UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): May 1, 1996
BAB Holdings, Inc.
(Name of small business issuer in its charter)
Illinois 0-27068 36-3857339
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
8501 West Higgins Road, Suite 320, Chicago, Illinois 60631
(Address of principal executive offices) Zip Code)
Issuer's telephone number (312) 380-6100
(Former name, former address and former fiscal year,
if changed since last report.)
TABLE OF CONTENTS
Page
Item 1. Changes in Control of Registrant.................................. 1
Item 2. Acquisition or Disposition of Assets.............................. 1
Item 3. Bankruptcy or Receivership........................................ 1
Item 4. Changes in Registrant's Certifying Accountant..................... 1
Item 5. Other Events...................................................... 2
Item 6. Resignation of Registrant's Directors............................. 2
Item 7. Financial Statements and Exhibits................................. 2
Item 8. Change in Fiscal Year............................................. 2
SIGNATURE 2
INDEX TO EXHIBITS............................................................ 3
ITEM 1. CHANGES IN CONTROL OF REGISTRANT
Not applicable.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On May 1, 1996, BAB Systems, Inc. (Systems), a wholly owned subsidiary
of BAB Holdings, Inc. (Holdings or the Company), exercised its option to
purchase substantially all of the assets of Bagels Unlimited, Inc. (BUI), a
Wisconsin corporation. This option was acquired in January 1996 in connection
with a revolving line of credit extended to BUI by Systems. BUI, a franchisee of
Systems, was engaged in the business of owning and operating five Big Apple
Bagels stores and had the development rights for one additional store in the
Milwaukee, Wisconsin area.
The assets acquired by Systems included all inventory, furniture,
equipment, signage and improvements of the five Big Apple Bagels stores in
operation. Additionally, Systems acquired all franchise and area development
rights and other contractual rights owned by BUI, including BUI's interest in
the leases for the five existing stores and the lease for the sixth store which
is currently under construction.
The purchase of assets was completed in exchange for the following
consideration: (a) approximately $643,000 representing the original purchase
price of $772,000, adjusted for the outstanding principal and interest owed on
the January 31, 1996 revolving line of credit issued by Systems to BUI,
(excluding monies borrowed in connection with the development of the fifth Big
Apple Bagels store which opened in April 1996) and BUI's inventory on hand at
cost, (b) 50,000 shares of Holdings' common stock, no par value, and (c) an
option to purchase 100,000 shares of Holdings' common stock exerciseable for 5
years commencing on May 1, 1996 at a $4.00 per share price.
Additionally, Holdings entered into a non-competition agreement with
the two principals of BUI in exchange for total consideration of $100,000. Other
than their employment with Holdings or its affiliates, these two individuals
shall not be involved in the retail or wholesale sale of bagels within a four
mile radius of any existing franchised or Company-owned Big Apple Bagels store
for a period of 6 years from the closing of this transaction.
The Company financed this transaction using a portion of the net
proceeds from its November 27, 1995 initial public offering of securities.
Systems will be assigning its rights in the existing five Big Apple
Bagels stores and the sixth store which is in development to BAB Operations,
Inc., a wholly owned subsidiary of Holdings, which owns and operates
Company-owned stores. The acquired stores and related assets will continue to be
operated as Big Apple Bagels stores, but will be Company-owned rather than
franchised stores.
ITEM 3. BANKRUPTCY OR RECEIVERSHIP
Not applicable.
ITEM 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT
Not applicable.
ITEM 5. OTHER EVENTS
None.
ITEM 6. RESIGNATION OF REGISTRANT'S DIRECTORS
Not applicable.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
The financial statements of BUI do not conform to generally accepted
accounting principles. The principals of BUI have engaged independent
accountants to audit the balance sheet of BUI as of February 28, 1996 and the
related statements of operations, stockholders' equity and cash flows for the
two years then ended and to express an opinion thereon. The audited financial
statements of BUI and the pro forma financial information relative to BUI will
be filed under Form 8-K/A not later than July 12, 1996.
EXHIBITS
The following exhibits are filed herewith.
Exhibit
No. Description of Exhibit
10.17 Asset Purchase Agreement by and among BAB Systems, Inc., Bagels
Unlimited, Inc. and Donald Nelson and Mary Ann Varichak dated May 1,
1996 (without schedules)
10.18 Non Competition Agreement by and among BAB Holdings, Inc. and Donald
Nelson and Mary Ann Varichak dated May 1, 1996
10.19 Stock Option Agreement between BAB Holdings, Inc. and Bagels Unlimited,
Inc. dated May 1, 1996
10.20 Registration Rights Agreement between BAB Holdings, Inc. and Bagels
Unlimited, Inc. dated May 1, 1996
ITEM 8. CHANGE IN FISCAL YEAR
Not applicable.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
BAB HOLDINGS, INC.
Dated: May 15, 1996 By: /s/ Sally A. Sullivan
Sally A. Sullivan, Chief Financial Officer,
Treasurer and Secretary (Principal accounting
and financial officer)
INDEX
NUMBER DESCRIPTION PAGE #
10.17 Asset Purchase Agreement by and among BAB Systems, Inc.,
Bagels Unlimited, Inc. and Donald Nelson and Mary Ann
Varichak dated May 1, 1996 (filed without schedules and
exhibits)
10.18 Non Competition Agreement by and among BAB Holdings,
Inc. and Donald Nelson and Mary Ann Varichak dated May
1, 1996
10.19 Stock Option Agreement between BAB Holdings, Inc. and
Bagels Unlimited, Inc. dated May 1, 1996
10.20 Registration Rights Agreement between BAB Holdings, Inc. and Bagels
Unlimited, Inc. dated May 1, 1996
ASSET PURCHASE AGREEMENT
BY AND AMONG
BAB SYSTEMS, INC.,
BAGELS UNLIMITED, INC.
AND
DONALD NELSON AND MARY ANN VARICHAK
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C> <C>
ARTICLE 1 DEFINITIONS.......................................................................... 1
ARTICLE 2 PURCHASE OF CERTAIN ASSETS; LIMITED ASSUMPTION OF
LIABILITIES.......................................................................... 1
2.1 Purchase of Assets................................................................... 1
2.2 Excluded Assets...................................................................... 3
2.3 Purchase Price; Payment for Purchased Assets......................................... 3
2.4 Limited Assumption of Liabilities.................................................... 4
2.5 Allocation of Purchase Price......................................................... 4
2.6 Proration of Payments................................................................ 4
ARTICLE 3 CLOSING.............................................................................. 5
3.1 Closing Date......................................................................... 5
ARTICLE 4 ADDITIONAL COVENANTS................................................................. 5
4.1 Pre-Closing Covenants................................................................ 5
4.2 Non-Competition Agreements........................................................... 6
4.3 Employees and Employee Benefits...................................................... 6
4.4 Seller to Change Corporate Name...................................................... 7
4.5 Access to Records.................................................................... 7
4.6 Registration Rights.................................................................. 7
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF SELLER AND
PRINCIPALS........................................................................... 7
5.1 Organization and Good Standing of Seller............................................. 7
5.2 Authorization of Agreement and Enforceability........................................ 7
5.3 Effect of Agreement.................................................................. 8
5.4 Government and Other Consents........................................................ 8
5.5 Financial Statements and Financial Performance....................................... 8
5.6 Commitments.......................................................................... 9
5.7 Tax Matters.......................................................................... 9
5.8 Title to Purchased Assets; Absence of Liens and Encumbrances, Etc.................... 9
5.9 Condition of Purchased Assets........................................................ 10
5.10 Intellectual Property................................................................ 10
5.11 Environmental Matters................................................................ 10
5.12 Insurance............................................................................ 11
5.13 Permits, Licenses, Compliance with Laws.............................................. 11
5.14 Ownership of Seller.................................................................. 11
5.15 Litigation........................................................................... 11
5.16 Books and Records.................................................................... 12
5.17 Labor Matters........................................................................ 12
5.18 Employee Benefits.................................................................... 12
5.19 Employees............................................................................ 12
5.20 Absence of Certain Changes or Events................................................. 12
5.21 No Brokers........................................................................... 13
5.22 Other Information.................................................................... 13
ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF BUYER.............................................. 13
6.1 Organization and Good Standing of Buyer.............................................. 13
6.2 Authorization of Agreement and Enforceability........................................ 14
6.3 Effect of Agreement.................................................................. 14
6.4 Financial Statements and Financial Performance....................................... 14
6.5 Capitalization....................................................................... 14
6.6 Intellectual Property................................................................ 14
6.7 Environmental Matters................................................................ 15
6.8 Insurance............................................................................ 15
6.9 Permits, Licenses, Compliance with Laws.............................................. 15
6.10 Litigation........................................................................... 15
6.11 Labor Matters........................................................................ 16
6.12 Employee Benefits.................................................................... 16
6.13 Other Information.................................................................... 16
6.14 No Brokers........................................................................... 16
ARTICLE 7 CONDITIONS PRECEDENT TO CLOSING...................................................... 16
7.1 Conditions Precedent to the Obligations of Buyer to Proceed with
Closing.............................................................................. 16
7.2 Conditions Precedent to the Obligations of the Seller and the Principals
to Proceed with Closing.............................................................. 18
ARTICLE 8 SECURITIES DISCLOSURES REGARDING BAB SECURITIES...................................... 19
8.1 Unregistered Securities; Restrictions On Transfer.................................... 19
ARTICLE 9 TERMINATION.......................................................................... 20
9.1 Termination Prior to Closing......................................................... 20
ARTICLE 10 INDEMNIFICATION...................................................................... 20
10.1 Indemnification by Seller and the Principals......................................... 20
10.2 Indemnification by Buyer............................................................. 21
10.3 Limitation of Liability.............................................................. 21
10.4 Right of Setoff; No Waiver........................................................... 21
10.5 Third Party Claims................................................................... 22
ARTICLE 11 ARBITRATION.......................................................................... 22
11.1 In General........................................................................... 22
11.2 Discovery............................................................................ 22
ARTICLE 12 GENERAL.............................................................................. 22
12.1 Expenses............................................................................. 22
12.2 Survival of Representations and Warranties........................................... 23
12.3 No Third Party Beneficiaries......................................................... 23
12.4 Notices.............................................................................. 23
12.5 Further Assurances................................................................... 24
12.6 Entire Agreement..................................................................... 24
12.7 Headings............................................................................. 24
12.8 Counterparts......................................................................... 24
12.9 Governing Law........................................................................ 24
12.10 Severability......................................................................... 24
12.11 Amendments........................................................................... 24
12.12 Assignment........................................................................... 25
12.13 Successors and Assigns............................................................... 25
12.14 No Joint Venture..................................................................... 25
12.15 Construction of Agreement............................................................ 25
</TABLE>
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT ("AGREEMENT") is entered into effective
as of May 1, 1996, by and between BAB Systems, Inc., an Illinois corporation
("BUYER"), Bagels Unlimited, Inc., a Wisconsin corporation ("SELLER"), and
Donald Nelson and Mary Ann Varichak (collectively, the "PRINCIPALS"). Buyer,
Seller and Principals are referred to collectively as the "PARTIES."
RECITALS:
A. Seller is engaged in the business of owning and operating Big Apple
Bagels stores pursuant to franchise and area development agreements with BAB
Systems, Inc., which is an affiliate of Buyer, in the Milwaukee, Wisconsin area
(the "BUSINESS").
B. Seller desires to sell, and Buyer desires to buy certain assets
related to the Business upon the terms and conditions set forth in this
Agreement.
C. The Principals collectively own all of the outstanding capital stock
of the Seller and desire that Buyer purchase certain assets from Seller and also
desire to enter into certain other agreements with Buyer on the terms and
conditions set forth herein.
AGREEMENTS:
NOW THEREFORE, in consideration of the foregoing Recitals and the
mutual agreements, covenants, representations, and warranties contained in this
Agreement, the receipt and sufficiency of which are acknowledged, the Parties
agree as follows:
ARTICLE 1
DEFINITIONS
Unless otherwise defined in this Agreement, capitalized terms used
herein shall have the meaning set forth in the attached Schedule 1 which is
incorporated by reference in this Agreement.
ARTICLE 2
PURCHASE OF CERTAIN ASSETS; LIMITED ASSUMPTION
OF LIABILITIES
2.1 PURCHASE OF ASSETS. On the terms and subject to the conditions of
this Agreement, Buyer shall purchase from Seller, and Seller shall sell, assign,
transfer, convey and deliver to Buyer, at Closing, all of the properties and
assets of Seller related to, derived from, or used in the operation of the
Business, wherever located, excepting only the Excluded Assets (the "PURCHASED
ASSETS"). The Purchased Assets shall specifically include, without limitation,
the following:
(a) all furniture, fixtures, equipment, shelving, displays,
signs, computer equipment and accessories, supplies, packaging
materials, raw materials, tools and other tangible personal property of
Seller, whether now owned or acquired between the date of this
Agreement and the Closing Date;
(b) all good and saleable inventory of coffee, bagels and
cream cheese, bagel and cream cheese ingredients, and other products
sold at the Stores ("INVENTORY");
(c) all of Seller's right, title and interest under the supply
contracts, utility contracts, equipment leases and other arrangements
with vendors relating to, derived from or used in the operation of the
Business to the extent assignable, including, without limitation, the
contents and arrangements identified on the attached Schedule 2.1(c)
(the "ASSIGNED CONTRACTS");
(d) all intellectual property developed and owned by Seller or
Principals and related to, derived from or used in the operation of the
Business (the "INTELLECTUAL PROPERTY"), including, without limitation,
(i) any and all trade names, trademarks, service names, service marks,
copyrights, private labels, logos or designs, whether registered or
not, related to, derived from or used in connection with the Business;
and (ii) all other knowledge, information, know-how, patents,
processes, procedures, devices, techniques, programs, software,
creations, methods, formulas, designs, drawings, and technical
information related to, derived from or used in the operation of the
Business.
(e) all books, records and documents of Seller related to,
derived from or used in the operation of the Business, including,
without limitation, all customer lists, supplier lists, price lists,
telephone numbers and listings, advertising materials and marketing
plans, business files, regulatory files and approvals, business plans,
financial data, operations manuals, repair or service manuals, fire,
safety or environmental reports and all data related to inventory,
sales and accounts receivable and similar books and records related to
the Business;
(f) all permits, licenses, orders, consents and approvals of
any governmental or regulatory authority related to the operation of
the Business, to the extent assignable (the "LICENSES AND PERMITS");
(g) all prepaid fees, charges and deposits for which Buyer
compensates Seller in accordance with Section 2.6;
(h) all of Seller's interest in and rights to the six (6) Big
Apple Bagels stores (the "STORES") and the leases for such Stores (the
"LEASES"), as set forth on the attached Schedule 2.1(h);
(i) all franchise agreements, licenses, and development
agreements related to the Stores or the Business;
(j) all accounts and notes receivable; and
(k) all other assets, properties, claims and rights of Seller,
which are not part of the Excluded Assets, that are related to, derived
from or used in the operation of the Business.
2.2 EXCLUDED ASSETS. The following assets of Seller (the "EXCLUDED
ASSETS") shall not be transferred to Buyer under this Agreement:
(a) all cash on hand and in bank accounts and the
consideration to be paid to Seller pursuant to this Agreement;
(b) any inventory or raw materials which are spoiled or
obsolete;
(c) any wastes located at the Stores;
(d) Seller's corporate charter, taxpayer and other
identification numbers, tax returns, corporate seals, corporate minute
books, stock ledgers and other documents of Seller relating to the
organization and existence of Seller as a corporation;
(e) Personal assets identified on the attached Schedule
2.2(e);
(f) Leased equipment identified on the attached Schedule
2.2(f); and
(g) Any claims or action of Seller against BAB arising prior
to the Closing Date and relating to the operation of the Business.
2.3 PURCHASE PRICE; PAYMENT FOR PURCHASED ASSETS.
(a) Purchase Price. The aggregate Purchase Price to be paid by
Buyer to Seller in consideration for the Purchased Assets (the
"PURCHASE PRICE") shall be (i) Seven Hundred Seventy-two Thousand Five
Hundred Dollars ($772,500), minus the sum of (A) the amount of all
liabilities assumed by Buyer pursuant to Section 2.4, (B) the amount of
any loans (principal and interest) outstanding from Buyer to Seller,
and (C) up to $20,000 to be withheld for payment by Buyer of the costs
of preparing Seller's Audited Financial Statements (as defined in
Section 5.5), plus the sum of (A) Seller's cost of the Inventory
existing on the Closing Date, and (B) costs of constructing, equipping,
and acquiring and installing signage of the Menomonee Falls Store,
which have been paid to date; (ii) 50,000 shares of the Common Stock,
no par value, of BAB Holdings, Inc. (the "BAB STOCK"); and (iii) an
option to purchase 100,000 shares of the Common Stock of BAB Holdings,
Inc. (the "BAB OPTION"), exercisable for a period of 5 years commencing
with the Closing Date at $4.00 per share in the form attached as
Exhibit 2.3.
(b) Payment of Purchase Price. The Purchase Price shall be
payable at the Closing in cash (or equivalent) in the amount determined
in accordance with 2.3(a)(i) and by delivery of the BAB Stock and BAB
Option, each issued in the name of Seller.
2.4 LIMITED ASSUMPTION OF LIABILITIES.
(a) Subject to the terms and conditions hereof, Buyer shall
assume at Closing the trade payables of Seller incurred in the normal
course of business operations.
(b) The actual amount of liabilities assumed pursuant to
Section 2.4(a) as of the Closing Date shall be set forth on a closing
statement to be agreed upon by the Parties prior to Closing and such
amount shall be used in the calculation of the Purchase Price under
Section 2.3(a). In the event that Buyer and Seller are unable to agree
upon such amount, such amount shall be determined by an independent
accountant mutually acceptable to Buyer and Seller.
(c) Except as expressly provided in this Section 2.4, Buyer
shall not assume any liabilities or obligations of Seller and Seller
shall be solely liable for and shall indemnify and hold Buyer harmless
against all liabilities and obligations arising from the ownership, use
and operation of the Business and the Purchased Assets prior to the
Closing Date, contingent or fixed, whether or not reflected on the
books and records of Seller.
2.5 ALLOCATION OF PURCHASE PRICE. Seller, Principals and Buyer agree
that they shall agree upon the allocation of the Purchase Price among the Assets
and upon the value of the non-cash consideration which is a part of the Purchase
Price and shall take no position inconsistent therewith for purposes of tax or
accounting.
2.6 PRORATION OF PAYMENTS. All real property, personal property and
similar taxes and installments of general and special assessments, if any, with
respect to the Purchased Assets shall be prorated on the basis of actual days
elapsed between the commencement of the relevant tax year and the Closing Date,
based on a 365-day year and the most recent tax statements or bills applicable
thereto. Any installment of rental payments with respect to the Leases, all
prepaid fees, charges and expenses incurred in the ordinary course of business,
and all utility or similar periodic charges incurred with respect to the
operations of the Stores which are payable with respect to the current period in
which the Closing Date occurs shall be prorated between Seller and Buyer on the
basis of actual days elapsed from the first day of the relevant period to the
Closing Date. Seller shall be responsible for all such taxes, payments and
charges allocable to the date of and all times prior to the Closing Date and
Buyer shall be responsible for all such taxes, payments and charges allocable to
all times after the Closing Date. In addition, Seller shall be entitled to all
revenues and shall pay all expenses related to the operation of the Business up
to and including the Closing Date. Notwithstanding the foregoing, in the event
that there is a year-end adjustment for rent, taxes, insurance or other charges
under any of the Leases, Seller or Principals shall promptly pay to Buyer a pro
rata share of the amount of such adjustment based on the actual days elapsed
from the first date of the relevant Lease year and the Closing Date. Nothing in
this Section 2.6 shall be construed to require Buyer to assume any obligations
related to the Business (including, without limitation, any obligations
requiring employees, payroll or employee benefits, except with respect to
employees who are hired by Buyer) other than the liabilities expressly assumed
pursuant to Section 2.4. Seller shall receive a credit for security deposits and
other deposits.
ARTICLE 3
CLOSING
3.1 CLOSING DATE. Subject to the conditions contained in this
Agreement, the closing of the transactions to be effected hereunder (the
"CLOSING") shall be held at the offices of Seller on May 1, 1996, or at such
other time and place or on such other date as shall be mutually agreed upon in
writing by Buyer and Seller (the actual date of such Closing is herein called
the "CLOSING DATE").
ARTICLE 4
ADDITIONAL COVENANTS
4.1 PRE-CLOSING COVENANTS. The Parties agree as follows with respect to
the period between execution of this Agreement and the Closing:
(a) General. Each of the Parties will use all reasonable best
efforts to take all actions, to do all things necessary, proper, or
advisable to consummate and make effective the transactions
contemplated by this Agreement (including, without limitation,
satisfying the conditions precedent to Closing).
(b) Due Diligence Matters. Seller shall make available to
Buyer and its advisors all such due diligence information, books and
records as Buyer may reasonably request in connection with Buyer's due
diligence investigation of the Business and the Purchased Assets, and
Seller shall provide Buyer with access to the Stores for purposes of
inspection and due diligence review.
(c) Continued Operations and Maintenance of Purchased Assets.
Seller and the Principals shall continue to operate the Business to the
best of their abilities in a manner consistent with the operations of
the Business prior to the date of this Agreement. Seller shall maintain
the books and records of the Business in the usual, regular and
ordinary manner on the basis consistent with prior periods. Seller
shall maintain the Purchased Assets in good repair, order and
condition, reasonable wear and use expected.
(d) Premises Clean-up. Prior to Closing, Seller shall clean up
the stores and any other Business premises and all wastes or other
Excluded Assets located at the stores and any other Business premises
shall be removed and properly disposed of by Seller in accordance with
all applicable laws.
(e) Notice of Developments/Risk of Loss. Seller will give
prompt written notice to Buyer of any material developments affecting
the Business. Seller shall bear the risk of loss as to any or all of
the Purchased Assets prior to Closing.
4.2 NON-COMPETITION AGREEMENTS. At Closing, the Principals shall each
execute and deliver a non-competition agreement mutually acceptable to Seller
and Buyer (collectively, the "NON-COMPETITION AGREEMENTS") in the form attached
hereto as Exhibit 4.2.
4.3 EMPLOYEES AND EMPLOYEE BENEFITS.
(a) Buyer may, but shall have no obligation to, offer
positions of employment to any of the employees or former employees of
Seller. Any particular offer of employment will be made solely at the
Buyer's discretion on terms and conditions established by Buyer.
Notwithstanding the foregoing, Buyer agrees that on the Closing Date it
will hire "substantially all" of Seller's "affected employees," as such
phrases are defined in Section 109.07 of the Wisconsin Statutes and the
regulations issued thereunder. Further, Buyer agrees that it will hire
a sufficient number of employees of Seller so as to ensure that no
notice is required to be given under the Worker Adjustment and
Retraining Notification Act, 29 U.S.C. ss. 2101 et seq.
(b) On the Closing Date, Seller shall terminate the employment
of any current employees who are not retained as employees by Buyer and
Seller shall be solely responsible for, and shall indemnify Buyer
against any contractual, unemployment, workers' compensation, sick pay,
vacation pay, severance pay, collective bargaining agreement, 401(k) or
pension obligations or other employment-related benefits, costs or
claims of any kind whatsoever which exist as of or prior to the Closing
Date with respect to such employees.
(c) Upon the request of Buyer, Seller shall provide full and
fair disclosure and access to and copies of all personnel files,
payroll and related employment records and full and fair disclosure of
information related to individual employee performance and conduct
consistent with the Americans with Disabilities Act and other
applicable laws.
4.4 SELLER TO CHANGE CORPORATE NAME. On the Closing Date, Seller shall
file an amendment to its articles of incorporation to change Seller's name to a
name that is dissimilar to its present name which does not contain the word
"Bagels." Following such name change, Seller shall not use the word "Bagels" in
any assumed names, trade names or service marks.
4.5 ACCESS TO RECORDS. Following Closing, Buyer shall have access to
and the right to make copies of, all of Seller's books and records that are part
of the Excluded Assets to the extent reasonably necessary for the operation of
the Business or the preparation of tax returns and financial statements of Buyer
following the Closing Date. Seller shall retain such excluded books and records
as required by all applicable laws. After the Closing, Seller and the Principals
shall have access to any records transferred to Buyer at Closing to the extent
reasonably necessary for the preparation of income tax returns.
4.6 REGISTRATION RIGHTS. At Closing, all of the Parties shall execute
and deliver a Registration Rights Agreement in the form attached hereto as
Exhibit 4.6 (the "REGISTRATION RIGHTS AGREEMENT") whereby Seller shall be
granted the right to include the BAB Stock and the Common Stock which may be
acquired upon exercise of the BAB Option in certain registration statements
which may be filed by BAB Holdings, Inc. under the Securities Act of 1933, as
amended.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF SELLER AND PRINCIPALS
Seller and the Principals, jointly and severally, represent, warrant,
covenant and agree with Buyer that the following representations and warranties
are true, correct and complete as of the date this Agreement and will be
reconfirmed and recertified (and updated, as necessary) so as to be true,
correct and complete as of the Closing Date:
5.1 ORGANIZATION AND GOOD STANDING OF SELLER. Seller is a corporation
duly organized, validly existing and in current status under the laws of the
State of Wisconsin. Seller has all requisite corporate power and authority,
licenses, permits and franchises to own, lease and operate its properties and
assets and to carry on the Business as currently conducted. Seller is qualified
and in good standing to do business as a foreign corporation in each
jurisdiction in which the property owned, leased or operated by it or the nature
of the business conducted by it makes such qualification necessary, except where
the failure to so qualify will not have a material adverse effect on the
Business or the Purchased Assets.
5.2 AUTHORIZATION OF AGREEMENT AND ENFORCEABILITY. Seller has full
corporate power and authority to execute and deliver this Agreement and the
Ancillary Documents and to perform its obligations under this Agreement and the
Ancillary Documents. Each of the Principals has the full power, authority and
legal capacity to execute this Agreement and the Ancillary Documents, and to
perform their respective obligations hereunder and thereunder. This Agreement
and the Ancillary Documents have been duly and validly authorized, executed and
delivered by Seller and the Principals, and constitute legal, valid and binding
obligations of Seller, enforceable against Seller and the Principals in
accordance with their respective terms.
5.3 EFFECT OF AGREEMENT. Neither the execution, delivery, and
performance of this Agreement or the Ancillary Documents by the Seller and the
Principals, nor the consummation by the Seller and the Principals of the
transactions contemplated hereby will (a) conflict with or result in a breach of
any provision of the articles of incorporation or bylaws of Seller, (b)
constitute or result in the breach of, conflict with or give rise to a right of
forfeiture, termination, cancellation or acceleration with respect to, any term,
condition or provision of, any note, bond, mortgage, indenture, license or other
contract or obligation to which Seller or any of the Principals is a party or by
which it or any of the Purchased Assets may be bound, except for such conflicts,
breaches or defaults as to which written waivers or consents shall have been
obtained on or prior to the Closing Date, or (c) violate in any material respect
any law, statute, regulation, judgment, order, writ, injunction, or decree
applicable to Seller, the Principals, the Business or any of the Purchased
Assets.
5.4 GOVERNMENT AND OTHER CONSENTS. No consent, order, authorization,
qualification, or approval of, or exemption by, or filing with any governmental,
public, or regulatory body or authority is required in connection with the
execution, delivery and performance by Seller or the Principals of this
Agreement or any Ancillary Document.
5.5 FINANCIAL STATEMENTS AND FINANCIAL PERFORMANCE. Schedule 5.5
contains copies of the unaudited compiled balance sheets and statements of
earnings for Seller, as of and for the years ended February 29, 1996 and
February 28, 1995 and a balance sheet and statement of earnings of the Seller,
as of and for the 12 month period ended February 29, 1996 and a statement of net
sales for the period of February 29, 1996 through March 31, 1996 (collectively,
the SELLER'S FINANCIAL STATEMENTS"). Not later than June 30, 1996, Seller shall
deliver to Buyer an audited balance sheet as of the close of Seller's most
recently completed fiscal year, and audited statements of income, cash flows,
and changes in stockholders equity for each of the two fiscal years preceding
the date of such audited balance sheet, accompanied by the report of an
independent certified public accountant acceptable to Buyer, plus unaudited
interim financial statements consisting of a balance sheet as of the end of
Seller's most recently completed fiscal quarter and statements of income and
cash flows for the interim period up to the date of such balance sheet and for
the comparable period of the preceding fiscal year (collectively, the "SELLER'S
AUDITED FINANCIAL STATEMENTS"). Except as set forth on Schedule 5.5, the
Seller's Financial Statements and the Seller's Audited Financial Statements have
been (or will be, as applicable) prepared in accordance with GAAP, and fairly
present the financial position and results of operations of Seller as of the
dates and for the periods indicated. No event has occurred since the date of the
Seller's Financial Statements which materially adversely affects the information
presented therein. Seller has, as of the date of the Seller's Financial
Statements, no liabilities or obligations (absolute or contingent) of a nature
not required or customarily reflected in financial statements or notes thereto
prepared in accordance with GAAP.
5.6 COMMITMENTS. Except as set forth in attached Schedule 5.6, Seller
is not a party to and neither the Seller nor the Purchased Assets is bound or
affected by, any (a) lease or sublease agreement relating to real or personal
property, (b) contract or assignment relating to the Intellectual Property, (c)
agreement or commitment for the purchase or sale of equipment or other capital
assets, goods, products, services, raw materials or supplies in excess of Five
Thousand and No/100 Dollars ($5,000.00), (d) employment agreement, collective
bargaining agreement or agreement with any labor union, (e) agreement with any
distributor, dealer, sales agent or sales representative, (f) agreement
guaranteeing, indemnifying or otherwise becoming liable for the obligations or
liabilities of another, (g) agreement for the borrowing or lending of money or
any agreement with any financial institution, including letters of credit and
performance bonds, (h) agreement granting any Person a lien, security interest
or mortgage on any of Seller' properties or assets, (i) joint venture or
partnership agreement with any other Person, (j) noncompetition, nondisclosure
or other agreement which restricts Seller or any of the Principals in the
conduct of the Business, or (k) other material agreement affecting the Purchased
Assets or the Business.
Correct and complete copies (or, where such arrangements are oral, true
and complete written summaries) of all such agreements and arrangements listed
on attached Schedule 5.6 (collectively referred to herein as the "COMMITMENTS"),
have been or will be delivered to Buyer for review prior to the Closing. Each of
the Commitments is now valid, binding and in full force and effect, enforceable
in accordance with its terms. Seller has fulfilled, or has taken all action
reasonably necessary to enable it to fulfill when due, all of its obligations
under the Commitments. There has not occurred any default by Seller or any event
which (with the lapse of time or the election of any Person other than Seller,
or both) will become a default, nor, to the knowledge of Seller, have there
occurred any default by any third party or any event which (with the lapse of
time or the election of Seller, or both) will become a default under any of the
Commitments. No waiver or indulgence has been granted by Seller or, to the
knowledge of Seller, by any of the other parties thereto related to the
Commitments.
5.7 TAX MATTERS. Each of the Seller and the Principals have timely
filed all federal, state, local and other tax and information returns as
required by law with regard to any income, sales, use, gross receipts, property,
employment and any other taxes, charges, levies or other assessments related to
the Business or the Purchased Assets (collectively, "TAXES"), and has paid all
Taxes shown as due on such returns. Each such return is true, correct and
complete, and Seller do not have or will not have any additional liability for
Taxes.
5.8 TITLE TO PURCHASED ASSETS; ABSENCE OF LIENS AND ENCUMBRANCES, ETC.
Seller have good and marketable title to the Purchased Assets. At Closing the
Purchased Assets shall be transferred to Buyer free and clear of all security
interests, claims, liens, mortgages, charges and encumbrances.
5.9 CONDITION OF PURCHASED ASSETS. All Purchased Assets have been
properly maintained in accordance with customary and prudent business practices
and are in good operating condition and repair, reasonable wear and tear
excepted. Seller have not received any notice to the effect that any of the
Stores are in violation of any applicable requirements of building codes, health
and safety laws or the Americans with Disabilities Act. To the knowledge of
Seller, each of the Stores, as currently used in the operation of the Business,
meet, in all material respects, all applicable requirements of building codes,
health and safety laws and the Americans with Disabilities Act.
5.10 INTELLECTUAL PROPERTY. Schedule 5.10 contains a list of all
Intellectual Property of the Seller. Seller have full ownership right, title and
interest in and to the Intellectual Property and to the best knowledge of Seller
and the Principals, the Intellectual Property constitutes valid and enforceable
rights of Seller. Neither Seller nor the Principals have received any notice and
have no reason to believe that the validity of the Intellectual Property or
Seller's interest therein can be or is being challenged by any third party.
Seller has not heretofore granted any licenses or conveyed any other rights or
interests to any of the Intellectual Property. To the best knowledge of Seller
and the Principals, the operation of the Business as currently conducted does
not infringe upon any patents or other intellectual property rights of any third
party. All trade names and trademarks used by Seller to identify its products
and services are protected by registration in the name of Seller on the
principal register in the United States Patent and Trademark Office, state
registrations and/or by rights in the United States accorded to Seller by virtue
of the common law.
5.11 ENVIRONMENTAL MATTERS.
(a) Seller has not received any notice from any governmental
agency or private or public entity advising that it is potentially
responsible for response costs or other costs with respect to a release
or threatened release of any Hazardous Substance and neither it nor to
Seller's knowledge its predecessors in interest with respect to the
Business have conducted activities which could reasonably be expected
to result in such a notice. No administrative, civil or criminal
actions, including without limitation third-party actions for personal
injury or property damage, are pending or threatened with respect to
Environmental Laws at the Stores or related to the Business. No
judgments, consent orders, consent decrees, stipulations, or other
restrictions have been entered or applied with respect to Environmental
Laws at the Stores or related to the Business. Seller have neither
received nor is aware of any governmental orders, notifications,
notices of violation, or requests for information relating to
environmental or health and safety conditions at or related to the
Stores or the Business, or is aware of any past or current violations
of any Environmental Law at the Stores or related to the Business or of
environmental conditions at the Stores or related to the Business. To
the best of Seller's knowledge, neither the operation of the Business,
either as currently conducted or conducted in the past at the Stores,
or at any other office space or other facility or real property owned,
leased, used or occupied by Seller, whether currently or at any time in
the past, or the use or occupation of the Stores violate nor have
violated any Environmental Laws.
(b) For purposes of this Agreement, (i) "ENVIRONMENTAL LAWS"
shall mean statute, law, ordinance or regulation of any federal, state,
county, local or foreign governmental authority relating to the
environment, including air, water or noise pollution, emissions or
discharges, the environment, public health, employee health, safety or
welfare, land use or the production, processing, distribution, use,
storage, labeling, handling, transportation, treatment or disposition
of any Hazardous Substance; and (ii) "HAZARDOUS SUBSTANCE" shall mean
asbestos, paints, solvents, ureaformaldehyde, polychlorinated
biphenyls, nuclear fuel or material, chemical waste, hazardous waste,
radioactive material, explosives, known carcinogens, petroleum products
and by-products and other dangerous, toxic, infectious or hazardous
pollutants, contaminants, chemicals, materials, wastes or substances
listed or identified in, or regulated by, any Environmental Laws.
5.12 INSURANCE. Seller carries worker's compensation insurance in at
least the amount required by law. The Seller has been covered during the three
year period ending on the Closing Date by insurance in scope, amount and
coverage customary and reasonable for the businesses in which it has engaged
during said three year period. Seller has not been refused any insurance nor has
its coverage been limited by any insurance carrier to which it has applied for
insurance during the last three years.
5.13 PERMITS, LICENSES, COMPLIANCE WITH LAWS. Seller has all permits,
licenses, orders, consents and approvals of federal, state, local or foreign
governmental or regulatory bodies that are required in order to permit Seller to
carry on the Business as currently conducted. Schedule 5.13 sets forth a correct
and complete list of all such permits, licenses, orders and approvals, all of
which are in full force and effect, and no suspension or cancellation of any of
them is threatened, and to Seller's knowledge, no cause exists for such
suspension or cancellation. The Business has been and is being conducted in
accordance and in compliance with all applicable federal, state, local or
foreign laws, codes, ordinances, rules and regulations, except for minor
violations which do not have a material adverse effect on the Business or the
Purchased Assets.
5.14 OWNERSHIP OF SELLER. The Principals collectively own, beneficially
and of record, of all of the issued and outstanding capital stock of Seller.
5.15 LITIGATION. There is no claim, action, suit, proceeding,
arbitration, investigation or inquiry pending before any federal, state, local,
or other court or governmental, administrative, or self-regulatory body or
agency, or any private arbitration tribunal, or to the knowledge of Seller
threatened against, Seller, the Business, or any of the Purchased Assets or the
transactions contemplated by this Agreement or the Ancillary Documents; nor is
there any basis for any such claim, action, suit, proceeding, arbitration,
investigation or inquiry. Seller is not in default under any order, license,
regulation or demand of any federal, state or local, or other court or
governmental, administrative or self-regulatory body or agency.
5.16 BOOKS AND RECORDS. All of the books of account and other financial
and corporate records of Seller have been made available to Buyer and its
representatives.
5.17 LABOR MATTERS. The Business is being operated in compliance with
all applicable domestic (federal, state, and local) and foreign laws respecting
employment and employment practices, terms and conditions of employment, and
wages and hours, and neither of the Seller has engaged in any unfair labor
practices, and has not discriminated on the basis of age or sex in its
employment conditions or practices. There is no unfair labor practice or age or
sex discrimination complaint against Seller pending before or, to the best of
Seller's knowledge, threatened before the National Labor Relations Board or any
other domestic (federal, state, or local) or foreign board, department,
commission, or agency. Seller is not a party to any collective bargaining
agreements.
5.18 EMPLOYEE BENEFITS. Seller has withheld all material amounts
required by law or agreement to be withheld from the wages or salaries of its
employees and is not liable for any arrears of wages or any taxes or penalties
for failure to comply with any of the foregoing. All accrued obligations of
Seller, whether arising by operation of law, by contract or by past custom, for
payments to trusts or other funds or to any governmental agency, with respect to
unemployment compensation, social security, pension or any other benefits for
employees of Seller, have been paid, or will have been paid prior to Closing,
and none of the foregoing has been rendered not due by reason of any extension,
whether at the request of Seller or otherwise. All reasonably anticipated
obligations of Seller (whether arising by operation of law, by contract, by past
custom or otherwise) for salaries, vacation and holiday pay, bonuses and other
forms of compensation which were payable to the employees of Seller will be paid
or payment will be adequately provided for prior to Closing. To the best of
Seller's knowledge, all of Seller's employee benefit plans are in full
compliance with the Employee Retirement Income Security Act of 1974 ("ERISA")
and other applicable laws. Seller has no pension, profit sharing, savings, stock
bonus and other deferred compensation plan established which is subject to the
requirements of ERISA, or any employer pension benefit plan to which Seller is
required to make or has made contributions.
5.19 EMPLOYEES. Schedule 5.19 attached hereto sets forth a correct and
complete list of the names of all persons currently employed by Seller
(including title and current salary). No employee of Seller is subject to any
employment, confidentiality, or noncompetition agreement or any agreement or
restriction of any kind that would impede in any way the ability of such
employee to carry out fully all activities of such employee in the furtherance
of the Business.
5.20 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as otherwise
indicated on Schedule 5.20, since December 31, 1995:
(a) There has not been any material adverse change, and the
Principals know of no fact, circumstance, event, occurrence,
contingency or condition which might reasonably be expected to result
in any material adverse change, whether or not in the ordinary course
of business and whether or not covered by insurance, in the Purchased
Assets or the Business of the Seller; and
(b) In general, the Business has been operated in all respects
in the ordinary course of business.
5.21 NO BROKERS. Neither Seller nor the Principals has entered into any
contract, arrangement or understanding with any person or firm which may result
in the obligation of Buyer to pay, or is aware of any claim or basis for any
claim for payment, of any finder's fees, brokerage or agent's commissions or
other like payments in connection with the negotiations leading to this
Agreement or the consummation of the transactions contemplated hereby.
5.22 OTHER INFORMATION. To the best knowledge of Seller and Principals,
none of the information and documents which have been or may be furnished by or
on behalf of the Seller or the Principals to Buyer, or to any of its
representatives, in connection with the transactions contemplated by this
Agreement, is or will be materially false or misleading or contains or will
contain any material misstatements of fact or omits or will omit any material
fact necessary to be stated in order to make the statements therein not
misleading, nor has Seller or the Principals withheld from Buyer any material
facts relating to the assets, property or business of Seller. If at any time
Seller or Principals become aware of facts or circumstances which would indicate
that any information or documents which have been furnished to Buyer are
materially incorrect or incomplete when furnished or as of the date of Closing,
Seller and Principals shall promptly advise Buyer, in writing, of such corrected
or additional information, or shall supply such corrected or additional
documents, as appropriate.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer (or its assignee, BAB Holdings, Inc., if appropriate) represents,
warrants, covenants and agrees with Seller and the Principals that the following
representations and warranties are true, correct and complete as of the date
hereof and will be true, correct and complete as of the Closing Date:
6.1 ORGANIZATION AND GOOD STANDING OF BUYER. Each of BAB Holdings, Inc.
and Buyer is a corporation duly organized, validly existing and in good standing
under the laws of the State of Illinois, and has all requisite corporate power
and authority make the representations, warranties and agreements made
hereunder, to own, lease and operate its properties and assets and to carry on
its business as currently conducted, to execute and deliver this Agreement, and
to perform its obligations under this Agreement. BAB Holdings, Inc. has all
requisite corporate power and authority to issue the BAB Stock and the BAB
Option.
6.2 AUTHORIZATION OF AGREEMENT AND ENFORCEABILITY. This Agreement and
the Ancillary Documents have been duly and validly authorized, executed and
delivered by Buyer and constitute the valid and legally binding obligations of
Buyer enforceable against Buyer in accordance with their respective terms.
6.3 EFFECT OF AGREEMENT. Neither the execution, delivery, and
performance of this Agreement or the Ancillary Documents nor the consummation of
the transactions contemplated hereby by Buyer will (a) conflict with or result
in a breach of any provision of the articles of incorporation or bylaws of
Buyer; or (b) constitute or result in the breach of, conflict with or give rise
to a right of termination, cancellation or acceleration with respect to, any
term, condition or provision of, any note, bond, mortgage, indenture, license or
other contract or obligation to which Buyer is a party of by which Buyer or any
of its properties or assets may be bound, except for such conflicts, breaches or
defaults as to which written waivers or consents shall have been obtained on or
prior to the Closing Date, or (c) violate any law, statute, regulation,
judgment, order, writ, injunction, or decree applicable to Buyer or any of its
properties or assets.
6.4 FINANCIAL STATEMENTS AND FINANCIAL PERFORMANCE.
The audited financial statements of BAB Holdings, Inc. ("BAB"), as of and for
the years ended November 30, 1995 and 1994 and an unaudited balance sheet and
income statement, as of and for the three month period ended February 29, 1996
(collectively, the "BAB FINANCIAL STATEMENTS") are set forth in Form 10-KSB and
Form 10-QSB, respectively, which reports have been provided to Seller. The
audited financial statements have been prepared in accordance with GAAP,
consistently applied throughout the periods indicated. Except as set forth on
Schedule 6.4, the BAB Financial Statements have been prepared in accordance with
GAAP applicable to unaudited interim financial statements consistent with the
annual financial statements, are correct and complete, and fairly present the
financial position and results of operations of the Buyer as of the dates and
for the periods indicated. No event has occurred since the preparation of the
BAB Financial Statements which materially adversely affects the information
presented in the BAB Financial Statements. BAB Holdings, Inc. as of the date of
the Financial Statements, does not have any liabilities or obligations (absolute
or contingent) of a nature required or customarily reflected in financial
statements or notes thereto prepared in accordance with GAAP, except as set
forth in the BAB Financial Statements.
6.5 CAPITALIZATION. The authorized capital stock of Buyer as of the
date hereof is as set forth in the BAB Financial Statements. All issued and
outstanding shares of capital stock, and upon consummation of the transaction
contemplated hereby, the BAB Stock will be, duly authorized, validly issued,
fully paid and non-assessable.
6.6 INTELLECTUAL PROPERTY. Buyer has full ownership right, title and
interest in and to its intellectual property and except as set forth in attached
Schedule 6.6, Buyer has not received any notice and has no reason to believe
that the validity of its intellectual property can be or is being challenged by
any third party. To the best knowledge of Buyer, the operation of its business
as currently conducted does not infringe upon any patents or other intellectual
property rights of any third party.
6.7 ENVIRONMENTAL MATTERS. Buyer has not received any notice from any
governmental agency or private or public entity advising that it is potentially
responsible for response costs or other costs with respect to a release or
threatened release of any Hazardous Substance and neither it nor to Buyer's
knowledge its predecessors in interest with respect to its business have
conducted activities which could reasonably be expected to result in such a
notice. No administrative, civil or criminal actions, including without
limitation third-party actions for personal injury or property damage, are
pending or threatened with respect to Environmental Laws related to its
business. No judgments, consent orders, consent decrees, stipulations, or other
restrictions have been entered or applied with respect to Environmental Laws
related to its business. Buyer neither received nor is aware of any governmental
orders, notifications, notices of violations, or requests for information
relating to environmental or health and safety conditions at or related to its
business, or is aware of any past or current violations of any Environmental Law
related to its business or of environmental conditions at the Stores or related
to the Business. Neither the operation of its business, as currently conducted
or at any other office space or other facility or real property owned, leased,
used or occupied by Buyer, whether currently or at any time in the past, or the
use or occupation of real property, violate nor have violated any Environmental
Laws.
6.8 INSURANCE. Buyer carries worker's compensation insurance in at
least the amount required by law. Buyer has been covered during the three year
period ending on the Closing Date by insurance in scope, amount and coverage
customary and reasonable for the businesses in which it has engaged during said
three year period. Buyer has not been refused any insurance nor has its coverage
been limited by any insurance carrier to which it has applied for insurance
during the last three years.
6.9 PERMITS, LICENSES, COMPLIANCE WITH LAWS. Buyer has all permits,
licenses, orders, consents and approvals of federal, state, local or foreign
governmental or regulatory bodies that are required in order to permit Buyer to
carry on its Business as currently conducted. To Buyer's knowledge, no cause
exists for such suspension or cancellation. The business of Buyer has been and
is being conducted in accordance and in compliance with all applicable federal,
state, local or foreign laws, codes, ordinances, rules and regulations, except
for minor violations which do not have a material adverse effect on its
business.
6.10 LITIGATION. Except as set forth on Schedule 6.10 attached hereto,
there is no claim, action, suit, proceeding, arbitration, investigation or
inquiry pending before any federal, state, local, or other court or
governmental, administrative, or self-regulatory body or agency, or any private
arbitration tribunal, or to the knowledge of Buyer threatened against, Buyer,
its business, or the transactions contemplated by this Agreement or the
Ancillary Documents; nor is there any basis for any such claim, action, suit,
proceeding, arbitration, investigation or inquiry. Buyer is not in default under
any order, license, regulation or demand of any federal, state or local, or
other court or governmental, administrative or self-regulatory body or agency.
6.11 LABOR MATTERS. The business of Buyer is being operated in
compliance with all applicable domestic (federal, state, and local) and foreign
laws respecting employment and employment practices, terms and conditions of
employment, and wages and hours, and Buyer has not engaged in any unfair labor
practices, and has not discriminated on the basis of age or sex in its
employment conditions or practices. There is no unfair labor practice or age or
sex discrimination complaint against Buyer pending before or threatened before
the National Labor Relations Board or any other domestic (federal, state, or
local) or foreign board, department, commission, or agency.
6.12 EMPLOYEE BENEFITS. All of Buyer's employee benefit plans are in
full compliance with the Employee Retirement Income Security Act of 1974
("ERISA") and other applicable laws. The Buyer has no pension, profit sharing,
savings, stock bonus and other deferred compensation plan established which is
subject to the requirements of ERISA, or any employer pension benefit plan to
which Seller are required to make or has made contributions.
6.13 OTHER INFORMATION. None of the information and documents which
have been or may be furnished by or on behalf of Buyer, to Seller or the
Principals, or to any of their representatives, in connection with the
transactions contemplated by this Agreement, is or will be materially false or
misleading or contains or will contain any material misstatements of fact or
omits or will omit any material fact necessary to be stated in order to make the
statements therein not misleading.
6.14 NO BROKERS. Buyer has not entered into any contract, arrangement
or understanding with any person or firm which may result in the obligation of
Seller or Principals to pay, or is aware of any claim or basis for any claim for
payment, of any finder's fees, brokerage or agent's commissions or other like
payments in connection with the negotiations leading to this Agreement or the
consummation of the transactions contemplated hereby.
ARTICLE 7
CONDITIONS PRECEDENT TO CLOSING
7.1 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF BUYER TO PROCEED WITH
CLOSING. The obligations of Buyer are subject to the fulfillment at Closing of
each of the following conditions to the reasonable satisfaction of Buyer;
provided that Buyer, in its discretion, may waive any one or more of such
conditions in writing and proceed with Closing without waiving any other
remedies available to Buyer:
(a) Accuracy of Representations and Warranties. The
representations and warranties of Seller and Principals contained in
this Agreement and in any Ancillary Document shall be true in all
material respects on and as of the Closing Date.
(b) Performance of Agreements. Seller shall have performed all
obligations and agreements and complied with all covenants and
conditions contained in this Agreement on its part to be performed or
complied with at or prior to the Closing. All conditions set forth in
Article 4 of this Agreement required to be completed prior to Closing
shall have been completed to Buyer's satisfaction.
(c) Required Consents. Seller shall have obtained all consents
in writing required for the assignment to Buyer of all Leases (if
required under the terms of the Leases), Licenses and Permits, and
Assigned Contracts.
(d) No Adverse Conditions. No adverse conditions shall have
been revealed in the course of Buyer's due diligence investigation and
no event shall have occurred which in Buyer's discretion has a material
adverse effect on the Business or the Purchased Assets.
(e) Board Approval. This Agreement shall have been approved by
Buyer's Board of Directors.
(f) Deliveries. Seller and the Principals shall have delivered
or caused to be delivered to Buyer at or prior to Closing all of the
following;
(i) all consents required by Section 7.1(c);
(ii) a certificate, dated the Closing Date, of the
Secretary or Assistant Secretary of Seller certifying the
resolutions adopted by the Shareholders and Board of Directors
of Seller approving the execution and delivery of this
Agreement and the consummation of the transactions
contemplated under this Agreement;
(iii) a bill of sale in substantially the form
attached hereto as Exhibit 7.1(f) and one or more other
instruments of transfer as may be reasonably required by Buyer
conveying good and marketable title to the Purchased Assets to
Buyer, free and clear of all security interests, claims,
liens, mortgages, charges and encumbrances in form and
substance satisfactory to Buyer, including an assignment of
all Intellectual Property to which the Principals shall be
joint assignors;
(iv) a certificate of good standing issued by the
Wisconsin Secretary of State and dated within five (5) days of
the Closing Date;
(v) a Non-Competition Agreement executed by the
Seller and by each of the Principals;
(vi) a Registration Rights Agreement executed by
Seller and the Principals; and
(vii) such other documents, opinions and certificates
as may be required under this Agreement.
7.2 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE SELLER AND THE
PRINCIPALS TO PROCEED WITH CLOSING. The obligations of Seller and the Principals
are subject to the fulfillment at the Closing of each of the following
conditions to the reasonable satisfaction of Seller; provided that Seller, in
their discretion, may waive any one or more of such conditions in writing and
proceed with Closing without waiving any other remedies available to Seller:
(a) Accuracy of Representations and Warranties. The
representations and warranties of Buyer contained in this Agreement or
in any Ancillary Document shall be true in all material respects on and
as of the Closing.
(b) Performance of Agreement. Buyer shall have performed all
obligations and agreements and complied with all covenants and
conditions contained in this Agreement to be performed or complied with
by it at or prior to the Closing Date.
(c) Deliveries by Buyer. Buyer shall have delivered to Seller
at or prior to the Closing all of the following:
(i) a certificate, dated the Closing Date, of the
Secretary or Assistant Secretary of Buyer certifying the
resolutions adopted by the Board of Directors of Buyer
approving the execution and delivery of this Agreement and the
transactions contemplated under this Agreement;
(ii) executed Non-Competition Agreement for each of
the Principals;
(iii) the cash consideration to be paid by Buyer
pursuant to this Agreement;
(iv) BAB Stock;
(v) the BAB Option executed by BAB Holdings, Inc.;
and
(vi) the Registration Rights Agreement, executed by
BAB Holdings, Inc.
ARTICLE 8
SECURITIES DISCLOSURES REGARDING BAB SECURITIES
8.1 UNREGISTERED SECURITIES; RESTRICTIONS ON TRANSFER. Seller and the
Principals understand, acknowledge, represent and agree with the following with
respect to the BAB Stock, the BAB Option, and the Common Stock which may be
issued upon exercise of the BAB Option (collectively, the "BAB SECURITIES"):
(a) The BAB Securities have not been registered under the
Securities Act of 1933 or any state securities law and Buyer is relying
upon exemptions from such registration in connection with the issuance
of the BAB Securities to Seller.
(b) The Seller and, if applicable, the Principals are
acquiring the BAB Securities for investment, without present intention
of distributing, reselling, pledging or otherwise disposing of the BAB
Securities (except that Buyer and BAB Holdings, Inc. shall not
unreasonably withhold approval for distribution of the BAB Securities
to the Principals).
(c) The Principals would acquire the BAB Securities from
Seller for their own account for investment and none of the Principals
has any present intention of distributing, reselling, pledging or
otherwise disposing of his or her interest in the BAB Securities.
(d) Seller and the Principals have been provided with access
to all information with respect to the Buyer and its business
(including the opportunity to meet with the Buyer's officers, to
request additional information regarding Buyer's financial condition,
properties, management and material contracts, and ask questions of
them), and Seller and the Principals have utilized such access to make
an informed decision to acquire the BAB Securities.
(e) Neither Seller nor the Principals may sell the BAB
Securities unless they are registered under the Securities Act of 1933,
as amended, and applicable state securities laws or pursuant to an
applicable exemption from such registration requirements. Seller and
the Principals shall have the registration rights set forth in the
Registration Rights Agreement. Even if the BAB Securities are so
registered or if exemption from registration is available, there can be
no assurance that there will be a market for these securities.
(f) Any certificate representing the BAB Securities will bear
legends in substantially the following form:
The securities evidenced by this certificate have not been
registered either under applicable federal law and rules or
applicable state law and rules. No sale, offer to sell, or
transfer of these securities may be made unless a registration
statement under the Securities Act of 1933, as amended, and
any applicable state law with respect to such securities is
then in effect or an exemption from the registration
requirements of such laws is then, in fact, applicable to such
securities.
ARTICLE 9
TERMINATION
9.1 TERMINATION PRIOR TO CLOSING. This Agreement may be terminated
prior to Closing as follows:
(a) By mutual written consent of Buyer and Seller;
(b) By Seller if any of the conditions set forth in Section
7.2 of this Agreement have not been met and have not been waived in
writing by Seller. If Seller terminates this Agreement under Section
9.1, Seller shall not be deemed to waive any other rights or remedies
available to Seller for a breach of this Agreement by Buyer; or
(c) By Buyer if any of the conditions set forth in Section 7.1
of this Agreement have not been met and have not been waived in writing
by Buyer. If Buyer terminates this Agreement under this Section 9.1,
Buyer shall not be deemed to waive any other rights or remedies
available to Buyer for a breach of this Agreement by Seller or the
Principals.
ARTICLE 10
INDEMNIFICATION
10.1 INDEMNIFICATION BY SELLER AND THE PRINCIPALS. Subject to the
limitations expressly set forth in Section 10.3, Seller and each of the
Principals, jointly and severally, shall indemnify and hold harmless Buyer from,
against and in respect of, any and all costs, losses, claims, liabilities,
fines, penalties, damages and expenses net of any insurance or other recoveries
(including without limitation interest which may be imposed, and court costs and
reasonable fees and disbursements of counsel) resulting from, arising out of or
incurred by Buyer in connection with any of the following:
(a) any breach of any of the representations or warranties
made by Seller or the Principals in this Agreement or any of the
Ancillary Documents, or failure or default by Seller or any of the
Principals in the performance of any of the covenants or agreements
made by Seller or any of the Principals in this Agreement or any of the
Ancillary Documents; or
(b) subject to the terms of Section 2.4, and specifically
excluding the Assumed Liabilities referred to therein, any debts,
obligations, liabilities, claims, penalties, fines or damages
pertaining to Seller, the Purchased Assets, or the Business arising on
or before Closing or related to incidents and occurrences prior to
Closing, whether or not known to Seller or disclosed to Buyer or
included in the Schedules, other portions of this Agreement or the
Ancillary Documents, and any liabilities of Seller arising after the
Closing.
10.2 INDEMNIFICATION BY BUYER. Subject to the limitations expressly set
forth in Section 10.3, Buyer shall indemnify and hold harmless Seller and the
Principals from, against and in respect of, any and all costs, losses, claims,
liabilities, fines, penalties, damages and expenses net of any insurance or
other recoveries (including without limitation interest which may be imposed in
connection therewith, and court costs and reasonable fees and disbursements of
counsel) resulting from, arising out of or incurred by Seller in connection
with: (a) any breach of any of the representations or warranties made by Buyer
in this Agreement or any of the Ancillary Documents, (b) any material failure or
material default by Buyer in the performance of any of the covenants or
agreements made by Buyer in this Agreement or any of the Ancillary Documents,
(c) Buyer's operation of the Stores after Closing, or (d) any and all rent and
other obligations of Seller and Principals arising under the Leases after the
Closing Date, but only if Seller and Principals request, and are unable to
obtain, releases from the respective lessors in connection with Buyer's
assumption of the Leases.
10.3 LIMITATION OF LIABILITY. No party shall assert any claim for
indemnification under Sections 10.1 or 10.2 unless the aggregate amount of all
claims of such party against the other party under this Agreement, on a
cumulative basis, exceeds Two Thousand and No/100 Dollars ($2,000.00); provided,
however, that once claims exceed such Two Thousand Dollars ($2,000.00)
threshold, the indemnifying party shall be liable for all valid claims,
including the initial claims aggregating $2,000.
10.4 RIGHT OF SETOFF; NO WAIVER. In addition to any remedies available
to Buyer, Buyer shall have a right to setoff any obligations of Seller or the
Principals to Buyer under this Agreement, any of the Ancillary Documents or any
agreements between Seller as franchisee and Buyer's affiliate as franchisor
against any obligation of Buyer to Seller or any of the Principals under this
Agreement or under any Ancillary Document. Any disputes over Buyers entitlement
to set-off shall be resolved pursuant to the arbitration provisions of Article
11. No failure or delay on the part of Buyer in exercising any right, power or
remedy under the Agreement or under any of the Ancillary Documents, or available
to Buyer at law or in equity shall operate as a waiver of such right, power or
remedy, nor shall any single or partial exercise of any such right, power or
remedy preclude any or further exercise thereof or the exercise of any other
right, power or remedy available to Buyer. Subject to the limitations of Section
10.3, the remedies provided in this Agreement and in the Ancillary Documents are
cumulative and not exclusive of any remedies available to any Party at law or
equity.
10.5 THIRD PARTY CLAIMS. If a claim by a third party is made against
Buyer, Seller or any of the Principals (the "INDEMNIFIED PARTY"), and the
Indemnified Party intends to seek indemnity against the other party (the
"INDEMNIFYING PARTY") under this Article 10, the Indemnified Party shall timely
notify the Indemnifying Party of such claim. The Indemnifying Party shall
reasonably cooperate with the Indemnified Party in connection with the efforts
of the Indemnified Party or its insurer with respect to the settlement or
defense of the claim. The Indemnified Party shall permit the Indemnifying Party
to participate in such settlement or defense through counsel chosen by the
Indemnifying Party, provided that the fees and expenses of such counsel shall be
borne by the Indemnifying Party. The Indemnified Party shall not settle or
compromise any such claim unless it shall have given the Indemnifying Party not
less than twenty (20) days' prior written notice of the proposed settlement or
compromise and afforded the Indemnifying Party an opportunity to consult with
the Indemnified Party regarding the proposed settlement or compromise.
ARTICLE 11
ARBITRATION
11.1 IN GENERAL. Except for an action for injunctive relief, any
dispute or claim arising out of or relating to this Agreement or the validity,
interpretation, enforceability of breach of this Agreement, which is not settled
by agreement between the parties, will be settled by binding arbitration in
Chicago, Illinois, in accordance with the rules of the American Arbitration
Association then in effect, and judgment upon any award rendered in such
arbitration may be entered in any court having competent jurisdiction.
11.2 DISCOVERY. The rules of discovery pertaining to the Illinois
courts under the Illinois Rules of Civil Procedure shall apply to any such
arbitration proceeding, provided discovery shall be accelerated and completed
within no more than ninety (90) days. The prevailing party in such arbitration,
in addition to all other relief provided, shall be entitled to an award against
the losing party of its costs and expenses, including reasonable attorney's
fees, incurred in such arbitration, and the losing party shall also bear all
fees and expenses of arbitration. In the event that there is no party that has
prevailed on substantially all issues, such legal expenses and expenses of
arbitration shall be allocated between the Parties as the arbitrator deems
appropriate.
ARTICLE 12
GENERAL
12.1 EXPENSES. Each Party shall pay its own costs, including counsel,
accountants and other advisors' fees, and expenses arising in connection with
the negotiation and preparation of this Agreement and the Ancillary Documents
and the consummation of the transactions contemplated hereby and thereby.
12.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Each of the Parties
covenants and agrees that all of the representations, warranties, covenants, and
agreements set forth in this Agreement and in any Ancillary Document shall
survive the Closing until December 31, 2000 and shall not be merged into any
instruments of transfer or other Ancillary Documents delivered by any of the
Parties at Closing or at any other time, except that the representations in
Sections 5.11 and 6.7 shall survive until December 31, 2002 and the
representations in Section 5.7 shall survive until the expiration of the statute
of limitations period applicable to claims which may be asserted for matters
covered thereby.
12.3 NO THIRD PARTY BENEFICIARIES. Nothing in this Agreement, expressed
or implied, is intended to confer on any person other than the Parties or their
respective heirs, successors and assigns any rights, remedies, obligations, or
other liabilities under or by reason of this Agreement.
12.4 NOTICES. All notices permitted or required under this Agreement
shall be in writing and shall be (a) delivered by personal service, (b)
delivered by courier service, (c) telecopied and confirmed immediately in
writing by a copy mailed by registered or certified mail, postage prepaid,
return receipt requested, or (d) sent by certified or registered mail, postage
prepaid, return receipt requested, to the parties hereto at their addresses set
forth below or at such other addresses which may be designated in writing by the
parties:
If to Seller or the Donald Nelson and Mary Ann Varichak
Principals, to: Bagels Unlimited, Inc.
9115 Oklahoma Avenue
Milwaukee, WI 53227
with a copy to: Whyte Hirschboeck Dudek S.C.
111 E. Wisconsin Ave., #2100
Milwaukee, WI 53202
Attn: Craig A. Caliendo
Telephone No.: (414) 273-2100
If to Buyer, to: BAB Systems, Inc.
8501 West Higgins Road, Suite 320
Chicago, IL 60631
Attn: Michael K. Murtaugh
Telecopier No.: (312) 380-6183
with a copy to: Popham, Haik, Schnobrich & Kaufman, Ltd.
Suite 3300, 222 South Ninth Street
Minneapolis, MN 55402
Attn: Janna R. Severance
Telecopier No.: (612) 334-8888
Such notices shall be effective upon receipt in the case of personal or courier
service or telecopier delivery and on the third (3rd) day after posting in the
U.S. mail.
12.5 FURTHER ASSURANCES. After the Closing, Seller and the Principals
shall, at Buyer's request, execute and deliver to Buyer without further
consideration, all such further assignments, conveyances, endorsements, deeds,
special powers of attorney, consents and other documents, and take such other
action, as Buyer may reasonably request (a) to transfer to, vest and protect in
Buyer and its right, title and interest in the Purchased Assets, and (b)
otherwise to consummate or effectuate the transactions contemplated by this
Agreement.
12.6 ENTIRE AGREEMENT. This Agreement (including the Exhibits and
Schedules) supersedes all prior agreements and understandings, oral and written,
between the parties with respect to the subject matter, and this Agreement,
together with the Ancillary Documents, constitutes the entire agreement of the
parties.
12.7 HEADINGS. The article, section and other headings contained in
this Agreement are for reference purposes only and shall not be deemed to be a
part of this Agreement or to affect the meaning or interpretation of this
Agreement.
12.8 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which, when executed, shall be deemed to be an original,
and all of which together shall be deemed to be one and the same instrument.
12.9 GOVERNING LAW. This Agreement shall be construed as to both
validity and performance and governed by and enforced in accordance with the
laws of the State of Wisconsin, without giving effect to the choice of law
principles.
12.10 SEVERABILITY. If any term, covenant, condition, or provision of
this Agreement or the application thereof to any circumstance shall be invalid
or unenforceable to any extent, the remaining terms, covenants, conditions, and
provisions of this Agreement shall not be affected and each remaining term,
covenant, condition, and provision of this Agreement shall be valid and shall be
enforceable to the fullest extent permitted by law. If any provision of this
Agreement is so broad as to be unenforceable, such provision shall be
interpreted to be only as broad as is enforceable.
12.11 AMENDMENTS. This Agreement may not be modified or changed except
by an instrument or instruments in writing signed by all Parties.
12.12 ASSIGNMENT. None of the Parties shall assign its rights or
obligations under this Agreement without the prior written consent of the other
Parties, except that Buyer may assign this Agreement to any Affiliate of Buyer
without the consent of Seller or Principals, provided that such assignment will
not affect the registration rights granted to Seller under the Registration
Rights Agreement.
12.13 SUCCESSORS AND ASSIGNS. Subject to the provisions of Section
12.12 hereof, the covenants, agreements, and conditions contained or granted
shall be binding upon and shall inure to the benefit of Buyer, Seller,
Principals and their respective heirs, successors and permitted assigns.
12.14 NO JOINT VENTURE. The Parties, by entering this Agreement and
consummating the transactions contemplated in this Agreement, shall not be and
shall not be considered a partner or joint venturer of one another.
12.15 CONSTRUCTION OF AGREEMENT. This Agreement and the Ancillary
Documents are documents negotiated at arm's-length by the Parties and their
respective counsel. Neither this Agreement or any of the Ancillary Documents
shall be construed as having been "drafted" by any one Party and shall not be
construed against any Party as a drafting party.
IN WITNESS WHEREOF, the parties have caused this Agreement to be signed
as of the date first above written.
BUYER:
BAB SYSTEMS, INC.
By /s/ Michael K. Murtaugh
Its Vice President and
General Counsel
SELLER:
BAGELS UNLIMITED, INC.
By /s/ Mary Ann Varichak
Its President
PRINCIPALS:
/s/ Donald Nelson
Donald Nelson
/s/ Mary Ann Varichak
Mary Ann Varichak
BAB Holdings, Inc. hereby acknowledges and agrees to be bound by the
foregoing Asset Purchase Agreement to the extent of its obligations thereunder
concerning issuance of its Common Stock in payment of the Purchase Price and
inclusion of any such shares issued in certain registration statements which it
may file under the Securities Act of 1933, as amended, pursuant to the terms of
the Registration Rights Agreement referred to in the foregoing Asset Purchase
Agreement.
BAB HOLDINGS, INC.
By /s/ Michael K. Murtaugh
Its Vice President and
General Counsel
INDEX OF SCHEDULES AND EXHIBITS
Schedules
Schedule 1 Definitions
Schedule 2.1(c) Assigned Contracts
Schedule 2.1(h) Store Location and Leases
Schedule 2.2(e) Excluded Personal Assets
Schedule 2.2(f) Excluded Leased Equipment
Schedule 5.5 Financial Statements
Schedule 5.6 Commitments
Schedule 5.10 Intellectual Property
Schedule 5.13 Permits and Licenses
Schedule 5.19 Employees
Schedule 5.20 Absence of Certain Changes or Events
Schedule 6.6 Buyer Intellectual Property
Schedule 6.10 Buyer Litigation
Exhibits
Exhibit 2.3 Form of BAB Option
Exhibit 4.2 Form of Non-Competition Agreement
Exhibit 4.6 Form of Registration Rights Agreement
Exhibit 7.1(f) Form of Bill of Sale
SCHEDULE 1
DEFINITIONS
1. "AFFILIATE," when used in reference to a specified Person, shall
mean any Person directly or indirectly (a) controlled by, (b) controlling, or
(c) under common control with, said specified Person. Specifically, and without
limitation of the foregoing, BAB Holdings, Inc. is hereby defined as an
Affiliate of BAB Systems, Inc.
2. "AGREEMENT" shall mean the Asset Purchase Agreement to which this
Schedule 1 is attached and all other schedules and exhibits attached thereto and
referred to therein.
3. "ANCILLARY DOCUMENT" shall mean any agreement, instrument, or other
document to which Buyer, Seller, or any of the Principals are a party that is to
be delivered at Closing or otherwise relates to the transactions contemplated
hereby.
4. "ASSIGNED CONTRACTS" shall have the meaning given such term in
Section 2.1(c).
5. "BUSINESS" shall have the meaning given such term in Recital A.
6. "BUYER" shall mean BAB Holdings, Inc.
7. "BAB FINANCIAL STATEMENTS" shall have the meaning given to such term
in Section 6.4.
8. "BAB STOCK" and "BAB OPTION" shall have the meanings given to such
terms in Section 2.3.
9. "CLOSING" shall have the meaning given such term in Article 3.
10. "CLOSING DATE" shall have the meaning given such term in Article 3.
11. "COMMITMENTS" shall have the meaning given such term in Section
5.6.
12. "ENVIRONMENTAL LAWS" shall have the meaning given such term in
Section 5.11(b).
13. "ERISA" shall have the meaning given such term in Section 5.18.
14. "EXCLUDED ASSETS" shall have the meaning given such term in Section
2.2 hereof.
15. "GAAP" shall mean United States generally accepted accounting
principles.
16. "HAZARDOUS SUBSTANCE" shall have the meaning given such term in
Section 5.11(b).
17. "INDEMNIFIED PARTY" shall have the meaning given such term in
Section 10.5.
18. "INDEMNIFYING PARTY" shall have the meaning given such term in
Section 10.5.
19. "INTELLECTUAL PROPERTY" shall have the meaning given such term in
Section 2.1(d).
20. "INVENTORY" shall have the meaning given such term in Section
2.1(b).
21. "LEASES" shall have the meaning given in Section 2.1(h).
22. "LICENSES AND PERMITS" shall have the meaning given such term in
Section 2.1(f).
23. "NON-COMPETITION AGREEMENT" shall have the meaning given such term
in Section 4.2.
24. "PARTIES" shall mean Buyer, Seller and the Principals,
collectively.
25. "PERSON" shall mean any individual, corporation, company, limited
or general partnership, trust or estate, joint venture, association, or other
entity.
26. "PRINCIPALS" shall mean Donald Nelson and Mary Ann Varichak,
collectively, and each individually is a "PRINCIPAL."
27. "PURCHASE PRICE" shall have the meaning given such term in Section
2.3(a).
28. "PURCHASED ASSETS" shall have the meaning given such term in
Section 2.1.
29. "REGISTRATION RIGHTS AGREEMENT" shall have the meaning given such
term in Section 4.6.
30. "SELLER" shall mean Bagels Unlimited, Inc.
31. "STORES" shall have the meaning given such term in Section 2.1(h).
SCHEDULE 6.6
BUYER'S INTELLECTUAL PROPERTY
NON-COMPETITION AGREEMENT
This Agreement is made and entered into this 1st day of May, 1996, by
and between BAB Holdings, Inc. ("Buyer") and Donald Nelson and Mary Ann Varichak
(together, "Principals")
W I T N E S S E T H :
WHEREAS, Buyer has entered into a purchase agreement of even date
herewith with Bagels Unlimited, Inc. ("Seller") and Principals (the "Agreement")
providing for the purchase by Buyer of certain of the assets of Seller used in
the conduct of Seller's business as a Big Apple Bagels franchisee.
WHEREAS, in order to consummate the transactions provided for in the
Agreement, Buyer has required that Principals assure that for a reasonable
period following consummation of the transactions provided for in the Agreement,
that neither of the Principals will engage in certain business in competition
with Buyer as provided herein;
NOW, THEREFORE, in consideration of the foregoing recited facts, the
terms and conditions hereinafter contained and contained in the Agreement and
for other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the parties agree as follows:
I.
RESTRICTIVE COVENANT
SECTION 1.1 NONCOMPETE. (a) In consideration of the Agreement and other
good and valuable consideration, including payment to the Principals of $100,000
on the date hereof, receipt of which is hereby acknowledged, Principals agree
that for a period of six (6) years from and after the date hereof, neither of
them shall, directly or indirectly, either as principal, agent, employee,
employer, shareholder, partner, consultant or in any other individual or
representative capacity whatsoever or as a partnership, corporation or any other
entity whatsoever, participate, engage in or have any financial or other
interest in any entity, business or activity which owns or operates a Business
(as that term is hereinafter defined) within the Trade Territory (as that term
is hereinafter defined). The parties specifically agree that any loans or other
financing arrangements with a son or daughter of a Principal or an entity owned
by a son or daughter of a Principal shall not be a violation of this restrictive
covenant.
(b) For purposes of this Agreement the following terms shall have the
following meanings:
(i) "Business" shall mean the sale of bagels (retail and
wholesale, alone or in combination with other products) and
the franchising of any business engaged in such sales.
(ii) "Trade Territory" shall mean the area within a four mile
radius of any then existing Big Apple Bagels store (franchised
and company-owned).
II.
BREACH
SECTION 2.1 ENFORCEMENT. The parties understand and agree that the
remedy at law for any breach of the terms of Article I of this Agreement would
be inadequate. In the event of a breach or threatened breached of Article I of
this Agreement, Buyer shall be entitled to petition for injunctive relief
restraining the breaching party, or any of its directors, officers, employees or
agents, from breaching or acting in any manner inconsistent with the conduct or
performance required by Article I of this Agreement. Principals hereby consent
to the personal jurisdiction of the courts of the State of Illinois, County of
Cook, with respect to any matter arising out of or in connection with this
Agreement.
SECTION 2.2 SCOPE. In the event it becomes necessary for Buyer to make
application to a court of competent jurisdiction for enforcement of the
provisions of Article I of this Agreement and such court shall determine that
any portion of Article I of this Agreement is unreasonably broad or
unenforceable, such court is hereby authorized and empowered to narrow the
provisions of Article I of this Agreement to such reasonable parameters and
limits as such court shall determine to be necessary to accomplish the intent of
the parties and to protect Buyer. The parties agree that the breaching party
shall pay all reasonable attorneys' fees incurred by Buyer in enforcing the
provisions of Article I of this Agreement. In determining what are reasonable
attorneys' fees, a court shall give primary consideration to the actual
attorneys' fees incurred and shall, unless unreasonable, award the actual
attorneys' fees incurred.
III.
MISCELLANEOUS
SECTION 3.1 WAIVER. The waiver by a party of a breach of any provision
of this Agreement shall not operate or be construed as a waiver of any
subsequent breach.
SECTION 3.2 CONSTRUCTION. This Agreement contains the entire agreement
of the parties with respect to the subject matter hereof and shall not be
amended except by an agreement in writing, signed by all of the parties hereto.
The rights of Buyer under this Agreement shall inure to the benefit of its
successors and assigns. If any provisions of this Agreement is at any time
adjudged invalid to any extent by any court of competent jurisdiction, such
provisions shall be deemed modified to the extent necessary to render it
enforceable, and such invalidity shall not affect any other provision of this
Agreement.
SECTION 3.3 APPLICABLE LAW. The validity, construction and
interpretation of this Agreement shall be governed exclusively by and according
to the laws of the State of Illinois.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
IN THE PRESENCE OF: BAB HOLDINGS, INC.
/s/ Sally A. Sullivan By /s/ Michael K. Murtaugh
Its Vice President and
General Counsel
/s/ Jim Lowe /s/ Donald Nelson
Donald Nelson
/s/ Jim Lowe /s/ Mary Ann Varichak
Mary Ann Varichak
STOCK OPTION AGREEMENT
THIS AGREEMENT is dated this 1st day of May, 1996, between BAB
Holdings, Inc., an Illinois corporation (the "Company") and Bagels Unlimited,
Inc., a Wisconsin corporation ("Optionee").
WITNESSETH, THAT:
WHEREAS, the Company has agreed to grant this stock option to Optionee
pursuant to that certain Asset Purchase Agreement dated May 1, 1996 by and among
the Company, Bagels Unlimited, Inc., Donald Nelson, and Mary Ann Varichak;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, the parties hereto hereby agree as follows:
1. Grant of Option. The Company hereby grants to Optionee an option to
purchase from the Company all or any part of an aggregate amount of 100,000
shares of the common stock of the Company at an option price of $4.00 per share.
2. Exercise Period. This option shall be exercisable on and after May
1, 1996 for a period of five (5) years, expiring at 5:00 p.m. CST on April 30,
2001.
3. Exercise of Option. This option may be exercised only by submitting
written notice of intent to exercise to the Company at its office at 8501 W.
Higgins Road, Suite 320, Chicago, IL. Such notice shall state the number of
shares in respect of which the option is being exercised and shall be
accompanied by payment for such shares in cash, certified or cashier's check or
by personal check, or other form of payment acceptable to the Company.
4. Exercise Upon Death. In the event that Optionee shall die (if
Optionee is a natural person) during the term of this Agreement, this option may
be exercised to the extent that the Optionee was entitled to do so at the date
of death by the person or persons to whom Optionee's rights under this option
pass by will or applicable law.
5. No Right to Continued Compensation. Nothing contained in this
Agreement shall obligate the Company to continue to accept and pay for any
products or services of Optionee, nor shall anything contained in this Agreement
interfere with the right of the Company to terminate any contract or
relationship with Optionee.
6. No Shareholder Rights. Optionee shall have no rights as a
shareholder with respect to any shares of common stock subject to this option
prior to the date of issuance of a certificate or certificates for such shares.
7. Investment Representation. Notice of the exercise of this option
shall include a representation that any option shares purchased shall be
acquired as an investment and not with a view to, or for sale in connection
with, any subsequent distribution. The Company and Optionee acknowledge that the
shares which may be acquired upon exercise hereof are the subject of a
Registration Rights Agreement dated May 1, 1996 by and between the Company and
Bagels Unlimited, Inc., whereby said shares may be included for resale by
Optionee in certain registrations of securities under the Securities Act of
1933, as amended, (the "Securities Act") which may be undertaken by the Company.
8. Compliance with Law and Regulations. The Optionee acknowledges that
this option may not be exercised until the Company has taken all actions then
required to comply with all applicable federal and state laws, rules and
regulations and any exchange on which the stock may then be listed. The
certificates representing the shares purchased upon the exercise of this option
shall bear a legend in substantially the following form:
These shares have not been registered pursuant to the Securities Act of
1933, as amended, or any regulations promulgated thereunder or any
applicable state securities laws or regulations. No sale, offer to
sell, or transfer of these shares shall be made unless a registration
statement under the Securities Act of 1933, as amended, with respect to
such shares is then in effect or an exemption from the registration
requirements thereof is available.
9. Non-Transferability. This option shall be exercisable only by the
Optionee and shall not be transferable except pursuant to operation of law.
10. Other Assistance. Upon the exercise of this option the Optionee or
other person exercising the option agrees to execute any document or make any
representation or give any commitment which the Board of Directors, in its
discretion, deems necessary or advisable by reason of the securities laws of the
United States or any state, and execute any document for the purpose of
restricting the transfer of stock to third parties.
11. Company Assurance. The Company agrees that on April 30, 2001, the
Company shall pay to Optionee, in cash, an amount equal to (A) the number of
option shares which have been purchased and subsequently sold by Optionee, (B)
multiplied by (i) $6.00, subject to adjustment by a fraction which takes account
of increases or decreases in total number of shares of the Company's Common
Stock issued and outstanding as a result of stock splits, stock dividends, stock
consolidations, or similar events affecting all holders of the Company's Common
Stock (as to such price, as adjusted if applicable, the "Target Price"), (ii)
minus the greater of the aggregate exercise price paid for such option shares
and the aggregate sale price of the option shares; provided, however, that if
during any period prior to April 30, 2001, the closing sale price of the
Company's Common Stock as reported on Nasdaq is equal to or greater than the
Target Price for 10 business days during any 20 consecutive business days, this
Section 11 shall immediately lapse at close of business on the 10th day and
shall thereafter be void and of no force or effect. In any event, this Section
11 shall be void and of no further force or effect upon the Option expiration
date set forth in Section 2.
12. Binding Agreement. This Agreement shall be binding upon and inure
to the benefit of the legal representatives, executors, administrators,
successors and assigns of each parties to this Agreement.
13. Complete Agreement. This Agreement sets forth the entire
understanding of the parties hereto and shall not be amended, changed or
terminated except by an instrument in writing signed by the parties to this
Agreement.
14. Counterparts and Governing Law. This Agreement may be executed in
counterparts, and its validity, construction and performance, shall be governed
by the laws of the State of Illinois.
IN WITNESS WHEREOF, the parties have executed this Agreement the date
first above written.
BAB HOLDINGS, INC.
By /s/ Michael K. Murtaugh
Its Vice President and
General Counsel
ACCEPTED:
BAGELS UNLIMITED, INC.
By /s/ Mary Ann Varichak
Its President
REGISTRATION RIGHTS AGREEMENT
DATED AS OF MAY 1, 1996
BETWEEN
BAB HOLDINGS, INC.
AND
BAGELS UNLIMITED, INC.
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement ("Agreement") is made as of May 1,
1996 between BAB Holdings, Inc., an Illinois corporation (the "Company"), and
Bagels Unlimited, Inc., a Wisconsin corporation ("BUI" or the "Holder").
RECITALS
WHEREAS, BUI is the holder of 50,000 shares of Common Stock, no par
value per share (the "Common Stock") of the Company, and may acquire an
additional 100,000 shares of Common Stock upon exercise of an option granted to
BUI by the Company (collectively as to such 50,000 shares and, upon issuance
thereof, the 100,000 shares, the "Shares").
WHEREAS, the Company has agreed to register the Shares on the terms and
conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants, agreements,
representations and warranties herein set forth, it is hereby agreed between the
Company and the Holder as follows:
ARTICLE I
REGISTRATION RIGHTS
SECTION 1.1. PARTICIPATION IN REGISTRATION. (a) If, at any time or from
time to time after the date hereof, the Company shall determine to register any
of its securities, either for its own account or the account of a security
holder or holders exercising their respective demand registration rights, other
than (i) a registration relating solely to employee benefit plans on Form S-1 or
S-8 or similar forms which may be promulgated in the future, or (ii) a
registration on Form S-4 or similar form which may be promulgated in the future
relating to a Securities and Exchange Commission Rule 145 transaction, the
Company will:
(i) promptly give to the Holder written notice thereof (which
shall include a list of the jurisdictions in which the Company intends
to attempt to qualify such securities under the applicable blue sky or
other state securities laws); and
(ii) include in such registration (and any related
qualification under blue sky laws or other compliance), and in any
underwriting involved therein, all Registrable Securities specified in
a written request or requests, made within 20 days after receipt of
such written notice from the Company, by the Holder.
(b) If the registration of which the Company gives notice is for a
registered public offering involving an underwriting, the Company shall so
advise the Holder as a part of the written notice given pursuant to Section
1.1(a)(i). In such event, the right of the Holder to registration pursuant to
Section 1.1 shall be conditioned upon the Holder's agreeing to participate in
such underwriting and in the inclusion of such Holder's Registrable Securities
in the underwriting to the extent provided herein. The Holder proposing to
distribute its securities through such underwriting shall (together with the
Company and the other holders distributing their securities through such
underwriting) enter into an underwriting agreement in customary form with the
underwriter or underwriters selected for such underwriting by the Company or by
other holders exercising their demand registration rights. Notwithstanding any
other provision of this Section 1.1, if the underwriter determines that
marketing factors require a limitation of the number of shares to be
underwritten, the underwriter may limit the number of Registrable Securities to
be included in the registration and underwritten public offering on a pro rata
basis based on the respective amounts of Registrable Securities owned by the
Holder and securities of the Company owned by each other holder seeking to
distribute his securities through the public offering; provided, however, that
the Company shall not exclude more than that number of shares which, in the
reasonable opinion of such underwriter, must reasonably be excluded in light of
such marketing factors. The Company shall so advise the Holder and the other
holders distributing their securities through the underwriting, and the number
of Registrable Securities and other securities that may be included in the
registration shall be allocated among all holders thereof (other than holders
who are exercising demand registration rights) on the basis that the Holder
shall be cut back before any cut-back of holders exercising demand registration
rights and, as among those holders suffering such cut-back, the cut-back shall
be in proportion, as nearly as practicable, to the respective amounts of
securities entitled to inclusion in such registration held by such holders at
the time of filing the registration statement. If the Holder disapproves of the
terms of any such underwriting, he may elect to withdraw therefrom by written
notice to the Company and the underwriter, which notice, to be effective, must
be received by the Company at least two business days before the anticipated
effective date of the registration statement. The Company may at any time
withdraw or abandon any registration statement which triggers the provisions of
this Section 1.1 without any liability to the Holder. Any securities excluded or
withdrawn from such underwriting shall be withdrawn from such registration.
SECTION 1.2. FORM S-3 REGISTRATION RIGHTS. If the Holder has not had
the opportunity to include its Registrable Securities in a registration pursuant
to Section 1.1 hereof by April 1, 1997 and if the Company is then qualified for
the use of Form S-3, the Company shall, not later than April 30, 1997, file a
registration statement on Form S-3 to permit resale of the Registrable
Securities of the Holder during the period of effectiveness of such Form S-3
registration statement, subject only to the following limitations:
(a) The Company shall not be required to maintain and keep any such
registration on Form S-3 effective for a period exceeding ninety (90) days from
the effective date thereof;
(b) The Company shall not be required to effect more than one (1)
registration pursuant to this Section 1.2;
(c) The Company shall not be required to prepare or effect any
registration pursuant to this Section 1.2 unless the Registrable Securities to
be sold by the Holder represent not less than 80% of the Registrable Securities
of the Holder;
(d) If the Company shall furnish to the Holder a certificate, signed by
the Company's president, stating that (i) the Company is conducting or is about
to conduct an offering of its securities and is advised by its managing
underwriter that such offering might be affected adversely by the registration
on behalf of the Holder or (ii) in the good faith judgment of the Board of
Directors of the Company the Form S-3 offering would (A) interfere with a
pending or contemplated financing, merger, sale of assets, recapitalization or
other similar corporate action of the Company or (B) be seriously detrimental to
the Company and its shareholders if such registration statement would be filed
on or before the date filing would be required and it is therefore essential to
defer the filing of such registration statement, the Company shall have the
right, exercisable only once during any period of twelve consecutive months, to
deter commencement of preparation of the registration statement for a period of
not more than 120 days;
(e) The Company shall not be required to effect any registration,
qualification or compliance in any particular jurisdiction in which the Company
would be required to execute a general consent to service of process in
effecting such registration, qualification or compliance unless the Company is
already subject to service in such jurisdiction and except as may be required by
the Securities Act;
(f) The Company may include in such Form S-3 registration statement
securities of other selling security holders, without limitation, and securities
offered for its own account (if the Company is then eligible for use of Form S-3
for such purpose); and
(g) The Company hereby undertakes to use its best efforts to file in a
timely manner all reports required of the Company under the Securities Exchange
Act of 1934 in order to qualify for use of Form S-3 and, as provided in this
Section 1.2, to maintain the effectiveness of any Form S-3 registration
statement which has been filed.
SECTION 1.3. EXPENSE OF REGISTRATION. All Registration Expenses
incurred in connection with any registration, qualification or compliance
pursuant to Article I shall be borne by the Company. All Selling Expenses
relating to securities registered by the Holder or other holders shall be borne
by the holders of such securities pro rata on the basis of the number of shares
so registered and to be sold by each.
SECTION 1.4. REGISTRATION PROCEDURES. In the case of each registration,
qualification or compliance effected by the Company pursuant to this Article I,
the Company will keep the Holder advised in writing as to the initiation of each
registration, qualification and compliance and as to the completion thereof. At
its expense the Company will:
(a) Keep such registration, qualification or compliance effective for a
period of one hundred twenty (120) days or until the Holder has completed the
distribution described in the registration statement relating thereto, whichever
first occurs.
(b) Furnish such number of prospectuses and other documents incident
thereto as a Holder from time to time may reasonably request, but only during
the period that the Company would be required to keep the registration
effective.
(c) Prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
registration statement.
(d) Use its best efforts to register and qualify the securities covered
by such registration statement under such other securities or Blue Sky laws of
such jurisdictions as shall be reasonably requested by the Holder, provided that
the Company shall not be required in connection therewith or as a condition
thereto to qualify to do business or to file a general consent to service of
process in any such states or jurisdictions.
(e) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and customary
form, with the managing underwriter of such offering. The Holder participating
in such underwriting shall also enter into and perform its obligations under
such agreement.
(f) Notify the Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of material fact or omits to state
a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing.
SECTION 1.5. INDEMNIFICATION. (a) The Company will indemnify the Holder
with respect to which registration, qualification or compliance has been
effected pursuant to this Article I, and each underwriter, if any, and each
person who controls any underwriter within the meaning of Section 15 of the
Securities Act, against all expenses, claims, losses, damages and liabilities
(or actions in respect thereof), including any of the foregoing incurred in
settlement of any litigation, commenced or threatened, arising out of or based
on any untrue statement (or alleged untrue statement) of a material fact
contained in any registration statement, prospectus, offering circular or other
document, or any amendment or supplement thereto, incident to any such
registration, qualification or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances in
which they were made, not misleading, or any violation by the Company of any
rule or regulation promulgated under the Securities Act applicable to the
Company and relating to action or inaction required of the Company in connection
with any such registration, qualification or compliance, and will pay to such
Holder, each such underwriter and each person who controls any such underwriter,
as incurred, any legal and any other expenses reasonably incurred in connection
with investigating, preparing or defending any such claim, loss, damage,
liability or action, provided that the Company will not be liable in any such
case to the extent that any such claim, loss, damage, liability or expense
arises out of or is based on any untrue statement or omission or alleged untrue
statement or omission, made in reliance upon and in conformity with written
information furnished to the Company by an instrument duly executed by such
Holder or underwriter and stated to be specifically for use therein.
(b) The Holder will, if Registrable Securities held by such Holder are
included in the securities as to which such registration, qualification or
compliance is being effected, indemnify the Company, each of its directors and
officers, each underwriter, if any, of the Company's securities covered by such
a registration statement, each person who controls the Company or such
underwriter within the meaning of Section 15 of the Securities Act, and each
other such Holder, each of its officers, directors or partners and each person
controlling such Holder within the meaning of Section 15 of the Securities Act,
against all expenses, claims, losses, damages and liabilities (or actions in
respect thereof) including any of the foregoing incurred in settlement of any
litigation commenced or threatened, arising out of or based on any untrue
statement (or alleged untrue statement) of a material fact contained in any such
registration statement, prospectus, offering circular or other document, or any
amendment or supplement thereto, incident to any such registration,
qualification or compliance or based on any omission (or alleged omission) to
state therein a material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances in which they were
made, not misleading, or any violation by any Holder of any rule or regulation
promulgated under the Securities Act applicable solely to the Holder (which is
not otherwise applicable to or violated by the Company) and relating to action
or inaction required solely of the Holder (and not relating to or required of
the Company) in connection with such registration, qualification or compliance,
and will pay to the Company, such Holders, such directors, officers, partners,
persons, underwriters or control persons, as incurred, any legal or any other
expenses reasonably incurred in connection with investigating, preparing or
defending any such claim, loss, damage, liability or action, in each case to the
extent, but only to the extent, that such untrue statement (or alleged untrue
statement) or omission (or alleged omission) is made in such registration
statement, prospectus, offering circular or other document or any amendment or
supplement thereto in reliance upon and in conformity with written information
relating to such Holder which shall have been furnished to the Company by an
instrument duly executed by such Holder and stated to be specifically for use
therein; provided, however, that the obligations of such Holder hereunder shall
be limited to an amount equal to the net proceeds to such Holder of Registrable
Securities sold as contemplated herein.
(c) Each party entitled to indemnification under this Section 1.5 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not be unreasonably
withheld), and the Indemnified Party may participate in such defense at its own
expense, and provided, further, that the failure of any Indemnified Party to
give notice as provided herein shall not relieve the Indemnifying Party of its
obligations under this Article I unless such failure resulted in actual
detriment to the Indemnifying Party. Notwithstanding the above, however, if
representation of one or more Indemnified Parties by the counsel retained by the
Indemnifying Party would be inappropriate due to actual conflicting interests
between such Indemnified Parties (the "Conflicting Indemnified Parties") and any
other party represented by such counsel in such proceeding, then such
Conflicting Indemnified Parties shall have the right to retain one separate
counsel, chosen by the holders of a majority of the Registrable Securities
included in the registration, at the expense of the Indemnifying Party. No
Indemnifying Party, (i) in the defense of any such claim or litigation, shall,
except with the consent of each Indemnified Party, consent to entry of any
judgment or enter into any settlement which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such Indemnified Party
of a release from all liability in respect to such claim or litigation, or (ii)
shall be liable for amounts paid in any settlement if such settlement is
effected without the consent of the Indemnifying Party.
SECTION 1.6. INFORMATION BY HOLDER. The Holder of Registrable
Securities included in any registration shall furnish to the Company such
information regarding such Holder and the distribution proposed by such Holder
as the Company may reasonably request in writing and as shall be reasonably
required in connection with any registration, qualification or compliance
referred to in this Article I.
SECTION 1.7. RULE 144 REPORTING. With a view to making available the
benefits of certain rules and regulations of the Commission which may at any
time permit the sale of the Restricted Securities to the public without
registration, the Company agrees to:
(a) Use its best efforts to make and keep public information available,
as those terms are understood and defined in Rule 144 under the Securities Act
at all times after the date hereof.
(b) Use its best efforts to file with the Commission in a timely manner
all reports and other documents required of the Company under the Securities Act
and the Securities Exchange Act of 1934, as amended (at any time it is subject
to such reporting requirements).
(c) So long as the Holder owns any Restricted Securities, to furnish to
the Holder forthwith upon request a written statement by the Company as to its
compliance with the reporting requirements of said Rule 144 (at any time after
90 days after the effective date of the first registration statement filed by
the Company for an offering of its securities to the general public) and of the
Securities Act and the Securities Exchange Act of 1934 (at any time after it has
become subject to such reporting requirements) and a copy of the most recent
annual or quarterly report of the Company.
SECTION 1.8. TRANSFER OF REGISTRATION RIGHTS. The rights to cause the
Company to register securities granted the Holder under Sections 1.1 and 1.2 may
be assigned only to Donald Nelson or Mary Ann Varichak, or both, but only in
connection with the transfer or assignment of not less than 1,000 shares
(appropriately adjusted for any recapitalization) of the Restricted Securities,
provided that the Company shall be entitled to notice of any such transfer of
registration rights within thirty (30) days of the date such transfer is
effected. No transferee, assignee or other person purporting to exercise rights
under this Article I who is not a signatory to this Agreement shall be entitled
to do so unless and until such person agrees to be bound by the terms hereof.
SECTION 1.9. "MARKET STAND OFF" AGREEMENT. The Holder hereby agrees
that it shall not, to the extent required by the Company and an underwriter of
Common Stock (or other securities) of the Company, sell or otherwise transfer or
dispose (other than to donees who agree to be similarly bound) of any
Registrable Securities during the ninety (90) day period following the effective
date of a registration statement of the Company filed under the Securities Act;
provided, however, that such agreement shall not apply to Registrable Securities
being registered and sold pursuant to such registration statement.
In order to enforce the foregoing covenant, the Company may impose
stop-transfer instructions with respect to the Registrable Securities of the
Holder until the end of such ninety (90) day period.
SECTION 1.10. PLAN OF DISTRIBUTION. To preserve an orderly market in
any publicly owned securities of the Company, the event that the aggregate
number of shares of Registrable Securities to be registered pursuant to a
Registration Statement under this Article I exceeds 5% of the outstanding
securities to be registered, the Company shall have the right to recommend two
or more investment banking firms to manage the distribution on behalf of the
Holder and to approve all pertinent marketing arrangements with respect thereto,
which approval shall not be unreasonably withheld.
ARTICLE II
MISCELLANEOUS
SECTION 2.1. GOVERNING LAW. This Agreement shall be governed in all
respects by the laws of the State of Illinois.
SECTION 2.2. SUCCESSORS AND ASSIGNS. Except as otherwise provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors and permitted assigns of the parties hereto. No assignment
of this Agreement may be made by either party at any time, without the other
party's prior written consent except that the Holder may assign any of its
rights hereunder to an affiliate of such Holder without the Company's consent
provided that such affiliate expressly assumes in writing all of such Holder's
obligations hereunder.
SECTION 2.3. ENTIRE AGREEMENT; AMENDMENT. This Agreement constitutes
the full and entire understanding and agreement between the parties with regard
to the subjects hereof. Except as expressly provided herein, neither this
Agreement nor any term hereof may be amended, waived, discharged or terminated
other than by a written instrument signed by the party against whom enforcement
of any such amendment, waiver, discharge or termination is sought.
SECTION 2.4. NOTICES, ETC. All notices and other communications
required or permitted hereunder shall be in writing and shall be mailed by
registered or certified mail, postage prepaid, or otherwise delivered by hand or
by messenger addressed (a) if to the Company, at 8501 West Higgins Road, Suite
320, Chicago, IL 60631, Attention: General Counsel, or at such other address as
the Company shall have furnished to the Holders in writing and (b) if to the
Holders, at such address as is set forth on the signature page hereto, or at
such other address as the Holder shall have furnished to the Company in writing.
Each such notice or other communication shall for all purposes of this Agreement
be treated as effective or having been given when delivered if delivered
personally, or, if sent by mail, at the earlier of its receipt or 72 hours after
the same has been deposited in a regularly maintained receptacle for the deposit
of the United States mail, addressed and postage prepaid as aforesaid.
SECTION 2.5. DELAYS OR OMISSIONS. Except as expressly provided herein,
no delay or omission to exercise any right, power or remedy accruing to the
Company or the Holder upon any breach or default of any party under this
Agreement, shall impair any such right, power or remedy of the Company or such
Holder nor shall it be construed to be a waiver of any such breach or default,
or any acquiescence therein, or of or in any similar breach or default
thereafter occurring; nor shall any waiver of any single breach or default be
deemed a waiver of any other breach or default theretofore or thereafter
occurring. Any waiver, permit, consent or approval of any kind or character on
the part of the Company or any Holder of any breach or default under this
Agreement, or any waiver on the part of any such party of any provisions or
conditions of this Agreement, must be in writing and shall be effective only to
the extent specifically set forth in such writing. All remedies, either under
this Agreement or by law or otherwise afforded to the Company or the Holder,
shall be cumulative and not alternative.
SECTION 2.6. COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which may be executed by only one of the parties
hereto, each of which shall be enforceable against the party actually executing
such counterpart, and all of which together shall constitute one instrument.
SECTION 2.7. SEVERABILITY. In the event that any provision of this
Agreement becomes or is declared by a court of competent jurisdiction to be
illegal, unenforceable or void, this Agreement shall continue in full force and
effect without said provisions; provided that no such severability shall be
effective if it materially changes the economic benefit of this Agreement to any
party.
SECTION 2.8. TITLES AND SUBTITLES. The titles and subtitles used in
this Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
SECTION 2.9. DEFINITIONS. As used in this Agreement, the following
terms have the meanings specified or referred to in this Section 2.9:
"Agreement" has the meaning specified in the first paragraph of this
Agreement.
"Commission" or "SEC" shall mean the Securities and Exchange Commission
or any other federal agency at the time administering the Securities Act.
"Company" has the meaning specified in the first paragraph of this
Agreement.
"Form S-3" shall mean Form S-3 under the Securities Act, or any
substantially similar, equivalent or successor form under the Securities Act.
"Holder" shall mean Bagels Unlimited, Inc. or any permitted transferee
of registration rights, Shares or Registrable Securities.
"Registrable Securities" means Shares which have not been sold to the
public, and shares of the Company's Common Stock issued with respect to the
Shares upon any stock split, stock dividend, recapitalization, or similar event,
which have not been sold to the public, which, in each case, are not eligible
for resale in reliance upon Rule 144 under the Securities Act.
"Registration Expenses" shall mean all expenses incurred by the Company
in complying with Section 1.1 hereof, including, without limitation, all
registration, qualification and filing fees, printing expenses, escrow fees,
fees and disbursements of counsel for the Company, blue sky fees and expenses,
and the expense of any special audits incident to or required by any such
registration (but excluding the compensation of regular employees of the
Company, which shall be paid in any event by the Company).
"Restricted Securities" shall mean any share certificate representing
Registrable Securities bearing a legend restricting further public distribution
thereof.
"Securities Act" shall mean the Securities Act of 1933, as amended, or
any similar federal statute and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Selling Expenses" shall mean all underwriting discounts and selling
commissions applicable to the sale and all fees and disbursements of counsel for
any holder.
IN WITNESS WHEREOF, each of the undersigned has caused the foregoing
Agreement to be executed by one of its duly authorized officers as of the date
first above written.
BAB HOLDINGS, INC.
By /s/ Michael K. Murtaugh
Its: Vice President and
General Counsel
BAGELS UNLIMITED, INC.
By /s/ Mary Ann Varichak
Its President
Address: 9115 West Oklahoma Avenue
Milwaukee, WI 53227
