ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT (the "Agreement"), dated as of October 9,
2000, between Rich Products Manufacturing Corporation, a Delaware corporation
d/b/a Jon Donaire Desserts, with its principal office located at 1150 Niagara
Street, Buffalo, New York ( "Buyer"), Rich Products Corporation, a Delaware
corporation with its principal office located at 1150 Niagara Street, Buffalo,
New York ( "RPC") and Starbake, Inc., a Delaware corporation, with its principal
office located at 1919 Friendship Drive, El Cajon, California, ("Starbake"), a
wholly owned subsidiary of Paramark Enterprises, Inc., a Delaware corporation
with its principal office located at One Harmon Plaza, Secaucus, New Jersey
07094 ("Paramark"). Paramark and Starbake are hereinafter collectively referred
to as "Seller"
W I T N E S S E T H :
WHEREAS, Seller is engaged in the business of manufacturing and selling
certain bakery goods and other food products, including cinnamon rolls,
cinnachips, bundt cakes, brownies, sheet cakes, iced cakes, decorated cakes,
torte cakes, rugulach and cobblers (collectively, the "Business");
WHEREAS, Seller desires to sell to Buyer and Buyer desires to purchase
from Seller, certain assets of the Business, all on the terms and conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the representations and warranties
made herein, and of the mutual benefits to be derived hereby, and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I
SALE AND PURCHASE OF THE ASSETS
1.1 Assets. Subject to and upon the terms and conditions set forth in
this Agreement, at the Closing, Seller will sell, transfer, convey, assign and
deliver to Buyer good and marketable title, free and clear of all liens,
liabilities, encumbrances, security interests, claims, and other restrictions,
and Buyer will purchase or acquire from Seller, all right, title and interest of
Seller in and to (i) the assets listed in Schedule 1.1 hereto (the "Specified
Assets") and (ii) the properties, assets and rights of every nature, kind and
description, tangible and intangible (including goodwill), whether real,
personal or mixed, whether accrued, contingent or otherwise and whether now
existing or hereinafter acquired (other than the Excluded Assets, as such term
is defined below) primarily relating to or used or held for use in connection
with the Business as the same may exist on the Closing Date and all in their AS
IS condition without any representation and warranty whatsoever except as may be
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specifically set forth in this Agreement (collectively, the "Assets"). Buyer
will agree to buy certain items of finished goods inventory, ingredients and
packaging inventory as will be mutually agreed upon by Buyer and Seller (the
"Inventory"). Buyer and Seller will agree on the Inventory to be purchased, and
the price for same (the "Inventory Price"), no later than October 12, 2000.
1.2 Excluded Assets. Seller will retain and not transfer to Buyer in
connection with this Agreement (a) cash and cash equivalents, (b) accounts
receivable, and (c) Seller's corporate records, minute books, stock books and
tax returns, (except to the extent that such records are necessary for Buyer to
operate the Business after the Closing, Buyer shall be entitled to make one copy
of such necessary documentation in accordance with Section 4.1.3 hereto).
1.3 Parties to Act as Collection Agents for Other Parties Accounts
Receivable. To the extent that either party to this Agreement receives payment,
after the Closing, on an account receivable that was actually due and owing to
the other party, the receiving party shall hold such accounts receivable payment
in trust for the other party and shall turn same over to the other party as soon
as practicable after the receipt thereof.
1.4 Allocation of Accounts Receivable Payments from Shared Customers.
In furtherance of the intent of Section 1.4 hereinabove, if either party
receives a payment on an accounts receivable after the Closing and such payment
is (i) from a customer of the Business that purchased bakery products from the
Business both before and after the Closing and (ii) the payment received is not
designated as a payment on a specific invoice or invoices submitted by either
Seller or Buyer, then each of such payments shall be applied by the receiving
party thereof as follows:
(a) First to any amounts due and owing from said customer to
the receiving party pursuant to invoices that are outstanding for more than
thirty (30) days and that relate solely to the Business; and
(b) Thereafter, to amounts due and owing to the non-receiving
party by the same customer on accounts receivable relating solely to the
Business.
ARTICLE II
CLOSING
2.1 Place and Date. The closing (the "Closing") of the sale and
purchase of the Assets shall take place at 10:00 a.m. p.d.t. within seven (7)
business days of Seller having obtained the consent of its shareholders to this
transaction, as more specifically set forth below. If personal appearances are
required, the Closing will occur at 1150 Niagara Street, Buffalo, New York, or,
if such appearances are not required, such other time and place upon which the
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parties may mutually agree in writing.
2.2 Purchase Price. On the terms and subject to the conditions set
forth in this Agreement, Buyer agrees to pay or cause to be paid to Seller, an
aggregate of One Million Nine Hundred United States Dollars (U.S. $1,900,000),
payable by wire transfer to accounts designated by Seller as follows:
a. $900,000.00 at the Closing;
d. $125,000.00 on or before each of June 1st and December 1st of each
of 2001, 2002, 2003 and 2004.
2.2A Inventory Price. The Inventory Price, less $100,000, will be paid
to Seller by Buyer no later October 13, 2000 by wire transfer to accounts
designated by Seller. The balance of the Inventory Price, in the amount of
$100,000 will be paid by Buyer to Seller at the Closing by wire transfer to
accounts designated by Seller
2.2B RPC Guarantee. Subject to Section 4.1.8 below, RPC hereby
guarantees (the "RPC Guarantee"):
a. All payments owing to Seller from Buyer under this Agreement and the
License Agreement;
b. All payments due and owing pursuant to the Consulting Agreements
described hereinbelow in Section 4.3.6;
c. The obligation of Buyer to proceed to Closing pursuant to this
Agreement.
The RPC Guarantee is unconditional, except as it may be limited by the
potential offsets arising out of Section 4.1.8 of this Agreement, and Seller may
seek performance under the RPC Guarantee simultaneously with seeking to enforce
the obligation of Buyer subject to the RPC Guarantee
2.3 Meaning of Closing. Closing, as used in this Agreement, shall mean,
as the context requires, either (a) the date of Closing on this Agreement or (b)
the date of entry into the License Agreement between Seller and Buyer as
described in Section 4.3.7 below.
2.4 Assumption of Liabilities. Buyer will assume the liabilities of
Seller specifically set forth and identified on Schedule 2.4 and Schedule 2.4.1
hereto (collectively, the "Assumed Liabilities"). Except for the Assumed
Liabilities, Buyer will not assume, be liable for, or become responsible for any
liability of Seller of any nature, whether accrued, absolute, contingent or
otherwise.
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2.5 Equipment and Other Lease Security Deposits. Certain of the Assumed
Liabilities consist of Seller's liabilities under equipment leases, and/or car
leases and or the lease for the premises in La Jolla, California, where the
Business is maintained by Seller (collectively the "Assumed Leases), all as more
particularly set forth on Schedule 2.4. To the extent that Seller has delivered
to the respective lessors under any or all of the Assumed Leases, the security
deposits and/or prepaid rent deposits set forth on Schedule 2.4 hereto
(collectively the "Security Deposits"), and such Security Deposits continue to
be held by the respective lessors as of the Closing, then Buyer shall reimburse
Seller at the Closing for the full amount of said Security Deposits.
2.6 Adjustment for Assumed Liabilities. Seller shall be responsible for
all payments under the Assumed Liabilities through the day prior to the Closing
Date, Buyer shall be responsible for all payments under the Assumed Liabilities
commencing on the Closing Date and Seller shall make a cash adjustment for same
accordingly at the Closing.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of Seller. Seller represents and
warrants to Buyer as follows:
3.1.1 General Representations.
(a) Corporate Status. Seller is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware,
with full corporate power and authority to carry on its business and to own or
lease and to operate its properties as and in the places where such business is
conducted and such properties are owned, leased or operated.
(b) Authority Relative to Agreement. The execution, delivery
and performance of this Agreement and all other agreements, certificates and
instruments contemplated hereby (collectively, the "Ancillary Agreements") by
Seller and consummation by Seller of the transactions contemplated hereby and
thereby have been duly and effectively authorized by all necessary action, and
this Agreement constitutes, and each Ancillary Agreement when executed will
constitute, a legal, valid and binding obligation of Seller enforceable against
it in accordance with its respective terms.
3.1.2 Financial Statements. The balance sheet of Seller as at
July 31, 2000 (the "Interim Balance Sheet") and the related statement of income
for the seven month period then ended (including the notes thereto) (the
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"Interim Statements") and the audited balance sheet of Seller as of December 31,
1999 (the "Audited Balance Sheet") and the related statements of income for the
calendar year then ended (the "Audited Statements") heretofore delivered by
Seller to Buyer, are accurate and complete in all respects and present fairly
the financial position of Seller as of such dates and the results of its
operations and changes in its financial position for such periods, and have been
prepared in conformity with generally accepted accounting principles. December
31, 1999 is sometimes hereinafter referred to as the "Audited Balance Sheet
Date".
3.1.3 Absence of Changes. Since the Audited Balance Sheet
Date, Seller has conducted the Business only in the ordinary course consistent
with prior practice and has not, on behalf of, in connection with or relating to
the Business or the Assets:
(a) to the best knowledge of Seller, suffered any event which
has or may have a material adverse effect on the Business or the Assets (a
"Material Adverse Affect");
(b) incurred any obligation or liability, absolute, accrued,
contingent or otherwise, whether due or to become due, except current
liabilities for trade or business obligations incurred in connection with the
purchase of goods or services in the ordinary course of business consistent with
prior practice, none of which liabilities, in any case or in the aggregate,
could have a Material Adverse Effect;
(c) discharged or satisfied any lien other than those then
required to be discharged or satisfied, or paid any obligation or liability,
absolute, accrued, contingent or otherwise, whether due or to become due, other
than current liabilities shown on the Audited Balance Sheet and current
liabilities incurred since the Audited Balance Sheet Date in the ordinary course
of business, consistent with prior practice;
(d) mortgaged, pledged or subjected to lien, any property,
business or assets, tangible or intangible, held in connection with the
Business;
(e) sold, transferred, leased to others or otherwise disposed
of any of the Assets, except for inventory sold in the ordinary course of
business, or canceled or compromised any debt or claim, or waived or released
any right of substantial value;
(f) received any notice of termination of any contracts, lease
or other agreement or suffered any damage, destruction or loss (whether or not
covered by insurance) which, in any case or in the aggregate, has had a Material
Adverse Effect;
(g) transferred or granted any rights under, or entered into
any settlement regarding the breach or infringement of, any Intellectual
Property, or modified any existing rights with respect thereto;
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(h) made any change in the rate of compensation, commission,
bonus or other direct or indirect remuneration payable, or paid or agreed or
orally promised to pay, conditionally or otherwise, any bonus, incentive,
retention or other compensation, retirement, welfare, fringe or severance
benefit or vacation pay, to or in respect of any shareholder, director, officer,
employee, distributor or agent of Seller relating to the Business;
(i) encountered any labor union organizing activity, had any
actual or threatened employee strikes, work stoppages, slowdowns or lockouts, or
had any material change in its relations with its employees, agents, customers
or suppliers;
(j) failed to replenish inventories and supplies in a normal
and customary manner consistent with its prior practice and prudent business
practices prevailing in the industry, or made any purchase commitment in excess
of the normal, ordinary and usual requirements of its business or at any price
in excess of the then current market price or upon terms and conditions more
onerous than those usual and customary in the industry;
(k) instituted, settled or agreed to settle any litigation,
action or proceeding before any court or governmental body relating to the
Business or the Assets other than in the ordinary course of business consistent
with past practices but not in any case involving amounts in excess of $10,000;
(l) entered into any transaction, contract or commitment other
than in the ordinary course of business.
3.1.4 Litigation. There is no action, claim, demand, suit,
proceeding, arbitration, grievance, citation, summons, subpoena, inquiry or
investigation of any nature, civil, criminal, regulatory or otherwise, in law or
in equity, pending or to the best knowledge of Seller threatened against or
relating to Seller in connection with the Assets or the Business or against or
relating to the transactions contemplated by this Agreement, and Seller does not
know or have reason to be aware of any basis for the same. No fines or penalties
have been asserted against Seller with respect to the Business under any
environmental law or any foreign, federal, state or local law relating to
occupational health or safety.
3.1.5 Operation of the Business. (a) Seller has conducted the
Business only through Seller and not through any other divisions or any direct
or indirect Affiliate of Seller and (b) no part of the Business is operated by
Seller through any entity other than Seller. An "Affiliate" of an entity is any
person or entity (a "Person") that controls, is under common control with, or is
controlled by such entity.
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3.1.6 Assets. Seller has good and marketable title to all of
the Assets free and clear of any and all liens, except as set forth on Schedule
3.1.6 hereto. The Assets comprise all assets and services required for the
continued procedural conduct of the Business by Buyer in materially the same
manner as currently being conducted by Seller. The Assets, taken as a whole,
constitute all the properties and assets relating to or used or held for use in
connection with the Business during the past twelve months (except inventory
sold, cash disposed of, accounts receivable collected, prepaid expenses
realized, contracts fully performed, properties or assets replaced by equivalent
or superior properties or assets, in each case in the ordinary course of
business, employees not hired by Buyer, and the Excluded Assets).
3.1.7 Inventories. To the best knowledge of Seller, (a) all
items included in the Inventory are of good, usable and merchantable quality in
all material respects and do not include obsolete or discontinued items and
(b)all such items of Inventory are of such quality as to meet the quality
control standards of Buyer and any applicable governmental quality control
standards. All items included in the Inventory that are finished goods are
saleable as current inventories at the current prices thereof in the ordinary
course of business. All items included in the Inventory are recorded on the
books of the Business at the lower of cost or market value on a consistent
basis.
3.1.8 Product Warranties. Except for warranties under
applicable law,(a) there are no warranties express or implied, written or oral,
with respect to the products of the Business and (b) there are no pending or, to
the best knowledge of Seller, threatened claims with respect to any such
warranty, and to the best knowledge of Seller, Seller has no liability with
respect to any such warranty, whether known or unknown, absolute, accrued,
contingent or otherwise and whether due or to become due.
3.1.9 Intellectual Property.
(a) Title. To the best knowledge of Seller, none of the items
of intellectual property comprising part of the Assets as listed in Schedule
3.1.9 hereto (collectively, the "Intellectual Property") are subject to any
outstanding licenses, liens, encumbrances, claims or other restrictions or
rights of others, and there are no pending or, to the best knowledge of Seller,
threatened challenges to any of the Intellectual Property. To the best knowledge
of Seller, the Business as heretofore conducted does not infringe or constitute,
and has not infringed or constituted, an unlawful invasion of any rights of any
Person and no notice of any such infringement or invasion has been received by
Seller. Seller has the right to use, free and clear of the claims or rights of
others, all Intellectual Property. To the best knowledge of Seller, the
Intellectual Property constitutes all such property necessary to conduct the
Business as heretofore conducted.
(b) Transfer. Immediately after the Closing, Buyer will own
all of the Intellectual Property, free from any liens, claims and encumbrances
and on the same terms and conditions as in effect prior to the Closing.
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(c) No Infringement. To the best knowledge of Seller, The
conduct of the Business does not infringe or otherwise conflict with any rights
of any Person in respect of any Intellectual Property. To the best knowledge of
Seller, None of the Intellectual Property is being infringed or otherwise used
or available for use, by any other Person.
(d) No Intellectual Property Litigation. No claim or demand of
any Person has been made nor is there any proceeding that is pending, or to the
knowledge of Seller after due inquiry, threatened, nor is there a reasonable
basis therefor, which (i) challenges the rights of Seller in respect of any
Intellectual Property, (ii) asserts that Seller is infringing or otherwise in
conflict with, or is, required to pay any royalty, license fee, charge or other
amount with regard to, any Intellectual Property, or (iii) claims that any
default exists under any agreement related to any of the Intellectual Property.
The Intellectual Property is not subject to any outstanding order, ruling,
decree, judgment or stipulation by or with any court, arbitrator, or
administrative agency, or has been the subject of any litigation within the last
five years, whether or not resolved in favor of Seller.
3.1.10 Insurance. Seller has delivered to Buyer a complete and
correct list and summary description of all insurance policies maintained by
Seller for the benefit of or in connection with the Assets or the Business
together with all riders and amendments thereto. Such policies are in full force
and effect, and all premiums due thereon have been paid. Seller has complied in
all material respects with the terms and provisions of such policies.
3.1.11 Leases.
(a) Seller has delivered to Buyer a correct and complete copy
of the Lease Agreement concerning Seller's commercial bakery facility located at
1919 Friendship Drive, El Cajon, California, including without limitation, any
amendments or addendum's thereto (the "Lease").
(b) The Lease is legal, valid, binding, enforceable, and in
full force and effect. Neither Seller nor, to the best of Seller's knowledge,
any other party is in default, violation or breach in any respect under the
Lease, and, to the best of Seller's knowledge, no event has occurred and is
continuing that constitutes or, with notice or the passage of time or both,
would constitute a default, violation or breach in any respect under the Lease.
3.1.12 Employees, Labor Matters, Etc. Seller is not a party to
or bound by any collective bargaining agreement and there are no labor unions or
other organizations representing, purporting to represent or, to the best of
Seller's knowledge, attempting to represent any employees employed in the
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operation of the Business. There has not occurred or, to the best of Seller's
knowledge, been threatened any material strike, slowdown, picketing, work
stoppage, concerted refusal to work overtime or other similar labor activity
with respect to any employees employed in the operation of the Business. There
are no labor disputes currently subject to any grievance procedure, arbitration
or litigation and there is no representation petition pending or, to the best
knowledge of Seller, threatened with respect to any employee employed in the
operation of the Business. Seller has complied with all provisions of applicable
law pertaining to the employment of employees, including, without limitation,
all such laws relating to labor relations, equal employment, fair employment
practices, entitlements, prohibited discrimination or other similar employment
practices or acts, except for any failure so to comply that, individually or
together with all such other failures, has not and will not result in a material
liability or obligation on the part of Buyer or the Business.
3.1.13 Employment by Buyer. Upon the Closing, Buyer may, but
shall have no obligation to, offer employment to any employee of Seller.
3.1.14 Liability. Regardless of whether Buyer offers
employment to any employee of Seller, Seller shall retain and pay all
obligations and liabilities arising out of Seller's employment of its employees
and the termination thereof, including, but not limited to obligations and
liabilities for all claims with respect to wages, benefits, workers
compensation, disability, unemployment insurance and related matters, regardless
of when any such claims are made.
3.1.15 Employment of Seller's Employees.
(a) For a period of two (2) years from the Closing Date,
Seller will not, and will not permit any of its Affiliates to, solicit, offer to
employ or retain the services of or otherwise interfere with the relationship of
Buyer with any Person employed by or otherwise engaged to perform services for
Buyer in connection with the operation of the Business.
(b) Neither Buyer nor any of its Affiliates shall have any
liability with respect to any employee of Seller or benefit plan of Seller or
any of its Affiliates or any claim thereof or related thereto. From and after
the Closing, Seller and its Affiliates shall, jointly and severally, remain
solely responsible for any and all benefit liabilities in respect of such
employees, and their beneficiaries and dependents, relating to or arising in
connection with or as a result of: (i) the employment or the actual or
constructive termination of employment of any such employee by Seller; (ii) the
participation in or accrual of benefits or compensation under, or the failure to
participate in or to accrue compensation or benefits under, any benefit plan or
other employee or retiree benefit or compensation plan, program, practice,
policy, agreement or arrangement of Seller or any of its Affiliates ; or (iii)
accrued but unpaid salaries, wages, bonuses, incentive compensation, vacation or
sick pay or other compensation or payroll items (including, without limitation,
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deferred compensation), except, in any such case, to the extent any such
liability is (x) specifically assumed by Buyer pursuant to this Agreement or (y)
reflected on the Audited Balance Sheet or relates to services rendered and arose
after the Audited Balance Sheet Date in the ordinary course of business,
consistent with the prior practice of Seller and in accordance with this
Agreement (applied as if the provisions of Section 4.1 had been in effect from
the close of business on the Audited Balance Sheet Date through the Closing
Date).
3.1.16 Employee Benefit Plans and Related Matters.
(a) Employee Benefit Plans. Schedule 3.1.16 sets forth a true
and complete list of each "employee benefit plan", as such term is defined in
section 3(3) of the Employee Income Retirement Security Act ("ERISA"), whether
or not subject to ERISA, and each bonus, incentive or deferred compensation,
severance, termination, retention, change of control, stock option, stock
appreciation, stock purchase, phantom stock or other equity-based, performance
or other employee or retiree benefit or compensation plan, program, arrangement,
agreement, policy or understanding, whether written or unwritten, that provides
or may provide benefits or compensation in respect of any employee or former
employee employed or formerly employed in the operation of the Business or the
beneficiaries or dependents of any such employee or former employee (such
employees, former employees, beneficiaries and dependents collectively, the
"Employees") or under which any of the Employees is or may become eligible to
participate or derive a benefit and that is or has been maintained or
established by Seller or any other trade or business, whether or not
incorporated, which, together with Seller is or would have been at any date of
determination occurring within the preceding six years treated as a single
employer under section 414 of the Internal Revenue Code (the "Code") (such other
trades and businesses collectively, the "Related Persons"), or to which Seller
or any Related Person contributes or is or has been obligated or required to
contribute or with respect to which Seller or the Business may have any
liability or obligation (collectively, the "Plans"). With respect to each such
Plan, Seller has provided Buyer complete and correct copies of: all written
Plans; descriptions of all unwritten Plans; all trust agreements, insurance
contracts or other funding arrangements; the two most recent actuarial and trust
reports; the two most recent Forms 5500 and all schedules thereto; the most
recent IRS determination letter; current summary plan descriptions; all material
communications received from or sent to the Internal Revenue Service (the
"IRS"), the Pension Benefit Guaranty Corporation or the Department of Labor
(including a written description of any oral communication); an actuarial study
of any post-employment life or medical benefits provided under any such Plan, if
any; statements or other communications regarding withdrawal or other multi
employer plan liabilities, if any; and all amendments and modifications to any
such document Seller has not communicated to any Employee of any intention or
commitment to modify any Plan or to establish or implement any other employee or
retiree benefit or compensation arrangement.
(b) Qualification. Each Plan (including all amendments
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thereto) intended to be qualified under section 401(a) of the Code, and the
trust (if any) forming a part thereof, has received a favorable determination
letter from the IRS as to its qualification under the Code and to the effect
that each such trust is exempt from taxation under section 501(a) of the Code,
and nothing has occurred since the date of such determination letter that could
adversely affect such qualification or tax-exempt status.
(c) Compliance; Liability.
(i) No Plan is subject to section 412 of the Code or
section 302 or Title IV of ERISA.
(ii) No liability has been or is expected to be incurred by
Seller, any of its Affiliates or the Business (either
directly or indirectly, including as a result of an
indemnification obligation) under or pursuant to Title
I or IV of ERISA or the penalty, excise tax or joint
and several liability provisions of the Code relating
to employee benefit plans that could, following the
Closing, become or remain a liability of the Business
or become a liability of Buyer or of any employee
benefit plan established or contributed to by Buyer
and, to the best knowledge of Seller and its Affiliates
after due inquiry, no event, transaction or condition
has occurred or exists that could result in any such
liability to the Business or, following the Closing,
Buyer.
(iii)Each of the Plans has been operated and administered
in all respects in compliance with all applicable laws,
except for any failure so to comply that, individually
or together with all other such failures, has not and
will not result in a material liability or obligation
on the part of the Business, or, following the Closing,
Buyer, and has not had or resulted in, and will not
have or result in, a Material Adverse Effect. There are
no material pending or, to the best knowledge of Seller
after due inquiry, threatened claims by or on behalf of
any of the Plans, by any Employee or otherwise
involving any such Plan or the assets of any Plan
(other than routine claims for benefits).
(iv) No Plan is a "multiemployer plan" as defined in Section
414(f) of the Code or Sections 3(37) or 4001(a)(3) of
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ERISA or is a "multiple employer plan" within the
meaning of Section 413(c) of the Code or Sections 4063,
4064 or 4066 of ERISA.
(v) All contributions required to have been made by Seller
and each Related Person to any Plan under the terms of
any such Plan or pursuant to any applicable collective
bargaining agreement or applicable law have been made
within the earliest time prescribed by any such Plan,
agreement or applicable law.
(vi) No Employee is or may become entitled to
post-employment benefits of any kind by reason of
employment in the Business, including, without
limitation, death or medical benefits (whether or not
insured), other than (a) coverage provided pursuant to
the terms of any Plan specifically identified as
providing such coverage in Schedule 3.1.16 or mandated
by section 4980B of the Code (b) retirement benefits
payable under any Plan qualified under section 401(a)
of the Code or (c) deferred compensation accrued as a
liability on the Audited Balance Sheet or incurred
after the Audited Balance Sheet Date in the ordinary
course of business consistent with the prior practice
of Seller, pursuant to the terms of a Plan. The
consummation of the transactions contemplated by this
Agreement, will not result in an increase in the amount
of compensation or benefits or the acceleration of the
vesting or timing of payment of any compensation or
benefits payable to or in respect of any Employee.
3.1.17 Records. The minute books of Seller insofar as they
relate to or affect the Business and the Assets are substantially complete and
correct in all material respects. The books of account of Seller, insofar as
they relate to or affect the Business and the Assets, are true, complete and
correct in all material respects.
3.1.18 Disclosure. No representation or warranty by Seller
contained in this Agreement nor any statement or certificate furnished or to be
furnished by or on behalf of Seller to Buyer or its representatives in
connection herewith or pursuant hereto contains or will contain any untrue
statement of a material fact, or omits or will omit to state any material fact
required to make the statements contained herein or therein not misleading.
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ARTICLE IV
COVENANTS
4.1 Covenants of Seller.
4.1.1 Conduct of Business. From the date hereof to the Closing
Date, except as expressly permitted or required by this Agreement or as
otherwise consented to by Buyer in writing, Seller will:
(a) carry on the Business in, and only in, the ordinary
course, in substantially the same manner as heretofore conducted, and use all
reasonable efforts to preserve intact its present business organization,
maintain its properties in good operating condition and repair, keep available
the services of its present officers and significant employees, and preserve its
relationship with customers, suppliers and others having business dealings with
it, to the end that its goodwill and going business shall be in all material
respects unimpaired following the Closing;
(b) pay accounts payable and other obligations of the Business
when they become due and payable in the ordinary course of business consistent
with prior practice;
(c) perform in all material respects all of its obligations
under all contracts and other agreements and instruments relating to or
affecting the Business or the Assets, and comply in all material respects with
all applicable laws applicable to it, the Assets or the Business;
(d) not enter into or assume any material agreement, contract
or instrument relating to the Business, or enter into or permit any material
amendment, supplement, waiver or other modification in respect thereof;
(e) not grant (or commit to grant) any increase in the
compensation (including incentive or bonus compensation) of any employee
employed in the operation of the Business or institute, adopt or amend (or
commit to institute, adopt or amend) any compensation or benefit plan, policy,
program or arrangement or collective bargaining agreement applicable to any such
employee; and
(f) not take any action or omit to take any action, which
action or omission would result in a breach of any of the representations and
warranties set forth in Section 3.1.3.
<PAGE>
4.1.2 No Solicitation. During the term of this Agreement,
Seller, any of its Affiliates or any Person acting on its behalf shall not (i)
solicit or encourage any inquiries or proposals for, or enter into any
discussions with respect to, the acquisition of any properties and assets held
for use in connection with, necessary for the conduct of, or otherwise material
to, the Business or (ii) furnish or cause to be furnished any non-public
information concerning the Business to any Person (other than Buyer and its
agents and representatives), other than in the ordinary course of business or
pursuant to applicable law and after prior written notice to Buyer. Seller shall
not sell, transfer or otherwise dispose of, grant any option or proxy to any
Person with respect to, create any lien, claim or encumbrance upon, or transfer
any interest in, any Asset, other than in the ordinary course of business and
consistent with this Agreement.
4.1.3 Access and Information.
(a) So long as this Agreement remains in effect, Seller will
(and will cause its Affiliates, respective accountants, counsel, consultants,
employees and agents to) give Buyer, Buyer's prospective lenders and investors,
and their respective accountants, counsel, consultants, employees and agents,
full access during normal business hours to, and furnish them with all
documents, records, work papers and information with respect to, all of such
Person's properties, assets, books, contracts, commitments, reports and records
relating to the Business, as Buyer shall from time to time reasonably request.
In addition, Seller will permit Buyer, Buyer's prospective lenders and
investors, and their respective accountants, counsel, consultants, employees and
agents, reasonable access to such personnel of Seller during normal business
hours as may be necessary or useful to Buyer in its review of the properties,
assets and business affairs of the Business and the above-mentioned documents,
records and information. Seller will keep Buyer generally informed as to the
affairs of the Business.
(b) Seller will retain all books and records relating to the
Business in accordance with Seller's record retention policies as presently in
effect. During the four-year period beginning on the Closing Date, Seller shall
not dispose of or permit the disposal of any such books and records not required
to be retained under such policies without first giving sixty (60) days' prior
written notice to Buyer offering to surrender the same to Buyer at Buyer's
expense.
4.1.4 Public Announcements. Except for the filing of an
accurate registration statement with the Securities and Exchange Commission (the
"SEC") and as required by Applicable Law, Seller shall not, and it shall not
permit any Affiliate to, make any public announcement in respect of this
Agreement or the transactions contemplated hereby without the prior written
consent of Buyer, which consent shall not be unreasonably withheld or delayed.
4.1.5 Further Actions.
<PAGE>
(a) Seller agrees to use all reasonable good faith efforts to
take all actions and to do all things necessary, proper or advisable to
consummate the transactions contemplated hereby.
(b) Seller will, as promptly as practicable, file or supply,
or cause to be filed or supplied, all applications, notifications and
information required to be filed or supplied by Seller pursuant to applicable
law in connection with this Agreement.
(c) Seller, as promptly as practicable, will use all
reasonable efforts to obtain, or cause to be obtained, all consents necessary
for the parties to consummate the transactions contemplated by this Agreement.
Buyer agrees to use reasonable commercial efforts to assist Seller in obtaining
such consents.
(d) Seller will coordinate and cooperate with Buyer in
exchanging such information and supplying such reasonable assistance as may be
reasonably requested by Buyer in connection with this Agreement.
4.1.6 Further Assurances. Following the Closing, Seller shall,
and shall cause its Affiliates to, from time to time, execute and deliver such
additional instruments, documents, conveyances or assurances and take such other
actions as shall be necessary, or otherwise reasonably requested by Buyer, to
confirm and assure the rights and obligations provided for in this Agreement,
and render effective the consummation of the transactions contemplated thereby.
4.1.7 Bulk Sales. In lieu of complying with the provisions of
the California Commercial Code relating to Bulk Sales, Seller covenants and
agrees to defend, hold harmless and indemnify Buyer from and against any and all
loss, liability, damage or claim whatsoever arising out of the failure or
alleged failure to comply with said provisions of the California Commercial Code
(including, but without limitation, claims, actions or suits by Creditors of
Seller) and all reasonable costs and expenses including, but without limitation,
reasonable attorneys' fees incident thereto.
4.1.8 Setoff. Seller further agrees in the event that in
addition to the remedies set forth in this Agreement, and without limiting any
other remedy Buyer and/or RPC may have as a result of a breach by Seller of the
foregoing covenants, Buyer and/or RPC may set off the costs, expenses, losses,
liabilities and damages incurred by Buyer and/or RPC (but only to the extent
such costs, expenses, losses, liabilities and damages represent actual out of
pocket costs paid by Buyer and/or RPC to unaffiliated third parties) as a result
of any breach or failure to pay by Seller relating to the payment of any amounts
owing to Buyer and/or RPC, whether under this Agreement or otherwise.
4.2 Covenants of Buyer.
<PAGE>
4.2.1 Public Announcements. Prior to the Closing, except as
required by Applicable Law, Buyer shall not, and shall not permit its Affiliates
to, make any public announcement in respect of this Agreement or the
transactions contemplated hereby without the prior written consent of Seller,
which consent shall not be unreasonably withheld.
4.2.2 Further Actions.
(a) Buyer agrees to use all reasonable good faith efforts to
take all actions and to do all things necessary, proper or advisable to
consummate the transactions contemplated hereby.
(b) Buyer will, as promptly as practicable, file or supply, or
cause to be filed or supplied, all applications, notifications and information
required to be filed or supplied by Buyer pursuant to applicable law in
connection with this Agreement.
(c) Buyer will coordinate and cooperate with Seller in
exchanging such information and supplying such reasonable assistance as may be
reasonably requested by Seller in connection with this Agreement.
4.2.3 Further Assurances. Following the Closing, Buyer shall,
and shall cause its Affiliates to, from time to time, execute and deliver such
additional instruments, documents, conveyances or assurances and take such other
actions as shall be necessary, or otherwise reasonably requested by Seller, to
confirm and assure the rights and obligations provided for in this Agreement,
and render effective the consummation of the transactions contemplated thereby.
4.3 Other Covenants and Conditions of Closing.
4.3.1 Subsequent Monthly Financial Statements. Seller's
monthly financial statements for each month after July 31, 2000 shall have been
provided to Buyer and shall (a) contain no liabilities different in kind or in
scope from the liabilities set forth in the Audited Balance Sheet, and (b)
confirm and be consistent with the information concerning the Business
(including the projected results of operations) previously provided to Buyer by
Seller prior to the date hereof.
4.3.2 Corporate Proceedings. Buyer shall have received a
certificate of the Secretary of Seller certifying that Seller has adopted
necessary resolutions on a director and shareholder level authorizing the
transaction contemplated herein.
4.3.3 Transfer Documents. Seller shall have delivered to Buyer
at the Closing all documents, certificates and agreements necessary to transfer
to Buyer good and marketable title to the Assets, free and clear of any and all
liens, claims and encumbrances thereon, including without limitation:
<PAGE>
(a) a bill of sale, assignment and general conveyance, in form
and substance reasonably satisfactory to Buyer, dated the Closing Date, with
respect to the Assets; and
(b) assignments of all assumed contracts that are a part of
the Assumed Liabilities, including the Lease in the form attached as Exhibit
4.3.3(b), and assignments of the Intellectual Property and any other agreements
and instruments constituting Assets, dated the Closing Date, assigning to Buyer
all of Seller's right, title and interest therein and thereto, with any required
consents included.
4.3.4 Consents and Estoppel. Buyer shall have received
consents to the assignment of the Lease to Buyer from the lessor of the Lease.
Buyer shall also have received estoppel certificates addressed to Buyer and from
the lessor of the Lease, dated within 45 days of the Closing Date, identifying
the Lease documents and any amendments thereto, stating that the Lease is in
full force and effect and, to the best knowledge of the lessor, that Seller is
not in default under the Lease and no event has occurred that, with notice or
lapse of time or both, would constitute a default by Seller under the Lease and
containing any other information reasonably requested by Buyer.
4.3.5 Corporate Proceedings. All corporate proceedings shall
be reasonably satisfactory in substance and form to both parties, and their
respective counsel, and each such party shall have received all such documents
and instruments, or copies thereof, certified if requested, as may be reasonably
requested.
4.3.6 Consulting Agreements. Seller and Buyer shall have
entered into the four (4) year consulting agreements in substantially the same
form as the forms of Consulting Agreements attached as Exhibit 4.3.6.
4.3.7 License Agreement. Simultaneous with the execution of
this Agreement, Seller and Buyer shall have entered into the License Agreement
attached as Exhibit 4.3.7 hereto.
ARTICLE V
TERMINATION
5.1 Termination. This Agreement may be terminated at any time prior to
the Closing Date:
<PAGE>
(a) by the written agreement of Buyer and Seller;
(b) by either Seller or Buyer by written notice to the other
party if the transactions contemplated hereby shall not have been consummated
pursuant hereto by December 31, 2000, unless (i) such date shall be extended by
the mutual written consent of Seller and Buyer (ii) Seller shall, at such time,
be actively engaged in soliciting the approval of the shareholder's of its
parent company to the transaction contemplated by this Agreement in which event
the Agreement may not be terminated unless the said shareholders refuse to grant
said approval within a reasonable time after December 31, 2000;
(c) by Buyer by written notice to Seller if the
representations and warranties of Seller shall not have been true and correct in
all respects (in the case of any representation or warranty containing any
materiality qualification) or in all material respects (in the case of any
representation or warranty without any materiality qualification) as of the date
when made; or
(d) by Seller by written notice to Buyer if the
representations and warranties of Buyer shall not have been true and correct in
all respects (in the case of any representation or warranty containing any
materiality qualification) or in all material respects (in the case of any
representation or warranty without any materiality qualification) as of the date
when made.
5.2 Effect of Termination. In the event of the termination of this
Agreement, this Agreement shall become void and have no effect, without any
liability to any Person in respect hereof or of the transactions contemplated
hereby on the part of any party hereto, or any of its directors, officers,
employees, agents, consultants, representatives, advisers, stockholders or
Affiliates, except for any liability resulting from such party's breach of this
Agreement.
ARTICLE VI
NON-COMPETITION AGREEMENT
6.1 Non-competition and Non-disclosure. Following the Closing Date,
Seller agrees not to:
a. engage or become interested, directly or indirectly, as
owner, employee, partner, through stock ownership (except ownership of less than
one percent (1%) of the number of shares outstanding of any securities which are
listed for trading on any securities exchange), investment of capital, lending
of money or property, rendering of services, or otherwise, whether alone or in
association with others, in the operation of any business engaged in the
<PAGE>
manufacturing of bakery products materially the same as the bakery products that
are a part of the Business as of the date of Closing anywhere in the United
States of America (the "Territory");
b. solicit or accept orders for services competitive to those
heretofore provided or sold by the Seller as a part of the Business anywhere in
the Territory from any then or previous customer of the Seller or otherwise
induce or attempt to induce any such customer to reduce such customer's
patronage of the Business; or
c. divulge, communicate, or utilize for the benefit of anyone
other than the Buyer, any confidential information of or pertaining to the
Business or any of its customers.
6.2 Equitable Remedies. Seller specifically acknowledges and agrees
that the remedy at law for any breach of any provision of this Article VI will
be inadequate and that Buyer, as applicable, in addition to any other relief
available to it, shall be entitled to the issuance of a restraining order or any
other similar equitable relief by any court of proper jurisdiction.
ARTICLE VII
MISCELLANEOUS
7.1 Indemnification.
(a) By Seller. Seller covenants and agrees to defend,
indemnify and hold harmless Buyer, its officers, directors, employees, agents,
advisers, representatives and Affiliates (collectively, the "Buyer Indemnities")
from and against, and pay or reimburse Buyer Indemnities for, any and all
claims, liabilities, obligations, losses, fines, costs, royalties, proceedings,
deficiencies or damages (whether absolute, accrued, conditional or otherwise and
whether or not resulting from third party claims) including out-of-pocket
expenses and reasonable attorneys' and accountants' fees incurred in the
investigation or defense of any of the same or in asserting any of their
respective rights hereunder (collectively, "Losses"), resulting from or arising
out of, but not limited to:
(i) any inaccuracy of any representation or warranty made
by Seller herein;
(ii) any failure of Seller to perform any covenant or
agreement hereunder or fulfill any other obligation in
respect hereof;
(iii) any liabilities (other than the Assumed Liabilities);
(iv) any of the Excluded Assets;
(iv) any and all Taxes of Seller;
(vi) any and all Benefit Liabilities in respect of
Employees;
<PAGE>
(vii)all liabilities and costs arising out of the
operations of the Business prior to the Closing Date or
relating to the Excluded Assets; and
(viii) any product liability claim with respect to products
manufactured or sold or events occurring prior to the
Closing.
(b) By Buyer. Buyer covenants and agrees to defend, indemnify
and hold harmless Seller and its officers, directors, employees, agents,
advisers, representatives and Affiliates (collectively, the "Seller
Indemnities") from and against any and all Losses resulting from or arising out
of:
(i) any inaccuracy in any representation or warranty by
Buyer made herein;
(ii) any failure of Buyer to perform any covenant or
agreement hereunder or fulfill any other obligation in
respect hereof;
(iii)the operation of the Business by Buyer or Buyer's
ownership, operation or use of the Assets or
performance under the Assumed Liabilities or employment
of any Employees employed by Buyer or product liability
claim with respect to products manufactured or sold by
Buyer, provided such activities and or liabilities
follow or arise out of Buyer's actions after the
Closing Date, and except to the extent such Losses
result from or arise out of any liabilities of Seller.
(c) Indemnification Procedures. In the case of any claim
asserted by a third party against a party entitled to indemnification under this
Agreement (the "Indemnified Party"), notice shall be given by the Indemnified
Party to the party required to provide indemnification (the "Indemnifying
Party") promptly after such Indemnified Party has actual knowledge of any claim
as to which indemnity may be sought, and the Indemnified Party shall permit the
Indemnifying Party (at the expense of such Indemnifying Party) to assume the
defense of any claim or any litigation resulting therefrom, provided that (i)
the counsel for the Indemnifying Party who shall conduct the defense of such
claim or litigation shall be reasonably satisfactory to the Indemnified Party,
(ii) the Indemnified Party may participate in such defense at such Indemnified
Party's expense, and (iii) the omission by any Indemnified Party to give notice
as provided herein shall not relieve the Indemnifying Party of its
<PAGE>
indemnification obligation under this Agreement except to the extent that such
omission results in a failure of actual notice to the Indemnifying Party and
such Indemnifying Party is materially damaged as a result of such failure to
give notice. Except with the prior written consent of the Indemnified Party, no
Indemnifying Party, in the defense of any such claim or litigation, shall
consent to entry of any judgment or enter into any settlement 'that provides for
injunctive or other non-monetary relief affecting the Indemnified Party or that
does not include as an unconditional term thereof the giving by each claimant or
plaintiff to such Indemnified Party of a release from all liability with respect
to such claim or litigation. In the event that the Indemnified Party shall in
good faith determine that the conduct of the defense of any claim subject to
indemnification hereunder or any proposed settlement of any such claim by the
Indemnifying Party might be expected to affect adversely the Indemnified Party's
Tax liability or the ability of Buyer to conduct the Business, or that the
Indemnified Party may have available to it one or more defenses or counterclaims
that are inconsistent with one or more of those that may be available to the
Indemnifying Party in respect of such claim or any litigation relating thereto,
the Indemnified Party shall have the right at all times to take over and assume
control over the defense, settlement, negotiations or litigation relating to any
such claim at the sole cost of the Indemnifying Party, provided that if the
Indemnified Party does so take over and assume control, the Indemnified Party
shall not settle such claim or litigation without the written consent of the
Indemnifying Party, such consent not to be unreasonably withheld. In the event
that the Indemnifying Party does not accept the defense of any matter as above
provided, the Indemnified Party shall have the full right to defend against any
such claim or demand and shall be entitled to settle or agree to pay in full
such claim or demand. In any event, the Indemnifying Party and the Indemnified
Party shall cooperate in the defense of any claim or litigation and the records
of each shall be available to the other with respect to such defense.
7.2 Survival of Representations and Warranties, Etc. The
representations and warranties contained in Article III of this Agreement shall
survive the execution and delivery of this Agreement for a period of two (2)
years after the Closing Date.
7.3 Expenses. Seller, on the one hand, and Buyer, on the other hand,
shall bear their respective expenses, costs and fees (including attorneys',
auditors' and financial commitment fees) in connection with the transactions
contemplated hereby, including the preparation, execution and delivery of this
Agreement and compliance herewith (the "Transaction Expenses"), whether or not
the transactions contemplated hereby shall be consummated.
7.4 Severability. If any provision of this Agreement, including any
phrase, sentence, clause, section or subsection is inoperative or unenforceable
for any reason, such circumstances shall not have the effect of rendering the
provision in question inoperative or unenforceable in any other case or
circumstance, or of rendering any other provision or provisions herein contained
invalid, inoperative, or unenforceable to any extent whatsoever.
<PAGE>
7.5 Notices. All notices, requests, demands, waivers and other
communications required or permitted to be given under this Agreement shall be
in writing and shall be deemed to have been duly given if (a) delivered
personally, (b) mailed by first-class, registered or certified mail, return
receipt requested, postage prepaid, or (c) sent by next-day or overnight mail or
delivery or (d) sent by telecopy or telegram.
(i) if to Buyer to,
Rich Products Manufacturing Corporation
1150 Niagara Street
Buffalo, New York 14213
Attn: William E. Grieshober, Jr.
(ii) if to Seller to,
Starbake, Inc.
c/o Paramark Enterprises, Inc.
One Harmon Plaza
Secaucus, New Jersey 07094
Attention: Alan S. Gottlich, President
With a copy to:
Saul Feiger, Esq.
152-18 Union Turnpike
Kew Garden Hills, New York 11367
or, in each case, at such other address as may be specified in writing to the
other parties hereto. All such notices, requests, demands, waivers and other
communications shall be deemed to have been received (w)if by personal delivery
on the day after such delivery, (x) if by certified or registered mail, on the
seventh business day after the mailing thereof, (y) if by next-day or overnight
mail or delivery, on the day delivered, (z) if by telecopy or telegram, on the
next day following the day on which such telecopy or telegram was sent, provided
that a copy is also sent by certified or registered mail.
7.7 Headings. The headings contained in this Agreement are for purposes
of convenience only and shall not affect the meaning or interpretation of this
Agreement.
<PAGE>
7.7 Entire Agreement. This Agreement constitutes the entire agreement
and supersede all prior agreements and understandings, both written and oral,
between the parties with respect to the subject matter hereof.
7.8 Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed an original and all of which shall
together constitute one and the same instrument.
7.9 Governing Law, Etc. This Agreement shall be governed in all
respects, including as to validity, interpretation and effect, by the law of the
State of California, without giving effect to the conflict of laws rules
thereof.
7.10 Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective heirs, successors and
permitted assigns.
7.11 Assignment. This Agreement shall not be assignable or otherwise
transferable by any party hereto without the prior written consent of the other
party hereto, provided that Buyer may assign this Agreement effective on the
Closing Date to any Affiliate of Buyer, provided, that no assignment shall in
any way affect Buyer's obligations or liabilities under this Agreement.
7.12 No Third Party Beneficiaries. Except as provided in Section 8.2
with respect to indemnification of Indemnified Parties hereunder, nothing in
this Agreement shall confer any rights upon any Person other than the parties
hereto and their respective heirs, successors and permitted assigns.
7.13 Amendment; Waivers, Etc. No amendment, modification or discharge
of this Agreement, and no waiver hereunder, shall be valid or binding unless set
forth in writing and duly executed by the party against whom enforcement of the
amendment, modification, discharge or waiver is sought. Any such waiver shall
constitute a waiver only with respect to the specific matter described in such
writing and shall in no way impair the rights of the party granting such waiver
in any other respect or at any other time. Neither the waiver by any of the
parties hereto of a breach of or a default under any of the provisions of this
Agreement, nor the failure by any of the parties, on one or more occasions, to
enforce any of the provisions of this Agreement or to exercise any right or
privilege hereunder, shall be construed as a waiver of any other breach or
default of a similar nature, or as a waiver of any of such provisions, rights or
privileges hereunder. The rights and remedies herein provided are cumulative and
are not exclusive of any rights or remedies that any party may otherwise have at
law or in equity. The rights and remedies of any party based upon, arising out
of or otherwise in respect of any inaccuracy or breach of any representation,
warranty, covenant or agreement or failure to fulfill any condition shall in no
<PAGE>
way be limited by the fact that the act, omission, occurrence or other state of
facts upon which any claim of any such inaccuracy or breach is based may also be
the subject matter of any other representation, warranty, covenant or agreement
as to which there is no inaccuracy or breach. The representations and warranties
of Seller shall not be affected or deemed waived by reason of any investigation
made by or on behalf of Buyer (including but not limited to by any of its
advisors, consultants or representatives) or by reason of the fact that Buyer or
any of such advisors, consultants or representatives knew or should have known
that any such representation or warranty is or might be inaccurate.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first above written.
RICH PRODUCTS MANUFACTURING CORP. STARBAKE, INC.
By_______________________________ By___________________________
Title______________________________ Title__________________________
RICH PRODUCTS CORPORATION PARAMARK ENTERPRISES, INC.
By_______________________________ By___________________________
Title______________________________ Title__________________________
<PAGE>
SCHEDULE 1.1
Specified Assets.
<PAGE>
SCHEDULE 1.2
Inventory.
<PAGE>
SCHEDULE 2.4
Assumed Liabilities.
<PAGE>
SCHEDULE 3.1.6
Liens on Assets.
<PAGE>
SCHEDULE 3.1.9
Intellectual Property
STARBAKE TM
<PAGE>
SCHEDULE 3.1.16
Employee Benefit Plans
None.
<PAGE>
EXHIBIT 4.3.3(b)
Assignment and Assumption Agreement
<PAGE>
EXHIBIT 4.3.6
Consulting Agreements
See Attached.
<PAGE>
EXHIBIT 4.3.7
License Agreement
