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EXECUTION COPY
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SHARE PURCHASE AGREEMENT
AMONG
SCHULTZ ACQUISITION CORP.,
BRODBECK ENTERPRISES, INC.,
ROBERT J. BRODBECK,
BARRY J. BRODBECK,
AND
THE OTHER SHAREHOLDERS
SPECIFIED HEREIN
DATED APRIL 17, 2001
TABLE OF CONTENTS
Page
ARTICLE I. SALE AND PURCHASE OF SHARES........................................1
1.1 Sale and Purchase of Shares.................................1
1.2 Purchase Price..............................................2
1.3 Payment of Purchase Price...................................2
1.4 Determination of Net Working Capital and Funded Debt........3
1.5 Excluded Assets.............................................6
ARTICLE II. CLOSING...........................................................6
2.1 Closing and Closing Date....................................6
2.2 Deliveries by Sellers.......................................6
2.3 Deliveries by Purchaser.....................................8
ARTICLE III. JOINT AND SEVERAL REPRESENTATIONS AND WARRANTIES
OF COMPANY AND SELLERS...................................................9
3.1 Due Organization and Authority..............................9
3.2 Authorization; Validity.....................................9
3.3 Subsidiaries and Other Affiliates..........................10
3.4 Qualification..............................................10
3.5 Outstanding Capital Stock..................................10
3.6 Options or Other Rights....................................11
3.7 Charter Documents and Corporate Records....................11
3.8 Sellers....................................................11
3.9 No Violation...............................................12
3.10 Inventory..................................................12
3.11 Absence of Undisclosed Liabilities.........................13
3.12 Financial Statements.......................................13
3.13 Absence of Certain Changes or Events.......................14
3.14 Title to Assets and Properties; Condition..................16
3.15 Compliance With Laws and Orders............................16
3.16 Permits....................................................17
3.17 Intellectual Property......................................17
3.18 No Conflict of Interest....................................18
3.19 Labor Relations............................................18
3.20 Officers, Directors and Employees..........................19
3.21 Employee Benefit Plans.....................................19
3.22 Taxes......................................................21
3.23 Legal Proceedings..........................................25
3.24 Material Contracts.........................................26
3.25 Insurance..................................................27
3.26 Accounts Receivable........................................28
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3.27 Environmental Matters......................................28
3.28 Fees or Commissions........................................29
3.29 Illegal Payments...........................................29
3.30 Principal Vendors..........................................29
3.31 Real Estate................................................30
3.32 Disclosure.................................................33
3.33 Guarantors of Company Indebtedness.........................33
3.34 Bank Accounts..............................................33
3.35 Funded Debt................................................33
3.36 Representations and Warranties on Closing Date.............34
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF PURCHASER......................34
4.1 Organization...............................................34
4.2 Authorization..............................................34
4.3 No Violation...............................................34
ARTICLE V. COVENANTS.........................................................35
5.1 Conduct of the Business....................................35
5.2 Certain Filings, Consents and Action.......................36
5.3 Full Access................................................36
5.4 Public Announcements.......................................37
5.5 Acquisition Proposals......................................37
5.6 Supplements to Schedules...................................37
5.7 Further Assurances.........................................38
5.8 Financial Information......................................38
5.9 Material Consents..........................................38
5.10 WARN Act...................................................38
5.11 Cash as of Closing Date....................................39
5.12 Articles Amendment; Buy and Sell Agreement.................39
5.13 Estoppel Certificates......................................39
5.14 Noncompetition; Confidentiality............................40
5.15 Section 338(h)(10) Election................................41
5.16 Tax Matters................................................42
5.17 Income Tax Matters.........................................44
5.18 Title Insurance............................................45
5.19 Roof/HVAC/Systems Inspections..............................45
5.20 Ordinary Course Capital Expenditures.......................46
5.21 Repayment of Debt..........................................46
5.22 Dick's Supermarket Foundation..............................46
5.23 Accrued Bonus Payments.....................................46
5.24 Escrow for Certain Post-Closing Employee Payments..........47
5.25 Bad Debt Reserve...........................................47
5.26 Schultz Guaranty...........................................48
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ARTICLE VI. CONDITIONS TO OBLIGATIONS OF PURCHASER...........................48
6.1 Representations and Warranties True as of the
Closing Date...............................................48
6.2 Performance by Company and Sellers.........................48
6.3 Material Consents..........................................48
6.4 Absence of Litigation......................................48
6.5 No Material Adverse Change.................................49
6.6 Title......................................................49
6.7 Resignations...............................................49
6.8 Landlord Estoppel Certificates.............................49
6.9 General Releases...........................................49
6.10 Buy and Sell Agreement.....................................49
6.11 Prairie Du Chien Store Construction Project................49
6.12 Platteville Conditional Use Permit.........................50
6.13 Repair/Replacement of Cakeroom Ventilation System..........50
6.14 Reorganization Approval....................................50
6.15 Title Insurance............................................50
6.16 Inspection.................................................50
6.17 Other Agreements...........................................50
ARTICLE VII. CONDITIONS TO OBLIGATIONS OF COMPANY AND SELLERS................51
7.1 Representations and Warranties True as of the
Closing Date...............................................51
7.2 Performance by Purchaser...................................51
7.3 Absence of Litigation......................................51
7.4 Other Agreements...........................................51
ARTICLE VIII. SURVIVAL OF REPRESENTATIONS AND WARRANTIES
AFTER CLOSING..........................................................51
8.1 Representations and Warranties of Company and Sellers......51
8.2 Representations and Warranties of Purchaser................53
ARTICLE IX. GENERAL INDEMNIFICATION..........................................54
9.1 Joint and Several Obligation of Sellers to Indemnify.......54
9.2 Obligation of Purchaser to Indemnify.......................55
9.3 Third Party Claims; Notice and Opportunity to Defend.......55
9.4 Tax Indemnities............................................56
9.5 Indemnification of Non-Third Party Claims..................57
9.6 Payment....................................................58
9.7 Limitations on Indemnification.............................59
9.8 No Waiver..................................................61
9.9 Non-Exclusive..............................................61
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ARTICLE X. TERMINATION OF AGREEMENT..........................................61
10.1 Termination................................................61
10.2 Survival After Termination.................................62
ARTICLE XI. RESOLUTION OF DISPUTES...........................................62
11.1 Arbitration................................................62
11.2 Arbitrators................................................63
11.3 Procedures, No Appeal......................................63
11.4 Authority..................................................63
11.5 Entry of Judgment..........................................63
11.6 Confidentiality............................................63
11.7 Continued Performance......................................63
11.8 Tolling....................................................64
ARTICLE XII. MISCELLANEOUS...................................................64
12.1 Certain Definitions........................................64
12.2 Disclosure Schedule........................................64
12.3 Expenses...................................................64
12.4 Notices....................................................65
12.5 Entire Agreement...........................................66
12.6 Waivers and Amendments; Non-Contractual Remedies;
Preservation of Remedies...................................66
12.7 Governing Law..............................................67
12.8 Binding Effect; No Assignment..............................67
12.9 Variations in Pronouns.....................................67
12.10 Counterparts...............................................67
12.11 Exhibits and Disclosure Schedule...........................67
12.12 Headings...................................................67
12.13 Severability of Provisions.................................67
12.14 Confidentiality............................................68
12.15 Acquisition Affiliate......................................68
Exhibits
Exhibit A Robert J. Brodbeck Employment Agreement
Exhibit B Form Lease (Stand-Alone Stores)
Exhibit C Form Lease (Mall Stores)
Exhibit D Form of Schultz Guaranty
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SHARE PURCHASE AGREEMENT
THIS SHARE PURCHASE AGREEMENT (this "Agreement") is made and entered
into as of April 17, 2001, by and among Schultz Acquisition Corp., a Wisconsin
corporation ("Purchaser"); Brodbeck Enterprises, Inc., a Wisconsin corporation
which will change its corporate name to "Dick's Supermarkets, Inc." upon the
Closing (as hereinafter defined) of this transaction ("Company"); Robert J.
Brodbeck and Barry J. Brodbeck (together, "Primary Shareholders"); and the other
shareholders of Company set forth on the signature page hereof (collectively,
together with the Primary Shareholders, "Sellers).
PRELIMINARY STATEMENTS
A. Sellers are, and will be at Closing, the beneficial and record
owners of all 2,280 of the issued and outstanding shares of the common stock of
Company (the "Shares"). Sellers desire to sell all of the Shares, and Purchaser
desires to purchase all of the Shares, all upon the terms and subject to the
conditions of this Agreement.
B. Company is a leading regional supermarket chain operating eight
supermarkets under the "Dick's Supermarkets" name in southwest Wisconsin and
northern Illinois. All of Company's supermarkets are leased and they are located
in Boscobel, Wisconsin; Darlington, Wisconsin; Dodgeville, Wisconsin; Galena,
Illinois; Lancaster, Wisconsin; Monroe, Wisconsin; Platteville, Wisconsin; and
Prairie du Chien, Wisconsin. Company also leases and operates a 28,600 square
foot central manufacturing facility consisting of a complete scratch bakery and
a delicatessen, together with Company's 14,000 square foot corporate support
offices. Company's supermarkets located in Boscobel, Darlington, Dodgeville,
Lancaster, Monroe and Platteville are leased from Brodbeck Realty Corporation, a
corporation owned by Sellers ("BRC"). Company's supermarkets located in Galena
and Prairie du Chien, as well as Company's bakery and delicatessen manufacturing
facilities (including the ancillary corporate support offices), are leased from
non-affiliated third parties (sometimes referred to as the "Non-Affiliated Real
Property Leases"). Company does not own any real estate.
STATEMENT OF AGREEMENT
In consideration of the representations, warranties, covenants and
agreements contained herein, and intending to be legally bound, Purchaser,
Company and Sellers hereby agree as follows:
ARTICLE I.
SALE AND PURCHASE OF SHARES
1.1 Sale and Purchase of Shares.
At the Closing on the Closing Date (as hereinafter defined) provided
for in Section 2.1, and upon the terms and subject to the conditions contained
in this Agreement, Sellers shall sell to Purchaser, and Purchaser shall purchase
from Sellers, all of the Shares free and clear of all
Liens (as hereinafter defined), in consideration of Purchaser's payment to
Sellers of the Purchase Price.
1.2 Purchase Price.
The purchase price (the "Purchase Price") payable by Purchaser for the
Shares shall be the sum of (i) Thirty Million Dollars ($30,000,000); minus (ii)
the Company's Funded Debt (as hereinafter defined) as of the Closing Date; and
plus or minus, as the case may be, (iii) the Net Working Capital Adjustment (as
hereinafter defined).
1.3 Payment of Purchase Price.
All payments of the Purchase Price, including any adjustments thereto,
are to be made to accounts designated in Schedule 1.3 or to such other accounts
designated by Sellers in writing before the time for such payments. The Purchase
Price shall be paid by Purchaser as follows:
1.3.1. Cash at Closing. At the Closing, subject to the
escrowed amounts pursuant to Section 5.24, Purchaser shall pay to the
accounts designated by Sellers in cash an amount equal to (i) Thirty
Million Dollars ($30,000,000); minus (ii) the Company's Funded Debt on
the Closing Date (some or all of which may be paid on the Closing Date
pursuant to Section 5.21); and plus or minus, as the case may be, (iii)
the amount by which the Net Working Capital (as hereinafter defined),
as determined pursuant to Section 1.4 and as reflected on the Estimated
Closing Balance Sheet (the "Estimated Net Working Capital") exceeds or
is less than Five Hundred Thousand Dollars ($500,000).
1.3.2. Final Net Working Capital Adjustment. On or before the
fifth business day following the final determination of the Final
Closing Balance Sheet (as hereinafter defined) (such date being
hereinafter referred to as the "Settlement Date"), either (i) Purchaser
shall pay Sellers in cash the amount, if any, by which the Net Working
Capital, as determined pursuant to Section 1.4 and as reflected on the
Final Closing Balance Sheet (the "Final Net Working Capital") exceeds
the Estimated Net Working Capital (plus interest thereon from the
Closing Date to the Settlement Date at the annual rate of 8%) or (ii)
Sellers jointly and severally shall pay Purchaser in cash the amount,
if any, by which the Final Net Working Capital is less than the
Estimated Net Working Capital (plus interest thereon from the Closing
Date to the Settlement Date at the annual rate of 8%). The adjustment
to the Purchase Price pursuant to this Section 1.3.2. is referred to
herein as the "Final Net Working Capital Adjustment" and the amount by
which the Final Net Working Capital exceeds or is less than Five
Hundred Thousand Dollars ($500,000) is herein referred to as the "Net
Working Capital Adjustment" or the "Purchase Price Adjustment").
1.3.3. Method of Payment. All payments under this Section 1.3
shall be made in the form of certified or bank cashier's check payable
to the order of the recipient or,
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at the recipient's option, by wire transfer of immediately available
funds to accounts designated in Schedule 1.3 or by the recipient(s)
pursuant to this Section 1.3.
1.4 Determination of Net Working Capital and Funded Debt.
1.4.1. Definition of Net Working Capital. The term "Net
Working Capital" as used herein shall mean the dollar amount by which
the net book value of all the current assets of Company, as determined
in accordance with generally accepted accounting principles as
consistently applied in the preparation of the Audited 2000 Financial
Statements ("GAAP") and including inventory valued at the lower of cost
(at FIFO) or market in accordance with Section 1.4.4, but excluding the
Excluded Assets (as hereinafter defined)(and excluding any related
prepaid life insurance premiums on the lives of the Primary
Shareholders) as required by Section 1.5 and any marketable securities,
exceeds the net book value of all the current liabilities of Company,
also as determined in accordance with GAAP, as reflected in the
Estimated Closing Balance Sheet or Final Closing Balance Sheet, as
applicable; provided, however, that the costs -------- ------- of any
capital improvements paid for in cash or accrued by Company after the
date hereof and prior to the Closing Date as requested by, or otherwise
approved by Purchaser in writing (excluding capital improvements or
expenditures required in the ordinary course of business pursuant to
Section 5.20 and the capital improvements or expenditures otherwise
required by other provisions of this Agreement) shall be added back to
current assets for purposes of determining Net Working Capital
hereunder.
1.4.2. Definition of Funded Debt. The term "Funded Debt" as
used herein shall mean the dollar amount of all borrowed and interest
bearing money of Company (whether classified as long-term or
short-term, but excluding any capitalized leases), including all
accrued interest thereon, which obligations are set forth and described
in full on Schedule 3.35.
1.4.3. Estimated Closing Balance Sheet. For purposes of
determining the Estimated Net Working Capital, the Funded Debt and the
Purchase Price payable by Purchaser at the Closing, prior to the
scheduled Closing Date, Company, in consultation and coordination with,
and with the participation of, Purchaser, shall prepare a projected
balance sheet of Company in accordance with GAAP (other than for the
fact that the balance sheet is projected) as of the close of business
on the scheduled Closing Date, which shall represent Company's and
Primary Shareholders' best good faith reasonable estimate of the Final
Closing Balance Sheet; such balance sheet to be in form and detail
reasonably acceptable to Purchaser and accompanied by schedules setting
forth in reasonable detail all assets and liabilities included therein.
Such balance sheet and the accompanying schedules shall contain
sufficient detail of the estimated assets and liabilities of Company as
of the Closing Date for the determination of Estimated Net Working
Capital and Estimated Funded Debt. In the event Purchaser shall object
to any of the information proposed to be set forth on such balance
sheet or accompanying schedules, then the Primary Shareholders and
Purchaser shall negotiate in good faith and mutually agree on the
information to be set forth on such balance
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sheet and accompanying schedules, subject to preparation of the Final
Closing Balance Sheet. The estimated balance sheet described in this
Section 1.4.3 as finally determined by the parties pursuant to this
subsection is herein referred to as the "Estimated Closing Balance
Sheet." In connection with the determination of the Estimated Closing
Balance Sheet, Company and Sellers shall fully cooperate with, and
provide to, Purchaser all information and detail, and full and complete
access to Company's financial and accounting personnel and books and
records (including all accountants' work papers and work product), as
Purchaser shall reasonably request.
1.4.4. Inventory. Purchaser, Company, Primary Shareholders and
their respective representatives shall cause a mutually agreed upon
third party to (or with respect to certain mutually agreed upon
inventory items, Purchaser and Company shall together), on a mutually
agreed upon Sunday night prior to the Closing Date, conduct a physical
inventory of Company ("Physical Inventory"). The Physical Inventory
count shall be conducted and the inventory shall be valued on a lower
of cost (on a FIFO basis) or market in accordance with GAAP, as of such
date, but excluding the value of any intercompany profits thereon.
Notwithstanding the foregoing, prior to the Closing, the parties shall
mutually agree on the value, if any, to be attributed to any (i)
inventory which relates to discontinued products, short code items or
which is otherwise unsaleable or obsolete; (ii) inventory which
represents more than projected requirements beyond the expiration or
sale date of such items or are of a kind not readily useable or
saleable in the ordinary course of Company's business; and (iii)
inventory which is not fresh, good, undamaged, labeled or otherwise
merchantable inventory usable in the ordinary course of business
(including bakery goods at retail that are more than one-day old)
(collectively, such type of inventory items are herein called
"Unsaleable Inventory"). If the parties cannot mutually agree on the
value of any of such Unsaleable Inventory items, and if the aggregate
amount in dispute with respect to all of such Unsaleable Inventory
items is less than $50,000, then the amount in dispute shall be
one-half borne by the Purchaser and one-half by the Primary
Shareholders and the Estimated Closing Balance Sheet will appropriately
reflect the reduction of Company's inventory value by the Primary
Shareholders share of such disputed amount for purposes of determining
Estimated Net Working Capital hereunder, subject to preparation of the
Final Closing Balance Sheet. If the aggregate amount in dispute with
respect to the value, if any, of all such types of Unsaleable Inventory
items is $50,000 or more, then Grant Thornton LLP shall resolve such
dispute in accordance with GAAP in its best judgment, and the Company's
inventory value for purposes of determining Estimated Net Working
Capital hereunder shall reflect Grant Thornton's conclusion with
respect thereto, subject to preparation of the Final Closing Balance
Sheet. Primary Shareholders and Purchaser shall each equally bear the
costs and expenses of Grant Thornton LLP.
1.4.5. Other Accrued Liabilities. Notwithstanding anything to
the contrary contained in this Agreement, the Estimated Closing Balance
Sheet and the Final Closing Balance Sheet shall contain accruals of all
liabilities and obligations of the Company in accordance with GAAP and,
in addition, sufficient to fully satisfy: (i) all liabilities of
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Company and/or Sellers with respect to all "stay," "change of control"
or similar bonuses or other payments to Company's employees arising
from or related to the purchase of the Shares, all of which are set
forth and described in detail (including the intended recipient and the
timing and conditions of such payments) on Schedule 1.4.5 ("Stay
Bonuses"), plus all employee payroll taxes applicable thereto; (ii) the
Prorated Items (as defined below) shall be accrued as liabilities of
Company as of the Closing Date; (iii) real and personal property taxes
shall be accrued as liabilities of Company on the basis of actual
amounts billed for such year or, if not so billed, on the basis of 100%
of actual taxes assessed or levied in 2000, adjusted to reflect changes
in assessments or rates of taxes known (and confirmed by applicable
Government Entities, as hereinafter defined) to be in effect for 2001;
(iv) accruals for all vacation and personal day pay earned, plus
employee payroll taxes applicable thereto, in accordance with GAAP and
Company's past practice; (v) all officer and employee bonuses (other
than Stay Bonuses) accrued through the Closing Date as set forth on
Schedule 5.23 and subject to Company's and Purchaser's obligations
under Section 5.23, plus all employee payroll taxes applicable thereto
("Bonus Accrual"); (vi) a bad debt reserve (if any) in an amount (if
any) mutually agreed by Primary Shareholders and Purchaser pursuant to
Section 5.25; and (vii) an accrual, if any, for any amounts unpaid or
otherwise not satisfied by Company, Primary Shareholders or BRC prior
to the Closing under Sections 5.18, 5.19 or 5.20. Notwithstanding the
foregoing, however, the expenses of Arthur Andersen LLP ("AA") incurred
(i) in connection with the preparation and delivery of the Final
Closing Balance Sheet pursuant to Section 1.4.6 will be shared equally
by Purchaser and Sellers; and (ii) in connection with the preparation
and delivery of the Audited 2000 Financial Statements shall be borne by
Sellers if this Agreement is terminated prior to Closing, otherwise by
Purchaser. All accrued liabilities shall be sufficient for the payment
in full of the liabilities to which they relate and accrued expenses
shall reflect all accruals of a character that would be reflected in a
manner consistent with a year-end balance sheet prepared in accordance
with GAAP. "Prorated Items" shall include rents, sewer, water, fuel,
telephone, electricity and other utilities and other charges and costs
typically prorated between a buyer and a seller.
1.4.6. Final Closing Balance Sheet. Purchaser and Sellers
shall mutually cause AA to deliver to Purchaser and Primary
Shareholders, not later than sixty (60) days subsequent to the Closing
Date, an audited balance sheet of Company as of the Closing Date,
prepared in accordance with GAAP from the books and records of Company,
and in accordance with this Section 1.4, and fairly presenting the
financial position of Company as of the Closing Date. The balance sheet
shall be accompanied by detailed schedules of the assets and
liabilities of Company at the Closing Date, the signed, unqualified
audit opinion of AA with respect to such balance sheet, and a report of
AA setting forth the amount of Final Net Working Capital and Final
Funded Debt reflected in the balance sheet and the amount of any
Purchase Price Adjustment to be paid and by whom pursuant to Section
1.3.3 hereof. Each of Purchaser and Primary Shareholders shall then
have thirty (30) days after AA's delivery of such balance sheet to
dispute any items thereon by delivery of a written notice to the other
party to such effect (including
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reasonable detail and supporting data). The parties shall thereafter
attempt in good faith to mutually resolve such dispute based on GAAP
and the other standards and procedures set forth in this Section 1.4.
If the parties cannot mutually resolve such dispute within thirty (30)
days, then either party may submit the dispute to Grant Thornton LLP
for final and binding resolution in accordance with GAAP in its best
judgment. Such audited balance sheet, as finally determined hereunder,
shall be final and conclusive as between the parties and is referred to
herein as the "Final Closing Balance Sheet." Primary Shareholders and
Purchaser shall each equally bear the costs and expenses of Grant
Thornton LLP.
1.5 Excluded Assets.
Neither the Estimated Closing Balance Sheet nor the Final Closing
Balance Sheet shall include the assets listed on Schedule 1.5 (the "Excluded
Assets"), which Company and Sellers hereby covenant and agree will be
distributed to Sellers by Company without any Loss (as hereinafter defined) to
Company.
ARTICLE II.
CLOSING
2.1 Closing and Closing Date.
The closing of the sale and purchase of the Shares described in this
Agreement (the "Closing") shall take place on (i) the date which is ten (10)
business days after the shareholders of Schultz Sav-O Stores, Inc. ("Schultz")
approve Schultz's proposed new holding company structure as further described in
Section 6.12 or (ii) such other date as may be agreed upon by Primary
Shareholders and Purchaser (the "Closing Date"); provided, however, in no event
shall the Closing take place later than July 16, 2001, unless mutually agreed in
writing by Purchaser and the Primary Shareholders. It is currently contemplated
that the Closing Date will be effective as of midnight, June 3, 2001, with the
parties' exchange of deliveries under Sections 2.2 and 2.3 on June 4, 2001. The
Closing will take place at the offices of Foley & Lardner, 777 East Wisconsin
Avenue, Milwaukee, Wisconsin 53202. A pre-closing of all transactions and
documents to be delivered at the Closing will occur on a mutually agreed upon
day preceding the scheduled Closing Date at the offices of Foley & Lardner at
which pre-closing all of the documents and items scheduled for delivery by the
parties at Closing will be satisfactorily previewed by the respective counsel
for the parties to ensure that all such documents and items are fully ready for
immediate delivery at the Closing.
2.2 Deliveries by Sellers.
At the Closing, Sellers shall deliver to Purchaser:
2.2.1. Certificates representing the Shares, duly endorsed or
accompanied by stock powers duly executed in blank, and otherwise in
form acceptable for transfer on the books and stock transfer records of
Company and any documents which are
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necessary for the transfer to Purchaser of good and unencumbered title
to the Shares, with all transfer tax or stamps, if any are required,
attached or provided for;
2.2.2. A true and correct copy of the current Articles of
Incorporation of Company with all amendments thereto (including an
original executed copy of the Articles Amendment (as hereinafter
defined), in form and substance ready for immediate filing with the
Wisconsin Department of Financial Institutions, and copies of all
shareholders and board of directors resolutions duly authorizing and
approving the Articles Amendment) and a certificate of existence for
Company, all (other than the Articles Amendment) certified as of a date
reasonably prior to the Closing Date by the Wisconsin Department of
Financial Institutions (as well as a good standing certificate of
Company in the State of Illinois certified by the Secretary of State
thereof as of a date reasonably prior to the Closing);
2.2.3. A true and correct copy of the current By-Laws of
Company with all amendments thereto, certified by the Secretary of
Company;
2.2.4. A certificate signed by Company and Primary
Shareholders attesting to the fact that all of the representations and
warranties of Company and Sellers made in this Agreement and in any
certificate, instrument, writing or document delivered to Purchaser in
connection herewith and in the Disclosure Schedule and exhibits hereto
are true and correct as of the Closing and that all of the conditions,
covenants and agreements of Company and Sellers required to be
performed or satisfied prior to the Closing have been performed or
satisfied as of the Closing, except where a breach or non-performance
has been waived in writing by Purchaser;
2.2.5. All required consents, notices and approvals of
Government Entities and third parties to the transactions contemplated
by this Agreement and set forth on Schedule 3.9 which, if not obtained
or delivered, would have a material adverse effect on the business of
Company ("Material Consents");
2.2.6. The written resignations required by Section 6.7 below;
2.2.7. The employment letter attached hereto as Exhibit A,
duly executed by Robert J. Brodbeck and Company (the "Employment
Agreement");
2.2.8. Lease Agreements, in substantially the form attached
hereto as Exhibits B and C, duly executed by BRC, as landlord, and
Company, as tenant, with respect to each of the six Company
supermarkets located on real property owned by (or leased to) BRC as
described in Recital B hereto (the "Affiliated Leases"), including
memoranda of leases or similar short-form leases related thereto as
required to obtain the title insurance referenced in Section 5.18;
2.2.9. The Estoppel Certificates referenced in Section 5.13;
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2.2.10. General releases, in the form reasonably acceptable to
Purchaser, duly executed by each Seller and each other officer and
director of the Company, as well as any other Company employee
receiving a Stay Bonus or other retention or severance benefit as a
result of this transaction, in each case releasing Company and
Purchaser (and the past, current and future shareholders, directors,
officers, agents and employees of Company and Purchaser) from any and
all known and unknown claims and Losses arising on or prior to the
Closing Date, except as expressly described and excepted from such
releases (including any claims or Losses alleged under this Agreement
or the Ancillary Instruments, as hereinafter defined), and containing
waivers of any right of contribution or other recourse against Company
with respect to representations, warranties or covenants made herein by
Company (the "General Releases");
2.2.11. Pay-off letters and UCC termination statements from
each creditor receiving payment of Funded Debt on the Closing Date
under Section 5.21, releasing all of such creditor's Liens; and
2.2.12. The Section 338(h)(10) Election duly executed and
delivered by Company and Sellers and in form and substance satisfactory
to Purchaser in accordance with Section 5.15, subject to finalization
by the parties after the Settlement Date.
2.2.13. All other previously undelivered documents,
instruments and writings required to be delivered by Company or Sellers
to Purchaser at or prior to the Closing pursuant to this Agreement or
otherwise legally required or reasonably necessary in connection
herewith.
2.3 Deliveries by Purchaser.
At the Closing, Purchaser shall deliver to Sellers:
2.3.1. the Purchase Price required to be delivered pursuant to
Section 1.3.1.;
2.3.2. copies of resolutions of the board of directors of
Schultz Sav-O Stores, Inc. ("Schultz") and Purchaser authorizing the
purchase of the Shares and the execution, delivery and performance of
this Agreement and all other documents required to purchase the Shares,
and all actions necessary or desirable hereunder;
2.3.3. a certificate signed by a senior officer of Purchaser
attesting to the fact that all of the representations and warranties of
Purchaser made in this Agreement and in any certificate, instrument,
writing or document delivered by Purchaser in connection herewith and
made by Purchaser in the Disclosure Schedule and exhibits hereto are
true and correct as of the Closing Date and that all of the conditions,
covenants and agreements of Purchaser required to be performed or
satisfied prior to the Closing have been performed or satisfied as of
the Closing, except where a breach or non-performance has been waived
in writing by Company and Sellers;
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2.3.4. The Guaranty duly executed by Schultz Sav-O Stores,
Inc. ("Schultz"), which is being executed and delivered as of the date
hereof, in substantially the form attached hereto as Exhibit D (the
"Schultz Guaranty"); and
2.3.5. all other previously undelivered documents, instruments
and writings required to be delivered by Purchaser to Sellers at or
prior to the Closing pursuant to this Agreement or otherwise legally
required or reasonably necessary in connection herewith.
ARTICLE III.
JOINT AND SEVERAL REPRESENTATIONS
AND WARRANTIES OF COMPANY AND SELLERS
Company and Sellers, jointly and severally, make the following
representations and warranties to Purchaser, each of which is true, correct and
complete as of the date of this Agreement, shall remain true, correct and
complete to and including the Closing Date, shall be unaffected by any
investigation heretofore or hereafter made by Purchaser or its representatives,
or any knowledge of Purchaser, other than as specifically disclosed by Company
and Sellers in the specific schedules referencing the applicable representation
or warranty below as to which such schedules create a specific exception (and
which exception shall not relate or apply to any other representation or
warranty below unless otherwise specifically so identified in the schedule which
specifically references such other representation or warranty) accompanying this
Agreement (the "Disclosure Schedule") or as otherwise contemplated by Section
5.6, and shall survive the Closing of the transactions provided for herein.
3.1 Due Organization and Authority.
Company is a corporation duly organized, validly existing and in good
standing under the laws of the State of Wisconsin and has all requisite
corporate power and lawful authority to own, lease and operate its assets and
properties and to carry on its business as now being and heretofore conducted.
3.2 Authorization; Validity.
3.2.1. Authorization. Company has full corporate power and
authority to enter into and perform its obligations under this
Agreement and all other agreements, instruments and documents
contemplated hereby (such other agreements, instruments and documents
are sometimes referred to herein as "Ancillary Instruments"). The
execution, delivery and performance by Company of this Agreement and
the Ancillary Instruments have been duly authorized by the board of
directors and shareholders of Company. Company's board of directors and
Sellers, as the sole shareholders of Company, will take all necessary
corporate and shareholder action prior to Closing to authorize and
approve the Articles Amendment. No other or further corporate act or
proceeding on the part of Company or Sellers (as shareholders) is
necessary to
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authorize this Agreement or the Ancillary Instruments or the
consummation of the transactions contemplated hereby and thereby.
3.2.2. Validity. This Agreement has been duly and validly
executed and delivered by Company and is, and when executed and
delivered each Ancillary Instrument will be, the legal, valid and
binding obligation of Company, enforceable in accordance with its
terms, except as such may be limited by bankruptcy, insolvency,
reorganization or other laws affecting creditors' rights generally, and
by general equitable principles.
3.3 Subsidiaries and Other Affiliates.
Company has no subsidiaries or investments in or equity ownership of
any corporations, partnerships, limited liability companies, cooperatives or
other business entities, other than with respect to Company's marketable
securities and investments included in the Excluded Assets. Distribution to the
Sellers of the Company's membership interest in Valley Bakers Cooperative as
part of the Excluded Assets under Section 1.5 will not adversely affect the
business or operations of the Company after the Closing.
3.4 Qualification.
Company is not required to be qualified or otherwise authorized as a
foreign corporation to transact business in any jurisdiction other than
Illinois. Company is duly licensed or qualified or otherwise authorized, and is
in good standing, as a foreign corporation in Illinois and has all requisite
corporate power and lawful authority to own, lease and operate its assets and
properties and to carry on its business as now being and heretofore conducted in
Illinois.
3.5 Outstanding Capital Stock.
3.5.1. General. Company is authorized to issue 230,000 shares
of common stock of which 2,280 shares are outstanding. The Shares
constitute all of the outstanding capital stock of Company. All of the
Shares are owned by Sellers. All of the Shares are duly authorized and
validly issued, fully paid and nonassessable. No other class of capital
stock or other ownership interests of Company is authorized, issued,
reserved for issuance or outstanding.
3.5.2. William Brodbeck Obligations. On December 5, 1995,
Company repurchased 888 shares of Company common stock from William
Brodbeck and on March 15, 1996, Company repurchased 252 shares of
Company common stock from William Brodbeck pursuant to the agreements
set forth in Schedule 3.5. As of the Closing, all Company duties,
obligations and liabilities with respect to such repurchase shall have
been fully and completely discharged and Company shall have no further
or other duty, obligation or liability to William Brodbeck or otherwise
with respect to such repurchase ("William Brodbeck Obligations").
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3.6 Options or Other Rights.
There is no outstanding right, subscription, security, warrant, call,
unsatisfied preemptive right, option or other agreement, commitment, arrangement
or undertaking of any kind to purchase or otherwise to receive from Company any
of the outstanding, authorized but unissued, unauthorized or treasury shares of
the capital stock, any security convertible into or exchangeable for any capital
stock of Company, or any other security of Company, and there is no outstanding
security of any kind convertible into or exchangeable for any such capital
stock. There is no bond, debenture, note or other indebtedness of Company having
the right to vote (or convertible into or exchangeable for securities having the
right to vote) on any matter on which shareholders of Company may vote.
3.7 Charter Documents and Corporate Records.
Sellers have heretofore delivered to Purchaser true and complete copies
of the Articles of Incorporation (certified by the Wisconsin Department of
Financial Institutions) and By-laws (certified by Company's Secretary or an
Assistant Secretary) of Company as in effect on the date hereof. The minute
books of Company, which in their entirety have been made available to Purchaser
for its inspection, contain true and complete records of all meetings and
consents in lieu of meeting of the Board of Directors (and any committee
thereof) of Company and its shareholders since the time of its organization
through the date hereof and accurately reflect all transactions referred to in
such minutes and consents in lieu of meeting. The stock books of Company, which
have been made available to Purchaser for its inspection, are true and complete
through the date hereof.
3.8 Sellers.
3.8.1. Power. Each Seller has full power, legal right,
capacity and authority to enter into, execute and deliver this
Agreement and the Ancillary Instruments, and to carry out the
transactions contemplated hereby and thereby.
3.8.2. Validity. This Agreement has been duly and validly
executed and delivered by each Seller and is, and when executed and
delivered each Ancillary Instrument will be, the legal, valid and
binding obligation of such Seller, enforceable in accordance with its
terms, except as such may be limited by bankruptcy, insolvency,
reorganization or other laws affecting creditors' rights generally, and
by general equitable principles.
3.8.3. Title. Each Seller has, and at Closing Purchaser will
receive, good and marketable title to the Shares to be sold by each
Seller hereunder, free and clear of all Liens, including, without
limitation, voting trusts or agreements, proxies, marital or community
property interests.
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3.9 No Violation.
Except as set forth on Schedule 3.9, neither the execution and delivery
of this Agreement or the Ancillary Instruments nor the consummation by Company
or Sellers of the transactions contemplated hereby and thereby (a) will violate
any statute, law, ordinance, rule or regulation (collectively, "Orders") of any
court, arbitrator, department, commission, board, bureau, agency, authority,
instrumentality or other body, whether federal, state, municipal, foreign or
other (collectively, "Government Entities"), (b) will require any authorization,
consent, approval, exemption or other action by or notice to any Government
Entities (including, without limitation, under any "plant-closing" or similar
law), or (c) subject to obtaining the consents referred to in Schedule 3.9, will
violate or conflict with, or constitute a default (or an event which, with
notice or lapse of time, or both, would constitute a default) under, or will
result in the termination of, or accelerate the performance required by, or
result in the creation of any Lien upon any of the assets of Company or the
Shares under, any term or provision of the Articles of Incorporation or By-Laws
of Company or of any contract, commitment, understanding, arrangement, agreement
or restriction or any kind or character to which Company or any Seller is a
party or by which Company or any Seller or any of its or their assets or
properties may be bound or affected. The termination by Company at or after the
Closing of Company's supply or vendor arrangement with any vendor, including
particularly but without limitation, Fleming Companies, will not result in any
Loss to or claim against Company.
3.10 Inventory.
3.10.1. General. Except for items which have been adequately
reserved against on the Audited Balance Sheet, all inventory of Company
is of good quality and readily useable or readily saleable in the
ordinary course of business, has commercial value at least equal to the
value shown on the Audited Balance Sheet and is valued in accordance
with GAAP at the lower of cost (on a LIFO basis) or market. All
inventory purchased since the date of the Audited Balance Sheet
consists of a quality and quantity readily useable or readily saleable
in the ordinary course of business of Company and in accordance with
applicable Law and industry standards. All inventory of Company as of
the Closing Date will be reflected on the Final Closing Balance Sheet
in accordance with Section 1.4.4. Except as set forth in Schedule 3.10,
all inventory is located on Company's premises.
3.10.2. No Recalled Inventory. No item included in the
inventory on the Audited Balance Sheet or the Final Closing Balance
Sheet has been the subject of a recall initiated by the manufacturer or
supplier thereof or by any Government Entity. Company's inventory is
(a) of a quality and purity which complies with the current federal
Food and Drug Administration and United States Department of
Agriculture regulations and other applicable Laws, and (b) is not
adulterated or misbranded within the meaning of the Federal Food, Drug
and Cosmetic Act, or within the meaning of any applicable Law.
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3.11 Absence of Undisclosed Liabilities.
3.11.1. Except as reflected on Schedule 3.11, Company does not
have any direct or indirect indebtedness, liability, claim, loss,
damage, deficiency, obligation or responsibility, fixed or unfixed,
choate or inchoate, liquidated or unliquidated, secured or unsecured,
accrued, absolute, contingent or otherwise, including without
limitation any Tax (as hereinafter defined) liabilities or any other
Loss, which are not and will not be accurately and fully reflected or
reserved against in the Audited Balance Sheet and Final Closing Balance
Sheet.
3.11.2. Except as disclosed in Schedule 3.11, there is no
basis for the assertion against Company of, nor any circumstance,
condition, event or arrangement that may give rise to, any liability of
Company or any successor to its business, except in the ordinary course
of business or pursuant to this Agreement and the transactions
contemplated hereby.
3.12 Financial Statements.
Included as Schedule 3.12 hereto are true and complete copies of the
financial statements of Company consisting of (i) unaudited balance sheets of
Company as of January 2, 2000, January 3, 1999 and December 28, 1997, and the
related statements of income for such years then ended (including the notes
contained therein or annexed thereto), and (ii) an audited balance sheet of
Company as of December 31, 2000 (the "Audited Balance Sheet") and the audited
related statements of income and cash flows for the year ending on December 31,
2000 (including the notes contained therein or annexed thereto; together with
the Audited Balance Sheet, the "Audited 2000 Financial Statements") and (iii)
unaudited balance sheets of Company as of January 28, 2001, February 25, 2001
and March 25, 2001 and the unaudited related statements of income for the
applicable respective periods (including any notes and schedules contained
therein or annexed thereto). The Audited 2000 Financial Statements are true,
complete and accurate and have been prepared in accordance with GAAP, applied on
a consistent basis, prepared in accordance with the books and records of
Company, and fairly present, in accordance with GAAP, the assets, liabilities
and financial position, the results of operations and cash flows of Company as
of and for the year ending on December 31, 2000. All other financial statements
included in Schedule 3.12 (including all notes and schedules contained therein
or annexed thereto) are, and the Audited Balance Sheet and the Final Closing
Balance Sheet will be true, complete and accurate, prepared in accordance with
GAAP (except, in the case of unaudited statements, for the absence of footnote
disclosure) applied on a consistent basis, prepared in accordance with the books
and records of Company, and fairly present, in accordance with GAAP, the assets,
liabilities and financial position, the results of operations of Company as of
the dates and for the years and periods indicated.
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3.13 Absence of Certain Changes or Events.
Except as set forth on Schedule 3.13 and except as specifically
contemplated herein, since the date of the Audited Balance Sheet, there has not
been:
3.13.1. any amendment to Company's Articles of Incorporation
(other than the Articles Amendment) or By-Laws, or merger with or into
or consolidation with any person, or resolution or resolutions adopted
by Sellers (as shareholders) or Company's board of directors
authorizing a dissolution or liquidation of Company;
3.13.2. any dividends declared or paid or other distributions
with respect to Company's stock of any kind to Sellers declared or made
(other than normal and ordinary S Corporation dividends to Sellers to
allow them to pay their income taxes as described on Schedule 3.13 and
other than for the distribution to Sellers of the Excluded Assets as
contemplated by Section 1.5), or any direct or indirect redemption,
purchase, retirement or other acquisition of any Shares or other
capital stock or equivalents;
3.13.3. any entering into, amendment or termination of any
contract (other than the Buy and Sell Agreement (as hereinafter
defined)), or any waiver of any material right under any contract,
other than in the ordinary course of business and consistent in amount
and nature with past practice;
3.13.4. any adverse changes to any of Company's business
policies, including, but not limited to advertising, marketing,
pricing, purchasing, personnel, sales, budget or product acquisition
policies;
3.13.5. any adverse change in the financial condition,
properties, business or operations of Company or any event or
circumstance, which may be, singly or in the aggregate, adverse to the
financial condition, properties, business or operations of Company;
3.13.6. any Loss to or destruction of any asset of Company,
whether or not covered by insurance, which is in excess of $25,000;
3.13.7. any actual or, to Company's or Sellers' knowledge, any
threatened strike or other labor dispute or disturbance;
3.13.8. any Loss or, to Company's or Sellers' knowledge, any
threatened loss of any Permit (as hereinafter defined) held by Company;
3.13.9. any Loss, indebtedness, liability or obligation
(whether absolute, accrued, contingent or otherwise) incurred by
Company, other than in the ordinary course of business and consistent
in amount and nature with past practice, any transaction entered into
by Company, other than in the ordinary course of business and
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consistent in amount and nature with past practice, or any guarantee by
Company of any indebtedness, liability or obligation of any persons;
3.13.10. any sale, transfer or other disposition of any asset
of Company, or any cancellation of any debt to or claim of Company,
except for sales of inventory in the ordinary course of business and
consistent in amount and nature with past practice and except for the
distribution to the Sellers of the Excluded Assets as contemplated by
Section 1.5;
3.13.11. other than increases in non-officer compensation in
the ordinary course of business and consistent in amount and nature
with past practice, any change in, or any commitment to change (oral or
written), the compensation or other direct or indirect remuneration
payable to any officer, employee or agent of Company or any bonus,
incentive or deferred compensation, profit sharing, retirement,
pension, severance, group insurance, death benefit or other fringe
benefit plan, trust agreement or similar arrangement, or any employment
or consulting agreement, granted, entered into, amended or altered;
3.13.12. any termination (whether by discharge, retirement or
otherwise) of any officer, employee or agent of Company (provided, that
the officer, employee or agent was paid in excess of $50,000 in 2000),
or any notice to so terminate given to or received by any of the
foregoing;
3.13.13. other than as required by Section 5.20, any capital
expenditures, additions or improvements made or committed to be made by
or on behalf of Company in excess of $25,000 in the aggregate with
respect to all expenditures, additions or improvements of Company;
3.13.14. any write off as uncollectible of any notes or
accounts receivable, or any portions thereof in excess of Company
reserves for such uncollected notes or accounts receivable;
3.13.15. any engagement by Company in any other material
transaction, other than in the ordinary course of business and
consistent in amount and nature with past practice;
3.13.16. any failure to maintain the books and records of
Company in the usual, regular and ordinary manner, consistent with past
practices, or any change in any accounting principle or practice of
Company; or
3.13.17. any agreement or commitment by Company to do any of
the foregoing.
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3.14 Title to Assets and Properties; Condition.
3.14.1. Title. Company owns outright and has good, marketable,
and, if insurable, insurable title to all of its assets and properties,
including, without limitation, those reflected on the Audited Balance
Sheet and to be reflected on the Final Closing Balance Sheet, except
for inventory disposed of in the ordinary course of business since the
date of the Audited Balance Sheet, in each case free of mortgages,
liens (statutory or otherwise), security interests, claims, pledges,
licenses, equities, options, conditional sales contracts, assessments,
levies, easements, covenants, reservations, restrictions,
rights-of-way, exceptions, limitations, charges or encumbrances of any
nature whatsoever (collectively, "Liens"), except for (i) those
described in Schedule 3.14 (all of which Liens shall be released on or
before the Closing Date to the extent they relate to Funded Debt that
is repaid on the Closing Date); (ii) inventory subject to purchase or
sales orders, in the ordinary course of business; (iii) assets or
properties held or used pursuant to any lease; and (iv) Liens securing
taxes, assessments, governmental charges, or levies, or the claims of
mechanics, workmen, repairmen, carriers, landlords and like persons,
arising or incurred in the ordinary course of business and all of which
are not yet due and payable or are being contested in good faith, so
long as such contest does not involve any substantial danger of sale,
forfeiture or loss of any asset or property that is material to the
business of the Company.
3.14.2. Condition. Assets and properties owned by Company, and
the equipment and the real estate being leased by Company pursuant to
any lease, are all of the assets and properties which are used in or
are reasonably necessary to carry on the business and operations of
Company as presently conducted. The structures, roofs, foundations,
exterior walls, buildings, facilities, stores, furniture, fixtures,
leasehold improvements, equipment, personal property and other assets
of Company have been maintained by or on behalf of Company in
accordance with generally accepted industry practice, and are in good
condition and repair (normal wear and tear excepted), are suitable for
the purposes for which they are used by Company, and have no structural
defects or defects adversely affecting the plumbing, electrical,
sewerage, or heating, water, ventilating, refrigeration, freezer or air
conditioning systems thereof.
3.15 Compliance With Laws and Orders.
Except as set forth in Schedule 3.15, Company (including each and all
of its stores, facilities, operations, practices, properties and assets) is in
compliance with all applicable Laws and Orders, including, without limitation,
those applicable to discrimination in employment, occupational safety and
health, trade practices, competition and pricing, product warranties, zoning,
building and sanitation, employment, retirement and labor relations, product
advertising and the Environmental Laws (as hereinafter defined). Except as set
forth in Schedule 3.15, Company has not received notice of any violation or
alleged violation of, and is subject to no liability or Loss for past or
continuing violation of, any Laws or Orders. All reports and returns required to
be filed by Company with any Government Entities have been
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filed, and were accurate and complete when filed. Without limiting the
generality of the foregoing:
3.15.1. The operation of Company's business as it is now
conducted does not, nor does any condition existing at any of Company's
facilities, in any manner constitute a nuisance or other tortious
interference with the rights of any person or persons in such a manner
as to give rise to or constitute the grounds for a suit, action, claim
or demand by any such person or persons seeking compensation or damages
or seeking to restrain, enjoin or otherwise prohibit any aspect of the
conduct of such business or the manner in which it is now conducted.
3.15.2. Company has delivered to Purchaser copies of all
reports of Company for the past three (3) years required under all
applicable health and safety Laws. The deficiencies, if any, noted on
such reports have been corrected.
3.16 Permits.
Company has in good standing all licenses (including alcohol, liquor
and beer licenses), permits, orders, certificates of occupancy, variances,
exemptions or approvals of, and has made all required registrations with, all
Governmental Entities that are necessary for the conduct of the business of
Company (collectively, "Permits"), including, without limitation, all Permits
relating to compliance with Environmental Laws. All Permits currently issued to
Company are listed on Schedule 3.16 and are in full force and effect. Company is
in compliance with the terms of the Permits and no violations are or have been
recorded or Litigation (as hereinafter defined) noticed, filed or, to Company's
or Sellers' knowledge, threatened in respect of any Permit; and no proceeding is
pending or, to Company's or Sellers' knowledge, threatened to revoke, suspend,
modify or limit any Permit. Assuming receipt of requisite approvals, and
Purchaser's qualification as owner, no Permit will be subject to revocation,
suspension, modification or limitation caused by Company or Sellers as a result
of this Agreement or the consummation of the transactions contemplated hereby.
3.17 Intellectual Property.
Schedule 3.17 sets forth all trade names, trademarks and other
intellectual property, including, without limitation, United States patent,
registered United States or state trade names, trademarks or service marks or
registered United States or state copyrights, owned or used by Company, and all
major software licensed to Company and used in Company's stores ("Intellectual
Property"). Except as set forth on Schedule 3.17, Company owns outright and has
good and marketable title to all Intellectual Property, including, without
limitation, the names "Dick's Supermarkets," "Dick's Catering Service" and
"Stoneman's Mill," free and clear of any Lien. In connection with the software
licensed to Company and used in Company's stores, Schedule 3.17 sets forth the
persons from whom the software is licensed, the products licensed, the scope of
the license, the term of the license and any other material provision of the
license. Company has not received any written notice of any violation or claim
of infringement by Company of any intellectual property rights of any other
person. The
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Intellectual Property is sufficient to conduct Company's business as presently
being conducted. Except as disclosed in Schedule 3.17, no Intellectual Property
has been hypothecated, assigned or licensed, in whole or in part, to any other
person or entity, and does not infringe upon or violate the right of any person
or entity in the jurisdiction in which they are used or registered, and are not
subject to challenge, claims of infringement, unfair competition or other
claims. There is no Litigation (as hereafter defined) pending or, to Company's
or Sellers' knowledge, threatened to challenge Company's right, title and
interest with respect to its continued use and right to preclude others from
using any of the Intellectual Property. The Intellectual Property is valid,
enforceable and in good standing, and there are no equitable defenses to
enforcement based on any act or omission of Company or Sellers.
3.18 No Conflict of Interest.
Except as set forth in Schedule 3.18 and except with respect to the
lease by BRC of the six supermarkets to Company or as otherwise contemplated by
this Agreement, no officer, director or Affiliate of Company:
3.18.1. owns, directly or indirectly, any interest in
(excepting less than 1% stock holdings for investment purposes in
securities of publicly held and traded companies), or is an officer,
director, employee or consultant of, any person which is, or is engaged
in business as, a competitor, lessor, lessee, supplier, distributor or
sales agent of Company;
3.18.2. owns, directly or indirectly, in whole or in part, any
property that Company uses in the conduct of its business;
3.18.3. has any cause of action or other claim against, or
owes any amount to, Company, except for claims in the ordinary course
of business (such as for accrued compensation, vacation pay, accrued
benefits under employee benefit plans, and similar matters, all of
which are or will be properly accrued for and reflected as liabilities
on the Audited Balance Sheet and Final Closing Balance Sheet) existing
on the date hereof;
3.18.4. has any contract with, or any outstanding loan to or
from, Company; or
3.18.5. has any interest in the assets or properties owned by
Company.
3.19 Labor Relations.
Company has not experienced any labor disputes or work stoppages due to
labor disagreements. Company is not a party to, or engaged in negotiating, any
collective bargaining agreement. Company is in compliance with all applicable
Laws respecting employment and employment practices, terms and conditions, wages
and hours. Company is not the subject of any claim which is pending or, to
Company's or Sellers' knowledge, threatened, asserting that Company has
committed an unfair labor practice (within the meaning of the National Labor
Relations Act or applicable state statutes) or seeking to compel Company to
bargain with any labor organization as to wages and conditions of employment. No
strike or
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other labor dispute involving employees of Company is pending or, to Company's
or Sellers' knowledge, threatened, and there is no activity involving any
employees of Company seeking to certify a collective bargaining unit or engaging
in any other organization activity.
3.20 Officers, Directors and Employees.
Schedule 3.20 sets forth (i) all written employment agreements with any
employee or agent of Company and the total annual compensation (separately
stating salary and bonus or other compensation) payable to each of them,
including the fringe benefits (other than those made available to employees
generally) provided to each of them; (ii) the name and total compensation of
each director and officer of Company; (iii) the name and total compensation of
each other employee of Company, other than directors and officers, who was paid
in excess of $50,000 in 2000; (iv) all wage and salary increases, bonuses and
increases in any other direct or indirect compensation received by such persons
since the date of the Audited Balance Sheet; (v) any payments or commitments,
including copies of all agreements, to pay any severance or termination pay to
any officer, director or employee of Company; and (vi) any accrual for, or any
commitment or agreement by Company to pay, such increases, bonuses or pay. All
such liabilities and accruals are or will be fully reflected in the Audited
Balance Sheet and the Final Closing Balance Sheet.
3.21 Employee Benefit Plans.
3.21.1. For purposes of this Agreement: (i) the term "ERISA"
shall mean the Employee Retirement Income Security Act of 1974, as
amended; (ii) the term "Code" shall mean the Internal Revenue Code of
1986, as amended; (iii) the terms "employee welfare benefit plan" and
"employee pension benefit plan" shall have the meanings set forth in
ERISA Sections 3(1) and 3(2), respectively; (iv) the term
"multi-employer plan" shall have the meaning set forth in ERISA Section
3(37); (v) the term "benefit plan" shall mean each employee welfare
benefit plan, each employee pension benefit plan (including each
multi-employer plan) and each other benefit plan, program or
arrangement (other than regular wages or salary) that covers employees,
directors, consultants or any dependent or spouse thereof, including,
but not limited to, any bonus, incentive or annual profit sharing
program, any stock option plan, any program granting stock appreciation
rights, any deferred compensation plan, any educational assistance plan
under Code Section 127, any dependent care assistance plan under Code
Section 129 and any program providing fringe benefits described in
Section 132 of the Code; and (vi) the term "current benefit plan" shall
mean any benefit plan which as of the date hereof is maintained by
Company or in which at least one employee of Company participates as of
the date hereof.
3.21.2. With respect to each current benefit plan (other than
such a plan that is a multi-employer plan): (i) such plan is listed on
Schedule 3.21; (ii) a true and correct copy of such plan and any trust,
investment manager contract, insurance policy, administrative contract,
summary plan description and/or similar type of document used in
connection with such plan or to provide benefits thereunder previously
have been
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delivered by Company or Sellers to Purchaser; (iii) if such plan is or
has at any time been required to file an annual report with the
Internal Revenue Service (the "IRS") or the Department of Labor
pursuant to the Code or ERISA prior to the Closing Date, true and
correct copies of the three most recent annual reports for such plan
previously have been delivered by or on behalf of Sellers to Purchaser;
if such plan is intended to be qualified under Code section 401(a), the
most recent favorable determination letter received from the IRS has
been delivered by or on behalf of Sellers to Purchaser; (v) information
with respect to any pending claims (other than under a retirement plan)
for which Company self insures benefits or that may result in a
retroactive premium adjustment has been delivered by or on behalf of
Sellers to Purchaser; and (vi) all records and information necessary in
administering such plan or legally required to be kept are maintained
in good order and will be available to Purchaser.
3.21.3. Except as is otherwise provided in Schedule 3.21, with
respect to each current benefit plan and each benefit plan which has
been maintained by Company since 1994 (other than such a plan that is a
multi-employer plan): (i) Company's officers have not misrepresented
any provision of such plan to any employees of Company or to any other
persons; (ii) such plan complies with and has been administered in
accordance with its terms and all applicable Laws, and all
contributions to or with respect to such plan, and all payments from
such plan, required to be made under the terms of such plan have been
made on a timely basis; (iii) to the extent such plan is subject to
ERISA, such plan has at all times been maintained and operated in
compliance with the applicable requirements of ERISA and the
regulations issued thereunder, including but not limited to the
requirements relating to reporting, disclosure and fiduciary duties;
(iv) if such plan is subject to ERISA Section 406 or Code Section 4975,
no prohibited transaction (as defined in ERISA Section 406 or Code
Section 4975) which involves such plan has ever occurred; (v) no
Litigation or written asserted claims exist against Company with
respect to such plan or any fiduciaries of such plan (excluding only
claims for plan benefits made in the normal course and operation of
such plan), and there is no reason to believe that any such Litigation
or claims are probable of assertion in the future; (vi) no additional
benefits or acceleration in the time at which benefits will be paid or
vest shall apply to such plan as a result of the transactions
contemplated by this Agreement; and (vii) to the extent such plan is
intended to provide severance benefits, no severance benefits shall be
payable to any employee of Company under such plan by reason of the
transactions contemplated by this Agreement.
3.21.4. Also, with respect to each current benefit plan which
provides benefits to plan participants that are not subject to federal
income tax so long as specific provisions of the Code are met (other
than such a plan that is a multi-employer plan), such plan currently
meets, and has always met from its inception, all such specific Code
provisions. Benefit plans described herein include, but are not limited
to, cafeteria plans, medical plans, group-term life insurance plans,
educational assistance plans, dependent care assistance plans,
incentive stock option plans and pension, profit sharing and stock
bonus plans which are intended to qualify under Sections 401(a) and
501(a) of the Code. Also, with respect to each current benefit plan
which is an
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employee pension benefit plan and which contains cash or deferred or
salary reduction arrangements under which eligible employees can choose
between an employer contribution to the plan on their behalf or
additional salary, wages or compensation (other than such a plan that
is a multi-employer plan), the cash or deferred or salary reduction
arrangement of such plan qualifies as of the date hereof, and has
always qualified from its inception, as a cash or deferred or salary
reduction arrangement which meets all of the requirements set forth in
Section 401(k) of the Code.
3.21.5. With respect to each current benefit plan (other than
such a plan that is a multi-employer plan), such plan may be amended or
terminated by Company in accordance with the applicable plan or law
without liability to Company, except for liability for benefits accrued
in the normal course and operation of the plan prior to the date of the
amendment or termination (and, if such plan is qualified as a plan
under Code Section 401(a), any other rights protected from reduction or
elimination by Section 411(d)(6) of the Code).
3.21.6. With respect to each current benefit plan which is an
employee pension benefit plan (other than such a plan that is a
multi-employer plan), except as is otherwise noted in Schedule 3.21:
(i) the IRS has determined that such plan satisfies all of the
applicable requirements of Code Sections 401(a) and 501(a) which are in
effect as of the date hereof, such determination has not been revoked
by the IRS and there are no grounds for the revocation of such
determination; (ii) no plan is a defined benefit pension plan subject
to the minimum funding standards as set forth in Section 412 of the
Code or has any liability to the Pension Benefit Guaranty Corporation
(the "PBGC"); (iii) as of the date hereof such plan owns no employer
security or employer real property (within the meaning of ERISA Section
407); (iv) true and correct copies of the most recent annual financial
report, IRS determination letter and IRS communication as to any plan
audit with respect to such plan previously have been furnished by or on
behalf of Sellers to Purchaser.
3.21.7. Company does not currently contribute nor has it ever
contributed or been obligated to contribute to any multi-employer plan.
Company has no liability or Loss as a result of being part of a
controlled group of corporations with BRC. Company does not and has
never utilized the services of any leased employees (whether or not
within the meaning of Code section 414(n)).
3.22 Taxes.
3.22.1. Definitions. For purposes of this Agreement, the
following terms shall have the following meanings:
3.22.1.1. "Pre-Closing Tax Period" means any taxable period
ending on or before the Closing Date and the portion ending at 11:59
p.m. on the Closing Date of any taxable period that commences prior to,
and includes (and ends after) the Closing Date.
-21-
3.22.1.2. "Tax" or "Taxes" means any federal, state, local,
territorial, provincial, or foreign income, net income, gross income,
gross receipts, single business, license, employment, excise,
severance, stamp, occupation, premium, windfall profits, environmental
(including taxes under Codess.59A), customs duties, import, export,
capital, capital stock, documentary, franchise, profits, gains,
withholding, social security (or similar), wage, payroll, unemployment,
disability, workers compensation, real property, personal property, ad
valorem, intangible, services, sales, use, transfer, registration,
value added, alternative or add-on minimum, estimated, or other tax,
fee, assessment, or similar charge of any kind whatsoever, including
any interest, penalty, or addition thereto, whether or not disputed.
3.22.1.3. "Tax Return" means any return, declaration, report,
estimate, claim for refund, or information return or statement relating
to, or required to be filed in connection with, any Taxes, including
any schedule, form, or attachment thereto, and including any amendment
thereof.
3.22.2. Taxes and Tax Returns. Except as otherwise provided in
Schedule 3.22:
3.22.2.1. All Tax Returns in respect of any Pre-Closing Tax
Period required to be filed prior to the Closing Date by Company have
been or will be filed in a timely manner and are or will be true,
complete and correct in all respects. All Taxes owed by Company due on
or before the Closing Date in respect of any Pre-Closing Tax Period
Taxes have been or will be timely and fully paid. Except for the income
tax returns for the year ended December 31, 2000, Company has not
extended the time within which to file any Tax Return the result of
which could be any claim against, or Loss (as hereinafter defined) to,
the Company. No claim has ever been made by an authority in a
jurisdiction where Company does not file Tax Returns that it is or may
be subject to Tax by that jurisdiction or authority.
3.22.2.2. The provision made for Taxes on the Audited Balance
Sheet is sufficient for the payment of all Taxes at the date of the
Audited Balance Sheet and for all years and periods prior thereto.
Since the date of the Audited Balance Sheet, Company has not incurred
any Taxes other than Taxes incurred in the ordinary course of business
consistent in type and amount with past practices of Company. The
charges, accruals and reserves for Taxes due, or accrued but not yet
due, relating to Company for any Pre-Closing Tax Period as reflected on
the Estimated Closing Balance Sheet and the Final Closing Balance Sheet
as an adjustment to Final Net Working Capital are and will be adequate
to cover such Taxes.
-22-
3.22.2.3. No penalties or other charges are or will become due
with respect to the late filing of any Tax Return required to be filed
on or before the Closing Date.
3.22.2.4. Other than Liens for nondelinquent ad valorem
property taxes arising by operation of law, there are no outstanding
Tax Liens on any property or assets of Company, nor have any
deficiencies for any Tax liability of Company been proposed, asserted
or assessed which remain unpaid at the Closing.
3.22.2.5. With respect to all Tax Returns: (i) there is no
action, suit, proceeding, investigation or claim pending or in progress
or, to Company's or Sellers' knowledge, threatened regarding any Taxes
relating to Company for any Pre-Closing Tax Period, and (ii) no
extension of time is in force with respect to any date on which any Tax
Return was or is to be filed and no waiver or agreement is in force for
the extension of time for the assessment or payment of any Tax.
3.22.2.6. Sellers have delivered to Purchaser correct and
complete copies of all Tax Returns, examination reports, and statements
of deficiencies assessed against or agreed to by any of Company since
January 1, 1996.
3.22.2.7. There are no audits of the Tax Returns of Company
pending.
3.22.2.8. Company has not agreed to, nor is it required to
make, any adjustment under Section 263A, Section 481, or Section 482 of
the Code (or any corresponding or similar provision of state, local or
foreign law) by reason of a change in accounting method or otherwise
that could result in a claim against, or Loss to, the Company.
3.22.2.9. All tax elections that are in effect with respect to
Taxes affecting Company as of the date hereof have been made on Tax
Returns filed by Company and delivered to Purchaser. After the date
hereof, no election with respect to Taxes will be made without the
written consent of Purchaser.
3.22.2.10. Company has not at any time consented under section
341(f)(1) of the Code (or any comparable provision of state, local or
foreign Law) to have the provisions of section 341(f)(2) of the Code
(or any comparable provision of state, local or foreign Law) apply to
any disposition of any asset owned by it.
3.22.2.11. All Taxes that Company is required to withhold or
collect have been duly withheld or collected, and have been timely paid
over to the appropriate governmental authorities to the extent due and
payable.
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3.22.2.12. No Person (as hereinafter defined) has executed or
entered into a closing agreement pursuant to Section 7121 of the Code
(or any comparable provision of state, local or foreign Law) that is
currently in force.
3.22.2.13. There are no Tax sharing agreements to which
Company is now a party.
3.22.2.14. Company is not a party to any agreement, contract,
arrangement or plan that would result, separately or in the aggregate,
in the payment (either before or after the Closing Date) of any "excess
parachute payments" within the meaning of Section 280G of the Code (or
any comparable provision of state, local or foreign law) or in any
compensation that will not be deductible pursuant to Section 162(m) of
the Code (or any comparable provision of state, local or foreign law).
3.22.2.15. No power of attorney is currently in effect, and no
Tax ruling has been requested of any governmental authority, with
respect to any Tax matter relating to Company.
3.22.2.16. Company is not, and has never been, a United States
real property holding company (as defined in Section 897(c)(2) of the
Code) during the applicable period specified in Section
897(c)(1)(A)(ii) of the Code.
3.22.2.17. No Seller is a person other than a United States
person within the meaning of the Code.
3.22.2.18. Company has not or never has had a permanent
establishment in any foreign country, as defined in any applicable tax
treaty or convention between the United States of America and such
foreign country.
3.22.2.19. Company is not a party to or member of any joint
venture, partnership, limited liability company or other arrangement or
contract that could be treated as a partnership for federal income tax
purposes.
3.22.2.20. Company (i) has not been a member of an Affiliated
Group filing a consolidated federal income Tax Return and (ii) does not
have any liability for the Taxes of any person or entity under Reg. ss.
1.1502-6 (or any corresponding or similar provision of state, local, or
foreign law), as a transferee or successor, by contract, or otherwise.
3.22.2.21. Company has not been a party to any Tax allocation
or Tax sharing agreement. No property of Company (i) is subject to a
tax benefit transfer lease subject to the provisions of former Section
168(f)(8) of the Internal Revenue Code of 1954, (ii) is "tax-exempt use
property" within the meaning of Section 168(h) of the Code, or (iii)
secures any debt the interest on which is exempt from Tax under Section
103 of the Code. Company does not
-24-
have in effect any election for federal income tax purposes under
Sections 108, 168, 338, 341, 441, 1017, 1033, 1502, or 4977 of the
Code. Company has not been the "distributing corporation" (within the
meaning of Section 355(c)(2) of the Code) with respect to a transaction
described in Section 355 of the Code within the three-year period
ending as of the date of this Agreement.
3.22.2.22. Company has disclosed on its federal income Tax
Returns all positions taken therein that could give rise to a
substantial understatement of federal income Tax within the meaning of
Codess. 6662. Company has not received a tax opinion with respect to
any transaction relating to Company other than a transaction in the
ordinary course of business. Company is not the direct or indirect
beneficiary of a guarantee of tax benefits or any other arrangement
that has the same economic effect with respect to any transaction or
tax opinion relating to Company. Company is not party to an
understanding or arrangement described in Section 6111(d) or Section
6662(d)(2)(C)(iii) of the Code. Company is not party to a lease
arrangement involving a defeasance of rent, interest or principal.
3.22.3. S Corporation Status. Company properly and timely
filed a valid election under Code Section 1362 to be treated as an S
corporation ("S Corp") as defined under Code Section 1361 for federal
income tax purposes effective January 3, 1988 and has a corresponding
election on the same date in effect under the laws of Wisconsin and
Illinois. Such elections have remained in effect since such times and
will remain in full force and effect through the Closing Date. Except
for transactions contemplated by this Agreement, neither Sellers nor
Company have taken any action or failed to take any action, nor has any
event occurred, that would result in the revocation or termination of
any of such elections at any time.
3.22.4. Basis in Assets. The adjusted basis of Company's
assets for federal income Tax purposes in the aggregate did not exceed
$19,000,000 as of the date of the Audited Balance Sheet. Company has no
"net unrealized built-in gain" as such phrase is defined in Section
1374(d) of the Code (or any corresponding or similar provision of
state, local, or foreign Law).
3.23 Legal Proceedings.
There are no outstanding Orders of any Governmental Entities applicable
to Sellers, Company or its stores, facilities, business or properties. Except as
set forth on Schedule 3.23, there are no actions, suits, claims, investigations,
inquiries, demands, complaints or legal, administrative, civil, criminal or
arbitration proceedings or investigations of whatever kind or nature
(collectively, "Litigation") (whether or not the defense thereof or liabilities
or Losses in respect thereof are covered by insurance) pending or, to Company's
or Sellers' knowledge, threatened, against Sellers, Company, or any of its
assets, stores, facilities, business or properties. All notices required to have
been given to any insurance company listed as insuring against any Litigation
set forth on Schedule 3.23 have been timely and duly given and
-25-
no insurance company has asserted, orally or in writing, that such Litigation is
not covered by the applicable policy relating to such Litigation. There is no
Litigation pending or, to the Company's or Sellers' knowledge, threatened that
would give rise to any right of indemnification on the part of any director or
officer of Company or the heirs, executors or administrators of such directors
or officers, against Company.
3.24 Material Contracts.
3.24.1. Schedule 3.24 sets forth and describes all of the
following contracts ("Material Contracts") to which Company is a party
or by or to which its stores, facilities, properties or assets are
bound or subject: (i) contracts with any current or former officer,
director, shareholder, employee, consultant, agent or other
representative or with any entity in which any of the foregoing is a
controlling person; (ii) contracts with any Person for the manufacture
or supply of any products sold by Company (other than contracts which
do not involve an obligation in excess of $25,000 in a calendar year);
(iii) contracts for the sale of any assets of Company, other than in
the ordinary course of business, or for the grant to any Person of any
option or preferential rights to purchase any assets of Company; (iv)
media, marketing, merchandising or advertising agreements; (v)
contracts under which Company agrees to indemnify any party or to share
any liability of any party; (vi) contracts with suppliers or vendors;
(vii) contracts, other than store leases, containing covenants of
Company not to compete in any line of business or with any Person in
any geographical area or covenants of any other Person not to compete
with Company in any line of business or in any geographical area;
(viii) subleases or leases by Company where Company is the landlord or
lessor; (ix) contracts requiring the payment to any person of an
override or similar commission or fee; (x) contracts relating to the
borrowing of money; (xi) contracts containing obligations or
liabilities of any kind to Sellers, as the holders of Shares; (xii)
contracts or options for the purchase of any property for a purchase
price in excess of $25,000; (xiii) management or employment contracts
and other similar agreements with any Person; (xiv) contracts pursuant
to the terms of which there is either a current or future obligation or
right of Company to make payments in excess of $25,000 or receive
payments in excess of $25,000; (xv) any other contract that is material
to the stores, facilities, properties, assets, business, results of
operations or financial condition of Company; (xvi) contracts relating
to the settlement of any claim in excess of $25,000; (xviii) equipment,
machinery, truck and other personal property leases; and (xviii)
contracts with any labor union or association representing any
employee. Schedule 3.24 also lists and describes the status of all
Material Contracts currently in negotiation or proposed by Company of a
type which if entered into by Company would be required to be listed on
Schedule 3.24 or on any other Schedule ("Proposed Material Contracts").
3.24.2. Company has delivered to Purchaser true and complete
copies of all of the Material Contracts and drafts of all proposed
Material Contracts set forth on Schedule 3.24. All of the Material
Contracts were entered into in bona fide transactions in the ordinary
course of business and are valid and binding upon the
-26-
parties thereto in accordance with their terms and are in full force
and effect. Company is not in default under any of such Material
Contracts. No condition exists that with notice or lapse of time or
both would constitute a default thereunder. No other party to any such
Material Contract is in default thereunder. No condition exists that
with notice or lapse of time or both would constitute a default
thereunder. Except as described on Schedule 3.24, no approval or
consent of any person is needed in order that the Material Contracts
set forth on Schedule 3.24 continue in full force and effect
immediately following the consummation of the transactions contemplated
by this Agreement.
3.25 Insurance.
Schedule 3.25 sets forth a list of all policies or binders of fire,
liability, product liability, workmen's compensation, vehicular and other
insurance held by or on behalf of Company (specifying the policyholder, the
amount of the coverage, the insurer, the type of the coverage, the risks insured
and any pending claims thereunder). Such policies and binders are valid and
binding in accordance with their terms, are in full force and effect, and insure
against risks and liabilities to an extent and in a manner customary in the
industry in which Company operates. Company is not in default with respect to
any provision contained in any such policy or binder, nor has it failed to give
any written notice or present any claim under any such policy or binder in due
and timely fashion or in the manner or detail required by the policy or binder.
There are no outstanding unpaid premiums under any such policy or binder. No
such policy or binder is subject to any currently enforceable retroactive rate
or premium adjustment, loss sharing arrangement or other actual or contingent
liability arising wholly or partially out of events arising prior to the date
hereof. Except as set forth on Schedule 3.25, Company has not received any
notice of cancellation or non-renewal of or any disallowance of any claim under
any such policy or binder. Company has not received any written notice from or
on behalf of any insurance carrier issuing any such policy that insurance rates
therefor will hereafter be substantially increased (except to the extent that
insurance rates may be increased for all similarly situated risks) or that there
will hereafter be a cancellation or an increase in deductible (or an increase in
premiums in order to maintain an existing deductible) or nonrenewal of any such
policy or binder. Such policies are sufficient for compliance by Company with
all requirements of Law and with the requirements of all Material Contracts.
There is no inaccuracy in any application for such policies or binders, failure
to pay premiums when due, or similar state of facts that might form the basis
for termination of any such insurance. Company has complied with all such
policies in all respects. No event has occurred that would be reasonably likely
to form the basis of a claim that would be covered by a policy of insurance held
by or on behalf of Company that (i) has not been asserted; (ii) if asserted,
would result in a material diminution of the remaining available coverage under
such policy; and (iii) would have an adverse effect on the stores, properties,
assets or business of Company. Schedule 3.25 also contains a true, accurate and
complete description of all outstanding bonds and other surety arrangements
involving more than $25,000 issued or entered in connection with the business
and operations of Company.
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3.26 Accounts Receivable.
All accounts receivable of Company have arisen from bona fide
arms-length transactions in the ordinary course of business of Company. Each of
the accounts receivable of Company to be set forth in the Final Closing Balance
Sheet will be fully collectible, subject to any bad debt reserve reflected in
the Final Closing Balance Sheet pursuant to Sections 1.4 and 5.25, by the
Company in the ordinary course of business (without the necessity to institute
any special collection proceedings or actions). Each of the accounts receivable
of Company to be set forth in the Final Closing Balance Sheet is not subject to
any counterclaims or rights of set-off and, to the extent not collectible,
reserves in sufficient amounts exist and will exist on the Final Closing Balance
Sheet to cover such contingency.
3.27 Environmental Matters.
3.27.1. Company is in compliance with all applicable federal,
state or local Laws pertaining to the regulation or protection of the
environment or contamination or cleanup of Hazardous Materials (as
hereinafter defined) (collectively "Environmental Laws").
3.27.2. Neither Company nor Sellers have received nor have
knowledge of any claim, notice, order, directive, or information
request from the United States Environmental Protection Agency, any
state environmental protection agency, or any other agency, department
or branch of a local, state or federal government (collectively
"Environmental Agency"), or from any private corporation or Person,
alleging liability or Loss under or violation of any Environmental Laws
with respect to Company or Leased Real Property (as hereinafter
defined) within the last five (5) years.
3.27.3. Except as disclosed on Schedule 3.27, Company has not
caused the "release" (as defined in Environmental Laws) of any
Hazardous Materials from Company's operations into, upon or under the
Leased Real Property. There are no Hazardous Materials in, upon, under,
about, migrating or threatening to migrate, to or from, or removed from
and stored off-site of the Leased Real Property, except ordinary
cleaning chemicals and solutions, suitably packaged goods offered for
sale at retail and office supplies used for their intended purpose.
"Hazardous Materials" shall mean all chemicals, substances and/or
materials listed under or otherwise governed or regulated by any
Environmental Laws including, without limitation, hazardous or toxic
substances, wastes or materials, petroleum products, or any
constituents thereof.
3.27.4. Company has provided or made available to Purchaser a
copy of all environmental reports, tests, assessments, audits, and
sampling results (collectively "Environmental Reports") available to it
pertaining to Company or the Leased Real Property.
3.27.5. (i) no investigation, Order, agreement, Litigation or
settlement under any Environmental Laws or with respect to any
Hazardous Materials is proposed, or to Company's or Sellers' knowledge
threatened or anticipated with respect to Company or
-28-
the Leased Real Property; (ii) the Leased Real Property has not been
used for solid or hazardous waste treatment, storage or disposal; and
(iii) except as set forth on Schedule 3.27, there are not now and have
never been any underground storage tanks in or upon any of the Leased
Real Property.
3.27.6. Except as set forth on Schedule 3.27, all Permits
required by any Environmental Agency (collectively, "Environmental
Permits") have been obtained and are in effect with respect to Company
and the Leased Real Property and no violation of any such Environmental
Permits has occurred in the past five (5) years. No proceeding is
pending or, to Company's or Sellers' knowledge, threatened which might
result in revocation or limitation of any such Environmental Permits,
and such Environmental Permits are not and will not be affected by the
transactions contemplated by this Agreement.
3.28 Fees or Commissions.
Neither Sellers nor Company (including its directors, officers and
employees) have employed any broker, agent or finder or incurred any liability
for any brokerage fees, agent's commissions or finder's fees or other similar
obligations in connection with the transactions contemplated hereby.
Notwithstanding the above, the parties recognize Company's retention of AA as
its financial advisor in connection with this transaction, the payment of fees
to whom shall be the sole responsibility of Sellers. A copy of AA's engagement
letter, as currently in effect, has been provided to Purchaser and, at the
Closing, AA shall deliver to Company and Purchaser its release and satisfaction
status that neither Company nor Purchaser has any obligation thereto with
respect to such engagement or fees.
3.29 Illegal Payments.
Neither Company nor any Seller, director, officer, employee or agent of
Company, or any other Person or entity on behalf of Company, has made or
authorized any payment of funds of, or relating to, Company which is prohibited
by any Law or Order.
3.30 Principal Vendors.
Schedule 3.30 contains a list of the ten (10) largest vendors of
Company for each of the two (2) most recent fiscal years (determined on the
basis of the total dollar amount of purchases) showing the total dollar amount
of purchases from each such vendor during each such year. Except as set forth on
Schedule 3.30, neither Company nor any Seller has any knowledge or information
of any facts indicating, nor any other reason to believe, that any of the
vendors listed on Schedule 3.30 will not continue to be suppliers to Company
after the Closing and will not thereafter continue to supply Company with
substantially the same quantity and quality of goods at competitive prices.
-29-
3.31 Real Estate.
3.31.1. Company does not own any interest in or to any land,
buildings, structures, plants, facilities or other improvements.
3.31.2. Schedule 3.31 is a true, correct and complete schedule
of all real property that is used or occupied by Company, including a
description of all land and all encumbrances, easements and
restrictions of record (or, if not of record, of which Company has
notice or knowledge) granted or appurtenant to or otherwise affecting
such real property, such use or occupancy being in accordance with, and
pursuant to, any leases, subleases, licenses and other agreements
(collectively, the "Real Property Leases"), the material terms of which
are also set forth and described on Schedule 3.31, under which Company
has the right to use or occupy, now or in the future, any real property
(the land, buildings, structures and other improvements covered by the
Real Property Leases being referred to herein as the "Leased Real
Property"). Company has heretofore delivered to Purchaser true, correct
and complete copies of all Real Property Leases (including all
modifications, amendments and supplements thereto) between Company and
lessors. Each Real Property Lease is valid, binding and in full force
and effect.
3.31.3. Company has good, valid, marketable, and insurable
title to the leasehold estates created by the Real Property Leases in
and to all Leased Real Property, in each case free and clear of all
Liens, other than easements and restrictions of record (none of which
interfere with the use of the Leased Real Property as currently
utilized or adversely affect the marketability of title to the interest
in said properties), and Liens for ad valorem property taxes and
special assessments not yet due and payable but which have been and
will be appropriately reserved against on the Audited Balance Sheet and
the Final Closing Balance Sheet.
3.31.4. Except as set forth on Schedule 3.31, all rent and
other sums and charges payable by Company under the Real Property
Leases are current, and all other obligations of Company to be complied
with under the Real Property Leases have been satisfied. Except as set
forth on Schedule 3.31, Company and each respective lessor has complied
with the terms of each Real Property Lease and no termination event or
condition or uncured default exists under any Real Property Lease.
Except as set forth on Schedule 3.31, no event has occurred and no
condition exists which, with the giving of notice or the lapse of time
or both, would constitute a default or termination event or condition
on behalf of either party to the Real Property Leases.
3.31.5. All of the land, buildings, stores, structures,
plants, facilities and other improvements used or occupied by Company
in the conduct of its business are included in the Leased Real
Property.
3.31.6. Except as set forth on Schedule 3.31, there is no
pending, or, to Company's or Sellers' knowledge, threatened or
contemplated condemnation,
-30-
expropriation or similar taking proceeding, with or without payment of
compensation therefor, affecting the Leased Real Property or any part
thereof or any sale or other disposition of the Leased Real Property or
any part thereof in lieu of condemnation, expropriation or similar
taking action.
3.31.7. Except for general reassessments of property and
assessments occurring on an annual basis and as a result of
improvements made to the Leased Real Property and reassessments that
may occur as a result of the transactions contemplated by this
Agreement, there is no pending or contemplated reassessment of any
parcel included in the Leased Real Property.
3.31.8. The permitted uses allowed under the zoning applicable
to the Leased Real Property currently (or will as of the Closing)
permit the current uses of the Leased Real Property for purposes of the
business of Company undertaken thereon. There are now in full force and
effect duly issued certificates of occupancy permitting the Leased Real
Property and improvements located thereon to be legally used and
occupied as the same are now constituted. The construction and
configuration of the improvements located upon the Leased Real Property
currently (or will as of the Closing) comply with all applicable
building and zoning codes, deed restrictions, ordinances and rules.
True, complete and correct copies of the leases and other documents
granting or relating to the leasing of the Leased Real Property,
including all amendments and modifications thereto, have been provided
to Purchaser by Company.
3.31.9. Except as set forth on Schedule 3.31 (but none of
which interfere with the use of the Leased Real Property as currently
utilized or adversely affect the marketability of title to the interest
in said properties), the stores, facilities, buildings and other
improvements of each parcel included in the Leased Real Property do not
encroach on any easements or on any land not included within the
boundary lines of such Leased Real Property and there are no
neighboring improvements encroaching on such Leased Real Property.
3.31.10. The current uses of any parcel included in the Leased
Real Property do not (or as of the Closing Date, will not) violate or
conflict in any respect with (i) any covenants, conditions, easements
or restrictions applicable thereto; (ii) the terms and provisions of
any contractual obligations relating thereto; or (iii) the terms and
conditions of any Laws or Orders, including zoning, building, and
occupancy codes, applicable thereto.
3.31.11. Except as disclosed on Schedule 3.31, no approval or
consent of any third party is necessary in order that the Real Property
Leases continue in full force and effect following the consummation of
the transactions contemplated in this Agreement. Except as disclosed on
Schedule 3.31, none of the Leased Real Property is subject to any
restrictions with respect to the transferability of the relevant
interests therein to Purchaser.
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3.31.12. Except as disclosed on Schedule 3.31, all of the
stores, buildings, structures, improvements and fixtures with respect
to the Leased Real Property are in a good state of repair, maintenance
and operating condition and, except for normal wear and tear, there are
no defects with respect thereto (including with respect to the
plumbing, electrical, sewerage, or heating, ventilating or air
conditioning systems), the same are sufficient to carry on the business
of Company as conducted during the previous twelve months, and none of
the disclosed defects would impair the day-to-day use of any such
stores, buildings, structures, improvements or fixtures or would
subject Company to liability under applicable Law.
3.31.13. Company has not received any notice, written or
otherwise, of any violation of any applicable zoning law, other Law or
order, relating to or affecting the Leased Real Property or Company's
use or occupancy thereof, which has not been (or will not be prior to
Closing) cured, and no basis for an assertion of such a violation
exists.
3.31.14. Company is in peaceful and undisturbed possession of
the Leased Real Property created under the Real Property Leases, and
has good and valid permanent rights of ingress and egress to and from
all Leased Real Property from and to the publicly dedicated highways
for all usual street, road and utility purposes and other purposes
necessary, convenient, or incidental to the business of Company. Other
than as set forth on Schedule 3.31, no fact or condition exists which
would prohibit or adversely affect the ordinary rights of access to and
from the Leased Real Property from and to the existing highways and
roads and there is no pending or threatened restriction or denial,
governmental or otherwise, upon such ingress and egress.
3.31.15. There is not any claim of adverse possession or
prescriptive rights involving any of the Leased Real Property.
3.31.16. Other than as set forth on Schedule 3.31, none of the
Leased Real Property is located in a flood plain, flood hazard area,
wetland or lakeshore erosion area within the meaning of any Law.
Although the Darlington supermarket is located in a flood plain, the
property has been filled to an elevation above the flood plain.
Although the parking lot of the Darlington property has been flooded
from time to time, such flooding has not adversely affected the
business or operation of the supermarket.
3.31.17. No public improvements have been commenced and none
are planned which in either case may result in special assessments
against or otherwise adversely affect any Leased Real Property or which
would be the responsibility or obligation of the Company.
3.31.18. No certified survey map or other state, municipal, or
other governmental approval regarding the division, platting, or
mapping of real estate is required as a prerequisite to the conveyance
by Company to Purchaser (or as a prerequisite to the recording of any
conveyance document, assignment of any leasehold
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interest, or execution of any lease) of any Leased Real Property
pursuant to the terms hereof.
3.32 Disclosure.
This Agreement, the Disclosure Schedule, and the exhibits to this
Agreement delivered by or on behalf of Company and/or Sellers in connection with
this Agreement and the transactions contemplated hereby are true, complete and
authentic. No document furnished by or on behalf of Company or Sellers to
Purchaser pursuant to this Agreement or in connection with the transactions
contemplated hereby contains an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements made, in the context in which made, not materially false or
misleading. All information and statements set forth on the Disclosure Schedule
shall be deemed to be additional representations and warranties of Company and
Sellers.
3.33 Guarantors of Company Indebtedness.
Schedule 3.33 includes a complete list of all Persons who have
delivered currently effective guaranties of Company indebtedness or liabilities
to any third party.
3.34 Bank Accounts.
Schedule 3.34 sets forth the names and locations of all banks, trust
companies, savings and loan associations and other financial institutions at
which Company maintains a safe deposit box, lock box or checking, savings,
custodial or other account of any nature, the type and number of each such
account and the signatories therefore, a description of any compensating balance
arrangements, and the names of all persons authorized to draw thereon, make
withdrawals therefrom or have access thereto.
3.35 Funded Debt.
Schedule 3.35 contains a true, complete and accurate listing of all of
the Company's Funded Debt (including, without limitation, all William Brodbeck
Obligations, all lines of credit and other notes payable, whether classified as
long-term or current, but excluding any capitalized leases), including all
amounts outstanding and accrued thereunder as of March 25, 2001. Schedule 3.35
also includes true and complete copies of all documents evidencing Company's
obligations under such Funded Debt, as well as all documents evidencing any
Liens on Company's assets or properties securing such Funded Debt. Schedule 3.35
also includes information on the applicable interest rate and scheduled maturity
with respect to each Funded Debt obligation, as well as the name of the
individual contact of each such creditor, the phone number thereof and the
address thereof, together with per diem interest accruals and any scheduled
principal payment dates anticipated prior to December 31, 2001. There are no
prepayment penalties, charges or premiums of any kind payable by the Company
applicable to any Funded Debt obligations.
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3.36 Representations and Warranties on Closing Date.
The representations and warranties contained in this Article III shall
be true and correct on and as of the Closing Date, with the same force and
effect as though such representations and warranties had been made on and as of
the Closing Date.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby makes the following representations and warranties to
Company and Sellers, each of which is true, correct and complete as of the date
of this Agreement, shall remain true, correct and complete to and including the
Closing Date, shall be unaffected by any investigation heretofore or hereafter
made by Company or Sellers, and shall survive the Closing of the transactions
provided for herein.
4.1 Organization.
Purchaser is a corporation validly existing and in good standing under
the laws of the State of Wisconsin and has all requisite corporate power and
lawful authority to own, lease and operate its assets and properties and to
carry on their businesses as now being and as heretofore conducted.
4.2 Authorization.
Purchaser has full corporate power and authority to enter into and
perform its obligations under this Agreement and the Ancillary Instruments. The
execution, delivery and performance by Purchaser of this Agreement and the
Ancillary Instruments have been duly authorized by its board of directors. No
other or further corporate act or proceeding on the part of Purchaser is
necessary to authorize this Agreement or the Ancillary Instruments or the
consummation of the transactions contemplated hereby and thereby.
4.3 No Violation.
Neither the execution and delivery of this Agreement or the Ancillary
Instruments nor the consummation by Purchaser of the transactions contemplated
hereby and thereby (a) will violate any Order of any Government Entity; (b) will
require any authorization, consent, approval, exemption or other action by or
notice to any Government Entities (including, without limitation, under any
"plant-closing" or similar law), or (c) will violate or conflict with, or
constitute a default (or an event which, with notice or lapse of time, or both,
would constitute a default) under, or will result in the termination of, or
accelerate the performance required by, or result in the creation of any Lien
upon any of the assets of Purchaser under, any term or provision of the Articles
of Incorporation or By-laws of Purchaser or of any contract, commitment,
understanding, arrangement, agreement or restriction or any kind or character,
commitment, understanding, arrangement, agreement or restriction of any kind or
character to which Purchaser is a party or by which Purchaser or any of its or
their assets or properties may be bound or affected.
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ARTICLE V.
COVENANTS
5.1 Conduct of the Business.
Company and Sellers agree that, from the date hereof through the
Closing, except to the extent otherwise permitted by this Agreement or consented
to in writing by Purchaser, Company shall, and Sellers shall cause Company to:
5.1.1. operate its business only in the ordinary course and
consistent in amount and nature with past practice;
5.1.2. use its best efforts to preserve Company's and its
stores' and facilities' business organization intact, to retain the
services of its employees and to preserve the goodwill and
relationships with customers, suppliers, creditors and others having
business relationships with it and them, maintain and repair all
Company property, and maintain Company's books, accounts and records in
its customary manner and consistent in amount and nature with past
practice so as to fully and accurately reflect relevant information
concerning Company;
5.1.3. take such action as may be reasonably necessary to
preserve its properties and assets and to maintain its Permits;
5.1.4. maintain in full force and effect its insurance
policies presently in effect;
5.1.5. comply with all applicable Orders or other Laws;
5.1.6. promptly advise Purchaser in writing of any adverse
change in the financial condition, assets, stores, facilities,
properties, business, markets or operations of Company and of any event
or circumstance which will result in any such change or which will
constitute a violation or breach of any representation, warranty or
covenant contained in this Agreement;
5.1.7. not make or commit to make any salary or wage increase
with respect to any officer or employee, except with respect to
non-officers in the ordinary course of business and consistent in
amount and nature with past practice, or enter into, amend or alter any
benefit plan (as defined in Section 3.21.1), trust agreement or
arrangement or any employment or consulting agreement;
5.1.8. not sell, transfer or otherwise dispose of or encumber
any of its assets or properties, except for sales of inventory in the
ordinary course of business;
5.1.9. review with, and receive the prior consent of,
Purchaser on all decisions regarding vendor contracts, equipment
purchases and sales, real property lease (including store sublease)
renewals and any other significant major operational decisions;
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5.1.10. not do or omit any act, or permit any omission to act,
which may cause or result in a breach of any Material Contract;
5.1.11. except for borrowing under existing lines of credit,
not incur any new credit facilities or new obligations for borrowed
money concerning Company's business or mortgage, pledge or subject to
Lien any assets of Company;
5.1.12. obtain Purchaser's consent to all extraordinary,
unusual or long-term advertising, merchandising and marketing actions,
initiatives, publications, promotions, campaigns, commercials,
extraordinary or long-term print media or inserts, couponing, or other
extraordinary, unusual or long-term commitments with respect to any of
the foregoing and the like with respect to the operation of Company and
its stores, facilities and business; and
5.1.13. not make any agreement or commitment to take any
action referred to in Sections 5.1.1 through 5.1.12 above.
5.2 Certain Filings, Consents and Action.
As promptly as practicable after the date of this Agreement, Purchaser
and Sellers will, and will cause each of their Affiliates to, make all filings
required to be made by them to consummate the transactions contemplated by this
Agreement. Purchaser and Sellers shall cooperate with each other in determining
whether any other filings are required to be made or consents, approvals,
permits or authorizations are required to be obtained under any other Law or
Order, or whether any consents, approvals or waivers are required to be obtained
from other parties to Material Contracts in connection with the consummation of
the transactions contemplated hereunder. To the extent that any filings,
consents, approvals, permits or authorizations are required, Purchaser and
Sellers shall cooperate and assist each other, in a commercially reasonable
manner, in obtaining the same.
5.3 Full Access.
Company shall, and Sellers shall cause Company to, permit
representatives and agents of Purchaser and AA to have full access (at all
reasonable times and upon reasonable advance notice) to all stores, facilities,
premises, properties, financial, accounting and Tax records, contracts, other
records and documents, and personnel and vendors of or pertaining to Company;
provided, that such access shall not materially disrupt Company's business
operations and that all such access shall be coordinated through Company's chief
financial officer. Company shall, and Sellers shall cause the officers and
management of Company to, cooperate fully with Purchaser's representatives,
attorneys, consultants and agents and to make themselves available to the extent
necessary to complete Purchaser's due diligence process and the Closing.
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5.4 Public Announcements.
Prior the Closing Date, Company, Sellers and Purchaser shall agree with
each other as to the general form, timing and substance of any public
announcement related to this Agreement or the transactions contemplated hereby,
such agreement not to be unreasonably withheld or delayed, and consult with each
other as to the general form, timing and substance of other public disclosures
related hereto; provided, however, that nothing contained herein shall prohibit
either party without the agreement of the other party, from making any
disclosure of the transaction required by Law or Purchaser or Schultz deems
necessary under federal or state securities Laws or under the applicable
requirements of The Nasdaq Stock Market.
5.5 Acquisition Proposals.
Prior to the Closing or the termination or expiration of this
Agreement, Company and Sellers will not, and Sellers shall cause Company and AA
(as its and the Sellers' financial advisor) not to, directly or indirectly,
through any officer, employee, director, representative, parent, Affiliate,
broker, advisor or agent (a) seek, solicit, initiate or encourage the submission
of inquiries, proposals or offers from any corporation, partnership, Person or
other entity or group relating to any acquisition or purchase of the Shares or
the assets, stores, facilities, properties or business of Company or any tender
or exchange offer, merger, reverse merger, consolidation, business combination,
recapitalization, spin-off, liquidation, dissolution or similar transaction
seeking, directly or indirectly, to acquire all or any part of the Shares or
Company's assets, stores, facilities, properties or business (each an
"Acquisition Proposal"); (b) continue, participate or cooperate in or consider
or pursue, any discussions or negotiations regarding any past, current or new
Acquisition Proposal or furnish to any person or entity information concerning
Company or any Acquisition Proposal; or (c) otherwise solicit or cooperate in
any way with, or assist, or participate in, facilitate or encourage any effort
or attempt by any person to make or enter into an Acquisition Proposal. Sellers
and Company shall notify Purchaser, in writing, of the receipt of any new
Acquisition Proposal and will promptly hereafter provide copies of all new
Acquisition Proposals to Purchaser. Any such written notification of a new
Acquisition Proposal shall summarize all material terms thereof, and if the new
Acquisition Proposal is in writing, contain a complete copy of such Acquisition
Proposal. Sellers and Company shall, promptly after the date hereof, obtain the
return of all confidential information provided to any other interested parties
prior to the date hereof and will provide true and correct copies to Purchaser
of all confidentiality agreements entered into with all such interested parties.
Such requests shall also advise the parties in possession of such confidential
information of their continuing obligation of confidentiality with respect
thereto.
5.6 Supplements to Schedules.
From time to time prior to the Closing Date, Sellers or Company may
supplement or amend the Disclosure Schedules with respect to any matter arising
after the date hereof which, if existing on or occurring prior to the date
hereof, would have been required to be set forth
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thereon or which is necessary to correct any information contained herein. In
the event Sellers or Company supplement or amend the Disclosure Schedules as
provided under this Section 5.6, Purchaser may elect to close the transactions
contemplated without waiving the breach of representation or warranty occasioned
by such supplement or amendment. Unless waived by Purchaser in writing, all such
claims shall be subject to the indemnification provisions of this Agreement.
5.7 Further Assurances.
After the Closing, Sellers will, at Purchaser's reasonable request from
time to time and without further consideration, execute and deliver or cause to
be executed and delivered to Purchaser such other instruments, documents of
sale, transfer, conveyance, assignment and confirmation and take such other
actions as Purchaser may reasonably request to carry out and effectuate the
provisions hereof and the transactions contemplated hereby.
5.8 Financial Information.
From and after the date hereof until the Closing, Sellers shall provide
Purchaser with copies of unaudited monthly financial statements of Company
(including on a store-by-store basis) within 15 days after the end of each
month. Prior to the date hereof, Company has provided Purchaser with copies of
all monthly financial statements (including on a store-by-store basis) for
January, February and March 2001 of Company.
5.9 Material Consents.
To the extent that the transactions contemplated herein may not be
consummated without the Material Consent of another Person which has not been
obtained, Company and Sellers shall use their best efforts in good faith to
obtain any such required Material Consents as promptly as possible and Purchaser
will cooperate with Sellers in obtaining all such Material Consents.
5.10 WARN Act.
5.10.1. Company will continue its operations intact and
without material change with its existing employees up to and through
the Closing Date.
5.10.2. Purchaser expects to retain a sufficient number of
employees in connection with the transactions contemplated by this
Agreement such that Purchaser will not create any obligation to provide
notice under the Worker Adjustment and Retraining Notification Act (the
"WARN Act") in connection with the transactions contemplated by this
Agreement.
5.10.3. With respect to store-level employees of Company,
Company retains any obligations under the WARN Act through the Closing
Date. If the notice requirements are triggered up to and through the
Closing Date by action taken by Company, all liabilities for such
notice will be assumed by Sellers. Similarly,
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Purchaser will assume any obligations under the WARN Act for the
termination of Company's employees after the Closing Date. If the
notice obligations are triggered after the Closing Date by action of
Company or Purchaser, all liabilities for such notice will be assumed
by Purchaser.
5.10.4. Although the notice rights for employees of Company
under the WARN Act, if any, are preserved herein, this Agreement
creates no other employment rights for any employees.
5.11 Cash as of Closing Date.
Sellers shall cause Company to have cash on hand at each of Company's
eight supermarkets as of the Closing Date consistent with past practice in the
ordinary course of business.
5.12 Articles Amendment; Buy and Sell Agreement.
5.12.1. Articles Amendment. As promptly as practicable
following the date hereof, but in any event prior to the Closing,
Company shall, and Sellers shall cause Company to, take all necessary
action to amend Company's Articles of Incorporation to (a) eliminate
Company's right of first refusal with respect to the Shares contained
in Article IV thereof; (b) change Company's corporate name to "Dick's
Supermarket, Inc.;" and (c) change Company's registered agent and
registered office, all in conformance with Purchaser's specifications,
and all of which actions shall include, as applicable and without
limitation, timely providing proper notice of a special shareholders
meeting, obtaining the requisite votes or consents for approval of such
amendment, and filing all necessary Articles of Amendment or other
documents with the Wisconsin Department of Financial Institutions and
all other Government Entities, all to the extent necessary to validly
effect such amendment in accordance with applicable Law prior to or as
of the Closing ("Articles Amendment").
5.12.2. Buy and Sell Agreement. As promptly as practicable
following the date hereof, but in any event prior to the Closing,
Sellers and Company shall, and Sellers shall cause Company to, take all
necessary action to terminate the Buy and Sell Agreement (the "Buy and
Sell Agreement") by and between Company and Primary Shareholders dated
as of March 28, 1996.
5.13 Estoppel Certificates.
Other than with respect to Affiliated Leases, Sellers shall obtain and
deliver to Purchaser, on or prior to the Closing Date, an estoppel certificate
or status letter from the landlord under each Real Property Lease (as well as
from the tenant under each sublease or lease where Company is the landlord),
which estoppel certificate or status letter will certify (i) the lease to which
it relates is valid and in full force and effect; (ii) the amounts payable by
Company (or other tenant) under the Real Property Lease (or other lease or
sublease) in question and the date to which the same were due; (iii) whether
there are any defaults
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thereunder, and, if so, specifying the nature thereof; and (iv) that the
transactions contemplated by this Agreement will not (or with notice or lapse of
time or both would) constitute a default thereunder and, if required by the
terms of such Real Property Lease (or other lease or sublease) and the terms of
this Agreement, that the landlord (or other tenant) consents to the change in
ownership of Company.
5.14 Noncompetition; Confidentiality.
Subject to the Closing, and as an inducement to Purchaser to execute
this Agreement and complete the transactions contemplated hereby, and in order
to preserve the goodwill associated with the business of Company being acquired
pursuant to this Agreement, and in addition to and not in limitation of any
covenants contained in any agreement executed and delivered pursuant to this
Agreement, each Primary Shareholder hereby covenants and agrees as follows:
5.14.1. Covenant Not to Compete. Except as contemplated by the
Employment Agreement, for a period of five (5) years from the Closing
Date, no Primary Shareholder will directly or indirectly:
5.14.1.1. engage in, continue in or carry on any grocery or
other retail food or beverage business or business that is
substantially similar thereto, including owning or controlling any
financial interest in any corporation, partnership, firm or other form
of business organization which is so engaged;
5.14.1.2. consult with, advise or assist in any way, whether
or not for consideration, any corporation, partnership, firm or other
business organization which is now or becomes a competitor of Company
or Purchaser or any Affiliate of Company or Purchaser in any respect,
including, but not limited to, advertising or otherwise endorsing the
products of any such competitor; soliciting customers or otherwise
serving as an intermediary for any such competitor; loaning money or
rendering any other form of financial assistance to or engaging in any
form of business transaction on other than an arm's length basis with
any such competitor;
5.14.1.3. offer employment to or hire any employee of Company,
without the prior written consent of Purchaser; or
5.14.1.4. engage in any practice the purpose of which is to
evade the provisions of this covenant not to compete or to commit any
act which adversely affects the business of Company, Purchaser or any
Affiliate of Company or Purchaser
provided, however, that the foregoing shall not prohibit the ownership
of securities of corporations which are listed on a national securities
exchange or traded in the national over-the-counter market in an amount
which shall not exceed 1% of the outstanding shares of any such
corporation. The parties agree that the geographic scope of this
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covenant not to compete shall be limited to the states of Wisconsin and
Illinois and a one hundred (100) mile radius surrounding each store
and/or other facility operated by the Company at Closing. The parties
agree that Purchaser may sell, assign or otherwise transfer this
covenant not to compete, in whole or in part, to any person,
corporation, firm or entity that purchases all or part of the business
of Company or Purchaser or any Affiliate of Company or Purchaser. In
the event a court of competent jurisdiction determines that the
provisions of this covenant not to compete are excessively broad as to
duration, geographical scope or activity, it is expressly agreed that
this covenant not to compete shall be construed so that the remaining
provisions shall not be affected, but shall remain in full force and
effect, and any such over broad provisions shall be deemed, without
further action on the part of any person, to be modified, amended
and/or limited, but only to the extent necessary to render the same
valid and enforceable in such jurisdiction.
5.14.2. Covenant of Confidentiality. No Seller shall at any
time subsequent to the Closing, except as explicitly requested by
Purchaser, (i) use for any purpose, (ii) disclose to any person, or
(iii) keep or make copies of documents, tapes, discs or programs
containing, any confidential information concerning Company or its
business. For purposes hereof, "confidential information" shall mean
and include, without limitation, all Intellectual Property, all
proprietary information, all trade secrets, all customer lists and
customer information, and all other information concerning Company's
processes, apparatus, equipment, packaging, products, marketing and
distribution methods, not previously disclosed to the public directly
by Company.
5.14.3. Equitable Relief for Violations. Each Seller agrees
that the provisions and restrictions contained in this Section 5.14 are
necessary to protect the legitimate continuing interests of Purchaser
in acquiring the Shares, and that any violation or breach of these
provisions will result in irreparable injury for which a remedy at law
would be inadequate and that, in addition to any relief at law which
may be available for such violation or breach and regardless of any
other provision contained in this Agreement, Purchaser shall be
entitled to injunctive and other equitable relief as a court may grant
after considering the intent of this Section 5.14.
5.15 Section 338(h)(10) Election.
5.15.1. Section 338(h)(10) Election. On or before the Closing
Date, Sellers and Purchaser shall make an election under Section
338(h)(10) of the Code (and any corresponding elections under state,
local, or foreign Tax law) (collectively a "Section 338(h)(10)
Election") with respect to the purchase and sale of the Shares.
Purchaser shall prepare at its expense the forms and schedules
(including without limitation IRS Form 8023) and on the Closing Date
both Purchaser and Sellers shall execute such forms and take whatever
other steps necessary to effect such Section 338(h)(10) Election,
subject to finalization thereof on the Settlement Date when the final
Purchase Price is known. Sellers shall pay any Tax attributable to the
making of the Section 338(h)(10) Election and shall indemnify Purchaser
and Company (without any
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limitation under Article IX) against any Adverse Consequences (as
hereinafter defined) arising out of any failure to pay such Tax.
Sellers shall also pay any state, local, or foreign Tax (and indemnify
Purchaser and Company against any Adverse Consequences arising out of
any failure to pay such Tax) attributable to an election under state,
local, or foreign law similar to Section 338(h)(10) of the Code.
5.15.2. Allocation of Purchase Price. The parties hereto agree
that the Purchase Price and the liabilities of Company (plus other
relevant items) will be allocated to the assets of Company for all
purposes (including Tax and financial accounting purposes) in a manner
consistent with the methodologies and procedures set forth on Schedule
5.15 (which Schedule 5.15 will state that inventory is to be written up
by 17.8% from its otherwise stated lower of cost (at FIFO) or market
value at the Closing Date (as determined pursuant to Section 1.4.4) and
that leasehold improvements and equipment will have a combined fair
market value of $9.0 million). Purchaser, Company and Sellers will file
all Tax Returns (including amended returns and claims for refund) and
information reports in a manner consistent with values derived from
such mutually agreed upon methodologies and procedures. To the extent
applicable, on the Closing Date, the parties shall exchange and execute
mutually acceptable IRS forms (and any equivalent state, local, and
foreign Tax forms) reflecting such allocations which are to be filed
with the IRS and/or any applicable state, local, or foreign Tax
authority.
5.16 Tax Matters.
The following provisions shall govern the allocation of responsibility
as between Purchaser, Company and Sellers for certain Tax matters following the
Closing Date:
5.16.1. Tax Periods Ending on or Before the Closing Date. (i)
Between the date of this Agreement and the Closing Date, Sellers shall
file, or cause Company to file, on a timely basis all Tax Returns that
are required to be filed by Company prior to the Closing Date (taking
into account any extensions of time to file) and (ii) Purchaser shall
prepare or cause to be prepared at Sellers' expense and file or cause
to be filed all Tax Returns for all Pre-Closing Tax Periods which are
filed after the Closing Date (other than income or franchise Tax
Returns with respect to periods for which a Subchapter S income or
franchise Tax Return is required). No position shall be taken on such
Tax Returns by Sellers (or Company) that would adversely affect
Purchaser or Company after the Closing. Sellers jointly and severally
shall reimburse Purchaser for Taxes of Company and the expenses to
prepare such Tax Returns with respect to such periods within ten (10)
days after payment by Purchaser or Company of such Taxes to the extent
such Taxes and expenses are not reflected in the reserve for Tax
Liability (rather than any reserve for deferred Taxes established to
reflect timing differences between book and Tax income) shown on the
face of the Final Closing Balance Sheet.
5.16.2. Tax Periods Beginning Before and Ending After the
Closing Date. Purchaser shall prepare or cause to be prepared and file
or cause to be filed any Tax
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Returns of Company for Tax periods which begin before the Closing Date
and end after the Closing Date. Sellers jointly and severally shall pay
to Purchaser within ten (10) days after the date on which Taxes are
paid with respect to such periods an amount equal to the portion of
such Taxes which relates to the portion of such Taxable period ending
on the Closing Date to the extent such Taxes are not reflected in the
reserve for Tax Liability (rather than any reserve for deferred Taxes
established to reflect timing differences between book and Tax income)
shown on the face of the Final Closing Balance Sheet. For purposes of
this Section, in the case of any Taxes that are imposed on a periodic
basis and are payable for a Tax period that includes (but does not end
on) the Closing Date, the portion of such Tax which relates to the
portion of such Tax period ending on the Closing Date shall (i) in the
case of any Taxes other than Taxes based upon or related to income or
receipts, be deemed to be the amount of such Tax for the entire Tax
period multiplied by a fraction the numerator of which is the number of
days in the Tax period ending on and including the Closing Date and the
denominator of which is the number of days in the entire Tax period,
and (ii) in the case of any Tax based upon or related to income or
receipts be deemed equal to the amount which would be payable if the
relevant Tax period ended on the Closing Date. Any credits relating to
a Tax period that begins before and ends after the Closing Date shall
be taken into account as though the relevant Tax period ended on the
Closing Date. All determinations necessary to give effect to the
foregoing allocations shall be made in a manner consistent with prior
practice of Company.
5.16.3. Cooperation on Tax Matters.
5.16.3.1. Purchaser, Company and Sellers shall
cooperate fully, as and to the extent reasonably requested by
the other party, in connection with the filing of Tax Returns
pursuant to this Section and any audit, appeal, hearing,
litigation or other proceeding with respect to Taxes. Such
cooperation shall include the retention and (upon the other
party's request) the provision of records and information
which are reasonably relevant to any such audit, appeal,
hearing, litigation or other proceeding and making employees
available on a mutually convenient basis to provide additional
information and explanation of any material provided
hereunder. Company and Sellers agree (i) to retain all books
and records with respect to Tax matters pertinent to Company
relating to any taxable period beginning before the Closing
Date until the expiration of the statute of limitations (and,
to the extent notified by Purchaser or Sellers, any extensions
thereof) of the respective taxable periods, and to abide by
all record retention agreements entered into with any Tax
authority, and (ii) to give the other party reasonable written
notice prior to transferring, destroying or discarding any
such books and records and, if the other party so requests,
Company or Sellers, as the case may be, shall allow the other
party to take possession of such books and records or a copy
thereof.
5.16.3.2. Purchaser and Sellers further agree, upon
request, to use their best efforts to obtain any certificate
or other document from any governmental
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authority or any other person as may be necessary to mitigate,
reduce or eliminate any Tax that could be imposed (including,
but not limited to, with respect to the transactions
contemplated hereby).
5.16.3.3. Purchaser and Sellers further agree, upon
request, to provide the other party with all information that
either party may be required to report pursuant to Section
6043 of the Code and all Treasury Department Regulations
promulgated thereunder (if any).
5.16.4. Certain Taxes. All transfer, documentary,
sales, use, stamp, registration and other such Taxes and fees
(including any penalties and interest) incurred in connection
with this Agreement, shall be paid by Sellers when due, and
Sellers will, at their own expense, file all necessary Tax
Returns and other documentation with respect to all such
transfer, documentary, sales, use, stamp, registration and
other Taxes and fees, and, if required by applicable law,
Purchaser will, and will cause its affiliates to, join in the
execution of any such Tax Returns and other documentation.
5.16.5. Adverse Consequences. "Adverse Consequences"
means all actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands,
injunctions, judgments, orders, decrees, rulings, damages,
dues, penalties, fines, costs, amounts paid in settlement,
liabilities, obligations, Taxes, liens, losses, expenses and
fees, including court costs and reasonable attorneys' fees and
expenses.
5.17 Income Tax Matters
5.17.1.1. Subchapter S Income Tax Returns and
Allocation of Tax. Sellers shall jointly and severally pay all
federal, state, and local income and franchise Taxes accruing
on or before the Closing Date. Sellers shall cause to be
prepared and timely and properly filed on behalf of Sellers
and Company all returns and filings with respect to federal
and state income or franchise Taxes accruing on or before the
Closing Date consistent with this Agreement. Sellers shall
jointly and severally indemnify and hold harmless Purchaser
and Company for any Taxes, penalties, interest, or other costs
if such returns or filings are not timely or accurately filed
or such Taxes are not timely paid in full. Such Taxes,
returns, and filings shall be determined by closing Company's
books and records as of and including the Closing Date, or if
the allocation of an item of income, loss, deduction, or
credit cannot be definitely allocated to an ascertainable
date, such item shall be pro rated on a daily basis. Sellers,
Company, and Purchaser shall reasonably cooperate, and shall
cause their respective affiliates, officers, employees,
agents, auditors, and representatives to cooperate, in
preparing and filing all returns, reports, and forms relating
to Taxes, including maintaining and making available to each
other all records necessary in connection with Taxes and in
resolving all disputes and audits with respect to all taxable
periods relating to Taxes.
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5.18 Title Insurance.
Prior to the Closing Date, Purchaser may obtain, at its cost and
expense, title insurance commitments agreeing to issue to Purchaser standard
form lessee's policies of title insurance with respect to all Leased Real
Property, together with a copy of each document to which reference is made in
such commitments. For all Leased Real Property, such policies shall be the
currently effective standard ALTA Form leasehold owner's policies and in such
amounts as such shall be reasonably acceptable to Purchaser. All policies shall
insure title in full accordance with the representations and warranties set
forth herein and shall be subject only to such conditions and exceptions as
shall be reasonably acceptable to Purchaser, and shall contain such endorsements
as Purchaser shall reasonably request (including, but not limited to and to the
extent available, an endorsement over rights of creditors, a "gap" endorsement,
an access endorsement, a zoning 3.1 endorsement, a comprehensive endorsement, a
tax parcel endorsement and a non-imputation endorsement, if requested by
Purchaser or Purchaser's lender). If any such title insurance commitment
reflects any defect in title which could adversely impact the use or operation
of the Leased Real Property or Company's facilities or stores located thereon,
then Purchaser shall so advise Primary Shareholders. Purchaser and Primary
Shareholders shall then cooperate in good faith to mutually resolve each such
defect to the mutual satisfaction of both parties. If the parties cannot reach a
mutual resolution of all such defects prior to the Closing Date and the
aggregate amount required to cure all such defects is less than $50,000 and
Purchaser still insists on curing such defects, then Primary Shareholders and
Purchaser shall each bear one-half of the cost to cure all of such defects. If
the parties cannot reach a mutual resolution of all such defects prior to the
Closing Date and the aggregate amount required to cure all such defects is
$50,000 or more, then Purchaser shall have the option of either: (i) terminating
this Agreement without obligation or liability to Sellers or Company pursuant to
Section 10.1.5 or (ii) closing the transactions contemplated herein and
submitting the dispute to arbitration for final and binding resolution pursuant
to Article XI and the non-prevailing party shall pay all costs and expenses of
such arbitration and, if required by such arbitration proceeding, all costs and
expenses of curing all such defects.
5.19 Roof/HVAC/Systems Inspections.
Prior to the Closing Date, Purchaser shall have the right, at its cost
and expense, to conduct physical inspections of the roofs, foundations, exterior
walls, windows and HVAC, electrical, plumbing and other systems of Company's
stores, facilities, buildings, structures and properties. If such inspections
shall indicate that a structural defect exists or other repair or replacement
should be undertaken, then Purchaser shall so advise Primary Shareholders.
Purchaser and Primary Shareholders shall then cooperate in good faith to
mutually resolve how to cure such structural defect or complete such repairs or
replacements to the mutual satisfaction of both parties. If the parties cannot
reach a mutual resolution of how to cure such structural defect or complete such
repairs or replacements prior to the Closing Date and the aggregate amount
required to cure all such defects, repairs and replacements is less than $50,000
and Purchaser still insists on curing such defects, repairs and replacements
then Primary Shareholders and Purchaser shall each bear one-half of the cost to
cure all of such defects, repairs and replacements; provided, however, that
nothing herein shall effect the
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Company's obligation prior to Closing to complete and pay for or accrue all
ordinary course capital expenditures under Section 5.20. If the parties cannot
reach a mutual resolution of such defects, repairs and replacements prior to the
Closing Date and the aggregate amount required to cure all such defects and
repairs is $50,000 or more, then Purchaser shall have the option of either: (i)
terminating this Agreement without obligation or liability to Sellers or Company
pursuant to Section 10.1.5 or (ii) closing the transactions contemplated herein
and submitting the dispute to arbitration for final and binding resolution
pursuant to Article XI and the non-prevailing party shall pay all costs and
expenses of such arbitration and, if required by such arbitration proceeding,
all costs and expenses of curing all such defects, repairs and replacements.
5.20 Ordinary Course Capital Expenditures.
Prior to the Closing and after the date hereof, Company shall complete
and pay for or accrue $100,000 of additional capital expenditures and
improvements otherwise scheduled to be completed prior to the scheduled Closing
Date in the ordinary course of business as set forth and described on Schedule
3.13. To the extent such dollar amount is not expended by Company prior to the
Closing Date, such unexpended amount shall be accrued as a current liability of
the Company for purposes of the Estimated Closing Balance Sheet and the Final
Closing Balance Sheet.
5.21 Repayment of Debt.
At the Closing, Purchaser may elect to fully pay-off and satisfy some
or all of Company's Funded Debt set forth on Schedule 3.35 and, to the extent so
paid off, Purchaser and Company shall receive pay-off letters and UCC
termination statements from each creditor receiving payment releasing all of
such creditor's Liens with respect to the Company's assets or properties.
5.22 Dick's Supermarket Foundation.
Promptly after the Closing Date, Primary Shareholders shall take all
actions necessary to change the name of Dick's Supermarket Foundation to a name
not confusingly similar to "Dick's Supermarket," Company shall not have any
further commitment or liability to such Foundation, and Sellers shall jointly
and severally indemnify Purchaser (and the Company after the Closing) against
any and all claims and/or Losses relating to Dick's Supermarket Foundation
against Company or Purchaser, without limit or restriction under Article IX.
5.23 Accrued Bonus Payments.
Purchaser covenants and agrees to cause Company to pay to the Company
employees designated by Robert Brodbeck bonus payments on the 75-day anniversary
of the Closing Date in such amounts as specified by Mr. Brodbeck, but which in
the aggregate shall not exceed the Bonus Accrual pursuant to Section 1.4.5;
provided, however, that any such employees receiving such bonus payments must
then still be employed by Company on the date of such bonus payments. All
employees eligible to receive such potential bonus payments are set forth
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on Schedule 5.23. Nothing herein shall provide a right of continued employment
by the Company to any such employees, who shall remain employees "at will."
5.24 Escrow for Certain Post-Closing Employee Payments.
The Purchaser and Sellers recognize that there will be certain
liabilities at Closing related to payments to existing employees of the Company
(pursuant to agreements or plans entered into prior to or on the Closing Date)
which will not be paid at a time which will enable the income tax deductions for
such payments to be reflected on the final S corporation return of the Company
ending on the Closing Date. These payments include the Stay Bonuses to be paid
to three executives of the Company (which Stay Bonus amounts will be reflected
as current liabilities on the Estimated Closing Balance Sheet and the Final
Closing Balance Sheet) and certain severance payments to be paid under the
Company's April 17, 2001 Income Protection Plan to existing employees of the
Company who are terminated by the Company after 75 days after the Closing Date
(which severance payment amounts will not be reflected on the Estimated Closing
Balance Sheet and the Final Closing Balance Sheet) ("Severance Payments"), as
all such Severance Payment obligations are described on Schedule 5.24 (which
Schedule 5.24 includes or will include, estimated Severance Payment liabilities
for two unidentified "senior level" employees (20 years or more service), two
unidentified "middle level" employees (15-19 years of service) and two
unidentified "lower level" employees (1-14 years of service)). Prior to or at
Closing, the Purchaser and the Primary Shareholders will estimate the amount of
the Severance Payments and will reduce the Purchase Price otherwise payable to
Sellers on the Closing Date by such amount and will deposit such amount into an
escrow account with an escrow agent acceptable to Purchaser. As Severance
Payments are paid by the Company, Purchaser or Company shall be entitled to
prompt reimbursement from the escrow account of the after-tax net cost to the
Company (after taking into account all applicable payroll, FICA, FUTA,
unemployment and similar payroll and other employee-related taxes) of such
Severance Payments. As Stay Bonuses are paid by the Company, the Sellers shall
be entitled to receive from the Company or Purchaser the amount of the after-tax
net benefit of the Stay Bonuses to the Company (after taking into account all
applicable payroll, FICA, FUTA, unemployment and similar payroll and other
employee-related taxes). Any shortfall in the escrow account shall be the
responsibility of the Sellers and any interest on the escrowed amount shall be
for the benefit of the Sellers. The costs and fees of the escrow agent shall be
divided evenly between Purchaser and Sellers. After one year from the Closing
Date, the escrow shall terminate and any remaining escrowed amounts shall be
delivered to Sellers. The payment of any Stay Bonuses or Severance Payments
shall not be considered compensation for purposes of any Company employee
benefit plan or agreement and Sellers shall indemnify and hold Company and
Purchaser harmless against any such attribution of such payments for employee
benefit plan or agreement purposes.
5.25 Bad Debt Reserve.
Prior to Closing, Primary Shareholders and Purchaser shall review
Company's outstanding accounts receivable (including the payment history and
credit worthiness thereof) and shall each cooperate with each other in good
faith to determine the amount of any bad debt
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reserve (if any) that should be included as part of the Estimated Closing
Balance Sheet and the Final Closing Balance Sheet.
5.26 Schultz Guaranty.
Simultaneous with the execution of this Agreement, Schultz is executing
and delivering the Schultz Guaranty.
ARTICLE VI.
CONDITIONS TO OBLIGATIONS OF PURCHASER
The obligations of Purchaser to consummate the transactions
contemplated hereby shall be subject to the fulfillment, on or before the
Closing Date, of the following conditions, any of which may be waived in whole
or in part by Purchaser in writing delivered to Sellers prior to or at the
Closing:
6.1 Representations and Warranties True as of the Closing Date.
The representations and warranties of Company and Sellers contained in
this Agreement and in any certificate, instrument or document delivered to
Purchaser in connection therewith and in the Disclosure Schedule and exhibits
hereto shall be deemed to have been made again on and as of the Closing Date and
shall be true and correct as of the Closing Date.
6.2 Performance by Company and Sellers.
Each of the covenants, agreements and obligations to be performed or
satisfied by Company and Sellers on or before the Closing Date pursuant to the
terms hereof shall have been duly performed or satisfied on or before the
Closing Date including, without limitation, delivery of the documents,
instruments and writings required to be delivered pursuant to Section 2.2.
6.3 Material Consents.
All notices to, permits, authorizations, approvals, consents and
waivers from any Governmental Entities and all Material Consents required in
order to consummate the transactions contemplated hereby shall have been made or
obtained in form and substance acceptable to Purchaser.
6.4 Absence of Litigation.
No Litigation seeking to enjoin or prevent the consummation of, or
seeking damages or other relief in connection with, the transactions
contemplated under this Agreement shall be pending or threatened. No preliminary
or permanent injunction or other Order shall have been issued by any federal or
state court of competent jurisdiction or any Government Entity which prevents
the consummation of the transactions contemplated hereby and no such injunction
or order shall remain in effect, and no action shall have been taken nor shall
any Law have been
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enacted by any Government Entity that makes consummation of the transactions
contemplated hereby illegal.
6.5 No Material Adverse Change.
Company shall have carried on its business in the normal course and
consistent with past practice and, since the date of the Audited Balance Sheet,
there shall not have been any material adverse change in the financial
condition, assets, properties, business, prospects, markets or operations of
Company or any event or circumstance which will likely result in any such
change.
6.6 Title.
Company shall have good, marketable and, if insurable, insurable title
to all of its assets and properties, free and clear of all Liens, except liens
(i) for current taxes and special assessments not yet due and payable, and (ii)
easements, restrictions and other interests of record and such matters as an
accurate survey would show.
6.7 Resignations.
Resignations of all directors of Company, except Robert J. Brodbeck,
and all officers for which Purchaser requests such resignations a reasonable
time prior to the Closing Date, shall have been received by Purchaser.
6.8 Landlord Estoppel Certificates.
All Estoppel Certificates required by Section 5.13 shall have been
obtained.
6.9 General Releases.
All General Releases shall have been received by Purchaser.
6.10 Buy and Sell Agreement.
Primary Shareholders and Company shall have taken all necessary action
to terminate the Buy and Sell Agreement and evidence thereof shall be provided
to Purchaser at Closing.
6.11 Prairie Du Chien Store Construction Project.
Prior to Closing, Purchaser shall inspect and review the plans, terms
and conditions of the proposed road widening construction project in front of
the Company's Prairie du Chien supermarket and shall be satisfied that such
project will not materially adversely affect the business or operations of such
supermarket. Any assessments or other related costs of construction relating to
such project shall be the sole responsibility of BRC and not the Company.
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6.12 Platteville Conditional Use Permit.
Prior to Closing, Primary Shareholders shall cause to be issued to the
Company a conditional use permit, in form and substance satisfactory to
Purchaser, allowing Company to continue to operate its manufacturing facility at
its Platteville, Wisconsin location without violation or breach of any and all
applicable zoning restrictions.
6.13 Repair/Replacement of Cakeroom Ventilation System.
Prior to Closing, Primary Shareholders shall cause BRC, at BRC's sole
cost and expense, to repair or replace the ventilation system at the Company's
Platteville bakery and delicatessen manufacturing facility in order to fully
cure and abate any and all prior claims with respect to the air quality of the
cakeroom thereof, and Primary Shareholders jointly and severally shall indemnify
Purchaser (and the Company after the Closing) with respect to any and all claims
and/or Losses with respect thereto or arising out of any and all prior
deficiencies in such ventilation system.
6.14 Reorganization Approval.
The shareholders of Schultz shall have approved Schultz's pending
corporate reorganization as described in Purchaser's Form S-4 Registration
Statement originally filed with the Securities and Exchange Commission on
February 26, 2001, including without limitation the formation of a new publicly
traded holding company pursuant to which Fresh Brands, Inc. shall become the
parent corporation to Schultz.
6.15 Title Insurance.
Purchaser shall have obtained good and valid and satisfactory title
insurance policies or, in final form, irrevocable title insurance binders, dated
as of the Closing Date, conforming to the specifications set forth in Section
5.18 hereof and all defects identified therein shall have been satisfied in
accordance with Section 5.18.
6.16 Inspection.
Purchaser shall have satisfactorily completed the inspections pursuant
to Section 5.19 and all actions required to be taken pursuant to Section 5.19
shall have been undertaken or completed.
6.17 Other Agreements.
All of the Ancillary Instruments not otherwise listed in this Article
VI shall have been executed and delivered as contemplated by this Agreement.
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ARTICLE VII.
CONDITIONS TO OBLIGATIONS OF COMPANY AND SELLERS
The obligations of Company and Sellers to consummate the transactions
contemplated hereby shall be subject to the fulfillment, on or before the
Closing Date, of the following conditions, any of which may be waived in whole
or in part by Company and Sellers in writing delivered to Purchaser prior to or
at the Closing:
7.1 Representations and Warranties True as of the Closing Date.
The representations and warranties of Purchaser contained in this
Agreement and in any certificate, instrument or document delivered to Sellers in
connection therewith shall be deemed to have been made again on and as of the
Closing Date and shall be true and correct as of the Closing Date.
7.2 Performance by Purchaser.
Each of the covenants, agreements and obligations to be performed or
satisfied by Purchaser on or before the Closing Date pursuant to the terms
hereof shall have been duly performed or satisfied on or before the Closing Date
including, without limitation, delivery of the documents, instruments and
writings required to be delivered pursuant to Section 2.3.
7.3 Absence of Litigation.
No Litigation seeking to enjoin or prevent the consummation of, or
seeking damages or other relief in connection with, the transactions
contemplated under this Agreement shall be pending or threatened. No preliminary
or permanent injunction or other Order shall have been issued by any federal or
state court of competent jurisdiction or any Government Entity which prevents
the consummation of the transactions contemplated hereby and no such injunction
or Order shall remain in effect, and no action shall have been taken nor shall
any Law have been enacted by any Government Entity that makes consummation of
the transactions contemplated hereby illegal.
7.4 Other Agreements.
Any of the agreements, documents or instruments to be delivered as
contemplated herein, not otherwise listed in this Article VII, shall have been
executed and delivered as contemplated by this Agreement.
ARTICLE VIII.
SURVIVAL OF REPRESENTATIONS AND WARRANTIES AFTER CLOSING.
8.1 Representations and Warranties of Company and Sellers.
8.1.1. All representations, warranties, covenants and
agreements of Company and Sellers shall survive the execution and
delivery of this Agreement and the Closing
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hereunder, except for the "Terminating Representations" set forth in
Schedule VIII hereto. The representations and warranties contained in
Sections 3.1 (Due Organization and Authority), 3.2 (Authorization), 3.3
(Subsidiaries and Other Affiliates), 3.5 (Outstanding Capital Stock and
William Brodbeck Obligations), 3.6 (Options and Other Rights), 3.8
(Sellers), 3.14 (Title) and 3.28 (Fees or Commissions) (collectively,
the "Perpetual Representations"), and the obligations, liabilities and
duties of Company and Sellers pursuant to the Company's and Sellers'
covenants and agreements herein, including Article IX to indemnify
Purchaser (and Company after Closing) with respect to Losses (as
defined below) related to such representations and warranties, shall
survive the execution and delivery of this Agreement and the Closing
hereunder indefinitely. Except as otherwise specifically provided above
or elsewhere in this Agreement, all other representations and
warranties (but not covenants and agreements) of Company and Sellers
contained in this Agreement or in any certificate, instrument, writing,
or documents delivered pursuant to this Agreement and in the Disclosure
Schedule delivered pursuant hereto, and the obligation of Sellers
pursuant to Article IX to indemnify Purchaser (and Company after the
Closing) with respect to Losses related to such representations and
warranties, shall terminate and expire (i) on the General Survival
Date, as defined and described in Schedule VIII, with respect to any
General Claim (as hereinafter defined) based upon, arising out of or
otherwise in respect of any fact, circumstance, action or proceeding of
which Purchaser shall not have given notice to Sellers on or prior to
the General Survival Date; (ii) on the date that is six months after
the date upon which the Loss to which any such Tax Claim (as
hereinafter defined) may relate is barred by all applicable statutes of
limitation with respect to which Purchaser shall not have given notice
to Sellers on or prior to such foregoing date; and (iii) on the date
that is six months after the date upon which any Litigation Claim (as
hereinafter defined) is barred by all applicable statutes of limitation
with respect to which Purchaser shall not have given notice to Sellers
on or prior to such foregoing date. Notwithstanding the prior
provisions hereof, no representation or warranty shall be deemed to
have expired or terminated to preclude any claim of breach or violation
thereof, or Loss related thereto, which is predicated on fraud or
intentional misrepresentation.
8.1.2. As used in this Agreement, the following terms have the
following meanings:
8.1.2.1. "General Claim" means any claim or Loss
(other than a Tax Claim, Environmental Claim, Litigation Claim
or claim or Loss related to any inaccuracy in or breach of a
Perpetual Representation) based upon, arising out of or
otherwise in respect of any inaccuracy in or any breach of any
representation or warranty of Company and/or Sellers contained
in this Agreement or in any certificate, instrument, writing
or document delivered pursuant to this Agreement and in the
Disclosure Schedule delivered pursuant hereto.
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8.1.2.2. "Tax Claim" means any claim or Loss based
upon, arising out of or otherwise in respect of any inaccuracy
in or any breach of any representation or warranty of Company
and/or Sellers contained in this Agreement or in any
certificate, instrument, writing or document delivered
pursuant to this Agreement and in the Disclosure Schedule
delivered pursuant hereto related to Taxes or Tax Returns
(including, without limitation, representations and warranties
contained in Section 3.22).
8.1.2.3. "Litigation Claim" means any claim or Loss
based upon, arising out of or otherwise in respect of any
inaccuracy in or any breach of any representation or warranty
of Company and/or Sellers contained in this Agreement or in
any certificate, instrument, writing or document delivered
pursuant to this Agreement and in the Disclosure Schedule
delivered pursuant hereto related to Litigation or Orders
(including, without limitation, representations and warranties
contained in Sections 3.15 or 3.23 ).
8.1.2.4. "Environmental Claim" means any claim or
Loss based upon, arising out of or otherwise in respect of (i)
any inaccuracy in or breach of any representation or warranty
of Company and/or Sellers contained in this Agreement or in
any certificate, instrument, writing or document delivered
pursuant to this Agreement and in the Disclosure Schedule
delivered pursuant hereto related to Environmental Laws
(including, without limitation, representation and warranties
contained in Section 3.27 and all matters set forth in
Schedule 3.27) or (ii) any Environmental Condition (including,
without limitation, all matters set forth on Schedule 3.27).
An "Environmental Condition" means the presence of any
Hazardous Material, any leaking (or potential leaking) or
non-conforming underground or aboveground storage or fuel tank
or any other actual or potential violation of any applicable
Environmental Laws at, in, on or under any of Company's
stores, facilities, buildings, structures or any other Leased
Real Properties that, under applicable Environmental Laws or
in the professional opinion of an environmental consultant,
must or should be remediated, corrected, cured, removed,
eliminated or investigated (including, without limitation, all
matters set forth in Schedule 3.27); provided, however, that
the term "Environmental Condition" does not include any
condition arising from any event that first occurs after the
Closing Date solely as a result of Company's use of the Leased
Real Properties, unless Company, BRC or any third party caused
the condition, or the event or such condition otherwise first
occurred prior to the Closing Date.
8.2 Representations and Warranties of Purchaser.
All representations, warranties, covenants and agreements of Purchaser
shall survive the execution and delivery of this Agreement and the Closing
hereunder including, without limitation, the provisions of Article IX hereof.
All representations and warranties of Purchaser (but not covenants and
agreements) contained in this Agreement or in any certificate,
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instrument, writing, document or schedules delivered by Purchaser pursuant to
this Agreement shall terminate and expire on the General Survival Date with
respect to any claims based upon, arising out of or otherwise in respect of any
fact, circumstance, action or proceeding of which Sellers shall not have given
notice to Purchaser on or prior to the General Survival Date.
ARTICLE IX.
GENERAL INDEMNIFICATION.
9.1 Joint and Several Obligation of Sellers to Indemnify.
9.1.1. From and after the date hereof, subject to the
applicable limitations contained in Article VIII, Sellers agree to
jointly and severally indemnify, defend and hold harmless Purchaser
(and each of its directors, officers, employees, shareholders,
Affiliates (including Company after the Closing), successors and
assigns) from and against all losses, liabilities, damages,
deficiencies, debts, obligations, demands, claims, actions, judgments,
settlements, awards, penalties or causes of action, assessments, costs
or expenses, including, without limitation, consequential, punitive or
incidental damages and losses, interest, penalties and reasonable
attorneys' fees and disbursements, including, without limitation, those
incurred in connection with the defense or prosecution of the
indemnifiable claim and those incurred in connection with the
enforcement of this provision ("Losses"), based upon, arising out of or
in connection with:
9.1.1.1. any inaccuracy in or any breach of any
representation, warranty, covenant or agreement of Company
and/or Sellers contained in this Agreement or in any
certificate, instrument, writing, or document delivered
pursuant to this Agreement, and in the Disclosure Schedule
hereto, with the exception of the representations and
warranties contained in Section 3.22 (with respect to which
indemnification provisions are separately set forth in Section
9.4);
9.1.1.2. other than as specifically provided herein,
all professional and other fees, expenses and commissions of
or incurred by Company or Sellers in connection with or
related to the transactions contemplated herein and/or the
sale of the Shares (including particularly, but without
limitation, attorneys' fees and expenses, accountants' fees
and expenses and financial advisor fees and expenses)
(collectively, "Professional Fees");
9.1.1.3. any Litigation, claims, liabilities and
Losses arising from the operation of the business of Company
prior to Closing that are not fully reflected on the Final
Closing Balance Sheet, including claims by employees of
Company arising out of their pre-Closing employment by
Company;
9.1.1.4. to the extent not otherwise covered by
Company's existing insurance policies, any Litigation by,
claims of, or liabilities or Losses (including the payment of
deductible or copay amounts) relating to, Rick
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Trausch and/or Kelly Boyle and/or any other Litigation
identified on Schedule 3.23 or violation of Law or Order set
forth on Schedule 3.15 ("Specifically Identified Losses");
9.1.1.5. to the extent not otherwise covered by
Company's existing insurance policies, any Litigation, claims,
liabilities or Losses (including the payment of deductible or
copay amounts) relating to product liability or recall for
products manufactured or sold by Company prior to the Closing
Date ("Product Claims");
9.1.1.6. any Litigation, claims, liabilities and
Losses arising from the operation of the business prior to
Closing under applicable state escheat or similar Laws
("Escheat Claims"); and
9.1.1.7. any Litigation, claims, liabilities or
Losses related to Environmental Claims.
9.2 Obligation of Purchaser to Indemnify.
From and after the date hereof, subject to the applicable limitations
contained in Article VIII, Purchaser agrees to indemnify, defend and hold
harmless Sellers from and against all Losses based upon, arising out of or in
connection with otherwise in respect of any inaccuracy in or any breach of any
representation, warranty, covenant or agreement of Purchaser contained in this
Agreement or in any certificate, instrument, writing, document or schedule
delivered pursuant to this Agreement.
9.3 Third Party Claims; Notice and Opportunity to Defend.
9.3.1. Notice of Third-Party Asserted Liability. Promptly
after receipt by any party hereto (the "Indemnitee") of notice from any
third party (other than a party hereto) of any demand, claim or
circumstances which, presently or with the lapse of time, would or
might give rise to a claim or the commencement (or threatened
commencement) of any action, proceeding or investigation (a
"Third-Party Asserted Liability") that may result in a Loss, the
Indemnitee shall give notice thereof (the "Claims Notice") to any other
party (or parties) obligated to provide indemnification pursuant to
Sections 9.1 or 9.2 (the "Indemnifying Party"); provided, however, that
the failure to so notify the Indemnifying Party shall not reduce or
affect the Indemnifying Party's obligations with respect thereto except
to the extent that the Indemnifying Party is materially prejudiced
thereby. The Claims Notice shall describe the Third-Party Asserted
Liability in reasonable detail, including the alleged basis for
assertions, and shall indicate the amount (estimated, if necessary and
to the extent feasible) of the Loss that has been or may be suffered by
the Indemnitee.
9.3.2. Opportunity to Defend. The Indemnifying Party may elect
to compromise or defend, in good faith at its or their own expense and
by its or their own counsel, any Third-Party Asserted Liability. If the
Indemnifying Party elects to
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compromise or defend such Third-Party Asserted Liability, it shall
within 10 days (or sooner, if the nature of the Third-Party Asserted
Liability so requires) notify the Indemnitee of its intent to do so,
and the Indemnitee shall cooperate, at the expense of the Indemnifying
Party, in the compromise of, or defense against, such Third-Party
Asserted Liability. Such an election shall constitute the Indemnifying
Party's complete assumption (vis-a-vis the Indemnitee) of
responsibility for such Third-Party Asserted Liability and any Losses
with respect thereto (including, without limitation, the responsibility
to undertake in good faith the immediate defense of such Third-Party
Asserted Claim at its own expense). If the Indemnifying Party elects
not to compromise or defend the Third-Party Asserted Liability, fails
to notify the Indemnitee of its election as herein provided or contests
its obligation to indemnify under this Agreement, then the Indemnitee
shall have the exclusive right to pay, compromise or defend such
Third-Party Asserted Liability. Notwithstanding the foregoing, neither
the Indemnifying Party nor the Indemnitee may settle or compromise any
claim without the consent of the other; provided, however, that consent
to settlement or compromise shall not be unreasonably withheld or
delayed. In any event, the Indemnitee and the Indemnifying Party may
participate, at their own expense, in the defense of such Third-Party
Asserted Liability. If the Indemnifying Party chooses to defend any
claim, the Indemnitee and Company shall make available to the
Indemnifying Party any books, records or other documents within their
control that are necessary or appropriate for such defense.
9.3.3. Indemnitee's Rights. Anything in this Section 9.3 to
the contrary notwithstanding, (i) if there is a reasonable probability
that a Third-Party Asserted Liability may materially and adversely
affect the Indemnitee other than as a result of money damages or other
money payments, the Indemnitee shall have the exclusive right to
defend, compromise or settle such Third-Party Asserted Liability
(without the obligation to obtain the consent of the Indemnifying Party
to any compromise or settlement), and (ii) the Indemnifying Party shall
not, without the written consent of the Indemnitee, settle or
compromise any Third-Party Asserted Liability or consent to the entry
of any judgment which does not include as an unconditional term thereof
the giving by the claimant or the plaintiff to the Indemnitee of a
release from all liability in respect of such Third-Party Asserted
Liability.
9.4 Tax Indemnities.
9.4.1. From and after the Closing Date (without limitation as
to time), Sellers agree to jointly and severally indemnify, defend and
hold harmless Purchaser (and its directors, officers, employees,
Affiliates, successors and assigns) from:
9.4.1.1. all liability for Taxes of Company for
Pre-Closing Tax Periods unless otherwise expressly accrued on
the face of the Final Closing Balance Sheet;
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9.4.1.2. all out-of-pocket fees and expenses
(including, but not limited to, legal or accounting fees)
incurred with respect to any item indemnified pursuant to
Section 9.4.1.1 above; and
9.4.1.3. all Tax Claims and any inaccuracy in or any
breach of any representation, warranty, covenant or agreement
of Company and/or Sellers contained in this Agreement or in
any certificate, instrument, writing, or document delivered
pursuant to this Agreement, and in the Disclosure Schedule
hereto pursuant to Sections 3.22, 5.16 and 5.17.
9.4.2. Straddle Periods. In the case of any taxable period
that commences prior to and includes (but does not end on) the Closing
Date (a "Straddle Period"), the Taxes of Company for the portion of the
Straddle Period that constitutes a Pre-Closing Tax Period shall be
computed (i) as if such taxable period ended as of 11:59 p.m. on the
Closing Date and (ii) (a) in the case of real and personal property
Taxes (and any other Taxes not measured or measurable, in whole or in
part, by net or gross income or receipts) on a per diem basis in
accordance with Company's accounting for taxes in its financial
statements, consistently applied, and, (b) in the case of other Taxes,
as determined from the books and records of Company consistent with the
past accounting practices of Company. Sellers' obligation to indemnify
Purchaser pursuant to the above with respect to Taxes for a Straddle
Period shall be limited to an amount equal to the excess of (i) Taxes
for the portion of the Straddle Period that constitutes a Pre-Closing
Tax Period (as calculated pursuant to the preceding sentence) over (ii)
the amount of Taxes for the Straddle Period paid by Company on or prior
to the Closing Date or accrued or reserved for on the face of the Final
Closing Balance Sheet.
9.5 Indemnification of Non-Third Party Claims.
9.5.1. Notice of Non-Third Party Claims. The Indemnitee shall
provide written notice of any claim between the parties hereto (other
than a Third Party Asserted Liability) for which indemnification is
believed to be due hereunder to the Indemnifying Party, stating the
facts and circumstances giving rise to the claim (to the extent then
known), specifying the amount of the claim (to the extent then known)
and making a request for any indemnification payment then believed due
under this Article IX. Any such claim shall be conclusive against the
Indemnifying Party in all respects twenty (20) days after receipt by
the Indemnifying Party of such notice, unless within such period the
Indemnifying Party sends the Indemnitee a notice disputing the
propriety of such claim under this Article IX. Such notice of dispute
shall describe in reasonable detail the reasons and basis for such
objection and the amount of the claim that the Indemnifying Party does
not believe should be subject to indemnification under this Article IX.
Upon receipt of any such notice of objection, both the Indemnitee and
the Indemnifying Party shall use all reasonable efforts to cooperate
and arrive at a mutually acceptable resolution of such dispute within
the next thirty (30) days. If a mutually acceptable resolution cannot
be reached between the Indemnitee and the Indemnifying Party within
such thirty (30)-day period, then either party may submit the
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dispute for resolution by a panel of three arbitrators selected from
the panels of arbitrators of the American Arbitration Association in a
city mutually selected by the Indemnitee and the Indemnifying Party
(or, if no city can be mutually agreed upon within fifteen (15) days,
then in Chicago, Illinois); provided, however, that (i) one arbitrator
shall be selected by the Indemnitee, the second arbitrator shall be
selected by the Indemnifying Party, and the third arbitrator shall be
selected by the two previously selected arbitrators and (ii) in all
respects, such panel shall be governed by the American Arbitration
Association's then existing Commercial Arbitration Rules. The
arbitrators shall allow such discovery as the arbitrators determine
appropriate under the circumstances and shall resolve the dispute as
expeditiously as practicable, and if reasonably practicable, within one
hundred twenty (120) days after the selection of the arbitrators. The
arbitrators shall give the Indemnitee and the Indemnifying Party
written notice of the decision, with the reasons therefor set out, and
the arbitrators shall have thirty (30) days thereafter to reconsider
and modify such decision if either the Indemnifying Party or the
Indemnitee so requests within ten (10) days after the decision.
Thereafter, the decision of the arbitrators shall be final, binding,
and nonappealable with respect to the Indemnitee and the Indemnifying
Party and all other persons, including (without limitation) persons who
have failed or refused to participate in the arbitration process. The
arbitrators shall determine whether and to what effect to require the
Indemnitee or the Indemnifying Party to pay or reimburse all or any
part of the other party's attorneys' fees and disbursements and other
costs and expenses incurred in connection with such arbitration.
9.6 Payment.
The Indemnifying Party shall promptly pay the Indemnitee any amount due
under this Article IX, which payment may be accomplished in whole or in part, at
the option of the Indemnitee, by the Indemnitee setting off any amount owed to
the Indemnifying Party by the Indemnitee or an Affiliate and/or by delivery to
Indemnitee of cash. To the extent set-off is made by an Indemnitee in
satisfaction or partial satisfaction of an indemnity obligation under this
Article IX that is disputed by the Indemnifying Party, upon a subsequent
determination by final judgment not subject to appeal that all or a portion of
such indemnity obligation was not owed to the Indemnitee, the Indemnitee shall
pay the Indemnifying Party the amount which was set off and not owed, together
with interest from the date of set-off until the date of such payment at an
annual rate equal to the average annual rate in effect as of the date of the
set-off, on those three maturities of United States Treasury obligations having
a remaining life, as of such date, closest to the period from the date of the
set-off to the date of such judgment. Upon judgment, determination, settlement
or compromise of any Third Party Asserted Liability, the Indemnifying Party
shall pay promptly on behalf of the Indemnitee, and/or to the Indemnitee in
reimbursement of any amount theretofore required to be paid by it, the amount so
determined by judgment, determination, settlement or compromise and all other
claims of the Indemnitee with respect thereto, unless in the case of a judgment
an appeal is made from the judgment. If the Indemnifying Party desires to appeal
from an adverse judgment, then the Indemnifying Party shall post and pay the
cost of the security or bond to stay execution of the judgment pending appeal.
Upon the payment in full by the Indemnifying Party of such amounts, the
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Indemnifying Party shall succeed to the rights of such Indemnitee, to the extent
not waived in settlement, against the third party who made such claim.
9.7 Limitations on Indemnification.
9.7.1. Insurance Offset. The computation of the amount of
indemnification claims under this Article IX shall be adjusted to give
credit to the Indemnifying Party for any amounts actually and
irrevocably recovered by the Indemnitee with respect to the matter for
which the Indemnitee is being indemnified under insurance policies for
the benefit of the Indemnitee that reduce a claim that would otherwise
be sustained, (i) net of any increase that will occur, or that is
reasonably likely to occur, in insurance premiums payable by the
Indemnitee, whether by retrospective or retroactive premium adjustments
or any other premium increase under the policy or policies under which
the claim is made, or any other policy where the increase results
directly from filing the claim; (ii) net of reasonable attorneys' fees
and expenses and other out-of-pocket costs of the Indemnitee incurred
in connection with the Indemnitee's collection of such coverage which
are not otherwise actually recovered by the Indemnitee; (iii) net of
the cost to the Indemnitee of any deductible, retention or co-payment
amount with respect to such coverage; (iv) net of the cost to the
Indemnitee of any amounts in excess of applicable policy coverages; (v)
net of the cost of any loss of insurance coverage for subsequent claims
under such policies resulting directly from such claims; and (vi) less,
dollar for dollar, the amount by which the claim when filed or at any
time during the applicable policy period, either singly or in the
aggregate with all other claims made under the applicable policy or
policies, exceeds a policy coverage limit; provided, however, that this
Section 9.7.1 shall apply only if this provision does not constitute an
improper waiver of the insurer's rights of subrogation against the
Indemnifying Party. Notwithstanding the foregoing, Purchaser shall not
have any obligation or liability to pay for the maintenance of coverage
for Purchaser or Company under any of Purchaser's or Company's policies
of insurance after the Closing, or to obtain approval for any waiver of
rights of subrogation.
9.7.2. Monetary Limitations. The following monetary
limitations shall apply to Sellers' indemnification obligations
pursuant to this Article IX:
9.7.2.1. Cap Amount. The maximum aggregate amount of
Sellers' obligation to provide indemnification pursuant to
this Article IX for breaches of representations and warranties
(but which limitation shall not apply to breaches of covenants
and agreements) shall equal the Cap Amount, as defined and set
forth in Schedule VIII; provided, however, that the Cap Amount
shall not apply in respect of, or otherwise count against or
be reduced by (and Sellers shall be fully and solely liable
without limitation for), all Excluded Claims, as defined and
set forth in Section 9.7.2.4 or shall otherwise be affected by
the Deductible Amount or De Minimis Amounts.
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9.7.2.2. Deductible Amount. Sellers shall not be
obligated to indemnify pursuant to this Article IX for
breaches of representations and warranties (but which
limitation shall not apply to breaches of covenants and
agreements) until and unless the aggregate of all
indemnification claims pursuant to this Article IX against
Sellers for breaches of representations and warranties exceeds
the Deductible Amount, as defined and set forth in Schedule
VIII, after which Sellers shall be obligated to indemnify for
all such claims and Losses, excluding the Deductible Amount
and subject to the Cap Amount; provided, however, that the
Deductible Amount shall not apply in respect of, or otherwise
count against or be reduced by (and Sellers shall be fully and
solely liable without limitation for), all Excluded Claims.
The Deductible Amount shall not be reduced or otherwise
affected by claims or Losses that are less than the De Minimis
Amount, as provided pursuant to Section 9.7.2.3.
9.7.2.3. De Minimis Amount. Sellers shall not be
obligated to indemnify pursuant to this Article IX for
breaches of representations and warranties (but which
limitation shall not apply to breaches of covenants and
agreements) with respect to any particular single or
individual claim or Loss to the extent that such particular
single or individual claim or Loss resulting from such breach
is less than the De Minimis Amount, as defined and set forth
in Schedule VIII; provided that (i) if the amount of such
particular single or individual claim or Loss equals or
exceeds the De Minimis Amount, then Sellers shall be liable
for all claims or Losses related thereto (subject to the other
provisions of this Article IX) and (ii) in each case, any
claim or Loss or series of claims or Losses arising out of or
relating to the same, substantially similar or substantially
related facts, circumstances, occurrences, transactions or
conditions shall be aggregated and constitute one single or
individual claim or Loss hereunder; provided, however, that
the De Minimis Amount shall not apply in respect of, or
otherwise count against or be reduced by (and Sellers shall be
fully and solely liable without limitation for), all Excluded
Claims.
9.7.2.4. Excluded Claims. Notwithstanding the
foregoing, the Cap Amount, the Deductible Amount and the De
Minimis Amount shall not apply to, or otherwise count against
or be reduced by, and Sellers shall be fully and solely
jointly and severally liable to the full extent of any and all
claims or Losses based on (i) fraud or intentional
misrepresentation; (ii) breaches or inaccuracies of the
Perpetual Representations; (iii) Tax Claims or other claims or
Losses pursuant to Section 9.4; (iv) claims or Losses for
Professional Fees pursuant to Section 9.1.1.2; (v) claims,
liabilities or Losses related to covenants and agreements
herein or in the Ancillary Instruments; (vi) Purchase Price
adjustments under Section 1.4; (vii) Litigation claims,
liabilities or Losses related to Product Claims; (viii)
Litigation, claims, liabilities or Losses related to
Specifically Identified Losses; (ix) Litigation, claims,
liabilities or Losses related to Escheat Claims; and (x)
Litigation, claims, liabilities or Losses related to
Environmental Claims.
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9.7.3. Purchaser's Limitations. No claims or Losses may be
asserted against Purchaser, other than for payment of the Purchase
Price in accordance with this Agreement, until and unless the aggregate
of all claims and Losses against Purchaser exceeds the Deductible
Amount, after which all such claims, excluding the Deductible Amount,
may be asserted; provided, however, that Purchaser shall not be
obligated to indemnify pursuant to this Article IX with respect to any
individual claim or Loss that is less than the De Minimis Amount and
any individual claims or Losses that are less than the De Minimis
Amount shall not reduce the Deductible Amount as it applies to
Purchaser hereunder. In no event shall Purchaser's obligations to
indemnify hereunder exceed the Cap Amount.
9.8 No Waiver.
The Closing of the transactions contemplated by this Agreement shall
not constitute a waiver by any part hereto of its rights to indemnification
hereunder or of any other rights, regardless of whether such party has knowledge
of the breach, violation or failure of condition constituting the basis of the
claim at or before the Closing, and regardless of whether such breach, violation
or failure is deemed to be "material."
9.9 Non-Exclusive.
The rights of either party under this Article IX are not exclusive of
any other rights any such party may have at law or equity to enforce, or seek
recompense for the violation or breach of, any covenants, agreements and other
obligations hereunder or under the Ancillary Instruments.
ARTICLE X.
TERMINATION OF AGREEMENT.
10.1 Termination.
This Agreement may be terminated prior to the Closing by delivery of
notice in writing to that effect as follows:
10.1.1. by Company or Sellers if Purchaser has breached any
material representation or warranty, or failed to perform any material
covenant or agreement contained in this Agreement, which breach or
failure to perform cannot be, or is not, cured by the Closing Date;
10.1.2. by Purchaser, if Company or Sellers have breached any
material representation or warranty, or failed to perform in any
material covenant or agreement contained in this Agreement, which
breach or failure to perform cannot be, or is not, cured by the Closing
Date;
10.1.3. at any time on or prior to the Closing Date, by mutual
written consent of the parties hereto;
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10.1.4. at any time, by either Company and Sellers, on the one
hand, or Purchaser, on the other hand, if any court of competent
jurisdiction or any other Government Entity shall have issued an Order
or taken any other action restraining, or enjoining or otherwise
prohibiting the transactions contemplated hereby;
10.1.5. by Purchaser pursuant to Sections 5.18, 5.19 or 5.20;
10.1.6. by either party if the Closing shall not have occurred
on or before July 16, 2001 unless the deadline for Closing is extended
pursuant to Section 2.1.
If this Agreement so terminates, it shall become null and void and have no
further force or effect, except as provided in Section 10.2.
10.2 Survival After Termination.
If this Agreement is terminated in accordance with Sections 10.1.3,
10.1.4, 10.1.5 or 10.1.6, and the transactions contemplated hereby are not
consummated, this Agreement shall become void and of no further force and
effect, without any liability or obligation of any party to any other party.
Termination of this Agreement pursuant to Section 10.1.1. or 10.1.2. shall not
in any way terminate, limit or restrict the rights and remedies of any party
hereto against the other party which has violated, breached or failed to satisfy
any of the representations, warranties, covenants, agreements, conditions or
other provisions of this Agreement prior to termination hereof. In addition to
the right of any party under common law to redress for any such breach or
violation, each party whose breach or violation has occurred prior to
termination shall indemnify the other party (without limitation under Article
IX) for whose benefit such representation, warranty, covenant, agreement or
other provision was made ("indemnified party") from and against all Losses and
liabilities asserted against, resulting to, imposed upon, or incurred by the
indemnified party, directly or indirectly, by reason of, arising out of or
resulting from such breach or violation. Subject to the foregoing, the parties'
obligations under this Section 10.2 shall survive termination; provided that the
aggrieved party asserts or reserves its rights or remedies hereunder to the
other party no later than six months after the termination date of this
Agreement.
ARTICLE XI.
RESOLUTION OF DISPUTES
11.1 Arbitration.
Any dispute, controversy or claim arising out of or relating to this
Agreement or any contract or agreement entered into pursuant hereto or the
performance by the parties of its or their terms shall be settled by binding
arbitration held in Chicago, Illinois in accordance with the Commercial
Arbitration Rules of the American Arbitration Association then in effect, except
as specifically otherwise provided elsewhere in this Agreement. Notwithstanding
the foregoing, Purchaser may, in its discretion, apply to a court of competent
jurisdiction for equitable relief from any violation or threatened violation of
the covenants or agreements of
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any Seller under this Agreement or Ancillary Instruments, or any covenants not
to compete contained in any Employment Agreement delivered pursuant to Section
2.2.8 hereof.
11.2 Arbitrators.
If the matter in controversy (exclusive of attorney fees and expenses)
shall appear, as at the time of the demand for arbitration, to exceed $100,000,
then the panel to be appointed shall consist of three neutral arbitrators (one
chosen by each party and the third chosen by the two chosen arbitrators);
otherwise, one mutually-chosen neutral arbitrator.
11.3 Procedures, No Appeal.
The arbitrator(s) shall allow such discovery as the arbitrator(s)
determine appropriate under the circumstances and shall resolve the dispute as
expeditiously as practicable, and if reasonably practicable, within 120 days
after the selection of the arbitrator(s). The arbitrator(s) shall give the
parties written notice of the decision, with the reasons therefor set out, and
shall have 30 days thereafter to reconsider and modify such decision if any
party so requests within 10 days after the decision. Thereafter, the decision of
the arbitrator(s) shall be final, binding, and nonappealable with respect to all
person, including (without limitation) persons who have failed or refused to
participate in the arbitration process.
11.4 Authority.
The arbitrator(s) shall have authority to award relief under legal or
equitable principles, including interim or preliminary relief, and to allocate
responsibility for the costs of the arbitration and to award recovery of
attorneys fees and expenses in such manner as is determined to be appropriate by
the arbitrator(s).
11.5 Entry of Judgment.
Judgment upon the award rendered by the arbitrator(s) may be entered in
any court having in personam and subject matter jurisdiction. Purchaser and
Sellers hereby submit to the in personam jurisdiction of the federal and state
courts in Wisconsin, for the purpose of confirming any such award and entering
judgment thereon.
11.6 Confidentiality.
All proceedings under this Article XI, and all evidence given or
discovered pursuant hereto, shall be maintained in confidence by all parties.
11.7 Continued Performance.
The fact that the dispute resolution procedures specified in this
Article XI shall have been or may be invoked shall not excuse any party from
performing its obligations under this Agreement and during the pendency of any
such procedure all parties shall continue to perform their respective
obligations in good faith.
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11.8 Tolling.
All applicable statutes of limitation shall be tolled while the
procedures specified in this Article XI are pending. The parties will take such
action, if any, required to effectuate such tolling.
ARTICLE XII.
MISCELLANEOUS.
12.1 Certain Definitions.
Except as otherwise defined in this Agreement, the following terms have
the following meanings:
"Affiliate" means, with respect to any Person, any other Person
controlling, controlled by or under common control with, or the parents, spouse,
lineal descendants or beneficiaries of, such Person.
"Person" means any individual, corporation, partnership, limited
liability company, firm, joint venture, association, joint stock company, trust,
unincorporated organization, governmental body or other entity.
12.2 Disclosure Schedule.
The Disclosure Schedule has been compiled in a bound volume, executed
by Company and Sellers and dated and delivered to Purchaser reasonably prior to
the date of this Agreement. Information set forth in the Disclosure Schedule
specifically refers to the article and section of this Agreement to which such
information is responsive and such information shall not be deemed to have been
disclosed with respect to any other article or section of this Agreement or for
any other purpose. The Disclosure Schedule shall not vary, change or alter the
language of the representations and warranties contained in this Agreement and,
to the extent the language in the Disclosure Schedule does not conform in every
respect to the language of such representations and warranties, such language in
the Disclosure Schedule shall be disregarded and be of no force or effect.
12.3 Expenses.
Sellers personally shall pay their, and the Company's, costs and
expenses associated with or incidental to the negotiation, preparation and
performance of this Agreement and the transactions contemplated hereunder,
including without limitation the fees of AA (as Company's financial advisor in
connection herewith), their counsel, accountants and investment advisors and
such of other costs and expenses specifically identified herein.
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12.4 Notices.
Any notice or other communication required or permitted hereunder shall
be in writing and shall be delivered personally, sent by required overnight
delivery carrier for next business day delivery or sent by certified, registered
or express mail, postage prepaid. Any such notice shall be deemed given when so
delivered personally, on the next business day when sent by required overnight
delivery carrier, or if mailed, five days after the date of deposit in the
United States mail, as follows:
(i) If to Purchaser or to Company after the Closing Date,
to:
Schultz Acquisition Corp.
2215 Union Avenue
Sheboygan, WI 53081
Attention: Elwood F. Winn
Facsimile: (920) 208-5100
(with a copy to)
Foley & Lardner
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Attention: Steven R. Barth
Telephone: (414) 271-2400
Facsimile: (414) 297-4900
or to such other person or address as Purchaser shall designate in accordance
with this Agreement.
(ii) If to Sellers, to:
Robert J. Brodbeck and Barry J. Brodbeck
1035 East Highway 151
Platteville, WI 53818-0656
Facsimile: (608) 348-3345
(with a copy to)
Krieg DeVault Alexander & Capehart, LLP
One Indiana Square, Suite 2800
Indianapolis, IN 46204-2079
Attention: Paul F. Lindemann
Facsimile: (317) 636-1507
or to such other person or address as Sellers shall designate in accordance with
this Agreement.
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(iii) If to Company before the Closing Date, to:
Brodbeck Enterprises, Inc.
c/o Arthur Andersen LLP
33 West Monroe
Chicago, Illinois 60603
Attention: Tim Carroll, Managing Director
Facsimile: 312-931-4023
(with a copy to)
Krieg DeVault Alexander & Capehart, LLP
Attention: Paul F. Lindemann
One Indiana Square, Suite 2800
Indianapolis, IN 46204-2079
Facsimile: (317) 636-1507
Any party may by notice given in accordance with this Section to the other
parties designate another address or person for receipt of notices hereunder.
12.5 Entire Agreement.
This Agreement (including the exhibits and Disclosure Schedule) and the
Ancillary Instruments executed in connection with the consummation of
transactions contemplated hereby contain the entire agreement among the parties
with respect to the purchase of the Shares and supersede all prior agreements,
written or oral, with respect thereto. This Agreement expressly supersedes the
letter agreements between the parties dated February 22, 2001 (as amended on or
about March 23, 2001) and December 21, 2000.
12.6 Waivers and Amendments; Non-Contractual Remedies; Preservation
of Remedies.
This Agreement may be amended, superseded, canceled, renewed or
extended, and the terms hereof may be waived, only by a written instrument
signed by the parties hereto or, in the case of a waiver, by the party waiving
compliance. No delay on the part of any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof, nor shall any waiver on
the part of any party of any such right, power or privilege, nor any single or
partial exercise of any such right, power or privilege, preclude any further
exercise thereof or the exercise of any other such right, power or privilege.
The rights and remedies herein provided are cumulative and are not exclusive of
any rights or remedies that any party may otherwise have at law or in equity.
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12.7 Governing Law.
This Agreement shall be governed and construed in accordance with the
laws of he State of Wisconsin applicable to agreements made and to be performed
entirely within such state and without application of Wisconsin's conflicts of
laws provisions.
12.8 Binding Effect; No Assignment.
This Agreement shall be binding upon and inure to the benefit of the
parties and their respective successors and legal representatives. This
Agreement is not assignable except by operation of law, except that Purchaser
may assign its rights hereunder to any of its Affiliates without the consent of
Sellers; provided, however, that any such assignment shall not relieve Purchaser
of its obligations hereunder.
12.9 Variations in Pronouns.
All pronouns and any variations thereof refer to the masculine,
feminine or neuter, singular or plural, as the context may require.
12.10 Counterparts.
This Agreement may be executed by the parties hereto in separate
counterparts (which may include signature pages delivered by facsimile), each of
which when so executed and delivered (including by facsimile) shall be an
original, but all such counterparts shall together constitute one and the same
instrument. Each counterpart may consist of a number of copies hereof each
signed by less than all, but together signed by all of the parties hereto.
12.11 Exhibits and Disclosure Schedule.
The exhibits and Disclosure Schedule are a part of this Agreement as if
fully set forth herein. All references herein to sections, exhibits and
Disclosure Schedule shall be deemed references to such parts of this Agreement,
unless the context shall otherwise require.
12.12 Headings.
The headings in this Agreement are for reference only and shall not
affect the interpretation of this Agreement.
12.13 Severability of Provisions.
If any provision or any portion of any provision of this Agreement, or
the application of any such provision or any portion thereof to any person or
circumstance, shall be held invalid or unenforceable, the remaining portion of
such provision and the remaining provisions of this Agreement, and the
application of such provision or portion of such provision as is held invalid or
unenforceable to persons or circumstances other than those as to which it is
held invalid or unenforceable, shall not be affected thereby.
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12.14 Confidentiality.
Subject to Section 5.4, between the date of this Agreement and the
Closing Date, Purchaser and Sellers will maintain in confidence, and will cause
the directors, officers, employees, agents, and advisors of Purchaser and
Company to maintain in confidence, and not use to the detriment of another party
or Company, any written, oral, or other information obtained in confidence from
another party or Company in connection with this Agreement or the transactions
contemplated thereby, unless (a) such information is already known to such party
or to others not bound by a duty of confidentiality or such information becomes
publicly available through no fault of such party, (b) the use of such
information is necessary or appropriate in making any filing or obtaining any
consent or approval required for the consummation of the transactions
contemplated by this Agreement, or (c) the furnishing or use of such information
is required by or necessary or appropriate in connection with legal proceedings.
If the contemplated transactions are not consummated, each party will return or
destroy as much of such written information as the other party may reasonably
request.
12.15 Acquisition Affiliate.
Prior to the Closing Date, Purchaser shall have the right, upon notice
to the Primary Shareholders, to designate and substitute a subsidiary or
affiliate of Purchaser or Schultz to act as and to be deemed the "Purchaser"
hereunder; provided, however, that no such designation or substitution shall in
any way relieve Schultz of its obligations under the Guaranty.
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IN WITNESS WHEREOF, the parties have executed this Agreement on the
date first above written.
PRIMARY SHAREHOLDERS:
/s/ Robert J. Brodbeck /s/ Barry J. Brodbeck
- ----------------------------------- -----------------------------------
Robert J. Brodbeck, personally Barry J. Brodbeck, personally
OTHER SELLERS:
BARRY J. BRODBECK CHILDREN'S BARRY J. BRODBECK
TRUST DESCENDANT'S TRUST
By: /s/ Duane P. Schumacher By: /s/ Duane P. Schumacher
-------------------------------- --------------------------------
Duane P. Schumacher Duane P. Schumacher
Trustee Trustee
ROBERT J. BRODBECK CHILDREN'S ROBERT J. BRODBECK
TRUST DESCENDANT'S TRUST
By: /s/ Duane P. Schumacher By: /s/ Duane P. Schumacher
-------------------------------- --------------------------------
Duane P. Schumacher Duane P. Schumacher
Trustee Trustee
BRODBECK ENTERPRISES, INC., SCHULTZ ACQUISITION CORP.,
a Wisconsin corporation a Wisconsin corporation
By: /s/ Robert J. Brodback By: /s/ Elwood F. Winn
-------------------------------- --------------------------------
Robert J. Brodbeck Elwood F. Winn
President President