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 13, 1997
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 (773) 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....................
Item 2. Acquisition or Disposition of Assets................
Item 3. Bankruptcy or Receivership..........................
Item 4. Changes in Registrant's Certifying Accountant.......
Item 5. Other Events........................................
Item 6. Resignation of Registrant's Directors...............
Item 7. Financial Statements and Exhibits...................
Item 8. Change in Fiscal Year...............................
SIGNATURE...................................................
INDEX TO EXHIBITS...........................................
Item 1. Changes in Control of Registrant
Not applicable.
Item 2. Acquisition or Disposition of Assets
On May 13, 1997 BAB Holdings, Inc. (the "Company") completed
the acquisition by merger of My Favorite Muffin Too, Inc. ("MFM"),
a New Jersey corporation. MFM franchises and operates muffin and
bagel specialty retail stores concentrated primarily in the
Eastern United States and Florida. At May 13, 1997, MFM had 60
franchise and 5 company-operated units in operation. MFM was
merged into BAB Acquisition Corporation, a wholly-owned subsidiary
of the Company, with MFM being the surviving entity.
The Company acquired substantially all the assets of MFM
including all of MFM's right, title and interest in all leased
real property, trademarks, recipes, equipment, machinery,
furniture and fixtures, leasehold improvements, franchise and
other operating contracts, current assets and other assets of the
MFM. Additionally, the Company has assumed liabilities of MFM
including accounts payable, accrued liabilities, lease obligations
and obligations under franchise and operating contracts. The
Company intends to continue using the assets of MFM in the
franchising and operation of muffin and bagel specialty retail
stores.
The acquisition through merger was completed by exchanging
150 shares of MFM stock held equally by Owen Stern, Ruth Stern and
Illona Stern (the "Sellers"), for 432,608 shares of the Company's
common stock, restricted as to transfer until January 1, 1999, and
$260,000 in cash to the Sellers. In addition to the other
liabilities assumed, the Company has additionally assumed
approximately $350,000 of existing bank debt of MFM though a
replacement time note with MFM's lender. Additionally, the
Company has retained the Sellers as employees of the Company
pursuant to employment contracts, through May 8, 2001 for Owen
Stern, and through May 8, 2000 for Ruth Stern and Illona Stern.
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 audited financial statements of MFM are not readily
available for filing with this initial report on Form 8-K. The
required financial statements for the previous fiscal year and
current interim periods, and required pro forma financial
information, will be filed when available within 60 days of the
due date of this Form 8-K.
Item 8. Change in Fiscal Year
Not applicable.
EXHIBITS
The following exhibits are filed herewith.
Exhibit
No. Description of Exhibit
2.5 Acquisition Agreement dated May 1, 1997 by and among
BAB Holdings, Inc., BAB Acquisition Corp., My Favorite
Muffin Too, Inc., Muffin Holdings of Pennsylvania, a
limited partnership, Ruth Stern, Owen Stern and Ilona
Stern (without schedules).
4.6 Registration Rights Agreement dated as of May 1, 1997
between BAB Holdings, Inc. and Owen Stern, Ruth Stern,
Ilona Stern and Pierce W. Hance
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 28, 1997 By:/s/ THEODORE P. NONCEK
-------------------------
Theodore P. Noncek,
Chief Financial Officer,
Secretary and Treasurer
(Principal accounting
and financial officer)
INDEX PAGE
NO. DESCRIPTION
2.5 Acquistion Agreement dated May 1, 1997 by and
among BAB Holdings, Inc., BAB Acquisition Corp.,
My Favorite Muffin Too, Inc., Muffin Holdings of
Pennsylvania, a limited partnership, Ruth Stern
Owen Stern and Ilona Stern (without schedules).
4.6 Registration Rights Agreement dated as of May 1,
1997 between BAB Holdings, Inc., and Owen Stern,
Ruth Stern, Ilona Stern and Pierce W. Hance
ACQUISITION AGREEMENT
dated May 1, 1997
by and among
BAB Holdings, Inc.
BAB Acquisition Corporation
My Favorite Muffin Too, Inc.
Muffin Holdings of Pennsylvania, a limited partnership
Ruth Stern, Owen Stern and Ilona Stern
TABLE OF CONTENTS
ARTICLE 1. THE MERGER
1.1 The Merger
1.2 Effective Time of the Merger
1.3 Effects of the Merger
1.4 Certificate of Incorporation
1.5 By-Laws
ARTICLE 2. CONSIDERATION
2.1 Conversion of Shares
2.2 Surrender of Certificates
2.3 Cash Consideration.
2.4 Ownership of MFM Too
ARTICLE 3. SECURITIES DISCLOSURES REGARDING BAB SHARES
3.1 Unregistered Shares; Restrictions on Transfer
3.2 Registration Rights Agreement
ARTICLE 4. ACQUIRED ASSETS
4.1 Acquired Assets
ARTICLE 5. ACQUIRED LIABILITIES
5.1 Acquired Liabilities
ARTICLE 6. REPRESENTATIONS AND WARRANTIES OF MFM AND
SHAREHOLDERS
6.1 Due Formation
6.2 Due Authorization
6.3 No Breach
6.4 Clear Title
6.5 Condition of Assets
6.6 Litigation
6.7 Labor Matters
6.8 Taxes
6.9 Employee Benefits
6.10 Full Disclosure
6.11 Financial Statements
6.12 Absence of Certain Developments
6.13 Proprietary Rights
6.14 Compliance with Laws
6.15 Operating Contracts
6.16 Real Estate
6.17 Receivables
6.18 Books and Records
6.19 Employees
6.20 Licenses and Permits
6.21 Sufficiency of Assets
6.22 Other Material Contracts and Obligations
6.23 Shareholders
6.24 Subsidiaries
6.25 Products Liability Claims
6.26 Insurance
6.27 Brokers
6.28 Certain Payments
6.29 Relationship with Related Persons
6.30 Inventory
6.31 Environmental Matters
6.32 Franchise Operations
6.33 Expense of Claims Covered by Escrowed Stock
6.34 Breach of Representations and Warranties by Shareholders
ARTICLE 7. REPRESENTATIONS AND WARRANTIES OF BAB AND BAB SUB
7.1 Due Incorporation
7.2 Due Authorization
7.3 No Breach
7.4 Full Disclosure
7.5 Brokers
7.6 BAB Shares
7.7 Securities Laws Filings
7.8 Compliance with Laws
7.9 Licenses and Permits
7.10 Breach of Representations and Warranties by BAB or BAB
Subsidiaries.
ARTICLE 8. PERFORMANCE BY MFM AND SHAREHOLDERS PENDING CLOSING
8.1 Access to Information
8.2 Business As Usual
8.3 Encumbrances
8.4 Pay Increases
8.5 Restrictions on New Contracts
8.6 Additional Franchise Sales
8.7 Preservation of Business
8.8 Payment and Performance of Obligations
8.9 Restrictions on Sale of Assets
8.10 Prompt Notice
8.11 Consents
8.12 Copies of Documents
8.13 No Solicitation of Other Offers
8.14 Inventory
8.15 Insurance
8.16 Filing Reports and Making Payments
8.17 Capital Expenditures
8.18 COBRA
8.19 Limitation on Transactions in Purchasers' Securities
8.20 Dividends
ARTICLE 9. PERFORMANCE BY BAB AND BAB SUB PENDING CLOSING
9.1 Access to Information
9.2 Business As Usual
9.3 Preservation of Business
9.4 Prompt Notice
9.5 Filing Reports and Making Payments
ARTICLE 10. CONDITIONS PRECEDENT TO OBLIGATIONS OF BAB AND BAB
SUB
10.1 Accuracy of Representations and Warranties
10.2 Compliance with Covenants and Agreements
10.3 No Adverse Change
10.4 Proceedings
10.5 Consents and Approvals
10.6 Financial Statements
10.7 Employment
10.9 Due Authorization
ARTICLE 11. CONDITIONS PRECEDENT TO OBLIGATIONS OF MFM AND
SHAREHOLDERS
11.1 Accuracy of Representations and Warranties
11.2 Compliance with Covenants and Agreements
11.3 No Adverse Change
11.4 Proceedings
11.5 Consents and Approvals
ARTICLE 12. INDEMNIFICATION
12.1 Indemnification by the Shareholders
12.2 Indemnification by Purchaser
12.3 Procedure for Indemnification
12.4 Survival of Representations, Warranties and Covenants
12.5 Limitation on MFM, Inc.'s and Shareholders Obligations
ARTICLE 13. CLOSING
13.1 Closing
13.2 Documents to be Delivered by MFM and Shareholders
13.3 Documents to be Delivered by BAB and BAB Sub
ARTICLE 14. PERFORMANCE FOLLOWING THE EFFECTIVE TIME
14.1 Collection of Receivables
14.2 Further Acts and Assurances
ARTICLE 15. TERMINATION
15.1 Termination
15.2 Return of Documents and Nondisclosure
ARTICLE 16. TITLE AND RISK OF LOSS
16.1 Title and Risk of Loss
ARTICLE 17. DEFINITIONS
ARTICLE 18. MISCELLANEOUS
18.1 Preservation of and Access to Records
18.3 Employees
18.4 Public Announcements
18.6 Sales, Use and Deed Taxes
18.7 Notices
18.8 Entire Agreement
18.9 Remedies Cumulative
18.10 Specific Performance
18.11 Amendments
18.12 Successors and Assigns
18.13 Costs
18.14 Governing Law
18.15 Counterparts; Facsimile
18.16 Headings
18.17 Scope of Agreement
18.18 Number and Gender
18.19 Severability
18.20 Parties in Interest
18.21 Waiver
LIST OF SCHEDULES AND EXHIBITS
ACQUISITION AGREEMENT
THIS ACQUISITION AGREEMENT ("Agreement") is made and entered
into as of the 1st day of May, 1997, by and among BAB Holdings,
Inc., an Illinois corporation ("BAB"), BAB Acquisition
Corporation, an Illinois corporation ("BAB Sub") which is a
wholly-owned subsidiary of BAB; My Favorite Muffin Too, Inc.
("MFM Too"), a New Jersey corporation, Muffin Holdings of
Pennsylvania ("MH"), a New Jersey limited partnership, which is
wholly-owned by MFM Too (collectively "MFM"), and Owen Stern,
Ruth Stern and Ilona Stern, who are the sole shareholders of MFM
Too (collectively, the "Shareholders").
RECITALS
WHEREAS, the Shareholders are the owners of all of the
issued and outstanding shares of each class and series of capital
stock of MFM Too and, indirectly, through MFM Too, are the owners
of all equity interests in MH;
WHEREAS, MFM Too is engaged in the business of owning,
operating and franchising My Favorite Muffin stores; and MH is in
the business of owning and operating a My Favorite Muffin stores;
(collectively the "Business"); and
WHEREAS, MFM desires to transfer and convey to BAB, and BAB
desires to acquire, by merger through BAB Sub, all of the assets
and rights used or useful in, or related to the operation of the
Business on the terms and conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the foregoing recitals,
the mutual covenants contained herein and for other good and
valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
ARTICLE 1. THE MERGER
1.1 The Merger. At the Effective Time (as defined in
Section 1.2), BAB Sub shall be merged with and into MFM Too and
the separate existence of the BAB Sub shall thereupon cease, with
MFM Too being the surviving corporation in the Merger (the
"Survivor").
1.2 Effective Time of the Merger. The Merger shall become
effective upon the later of the filing of the Certificate of
Merger (a) with Secretary of State of the State of Illinois or
(b) with the Secretary of State of the State of New Jersey (the
"Effective Time"). The Certificates of Merger shall be filed as
soon as practicable after the Closing of the Merger under Article
13 hereof (the "Closing").
1.3 Effects of the Merger. The Merger shall have the
effects set forth in the applicable sections of the Illinois
Business Corporations Act and of the New Jersey Business
Corporations Act.
1.4 Certificate of Incorporation. The Certificate of
Incorporation of MFM Too, as in effect immediately prior to the
Effective Time, shall be the Certificate of Incorporation of the
Survivor.
1.5 By-Laws. The By-Laws of MFM Too, as in effect
immediately prior to the Effective Time, shall be the By-Laws of
the Survivor.
ARTICLE 2. CONSIDERATION
2.1 Conversion of Shares. As of the Effective Time, by
virtue of the Merger and without any action on the part of any
holder thereof:
(a) Each outstanding share of the Common Stock,
without par value, of BAB Sub shall be converted into the
right to receive one share of the Common Stock, without par
value, of MFM Too, resulting in the issuance of One Hundred
Fifty (150) shares of the Common Stock of MFM Too,
representing all of the issued and outstanding shares of
Common Stock of MFM Too, to BAB, the sole shareholder of BAB
Sub.
(b) The sole asset of BAB Sub, now merged into and
acquired by MFM Too, consisting of 432,608 shares of the
Common Stock of BAB, shall be distributed to the
Shareholders and to Pierce W. Hance as an accommodation to
the Shareholders.
(c) 18,625 BAB Shares of the number of BAB Shares
determined in 2.1(b) above, which number of BAB shares shall
be determined by dividing (i) $65,000 by (ii) the mean of
the closing prices of the Common Stock of BAB over the
thirty (30) trading days immediately preceding the date of
Closing, shall be issued to Pierce W. Hance as an
accommodation to the Shareholders in partial consideration
of the fee or fees due to Pierce W. Hance and Strategic
Advisory Group, Inc. by the Shareholders upon consummation
of this Agreement.
(d) Upon such distribution to and on behalf of the
Shareholders, all outstanding shares of MFM Too held by the
Shareholders shall be canceled and retired and shall cease
to exist, and BAB shall then be the sole shareholder of MFM
Too.
2.2 Surrender of MFM Too Certificates.
(a) Immediately after the Effective Time, the
Shareholders shall surrender to BAB the certificate or
certificates which, prior to the Effective Time, represented
the shares of MFM Too owned by the Shareholders, duly
endorsed in blank or accompanied by an appropriate
instrument of transfer satisfactory in form and substance to
counsel for BAB. Upon such surrender and subject to Section
2.2(b) below, BAB shall issue stock certificates evidencing
the number of unregistered BAB Shares to the Shareholders
and to Pierce W. Hance as an accommodation to the
Shareholders, as set forth below:
<TABLE>
<CAPTION>
MFM Too Cert. No. and No. of BAB
Shareholder No. of Shares Shares
- --------------------- --------------------- --------------
<S> <C> <C>
Owen Stern Cert. No.3/50 shares 140,755 shares
Ruth Stern Cert. No.1/50 shares 136,614 shares
Ilona Stern Cert. No.2/50 shares 136,614 shares
Pierce W. Hance 18,625 shares
</TABLE>
(b) Two Hundred Thousand (200,000) BAB Shares of the
BAB Shares issued pursuant to Section 2.2(a) above, shall be
delivered to LaSalle National Trust, N.A., or such other
entity as mutually agreed to by BAB and Shareholders, as
Escrow Agent, to be held pursuant to an Escrow Agreement
substantially in the form attached hereto as Exhibit A,
pending the resolution of each of the Heron and Mann
arbitration claims, an unasserted, potential claim by Mr.
Carpet, and the resolution of the New Jersey sales audit
inquiry (the "Escrowed Shares"). The Escrowed Shares shall
be applied to offset the amount of any award, with respect
to the arbitration proceedings or carpet claim, or final
determination of tax liability by order of court or by
agreement of the taxing authority and BAB, with respect to
the sales audit inquiry. The number of shares to be applied
to each such offset shall be the amount of the award or tax
liability divided by the per share price determined in
Section 2.1(b)(ii) above. The Escrowed Stock shall not be
applied to the costs or expenses of the defense of such
claims. Since the amount of damages claimed in the Heron
matter is greater than fifty percent (50%) of the value of
the Escrowed Shares, within thirty (30) days of the
resolution of the Heron claim, BAB and the Shareholders
shall determine the number of Shares to remain escrowed
which they shall reasonably agree to be sufficient to cover
the value of the remaining claims based upon the facts,
circumstances and status of the remaining claim or claims at
that time. After deducting the number of BAB Shares to
satisfy the Heron claim, if any, and after deducting the
number of Shares to adequately cover the value of the
remaining claim(s) with respect to the Escrowed Stock, if
there is a surplus of Shares of Escrowed Stock, such surplus
Shares shall be released to the Shareholders. Upon
resolution of all four claims, any remaining Escrowed Shares
shall be released to the Shareholders.
2.3 Cash Consideration. As additional consideration, BAB
shall pay at Closing by bank check, money order or wire transfer
the amount of One Hundred Ninety-Seven Thousand Seven Hundred
Fifty Dollars ($197,750) jointly to Owen and Ruth Stern, and
Sixty-One Thousand Two Hundred Fifty Dollars ($61,250) to Ilona
Stern.
2.4 Ownership of MFM Too. At the Effective Time, and by
virtue of the Merger, all of the assets and liabilities of MFM
Too shall be beneficially owned by BAB as a result of MFM Too
becoming a wholly-owned subsidiary of BAB.
ARTICLE 3. SECURITIES DISCLOSURES REGARDING BAB SHARES
3.1 Unregistered Shares; Restrictions on Transfer. The
Shareholders understand, acknowledge, represent and agree as
follows with respect the BAB Shares:
a. The BAB Shares have not been registered under the
Securities Act (as hereinafter defined) or any state
securities law and BAB is relying upon exemptions from such
registration in connection with the issuance of the BAB
Shares to Shareholders.
b. Shareholders are acquiring the BAB Shares for
their own account for investment, with no present intention
of distributing, reselling, pledging or otherwise disposing
of its interest in the BAB Shares.
c. Shareholders have been provided with access to all
information with respect to BAB and its business (including
the opportunity to meet with the BAB's officers, to request
additional information regarding BAB's financial condition,
properties, management and material contracts, and ask
questions of them), and have utilized such access to make an
informed decision to acquire the BAB Shares.
d. Shareholders may not sell the BAB Shares prior to
January 1, 1999 and may not sell the BAB Shares thereafter
unless they are registered under the Securities Act and
applicable state securities laws or pursuant to an
applicable exemption from such registration requirements.
Even if such shares are so registered or if exemption from
registration is available, there can be no assurance that
there will be a market for these shares.
e. Any certificate representing the BAB Shares will
bear a legend 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.
3.2 Registration Rights Agreement. BAB agrees to
register the BAB Shares for sale under the Securities Act of
1993 on or before December 31, 1997 either pursuant to
participatory rights in a secondary offering or in a
separate registration pursuant to the terms and conditions
set forth in a Registration Rights Agreement substantially
in the form attached as Exhibit A.
ARTICLE 4. ACQUIRED ASSETS
4.1 Acquired Assets. As of the Effective Time, the
Survivor, for the benefit of BAB, shall acquire from MFM the
assets, properties, Contracts, operations and business used or
useful in connection with the operation of the Business owned and
operated by MFM, which are to be acquired pursuant to this
Agreement (collectively the "Assets") including, without
limitation:
a. All of MFM's right, title and interest in and to
the real property leased by MFM in connection with the
operation of the Business, together with the improvements,
fixtures, hereditaments and appurtenances thereto;
b. All of MFM's right, title and interest in and to
any and all federal, state, foreign and common law
trademarks, trademark registrations and applications
therefor, service marks, service mark registrations and
applications therefor, copyrights, copyright registrations
and applications therefor, trade names, assumed names,
logos, patents, patent applications, technology, know-how,
trade secrets, processes, formulas, recipes, drawings,
designs and similar intellectual property and proprietary
rights of any kind, as well as MFM's transferable interests
in any and all federal, state and foreign common law rights
protecting the same, including, but not limited to, those
proprietary rights described on Schedule 4.1(b) hereto (the
"Proprietary Rights");
c. All of MFM's equipment, machinery, furniture,
fixtures, furnishings, tooling, personal property, shelving,
patterns, molds, office equipment, computer hardware, trade
fixtures, leasehold improvements, tools and other tangible
personal property owned or leased by MFM and used or useful
in the operation of the Business, together with any
manufacturer, vendor or installer warranties thereon
("Personal Property");
d. All of MFM's vehicles used or useful in the
operation of the Business, including, but not limited to,
those vehicles described on Schedule 4.1(d) hereto (the
"Vehicles");
e. All of the telephone numbers and telephone
directory advertisements used by MFM in the operation of the
Business;
f. All of MFM's business records relating to the
Business, including, but not limited to, files and records,
customer lists, lists of suppliers, operations and other
manuals, accounting records (including work papers related
thereto), correspondence, files, research data, advertising
data, Contracts and other records and information necessary
or desirable for Purchaser to carry on the Business in the
ordinary course on and after the Effective Time;
g. All of MFM's contract rights and benefits in and
to the Contracts, Contracts in progress, commitments,
leases, licenses, franchise agreements, area franchise
development agreements and all other agreements which relate
to or arise from or are used or are necessary for the
Business and any amendments thereto; all such Contracts,
Contracts in progress, commitments, leases, agreements,
licenses, franchise agreements, area franchise development
agreements and all other agreements are described in
Schedule 4.1(g) hereto (the "Operating Contracts");
h. All of MFM's governmental licenses, certificates,
franchises, permits, registrations, concessions, consents
and approvals related to the Business, including, but not
limited to, those described in Schedule 4.1(h) hereto (the
"Licenses");
i. All of MFM's prepaid expenses, credit memos and
deposits which relate to the Business, the categories of
which are described in Schedule 4.1(i) hereto;
j. All of MFM's office, shop and other supplies used
in the operation of the Business and which are on hand as of
the Effective Time;
k. All of MFM's accounts receivable, notes receivable
and other rights to the payment of money arising out of the
operation of the Business and which remain uncollected on
the Effective Time, whether or not evidenced by a writing or
reflected on the Balance Sheets (as hereinafter defined)
(the "Receivables");
l. All of MFM's inventory which is on hand as of the
Effective Time, including raw materials, work in process and
finished goods (the "Inventory");
m. All of the plans, specifications, blueprints,
surveys, repair and operating manuals, warranties,
guaranties, maintenance records, information regarding real
estate taxes, assessments and/or insurance and other written
information in the possession of MFM Too or MH relating to
any of the Purchased Assets or to the improvements on any
Leased Premises as well as copies of the certificates of
occupancy for such improvements;
n. All of MFM's rights, if any and to the extent
transferable, in any computer software and software program
documentation in computer readable and hard-copy forms
reasonably acceptable to Purchaser, including, but not
limited to, the software described in Schedule 4.1(n) hereto
(the "Software");
o. All of MFM's rights and claims against third
parties relating to the Purchased Assets;
p. All of MFM's supply of brochures, displays, models
and other marketing materials on hand as of the Effective
Time, as well as the camera ready art, negatives, proofs and
other reproduction materials for the same;
q. All saleable goodwill as a going concern and other
intangible personal property of MFM which comprise a part of
the Business;
r. All cash and cash equivalents on hand and/or on
deposit in bank and/or brokerage accounts as of the
Effective Time;
s. All other assets of MFM of every type, nature and
description; and
t. All accretions and additions to the Purchased
Assets that occur prior to the Effective Time.
ARTICLE 5. ACQUIRED LIABILITIES
5.1 Acquired Liabilities. MFM covenants and agrees that as
of the Effective Date debts, liabilities and obligations of MFM
set forth in the following subsections (a) through (g) represent
all of such debts, liabilities and obligations as of such date:
a. Contracts, Leases, Agreements, Etc.; Liens.
Schedule 5.1(a) sets forth a list (including, in the case of
oral arrangements, a written description of all material
terms thereof) of each lease, contract, agreement (including
hold harmless agreements) or other commitments, written or
otherwise, related to MFM and/or the Business or the Assets
(as of March 31, 1997, or such later date as may be stated
on such Schedule), including, without limitation, the
following:
(i) The purchase of any services, materials,
inventory, services, supplies or equipment;
(ii) The sale of assets, products or services
(including customer purchase orders), which is in any
way not yet performed;
(iii) The lease of any equipment, furniture,
furnishings, fixture, vehicles, machinery or any other
personal property; or
(iv) The lease of any real property.
Except as specifically set forth in Schedule
5.1(a), each contract, commitment, or arrangement
referred to in Schedule 5.1(a) is terminable pursuant
to the terms of the contract without penalty, cost, or
liability on notice not exceeding sixty (60) days. MFM
is not in material breach (nor has it received notice
of a claim that it is in material breach) of any
contracts identified on Schedule 5.1(a) as not
terminable on 60 days notice. All such contracts,
commitments or other arrangements are assignable
without consent of any person other than as listed in
Schedule 5.1(a) and such consents, if any, as are
required shall be obtained by MFM prior to the Closing.
b. Loans and Credit Agreements, Etc. Schedule 5.1(b)
sets forth a list of all outstanding mortgages, promissory
notes, evidences of indebtedness, security agreements, deeds
of trust, indentures, loan or credit agreements or similar
instruments for money borrowed, excluding normal trade
credit, related to the Business or the Assets to which MFM
is a party (as lender or borrower), written or otherwise,
and all amendments or modifications, if any, thereof.
c. Insurance Policies and Claims. Schedule 5.1(c)
sets forth a list of all policies of insurance maintained by
MFM and covering its officers, directors, employees, or the
Business or the Assets, copies of which policies have been
provided by MFM or the Shareholders to BAB, which list
includes descriptions of each claim made by MFM under any
such policy of insurance within the past 3 years, describing
such claim and the amount thereof.
d. Employee Plans. Schedule 5.1(d) sets forth a list
of all Employee Plans (as defined below) of MFM and any
related insurance contracts and trust and custodial
agreements.
"Employee Plans" means any health care plan or
arrangement; life insurance or other death benefit plan;
deferred compensation or other pension or retirement plan;
stock option, bonus or other incentive plan; severance or
early retirement plan; or other fringe or employee benefit
plan or arrangement; or any employment or consulting
contract or executive compensation agreement; whether the
same are written or otherwise, formal or informal, voluntary
or required by law or by MFM's policies or practices,
including, without limitation, any "pension plan" as defined
in Section 3(2) of the Employee Retirement Income Security
Act of 1974, as amended, and regulations promulgated
thereunder ("ERISA"), any "welfare plan" as defined in
Section 3(1) of ERISA (whether or not any of the foregoing
is funded), (i) to which MFM is a party or by which MFM is
bound with respect to any present or former employees; (ii)
which MFM has at any time established or maintained for the
benefit of or relating to present or former employees,
leased employees or agents of the Business, and/or their
dependents, or directors of MFM; or (iii) with respect to
which MFM has made any payments or contributions since the
date of the Balance Sheet, or otherwise has any liability.
e. Taxes. Schedule 5.1(e) sets forth a list of (i)
all tax, assessment or information reports and returns
related to the Business or the Assets filed by or on behalf
of MFM or its predecessors, subsidiaries or affiliates with
any jurisdiction during the last three years, and (ii) a
list of all tax or assessment elections of MFM in effect.
f. Employees. Schedule 6.19 sets forth the name and
current compensation of each employee, including bonuses and
incentive pay arrangements.
g. Other Obligations. Schedule 5.1(g) sets forth a
list of all other obligations related to the Business or the
Assets to be assumed by BAB.
ARTICLE 6. REPRESENTATIONS AND WARRANTIES OF MFM AND
SHAREHOLDERS
As an inducement for BAB and BAB Sub to enter into this
Agreement and consummate the transactions contemplated hereby,
intending that BAB and BAB Sub rely thereon in entering into and
performing this Agreement, MFM and the Shareholders jointly and
severally warrant and represent to BAB and BAB Sub that each and
all of the following are true and correct in all material
respects as of the date of this Agreement and will be true and
correct in all material respects at and as of the Closing:
6.1 Due Formation. MFM, Too is a corporation duly formed,
validly existing and in good standing under the laws of the State
of New Jersey and has all requisite power and authority,
corporate and otherwise, to own, operate and lease their
properties and assets and to conduct their respective portion of
the Business as it is now being conducted. MH is a limited
partnership duly formed, validly existing in a good standing
under the laws of the State of New Jersey and has all requisite
power and authority to own, operate and lease its properties and
assets and to conduct its respective portion of the Business as
it is now being conducted. All of the interests in MH, as
general partner and limited partner, are owned beneficially and
of record by MFM Too. Each of MFM Too and MH is duly qualified
to transact business as a foreign corporation or partnership, as
applicable and is in good standing under the laws of New Jersey;
and there are no other jurisdictions in which any of them is
required to be so qualified and the failure to be so qualified
could reasonably be expected to have a Material Adverse Effect
(as hereinafter defined) on MFM Too, MH. Neither MFM Too nor MH
is subject to any Contract which restricts or may restrict the
conduct of the Business in any jurisdiction or location except
for territorial protections contained in MFM's franchise
agreements and area development agreements listed on Schedule
4.1(g) hereto.
6.2 Due Authorization. The execution, delivery and
performance of this Agreement, including the documents,
instruments and agreements to be executed and/or delivered by MFM
pursuant to this Agreement, and the consummation of the
transactions contemplated hereby and thereby have been duly and
validly authorized by all necessary corporate action on their
part including authorization by their respective Board of
Directors, general partner, and Shareholders, as applicable.
This Agreement and the documents, instruments and agreements to
be executed and/or delivered by MFM and the Shareholders pursuant
to this Agreement have been or will be on or before the Effective
Time duly and validly authorized, executed and delivered by MFM
and the Shareholders, and the obligations of MFM and the
Shareholders hereunder and thereunder are or will be upon such
execution or delivery valid and legally binding, and this
Agreement and the documents, instruments and agreements to be
executed and/or delivered by MFM and the Shareholders pursuant to
this Agreement are or will be upon such execution and delivery
enforceable against MFM and the Shareholders in accordance with
their respective terms, except as such enforcement may be limited
by applicable bankruptcy, reorganization, insolvency, moratorium
or other similar laws presently or hereafter in effect affecting
the enforcement of creditors' rights generally and by general
principles of equity (regardless of whether such enforceability
is considered in a proceeding at law or in equity), including,
among others, limitations on the availability of equitable
remedies.
6.3 No Breach. MFM has full corporate (or partnership)
power and authority to perform its obligations under this
Agreement and the documents, instruments and agreements to be
executed and/or delivered by them pursuant hereto. The execution
and delivery of this Agreement, including the documents,
instruments and agreements to be executed and/or delivered by MFM
pursuant to this Agreement, and the consummation of the
transactions contemplated hereby and thereby will not: (i)
violate any provision of the Certificate of Incorporation or
Bylaws (or comparable governing documents or instruments) of MFM
Too or MH; (ii) to their Knowledge, violate any Applicable Laws
(as hereinafter defined), issued, enacted, entered or deemed
applicable by any Governmental Body (as hereinafter defined)
having jurisdiction over MFM Too or MH or any of their respective
properties or assets; (iii) to their Knowledge, except as
provided in Schedule 6.3 hereto, require any filing with, permit
from, consent or approval of, or the giving of any notice to, any
Person (as hereinafter defined); (iv) to their Knowledge, except
as provided in Schedule 6.3 hereto, result in a violation or
breach of, or constitute (with or without due notice or lapse of
time or both) a default (or give another party any rights of
termination, cancellation or acceleration) under any of the
terms, conditions or provisions of any note, bond, mortgage,
indenture, license, franchise, permit, lease, or other Contract
to which MFM is a party, or by which it or any of its properties
or assets may be bound, including the Operating Contracts; or (v)
to their Knowledge, result in the creation or imposition of any
Encumbrance on any of the Assets of MFM.
6.4 Clear Title. At the time good, valid and marketable
title to all of the Assets, whether real, personal or mixed, and
whether tangible or intangible including, without limitation, all
of the properties and assets reflected on the Balance Sheets
(except for personal property sold since the date of the Balance
Sheets in the Ordinary Course of Business), free and clear of any
and all Encumbrances, of any kind, nature or description
whatsoever, except as provided in Schedule 6.4 hereto.
6.5 Condition of Assets. All of the Assets to be acquired
pursuant to the merger contemplated by this Agreement (i) have
been maintained in accordance with prudent business practice,
(ii) are in reasonably good operating condition and repair,
subject only to ordinary wear and tear, and (iii) are usable and
fit for their intended purpose. MFM and the Shareholders shall
use their respective best efforts and shall cooperate with BAB
and BAB Sub with respect to the transfer to Survivor of all
existing manufacturers', vendors', installers' or other
warranties for the Assets which are in effect as of the Effective
Time.
6.6 Litigation. Except as described in Schedule 6.6
hereto, neither MFM nor the Shareholders has notice of any
pending Proceeding (as hereinafter defined):
a. that has been commenced by or against MFM or the
Shareholders relates to or may affect the business of, or
any of the assets owned or used by, MFM or the Shareholders;
or
b. that challenges, or that may have the effect of
preventing, delaying, making illegal, or otherwise
interfering with, any of the transactions contemplated
hereby.
To the Knowledge of MFM and the Shareholders, (1) no such
Proceeding has been Threatened (as hereinafter defined), and (2)
no event has occurred or circumstance exists that MFM or the
Shareholders, in exercise of reasonable judgment, believe may
give rise to, or serve as a basis for, the commencement of any
such Proceeding. Each of MFM has delivered to BAB copies of all
pleadings, correspondence, and other documents relating to each
Proceeding listed in Schedule 6.6 hereto. Except as otherwise
disclosed in Schedule 6.6, the Proceedings listed in Schedule 6.6
will not have a Material Adverse Effect on MFM or the Business.
Neither of MFM nor the Shareholders has notice that such person
is a party to or subject to the provisions of any writ, ruling,
award, executive order, directive, requirement, injunction
(whether temporary, preliminary or permanent), judgment, decree
or other order issued, enacted, entered or deemed applicable by
any Governmental Body which could, individually or in the
aggregate, reasonably be expected to have a Material Adverse
Effect on MFM or the Survivor or impair the ability of MFM or the
Shareholders to consummate the transactions contemplated hereby.
6.7 Labor Matters. MFM has never been a party to any
collective bargaining agreement or other labor Contract. There
has never been, and there is not presently pending or existing,
and to the Knowledge of MFM and the Shareholders there is not
Threatened, any strike, slowdown, picketing, work stoppage, labor
arbitration or other Proceeding with respect to any grievance of
any employee, application or complaint filed by an employee or
union with the National Labor Relations Board, or any comparable
Governmental Body, organizational activity, or other labor
dispute against or affecting any of MFM or the Business, and no
application for certification of a collective bargaining
agreement is pending or, to the Knowledge, is Threatened. To the
best of their Knowledge of MFM and the Shareholders, no event has
occurred or circumstance exists that could provide the basis for
any work stoppage or other labor dispute. There is no lockout of
any employees by any of MFM Too or MH and no such action is
contemplated by MFM. MFM has complied in all material respects
with all Applicable Laws relating to employment, equal employment
opportunity, discrimination, harassment, immigration, wages,
hours, benefits, collective bargaining, the payment of social
security and similar taxes, occupational safety and health, and
plant closing, and MFM has no notice of any allegation, charge,
complaint or Proceeding pending or to its Knowledge Threatened
against it or any of its officers, directors, or employees
relating to any such laws, and MFM has no notice of any basis for
any such allegation, charge, complaint, or Proceeding.
6.8 Taxes.
a. Except as described in Schedule 6.8 hereto, all
returns and reports, including, without limitation,
information and withholding returns and reports ("Tax
Returns") of or relating to any foreign, federal, state,
county, local or other Tax (as hereinafter defined) that are
required to be filed on or before the Effective Time by or
with respect to MFM or any other corporation or entity that
is or was a member of an affiliated group (within the
meaning of Section 1504(a) of the Code) of which MFM was a
member for any period ending on or prior to the Effective
Date, have been or will be duly and timely filed, and all
Taxes (as hereinafter defined), including interest and
penalties, due and payable pursuant to such Tax Returns,
have been paid or adequately provided for in reserves
established by MFM, except where the failure to file, pay,
or provide for do not, and insofar as reasonably can be
foreseen will not have, a Material Adverse Effect on the
Survivor, or the Business.
b. Except as described in Schedule 6.8 hereto, MFM
has no notice of any material claim against any of them with
respect to any Taxes, and no material assessment, deficiency
or adjustment has been asserted or proposed with respect to
any Tax Return of or with respect to MFM that has not been
adequately provided for in reserves established by MFM.
c. Except as described in Schedule 6.8 hereto, the
total amounts set up as liabilities for current and deferred
Taxes on the books of MFM has been prepared in accordance
with GAAP and are sufficient to cover the payment of all
material Taxes, including any penalties or interest hereon
and whether or not assessed or disputed, that are, or are
hereafter found to be, or to have been, due with respect to
the operations of the MFM through the periods covered
thereby.
d. With respect to MH, MH has filed all required tax
returns, and those tax returns have been materially accurate
in all respects. MH is not under examination and has not
been notified of any examinations by any tax authorities.
The general partner and limited partners have reported all
income and loss consistent with the K-1s.
6.9 Employee Benefits.
a. Neither MFM nor any current or former
affiliate of any of MFM, has at any time maintained,
contributed to, or obligated itself, or otherwise had
any debt, liability or obligation with respect to any
Benefit Plans (as hereinafter defined), with respect to
which the Survivor or BAB will incur any debts,
liabilities or obligations as a result of the
consummation of the transactions contemplated hereby;
and
b. the requirements related to the continuation
of medical benefit coverage for former employees of
MFM, their spouses, and other dependents as required to
be provided under Section 4980B of the Code and Part 6
of Subtitle B of Title I of ERISA and the accompanying
proposed regulations and state continuation coverage
laws ("COBRA") have been satisfied and will be
satisfied by MFM following the Effective Date.
6.10 Full Disclosure. No representation or warranty made by
MFM or by Shareholders in this Agreement, including the
documents, instruments and agreements to be executed and/or
delivered by any of them pursuant to this Agreement, and no
statement, certificate or other document or instrument furnished
or to be furnished by or on behalf of either any of them pursuant
to this Agreement or in connection with the consummation of the
transactions contemplated hereby, contains or will contain any
untrue statement of a material fact or omits or will omit, to
state a material fact necessary to make the statements contained
herein and therein not misleading or any fact necessary to
provide BAB with proper and adequate information concerning the
properties, Assets, revenues, Business, operations, liabilities,
financial condition and prospects of MFM. Neither MFM nor the
Shareholders has knowingly failed to fully disclose to BAB any
and all facts and information known to it/him/them that
reasonably could be expected to have a Material Adverse Effect on
the Survivor or the Business.
6.11 Financial Statements. MFM Too has furnished true and
correct copies to BAB of the audited financial statements
identified in Schedule 6.11 attached hereto, which financial
statements include MH financial/operating information and has
furnished true and correct copies to BAB of the MFM, Inc.
reviewed financial statements identified in Schedule 6.11.
Except as provided in Schedule 6.11 hereto, all of said financial
statements, including any notes thereto, are true and correct in
all material respects and fairly present their financial position
and condition as of the respective dates of such statements and
their results of operations for the periods covered, in
accordance with GAAP applied on a basis consistent with that of
prior years and periods. MFM shall, as soon as reasonably
possible, furnish to BAB combined, audited financial statements
for MFM Too, MH and MFM, Inc. for the twelve-month period ended
December 31, 1996 and combined financials statements for such
entities for the three-month period ended March 31, 1997, as if
MFM was reporting on a consolidated basis for such periods. The
audited financial statements to be provided to BAB will satisfy
applicable requirements under the Securities Act of 1933 and the
Securities and Exchange Act of 1934. The auditors of MFM are
"independent" auditors whose reports are or will be in conformity
with Regulation S-X. Subsequent to December 31, 1996, which is
the date of the most recent audited financial statements of MFM
Too and the most recent reviewed financial statements of MFM,
Inc. (collectively the "Financial Statements") provided in
Schedule 6.11, there have been no material adverse changes in the
properties, assets, liabilities, revenues, expenses, operations,
financial condition or prospects of the Business from that
reflected in said Financial Statements. Except for debts,
liabilities and obligations (i) to be reflected or reserved
against in the Financial Statements or in the notes thereto, (ii)
current liabilities incurred in the Ordinary Course of Business
since the date of the balance sheets, and/or (iii) described on
Schedule 6.11 hereto, MFM does not have any debts, liabilities or
obligations of any nature, whether secured, unsecured, known,
unknown, accrued, absolute, fixed, contingent or otherwise,
whether due or to become due, which, individually or in the
aggregate, could reasonably be expected to have a Material
Adverse Effect on the Survivor or the Business. Except as
otherwise described herein, all debts, liabilities and
obligations incurred after the date of the Financial Statements
have been incurred in the Ordinary Course of Business, and are
usual and ordinary in amount both individually and in the
aggregate, and the net worth of MFM has not materially
deteriorated since such date.
6.12 Absence of Certain Developments. Except for the
transaction contemplated by this Agreement, since December 31,
1996, MFM has conducted the Business only in the Ordinary Course
of Business and has not:
a. Sold, assigned or otherwise transferred any
properties or assets other than in the Ordinary Course of
Business;
b. Suffered any material loss or waived or released
any material right or claim in the Ordinary Course of
Business;
c. Suffered, sustained or incurred any material
damage, destruction or casualty loss to any properties or
assets, whether or not covered by insurance;
d. Engaged in any transaction not in the Ordinary
Course of Business;
e. Made any capital expenditure exceeding $10,000;
f. Incurred any debts, liabilities or obligations,
absolute or contingent, known or unknown, except current
liabilities incurred in the Ordinary Course of Business;
g. Loaned money to any Person, or guaranteed any loan
to any Person, whether or not in the Ordinary Course of
Business;
Except as described in Schedule 4.1(g) hereto, amended
or terminated any of their operating contracts or licenses
(collectively, the "Operations Contracts" and "Licenses,"
except in the Ordinary Course of Business;
a. Changed accounting methods or practices
(including, without limitation, any change in depreciation,
amortization or cost accounting policies or rates);
b. Suffered, sustained or incurred any material
adverse change in the properties, Assets, revenues,
Business, operations, financial condition or prospects of
MFM or the Business;
c. Received notice from any customer, franchisee,
lessor, vendor or any other Person which could reasonably be
expected to have, give rise to or result in a Material
Adverse Effect on the Survivor or the Business; or
d. Entered into any Contract to do any of the
foregoing.
6.13 Proprietary Rights. Schedule 4.1(b) hereto contains a
list of all of the federal, state, foreign and common law
trademarks, trademark registrations and applications therefor,
service marks, service mark registrations and applications
therefor, copyrights, copyright registrations and applications
therefor, trade names, assumed names, logos, patents, patent
applications, technology, know-how, trade secrets, processes,
formulas, drawings, designs and other similar intellectual
property and/or proprietary rights of any kind used in the
operation of the Business collectively, the ("Proprietary
Rights"). Schedule 4.1(n) hereto contains a list of all of the
computer software and software program documentation of any kind
used in the conduct of the Business collectively, the
("Software"). Except as set forth in Schedule 6.13 hereto,
either MFM nor the Shareholders has any Knowledge of any asserted
claim or any reason to believe that the operations of the
Business or the possession or use in the Business of any of the
Assets, including the Proprietary Rights and/or Software,
infringes any trademark, service mark, copyright, trade name,
assumed name, logo, patent, technology, know-how, trade secret,
process, formula, drawing, design or other intellectual property
or proprietary rights of any other Person; except as provided in
the franchise agreements and area franchise development
agreements included in the Operating Contracts, or in contracts,
commitments, leases, licenses and other agreements which relate,
arise from, or are used or necessary for the Business and any
amendments thereto. MFM has the right to use all of the
Proprietary Rights and the sole and exclusive right to use MFM
trade names, trademarks, service marks and other intellectual
properties which have been registered with the U.S. Patent and
Trademark Office; neither MFM nor the Shareholders have entered
into any Contract or license that would impair rights to transfer
their respective rights in and to the Proprietary Rights and/or
Software to the Survivor. Neither MFM nor the Shareholders has
any reason to believe that any of the MFM Proprietary Rights are,
or are claimed to be, invalid; and, except as provided in
Schedule 4.1(n) hereto, neither of MFM nor the Shareholders is
obligated under any license, Contract or otherwise to pay
royalties, fees or other payments with respect to any of the
Proprietary Rights and/or Software. Except as provided in
Schedule 6.3 hereto, the assignment of the Proprietary Rights and
Software to the Survivor at the Effective Time pursuant to the
merger and purchase transactions contemplated by this Agreement
does not require any filing with, permit from, consent or
approval of, or the giving of any notice to, any Person.
6.14 Compliance with Laws. To the Knowledge of MFM and the
Shareholders, the Business has been operated and MFM is in
substantial compliance with, all requirements of the Licenses,
all Applicable Laws, and all requirements of insurance carriers,
and there exists no condition which could give rise to a
cancellation or nonrenewal of any insurance coverage or License.
Neither of MFM nor the Shareholders has notice of any presently
existing circumstances which are likely to result in any
violation of a material nature of any Applicable Laws respecting
MFM, the Assets or the Business.
6.15 Operating Contracts. The Operating Contracts set forth
on Schedule 4.1(g) hereto include all Contracts, commitments,
leases, licenses and all other agreements, including franchise
agreements and area franchise development agreements which relate
to, arise from or are used or are necessary for the operation of
the Business. All of the Operating Contracts are valid, binding
in all material respects and currently in full force and effect,
and the performance by the parties thereto will not, individually
or in the aggregate, have a Material Adverse Effect upon MFM, the
Business or BAB's operation of the Business. Neither MFM nor the
Shareholders has been notified of and none of them knows of any
default in any material respect under any of the Operating
Contracts, and to their Knowledge, no event has occurred which,
through the passage of time or the giving of notice, or both,
would constitute a default or give rise to a right of termination
or cancellation under any of the Operating Contracts, or cause
the acceleration of an obligation of MFM or result in the
creation of any Encumbrance whatsoever upon any of the Assets,
except as disclosed in writing to BAB by MFM and the Shareholders
prior to the Effective Time. To the Knowledge MFM and the
Shareholders, no other party is in default under any of the
Operating Contracts, nor has any event occurred which, through
the passage of time or the giving of notice, or both, would
constitute a default or give rise to a right of termination or
cancellation under any of the Operating Contracts, or cause the
acceleration of any obligation owed to or by MFM. Except as
described on Schedule 4.1(g) hereto, none of the Operating
Contracts have been canceled, terminated, amended or modified
and, to the Knowledge of MFM and the Shareholders, all parties to
such Operating Contracts are in all material respects in
compliance therewith. Except as provided in Schedule 6.3 hereto,
all of the Operating Contracts are assignable to and assumable by
the Survivor without giving advance notice to or receiving the
consent or approval of any Person and any such required notices,
consents and approvals, if any, as are required shall be given or
obtained by MFM or the Shareholders prior to the Closing.
6.16 Real Estate. With respect to the Leased Premises:
a. Schedule 4.1(g) contains a complete and accurate
list of all leases, copies of which leases, including any
modifications, extensions and amendments thereto with
respect to the Leased Premises and any and all premises
Leased by MFM (the "Leased Premises") have been provided to
BAB by MFM;
b. Neither of MFM nor the Shareholders has been
notified of any special assessments levied or assessed on or
against any Leased Premises;
c. To the Knowledge of MFM and the Shareholders,
there are no public improvements affecting any Leased
Premises, including, but not limited to, water, sewer,
sidewalk, street, alley, curbing, landscaping or related
improvements, which have been commenced and/or completed and
for which an assessment has not been levied or, to the
Knowledge of MFM and the Shareholders, which may be levied
after the date of this Agreement. To the Knowledge of MFM
and the Shareholders, there are no planned public
improvement which may result in an assessment against or
otherwise materially affect any Leased Premises;
d. There are no condemnation Proceedings pending or,
to the Knowledge of MFM and the Shareholders, Threatened, as
defined herein, with respect to all or any part of any
Leased Premises which are likely to adversely affect the use
or occupancy of such Leased Premises or the operation of the
Business therein by the Survivor after the Effective Time;
e. Except as set forth in the leases for the Leased
Premises, to the Knowledge of MFM and the Shareholders,
there are no private restrictions, covenants, reservations
or agreements which affect the use or occupancy of any
Leased Premises;
f. To the Knowledge of MFM and the Shareholders,
there are no Applicable Laws issued, enacted, entered or
deemed applicable by any Governmental Body requiring repair,
alteration or correction of any existing condition on any
Leased Premises and there are no conditions that could give
rise to the same;
g. To the Knowledge of MFM and the Shareholders,
there are no structural, mechanical or other defects of
material significance in any of the buildings, improvements,
fixtures and equipment, including the roof, heating,
ventilating, air conditioning, electrical, plumbing and
sanitary disposal systems, located on any Leased Premises
which are likely to adversely affect the use or occupancy of
such Leased Premises or the operation of the Business
therein by the Survivor. To the Knowledge of MFM and the
Shareholders, all such Leased Premises, including the
leasehold improvements, fixtures, equipment, roof, and
heating, ventilating, air conditioning, electrical, plumbing
and sanitary disposal systems, have been and will be until
the Effective Time maintained in good repair, working order
and condition;
h. To the Knowledge of MFM and the Shareholders, each
of the Leased Premises has direct legal access to, abuts,
and is served by a publicly dedicated and maintained road,
which road provides a valid means of ingress and egress to
and from each Leased Premises, without additional cost or
expense to the Survivor, and to the Knowledge of MFM and the
Shareholders, there are no applications, ordinances,
petitions, resolutions or other matters pending before any
Governmental Body in regard to access routes, curb cuts,
median strips, or other contemplated actions which might
tend to diminish or curtail the full flow of traffic by any
Leased Premises or access thereto; and
i. To the Knowledge of MFM and the Shareholders, all
utilities, including water, gas, telephone, electricity,
sanitary and storm sewers are currently available to each of
the Leased Premises at normal and customary rates.
6.17 Receivables. Except as set forth in Schedule 6.17,
all accounts receivable of MFM that are reflected on the
Financial Statements (collectively, the "Accounts Receivable")
represent, or will represent, valid obligations arising from
sales actually made or services actually performed in the
Ordinary Course of Business. To the Knowledge of MFM and the
Shareholders, (a) the Accounts Receivable are or will be as of
the Effective Time current and collectible net of the respective
reserves shown on the Financial Statements (which reserves are
reasonably adequate and calculated consistent with past practice)
unless paid prior to the Effective Time, (b) the Accounts
Receivable as of the Effective Time will not represent a material
adverse change in the composition of such Accounts Receivable in
terms of aging from those reflected in the Balance Sheets, and
(c) there is no contest, claim, or right of set-off in any
Contract with any maker of an Accounts Receivable, relating to
the amount or validity of such Accounts Receivable.
6.18 Books and Records. All books of account and other
financial and corporate records relating to the Business have
been made available to BAB and its representatives (or will be so
made available prior to the Effective Time). Such books of
account and records are current, complete, true and correct in
all material respects and reflect in all material respects all
items of income and expense with respect to the Business and all
assets, liabilities and accruals with respect to the Business in
accordance with GAAP, consistently applied. To the Knowledge of
MFM and the Shareholders, MFM has filed all reports relating to
the Business required by any and all Applicable Laws to be filed,
except for any failures or delinquencies in reporting which will
not have a Material Adverse Effect on the Business or the
Survivor.
6.19 Employees. Schedule 6.19 hereto contains a complete
and accurate list of the following information for each employee
of MFM, including each employee on leave of absence or layoff
status: name, job title, current compensation paid or payable
and any change in compensation since January 1, 1997, vacation
and sick leave accrued, and hire date for purposes of determining
vesting and eligibility to participate under each Scheduled Plan.
No current or former officer or director of MFM and, to the best
of the Knowledge of MFM and the Shareholders, no other current or
former employee of MFM is a party to, or is otherwise bound by,
any agreement or arrangement, including any consulting,
confidentiality, non-competition, proprietary rights or other
agreement, between such employee or officer of director and any
other Person ("Proprietary Rights Agreement") that in any way
materially adversely affected, affects, or will affect (i) the
performance of his or her duties as an employee or officer or
director of MFM or (ii) the ability of MFM to conduct its
Business, including any Proprietary Rights Agreement with MFM by
any such employee, officer or director.
6.20 Licenses and Permits. MFM has obtained all licenses,
certificates, franchises, permits, consents and approvals of each
and every Governmental Body having jurisdiction over MFM or any
of its respective properties assets or business necessary or
appropriate to own the Assets and to operate and carry on the
Business as it is now being conducted, except where the failure
to do so would not have a Material Adverse Effect on the Business
or the (collectively, the "Licenses"). All such Licenses, are
described on Schedule 4.1(h) hereto and are valid and in full
force and effect.
6.21 Sufficiency of Assets. The Assets to be acquired by
BAB through the merger transactions contemplated by this
Agreement will, at the Effective Time, include all assets,
whether owned or leased, including intangible assets, properties,
franchises, licenses, permits, Contracts, operations and business
that relate to, arise from, are used or held by MFM and the
Shareholders for the operation of the Business, except for the
Excluded Assets. The instruments and documents to be executed
and/or delivered by MFM and the Shareholders pursuant to
Section 13.2 hereof on or before the Effective Time shall be
adequate and sufficient to vest in BAB as of the Effective Time,
all right, title and interest of MFM and the Shareholders in or
to the Assets.
6.22 Other Material Contracts and Obligations. Except for
the Operating Contracts, non-assignable insurance policies,
contracts relating to and affecting such Excluded Assets, the
Contracts disclosed on Schedule 6.22 hereto, neither MFM nor the
Shareholders is a party to or bound by any Contract relating to
the Business, including any:
a. Dealer, distributorship, franchise brokerage,
consulting, independent contractor or sales agency
agreements, excluding purchase orders with respect to the
purchase or sale of products or services in the Ordinary
Course of Business;
b. Advertising Contracts;
c. Contract, commitment or arrangement for capital
expenditures having a remaining balance in excess of
$25,000;
d. Leases with respect to any property, real or
personal, whether as lessor or lessee;
e. Contract containing covenants not to compete in
any lines of business or with any Person, except for
territorial protections contained in MFM's franchise
agreements and area development agreements listed on
Schedule 4.1(g) hereto;
f. Franchise, license or area development agreements;
g. Guarantees;
h. Contract or purchase order for the purchase of any
services, raw materials, supplies or equipment involving
payments of more than $10,000 per annum, excluding purchase
orders for the purchase of products or services entered into
in the Ordinary Course of Business; or
i. Contract for the sale of any properties, assets or
services involving a value estimated at more than $25,000,
excluding purchase orders for the sale of products or
services in the Ordinary Course of Business.
6.23 Shareholders. The Shareholders are the record and
beneficial holders of all of the issued and outstanding shares of
each and every class and series of capital stock of MFM
consisting of One Hundred Fifty (150) shares of Common Stock; and
MFM is the record and beneficial owner of all equity interests in
MH. There are no outstanding subscriptions, warrants, options,
agreements, convertible securities or other commitments pursuant
to which MFM is or may be obligated to issue any shares of any
class or series of its capital stock or other securities to any
other Person and MFM shall not offer, sell or issue any
securities or rights to acquire securities on or after the date
hereof.
6.24 Subsidiaries. Neither of MFM nor MH has any
subsidiaries and none of them own any shares of stock or other
securities or interests, directly or indirectly, in any other
Person, except that MFM owns all of the issued and outstanding
equity interests of MH. Neither of MFM nor MH is subject to any
obligation or requirement to provide funds to, or invest in, any
other Person.
6.25 Products Liability Claims. Except as set forth in
Schedule 6.25, all products sold through the Business have been
merchantable, free from defects and, where applicable, fit for
human consumption. MFM has never received a claim based upon an
alleged breach of product warranty or defective product, arising
from manufacture or sale of such products (collectively, "Product
Liability Claims"). MFM does not have any reasonable grounds to
believe that future Product Liability Claims with respect to
products sold through the Business on or before the Effective
Time will be different from past experience with respect thereto
as set forth herein.
6.26 Insurance. Schedule 6.26 hereto contains a complete
and accurate list of all insurance policies (including "self-
insurance" programs) now maintained by MFM in respect of the
Business (the "Insurance Policies"). The Insurance Policies are
in full force and effect, neither of MFM nor the Shareholders
have notice that MFM, is in default under any Insurance Policy,
and no claim for coverage under any Insurance Policy has been
denied. All of the Insurance Policies will be maintained in full
force and effect until the Effective Time except for
cancellations or possible cancellations which do not, and insofar
as reasonably can be foreseen in the future, will not have a
Material Adverse Effect on the Business. To the Knowledge of MFM
and the Shareholders, the Insurance Policies are reasonably
prudent and adequate for the Business. MFM has promptly and
adequately notified the Insurance Policies of any and all claims
known to it with respect to the operations or products of
Business. MFM has not been refused any insurance coverage by any
insurance carrier to which it has applied for insurance during
the past three (3) years with respect to the Assets or the
Business.
6.27 Brokers. Except for Pierce W. Hance and Strategic
Advisory Group, Inc., neither MFM nor the Shareholders have
employed or engaged any broker, finder, agent, banker or third
party, or otherwise dealt with anyone purporting to act in the
capacity of a finder or broker in connection with the
transactions contemplated hereby. Except for the fees paid to
Pierce W. Hance and Strategic Advisory Group, Inc. as set forth
in Schedule 6.27 attached hereto, no commissions, finder's fees
or like charges have been or will be incurred in connection with
the execution and delivery of this Agreement or the consummation
of the transactions contemplated hereby.
6.28 Certain Payments. Neither of MFM nor any of its
directors or officers, or the Shareholders and, to their
Knowledge, no other members of management or agents, employees or
any other Person associated with or acting for or on behalf of
any of them, has directly or indirectly (a) made any
contribution, gift, bribe, rebate, payoff, influence payment,
kickback, or other payment to any Person, private or public,
regardless of form, whether in money, property, or services (i)
to obtain favorable treatment in securing business, (ii) to pay
for favorable treatment for business secured, (iii) to obtain
special concessions or for special concessions already obtained,
for or in respect of MFM or any Affiliates or Related Persons or
for or in respect of the Business, or (iv) in violation of any
Applicable Laws, or (b) established or maintained any fund or
asset that has not been recorded in the books and records of MFM.
6.29 Relationship with Related Persons. The Shareholders
and the directors, officers, and employees of the MFM and its
Related Persons (as hereinafter defined) do not have any interest
in any of the assets of MFM and, to the Knowledge of MFM and the
Shareholders, do not own, of record or as a beneficial owner, an
equity interest or any other financial or profit interest in any
Person that has had business dealings or a material financial
interest in any transaction with MFM. None of the Shareholders
nor any of the executive officers of MFM and none of their
related Persons or Affiliates have engaged or are engaged in
competition with MFM with respect to any line of products or
services of any of them (a "Competing Business") in any market
presently served by MFM or by BAB and its Affiliates. No
Shareholder, director or officer of MFM and none of its Related
Persons or Affiliates is a party to any Contract with, or has any
claim or right against any of MFM.
6.30 Inventory. All inventory of MFM, as set forth on the
Financial Statements, consists of a quality and quantity usable
and salable at customary prices in the Ordinary Course of
Business, except for obsolete items and items of below-standard
quality, all of which have been written off or written down to
net realizable value in the Financial Statements. All
inventories not written off have been priced at the lower of cost
or market, in accordance with GAAP. The quantities of each item
of inventory (whether raw materials, work-in-process, or finished
goods) are not excessive but are reasonable in the present
circumstances and all work-in-process and finished goods
inventory is free of any materials defect or other material
deficiency.
6.31 Environmental Matters. To the Knowledge of MFM and the
Shareholders:
a. MFM has never generated, transported, treated,
stored, disposed, or otherwise handled any Hazardous
Material at any site, location, or facility in connection
with the Assets, the Business, or the Leased Premises and
does not have notice that such Hazardous Materials are
present on, in, under or near any Leased Premises used in
connection with the Business.
b. MFM is (i) in compliance with all applicable
Environmental and Safety Requirements (as hereinafter
defined), and (ii) possesses all required permits, licenses,
certifications, and approvals and has filed all notices or
applications required thereby or pertaining thereto.
c. Neither of MFM nor the Shareholders has ever
received any notice (written or oral) of any private,
administrative, or judicial inquiry, investigation, order,
or action, or any notice (written or oral) of any intended
or Threatened private, administrative, or judicial inquiry,
investigation, order, or action relating to the presence, or
alleged presence, of Hazardous Materials on, in, under, or
near any Leased Premises, and to the Knowledge, of MFM and
the Shareholders there is no reasonable basis for any such
inquiry, investigation, order, action, or notice; and
neither MFM nor the Shareholders has notice of any pending
or Threatened investigations, actions, orders, or
Proceedings (or notices of potential investigations,
actions, orders, or Proceedings) from any Governmental Body,
or any other Person, regarding any matter relating to
Environmental and Safety Requirements.
d. No facts, events, or conditions with respect to
the past or present operations or facilities of MFM, during
the respective terms of its ownership, exist which could
reasonably be expected to interfere with, or prevent
continued compliance with, or could give rise to, any common
law or statutory liability or otherwise form the basis of
any claim, action, suit, proceeding, hearing, or
investigation against or involving any of the Assets, or
MFM, the Leased Premises under any Environmental and Safety
Requirement, or related common law theories based on any
such fact, event, or circumstance, including, without
limitation, liability for investigation costs, cleanup
costs, personal injury, or property damage.
6.32 Franchise Operations. MFM has substantially complied
with all Applicable Laws, including franchise and business
opportunity laws, of every Governmental Body, including the
Federal Trade Commission (the "FTC"), in offering and selling "My
Favorite Muffin" franchises and area franchises. Schedule 6.32
contains a complete list of all terminated franchise agreements,
area franchise development agreements and other similar
agreements together with all amendments, modifications, renewals,
extensions and addendums thereto. MFM has not obtained a federal
copyright with respect to the "My Favorite Muffin Operations
Manual" and any supplemental business manuals. All of the terms
and conditions of all franchises and all area franchises to which
MFM is a party are contained in a written document identified on
Schedule 4.1(g) hereto, and, except as set forth in such
Schedule, no such term or condition has been waived by MFM. Each
jurisdiction in which MFM has registered its franchises and/or
area franchises for offer and sale is listed on Schedule 4.1(g)
hereto together with any conditions to registration imposed by
any such jurisdiction. Schedule 4.1(g) sets forth a description
of all outstanding offers by MFM to enter into franchise
agreements and/or area franchise development agreements with
prospective franchisees and area franchisees. Such Schedule also
sets forth a description of all of franchise agreements and area
franchise development agreements terminated, canceled or revoked
by the Seller at any time during the past three (3) years,
including the respective dates of termination or cancellation and
the reasons therefor. MFM's Franchise Offering Circulars in use
in each jurisdiction have been maintained current in all material
respects and fairly disclose all matters required to be disclosed
by Applicable Laws. To MFM's Knowledge, all franchise agreements
and area franchise development agreements entered into by MFM
with its franchisees were entered into accordance in all material
respects, with the requirements of Applicable Laws.
6.33 Expense of Claims Covered by Escrowed Stock The
Shareholders, and not MFM, shall be responsible for and shall pay
all unpaid expenses and costs, including legal fees, incurred by
or on behalf of MFM and/or its officers, directors and
shareholders from and after January 1, 1997 to the date of
execution of this Agreement arising out of or having to do with
the defense of the Heron claim, the Mann claim, the potential
claim by Mr. Carpet and the New Jersey sales audit inquiry.
6.34 Breach of Representations and Warranties by
Shareholders. The Shareholders shall indemnify and hold BAB and
BAB Sub harmless against any loss, costs, expense, deficiency,
liability or damage incurred by them or either of them, subject
to a limitation of damages not to exceed the total consideration
paid herein, resulting from the failure to disclose a material
fact or facts or the incorrectness of any representation made by
MFM or the Shareholders in this Agreement, the breach of any
warranty of MFM or Shareholders contained in this Agreement, or
the nonfulfillment by MFM or Shareholders of any agreement or
covenant made by MFM or the Shareholders in this Agreement.
ARTICLE 7. REPRESENTATIONS AND WARRANTIES OF BAB AND BAB SUB
As an inducement for MFM and the Shareholders to enter into
this Agreement and consummate the transactions contemplated
hereby, intending that MFM and the Shareholders rely thereon in
entering into and performing this Agreement, BAB and BAB Sub
warrant and represent to MFM and the Shareholders that each and
all of the following are true and correct in all material
respects as of the date of this Agreement and will be true and
correct in all material respects at and as of the Closing:
7.1 Due Incorporation. Each of BAB and BAB Sub is a
corporation duly organized, validly existing and in good standing
under the laws of the State of Illinois, and has all requisite
power and authority, corporate and otherwise, to own, operate and
lease its properties and assets and to conduct its business as it
is now being conducted. Each of BAB and BAB Sub is duly
qualified to transact business as a foreign corporation and is in
good standing under the laws of every state or jurisdiction in
which the nature of its activities or of its properties owned,
leased or operated makes such qualification necessary and the
failure to be so qualified could reasonably be expected to have a
Material Adverse Effect on the BAB or the BAB Sub. Neither BAB
nor BAB Sub is subject to any Contract which restricts or may
restrict the conduct of the Business in any jurisdiction or
location except for territorial restrictions in franchise and
area development agreements of BAB Systems, Inc. and Brewsters
Coffee Franchise Corporation.
7.2 Due Authorization. The execution, delivery and
performance of this Agreement, including the documents,
instruments and agreements to be executed and/or delivered by BAB
or the Parent pursuant to this Agreement, and the consummation of
the transactions contemplated hereby and thereby have been, or
will be on or before the Closing, duly and validly authorized by
all necessary corporate action on the part of BAB and BAB Sub.
This Agreement and the documents, instruments and agreements to
be executed by Survivor pursuant to this Agreement have been, or
will be on or before the Effective Time, duly and validly
authorized, executed and delivered by Survivor and the
obligations of Survivor hereunder and thereunder are or will be
valid and legally binding, and this Agreement and the documents,
instruments and agreements to be executed and delivered by the
Survivor pursuant to this Agreement are or will be upon such
execution and delivery enforceable against them in accordance
with their respective terms, except as such enforcement may be
limited by applicable bankruptcy, reorganization, insolvency,
moratorium or other similar laws presently or hereafter in effect
affecting the enforcement of creditors' rights generally and by
general principles of equity (regardless of whether such
enforceability is considered in a proceeding at law or in
equity), including, among others, limitations on the availability
of equitable remedies.
7.3 No Breach. Each of BAB and BAB Sub has full corporate
power and authority to perform its obligations under this
Agreement and the documents, instruments and agreements to be
executed by it pursuant hereto. The execution and delivery of
this Agreement, including the documents, instruments and
agreements to be executed by BAB and BAB Sub pursuant to this
Agreement, and the consummation of the transactions contemplated
hereby and thereby will not: (i) violate any provision of the
Articles of Incorporation or Bylaws (or comparable governing
documents or instruments) of either of them; (ii) violate any
Applicable Laws issued, enacted, entered or deemed applicable by
any Governmental Body having jurisdiction over either of them or
any of its properties or assets; (iii) require any filing with,
or permit, consent or approval of, or the giving of any notice to
any Person; (iv) result in a violation or breach of, or
constitute (with or without due notice or lapse of time or both)
a default (or give another party any rights or termination,
cancellation or acceleration) under, any of the terms, conditions
or provisions of any note, bond, mortgage, indenture, license,
franchise, permit, lease, or Contract to which either of them is
a party, or by which either of them or any of their respective
assets or properties may be bound; or (v) result in the creation
or imposition of any Encumbrance on any of their respective
assets or properties.
7.4 Full Disclosure. No representation or warranty made by
BAB and BAB Sub in this Agreement, including the documents,
instruments and agreements to be executed and/or delivered by
them pursuant to this Agreement, and no statement, certificate or
other document or instrument furnished or to be furnished
pursuant to this Agreement or in connection with the consummation
of the transactions contemplated hereby, contains or will contain
any untrue statement of a material fact or omits or will omit to
state a material fact necessary to make the statements contained
herein and therein not misleading. Neither BAB nor BAB Sub has
knowingly failed to fully disclose to MFM and the Shareholders
facts or information known to it that reasonably could be
expected to have a Material Adverse Effect on the business of the
Survivor.
7.5 Brokers. Neither BAB nor BAB Sub has employed or
engaged any broker, finder, agent, investment banker or third
party nor has it otherwise dealt with anyone purporting to act in
the capacity of a finder or broker, in connection with the
transactions contemplated hereby. No commissions, finder's fees
or like charges have been or will be incurred by BAB or BAB Sub
in connection with the execution and delivery of this Agreement
or the consummation of the transactions contemplated hereby.
7.6 BAB Shares. The BAB Shares to be issued and delivered
at the Effective Time, at the time said BAB Shares are issued and
delivered, will be duly authorized, valid issued, fully paid and
nonassessable and the Shareholders shall receive good title
thereto free and clear of any Encumbrances of any nature
whatsoever.
7.7 Securities Laws Filings. BAB has made all filings
required of it under applicable securities laws. As of their
respective dates, all such filings complied in all material
respects with applicable securities laws requirements and did not
contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein necessary to make
the statements therein, in light of the circumstances in which
they were made, not misleading.
7.8 Compliance with Laws. To BAB's Knowledge, the business
of BAB has been operated in substantial compliance with all
requirements of insurance carriers, the terms of applicable
licenses and all Applicable Laws, and BAB has not received any
notice of, or has no reason to anticipate that any presently
existing circumstances are likely to result in, any violation of
a material nature of any applicable laws respecting the existing
business of BAB as of the date of this Agreement.
7.9 Licenses and Permits. Each of BAB and BAB Sub has
obtained all licenses, certificates, franchises, permits,
consents and approvals of each and every Governmental Body having
jurisdiction over them or any of their respective properties,
assets or business necessary or appropriate to own their assets
and to operate and carry on their business as it is now being
conducted, except where failure to do so would not have a
Material Adverse Effect upon the business of BAB.
7.10 Breach of Representations and Warranties by BAB or BAB
Subsidiaries. BAB and BAB Sub agree to indemnify and hold the
Shareholders harmless against any loss, cost, expense,
deficiency, liability or damage incurred by Shareholders
resulting from failure to disclose a material fact or facts or
the incorrectness of any representation made by BAB or BAB Sub in
this Agreement, the breach of any warranty of BAB or BAB Sub
contained in this Agreement, or the nonfulfillment by BAB or BAB
Sub of any agreement or covenant made by them in this Agreement.
ARTICLE 8. PERFORMANCE BY MFM AND SHAREHOLDERS PENDING CLOSING
MFM and the Shareholders, jointly and severally, covenant
and agree that from and after the date of this Agreement and
until the earlier Effective Time or the termination of this
Agreement in accordance with Article 15 hereof:
8.1 Access to Information. At the request of BAB, MFM and
the Shareholders shall, from time to time, give or cause to be
given to BAB, its officers, employees, counsel, accountants,
investment bankers and other representatives, upon reasonable
notice to MFM or the Shareholders full and prompt access during
normal business hours to the Business, the Assets and all of the
books, minute books, title papers, records, files, Contracts,
insurance policies, Licenses and documents of every character
relating to the Business; and they shall promptly furnish or
cause to be furnished to BAB, its officers, employees, counsel,
accountants, investment bankers and other representatives all of
the information with respect to them, the Business and the Assets
as BAB or the representatives may reasonably request. BAB, its
officers, employees, counsel, accountants, investment bankers and
other representatives shall have the authority to interview all
employees, customers, vendors, suppliers, franchisees and other
Persons having relationships with MFM, the Shareholders and the
Business; and MFM and the Shareholders shall make such
introductions as may be reasonably requested. In addition, BAB
may, at its sole cost and expense, at any time prior to the
Effective Time, through its officers, employees, counsel,
accountants, investment bankers and other representatives,
conduct such investigations and examinations of the Assets and
Business as it deems necessary or advisable, and MFM and the
Shareholders will cooperate fully and reasonably in such
investigations.
8.2 Business As Usual. MFM shall carry on the Business
diligently, only in the usual and ordinary course, and will keep
and maintain the Assets in good and safe repair and condition
consistent with past practices.
8.3 Encumbrances. MFM shall not, directly or indirectly,
perform or fail to perform any act which might reasonably be
expected to result in the creation or imposition of any
Encumbrance whatsoever on any of the Assets, other than in the
Ordinary Course of Business, or otherwise adversely effect the
marketability of their title to any of the Assets.
8.4 Pay Increases. MFM shall not, without the prior
written consent of BAB, grant any general or uniform increase in
the salaries or rate of pay to their respective employees, grant
any increase in any benefits or establish, adopt, enter into,
make any new grants or awards under, or amend any collective
bargaining, employment, bonus, stock option, restricted stock,
stock purchase, profit-sharing, deferred compensation, severance,
pension, retirement, disability, medical, dental, health or life
insurance, death benefit, incentive or other compensation or
retirement plan, arrangement, agreement, trust, fund, policy or
arrangement for the benefit of their respective employees, other
than in the Ordinary Course of Business; provided that no pay
increases or increases in benefits, as described above, shall be
granted to the Shareholders, except as permitted under Section
8.21 hereof.
8.5 Restrictions on New Contracts. MFM shall not enter
into any Contract, incur any liability, absolute or contingent,
assume, guarantee or otherwise become liable or responsible for
the obligations of any other Person, make any loans, advances or
capital contributions to any other Person (except for extensions
of credit to its customers in the Ordinary Course of Business),
or waive any right or enter into any other transaction, in each
case other than in the usual and Ordinary Course of Business and
consistent with prudent business practices.
8.6 Additional Franchise Sales MFM shall advise BAB in
advance of any additional sales of franchises and the material
terms thereof, if such terms differ from its "standard" franchise
offering terms as disclosed in its Uniform Franchise Offering
Circulars provided to BAB.
8.7 Preservation of Business. MFM and the Shareholders
shall use their respective best efforts to preserve the Business
intact, to keep available to BAB the present employees of the
Business and to preserve for BAB the Business and its present
goodwill and relationships with vendors, suppliers, customers,
franchisees and others.
8.8 Payment and Performance of Obligations. MFM will
timely pay and discharge all invoices, bills and other monetary
obligations and shall not perform or fail to perform any act
which will cause a material breach of any of the MFM Operating
Contracts.
8.9 Restrictions on Sale of Assets. MFM shall not sell,
assign, transfer, lease, sublease, pledge or otherwise encumber
or dispose of any of the properties or assets of the Business,
except for the sale of inventory in the Ordinary Course of
Business and at regular prices. Without limiting the generality
of the foregoing, MFM shall not permit any of the Proprietary
Rights to lapse or dispose of or otherwise lose the right to use
any of the Proprietary Rights.
8.10 Prompt Notice. MFM and the Shareholders shall promptly
notify BAB in writing upon becoming aware of any of the
following: (i) any investigation, claim, demand, action, suit or
other Proceeding that may be brought, Threatened, asserted or
commenced against any of them, their officers or directors
involving in any way any of them, the Business or the Assets,
(ii) any changes in accuracy of the representations and
warranties made by them or Shareholders in this Agreement, (iii)
any order or decree or any complaint praying for an order or
decree restraining or enjoining the consummation of the
transactions contemplated hereby, or (iv) any notice from any
Governmental Body of its intention to institute an investigation
into, or institute a Proceeding to restrain or enjoin the
consummation of the transactions contemplated hereby or to
nullify or render in effective this Agreement or such
transactions if consummated.
8.11 Consents. As soon as reasonably practicable and in any
event on or before the Closing, MFM will obtain or cause to be
obtained all of the consents and approvals of all Persons
necessary to vest in the Survivor, and in BAB indirectly through
its ownership of the Survivor all of the Assets, including
without limitation the Operating Contracts, Licenses, Proprietary
Rights and Software, herein provided to be acquired pursuant to
this Agreement, including the consents and approvals listed on
Schedule 6.3 hereto.
8.12 Copies of Documents. As soon as reasonably possible
following the execution hereof, MFM shall furnish BAB with a
true, complete and accurate copy of each Operating Contract and
any additional Contract listed on Schedule 6.22 hereto.
8.13 No Solicitation of Other Offers. MFM and Shareholders
will not, and will not permit their respective directors,
officers, employees, representatives, investment bankers, agents
and affiliates to, directly or indirectly, (i) solicit or
encourage submission or any inquiries, proposals or offers by,
(ii) participate in any negotiations with, (iii) afford any
access to the properties, books or records of any of them to,
(iv) accept or approve, or (v) otherwise assist, facilitate or
encourage, or enter into any agreement or understanding with, any
Person or group (other than BAB and its Affiliates, agents and
representatives), in connection with any Acquisition Proposal (as
hereinafter defined). In addition, from and after the date of
this Agreement until the Effective Time or the earlier
termination of this Agreement in accordance with its terms, they
will not, and will not permit their respective directors,
officers, employees, representatives, investment bankers, agents
and affiliates to, directly or indirectly, make or authorize any
statement, recommendation or solicitation in support of any
Acquisition Proposal made by any Person or group (other than
BAB). MFM and the Shareholders will immediately cease and all
existing activities, discussions or negotiations with any parties
conducted heretofore with respect to any of the foregoing.
8.14 Inventory. MFM shall maintain the levels of inventory,
materials and supplies used in the Business consistent with past
practice.
8.15 Insurance. MFM will maintain in full force and effect
all insurance coverages for the Assets substantially comparable
to coverages existing on the date hereof.
8.16 Filing Reports and Making Payments. MFM shall timely
file all required reports and notices with each and every
applicable Governmental Body and timely make all payments due and
owing to each such Governmental Body, including, but not by way
of limitation, any filings, notices and/or payments required by
reason of the transactions contemplated by this Agreement.
8.17 Capital Expenditures. MFM shall not make any capital
expenditures in excess of $10,000 without the BAB's prior written
consent.
8.18 COBRA. MFM shall at its sole cost and expense supply
its employees with any and all notices and other information with
respect to such employees' rights to continue their health and
other insurance upon the termination of their employment upon
consummation of the transactions contemplated hereby, all in
accordance with all Applicable Laws.
8.19 Limitation on Transactions in BAB's Securities.
Neither MFM nor its respective officers, directors, or employees,
or the Shareholders shall acquire or dispose of, nor shall they
permit any of their respective affiliates to acquire or dispose
of, directly or indirectly, any interest in or right to acquire
any securities of BAB.
8.20 Dividends. MFM shall not pay any dividend or make any
distribution with respect to any class or series of its capital
stock; provided, however, that notwithstanding the foregoing,
they may make pro rata distributions of money with respect to
their issued and outstanding shares of capital stock to
Shareholders sufficient to enable the Shareholders to pay the
federal and state income taxes on the income that passes through
under Section 1366 of the Code net of any tax benefit produced by
losses, deductions and credits that pass through under Section
1366 of the Code and compensation in amounts not in excess of
amounts distributed as compensation in the past fiscal year.
ARTICLE 9. PERFORMANCE BY BAB AND BAB SUB PENDING CLOSING
BAB and BAB Sub covenant and agree that from and after the
date of this Agreement and until the earlier of the Closing or
the termination of this Agreement in accordance with Article 15
hereof:
9.1 Access to Information. At the request of Shareholders,
BAB shall, from time to time, give or cause to be given to MFM
and the Shareholders, and their respective counsel, accountants,
investment bankers and other representatives, upon reasonable
notice, full and prompt access during normal business hours to
minute books, title papers, records, files, contracts, insurance
policies, licenses and documents of every character of BAB
relating to BAB's business to the extent such documents and
information would be available for inspection by shareholders of
BAB under applicable state corporation law, and BAB shall
promptly furnish or cause to be furnished to Shareholders, their
counsel, accountants, and other representatives such information
with respect to the BAB and its business as they may reasonably
request; provided however, that nothing contained herein shall
require BAB to disclose information not publicly available to
BAB's shareholders, generally.
9.2 Business As Usual. BAB shall carry on its business
diligently, only in the usual and ordinary course and
substantially in the same manner as heretofore conducted and will
keep and maintain its assets in good and safe repair and
condition consistent with past practices.
9.3 Preservation of Business. BAB shall use its best
efforts to preserve its present goodwill and relationships with
its vendors, suppliers, customers, franchisees and others having
business relationships with its business.
9.4 Prompt Notice. BAB shall promptly notify MFM and the
Shareholders in writing upon becoming aware of any of the
following: (i) any investigation, claim, demand, action, suit or
other Proceeding that may be brought, Threatened, asserted or
commenced against BAB, its officers or directors involving in any
way Parent, provided that notice shall not be required prior to
public dissemination of such information, (ii) any changes in
accuracy of the representations and warranties made by BAB in
this Agreement, (iii) any order or decree or any complaint
praying for an order or decree restraining or enjoining the
consummation of the transactions contemplated hereby, or (iv) any
notice from any Governmental Body of its intention to institute
an investigation into, or institute a Proceeding to restrain or
enjoin the consummation of the transactions contemplated hereby
or to nullify or render in effective this Agreement or such
transactions if consummated.
9.5 Filing Reports and Making Payments. BAB shall timely
file all required reports and notices with each and every
applicable Governmental Body and timely make all payments due and
owing to each such Governmental Body, including, but not by way
of limitation, any filings, notices and/or payments required by
reason of the transactions contemplated by this Agreement.
ARTICLE 10. CONDITIONS PRECEDENT TO OBLIGATIONS OF BAB AND BAB
SUB
Unless waived by BAB and BAB Sub in writing, each and every
obligation of BAB to be performed at the Closing and at the
Effective Date shall be subject to the satisfaction at or prior
thereto of each and all of the following conditions precedent:
10.1 Accuracy of Representations and Warranties. The
representations and warranties made by MFM and the Shareholders
in this Agreement, including the documents, instruments and
agreements to be executed and/or delivered by any of them
pursuant to this Agreement, shall be true and correct in all
material respects at and as of the Closing and at the Effective
Time with the same force and effect as though such
representations and warranties had been made or given at and as
of the Closing.
10.2 Compliance with Covenants and Agreements. The
Shareholders shall have performed and complied in all material
respects with all of its/his/their covenants, agreements and
obligations under this Agreement which are to be performed or
complied with by them at or prior to the Closing and at the
Effective Time, including the execution and/or delivery of the
documents, instruments and agreement specified in Section 13
hereof or in such documents, instruments and agreements, all of
which shall be reasonably satisfactory in form and substance to
counsel for BAB.
10.3 No Adverse Change. As of the Closing and at the
Effective Time, nothing shall have occurred which could,
individually or in the aggregate, reasonably be expected to have
a Material Adverse Effect upon MFM or the ability of the Survivor
to conduct the Business on the same basis with the same earning
power as in the past.
10.4 Proceedings. Except for the Proceedings of which MFM
has advised BAB in writing prior to the execution of this
Agreement, the obligations of BAB under this Agreement are
subject to there being no (i) Proceedings which have been
brought, asserted, commenced or Threatened against the BAB or BAB
Sub, or against any of MFM or the Shareholders by any Person
involving or affecting in any way any of MFM or the Shareholders,
the Business, the Assets, this Agreement or the consummation of
the transactions contemplated hereby, or (ii) Applicable Laws
restraining or enjoining or which may reasonably be expected to
nullify or render ineffective this Agreement or the consummation
of the transactions contemplated hereby or which otherwise could
reasonably be expected to have a Material Adverse Effect.
10.5 Consents and Approvals. All consents, waivers,
releases, authorizations, approvals, licenses, certificates,
permits and franchises of each Person as may be necessary to
consummate the transactions contemplated by this Agreement and
for the Survivor to carry on and continue the Business shall have
been obtained.
10.6 Financial Statements. MFM shall, at BAB's expense,
cause its auditors to promptly prepare, audit where necessary,
issue an unqualified opinion on, and deliver to BAB all financial
statements and related financial information which BAB may
require for inclusion in its reports to be filed with Securities
and Exchange Commission. All such financial statements shall be
prepared in accordance with GAAP, consistently applied, and shall
satisfy applicable requirements under the Securities Act and the
Exchange Act (as hereinafter defined) in connection with the on-
going periodic reporting requirements imposed on BAB by
Applicable Laws.
10.7 Employment. BAB or one or more of its Affiliates
shall have reached terms of continued employment or other
arrangements reasonably satisfactory to BAB with those current
key employees of MFM as BAB deems in its reasonable discretion to
be helpful or necessary in the continued operation of the
Business after the Effective Time. In furtherance of and not in
limitation of the foregoing, BAB shall have reached employment
agreements (collectively, the "Employment Agreements") with Owen
Stern, Ruth Stern, and Ilona Stern providing for their employment
by BAB or one or more of its Affiliates, such Employment
Agreements to be substantially in the forms of Exhibits C, D and
E attached hereto. In consideration of the Conversion of Shares
and the Cash Consideration set forth in Article 3 above, each of
the Employment Agreements shall contain agreements not to compete
and confidentiality agreements. As soon as reasonably possible
after Closing, Owen Stern, Ruth Stern and Ilona Stern shall make
arrangements to relocate to the Chicago area, as a condition of
their employment.
10.8 Due Authorization. The execution and delivery of this
Agreement, including the documents, instruments and agreement to
be executed and/or delivered by BAB and BAB Sub pursuant hereto
and thereto, and the consummation of the transactions
contemplated hereby and thereby shall have been duly and validly
authorized by resolution of their respective Boards of Directors
and any other necessary corporate action on the part of BAB and
BAB Sub.
ARTICLE 11. CONDITIONS PRECEDENT TO OBLIGATIONS OF MFM AND
SHAREHOLDERS
Unless waived by MFM and the Shareholders in writing, each
and every obligations to be performed at the Closing shall be
subject to the satisfaction at or prior thereto of each and all
of the following conditions precedent:
11.1 Accuracy of Representations and Warranties. The
representations and warranties made by BAB and BAB Sub in this
Agreement, including the documents, instruments and agreements to
be executed and/or delivered by BAB and BAB Sub pursuant to this
Agreement, shall be true and correct in all material respects at
and as of the Effective Time with the same force and effect as
though such representations and warranties had been made or given
at and as of the Closing.
11.2 Compliance with Covenants and Agreements. BAB and BAB
Sub shall have performed and complied in all material respects
with all of their covenants, agreements and obligations under
this Agreement which are to be performed or complied with by them
at or prior to the Effective Time, including the execution and/or
delivery of the documents, instruments and agreements specified
in this Agreement or in such other documents, instruments and
agreements, all of which shall be reasonably satisfactory in form
and substance to counsel for the Shareholders.
11.3 No Adverse Change. As of the Effective Time, nothing
shall have occurred which could, individually or in the
aggregate, reasonably be expected to have a Material Adverse
Effect upon the ability of the Survivor to conduct the Business.
11.4 Proceedings. The obligations of MFM and the
Shareholders under this Agreement are subject to there being no
(i) proceedings which have been brought, asserted, commenced or
Threatened against BAB and BAB Sub by any Person involving or
affecting this Agreement or the consummation of the transactions
contemplated hereby, or (ii) Applicable Laws restraining or
enjoining or which may reasonably be expected to nullify or
render ineffective this Agreement or the consummation of the
transactions contemplated hereby or which otherwise could
reasonably be expected to have a Material Adverse Effect on the
Survivor or BAB.
11.5 Consents and Approvals. All consents, waivers,
releases, authorizations, approvals, licenses, certificates,
permits and franchises of each Person as may be necessary for BAB
and BAB Sub to consummate the transactions contemplated by this
Agreement and for the BAB to carry on and continue the Business
shall have been obtained.
ARTICLE 12. INDEMNIFICATION
12.1 Indemnification by the Shareholders.
(a) From and after the Closing, the Shareholders,
jointly and severally, agree to indemnify BAB and Survivor
and hold BAB and Survivor harmless from and against court
awarded and/or confirmed damages, fines, penalties, charges,
assessments, judgments or the like (collectively, "Awards")
incurred or sustained by BAB or the Survivor as a result of
or arising out of:
(i) the non-fulfillment or breach of any covenant
or agreement or the breach of any representation or
warranty of MFM or any Shareholder set forth in this
Agreement or in any instrument, certificate or other
document delivered pursuant thereto, which indemnity,
as to this subsection 12.1(a)(i) only, shall include
the costs, expenses and fees, legal and otherwise,
incurred by BAB or the Survivor with respect to such
non-fulfillment or breach;
(ii) except as disclosed in Section 6.6 regarding
New Jersey Sales Tax, all tax liabilities (federal,
state and local, including without limitation, income,
franchise, unemployment, withholding, sales, real and
personal property), and all other taxes required to be
paid by the Company or any of its affiliates (including
tax liabilities resulting from any distributions by MFM
or its Shareholders), in each case, for any fiscal tax
period ending on or before the Closing, as may be
assessed and found due after audit and review. Should
additional taxes be finally assessed for any period
ending on or prior to the Closing Date, the
Shareholders will be jointly and severally responsible
for the payment of such taxes, together with any
interest and penalties due. BAB will keep all of the
books and records of MFM until the statute of
limitations with respect to the applicable audit
periods shall have expired and any audits and tax
proceedings shall have completed;
(iii) any investigation, claim, lawsuit,
injunction, arbitration, or regulatory or
administrative suit, proceeding, order or action with
respect to Environmental Matters arising out of or
relating to the activities or omissions of the MFM
through and including the Closing Date, whether or not
disclosed herein or in the Schedules hereto; and
(iv) any and all debts, claims, liabilities and
obligations of MFM arising out of or relating in any
way to any transactions, occurrences, events, facts, or
actions or omissions that shall have taken place prior
to the Effective Date, regardless of when the action is
instituted, to the extent not (a) disclosed and
adequately provided for in the Financial Statements, or
(b) disclosed in any Schedule hereto.
(b) Notwithstanding the foregoing Paragraph 12.1(a)
and the subsections thereto or anything contained herein
deemed to be to the contrary, MFM and the Shareholders shall
have no indemnification obligation with respect
(i) to any claim asserted by any party to MFM's
existing Contracts or related guarantees, which claims
are a result of or arise out of the execution or
delivery of this Agreement or the consummation of the
transactions contemplated hereby or the action(s) of
BAB or BAB Subs related to the operation of the
Business occurring after the Effective Time, including
but not limited to any changes mandated by BAB to the
MFM franchisees;
(ii) Any and all claims brought against the
Shareholders by the Escrow Agent arising out of and
having to do with the Escrow Agreement;
(iii) Any liability, loss, expense, payment,
judgment, award or attorneys fees incurred by
Shareholders as a result of the lease at 4 Market Hall,
Princeton Forrestal Village, Princeton, NJ 08540 for
liabilities arising under said lease after the
Effective Time; and
(iv) Any liability or expense, including legal
fees and other costs that the Shareholders may incur,
arising out of or having to do with any enforcement
action taken by PNC Bank, N.A. with respect to the
credit facility and/or loan agreement(s) between PNC
Bank, N.A. and MFM, guaranteed by the Shareholders, as
a result of the failure of the new BAB/PNC credit
facility to close within fifteen (15) days of the
merger of MFM in and to the BAB Sub.
(c) The maximum liability of the Shareholders in the
aggregate under the provisions of this Article 12 shall not
exceed an amount equal to the value of the BAB Shares as of
the date of final adjudication or settlement of any claim,
if such date is on or before December 31, 1998, or the value
of the BAB Shares on the date of settlement or adjudication
of any claim plus the gross proceeds of sale of any BAB
Shares if such date is on or after January 1, 1999.
(d) The indemnification set forth above for all
claims, including fraud, claimed by third parties shall
exist for a period of two years from the Effective Date, and
thereafter, the indemnification for fraud claimed by third
parties shall continue for an additional two year period;
however, the indemnifications set forth in Section
12.1(a)(i) above shall not be subject to such two or four
year limitations and shall continue thereafter.
12.2 Indemnification by BAB. BAB (including its successors
and assigns) covenants and agrees to pay and perform and
indemnify and hold the Shareholders and each of their respective
heirs, personal representatives, successors and assigns, harmless
from, against and in respect of any and all Losses that any of
them may at any time, directly or indirectly, suffer, sustain,
incur or become subject to, arising out of, based upon or
resulting from or on account of each and all of the following:
a. The breach or falsity of any representation,
warranty, covenant or agreement made by BAB or BAB Sub in
this Agreement, including the documents, instruments and
agreements to be executed and/or delivered by BAB or BAB Sub
pursuant hereto and thereto.
b. The failure of BAB or BAB Sub to pay and perform
the debts, liabilities and obligations it acquires hereby
pursuant to Article 5 hereof.
c. Any liability, obligation or commitment of BAB or
BAB Sub arising after the Effective Time relating to
Survivor's ownership of the Assets, the operation of the
Business relating thereto, or franchises sold after the
Effective Time, but expressly excluding any liabilities,
obligations or commitments arising from facts or
circumstances existing prior to the Effective Time.
d. Any and all debts, claims or causes of action
asserted against MFM or Shareholders arising out of or
resulting from the execution of delivery of this Agreement
and the consummation of the transactions contemplated hereby
or the action(s) of BAB or BAB Subsidiaries related to the
operation of the Business, including but not limited to
changes mandated by BAB or BAB Sub to the MFM franchisees,
occurring after the Effective Time
e. Any and all claims brought against the
Shareholders by the Escrow Agent arising out of and having
to do with the Escrow Agreement.
f. Any liability, loss, expense, payment, judgment,
award or attorneys fees incurred by Shareholders as a result
of the lease at 4 Market Hall, Princeton Forrestal Village,
Princeton, NJ 08540 for liabilities arising under said lease
after the Effective Time.
g. Any liability or expense, including legal fees and
other costs that the Shareholders may incur, arising out of
or having to do with any enforcement action taken by PNC
Bank, N.A. with respect to the credit facility and/or loan
agreement(s) between PNC Bank, N.A. and MFM, guaranteed by
the Shareholders, as a result of the failure of the new
BAB/PNC credit facility to close within fifteen (15) days of
the merger of MFM in and to the BAB Sub.
12.3 Procedure for Indemnification. In the event a party
intends to seek indemnification pursuant to the provisions of
Sections 12.1 or 12.2 hereof (the "Indemnified Party"), the
Indemnified Party shall promptly give notice hereunder to the
other party (the "Indemnifying Party") after obtaining written
notice of any claim or the service of a summons or other initial
legal process in any action instituted against the Indemnified
Party as to which recovery may be sought against the Indemnifying
Party because of the indemnification provided for in Section 12.1
or 12.2 hereof, and, if such indemnity shall arise from the claim
of a third party, the Indemnified Party shall permit the
Indemnifying Party to assume the defense of any such claim and
any litigation resulting from such claim; provided, however, that
the Indemnified Party shall not be required to permit such an
assumption of the defense of any claim or litigation which, if
not first paid, discharged or otherwise complied with, would
result in an interruption or disruption of the business of the
Indemnified Party or any material part thereof. Notwithstanding
the foregoing, the right to indemnification hereunder shall not
be affected by any failure of the Indemnified Party to give such
notice (or by delay by the Indemnified Party in giving such
notice) unless, and then only to the extent that, the rights and
remedies of the Indemnifying Party shall have been prejudiced as
a result of the failure to give, or delay in giving, such notice.
Failure by the Indemnifying Party to notify the Indemnified Party
of its election to defend any such claim or action by a third
party within twenty (20) days after notice thereof shall have
been given to the Indemnifying Party shall be deemed a waiver by
the Indemnifying Party of its right to defend such claim or
action.
If the Indemnifying Party assumes the defense of such claim
or litigation resulting therefrom, the obligations of the
Indemnifying Party hereunder as to such claim or litigation shall
include taking all steps necessary in the defense or settlement
of such claim or litigation and holding the Indemnified Party
harmless from and against any and all damages caused by or
arising out of any settlement approved by the Indemnifying Party
or any judgment entered in connection with such claim or
litigation. The Indemnifying Party shall not, in the defense of
such claim or any litigation resulting therefrom, consent to
entry of any judgment (other than a judgment of dismissal on the
merits without costs) except with the written consent of the
Indemnified Party or enter into any settlement (except with the
written consent of the Indemnified Party, which shall not be
unreasonably withheld) which does not include as an unconditional
term thereof the giving by the claimant or the plaintiff to the
Indemnified Party a release from all liability in respect to such
claim or litigation.
Except as otherwise provided herein, if the Indemnifying
Party assumes the defense of such claim or litigation resulting
therefrom, the Indemnified Party shall bear the fees and expenses
of any additional counsel retained by it to conduct its defense.
Except as otherwise provided herein, if the Indemnifying
Party does not assume the defense of any such claim by a third
party or litigation resulting therefrom after receipt of notice
from the Indemnified Party, the Indemnified Party may defend
against such claim or litigation in such manner as it deems
appropriate, and unless the Indemnifying Party shall deposit with
the Indemnified Party a sum equivalent to the total amount
demanded in such claim or litigation plus the Indemnified Party's
estimate of the cost (including attorneys' fees) of defending the
same, the Indemnified Party may settle such claim or litigation
on such terms as it may deem appropriate and the Indemnifying
Party shall promptly reimburse the Indemnified Party for the
amount of such settlement and for all costs (including attorneys'
fees), expenses and damages incurred by the Indemnified Party in
connection with the defense against or settlement of such claim
or litigation, or if any such claim or litigation is not so
settled, the Indemnifying Party shall promptly reimburse the
Indemnified Party for the amount of any judgment rendered with
respect to any claim by a third party in such litigation and for
all costs (including attorneys' fees), expenses and damage
incurred by the Indemnified Party in connection with the defense
against such claim or litigation, whether or not resulting from,
arising out of, or incurred with respect to, the act of a third
party.
12.4 Survival of Representations, Warranties and Covenants.
The representations and warranties contained in this Agreement
and in any Exhibit, Schedule, certificate, instrument or document
delivered by or on behalf of any of the parties hereto pursuant
to this Agreement and the transactions contemplated hereby and
the indemnities with respect thereto contained in Sections
12.1(a) and 12.2(a) hereof shall survive the Closing and
Effective Time and shall expire on the second annual anniversary
of the Effective Time, except that (i) the representations and
warranties of the MFM and Shareholders and their related
indemnities concerning fraud shall expire on the fourth-annual
anniversary of the Effective Time, and (ii) the representations
and warranties and related indemnities under Section 6.31 and 7.7
shall expire on the fourth annual anniversary of the Effective
Time. After the expiration of such periods, no claim for the
breach or falsity of any such representation or warranty may be
brought, and no litigation with respect thereto may be commenced,
and no party shall have any liability or obligation with respect
thereto, unless the indemnified party in good faith and having a
reasonable basis, gave written notice to the indemnifying party
specifying with particularity the breach or falsity of such
representation or warranty claimed on or before the expiration of
such period, in which case a claim may be brought under this
Agreement with respect to that matter during a period
corresponding to the applicable statute of limitations.
12.5 Limitation on Indemnification Obligations.
Notwithstanding the provisions of Section 12.1 or 12.2 hereof to
the contrary:
a. No claim may be brought pursuant to the provisions
of Article 12 for any Awards or for any action arising under
or in connection with their respective representations,
warranties and covenants contained in this Agreement, unless
and until the aggregate amount of such claims exceeds
$20,000, and then only to the extent of such excess over
$20,000.
b. No claim may be brought pursuant to the provisions
of Article 12 for any Awards or for any action arising under
or in connection with their respective representations,
warranties and covenants contained in this Agreement to the
extent such claim is paid by insurance.
c. The aggregate liability of the Shareholders, on
the one hand, and BAB on the other hand, for any Awards or
for any action arising under or in connection with the
parties' respective representations, warranties and
covenants contained in this Agreement shall be limited as
set forth in Section 12.1(c) above with respect to the
Shareholders and shall be limited to the value of the total
consideration paid by BAB to the Shareholders under this
Agreement with respect to BAB.
d. No claim may be brought pursuant to the provisions
of Article 12 for any action arising under or in connection
with the breach of any of the representations or warranties
contained in this Agreement if the party asserting loss had
actual knowledge of the breach of such representation and
warranty prior to the execution of this Agreement. The
burden of proving such actual knowledge shall rest on the
party who asserts the provisions of this Section 12.5(e) as
a defense to a claim for indemnification or any other
action.
12.6 Basis for Settlement or Litigation of Claims. With
respect to the possible settlement or prosecution or defense of a
claim arising under Article 12 or arising under the claims
covered by the Escrowed Stock, as more particularly set forth in
the Escrow Agreement, the decision to settle, prosecute or defend
during the pendancy of such proceeding(s) shall be based solely
upon legal, commercial and financial/economic factors and on the
merits of such proceeding in the best interests of the party
hereunder that is the plaintiff or defendant in such proceedings
as if this indemnification provision or the Escrow Agreement did
not exist.
ARTICLE 13. CLOSING
13.1 Closing. Subject to the satisfaction or waiver of the
conditions precedent contained in Articles 10 and 11 hereof, the
closing of the merger transaction contemplated by this Agreement
(the "Closing") shall be held at BAB's offices in Chicago,
Illinois, at 10:00 o'clock AM (local time) on such date as may be
mutually agreed upon in writing by BAB and MFM but not later than
May 8, 1997.
13.2 Documents to be Delivered by MFM and Shareholders. At
the Closing, MFM and the Shareholders shall execute, where
necessary or appropriate, and deliver to BAB each and all of the
following:
a. A certificate in the form of Exhibit F hereto
signed by the Shareholders and a duly authorized officer of
MFM and dated as of the Closing, to the effect that the
representations and warranties made by them and the
Shareholders in this Agreement are true and correct in all
material respects at and as of the Closing and will be one
as of the Effective Time with the same force and effect as
though such representations and warranties had been made on
or given at and as of the Closing, and that they have
performed and complied with all of their covenants,
agreements and obligations under this Agreement which are to
be performed and complied with by them at or prior to the
Closing;
b. Copies certified by the Secretary of each of MFM
Too and the general partner of MH of the duly adopted
resolutions of their respective Boards of Directors and
general partner(s) and by the Shareholders approving this
Agreement and authorizing the execution and delivery of this
Agreement, including the documents, instruments and
agreements to be executed and/or delivered by MFM Too, MH
and the Shareholders pursuant to this Agreement, and the
consummation of the transactions contemplated hereby and
thereby;
c. Releases, satisfactions, or terminations of all
mortgages, financing statements or other evidences of liens
filed with a secretary of state, any county recorder and/or
any other similar office evidencing an Encumbrance on any of
the MFM Assets;
d. All consents, releases, assignments and
permissions of any kind or nature, whether from a
Governmental Body or otherwise, which reasonably may be
required to effectively sell, assign and transfer the Assets
to the Survivor, all in a form reasonably satisfactory to
counsel for BAB;
e. Certificates of title and assignments thereof for
all Vehicles;
f. Resignation of all officers and directors of MFM;
g. The Registration Rights Agreement executed by the
Shareholders;
h. The Certificate of Merger to be filed with
Secretaries of State of New Jersey and Illinois; and
i. Such other documents and items as are reasonably
necessary or appropriate to effect the consummation of the
transactions contemplated hereby or which may be customary
under local law.
j. Opinion of counsel to MFM Too, Inc. and the
Shareholders in the form of Exhibit G hereto.
13.3 Documents to be Delivered by BAB and BAB Sub. At the
Closing, BAB and BAB Sub shall execute, as necessary or
appropriate, and deliver to Shareholders each and all of the
following:
a. A certified or bank cashier's checks (or wire
transfers of immediately available funds) in the amounts
provided for in Section 3 hereof;
b. A certificate in the form of Exhibit H hereto
signed by duly authorized officers of BAB and BAB Sub, and
dated as of the Closing, to the effect that the
representations and warranties made by BAB and BAB Sub in
this Agreement are true and correct in all material respects
at and as of the Closing and will be true as of the
Effective Time with the same force and effect as though such
representations and warranties had been made on or given at
and as of the Closing and at the Effective Time and the BAB
and BAB Sub have each performed and complied with all of
their respective covenants, agreements and obligations under
this Agreement which are to be performed and complied with
by them at or prior to on the Closing;
c. A copy certified by the Secretary or Assistant
Secretary of BAB and BAB Sub of the duly adopted resolutions
of their respective Boards of Directors and by the sole
shareholder of BAB Sub approving this Agreement and
authorizing the execution and delivery of this Agreement,
including the documents, instruments and agreements to be
executed and/or delivered by BAB and BAB Sub pursuant
hereto, and the consummation of the transactions
contemplated hereby and thereby;
d. Certificates representing the BAB Shares.
e. The Certificate of Merger to be filed with the
Secretaries of State of New Jersey and Illinois; and
f. The Registration rights Agreement executed by BAB.
ARTICLE 14. PERFORMANCE FOLLOWING THE EFFECTIVE TIME
The following covenants and agreements are to be performed
after the Closing and the Effective Time by the parties and shall
continue in effect for the periods respectively indicated or,
where no indication is made, until performed:
14.1 Collection of Receivables. After the Closing and the
Effective Time, the Survivor shall be empowered to collect all
Receivables and other items transferred to the Survivor hereunder
and to endorse any checks or other instrument received on account
of any such Receivables or other items. Each of MFM and the
Shareholders agree to promptly transfer to the Survivor any cash,
checks or other property that they may receive in respect of the
Receivables or other items. At the written request of BAB, each
of MFM and Shareholders will cooperate, and will use their best
efforts to have the officers, directors, and other employees of
MFM cooperate, with BAB on and after the Closing and the
Effective Time in endeavoring to effect the collection of all
Receivables and with respect to other actions, proceedings,
arrangements or disputes involving MFM based upon Contracts,
arrangements or acts of such persons which were in effect or
occurred on or prior to the Effective Time.
14.2 Further Acts and Assurances. MFM, its respective
officers, directors, partners, and the Shareholders will, at any
time and from time to time, on and after the Closing, upon the
reasonable request of BAB, do all such further acts and things
and execute, acknowledge and deliver, or cause to be executed,
acknowledged and delivered to BAB any and all papers, documents,
instruments, agreements, deeds, assignments, transfers,
assurances and conveyances as may be reasonably necessary or
desirable to vest, perfect and confirm of record in the Survivor,
its successors and assigns, the title to any of the Assets or
otherwise to carry out and give effect to the provisions and
intent of this Agreement. In addition, from and after the
Closing and the Effective Time, the Shareholders will afford to
BAB and its attorneys, accountants, investment bankers and other
representatives access, during normal business hours, to such
personnel, books and records relating to the Assets and the
Business as may reasonably be required in connection with the
preparation of financial information or the filing of tax returns
and will cooperate in all reasonable respects with BAB in
connection with claims and litigation asserted by or against
third parties, relating to the transactions contemplated hereby.
ARTICLE 15. TERMINATION
15.1 Termination. This Agreement may be terminated and the
transactions contemplated herein may be abandoned after the date
of this Agreement, but not later than the Effective Time:
a. By mutual written consent of all parties hereto;
b. By BAB or BAB Sub if any of the conditions
provided for in Article 10 of this Agreement have not been
met and have not been waived in writing by BAB or BAB Sub on
or before the Closing;
c. By MFM and the Shareholders if any of the
conditions provided for in Article 11 of this Agreement have
not been met and have not been waived in writing by the
Shareholders on or before the Closing; and
e. By BAB pursuant to Section 16.1(b) hereof.
In the event of termination or abandonment by any party as
provided in this Section, written notice shall forthwith be given
to the other party and each party shall pay its own expenses
incident to preparation for consummation of this Agreement and
the transactions contemplated hereunder and neither party shall
have any obligation or liability to the other hereunder except
such liability as may arise as a result of a breach hereof.
15.2 Return of Documents and Nondisclosure. If this
Agreement is terminated for any reason pursuant to Section 15.1
hereto, each party shall return all documents and materials which
shall have been furnished by or on behalf of the other party, and
each party hereby covenants and agrees that except insofar as may
be necessary to assert their respective rights hereunder, the
agreements concerning confidentiality and contained in the Letter
of Intent between the parties dated February 13, 1997 shall
continue in full force and effect in accordance with their terms.
ARTICLE 16. TITLE AND RISK OF LOSS
16.1 Title and Risk of Loss.
a. MFM and the Shareholders shall bear all costs and
expenses and assume and bear all risk of loss, damage or
destruction of or to the Assets due to theft, expropriation,
seizure, destruction, damage, fire, earthquake, flood or
other cause or casualty until title thereto is passed to the
Survivor at the Effective Time.
b. If prior to the Closing, any material Assets shall
have suffered, sustained or incurred any material loss,
damage or destruction, including, without limitation, any
environmental contamination or pollution, MFM and
Shareholders shall not have elected at their sole option and
expense to wholly repair or replace the Assets which
suffered, sustained or incurred the material loss, damage or
destruction with assets which are as nearly identical as
practicable in value, form and function, BAB shall have the
right, at its sole discretion and election, to either (i)
terminate this Agreement, or (ii) complete the acquisition
contemplated by this Agreement, in which event:
1) MFM and the Shareholders shall assign and
transfer to BAB and BAB shall be entitled to receive
all insurance proceeds and other compensation collected
by reason of such loss, damage or destruction, together
with any rights to receive any uncollected insurance
proceeds or other compensation relating to such loss,
damage or destruction and an amount equal to the sum of
the aggregate amount of any applicable deductibles
under any insurance policies covering the lost, damaged
or destroyed Assets plus any self-insured retentions;
or
2) BAB shall be entitled to reduce the
consideration to be paid in Articles 2 and 3 hereby of
an amount equal to the cost of repair, or if destroyed
or damaged beyond repair, or if expropriated, seized,
lost or stolen, by an amount equal to the replacement
cost; or
3) BAB shall be entitled to utilize alternatives
1 and 2 concurrently, but not both with respect to any
single MFM Asset.
If BAB elects to complete the acquisition contemplated
hereby notwithstanding any such loss, damage or destruction, and
if MFM and the Shareholders assigns such insurance proceeds and
other compensation and any other rights thereto to BAB, then and
Shareholders shall be released from any and all liability or
responsibility with respect to such loss, damage or destruction,
but shall cooperate with BAB, at no cost or expense to BAB, in
collecting all insurance proceeds and other compensation with
respect thereto. The consideration to be paid pursuant to
Articles 2 and 3 hereunder in such event shall be reduced by the
amount of any deductible amounts under such insurance policies
and self-insured retentions which are not paid by MFM and
Shareholders to BAB.
ARTICLE 17. DEFINITIONS
For purposes of this Agreement, the following terms have the
meanings specified:
"Acquisition Proposal" - any proposal relating to the
possible acquisition of any of MFM whether by way of merger,
purchase of capital stock or partnership interests representing
fifty percent (50%) or more of the voting power or equity of such
entity, purchase of all or substantially all of the assets of
such entity, or otherwise.
"Affiliate" - a Person which is controlled by, or which
controls, or is under common control with another Person is an
affiliate of such Person, whether such relationship is by virtue
of common ownership, common Board of Directors, common general
partners, voting trusts or agreements, ability to direct the vote
of or disposition of voting securities, or otherwise.
"Applicable Laws" - any and all federal, state, local,
municipal, county, foreign, or other laws, ordinances,
constitutions, regulations, statutes, treaties, rules, codes,
licenses, certificates, franchises, permits, writs, rulings,
awards, executive orders, directive, requirements, injunctions
(whether temporary, preliminary, or permanent), judgment, decree,
or other order adopted, enacted, implemented, promulgated,
issued, entered or deemed applicable by or under the authority of
any Governmental Body or by the eligible voters of any
jurisdiction.
"Benefit Plans" - any and all bonus, stock option,
restricted stock, stock purchase, profit-sharing, deferred
compensation, severance, pension, retirement, disability,
medical, dental, health or life insurance, death benefit,
incentive, welfare and/or other benefit, compensation and/or
retirement plan, policy, arrangement and/or an agreement now or
at any time heretofore maintained, sponsored or participated in
by either MFM or any of its respective affiliates.
"Code" - the Internal Revenue Code of 1986, as amended, or
any successor law and regulations issued by the IRS pursuant to
the Internal Revenue Code or any successor law.
"Contract" - any agreement, contract, obligation, promise,
commitment, understanding or undertaking (whether written or oral
and whether express or implied) of any type, nature or
description that is legally binding.
"BAB Shares" - the shares of Common Stock of BAB Holdings,
Inc. issuable to Shareholders and Pierce W. Hance pursuant to
Article 2.1 hereof.
"Encumbrance" - any claim, lien, pledge, charge, security
interest, encumbrance, mortgage, lease, license, equitable
interest, option, right of first refusal or preemptive right,
condition, or other restriction of any kind, including any
restriction on use, voting (in the case of any security),
transfer, receipt of income, or exercise of any other attribute
of ownership, except to the extent that any such claim or other
restriction does not, and insofar as can reasonably be foreseen
in the future will not, have a Material Adverse Effect on either
MFM or BAB or the Survivor.
"Environmental and Safety Requirements" - all federal,
state, and local statutes, laws, rules, regulations, codes,
ordinances, orders, standards, permits, licenses, actions,
policies and requirements (including consent decrees, judicial
decisions and administrative orders) relating to protection,
preservation or conservation of the environment and public or
worker health and safety, all as amended, hereafter amended, or
reauthorized.
"ERISA" - the Employee Retirement Income Security Act of
1974, as amended.
"Exchange Act" - The Securities Exchange Act of 1934, as
amended, or any successor law.
"GAAP" - generally accepted accounting principles in the
United States.
"Governmental Body" - any:
(i) nation, state, county, city, town, village, district,
or other jurisdiction of any nature;
(ii) federal, state, local, municipal, foreign, or other
government;
(iii) governmental or quasi-governmental authority of
any nature (including any governmental agency, branch,
commission, department, official, or other entity, and any court
or other tribunal);
(iv) multi-national organization or body; or
(v) body exercising, or entitled or purporting to exercise,
any administrative, executive, judicial, legislative, police,
regulatory, or taxing authority or power of any nature.
"Hazardous Materials" - All (i) hazardous substances, as
defined by the Comprehensive Environmental Response, Compensation
and Liability Act, 42 U.S.C. Sec. 9601 et seq.; (ii) hazardous
wastes as defined by the Resource Conservation and Recovery Act,
42 U.S.C. Sec. 6901 et seq.; (iii) petroleum, including without
limitation, crude oil or any fraction thereof which is liquid at
standard conditions of temperature and pressure (60 degrees
Fahrenheit and 14.7 pounds per square inch absolute); (iv) any
radioactive materials, including, without limitation, any source,
special nuclear, or by-product material as defined in 42 U.S.C.
Sec. 2011 et seq.; (v) asbestos in any form or condition; (vi)
polychlorinated biphenyls ("PCB's"); and (vii) any other
material, substance, or waste to which liability or standards of
conduct may be imposed under any Environmental and Safety
Requirements.
"IRS" - the United States Internal Revenue Service.
"Knowledge" - shall mean knowledge after such inquiry as is
reasonable under the circumstance.
"Material Adverse Effect" - in connection with any party,
any event, change, or effect that is materially adverse,
individually or in the aggregate, to the condition (financial or
otherwise), properties, assets, liabilities, businesses,
operations, results of operations or prospects of such party,
taken as a whole.
"Ordinary Course of Business" - an action taken by a Person
will be deemed to have been taken in the "Ordinary Course of
Business" only if:
(i) such action is consistent with the past practices of
such Person and is taken in the ordinary course of the normal
day-to-day operations of such Person; and
(ii) such action is not required to be authorized by the
board of directors of such Person (or by any Person or group of
Persons exercising similar authority) and does not require any
other separate or special authorization of any nature.
"Person" - any individual, corporation (including any non-
profit corporation), general, limited or limited liability
partnership, limited liability company, joint venture, estate,
trust, association, organization, or other entity or Governmental
Body.
"Proceeding" - any suit, litigation, arbitration, hearing,
audit, investigation, or other action (whether civil, criminal,
administrative or investigative) commencing, brought, conducted,
or heard by or before, or otherwise involving, any Governmental
Body or arbitrator.
"Related Person" - with respect to a particular individual:
(i) each other member of such individual's Family (as
hereafter defined); and
(ii) any Person that is, directly or indirectly, controlled
by any one or more members of such individual's Family.
With respect to a specify Person other than an individual:
(i) any Person that, directly or indirectly, controls, is
controlled by, or is under common control with such Person; and
(ii) each Person that serves as a director, executive
officer, general partner, executor, or trustee of such specified
Person (or in a similar capacity);
For purposes of this definition, the "Family" of an individual
includes (i) such individual, (ii) the individual's spouse, (iii)
any lineal ancestor or lineal descendant of the individual, or
(iv) a trust for the benefit of the foregoing. A Person will be
deemed to control another Person, for purposes of this
definition, if the first Person possesses, directly or
indirectly, the power to direct, or cause the direction of, the
management policies of the second Person, (A) through the
ownership of voting securities, (B) through common directors,
trustee, or officers, or (C) by contract or otherwise.
"SEC" - the Securities and Exchange Commission.
"Securities Act" - the Securities Act of 1933, as amended,
or any successor law.
"Securities Exchange Act" - the Securities Exchange Act of
1934, as amended, or any successor law.
"Tax or Taxes" - (i) any and all new income, gross income,
gross receipts, sales and use, ad valorem, franchise, profits,
transfer, sales, use, social security, unemployment, licenses,
withholding, payroll, excise, severance, stamp, occupation,
property, customers duties and/or other taxes, fees or charges of
any king whatsoever imposed by a foreign, federal, state, country
local and/or other taxing authority together with any interest or
penalty thereon, and/or (ii) the liability for the payment of any
consolidated tax, including penalty or interest thereon, of the
type described in the immediately preceding subsection (i),
including any federal, state, local and/or other consolidated
income tax liability including any penalty or interest thereon,
as a result of being a member of, and which may be imposed upon,
an affiliated group (as defined in Section 1504(a) of the Code,
or other Applicable Law).
"Threatened" - a claim, Proceeding, dispute, action, or
other matter will be deemed to have been "Threatened" if any
demand or statement has been made in writing, or any notice has
been given in writing, or if any other event has occurred, or any
other circumstances exist that would lead a reasonably prudent
Person to conclude that such a claim, Proceeding, dispute,
action, or other matter is substantially likely to be asserted,
commenced, taken, or otherwise pursued in the future.
ARTICLE 18. MISCELLANEOUS
18.1 Preservation of and Access to Records. All books and
records of MFM conveyed to the Survivor hereunder shall be
preserved by the Survivor for a period of six (6) years after the
Effective Time; provided, however, the Survivor may destroy any
part or parts of such records upon obtaining written consent of
Shareholders for such destruction, which consent shall not be
unreasonably withheld or delayed. Such records shall be made
available to the Shareholders and their representatives at all
reasonable times during normal business hours of the Survivor
during said six-year period with the right at their expense to
make abstracts from and copies thereof. The Survivor may return
such records to the Shareholders at any time and Survivor's
obligation to preserve or make available such records shall
thereupon terminate.
18.2 Cooperation Prior To Closing. The parties hereto shall
cooperate with each other in all respects, including using their
reasonable efforts to assist each other in satisfying the
conditions precedent to their respective obligations under this
Agreement, to the end that the transactions contemplated hereby
will be consummated. Without limiting the generality of the
foregoing, (a) the Shareholders will vote all of their shares and
partnership interests in MFM in favor of the consummation of the
transactions contemplated hereby, (b) MFM and BAB shall consult
with each other before they enter into any franchise agreements
and/or area franchise development agreements from and after the
date hereof to prevent, to the extent practicable, any
territorial or other conflicts, any commitments which, in the
judgment of BAB could adversely affect the Business after the
Effective Time, or the business of BAB prior to or after the
Effective Time, (c) MFM and Shareholders shall assist BAB, at
BAB's sole expense, in amending the franchise offering circulars
utilized for the sale of Big Apple Bagels, Brewsters Coffee, and
My Favorite Muffin franchises in accordance with Applicable Laws
to reflect that following the Effective Time, BAB and/or its
subsidiaries or other Affiliates will be offering and selling My
Favorite Muffin franchises and area franchises, (e) MFM and the
Shareholders shall assist and cooperate with BAB and its
Affiliates in preparing a franchise offering circular for My
Favorite Muffin franchisees and area franchises and in
registering such franchises for offer and sale in accordance with
Applicable Laws so that BAB and/or its Affiliates may offer and
sell such franchises immediately following the Effective Time;
(f) BAB shall cooperate with MFM in promptly and adequately
responding to all concerns expressed by MFM's franchisees
relating to the transactions contemplated by this Agreement; (g)
from and after the execution of this Agreement, the parties
hereto acknowledge and agree that the parties and their
respective affiliates will discontinue offering and selling their
respective franchises unless and until they have amended their
franchise offering circulars and applicable franchise
registrations to disclose the execution of this Agreement and the
proposed consummation of the transactions contemplated hereby;
and (h) each party shall promptly supply the other with all
information required by such party and its affiliates to amend
and/or prepare their franchise offering circulars and franchise
registrations as contemplated hereby.
18.3 Employees. Nothing contained in this Agreement shall
constitute or be construed as a contract of employment between
BAB or any of its Affiliates and any employees of MFM, and any
such employee(s) hired by BAB or any of its Affiliates, including
but not limited to the Survivor, shall remain subject to
discharge and lay-off by such employer at any time.
18.4 Public Announcements. The timing and content of all
public announcements relating to the execution of this Agreement
and the consummation of the transactions contemplated hereby
shall be approved by both BAB and the Shareholders prior to the
release of such public announcements. Notwithstanding the
foregoing, BAB may make such public disclosures as may be
required by Applicable Laws. Subsequent to the Closing, BAB may
make such announcements and/or advertisements as it, in its sole
discretion, deems necessary to all customers, franchisees, and
supplies and/or potential customers, franchisees and suppliers of
the Business.
18.5 Sales, Use and Deed Taxes. The Survivor agrees to pay
in full any and all federal, state, local and foreign sales
taxes, use taxes, deed taxes, mortgage registrations, real estate
transfer taxes or other similar taxes (including any interest or
penalty thereon), but specifically excluding any income tax, as
and when the same may be due, which may be imposed upon or arise
out of the sale of the consummation of the transactions
contemplated hereby.
18.6 Notices. All notices, demands and other communications
provided for hereunder shall be in writing and shall be given by
personal delivery, via facsimile transmission (receipt
telephonically confirmed), by nationally recognized overnight
courier (prepaid), or by certified or registered first class
mail, postage prepaid, return receipt requested, sent to each
party, at its/his address as set forth below or at such other
address or in such other manner as may be designated by such
party in written notice to each of the other parties. All such
notices, demands and communications shall be effective when
personally delivered, one (1) business day after delivery to the
overnight courier, upon telephone confirmation of facsimile
transmission or upon receipt after dispatch by mail to the party
to whom the same is so given or made:
If to MFM or the Shareholders: My Favorite Muffin Too,
Inc.
Ruth Stern
4 Cedar Brook Drive North
Cranburry, NJ 08512
With a copy to: Arthur L. Pressman
Abraham, Pressman & Bauer, P.C.
1818 Market Street, 35th Floor
Philadelphia, PA 19103
If to Purchaser:
BAB Holdings, Inc.
8501 W. Higgins Road, Suite 320
Chicago, IL 60631
Attn: Michael K. Murtaugh, General
Counsel
With a copy to: Janna R. Severance
Moss & Barnett P.A.
4800 Norwest Center, 90 South Seventh
Street
Minneapolis, MN 55402-4129
18.7 Entire Agreement. This Agreement, including the
documents, instruments, and agreements to be executed by the
parties pursuant hereto, contains the entire agreement of the
parties hereto and supersedes all prior or contemporaneous
agreements and understandings, oral or written, between the
parties hereto with respect to the subject matter hereof.
18.8 Remedies Cumulative. Remedies herein provided are
cumulative and not exclusive of any other remedies provided by
Applicable Law.
18.9 Specific Performance. The parties acknowledge and
agree that the Assets are unique and that an aggrieved party will
have no adequate remedy at law if a defaulting party shall fail
to perform any of its/his/their obligations hereunder. In such
event, the aggrieved party shall have the right, in addition to
any other rights it may have, to specific performance of this
Agreement.
18.10 Amendments. No purported amendment, modification
or waiver of any provision of this Agreement or any of the
documents, instruments or agreements to be executed by the
parties pursuant hereto shall be effective unless in a writing
specifically referring to this Agreement and signed by all of the
parties.
18.11 Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and
their respective heirs, personal representatives, successors and
permitted assigns, but except as hereinafter provided in this
Section, nothing in this Agreement is to be construed as an
authorization or right of any party to assign its rights or
delegate its duties under this Agreement without the prior
written consent of the other parties hereto. In its sole
discretion, BAB may assign its rights and the rights of BAB Sub
in, and/or delegate its duties and the duties of BAB Sub under
this Agreement to, one or more Persons that directly or
indirectly through one or more intermediaries, control, or are
controlled by, or are under common control with, the BAB Sub
(individually an "Affiliate" and collectively "Affiliates"). In
the event of such an assignment of rights and/or delegation of
duties, all references to BAB Sub in this Agreement shall be
deemed to be references to the Affiliate(s) to which this
Agreement is assigned; provided that no such assignment and/or
delegation shall relieve BAB Sub of any of its duties or
obligations hereunder.
18.12 Costs. Except as otherwise expressly provided for
herein and notwithstanding any assumption of liabilities pursuant
to the terms of the merger contemplated by this Agreement, MFM on
behalf of Shareholders and BAB on behalf of itself and BAB Sub
shall pay its/their own costs and expenses incurred in connection
with negotiating and preparing this Agreement and consummating
the transactions contemplated hereby, including but not limited
to fees and disbursements of their attorneys and accountants.
18.13 Governing Law. This Agreement, including the
documents, instruments and agreements to be executed and/or
delivered by the parties pursuant hereto, shall be construed,
governed by and enforced in accordance with the laws of the State
of Illinois, without giving effect to the principles of conflicts
of laws thereof.
18.14 Counterparts; Facsimile. This Agreement may be
executed in two or more counterparts, each of which shall be
deemed an original but all of which together shall constitute one
and the same Agreement. Any facsimile signature shall be deemed
an original signature.
18.15 Headings. The headings of the articles, sections
and subsections of this Agreement are intended for the
convenience of the parties only and shall in no way be held to
explain, modify, construe, limit, amplify or aid in the
interpretation of the provisions hereof. The terms "this
Agreement," "hereof," "herein," "hereunder," "hereto" and similar
expressions refer to this Agreement as a whole and not to any
particular article, section, subsection or other portion hereof
and include the Schedules and Exhibits hereto and any document,
instrument or agreement executed and/or delivered by the parties
pursuant hereto.
18.16 Scope of Agreement. Unless the context otherwise
requires, all references in this Agreement or in any Schedule or
Exhibit hereto, to the assets, properties, operations, business,
financial statements, employees, books and records, accounts
receivable, accounts payable, Contracts, agreements or other
attributes of the Business of MFM shall mean such items or
attributes as they are used in, apply to, or relate to the
Business.
18.17 Number and Gender. Unless the context otherwise
requires, words importing the singular number shall include the
plural and vice versa and words importing the use of any gender
shall include all genders.
18.18 Severability. In the event that any provision of
this Agreement is declared or held by any court of competent
jurisdiction to be invalid or unenforceable, such provision shall
be severable from, and such invalidity or unenforceability shall
not be construed to have any effect on, the remaining provisions
of this Agreement, unless such invalid or unenforceable provision
goes to the essence of this Agreement, in which case the entire
Agreement may be declared invalid and not binding upon any of the
parties.
18.19 Parties in Interest. Nothing expressed or implied
in this Agreement is intended or shall be construed to confer any
rights or remedies under or by reason of this Agreement upon any
Person or entity other than the parties hereto or their
respective heirs, personal representatives, successors and
permitted assigns. Nothing in this Agreement is intended to
relieve or discharge the obligations or liabilities of any third
Person or entity to the parties hereto.
18.20 Waiver. The terms, conditions, warranties,
representations and indemnities contained in this Agreement,
including the documents, instruments and agreements executed
and/or delivered by the parties pursuant hereto, may be waived
only by a written instrument executed by the party waiving
compliance. Any such waiver shall only be effective in the
specific instance and for the specific purpose for which it was
given and shall not be deemed a waiver of any other provision
hereof or of the same breach or default upon any recurrence
thereof. No failure on the part of a party hereto to exercise
and no delay in exercising any right hereunder shall operate as a
waiver thereof nor shall any single or partial exercise of any
right hereunder preclude any other or further exercise thereof or
the exercise of any other right.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by duly authorized representations as of
the day, month and year first above written.
BAB HOLDINGS, INC.
By s/ Michael W. Evans
-----------------------
Its President and CEO
BAB ACQUISITION SUB, INC.
By s/ Michael W. Evans
-----------------------
Its President and CEO
MY FAVORITE MUFFIN TOO,INC.
By s/ Owen Stern
-----------------------
Its President
MUFFIN HOLDINGS OF PENNSYLVANIA,
A LIMITED PARTNERSHIP
By Muffin Favorite Muffin Too,
Inc.
Its sole general and limited
partner
By s/ Owen Stern
---------------------
The President of My Favorite
Muffin Too, Inc.
SHAREHOLDERS:
s/ Owen Stern
----------------------
Owen Stern
s/ Ruth Stern
----------------------
Ruth Stern
s/ Ilona Stern
----------------------
Ilona Stern
LIST OF SCHEDULES AND EXHIBITS
Schedule 4.1(b) List of Proprietary Rights
Schedule 4.1(d) List of Vehicles
Schedule 4.1(g) List of Operating Contracts
Schedule 4.1(h) List of Licenses, Certificates,
Franchises,Permits, Consents and
Approvals
Schedule 4.1(i) Categories of Pre-Paid Expenses
Schedule 4.1(n) List of Computer Software
Schedule 5.1(a) List of Contracts, Leases, Etc.
Schedule 5.1(b) List of Loans and Credit Agreements
Schedule 5.1(c) List of Insurance Policies and Claims
Schedule 5.1(d) List of Employee Plans
Schedule 5.1(e) List of Taxes
Schedule 5.1(g) List of Other Obligations
Schedule 6.3 List of Required Filings, Permits,
Consents, Approvals and Notices
Schedule 6.4 List of Encumbrances
Schedule 6.6 List of Pending and Threatened Litigation
Schedule 6.8 List of Tax Matters
Schedule 6.11 List of Financial Statements and Certain
Liabilities
Schedule 6.17 List of Questionable Accounts Receivable
Schedule 6.19 List of Employees and Employment Terms
Schedule 6.22 List of Other Material Contracts
Schedule 6.25 Product Liability Claims
Schedule 6.26 List of Insurance Policies
Schedule 6.27 Broker(s) and Fee Arrangement
Schedule 6.32 List of Terminated Franchise Agreements
Exhibit A Form of Escrow Agreement
Exhibit B Form of Registration Rights Agreement
Exhibit C Form of Employment Agreement with Owen Stern
Exhibit D Form of Employment Agreement with Ruth Stern
Exhibit E Form of Employment Agreement with Ilona Stern
Exhibit F MFM's and Shareholders' Closing Certificate
Exhibit G Opinion of Counsel to MFM Too, MH and the
Shareholders
Exhibit H BAB's and BAB Sub's Closing Certificate
REGISTRATION RIGHTS AGREEMENT
Dated as of May 1, 1997
Between
BAB HOLDINGS, INC. ("the Company")
AND
OWEN STERN, RUTH STERN, ILONA STERN AND PIERCE W. HANCE
(THE "HOLDERS")
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement ("Agreement") is made as
of May 1, 1997 between BAB Holdings, Inc., an Illinois
corporation (the "Company"), and Owen Stern, Ruth Stern, Ilona
Stern, and Pierce W. Hance (individually, a "Holder" and,
collectively, the "Holders").
RECITALS
WHEREAS, pursuant to the terms of an Acquisition Agreement
dated as of May 1, 1997 (the "Acquisition Agreement"), by and
among the Owen Stern, Ruth Stern and Ilona Stern, My Favorite
Muffin, Too, Inc. ("MFM Too") and Muffin Holdings of Pennsylvania
("MH"), and the Company, the Holders have acquired an aggregate
of 432,608 shares of Common Stock, no par value per share (the
"Common Stock"), of the Company (the "Shares"); and
WHEREAS, the Company has agreed to register the Shares on
the terms and conditions set forth herein, and in any event, to
register the Shares not later than December 31, 1997;
NOW, THEREFORE, in consideration of the mutual covenants,
agreements, representations and warranties herein set forth, it
is hereby agreed among the Company and the Holders as follows:
ARTICLE I
REGISTRATION RIGHTS
Section 1.1. Registration. Notwithstanding anything herein
deemed to be to the contrary, the Company, pursuant to Section
1.3 hereof, shall register the Shares held by the Holders not
later than December 31, 1997.
Section 1.2. Participation in Registration.
(a) If, at any time or from time to time after May 1, 1997
and prior to December 31, 1997, 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 an SEC Rule 145
transaction, the Company will:
(i) promptly give to the Holders 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 30 days after receipt of such written notice from the
Company, by the Holders.
(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 Holders as a part of the written
notice given pursuant to Section 1.1(a)(i). In such event, the
right of the Holders to registration pursuant to Section 1.1
shall be conditioned upon the Holders' agreeing to participate in
such underwriting and in the inclusion of such Holders'
Registrable Securities in the underwriting to the extent provided
herein. The Holders proposing to distribute their 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 Holders 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 Holders and the other holders
distributing their securities through such 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) 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 Holders disapprove of the terms
of any such underwriting, they 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 Holders. Any
securities excluded or withdrawn from such underwriting shall be
withdrawn from such registration.
Section 1.3. Demand Registration Rights. On and after the
Eligibility Date, and for a period of one (1) year thereafter,
the Holders, by written notice signed by the Holders (or by
permitted assignees who hold not less than 25% of the Registrable
Securities) may demand that the Company file a registration
statement on Form S-3 to permit resale of the Registrable
Securities of the Holders during the period of effectiveness of
such Form S-3 registration statement; provided that if the
Eligibility Date is later than December 1, 1997, the Holders'
demand and the Company's obligation shall not be limited to
Form S-3 but shall extend to any Form then available to the
Company for registration of the Registrable Securities. Any such
registration shall be subject to the following limitations:
(a) The Company shall not be required to maintain and keep
any such registration 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 1.3;
(c) The Company shall not be required to prepare or effect
any registration pursuant to this Section 1.3 unless the
Registrable Securities to be sold by the Holders represent not
less than 25% of the total Registrable Securities;
(d) If the Company shall furnish to the Holders a
certificate, signed by the Company's president or chief executive
officer, 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 Holders or (ii) in
the good faith judgment of the Board of Directors of the Company
the Holders' proposed offering would interfere with a pending or
contemplated financing, merger, sale of assets, recapitalization
or other similar corporate action of the Company 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 defer filing the registration statement
for a period of not more than 120 days; provided, however, that
the time period set forth in Section 1.3 with respect to the
exercise by the Holders of their registration rights shall be
extended by the number of days by which any registration is
deferred under the terms of this paragraph (d);
(e) The Company may include in such registration statement
securities of other selling security holders, without limitation,
and securities offered for its own account, if permitted by the
registration form used; and
(f) The Company hereby undertakes to use its best effort to
meet the criteria for use of Form S-3 at the earliest possible
date, to continue to qualify for such use for a period of one (1)
year following the Eligibility Date, and, in any case, to cause
the Registrable Securities to be registered under the Securities
Act not later than December 31, 1997.
(g) The Company shall not be required to prepare or effect
any registration pursuant to this Section 1.3 if the Company has
effected any registration in which the Holders were entitled to
participate under Section 1.2 hereof, and all rights of the
Holders to demand registration under Section 1.3 shall terminate
upon the SEC effective date of such Section 1.2 registration.
Section 1.4. 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 Holders 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 1.5. 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 Holders
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 ninety (90) days or until the Holders
have 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 Holders 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 Holders, 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 Holders participating in such underwriting
shall also enter into and perform their obligations under such
agreement.
(f) Notify the Holders 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 1.6. Indemnification.
(a) The Company will indemnify the Holders 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 Holders, 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 Holders or underwriter and
stated to be specifically for use therein.
(b) The Holders will, if Registrable Securities held by
such Holders 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 the Holders of any rule or regulation
promulgated under the Securities Act applicable solely to the
Holders (which is not otherwise applicable to or violated by the
Company) and relating to action or inaction required solely of
the Holders (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 Holders which shall have been furnished to the
Company by an instrument duly executed by such Holders and stated
to be specifically for use therein; provided, however, that the
obligations of such Holders hereunder shall be limited to an
amount equal to the net proceeds to such Holders of Registrable
Securities sold as contemplated herein.
(c) Each party entitled to indemnification under this
Section 1.6 (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 1.7. Information by Holders. The Holders of
Registrable Securities included in any registration shall furnish
to the Company such information regarding such Holders and the
distribution proposed by such Holders 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 1.8. 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 Holders own any Restricted Securities,
to furnish to the Holders 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 1.9. Transfer of Registration Rights. Rights to
cause the Company to register securities granted under Article I
may not be assigned without the prior written consent of the
Company in each instance, except pursuant to will or the laws of
descent and distribution. 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 of
this Article I. The Company shall not unreasonably withhold its
consent to a request to transfer the registration rights granted
hereunder.
Section 1.10. "Market Stand Off" Agreement. The Holders
hereby agree that they 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 Shares 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 Shares of
the Holders until the end of such ninety (90) day period.
Section 1.11. Plan of Distribution. To preserve an orderly
market in any publicly owned securities of the Company, in the
event that the aggregate number of Registrable Securities to be
registered pursuant to a registration statement under Section 1.3
exceeds 5% of the Company's outstanding securities, the Holders
will provide advance notice to the Company of their intended
marketing and distribution arrangements in connection with such
registration, including information with respect to any
investment banking firm or broker-dealer retained by the Holders
to manage the distribution.
Section 1.12. Limitation on Resale. The undersigned
Holders, with the exception of Pierce W. Hance, hereby
acknowledge and affirm their agreement, as set forth in the
Acquisition Agreement, to refrain from any sale or disposition of
any of the Shares prior to January 1, 1999; however, this
limitation shall not apply to Pierce W. Hance.
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. Except as otherwise provided herein, no
assignment of this Agreement may be made by either party at any
time, without the other party's prior written consent.
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 Holders 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 Holders upon any
breach or default of any party under this Agreement, shall impair
any such right, power or remedy of the Company or such Holders
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 Holders 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
Holders, shall be cumulative and not alternative.
Section 2.6. Counterparts; Facsimile Signature. 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. Facsimile signatures to this Agreement shall
constitute the original signature of the signing party.
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.
"Eligibility Date" shall mean the earliest date after the
date hereof upon which the Company meets the criteria for use of
Form S-3.
"Form S-1," "Form S-3," "Form S-4" and "Form S-8" shall mean
such forms, as currently identified, for registration of
securities under the Securities Act, or any substantially
similar, equivalent or successor forms under the Securities Act.
"Holders" shall mean the persons named on the signature page
hereof and any permitted transferee of registration rights.
"Registrable Securities" means Shares which are issued and
outstanding and which have not been sold to the public, plus
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 Article I 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, the Company has caused the foregoing
Agreement to be executed by one of its duly authorized officers,
and the Holders have each executed the foregoing Agreement, each
as of the date first above written.
BAB HOLDINGS, INC.
By s/Michael W. Evans
_______________________________
Its President and CEO
s/ Owen Stern
-------------------------------
Address: 7 Maurice Ct.
Kendall Park, NJ 08824
s/ Ruth Stern
-------------------------------
Address: 7 Maurice Ct.
Kendall Park, NJ 08824
s/ Ilona Stern
-------------------------------
Address: 20 Mill Road
Matawan, NJ 07747
s/ Pierce W. Hance
-------------------------------
Address: 253 Main Street
Sag Harbor, NY 11963
