of which is an original but all of which shall constitute one instrument.
11.9. Headings. The section and other headings in this Agreement are for
convenience of reference only and shall not be deemed to alter or affect the
meaning or interpretation of any provision hereof.
11.10. Governing Law. The validity, performance and enforcement of this
Agreement shall be governed by the laws of the State of New Jersey, without
giving effect to the principles of conflicts of law thereof.
11.11. Severability . If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction or other authority
to be invalid, void or unenforceable, (i) the remainder of the terms,
provisions, covenants and restrictions of this Agreement shall remain in full
force and effect and shall in no way be affected, impaired or invalidated, and
(ii) to the fullest extent possible, the provisions of this Agreement
(including, without limitation, all portions of any section of this Agreement
containing such provision held to be invalid, illegal or unenforceable that are
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<PAGE>
not themselves invalid, illegal or unenforceable) shall be construed so as to
give effect to the intent manifested by the provision held invalid, illegal or
unenforceable.
11.12. Remedies Cumulative. Except as otherwise provided herein, each
right, power and remedy, provided for herein or now or hereafter existing at
law, in equity, by statute or otherwise shall be cumulative and concurrent and
the exercise or beginning of the exercise or the forbearance of exercise by any
party of any one or more of such rights, powers or remedies shall not preclude
the simultaneous or later exercise by any such party of any or all of such other
rights, powers or remedies.
11.13. Exclusivity. So long as this Agreement remains in effect, the
Company shall not discuss or negotiate with any other firm or individual for the
sale of its assets, and no Shareholder shall discuss or negotiate with any other
firm or individual for the sale of their shares.
11.14. Arbitration. (a) Except as set forth below, all controversies,
disputes or claims arising between or among Patent, Acquisition, Company or
Shareholders in connection with, arising from, or with respect to: (i) this
Agreement or any provision hereof; (ii) the relationship of the parties
hereunder; or (iii) the validity of this Agreement or any provision hereof,
shall be submitted for binding arbitration to the American Arbitration
Association at its office in Somerset, New Jersey. Such arbitration shall be
conducted in accordance with the then-current Commercial Arbitration Rules of
the American Arbitration Association.
(b) The appointed arbitrators shall promptly elect a chairperson. The
chairperson shall hold a preliminary hearing within thirty (30) days after being
selected. All discovery authorized by this Agreement or by the chairperson shall
be conducted and concluded not later than one hundred twenty (120) days after
the preliminary hearing concludes. The arbitration hearing shall commence not
later than sixty (60) days after discovery concludes and the arbitration hearing
shall itself conclude not later than thirty (30) days after its commencement,
unless modified as hereinafter provided. The arbitrators shall render their
decision within fifteen (15) days after the conclusion of the arbitration
proceeding. The decision of a majority of the arbitrators shall be binding on
the parties.
(c) The parties shall be free to request production of documents or other
information from other parties. Any request for documents or other information
shall be specific; relate to the matter at controversy; call for the production
only of non-privileged documents relevant to the disputed claims; and afford to
the party to whom the request is made a reasonable period time to respond
without interfering with the time set for the hearing. A party upon whom a
request for documents or other information is made shall promptly advise the
arbitrators, in writing, of any objections to such request. Any objection shall
be specific and set forth all of the reasons supporting such objection. The
chairperson's ruling on any request or objection shall be binding on the
parties.
(d) At any time after all pleadings have been submitted to the arbitration
panel, or at times agreed upon by the parties, but no later than twenty (20)
calendar days prior to the arbitration hearing, each party may take two (2)
depositions of an opposing party or of an individual under the control of an
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opposing party. Additionally, any party shall be entitled to depose any person
designated as an expert witness by any other party.
(e) The chairperson shall have authority to determine any pre-hearing
disputes. The parties shall comply with any directive from the chairperson
within the time specified by the chairperson. At any time, the chairperson may
elect to refer any issue under this paragraph to the full arbitration panel.
(f) Any award conferred by the arbitrators shall be final, binding and
non-appealable. Judgment may be entered on such award in any court of competent
jurisdiction. The arbitrators shall have the right to award or include in their
award any relief which they deem proper under the circumstances, including
without limitation, money damages, specific performance, injunctive relief,
attorneys' fees and costs.
(g) Anything herein to the contrary notwithstanding the following disputes
and controversies shall not be subject to arbitration: (a) any dispute involving
enforcement of the Shareholders' covenants not to compete as set forth in
Paragraph 5.6 of this Agreement; and (b) any judicial proceeding in equity
seeking temporary restraining orders, preliminary injunctions (whether
prohibitive or mandatory), or other interlocutory relief.
[INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
MANHATTAN BAGEL COMPANY, INC.
By: /s/ Jack Grumet
-------------------------------------------
Jack Grumet
Chairman & Chief Executive Officer
SBI ACQUISITION CORP.
By: /s/ Jack Grumet
-------------------------------------------
Jack Grumet
Chairman & Chief Executive Officer
SPECIALTY BAKERIES, INC.
By: /s/ Rocco Fiorentino
-------------------------------------------
Rocco Fiorentino, President
SHAREHOLDERS:
/s/ Rocco Fiorentino
-------------------------------------------
Rocco Fiorentino
/s/ John Gerber
-------------------------------------------
John Gerber
/s/ Frank Guglielmo
-------------------------------------------
Frank J. Guglielmo
42
