<PAGE>
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): December 13, 1996
JAVA CENTRALE, INC.
-----------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
California 34-0-23936 68-0268780
- --------------------------------------------------------------------------------
(STATE OF OTHER JURISDICTION (COMMISSION (IRS EMPLOYER
OF INCORPORATION) FILE NUMBER) IDENTIFICATION NO.)
1610 Arden Way, Suite 145, Sacramento, California 95815
- --------------------------------------------------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE) (ZIP CODE)
Registrant's telephone number, including area code: (916) 568-2310
--------------
- --------------------------------------------------------------------------------
(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT.)
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On December 13, 1996 Java Centrale, Inc. ("the Company") sold all operating
locations of their Oh La La Division to Good Food Fast Companies ("GFF")
pursuant to the terms of an asset purchase agreement dated November 22, 1996
between the Company, and GFF. The assets sold consisted of 11 Oh La La cafes
and carts located in San Francisco, Ca., the leases with respect to each
location, related equipment and improvements for each location, inventory,
accounts receivable and deposits associated with these locations. The locations
will continue operating under the name of Oh La La.
The consideration paid by GFF for the purchase of Oh La La consisted of
233,333 (or $750,000) preferred shares of GFF, $1,250,000 in cash , $750,000 in
a convertible note receivable and the assumption of $48,341 in liabilities. The
preferred shares of GFF were issued with certain conversion rights into common
shares of GFF, covenants, an 8% cumulative dividend and other restrictions. The
convertible note has terms and conditions of 9% interest paid monthly with the
principal due in three years and certain conversion rights into common shares of
GFF.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) Pro Forma Financial Information F-1 to F-5
(b) Exhibits
2.3 Asset Purchase Agreement, dated November 22, 1996, between
Java Centrale, Inc. and Good Food Fast Companies
<PAGE>
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 thereunto duly authorized.
JAVA CENTRALE, INC.
-----------------------------
(Registrant)
Date: December 26, 1996
By: /s/ Steven J. Orlando
------------------------------------
Steven J. Orlando
Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
<PAGE>
Pro Forma Unaudited Condensed Combined
Financial Statements of the Company
The following pro forma condensed combined balance sheet as of September 30,
1996, reflects the disposition of the assets of the Oh La La! division.
The following pro forma condensed combined statement of operations are presented
to reflect the disposition of the assets of the Oh La La! division accounted for
as sale of assets.
Assumptions underlying the pro forma adjustments are described in the
accompanying notes which should be read in conjunction with the statements. The
pro forma statements do not purport to be indicative of future results of
operations which may result from the disposition of the Oh La La! division.
F-1
<PAGE>
PRO FORMA UNAUDITED CONDENSED COMBINED
BALANCE SHEET
September 30, 1996
ASSETS
<TABLE>
<CAPTION>
Java Centrale, Inc. Oh La La Division Pro Forma
and Subsidiary
(unaudited) (unaudited) Adjustments Combined
------------------- ----------------- ------------------------------
<S> <C> <C> <C> <C>
Current Assets:
Cash $ 1,497,920 $ - $1,250,000(c) $2,747,920
Accounts receivable 590,630 (46,022) - 544,608
Inventories 381,905 (50,355) - 331,550
Notes receivable 898,732 - - 898,732
Prepaid expenses & other 993,299 (31,244) - 962,055
----------- ------------ ---------- -----------
Total current assets 4,362,486 (127,621) 1,250,000 5,484,865
----------- ------------ ---------- -----------
Notes receivable 887,687 - 750,000(c) 1,637,687
Property and equipment, net 4,725,341 (1,111,436) - 361,905
Goodwill and other assets 6,206,246 (1,157,846) 700,000(c) 5,748,400
----------- ------------ ---------- -----------
$16,181,760 $(2,396,903) $2,700,000 $16,484,857
----------- ------------ ---------- -----------
----------- ------------ ---------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 1,880,293 $ - $ - $1,880,293
Accrued liabilities 778,454 - 116,000(c) 894,454
Short term debt 761,253 - - 761,253
Current maturities, leases & debt 1,178,250 - - 1,178,250
----------- ------------ ---------- -----------
Total current liabilities 4,598,250 - 116,000 4,714,250
----------- ------------ ---------- -----------
Deferred revenues 833,500 - - 833,500
Capital leases & long-term debt 477,114 (48,342) - 428,772
Convertible debt 1,749,546 - - 1,749,546
Other liabilities 129,740 - - 129,740
Stockholders' Equity
Common stock 18,017,091 - - 18,017,091
Net assets sold - (2,348,561) 2,348,561 -
Accumulated deficit (9,623,481) - 235,439(b)(c) (9,388,042)
----------- ------------ ---------- -----------
8,393,610 (2,348,561) 2,584,000 8,629,049
----------- ------------ ---------- -----------
$16,181,760 $(2,396,903) $2,700,000 $16,484,857
----------- ------------ ---------- -----------
----------- ------------ ---------- -----------
</TABLE>
F-2
<PAGE>
PRO FORMA UNAUDITED CONDENSED COMBINED
STATEMENT OF OPERATIONS
For the Six Months Ended September 30, 1996
<TABLE>
<CAPTION>
Java Centrale, Inc. Oh La La Division Pro Forma
and Subsidiary
(unaudited) (unaudited) Adjustments Combined
------------------- ----------------- ------------------------------
<S> <C> <C> <C> <C>
Revenue $ 8,481,313 $(1,962,521) $ - $6,518,792
------------ ------------ ---------- -----------
Operating costs
Cost of goods sold 2,844,714 (628,860) - 2,215,854
Labor 2,744,596 (684,443) - 2,060,153
Direct and occupancy 1,564,288 (394,809) - 1,169,479
Depreciation 320,925 (81,000) - 239,925
------------ ------------ ---------- -----------
Total cost of company sales 7,474,523 (1,789,112) - 5,685,411
------------ ------------ ---------- -----------
General and administrative expenses 2,112,360 (98,857) (45,000)(d) 1,968,503
Depreciation and amortization 318,930 (30,000) - 288,930
Loss associated with cafe closures 128,580 - - 128,580
------------ ------------ ---------- -----------
Operating income (loss) (1,553,080) (44,552) 45,000 (1,552,632)
------------ ------------ ---------- -----------
Other income (expense):
Interest income (expense), net (130,649) - 61,750(a) (68,899)
Other income, net 172,478 - - 172,478
------------ ------------ ---------- -----------
Net income (loss) $(1,511,251) $(44,552) $106,750 $(1,449,053)
------------ ------------ ---------- -----------
------------ ------------ ---------- -----------
</TABLE>
F-3
<PAGE>
PRO FORMA CONDENSED COMBINED
STATEMENT OF OPERATIONS
For the Fiscal Year Ended March 31, 1996
<TABLE>
<CAPTION>
Java Centrale, Inc. Oh La La Division Pro Forma
and Subsidiary (unaudited) Adjustments Combined
------------------- ----------------- ------------------------------
<S> <C> <C> <C> <C>
Revenue $ 9,554,800 $(3,523,522) $ - $6,031,278
------------ ------------ ---------- -----------
Operating costs
Cost of goods sold 3,857,735 (1,046,707) - 2,811,028
Labor 2,714,067 (1,094,725) - 1,619,342
Direct and occupancy 1,742,044 (823,238) - 918,806
Depreciation 227,631 (127,500) - 100,131
------------ ------------ ---------- -----------
Total cost of company sales 8,541,477 (3,092,170) - 5,449,307
------------ ------------ ---------- -----------
General and administrative expenses 4,261,049 (270,373) (90,000)(d) 3,900,676
Depreciation and amortization 380,159 (60,000) - 320,159
Loss associated with cafe closures 410,200 - - 410,200
------------ ------------ ---------- -----------
Operating income (loss) (4,038,085) (100,979) 90,000 (4,049,064)
------------ ------------ ---------- -----------
Other income (expense):
Interest income (expense), net (18,989) - 123,500(a) 104,511
Other income, net 90,648 - - 90,648
------------ ------------ ---------- -----------
Net income (loss) $(3,966,426) $(100,979) $213,500 $(3,853,905)
------------ ------------ ---------- -----------
------------ ------------ ---------- -----------
</TABLE>
F-4
<PAGE>
NOTES TO THE PRO FORMA CONDENSED COMBINED
STATEMENTS OF EARNINGS OF THE COMPANY
a) Interest increase relating to the Note receivable at a rate of 9% and the
dividends from the Preferred Stock at a rate of 8%.
b) No tax provision resulting from the sale of assets.
c) Sale of assets as adjusted:
Cash received $ 1,250,000
Promissory note received 750,000
Preferred shares received 700,000
Liabilities assumed by buyer 48,342
------------
Total selling price 2,748,342
Book value of assets disposed (2,396,903)
Cost associated with disposal of assets (116,000)
------------
Gain on sale $ 235,439
------------
------------
d) Indirect selling, general and administrative costs reduced as a result of
the disposal of the Oh La La! division.
F-5
<PAGE>
ASSET PURCHASE AGREEMENT
BETWEEN
JAVA CENTRALE, INC.
AND
THE GOOD FOOD FAST COMPANIES
DATED AS OF NOVEMBER 22, 1996
<PAGE>
TABLE OF CONTENTS
PAGE
----
1. DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. DEPOSITS.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(a) INITIAL DEPOSIT . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(b) SECOND DEPOSIT. . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(c) TREATMENT OF THE DEPOSITS IF NO CLOSING OCCURS. . . . . . . . . . . 5
(d) INTEREST ON THE DEPOSITS. . . . . . . . . . . . . . . . . . . . . . 6
3. BASIC TRANSACTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(a) PURCHASE AND SALE OF ASSETS . . . . . . . . . . . . . . . . . . . . 6
(b) ASSUMPTION OF LIABILITIES . . . . . . . . . . . . . . . . . . . . . 6
(c) THE CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(d) EFFECTIVE DATE
(e) PURCHASE PRICE. . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(f) DELIVERIES AT THE CLOSING . . . . . . . . . . . . . . . . . . . . . 7
(g) ALLOCATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(h) RISK OF LOSS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(i) POST-CLOSING. . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4. REPRESENTATIONS AND WARRANTIES OF THE SELLER . . . . . . . . . . . . . . 9
(a) ORGANIZATION, STANDING AND POWER. . . . . . . . . . . . . . . . . . 9
(b) AUTHORIZATION OF TRANSACTION. . . . . . . . . . . . . . . . . . . . 9
(c) NONCONTRAVENTION. . . . . . . . . . . . . . . . . . . . . . . . . . 10
(d) NO CONSENTS OR APPROVALS REQUIRED . . . . . . . . . . . . . . . . . 10
(e) FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . . . . . . . 10
(f) UNDISCLOSED LIABILITIES . . . . . . . . . . . . . . . . . . . . . . 10
(g) TAX MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(h) TITLE TO ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(i) TANGIBLE ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(j) INTELLECTUAL PROPERTY . . . . . . . . . . . . . . . . . . . . . . . 11
(k) INVENTORY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(l) REAL PROPERTY LEASE . . . . . . . . . . . . . . . . . . . . . . . . 11
(m) CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(n) ACCOUNTS RECEIVABLE . . . . . . . . . . . . . . . . . . . . . . . . 13
(o) POWERS OF ATTORNEY. . . . . . . . . . . . . . . . . . . . . . . . . 14
(p) INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
(q) LITIGATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(r) EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(s) EMPLOYEE BENEFITS . . . . . . . . . . . . . . . . . . . . . . . . . 15
(t) GUARANTIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(u) ENVIRONMENT, HEALTH, AND SAFETY . . . . . . . . . . . . . . . . . . 15
(v) LEGAL COMPLIANCE. . . . . . . . . . . . . . . . . . . . . . . . . . 17
(w) DISCLOSURE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(x) FINDERS', BROKERS', AND AGENTS' FEES. . . . . . . . . . . . . . . . 17
(y) EXEMPTION FROM REGISTRATION . . . . . . . . . . . . . . . . . . . . 18
(z) DESIGNATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5. REPRESENTATIONS AND WARRANTIES OF THE BUYER. . . . . . . . . . . . . . . 18
(a) ORGANIZATION OF THE BUYER . . . . . . . . . . . . . . . . . . . . . 18
(b) CAPITALIZATION. . . . . . . . . . . . . . . . . . . . . . . . . . . 19
i
<PAGE>
(c) PURCHASE SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(d) AUTHORIZATION OF TRANSACTION. . . . . . . . . . . . . . . . . . . . 19
(e) NONCONTRAVENTION. . . . . . . . . . . . . . . . . . . . . . . . . . 19
(f) FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . . . . . . . 19
(g) LITIGATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(h) ENVIRONMENT, HEALTH, AND SAFETY . . . . . . . . . . . . . . . . . . 20
(i) BROKERS' FEES . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(j) BUYER'S FINANCING DOCUMENTS . . . . . . . . . . . . . . . . . . . . 20
(l) LEGAL COMPLIANCE. . . . . . . . . . . . . . . . . . . . . . . . . . 21
(m) EQUITY FINANCING. . . . . . . . . . . . . . . . . . . . . . . . . . 21
6. PRE-CLOSING COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . 21
(a) GENERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
(b) NOTICES AND CONSENTS. . . . . . . . . . . . . . . . . . . . . . . . 22
(c) OPERATION OF BUSINESS . . . . . . . . . . . . . . . . . . . . . . . 22
(d) PRESERVATION OF BUSINESS. . . . . . . . . . . . . . . . . . . . . . 22
(f) FULL ACCESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(g) NOTICE OF DEVELOPMENTS. . . . . . . . . . . . . . . . . . . . . . . 22
(h) EXCLUSIVITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(i) FOREIGN PERSON AFFIDAVIT. . . . . . . . . . . . . . . . . . . . . . 23
7. CONDITIONS TO OBLIGATION TO CLOSE. . . . . . . . . . . . . . . . . . . . 23
(a) CONDITIONS TO OBLIGATION OF THE BUYER . . . . . . . . . . . . . . . 23
(b) CONDITIONS TO OBLIGATIONS OF THE SELLER . . . . . . . . . . . . . . 24
8. TERMINATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(a) TERMINATION OF AGREEMENT. . . . . . . . . . . . . . . . . . . . . . 25
(b) EFFECT OF TERMINATION . . . . . . . . . . . . . . . . . . . . . . . 26
9. Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
(a) OBLIGATION OF THE SELLER TO INDEMNIFY. . . . . . . . . . . . . . . 26
(b) OBLIGATIONS OF THE BUYER. . . . . . . . . . . . . . . . . . . . . . 27
(c) METHOD OF ASSERTING CLAIMS FOR INDEMNIFICATION. . . . . . . . . . . 28
(d) MEANS OF INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . 28
(e) SURVIVAL OF RIGHTS TO INDEMNIFICATION . . . . . . . . . . . . . . . 28
10. SURVIVAL OF REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . 29
11. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
(a) NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
(b) FURTHER ASSURANCES. . . . . . . . . . . . . . . . . . . . . . . . . 30
(c) COSTS AND EXPENSES. . . . . . . . . . . . . . . . . . . . . . . . . 30
(d) TIME. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
(e) ENTIRE AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . 30
(f) AMENDMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
(g) ASSIGNMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(h) CHOICE OF LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(i) HEADINGS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(j) NUMBER AND GENDER . . . . . . . . . . . . . . . . . . . . . . . . . 31
(k) CONSTRUCTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(l) EFFECT OF WAIVER. . . . . . . . . . . . . . . . . . . . . . . . . . 31
(m) SEVERABILITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
ii
<PAGE>
(n) ENFORCEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(o) BINDING NATURE. . . . . . . . . . . . . . . . . . . . . . . . . . . 34
(p) NO THIRD-PARTY BENEFICIARIES. . . . . . . . . . . . . . . . . . . . 34
(q) COUNTERPARTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
(r) PRESS RELEASES AND ANNOUNCEMENTS. . . . . . . . . . . . . . . . . . 34
EXHIBITS
Exhibit A List of Acquired Assets
Exhibit B List of Assumed Liabilities
Exhibit C Convertible Subordinated Note
Exhibit D Buyer's Guarantee Agreement
Exhibit E Security Agreement
Exhibit F Certificate of Determination of Buyer's Series A Preferred
Stock
Exhibit G Bill of Sale
Exhibit H Assignment and Assumption Agreement
Exhibit I Allocation Schedule
Exhibit J September P&L's
EXHIBIT K Intercreditor Agreement
iii
<PAGE>
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "Agreement") is entered into November
22, 1996, by and between The Good Food Fast Companies, a Nevada corporation (the
"Buyer"), and Java Centrale, Inc., a California corporation (the "Seller"). The
Buyer and the Seller may be collectively referred to herein as the "Parties."
R E C I T A L S
A. This Agreement contemplates a transaction in which the Buyer or one of
its wholly-owned subsidiaries will purchase from the Seller the Oh-La-La!
Division, an unincorporated operating division of the Seller (the "Division"),
in return for cash and certain obligations and securities of the Buyer (the
"Acquisition").
B. The assets to be acquired by the Buyer pursuant to this Agreement are
listed in Exhibit "A" and the liabilities to be assumed by the Buyer are listed
in Exhibit "B." No other assets or liabilities of the Seller are intended to be
transferred by virtue of this Agreement.
A G R E E M E N T
NOW, THEREFORE, in consideration of the premises and the mutual promises
herein made, and in consideration of the representations, warranties, and
covenants herein contained, the Parties agree as follows:
1. DEFINITIONS.
"Acquired Assets" means all of the Seller's right, title, and interest to
and in those assets, property, rights, privileged, claims, and contracts of
every kind and nature, real and personal, tangible and intangible, wherever
located, which are used in connection with the operation of the Division, as
more fully described in Exhibit "A" hereto.
"Acquisition" has the meaning set forth in Recital A, above.
"Adverse Consequences" means all charges, complaints, notices, actions,
suits, proceedings, hearings, investigations, claims, demands, judgments,
orders, decrees, stipulations, injunctions, damages, dues, penalties, fines,
costs, amounts paid in settlement, Liabilities, obligations, Taxes, liens,
losses, expenses, and fees, including all attorneys' fees and court costs in any
court or quasi-judicial or administrative agency of any federal, state, local or
foreign jurisdiction or before an arbitrator.
1
<PAGE>
"Affiliate" means a person who or which, directly or through one or more
intermediaries, controls or is controlled by, or is under common control with,
the person specified.
"Allocation Schedule" has the meaning set forth in Section 3(f) below.
"Assumed Liabilities" means only those certain real estate leases and
leasehold improvements used by the Seller in connection with, or that relate to,
the operation of the Division, and those specific real estate improvement loans
(which shall not exceed Fifty Thousand Dollars ($50,000) in principal balance),
which are described in Exhibit "B" hereto.
"Basis" means any past or present fact, situation, circumstance, status,
condition, activity, practice, plan, occurrence, event, incident, action,
failure to act, or transaction that forms or could reasonably form the basis for
any specified consequence.
"Buyer" has the meaning set forth in the preface above.
"Buyer Financial Statements" has the meaning set forth in Section 4(e)
below.
"Buyer Subsidiary" has the meaning set forth in the preface above.
"Closing" has the meaning set forth in Section 3(c) below.
"Closing Date" has the meaning set forth in Section 3(c) below.
"Code" means the Internal Revenue Code of 1986, as amended.
"Deposits" includes the Initial Deposit and the Second Deposit.
"Disclosure Schedule" has the meaning set forth in Section 4 below.
"Division" means that unincorporated division of the Seller known generally
as Oh-La-La! Espresso Bars & Cafes.
"Effective Date" shall have the meaning set forth in Section 3(d), below.
"Employee Benefit Plan" means any (a) nonqualified deferred compensation or
retirement plan or arrangement which is an Employee Pension Benefit Plan,
(b) qualified defined contribution retirement plan or arrangement which is an
Employee Pension Benefit Plan, (c) qualified defined benefit retirement plan or
arrangement which is an Employee Pension Benefit Plan (including any
Multiemployer Plan), or (d) Employee Welfare Benefit Plan or material fringe
benefit plan or program.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
2
<PAGE>
"Extremely Hazardous Substance" has the meaning set forth in Sec. 302 of
the Emergency Planning and Community Right-to-Know Act of 1986, as amended.
"Financial Statements" has the meaning set forth in Section 4(d) below.
"GAAP" means United States generally accepted accounting principles as in
effect from time to time.
"Indemnitee" has the meaning set forth in Section 9(c) below.
"Indemnitor" has the meaning set forth in Section 9(c) below.
"Initial Deposit" means the Twenty-Five Thousand Dollar ($25,000) deposit
paid by the Buyer to the Seller at the time the Letter of Intent between the
parties was executed.
"Intellectual Property" means all (a) patents, patent applications, patent
disclosures, and improvements thereto, (b) trademarks, service marks, trade
dress, logos, trade names, and corporate names and registrations and
applications for registration thereof, (c) copyrights and registrations and
applications for registration thereof, (d) mask works and registrations and
applications for registration thereof, (e) computer software, data, and
documentation, (f) trade secrets and confidential business information
(including ideas, formulas, recipes, compositions, inventions (whether
patentable or unpatentable and whether or not reduced to practice), know-how,
manufacturing and production processes and techniques, research and development
information, drawings, specifications, designs, plans, proposals, technical
data, copyrightable works, financial, marketing, and business data, pricing and
cost information, business and marketing plans, and customer and supplier lists
and information), (g) other proprietary rights, (h) copies and tangible
embodiments thereof (in whatever form or medium), and (i) all registrations or
applications for registration of any of them.
"Intercreditor Agreement" means that certain agreement between the Seller
and Sirrom Capital Corporation ("Sirrom") of even date herewith, a copy of which
is attached to this agreement as Exhibit K, defining the relative priorities of
the security interests held by the Seller and Sirrom in the assets securing the
Note.
"Knowledge" means the actual knowledge of one or more officers and/or
directors of the Party in question.
"Law(s)" shall mean any statute, regulation, rule, judgment, ordinance,
order, decree, stipulation, injunction, charge, or other restrictions of any
federal, state, or local government, governmental agency, or court.
"Liability" means any liability (whether known or unknown, whether absolute
or contingent, whether liquidated or unliquidated,
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and whether due or to become due), including any liability for Taxes.
"Material Adverse Effect" means (a) an adverse effect of $10,000 or more
upon the business, operations, properties, assets or condition (financial or
otherwise) of (i) the Division or (ii) the Buyer, as the context requires, or
(b) the impairment in any material respect of the ability of the Division to
operate in the Ordinary Course of Business. In determining whether any
individual event would result in a Material Adverse Effect, notwithstanding that
such event does not of itself have such effect, a Material Adverse Effect shall
be deemed to have occurred if the cumulative effect of such event and all other
then existing events would result in a Material Adverse Effect.
"Note" has the meaning set forth in Section 3(e)(iv) below.
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"Party" has the meaning set forth in the preface above.
"Purchase Price" has the meaning set forth in Section 3(e) below.
"Purchase Shares" has the meaning set forth in Section 3(e)(v) below.
"PWCC" means Pacific West Coffee Company, a California corporation and a
wholly-owned subsidiary of the Buyer.
"Reportable Event" has the meaning set forth in ERISA Section 4043.
"Second Deposit" means the deposit of Seventy-Five Thousand Dollars
($75,000) made by the Buyer to the Seller at the time this Agreement was entered
into.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Security Agreement" means the Security Agreement entered into between the
Seller and the Buyer or one of its wholly-owned subsidiaries, a copy of which is
attached hereto as Exhibit E, in connection with the Buyer's obligations under
the Note.
"Security Interest" means any mortgage, pledge, security interest,
encumbrance, charge, or other lien, other than (a) construction, mechanic's,
materialmen's, and similar liens, (b) liens for Taxes not yet due and payable,
(c) liens arising under worker's compensation, unemployment insurance, social
security, retirement, and similar legislation, (d) liens arising in connection
with sales of foreign receivables, (e) liens on goods in transit incurred
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pursuant to documentary letters of credit, (f) purchase money liens and liens
securing rental payments under capital lease arrangements, and (g) other liens
arising in the Ordinary Course of Business and not incurred in connection with
the borrowing of money.
"Seller" has the meaning set forth in the preface above.
"September P&L's" has the meaning set forth in Section 4(e) below.
"Sirrom" means Sirrom Capital Corporation, a Tennessee corporation.
"Subsidiary" means any corporation with respect to which another specified
corporation has the power to vote or direct the voting of sufficient securities
to elect a majority of the directors.
"Tax" means any federal, state, local, or foreign income, gross receipts,
capital stock, franchise, profits, withholding, social security, unemployment,
disability, personal property, stamp, excise, occupation, sales, use, transfer,
value added, alternative minimum, estimated, or other tax, including any
interest, penalty, or addition thereto, whether disputed or not.
"Third-Party Claim" has the meaning set forth in Section 9(c) below.
2. DEPOSITS.
(a) INITIAL DEPOSIT. Prior to the date on which this Agreement was
entered into, the Buyer paid the Seller a deposit (the "Initial Deposit") equal
to Twenty-Five Thousand Dollars ($25,000). The Buyer and the Seller mutually
agree that upon Closing the Initial Deposit shall be considered to be part of
the Purchase Price for the Acquired Assets.
(b) SECOND DEPOSIT. The Buyer shall pay to the Seller an additional
deposit in the amount of Seventy-Five Thousand Dollars ($75,000) (the "Second
Deposit" and, together with the Initial Deposit, the "Deposits") on the date on
which this Agreement is entered into. The Buyer and the Seller mutually agree
that upon Closing the Second Deposit shall be considered to be part of the
Purchase Price for the Acquired Assets.
(c) TREATMENT OF THE DEPOSITS IF NO CLOSING OCCURS.
(i) If for any reason a Closing does not occur as provided
herein, notwithstanding the fact that as of the time described in Section
8(a)(ii)(B), the Seller is ready and able to perform all of the obligations
specified in section 7(a), then effective as of that date both of the Deposits
shall be forfeited to the Seller, and the Buyer shall have no further rights to
or claim on the Deposits.
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(ii) If for any reason a Closing does not occur as provided
herein, notwithstanding the fact that as of the time described in Section
8(a)(ii)(B), the Buyer is ready and able to perform all of the obligations
specified in Section 7(b), then both of the Deposits shall be returned to the
Buyer, without interest thereon, and the Seller shall have no further rights to
or claim on the Deposits; PROVIDED, HOWEVER, that the Seller may retain a total
of Seven Thousand Five Hundred Dollars ($7,500) of the Deposits as partial
compensation for its legal fees and expenses in connection with this Agreement
and the transactions described herein.
(d) INTEREST ON THE DEPOSITS. Whether or not any Closing ever takes
place, the Seller shall be entitled to all interest which may be earned on both
Deposits from and after the date on which they were originally paid to the
Seller.
3. BASIC TRANSACTION.
(a) PURCHASE AND SALE OF ASSETS. For the consideration specified
below in this Section 3, and subject to the terms and conditions of this
Agreement, the Buyer agrees to purchase from the Seller, and the Seller agrees
to sell, transfer, convey, and deliver to the Buyer, all of the Acquired Assets.
The Buyer shall not acquire, and the Seller shall not convey, any other asset of
the Buyer not included within the definition of Acquired Assets set forth in
Section 1, above.
(b) ASSUMPTION OF LIABILITIES. Subject to the terms and conditions
of this Agreement, the Buyer agrees to assume and become responsible for all of
the Assumed Liabilities from and after the Closing. The Buyer shall not assume
any other obligation or Liability of the Seller not included within the
definition of Assumed Liabilities set forth in Section 1, above.
(c) THE CLOSING. The closing of the transaction contemplated by this
Agreement (the "Closing") shall take place at the offices of Seller's counsel,
Rosenblum, Parish & Isaacs, PC, in San Francisco, California, on a mutually
agreeable date on or before December 10, 1996, commencing at 11:00 A.M. local
time (the "Closing Date"), or at such later time as the Buyer and the Seller
shall agree. A pre-closing shall be held on the business day immediately
preceding the Closing Date at the same location and beginning at 10:00 A.M.
local time. To the extent practical, the Parties shall try to handle as much of
the Closing by mail as they reasonably can.
(d) EFFECTIVE DATE. The effective date of this Agreement and the
transactions contemplated herein (the "Effective Date") shall for all purposes
be deemed to be 5:00 P.M., local time, on: (i) December 1, 1996, in the event
that the Closing shall take place on or before December 10, 1996, or (ii) the
actual Closing Date if the Closing Date occurs after December 10, 1996.
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(e) PURCHASE PRICE. The purchase price for the Acquired Assets (the
"Purchase Price") shall be and include:
(i) the Buyer's assumption of the Assumed Liabilities;
(ii) the full amount of the Initial Deposit and the Second
Deposit, amounting in the aggregate to One Hundred Thousand Dollars ($100,000);
(iii) One Million One Hundred Fifty Thousand Dollars ($1,150,000)
in cash;
(iv) a three-year secured convertible subordinated note from
Pacific West Coffee Company, a wholly-owned subsidiary of the Buyer ("PWCC") to
the Seller, in the total principal amount of Seven Hundred Fifty Thousand
Dollars ($750,000), bearing interest at the rate of nine percent (9%) per year
from the Closing Date and otherwise in the form and including the terms and
conditions set forth in Exhibit C to this Agreement (the "Note"); and
(v) 233,333 shares of the Buyer's Cumulative Convertible
Preferred Stock, Series A (the "Purchase Shares"), which shall have the rights,
preferences, and privileges set forth in the Certificate of Determination
attached hereto as Exhibit "E" to this Agreement.
(f) DELIVERIES AT THE CLOSING. At the Closing,
(i) The Seller will deliver to the Buyer:
(A) the various certificates, instruments, and documents
referred to in Section 7(a) below,
(B) duly executed and (if appropriate) acknowledged
assignments of all real property leases and lease improvement loans which are
included in the Acquired Assets,
(C) such other instruments of sale, transfer, conveyance,
and assignment as the Buyer and its counsel reasonably may request,
(D) a current UCC-1 search profile reflecting claims or
security interests that may affect or relate to any of the Acquired Assets as of
the Closing Date,
(E) a list of the locations of any and all deposits
pertaining to the leases included in the Acquired assets,
(F) a duly executed Bill of Sale and Assignment, in
substantially the form of Exhibit "F" attached hereto,
(G) an affidavit from the Seller to the Buyer pursuant to
Sections 897 and 1445(b)(2) of the Code, stating under
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penalty of perjury that the Seller is not a foreign person and providing the
Seller's U.S. taxpayer identification number, and
(H) an executed Intercreditor Agreement between the Seller
and Sirrom; and
(ii) The Buyer will deliver to the Seller:
(A) the various certificates, instruments, and documents
referred to in Section 7(b) below,
(B) a duly executed assumption of the Assumed Liabilities
in the form attached hereto as Exhibit "G,"
(C) a certified or cashier's check, or a duly certified
wire transfer of funds, in the amount of One Million One Hundred Fifty Thousand
Dollars ($1,150,000),
(D) the executed Note,
(E) a share certificate representing the shares of the
Purchase Shares specified in Section 2(d) above, and
(F) a Guarantee Agreement, guaranteeing payment in full of
the Note, in the form and including the terms and conditions set forth in
Exhibit D to this Agreement.
(g) ALLOCATION. The Parties agree to value the Purchase Shares
representing a portion of the Purchase Price, and to allocate the Purchase Price
(and all other capitalized costs) among the Acquired Assets for tax purposes, in
accordance with a mutually and reasonably acceptable allocation schedule to be
delivered at the Closing (the "Allocation Schedule") and complete an Asset
Acquisition Statement (IRS Form 8594), which Allocation Schedule shall thereupon
be attached to this Agreement as Exhibit "H."
(h) RISK OF LOSS.
(i) The Seller assumes all risk of material loss or damage to
the Acquired Assets, from any cause whatsoever, up to the Closing Date. If
material loss or damage to the Acquired Assets occurs, the Buyer shall have the
option to terminate this Agreement and, if the Buyer does so, all rights and
obligations of the Parties shall terminate without liability to either Party.
Within ten (10) calendar days after receiving written notice from Seller of
material loss or damage to the Acquired Assets, Buyer shall notify Seller of its
decision to terminate this Agreement. If Buyer does not timely notify Seller of
its decision to terminate, this Agreement shall remain in full force and effect;
HOWEVER, the Purchase Price shall be adjusted at the Closing to reflect such
loss or damage to the extent that such loss or damage is not payable from
insurance with respect to which the insurer has already agreed to the existence
and amount of the coverage and the Seller assigns to the Buyer at the Closing
the right to such insurance proceeds. If the Parties are unable to agree on the
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materiality or the amount of said adjustment, the dispute shall be determined by
a panel consisting of an independent appraiser selected by each of the Parties
and a third appraiser selected by the other two appraisers, and that
determination shall be binding on both Parties. The Parties shall each pay
one-half of the expenses incurred in connection with any such appraisal.
(ii) Except as provided in Section 9, below, the Buyer assumes
all risk of loss to the Acquired Assets, from any cause whatsoever, from and
after the Closing Date.
(i) POST-CLOSING.
(i) After the Closing, the Seller shall cooperate fully with the
Buyer in the preparation of tax returns, and shall provide, at the Seller's
expense, any requested records and other information to assist the Buyer in the
preparation of tax returns or in connection with an audit, inquiry,
investigation, or examination of any of the Buyer's tax returns, books, or
records relating to the Acquired Assets.
(ii) The Buyer and the Seller shall jointly determine the amount
of any sales taxes which may be payable in connection with the transactions
contemplated in this Agreement. Within thirty (30) days after the Closing Date,
the Seller shall make a payment to the Buyer equal to one-half (50%) of the
agreed-upon sales tax liability.
4. REPRESENTATIONS AND WARRANTIES OF THE SELLER. The Seller represents
and warrants to the Buyer that the statements contained in this Section 4 are
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date (as though made then and as though the Closing
Date were substituted for the date of this Agreement throughout this Section 4),
except as set forth in the disclosure schedule accompanying this Agreement (the
"Disclosure Schedule"). The Disclosure Schedule will be arranged in paragraphs
corresponding to the lettered and numbered paragraphs contained in this Section
4.
(a) ORGANIZATION, STANDING AND POWER. The Seller is a corporation
duly organized, validly existing and in good standing under the Laws of the
State of California, and is in good standing and qualified to do business under
the Laws of each jurisdiction in which the nature of its business or leasing of
its properties requires such qualification, where the failure to be so qualified
would have a Material Adverse Effect. The Seller has full corporate power and
authority to carry on the business in which it is engaged and to own and use the
Acquired Assets.
(b) AUTHORIZATION OF TRANSACTION. The Seller has full corporate
power and authority to execute and deliver this Agreement and to perform its
obligations hereunder. Without limiting the generality of the foregoing, the
Board of Directors of the Seller has duly authorized the execution, delivery,
and performance of
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this Agreement by the Seller. This Agreement constitutes the valid and
legally binding obligation of the Seller, enforceable in accordance with its
terms and conditions, subject to the effect of (i) bankruptcy, insolvency,
reorganization, moratorium or other similar Laws affecting the rights and
remedies of creditors generally and (ii) general principles of equity.
(c) NONCONTRAVENTION. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(i) violate any Law to which the Seller is subject or any provision of the
Seller's Articles of Incorporation or bylaws or (ii) conflict with, result in a
breach of, constitute a default under, result in the acceleration of, create in
any party the right to accelerate, terminate, modify, or cancel, or require any
notice under any contract, lease, sublease, license, sublicense, franchise,
permit, indenture, agreement or mortgage for borrowed money, instrument of
indebtedness, Security Interest, or other arrangement to which the Seller is a
party or by which it is bound or to which any of its assets is subject, or
result in the imposition of any Security Interest upon any of its assets.
(d) NO CONSENTS OR APPROVALS REQUIRED. The consummation of the sale
of the Acquired Assets by the Seller pursuant to this Agreement does not require
any order, consent, approval of, or filing or registration with, any government,
governmental agency, bureau, board, commission, court, department, or other
instrumentality of the federal or California governments, except for compliance
with California securities laws, where applicable. All required proceedings and
other action to assure compliance with applicable bulk sales and specific asset
transfer laws, if necessary, have been duly taken.
(e) FINANCIAL STATEMENTS. Attached hereto as Exhibit "I" are
unaudited monthly profit and loss statements for each of the individual stores
which comprise the Division, prepared by the Seller, for the month of September,
1996 (the "September P&L's"). The September P&L's are correct and complete in
all material respects, and are consistent with the books and records of the
Seller; PROVIDED, HOWEVER, that the September P&L's are subject to normal
year-end adjustments which, with respect to the period prior to the Closing
Date, will not to the Knowledge of the Seller, be material.
(f) UNDISCLOSED LIABILITIES. In connection with the Acquired Assets,
Seller has no Liability (and there is no Basis for any present or future Adverse
Consequence against Seller giving rise to any Liability) relative to the
Acquired Assets or to the operation of the Division, except for Liabilities
which (i) are set forth in the face of the Seller's unaudited financial
statements for the period ended June 30, 1996, (ii) have arisen after September
30, 1996 in the Ordinary Course of Business (none of which relates to any breach
of contract, breach of warranty, tort, infringement, or violation of Law or
arose out of any Adverse Consequence, other than in the Ordinary Course of
Business) and
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(iii) are actually disclosed in the footnotes to Seller's audited
financial statements as of March 31, 1996 and for the period then ended.
(g) TAX MATTERS. The Seller has filed all Tax reports and returns,
relative to the Division and/or the Acquired Assets, that it is required to
file. All such reports and returns were correct and complete in all material
respects. All Taxes owed by the Seller relative to the Division and/or the
Acquired Assets (whether or not shown on any report or return, and including
sales taxes arising from the sale of the Acquired Assets) have been paid or
provided for. The Seller currently is not the beneficiary of any extension of
time within which to file any report or return. There are no Security Interests
on any of the Acquired Assets that arose in connection with any failure (or
alleged failure) to pay any tax, and the Seller has no Knowledge of any Basis
for the imposition of such a Security Interest in the future.
(h) TITLE TO ASSETS. The Seller has good and marketable title to all
of the Acquired Assets, free and clear of any Security Interest or restriction
on transfer.
(i) TANGIBLE ASSETS. Each of the Acquired Assets that is a tangible
asset has been maintained in accordance with normal industry practice, is in
good operating condition and repair (subject to normal wear and tear), and is
suitable for the purposes for which it presently is used.
(j) INTELLECTUAL PROPERTY. The Seller uses, pursuant to a License
Agreement dated July 14, 1992 between Oh-La-La! International, S.A.
("International") and PSSS, Inc. a Delaware corporation, which license was
subsequently assigned to the Seller, certain Intellectual Property owned by
International, consisting of the right to the name and style Oh-La-La!. The
Seller does not own or use any other material Intellectual Property with respect
to the Acquired Assets.
(k) INVENTORY. None of the inventory of the Seller comprising part
of the Acquired Assets is obsolete, damaged, or defective to such an extent as
to cause a Material Adverse Effect, subject only to the reserve for inventory
write-down set forth in the Most Recent Balance Sheet as adjusted for the
passage of time through the Closing Date in accordance with the past custom and
practice of the Seller.
(l) REAL PROPERTY LEASE. Exhibit "A" to this Agreement lists and
describes briefly all real property leased or subleased to or by the Seller in
connection with the Acquired Assets. The Seller has delivered to Buyer correct
and complete copies of the leases and subleases listed in Exhibit "A." With
respect to each lease and sublease listed in Exhibit "A," except as otherwise
disclosed therein:
(i) the lease or sublease is legal, valid, binding, enforceable,
and in full force and effect;
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(ii) there is no guarantee of the lease or sublease by any of
the shareholders of the Seller or, to the Knowledge of the Seller, any other
third party;
(iii) the lease or sublease will continue to be legal, valid,
binding, enforceable, and in full force and effect on identical terms following
the Closing;
(iv) to the Knowledge of the Seller, no party to the lease or
sublease is in breach or default thereof in any material respect, and no event
has occurred which, with notice or lapse of time, would constitute a breach or
default or permit termination, modification, or acceleration thereunder;
(v) to the Knowledge of the Seller, no party to the lease or
sublease has repudiated any provision thereof;
(vi) to the Knowledge of the Seller, there are no disputes, oral
agreements, or forbearance programs in effect as to the lease or sublease;
(vii) the Seller has not assigned, transferred, conveyed,
mortgaged, deeded in trust, or encumbered any interest in the leasehold or
subleasehold;
(viii) all facilities leased or subleased thereunder have
received all approvals of governmental authorities (including licenses and
permits) required in connection with the operation thereof and have been
operated and maintained in accordance with applicable Laws, where the failure to
obtain such approvals or comply with applicable Laws would have a Material
Adverse Effect; and
(ix) all facilities leased or subleased thereunder are supplied
with utilities and other services necessary for the operation of said
facilities.
(m) CONTRACTS.
(i) Section 4(m) of the Disclosure Schedule lists the following
contracts, agreements, and other written arrangements to which the Seller is a
party in connection with the Acquired Assets:
(A) any area development agreement or franchise agreement;
(B) any written arrangement (or group of related written
arrangements) for the lease of personal property from or to third parties
providing for lease payments in excess of $5,000 per annum;
(C) any written arrangement (or group of related written
arrangements) for the purchase or sale of food, supplies, products, or other
personal property or for the
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furnishing or receipt of services, that either calls for performance over a
period of more than three (3) months or involves more than the sum of
$10,000; or
(D) any written arrangement concerning partnership or joint
venture;
(E) any written arrangement (or group of related written
arrangements) under which the Seller has created, incurred, assumed, or
guaranteed (or may create, incur, assume, or guarantee) either (1) indebtedness
(including capitalized lease obligations) involving more than $10,000 or (2) a
Security Interest on any of its assets, tangible or intangible;
(F) any written arrangement concerning confidentiality or
noncompetition;
(G) any written arrangement with any of its directors,
officers, or employees in the nature of a collective bargaining agreement,
employment agreement, or severance agreement;
(H) any written arrangement under which the consequences of
a default or termination could have a Material Adverse Effect; or
(I) any other written arrangement (or group of related
arrangements) either involving more than $10,000 or not entered into in the
Ordinary Course of Business.
(ii) The Seller has delivered to the Buyer a correct and complete
copy of each written arrangement listed in Section 4(m) of the Disclosure
Schedule (as amended to date). With respect to each written arrangement so
listed: (A) the written arrangement is legal, valid, binding, enforceable, and
in full force and effect; (B) the written arrangement will continue to be legal,
valid, binding, and enforceable and in full force and effect on identical terms
following the Closing; (C) to the Knowledge of the Seller, no party is in breach
or default, and no event has occurred which with notice or lapse of time, or
both, would constitute a breach or default or permit termination, modification,
or acceleration, under the written arrangement; and (D) to the Knowledge of the
Seller, no party has repudiated any provision of the written arrangement. The
Seller is not a party to any binding verbal contract, agreement, or other
arrangement which, if reduced to written form, would be required to be listed in
Section 4(m) of the Disclosure Schedule under the terms of this Section 4(m).
(n) ACCOUNTS RECEIVABLE. All accounts receivable of the Seller in
connection with the Acquired Assets are reflected properly on its books and
records, are valid receivables subject to no set-offs or counterclaims, are
presently current and collectible, and will be collected in accordance with
their terms at their recorded amounts, subject only to the reserve for bad debts
set forth in the Most Recent Balance Sheet as adjusted for
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the passage of time through the Closing Date in accordance with the past
custom and practice of the Seller.
(o) POWERS OF ATTORNEY. There are no outstanding powers of attorney
executed on behalf of the Seller which grant any other party the direct or
indirect power or authority to convey, manage, or otherwise affect any of the
Acquired Assets.
(p) INSURANCE.
(i) Section 4(p) of the Disclosure Schedule sets forth the
following information with respect to each insurance policy (including policies
providing property, casualty, liability, and workers' compensation coverage and
bond and surety arrangements) with respect to any of the Acquired Assets to
which the Seller has been a party, a named insured, or otherwise the beneficiary
of coverage at any time since its formation:
(A) the name, address, and telephone number of the agent;
(B) the name of the insurer, the name of the policyholder,
and the name of each covered insured;
(C) the policy number and the period of coverage;
(D) the scope (including an indication of whether the
coverage was on a claims made, occurrence, or other basis) and amount (including
a description of how deductibles and ceilings are calculated and operate) of
coverage; and
(E) a description of any retroactive premium adjustments or
other loss-sharing arrangements.
(ii) The Seller has delivered, or provided the Buyer access to, a
corrected complete copy of each policy listed in Section 4(p) of the Disclosure
Schedule (as amended to date). With respect to each such insurance policy:
(A) the policy is legal, valid, binding, enforceable, and currently in full
force and effect; (B) neither the Seller nor, to the Knowledge of the Seller,
any other party is in breach or default in any material respect (including with
respect to the payment of premiums or the giving of notices), and, to the
Knowledge of the Seller, no event has occurred which, with notice or the lapse
of time or both, would constitute such a breach or default in any material
respect or permit termination, modification, or acceleration, under the policy;
and (C) to the Knowledge of the Seller, no party to the policy has repudiated
any provision thereof.
(iii) The Seller has been covered since its original acquisition
of the Acquired Assets by insurance in scope and amount customary and reasonable
for the businesses in which it has engaged during the aforementioned period.
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(q) LITIGATION. Section 4(q) of the Disclosure Schedule sets forth
each instance in which the Seller (A) is subject to any Adverse Consequence with
respect to any of the Acquired Assets, or (B) is a party or, to the Knowledge of
the Seller, is threatened to be made a party to any Adverse Consequence with
respect to any of the Acquired Assets. The Seller has no reason to believe that
any other Adverse Consequence with respect to any of the Acquired Assets may be
brought or threatened against the Seller.
(r) EMPLOYEES. To the Knowledge of any of the directors, officers
and employees of the Seller with responsibility for employment matters of the
Seller, no key employee or group of employees employed by the Division has any
plans to terminate employment upon the consummation of the transactions
contemplated by this Agreement. The Seller is not a party to or bound by any
collective bargaining agreement, nor has it experienced any strikes, grievances,
claims of unfair labor practices, or other collective bargaining disputes with
any of its employees employed at any of the Division. The Seller has not
committed any unfair labor practice in connection with any such employees. The
Seller has no Knowledge of any organizational effort presently being made or
threatened by or on behalf of any labor union with respect to employees employed
at any of the Division.
(s) EMPLOYEE BENEFITS. The Seller does not have any Employee Benefit
Plan that is a defined benefit plan. The Seller does not have any unfunded
liability with respect to any Employee Benefit Plan. There is no Basis for any
successor liability to accrue to the Buyer in connection with any Employee
Benefit Plan of the Seller.
(t) GUARANTIES. Except as disclosed in Section 4(t) of the
Disclosure Schedule, the Seller is not a guarantor of or otherwise liable for
any Liability or obligation (including indebtedness) of any other person in
connection with the Acquired Assets that would, in the event of any past or
future occurrence (including the passage of time) relative to such guarantee or
liability, constitute or result in a Material Adverse Effect or a direct or
indirect claim or lien on any of the Acquired Assets.
(u) ENVIRONMENT, HEALTH, AND SAFETY.
(i) The Seller and, to its Knowledge, its respective
predecessors and Affiliates have complied with all Laws applicable to any of the
Acquired Assets concerning the environment, public health and safety, except
where such failure to comply will not have a Material Adverse Effect, and no
Adverse Consequence has been filed or commenced against the Seller alleging any
failure to comply with any such Law where such Adverse Consequence or failure so
to comply would have a Material Adverse Effect.
(ii) In connection with any of the Acquired Assets, the Seller
has no Liability arising out of its operation of the Acquired Assets since its
original acquisition thereof (and, to the
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Knowledge of the Seller, there is no Basis related to the past or present
operations, properties, or facilities of the Seller and its respective
predecessors and Affiliates for any Adverse Consequence against the Seller
giving rise to any Liability) under any Law concerning the release or
threatened release of hazardous substances, public health and safety,
pollution, or protection of the environment, except for such Liability that
would not constitute a Material Adverse Effect.
(iii) In connection with any of the Acquired Assets, the Seller
and, to the Knowledge of the Seller, its respective predecessors and Affiliates
have not handled or disposed of any substance, arranged for the disposal of any
substance, or owned or operated any property or facility in any manner that
could form the Basis for any Adverse Consequence for damage to any site,
location, or body of water (surface or subsurface), or for illness or personal
injury, except for any such Liability or Adverse Consequence that would not
constitute a Material Adverse Effect.
(iv) In connection with any of the Acquired Assets, the Seller
has no Liability for (and the Seller has not exposed any employee to) any
substance or condition that could form the Basis for any Adverse Consequence for
any illness of or personal injury to any employee, except for any such Liability
or Adverse Consequence that would not constitute a Material Adverse Effect.
(v) With respect to the Acquired Assets, the Seller has obtained
and been in compliance with all of the terms and conditions of all permits,
licenses, and other authorizations which are required under, and has complied
with all other limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules, and timetables which are contained in, all
federal, state, local, and foreign laws (including rules, regulations, codes,
plans, judgments, orders, decrees, stipulations, injunctions, and charges
thereunder) relating to public health and safety, worker health and safety, and
pollution or protection of the environment, including Laws relating to
emissions, discharges, releases, or threatened releases of pollutants,
contaminants, or chemical, industrial, hazardous, or toxic materials or wastes
into ambient air, surface water, ground water, or lands or otherwise relating to
the manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling of pollutants, contaminants, or chemical, industrial,
hazardous, or toxic materials or wastes, except for any such noncompliance that
would not constitute a Material Adverse Effect.
(vi) To the Knowledge of the Seller, all properties and equipment
used by the Seller in connection with any of the Acquired Assets have been free
of asbestos, PCB's, methylene chloride, trichloroethylene, and any other
Extremely Hazardous Substances.
(vii) Any and all product labeling of the Seller in connection
with any of the Acquired Assets has been in conformity with applicable Laws in
all material respects.
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(viii) To the Knowledge of the Seller, no pollutant, contaminant,
or chemical, industrial, hazardous, or toxic material or waste ever has been
buried, stored, spilled, leaked, discharged, emitted, or released on any real
property that the Seller, in connection with any of the Acquired Assets, leases
or ever has owned or leased during the period of such ownership or leasing, and
the Seller is not aware of any such occurrence thereon at any other time.
(v) LEGAL COMPLIANCE.
(i) The Seller has complied with all Laws applicable to the
Seller with respect to the Acquired Assets, and no Adverse Consequence with
respect to the Acquired Assets has been filed or commenced against the Seller
alleging any failure to comply with any such Law that could have a Material
Adverse Effect.
(ii) The Seller has not:
(A) made or agreed to make any contribution, payment, or
gift of funds or property to any governmental official, employee, or agent where
either the contribution, payment, or gift or the purpose thereof was illegal
under the Law;
(B) established or maintained any unrecorded fund or asset
for any purpose, or made any false entries on any books or records for any
reason; or
(C) made or agreed to make any contribution, or reimbursed
any political gift or contribution made by any other person, to any candidate
for federal, state, local, or foreign public office.
(iii) The Seller filed in a timely manner all reports, documents,
and other materials it was required to file (and the information contained
therein was correct and complete in all material respects) under all applicable
Laws with respect to any of the Acquired Assets where the failure so to file
would have a Material Adverse Effect.
(iv) The Seller has possession of all records and documents with
respect to any of the Acquired Assets that it was required to retain under all
applicable Laws.
(w) DISCLOSURE. The representations and warranties contained in this
Section 4 do not contain any untrue statements of a material fact or omit to
state any material fact necessary in order to make the statements and
information contained in this Section 4 not misleading.
(x) FINDERS', BROKERS', AND AGENTS' FEES. The Seller has no
Liability or obligation to pay any fees or commissions to any broker, finder, or
agent (other than the obligation to pay Christopher A. Wheeler a sum equal to
$27,000 as a finder's fee)
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with respect to the transactions contemplated by this Agreement for which the
Buyer would become liable or obligated.
(y) EXEMPTION FROM REGISTRATION.
(i) The Seller acknowledges that the Purchase Shares will be
issued in accordance with an exemption from the registration requirements under
the Securities Act and that the Purchase Shares cannot be sold, assigned,
transferred, hypothecated, or otherwise disposed of unless (A) the Purchase
Shares are included in a registration statement filed with, and declared
effective by, the SEC, or (B) in the opinion of counsel reasonably satisfactory
to the Buyer, an exemption from the registration requirements is available.
(ii) The Seller further acknowledges that, for the Purchase
Shares to be sold, absent inclusion in an effective registration statement or
the applicability of some other exemption from such registration requirements,
the Seller would have to comply with Rule 144, promulgated under the Securities
Act, which Rule, as currently in effect, requires among other things, the
satisfaction of a two-year holding period.
(iii) The Seller also acknowledges and agrees that (A) the Buyer
is under no obligation to include any of the Purchase Shares in any registration
statement that may be filed by the Buyer with the SEC, (B) the certificates
evidencing the Purchase Shares will bear an appropriate restrictive legend, and
(C) a stop transfer notation will be placed on the books and records of the
Buyer's transfer agent.
(z) DESIGNATION. The Seller acknowledges that at Closing the Buyer
shall have the right, at its sole discretion, to designate that the Seller
convey the Acquired Assets and the Assumed Liabilities directly to any wholly
owned subsidiary of the Buyer, including without limitation GFFC Acquisition
Corporation, a California corporation.
5. REPRESENTATIONS AND WARRANTIES OF THE BUYER. The Buyer represents and
warrants to the Seller that the statements contained in this Section 5 are
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date (as though made then and as though the Closing
Date were substituted for the date of this Agreement throughout this Section 5),
except as set forth in the Disclosure Schedule. The Disclosure Schedule will be
arranged in paragraphs corresponding to the lettered and numbered paragraphs
contained in this Section 5.
(a) ORGANIZATION OF THE BUYER. The Buyer is a corporation duly
organized, validly existing, and in good standing under the Laws of Nevada. The
Buyer is in good standing and qualified to do business under the laws of each
jurisdiction in which the nature of its business or the ownership or leasing of
its properties requires such qualification where the failure to be so qualified
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would have a material adverse effect. The Buyer has full corporate power and
authority to carry on the business in which it is engaged and to own and use the
properties owned, leased and used by it.
(b) CAPITALIZATION. The authorized capitalization of the Buyer
consists of 5,000,000 shares of $.001 par value preferred stock, of which no
shares are outstanding at the date of this Agreement, and 10,000,000 shares of
$.001 par value common stock, of which 620,000 shares are outstanding at the
date of this Agreement. To the Knowledge of the Buyer, all outstanding shares
have been duly authorized, validly issued, and are fully paid and
non-assessable, and all such shares were issued in compliance in all material
respects with applicable federal and state securities law. Except as set forth
(1) in the Buyer's Financial Statements or (ii) in Section 5(d) of the
Disclosure Schedule, there are no outstanding or presently authorized
securities, warrants, preemptive rights, subscription rights, options or related
commitments or agreements of any nature to issue any of the Buyer's securities.
(c) PURCHASE SHARES. Upon issuance, the Purchase Shares will be duly
authorized, validly issued, fully paid, and nonassessable.
(d) AUTHORIZATION OF TRANSACTION. The Buyer has full corporate power
and authority to execute and deliver this Agreement and to perform its
obligations hereunder, neither of which requires the approval of the Buyer's
shareholders. This Agreement constitutes the valid and legally binding
obligation of the Buyer, enforceable in accordance with its terms and
conditions, subject to the effect of (i) bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the rights and remedies of creditors
generally and (ii) general principles of equity.
(e) NONCONTRAVENTION. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(i) violate any Law to which the Buyer is subject or any provision of its
Articles of Incorporation or bylaws or (ii) conflict with, result in a breach
of, constitute a default under, result in the acceleration of, create in any
party the right to accelerate, terminate, modify, or cancel, or require any
notice under any contract, lease, sublease, license, sublicense, franchise,
permit, indenture, agreement or mortgage for borrowed money, instrument of
indebtedness, Security Interest, or other arrangement to which the Buyer is a
party or by which it is bound or to which any of its assets is subject. Except
for compliance with certain notice filing provisions under the state and federal
securities laws, the Buyer does not need to give any notice to, make any filing
with, or obtain any authorization, consent, or approval of any government or
governmental agency for the Parties to consummate the transactions contemplated
by this Agreement.
(f) FINANCIAL STATEMENTS.
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(i) Attached hereto as Section 5(f) of the Disclosure Schedule
are the following financial statements of the Buyer (collectively the "the Buyer
Financial Statements"): unaudited consolidated balance sheets and statements of
income, changes in stockholders' equity, and cash flows as of and for the period
from the Buyer's date of incorporation through the end of the last full month
prior to the Closing Date.
(ii) The Buyer Financial Statements have been prepared in
accordance with GAAP applied on a consistent basis throughout the period covered
thereby, are correct and complete in all material respects, and are consistent
with the books and records of the Buyer (which books and records are correct and
complete in all material respects), subject to normal year-end adjustments
(which will not be material).
(g) LITIGATION. Except as set forth in the Buyer's Financial
Statements (including any Notes thereto), the Buyer is not (i) subject to any
Adverse Consequence that would have a material adverse effect, or (ii) a party
or, to the Knowledge of the Buyer, threatened to be made a party to, any Adverse
Consequence that would have a Material Adverse Effect.
(h) ENVIRONMENT, HEALTH, AND SAFETY. To the Knowledge of the Buyer,
there are no (A) claims of violation by the Buyer of any federal, state, or
local environmental protection laws and regulations where such violation would
have a Material Adverse Effect, and the Buyer has not received any notice of
such violation; and (B) material capital expenditures required for compliance
with any federal, state, or local laws or regulations now in force relating to
an Extremely Hazardous Substance.
(i) BROKERS' FEES. The Buyer has no Liability or obligation to pay
any fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which the Seller could become
liable or obligated.
(j) BUYER'S FINANCING DOCUMENTS. Attached to this Agreement as
Section 5(j) of the Disclosure Schedule are true and accurate copies of each of
the following:
(i) all offering documents distributed by the Buyer or any of
its agents or affiliates in connection with the equity offering described in
paragraph (m) of this Section 5,
(ii) all loan, security, and other promissory notes and
agreements entered into by the Buyer or any of its affiliates in connection with
the transaction(s) described in Section 4 of the Note, and
(iii) all agreements and other instruments by which the Seller's
claims under the Note and the Security Agreement may be subordinated to the
claims of any other person or entity not a party to this Agreement.
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(k) DISCLOSURE. The representations and warranties contained in this
Section 5 do not contain any untrue statements of a material fact or omit to
state any material fact necessary in order to make the statements and
information contained in this Section 5 not misleading.
(l) LEGAL COMPLIANCE.
(i) The Buyer has complied in all material respects with all
Laws, and no Adverse Consequence has been filed or commenced against The Buyer
alleging any failure to comply with any such Law that could have a Material
Adverse Effect.
(ii) The Buyer has not:
(A) made or agreed to make any contribution, payment, or
gift of funds or property to any governmental official, employee, or agent where
either the contribution, payment, or gift or the purpose thereof was illegal
under the Law;
(B) established or maintained any unrecorded fund or asset
for any purpose, or made any false entries on any books or records for any
reason; or
(C) made or agreed to make any contribution, or reimbursed
any political gift or contribution made by any other person, to any candidate
for federal, state, local, or foreign public office.
(iii)The Buyer has filed in a timely manner all reports,
documents, and other materials it was required to file (and the information
contained therein was correct and complete in all material respects) under all
applicable Laws where the failure so to file would have a Material Adverse
Effect.
(iv) The Buyer has possession of all material records and
documents that it is required to retain under all applicable Laws, except where
the failure so to retain would not have a Material Adverse Effect.
(m) EQUITY FINANCING. Between the date of this Agreement and the
Closing Date, the Buyer has raised not less than $250,000 through a private
offering of its equity securities.
6. PRE-CLOSING COVENANTS. The Parties agree as follows with respect to
the period between the execution of this Agreement and the Closing.
(a) GENERAL. Each of the Parties will use its reasonable best
efforts to take all action and to do all things necessary, proper, or advisable
to consummate and make effective the transactions contemplated by this Agreement
(including satisfying the closing conditions set forth in Section 7 below).
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(b) NOTICES AND CONSENTS. The Seller will give any notices to third
parties, and the Seller will use its reasonable best efforts to obtain any third
party consents, that the Buyer may request in connection with the matters
pertaining to the Acquired Assets and/or the Assumed Liabilities disclosed or
required to be disclosed in the Disclosure Schedule. Each of the Parties will
take any additional action that may be reasonably necessary, proper, or
advisable in connection with any other notices to, filings with, and
authorizations, consents, and approvals of government agencies, and third
parties that it may be required to give, make, or obtain. Without limiting the
generality of the foregoing, the Seller will use its reasonable best efforts to
obtain the required consents of the landlords of the Division to the assignments
to the Buyer of the leases for the Division; and the Seller agrees to pay any
and all reasonable charges or costs imposed by any of such landlords in
connection with obtaining such consents.
(c) OPERATION OF BUSINESS. In connection with the Acquired Assets,
the Seller will not engage in any practice, take any action, embark on any
course of inaction, or enter into any transaction outside the Ordinary Course of
Business.
(d) PRESERVATION OF BUSINESS. In connection with the Acquired Assets
and the Assumed Liabilities, the Seller will keep its business substantially
intact, including its present operations, physical facilities, working
conditions, and relationships with lessors, licensors, suppliers and employees.
(e) PAYMENT OF DEBTS AND OBLIGATIONS OF THE DIVISION. Except for the
Assumed Liabilities or otherwise as agreed by the Buyer, all debts and
obligations of the Division or of the Seller related to the Acquired Assets
shall be paid or provided for prior to the Closing.
(f) FULL ACCESS. The Seller will permit representatives of the Buyer
to have full access at all reasonable times, and in a manner so as not to
interfere with normal business operations of the Seller, to all premises,
properties, books, records, contracts, Tax records, and documents of the Seller
pertaining to the Acquired Assets and the Assumed Liabilities.
(g) NOTICE OF DEVELOPMENTS. The Seller will give prompt written
notice to the Buyer of (i) any material developments affecting the Acquired
Assets or Assumed Liabilities and (ii) any occurrence or event rendering any of
the Seller's representations and warranties in Section 4 of this Agreement
inaccurate, incorrect or incomplete in any material respect. The Buyer will
give prompt written notice to the Seller of (A) any materially adverse
developments affecting the assets, Liabilities, business, financial condition,
operations, results of operations or future prospects of the Buyer and (B) any
occurrence or event rendering any of the Buyer's representations and warranties
inaccurate, incorrect or incomplete in any material respect. Each Party will
give prompt written notice to the other of any material development affecting
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the ability of the Parties to consummate the transactions contemplated by this
Agreement. No disclosure by any Party pursuant to this Section 6(f), however,
shall be deemed to amend or supplement the Disclosure Schedule or to prevent or
cure any misrepresentation, breach of warranty, or breach of covenant.
(h) EXCLUSIVITY. Prior to the Closing, the Seller will not
(i) solicit, initiate, or encourage the submission of any proposal or offer from
any person relating to any (A) liquidation, dissolution, or recapitalization,
(B) merger or consolidation, (C) acquisition or purchase of securities or
assets, or (D) similar transaction or business combination involving the
Division or (ii) participate in any discussions or negotiations regarding,
furnish any information with respect to, assist or participate in, or facilitate
in any other manner any effort or attempt by any person to do or seek any of the
foregoing. The Seller will notify the Buyer immediately if any person makes any
proposal, offer, inquiry, or contact with respect to any of the foregoing.
(i) FOREIGN PERSON AFFIDAVIT. The Seller shall, upon request of the
Buyer, furnish to the Buyer on or before Closing a sworn Affidavit stating under
penalty of perjury that Seller is not a "foreign person" as such term is defined
in Section 1445(f)(3) of the Code or such other evidence that the Buyer is not
required to withhold taxes from the Purchase Price as the Buyer may reasonably
determine to meet the requirements of Sections 1445(b)(4) and 1445(b)(5) of the
Code.
7. CONDITIONS TO OBLIGATION TO CLOSE.
(a) CONDITIONS TO OBLIGATION OF THE BUYER. The obligation of the
Buyer to consummate the transactions to be performed by it in connection with
the Closing is subject to satisfaction of each and all of the following
conditions (PROVIDED, HOWEVER, that the Buyer may waive any condition specified
in this Section 7(a) if it executes a writing so stating at or prior to the
Closing):
(i) each of the representations and warranties of the Seller set
forth in Section 4 above shall be true and correct in all material respects at
and as of the Closing Date;
(ii) the Seller shall have performed and complied with all of its
covenants hereunder in all material respects through the Closing;
(iii) no Adverse Consequence shall be pending or threatened,
wherein an unfavorable determination would (A) prevent consummation of any of
the transactions contemplated by this Agreement, (B) cause any of the
transactions contemplated by this Agreement to be rescinded following
consummation, or (C) affect adversely the right of the Buyer to own, operate, or
control the Acquired Assets, except where such adverse determination as to
clause (C) would not constitute a Material Adverse Effect;
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(iv) the Seller shall have delivered to the Buyer a certificate
(without qualification as to knowledge or materiality or otherwise, except as to
Section 7(a)(iii), which may be qualified to the Knowledge of the Seller) to the
effect that each of the conditions specified above in clauses (i)-(iii) of
Section 7(a) is satisfied in all respects;
(v) the Seller shall have delivered to the Buyer a current UCC-1
search profile that may affect or relate to any of the Acquired Assets as of the
Closing Date;
(vi) consents shall have been received from the respective
landlords of the Division to the assignments to the Buyer of substantially all
of the respective leases for the Division, on terms and conditions that are
reasonably satisfactory to the Buyer;
(vii) each Party hereto shall have executed and delivered to the
other Party an Allocation Schedule reasonably acceptable to the Buyer;
(viii) the Seller's Board of Directors shall have approved the
transactions contemplated by this Agreement; and
(ix) all actions to be taken by the Seller in connection with
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the transactions
contemplated hereby shall be reasonably satisfactory in form and substance to
the Buyer.
(b) CONDITIONS TO OBLIGATIONS OF THE SELLER. The obligation of the
Seller to consummate the transactions to be performed by it in connection with
the Closing is subject to satisfaction of the following conditions (PROVIDED,
HOWEVER, that the Seller may waive any condition specified in this Section 7(b)
if it executes a writing so stating at or prior to the Closing:
(i) the Seller shall have duly received the Second Deposit, in
the form of cash, a cashier's or certified check, or a wire transfer in
accordance with the Seller's instructions, and the funds comprising the Second
Deposit shall have been cleared by the Seller's bank and duly credited to it;
(ii) each of the representations and warranties of the Buyer set
forth in Section 5 above shall be true and correct in all material respects at
and as of the Closing Date;
(iii) the Buyer shall have performed and complied with all of its
covenants hereunder in all material respects through the Closing;
(iv) no Adverse Consequence shall be pending or threatened,
wherein an unfavorable determination would (A) prevent consummation of any of
the transactions contemplated by this Agree-
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ment or (B) cause any of the transactions contemplated by this Agreement to
be rescinded following consummation;
(v) the Buyer shall have delivered to the Seller a certificate
(without qualification as to knowledge or materiality or otherwise, except as to
Section 7(b)(iv), which may be qualified to the Knowledge of the Buyer) to the
effect that each of the conditions specified above in clauses (i)-(iv) of
Section 7(b)is satisfied in all respects;
(vi) the Board of Directors of the Buyer shall have approved the
transactions contemplated by this Agreement;
(vii) none of the landlords of the Seller shall have imposed
unreasonable costs or terms in connection with its consent to the Acquisition;
(viii) each Party hereto shall have executed and delivered to the
other Party an Allocation Schedule reasonably acceptable to the Seller; and
(ix) all actions to be taken by the Buyer in connection with
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments and other documents required to effect the transactions
contemplated hereby will be reasonably satisfactory in form and substance to the
Seller.
8. TERMINATION.
(a) TERMINATION OF AGREEMENT. The Parties may terminate this
Agreement as provided below.
(i) the Buyer and the Seller may terminate this Agreement by
mutual written consent at any time prior to the Closing.
(ii) The Buyer may terminate this Agreement
(A) by giving written notice to the Seller at any time
prior to the Closing if the Seller is in breach of any representation, warranty,
or covenant contained in this Agreement in any material respect and fails to
cure such breach within five (5) calendar days of notice thereof from the Buyer;
PROVIDED, HOWEVER, that if the Buyer does not terminate this Agreement because
of any disclosed breach by the Seller and chooses to consummate the transactions
contemplated by this Agreement, then the Buyer shall be deemed to have waived
such disclosed breach for the purposes of this Agreement; or
(B) by giving written notice to the Seller at any time prior
to the Closing if the Closing shall not have occurred on or before the 3Oth day
following the date of this Agreement by reason of the failure of any unwaived
condition precedent under Section 7(a) hereof (unless the failure results
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primarily from the Buyer itself breaching any representation, warranty, or
covenant contained in this Agreement);
(iii) The Seller may terminate this Agreement
(A) by giving written notice to the Buyer at any time prior
to the Closing if the Buyer is in breach of any representation, warranty, or
covenant contained in this Agreement in any material respect and fails to cure
such breach within five (5) calendar days of notice thereof from the Seller;
PROVIDED, HOWEVER, that if the Seller does not terminate this Agreement because
of any disclosed breach by the Buyer and chooses to consummate the transactions
contemplated by this Agreement, then the Seller shall be deemed to have waived
such disclosed breach for the purposes of this Agreement; or
(B) by giving written notice to the Buyer at any time prior
to the Closing if the Closing shall not have occurred on or before the 30th day
following the date of this Agreement by reason of the failure of any unwaived
condition precedent under Section 7(b) hereof (unless the failure results
primarily from the Seller itself breaching any representation, warranty, or
covenant contained in this Agreement).
(b) EFFECT OF TERMINATION. If any Party terminates this Agreement
pursuant to Section 8(a) above, all obligations of the Parties hereunder shall
terminate (except as otherwise provided in Section 2 hereof), without any
Liability of any Party to any other Party (except for any Liability of any Party
then in breach).
9. INDEMNIFICATION.
(a) OBLIGATION OF THE SELLER TO INDEMNIFY. The Seller hereby
indemnifies and holds harmless the Buyer and the Buyer's directors, officers,
employees, and agents in respect of any and all Adverse Consequences incurred by
Buyer in connection with each and all of the following; PROVIDED, HOWEVER, that
such indemnification (A) shall be limited in aggregate amount to the outstanding
principal balance of the Note at the time the Notice described in paragraph (c),
below, is delivered, and (B) shall not be available for the first $10,000 (in
the aggregate) as to which the Buyer would otherwise be entitled to
indemnification in the aggregate hereunder:
(i) Any misrepresentation or breach of any warranty made by the
Seller in this Agreement or in any Schedule, Exhibit, or other document attached
hereto or delivered to the Buyer by the Seller or any officer of the Seller in
connection with the transactions contemplated hereby.
(ii) The breach of any covenant, agreement, or obligation of the
Seller contained in this Agreement or any Schedule or Exhibit hereto or any
other instrument specifically contemplated by this Agreement.
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(iii) Any misrepresentation contained in any statement in writing
or certificate furnished by an officer of the Seller pursuant to this Agreement
or in connection with the transactions contemplated by this Agreement.
(iv) Unless and to the extent they are Assumed Liabilities, any
unpaid liability, obligation, or claim for Taxes owed by the Seller which could
affect or constitute a lien or claim with respect to the Acquired Assets with
respect to any period ending on or before the Closing Date.
(v) Any misrepresentation in or omission from any list, Schedule,
Exhibit, certificate or other instrument required to be furnished or
specifically contemplated to have been furnished pursuant to this Agreement to
the Buyer or its authorized representatives.
(vi) Unless and to the extent they are Assumed Liabilities, any
and all payments due and owing by the Seller to its employees who leave the
Seller's employ and become employees of the Buyer with respect to periods of
employment up to the Closing insofar as such payments relate to salary, bonuses,
compensation, vacation pay, sick leave, retirement benefits and/or fringe
benefits as shown on the various employee benefit plans which the Seller
currently maintains and any other forms of remuneration owed by the Seller to
its employees.
(vii) Any other liability arising out of or related to the
operation of the business of the Division prior to the Closing Date, except for
and to the extent of the Assumed Liabilities.
(b) OBLIGATIONS OF THE BUYER. The Buyer hereby indemnifies and holds
harmless the Seller in respect of any and all Adverse Consequences incurred by
the Seller in connection with each and all of the following:
(i) Any misrepresentation or breach of any warranty made by the
Buyer in this Agreement or in any Schedule, Exhibit, or other document attached
hereto or delivered to the Seller by the Buyer or any officer of the Buyer in
connection with the transactions contemplated hereby.
(ii) The breach of any covenant, agreement, or obligation of the
Buyer contained in this Agreement or any Schedule or Exhibit hereto or any other
instrument specifically contemplated by this Agreement.
(iii) Any misrepresentation contained in any statement in writing
or certificate furnished by an officer of the Buyer pursuant to this Agreement
or in connection with the transactions contemplated by this Agreement.
(iv) The failure to pay or perform any of the Assumed
Liabilities.
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(v) Any other liability arising out of or related to the
operation of the business of the Division on or after the Closing Date.
(c) METHOD OF ASSERTING CLAIMS FOR INDEMNIFICATION. Whenever any
claims shall arise for indemnification hereunder, the party seeking
indemnification (the "Indemnitee") shall promptly notify the other party (the
"Indemnitor") of the claim and, when known, the facts constituting the basis for
such claim. If any claim for indemnification hereunder results from or is in
connection with any claim or Adverse Consequence by a person who is not a party
to this Agreement (the "Third-Party Claim"), such notice shall also specify, if
known, the amount or an estimate of the amount of the liability arising
therefrom. The Indemnitee shall give the other party prompt notice of any such
claim and the Indemnitor shall undertake the defense thereof by representatives
of its own choosing, reasonably satisfactory to the Indemnitee, at the expense
of the Indemnitor. The Indemnitee shall have the right to participate in any
such defense of a Third-Party Claim with advisory counsel of its own choosing,
at its own expense. If the Indemnitor fails to defend within a reasonable time
after notice of any such Third-Party Claim, the Indemnitee or any subsidiary or
affiliate of the Indemnitee shall have the right to undertake the defense,
compromise, or settlement of such Third-Party Claim on behalf and for the
account of the Indemnitor, at the Indemnitor's expense and risk. The Indemnitor
shall not, without the Indemnitee's written consent, settle or compromise any
such ThirdParty Claim or consent to entry of any judgment that does not include,
as an unconditional term thereof, the giving by the claimant or the plaintiff to
Indemnitee of an unconditional release from all liability in respect of such
Third-Party Claim. Notwithstanding any provision herein to the contrary,
failure of Indemnitee to give any notice required by this Section shall not
constitute a waiver of Indemnitee's right to indemnification or a defense to any
claim by Indemnitee hereunder.
(d) MEANS OF INDEMNIFICATION. All indemnification hereunder shall be
effected upon demand as follows:
(i) if the Buyer is the Indemnitor, by prompt payment of cash,
delivery of a cashier's check or wire transfer in the amount of the
indemnification liability, or
(ii) if the Seller is the Indemnitor, (A) first by reduction of
the principal balance of the Note, and (B) to the extent that the remaining
principal balance of the Note is less than the Seller's indemnification
obligation hereunder, by prompt payment of cash, delivery of a cashier's check,
or wire transfer in the amount of the balance of the Buyer's indemnification
liability.
(e) SURVIVAL OF RIGHTS TO INDEMNIFICATION.
(i) The indemnities contained herein shall survive the Closing
for a period of six (6) months after the Closing Date.
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(ii) In addition to the foregoing provision of this paragraph
(e), and notwithstanding anything else in this Agreement to the contrary, the
Seller shall remain liable with respect to any Adverse Consequence, whether or
not asserted or commenced, relating to the Acquired Assets which has arisen
prior to the Closing Date; PROVIDED that, as to any such Adverse Consequence as
to which the Buyer first obtains knowledge after the Closing Date, the Seller
receives written notice of such Adverse Consequence promptly after the Buyer has
knowledge thereof; and PROVIDED, FURTHER, that, as to each such Adverse
Consequence, the Seller has complete and exclusive authority to investigate,
process, defend and settle such Adverse Consequence.
10. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All of the
representations and warranties of the respective parties contained in this
Agreement shall survive the Closing for a period of six (6) months after the
Closing Date.
11. MISCELLANEOUS.
(a) NOTICES.
(i) All notices or other communications required or permitted
hereunder shall be in writing and shall be deemed to have been duly given if
delivered in person or sent by overnight delivery, confirmed telecopy or prepaid
first class registered or certified mail, return receipt requested, to the
following addresses, or such other addresses as are given to the other parties
to this Agreement in the manner set forth herein:
(A) If to the Buyer, to:
The Good Food Fast Companies
C/o Pacific Culinary Capital
1280 Bison Street, Suite B9-243
Newport Beach, CA 92660
Attn.: Christopher A. Wheeler, President
Telephone Number: (714) 444-4939
Telecopier Number: (714) 444-4952
With a courtesy copy to:
Barry Falk, Esq.
Jeffers, Wilson & Shaff, LLP
18881 Von Karman Avenue, Suite 1400
Irvine, CA 92612
Telephone Number: (714) 660-7700
Telecopier Number: (714) 660-7799
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(B) If to the Seller, to:
Java Centrale, Inc.
1610 Arden Way, Suite 145
Sacramento, California 95815
Attn.: Steven J. Orlando
Telephone Number: (916) 568-2310
Telecopier Number: (916) 568-6446
with a courtesy copy to:
Philip S. Boone, Jr., Esq.
C/o Rosenblum, Parish & Isaacs, PC
555 Montgomery Street, 15th Floor
San Francisco, California 94111
Telephone Number: (415) 421-8232
Telecopier Number: (415) 397-5383
(ii) Any such notices shall be effective when delivered in person
or sent by telecopy, one business day after being sent by overnight delivery or
three (3) business days after being sent by registered or certified mail. Any
of the foregoing addresses may be changed by giving notice of such change in the
foregoing manner, except that notices for changes of address shall be effective
only upon receipt.
(b) FURTHER ASSURANCES. At any time, and from time to time, each
Party will execute such additional instruments and take such action as may be
reasonably requested by the other Party to confirm or perfect title to any
property transferred hereunder or otherwise to carry out the intent and purposes
of this Agreement.
(c) COSTS AND EXPENSES. The Buyer agrees to pay its own costs and
expenses incurred in negotiating this Agreement and consummating the
transactions described herein.
(d) TIME. Time is of the essence in the performance of this
Agreement.
(e) ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement between the parties hereto with respect to the subject matter hereof.
It supersedes all prior negotiations, letters and understandings relating to the
subject matter hereof.
(f) AMENDMENT. This Agreement may not be amended, supplemented or
modified in whole or in part except by an instrument in writing signed by the
party or parties against whom enforcement of any such amendment, supplement or
modification is sought.
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(g) ASSIGNMENT. Except as provided in Section 5(y), above, this
Agreement may not be assigned by any party hereto without the prior written
consent of the other party.
(h) CHOICE OF LAW. This Agreement will be interpreted, construed and
enforced in accordance with the internal laws of the State of California,
without reference to the choice of laws provisions thereof.
(i) HEADINGS. The section and subsection headings in this Agreement
are inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(j) NUMBER AND GENDER. Words used in this Agreement, regardless of
the number and gender specifically used, shall be deemed and construed to
include any other number, singular or plural, and any other gender, masculine,
feminine or neuter, as the context indicates is appropriate.
(k) CONSTRUCTION. The parties hereto and their respective legal
counsel participated in the preparation of this Agreement; therefore, this
Agreement shall be construed neither against nor in favor of any of the parties
hereto, but rather in accordance with the fair meaning thereof.
(l) EFFECT OF WAIVER. The failure of any party at any time or times
to require performance of any provision of this Agreement will in no manner
affect the right to enforce the same. The waiver by any party of any breach of
any provision of this Agreement will not be construed to be a waiver by any such
party of any succeeding breach of that provision or a waiver by such party of
any breach of any other provision.
(m) SEVERABILITY. The invalidity, illegality or unenforceability of
any provision or provisions of this Agreement will not affect any other
provision of this Agreement, which will remain in full force and effect, nor
will the invalidity, illegality or unenforceability of a portion of any
provision of this Agreement-affect the balance of such provision. In the event
that any one or more of the provisions contained in this Agreement or any
portion thereof shall for any reason be held to be invalid, illegal or
unenforceable in any respect, this Agreement shall be reformed, construed and
enforced as if such invalid, illegal or unenforceable provision had never been
contained herein.
(n) ENFORCEMENT.
(i) Should it become necessary for any party to institute legal
action, or arbitration as provided in clause (iii) of this paragraph (n), to
enforce the terms and conditions of this Agreement, the successful party will be
awarded reasonable attorneys' fees at all trial and appellate levels, expenses
and costs.
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(ii) The parties hereto acknowledge and agree that any party's
remedy at law for a breach or threatened breach of any of the provisions of this
Agreement would be inadequate and such breach or threatened breach shall be per
se deemed as causing irreparable harm to such party. Therefore, in the event of
such breach or threatened breach, the parties hereto agree that, in addition to
any available remedy at law, including but not limited to monetary damages, an
aggrieved party, without posting any bond, shall be entitled to obtain, and the
offending party agrees not to oppose the aggrieved party's request for,
equitable relief in the form of specific enforcement, temporary restraining
order, temporary or permanent injunction, or any other equitable remedy that may
then be available to the aggrieved party.
(iii) Any dispute, controversy, or matter arising under this
Agreement (other than disputes which properly fall within the jurisdiction of a
small claims court) shall be resolved by binding arbitration, conducted in San
Francisco, California, pursuant to the rules of commercial arbitration of the
American Arbitration.
(o) BINDING NATURE. This Agreement will be binding upon and will
inure to the benefit of any successor or successors of the parties hereto.
(p) NO THIRD-PARTY BENEFICIARIES. No person shall be deemed to
possess any third-party beneficiary right pursuant to this Agreement. It is the
intent of the parties hereto that no direct benefit to any third party is
intended or implied by the execution of this Agreement.
(q) COUNTERPARTS. This Agreement may be executed in one or more
counterparts, including electronically transmitted counterparts, each of which
will be deemed an original and all of which together will constitute one and the
same instrument.
(r) PRESS RELEASES AND ANNOUNCEMENTS. Neither of the Parties shall
make any public disclosure or press release concerning the subject matter of
this Agreement without the prior consent of the other. In each such instance,
such consent shall not be unreasonably withheld. Notwithstanding the foregoing,
the Seller
[THIS SPACE INTENTIONALLY LEFT BLANK]
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shall be permitted to make such public disclosure without such consent if its
counsel deems such disclosure necessary to comply with applicable federal and/or
state laws.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on as
of the date first above written.
SELLER: JAVA CENTRALE, INC.
a California corporation
By:_____________________________________
Gary C. Nelson
Its President
BUYER: THE GOOD FOOD FAST COMPANIES
a Nevada corporation
By:_____________________________________
Christopher A. Wheeler
Its President
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