STOCK PURCHASE AND SALE AGREEMENT
by and among
INTERNATIONAL FRANCHISE CORP.
as Buyer,
and
COOLBRANDS INTERNATIONAL INC.
and
INTEGRATED BRANDS INC.,
as Stockholders
December 23, 2005
TABLE OF CONTENTS
Page
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Article I - PURCHASE AND SALE OF COMPANY SHARES; CLOSING..........................................................2
Section 1.1. Purchase and Sale of Company Shares......................................................2
Section 1.2. Time and Place of Closing................................................................2
Section 1.3. Deliveries at Closing....................................................................2
Section 1.4. Additional Consideration.................................................................3
Article II - REPRESENTATIONS AND WARRANTIES REGARDING THE COMPANIES...............................................4
Section 2.1. Existence; Good Standing; Authority......................................................4
Section 2.2. Capitalization...........................................................................5
Section 2.3. Litigation...............................................................................6
Section 2.4. Intellectual Property....................................................................6
Section 2.5. Consents and Approvals...................................................................6
Section 2.6. Brokers..................................................................................6
Section 2.7. Compliance with U.S. Franchise Laws......................................................7
Section 2.8. Properties; Absence of Lien and Debt.....................................................7
Section 2.9. Taxes....................................................................................7
Section 2.10. Included Franchise Business Trust Funds..................................................7
Section 2.11. Liabilities..............................................................................7
Section 2.12. Disclaimer of Other Representations and Warranties; Knowledge; Disclosure................7
Article III - REPRESENTATIONS AND WARRANTIES REGARDING THE STOCKHOLDERS...........................................9
Section 3.1. Company Shares...........................................................................9
Section 3.2. Authority................................................................................9
Article IV - REPRESENTATIONS AND WARRANTIES OF BUYER.............................................................10
Section 4.1. Existence; Good Standing; Authority.....................................................10
Section 4.2. No Conflict.............................................................................10
Section 4.3. Consents and Approvals..................................................................10
Section 4.4. Litigation..............................................................................11
Section 4.5. Financing...............................................................................11
Section 4.6. Brokers.................................................................................11
Section 4.7. Investment Intent.......................................................................11
Section 4.8. Inspection; No Other Representations....................................................12
Article V - CERTAIN COVENANTS OF BUYER AND THE STOCKHOLDERS......................................................12
Section 5.1. Conduct of Business Prior to Closing....................................................12
Section 5.2. Access to Information...................................................................12
Section 5.3. Regulatory and Other Authorizations; Consents...........................................12
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Section 5.4. Reorganization..........................................................................13
Section 5.5. Further Action..........................................................................14
Section 5.6. Press Releases..........................................................................14
Section 5.7. Notice of Certain Facts.................................................................14
Section 5.8. Cooperation with Respect to Actions.....................................................14
Article VI - ADDITIONAL COVENANTS................................................................................14
Section 6.1. Employees; Benefits.....................................................................14
Section 6.2. Conveyance Taxes; Costs.................................................................15
Section 6.3. Books and Records.......................................................................15
Section 6.4. Cooperation for Tax Matters.............................................................16
Section 6.5. Tax Returns and Payment.................................................................16
Section 6.6. Officers' and Directors' Indemnification................................................17
Article VII - CONDITIONS TO CLOSING..............................................................................18
Section 7.1. Conditions to Obligations of the Stockholders...........................................18
Section 7.2. Conditions to Obligations of Buyer......................................................19
Article VIII - SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION.......................................20
Section 8.1. Survival................................................................................20
Section 8.2. Indemnification by the Stockholders.....................................................20
Section 8.3. Indemnification by Buyer................................................................23
Section 8.4. Treatment of Indemnity Payments.........................................................25
Section 8.5. Remedies Exclusive......................................................................25
Article IX - TERMINATION.........................................................................................26
Section 9.1. Termination.............................................................................26
Section 9.2. Effect of Termination...................................................................26
Section 9.3. Waiver..................................................................................26
Article X - GENERAL PROVISIONS...................................................................................27
Section 10.1. Notices.................................................................................27
Section 10.2. Fees and Expenses.......................................................................28
Section 10.3. Certain Definitions.....................................................................28
Section 10.4. Interpretation..........................................................................29
Section 10.5. Counterparts............................................................................29
Section 10.6. Amendments..............................................................................30
Section 10.7. Entire Agreement; Severability..........................................................30
Section 10.8. Third Party Beneficiaries...............................................................30
Section 10.9. Governing Law...........................................................................30
Section 10.10. Assignment..............................................................................30
Section 10.11. Consent to Jurisdiction; Waiver of Jury Trial...........................................30
Section 10.12. Mutual Drafting.........................................................................31
Section 10.13. Remedies................................................................................31
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SCHEDULES
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Schedule 2.1(a) Organization and Good Standing
Schedule 2.2 Capitalization
Schedule 2.3 Litigation
Schedule 2.4 Intellectual Property
Schedule 2.5(a) Government Consents
Schedule 2.5 (b) Third-Party Consents
Schedule 2.8 Encumbrances
Schedule 2.10 Included Franchise Business Trust Funds
Schedule 4.2 Conflicts of Buyer
Schedule 4.3(a) Buyer Government Consents
Schedule 4.3(b) Buyer Third-Party Consents
Schedule 4.4 Buyer Litigation
Schedule 6.1 U.S. Hired Employees and Severance Arrangements
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STOCK PURCHASE AND SALE AGREEMENT
This STOCK PURCHASE AND SALE AGREEMENT (this "Agreement") is dated as
of December 23, 2005 by and among, International Franchise Corp., an Ontario
corporation ("Buyer"), Integrated Brands Inc., a New Jersey corporation ("IB"),
and CoolBrands International Inc., a Nova Scotia corporation ("Parent" and
together with IB the "Stockholders").
WHEREAS, the Stockholders own, directly or indirectly, all the issued
and outstanding equity interests of Swensen's, Inc., a Delaware corporation
("Swensen's"), Yogen Fruz Acquisitions Inc., a Nevada corporation ("YF
Acquisitions"), Yogen Fruz Canada Inc., an Ontario corporation ("YF Canada"),
and CoolBrands Franchise LLC, a Delaware limited liability company ("CFLLC,"
and, together with Swensen's, YF Canada, YF Acquisitions, collectively, the
"Companies"; and such equity interests, collectively, the "Company Shares"); and
WHEREAS, the Companies and their subsidiaries set out in Exhibit A
hereto (such subsidiary companies, all of which are primarily engaged in the
Included Franchise Business, being collectively referred to herein as the
"Subsidiaries") are or have been engaged in the business of operating franchise
systems under the Bresler's, Golden Swirl, Heidi's, I Can't Believe It's Yogurt,
Ice Cream Churn, Java Coast, Swensen's and Yogen Fruz trademarks and own a 50%
interest in an entity which has the right to operate one ice cream store under
the name "Schrafft's" at the New York-New York Hotel in Las Vegas, Nevada (the
"Included Franchise Business"); and
WHEREAS, all of the assets which form part of the Included Franchise
Business will on the Closing Date be owned by the Companies and/or the
Subsidiaries; and
WHEREAS, the Stockholders and their Affiliates (including the
Companies) also engage or have engaged in the business of operating franchise
systems under the Jerry Tucci's Pizza Pasta, Steve's and Tropicana Smoothies
trademarks (such franchises, together with any other franchise systems not
expressly listed as part of the Included Franchise Business above, the "Excluded
Franchise Business"); and
WHEREAS, the Stockholders desire to sell to Buyer, and Buyer desires to
purchase from the Stockholders, the business of the Stockholders and their
direct and indirect subsidiaries that relate primarily to the Included Franchise
Business, and to accomplish such sale and purchase, the Stockholders will sell
and Buyer will purchase all of the issued and outstanding Company Shares on the
terms and conditions set forth herein; and
WHEREAS, prior to the Closing, the Stockholders will transfer (i) to
one or more of their Affiliates (other than the Companies and the Subsidiaries)
all of the assets and liabilities that (A) relate primarily to the Excluded
Franchise Business or to any other business of the Stockholders other than the
Included Franchise Business and (B) all cash of the Companies and their
subsidiaries (other than the Included Franchise Business Trust Funds (as defined
below)) and (ii) to the Companies and/or the Subsidiaries, any assets (other
than cash, but including the Included
Franchise Business Trust Funds) and liabilities currently held by the
Stockholders or their Affiliates (other than the Companies) which primarily
relate to the Included Franchise Business.
NOW THEREFORE, in consideration of the mutual agreements and covenants
herein contained, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
Article I - PURCHASE AND SALE OF COMPANY SHARES; CLOSING
--------------------------------------------------------
Section 1.1. Purchase and Sale of Company Shares. Subject to the terms
and conditions set forth in this Agreement and in reliance on the
representations and warranties contained herein, at the Closing (as defined
below), the Stockholders agree to sell to Buyer, and Buyer agrees to purchase
from the Stockholders, all of the Company Shares for an aggregate purchase price
equal to Eight Million (U.S. Dollars) ($8,000,000.00) in cash (the "Purchase
Price"). The Stockholder and the Buyer agree that the Purchase Price shall be
allocated to the Company Shares of each of the Companies in accordance with an
allocation schedule to be provided by the Stockholders to Buyer within sixty
(60) days following the Closing (as defined below). Each party agrees to utilize
such allocations for all purposes, including financial and tax purposes and not
to take any action or position inconsistent with such allocations.
Section 1.2. Time and Place of Closing. The closing (the "Closing") of
the purchase and sale of the Company Shares and the other transactions
contemplated by this Agreement shall be held at the offices of Goodwin Procter
LLP, 599 Lexington Avenue, New York, New York 10022, on the date on which the
conditions to Closing set forth in Sections 7.1(c) and 7.2(c) of this Agreement
have been satisfied, or at such other time or such other place as Buyer and the
Stockholders may mutually determine. The date on which the Closing actually
occurs is referred to herein as the "Closing Date."
Section 1.3. Deliveries at Closing.
(a) At the Closing, the Stockholders will deliver or cause to
be delivered to Buyer the following:
(i) stock certificates evidencing all of the Company
Shares which are certificated, in each case duly endorsed in
blank or accompanied by stock powers duly executed in blank,
or if such stock certificates have been lost or destroyed,
affidavits of loss in lieu thereof;
(ii) such minute books and stock transfer books of
the Companies and the Subsidiaries, if any, as are in the
Stockholders' possession; and
(iii) each of the certificates, instruments and other
documents required to be delivered at the Closing pursuant to
Section 7.2 hereof.
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(b) At the Closing, Buyer will deliver or cause to be
delivered to the Stockholders (on behalf of the Stockholders and their
Affiliates, as determined by the Stockholders) the following:
(i) the Purchase Price by wire transfer of
immediately available funds to an account specified in writing
by the Parent at least two (2) days prior to the Closing Date;
and
(ii) each of the certificates and other documents
required to be delivered at the Closing pursuant to Section
7.1 hereof.
(c) From and after the Closing, Buyer and Stockholders shall
cooperate to accomplish the intent of the reorganization described in
Section 5.4 and to assist Buyer's attempts to reinstate certain of the
Subsidiaries into good standing in their respective jurisdictions of
incorporation.
Section 1.4. Additional Consideration.
(a) In the event that Buyer, at any time or from time to time
on or prior to the second anniversary of the Closing Date, in one or
more transactions, sells, assigns, transfers or otherwise disposes of
(any such transaction being a "Transfer", provided however, that any
sale by the Buyer of any single, multi area or master franchise in the
ordinary course of business consistent with past practice (and not as a
means of Transferring all or substantially all of the rights to any
trademark or franchise concept included in the Included Franchise
Business) shall not be a Transfer for the purposes of this Section 1.4)
all or any portion of the Included Franchise Business or any interest
therein, whether by asset sale, stock sale, merger or otherwise, then
Buyer shall be obligated to and shall pay to Stockholders the following
amounts as additional consideration:
(i) If the Aggregate Transfer Consideration received
by Buyer with respect to all Transfers deemed to have occurred
on or prior to the second anniversary of the Closing Date is
equal to or less than $2,000,000.00 USD (the "Base
Threshold"), then the amount due under this Section 1.4 shall
be $0.
(ii) With respect to all Transfers deemed to have
occurred on or prior to the first anniversary of the Closing
Date (the "First Anniversary Date"), if the Aggregate Transfer
Consideration received from the Closing Date until the First
Anniversary Date is (A) more than $2,000,000.00 USD but equal
to or less than $4,000,000.00, then the amount payable by the
Buyer to the Stockholders shall be equal to 25% of the excess
of such Aggregate Transfer Consideration over the Base
Threshold and (B) more than 50% of the Purchase Price (the
"Second Step Threshold"), then the amount payable by the Buyer
to the Stockholders shall be the sum of (x) 50% of the amount
by which the Aggregate Transfer Consideration exceeds the
Second Step Threshold plus (y) $500,000.00.
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(iii) With respect to Transfers deemed to have
occurred after the First Anniversary Date but on or prior to
the second anniversary of the Closing Date (such transactions
being "Second Year Transactions" and the date which is the
second anniversary of Closing being the "Second Anniversary
Date"), the percentages in (ii)(A) and (ii)(B)(x) above shall
be reduced to 12.5% and 25%, respectively with respect to any
proceeds of such Second Year Transactions, but the percentages
in (ii)(A) and (ii)(B)(x) above shall continue to apply to the
proceeds of any Transfers that were deemed to have occurred
during the first year following the Closing to the extent of
the Aggregate Transfer Consideration received with respect
thereto.
(b) The foregoing calculations are intended to be made on a
rolling aggregate two year test so that the Aggregate Transfer
Consideration shall include all Transfers occurring prior to the
measurement date for purposes of determining which threshold has been
met. Therefore, "Aggregate Transfer Consideration" shall mean the
aggregate cumulative proceeds received by Buyer and its Affiliates from
any Transfer of all or any portion of the Included Franchise Business
as of the relevant measurement dates. If there are multiple Transfers,
then as to each Transfer the percentage that shall be applied with
respect to the portion of the Aggregate Transfer Consideration
applicable to such Transfer shall be determined in accordance with
Subsection 1.4 (a)(iii) above
(c) Buyer shall promptly notify Stockholders upon the entering
into of any definitive agreement with respect to a Transfer. For
purposes of this Section 1.4, each such Transfer shall be deemed to
occur as of the date of the execution of such definitive agreement,
unless such Transfer fails to be consummated within 180 days after the
date of such execution, in which event, the Transfer date shall be the
actual date of Transfer, if any.
(d) Payments hereunder shall be due and payable by the Buyer
to the Stockholders within 30 days of each of (i) the First Anniversary
Date and (ii) the Second Anniversary Date or any later date on which
any Second Year Transaction shall actually close. Any such payments
shall be allocated in accordance with an allocation schedule delivered
by the Stockholders to Buyer within 60 days after the last payment
under this Section 1.4.
Article II - REPRESENTATIONS AND WARRANTIES REGARDING THE COMPANIES
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The Stockholders, jointly and severally, hereby make to Buyer each of
the representations and warranties contained in this Article II.
Section 2.1. Existence; Good Standing; Authority. Each Company (other
than CFLLC and YF Canada) is a corporation duly incorporated, validly existing
and, if applicable, in good standing under the laws of its jurisdiction of
organization. CFLLC and YF Canada are in
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existence and have not been dissolved under the laws of their jurisdiction of
organization. Each Company has all requisite corporate or company power and
authority to own, operate, lease and encumber its properties and carry on its
business as currently conducted, except where the failure to be so would not,
individually or in the aggregate, have a Material Adverse Effect. Except as set
forth in Schedule 2.1, each Company is duly licensed or qualified to do business
as a foreign corporation under the laws of each other jurisdiction in which the
character of its properties or in which the transaction of its business makes
such qualification necessary, except where the failure to be so licensed or
qualified would not, individually or in the aggregate, have a Material Adverse
Effect.
Section 2.2. Capitalization. As of the date of this Agreement, all of
the authorized, issued and outstanding capital stock or interests of each
Company is owned by either IB or Parent. As of the date of this Agreement,
except as set forth in Schedule 2.2, there are no outstanding options, warrants
or other rights of any kind to acquire any additional shares of capital stock of
any Company or securities convertible into or exchangeable for, or which
otherwise confer on the holder thereof any right to acquire, any such additional
shares, nor is any Company committed to issue any such option, warrant, right or
security. Except as set forth in Schedule 2.2, there are no agreements or
understandings to which any Company is a party with respect to the voting of any
shares of capital stock of such Company or which restrict the transfer of any
such shares. Except as set forth in Schedule 2.2, there are no outstanding
contractual obligations of any Company to repurchase, redeem or otherwise
acquire any shares of capital stock, other equity interests or any other
securities of the Company. Except as set forth in Schedule 2.2, no Company is
under any obligation by reason of any agreement to register the offer and sale
or resale of any of its securities under the U.S. Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder (the "Securities
Act").
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Section 2.3. Litigation. Except as set forth in Schedule 2.3, to the
Stockholders' knowledge, as of the date of this Agreement there is no
litigation, action, suit, proceeding, claim, arbitration or investigation
pending or threatened in writing ("Action") against any of the Companies or the
Subsidiaries which arises out of the operation of the U.S. operations of the
Included Franchise Business and Stockholders have no knowledge of any existing
facts or circumstances that are reasonably likely to give rise to any such
Action. No representation is made with respect to any Action which relates to
the ownership or operation of the Included Franchise Business outside the United
States.
Section 2.4. Intellectual Property. To the Stockholders' knowledge,
except as set forth on Schedule 2.4, one of the Companies or one of the
Subsidiaries is the owner of all the United States registered trademarks and
service marks (and certain international marks with respect to Swensen's) listed
in Schedule 2.4 (collectively, the "Intellectual Property Rights"). No
representation is made with respect to any trademarks, service marks, design
marks or trade names relating to or used in the operation of the Included
Franchise Business within or outside of the United States other than those (and
to the extent) listed on Schedule 2.4, including Yogen Fruz, Heidi's,
Schrafft's, Java Coast, Ice Cream Churn, I Can't Believe It's Yogurt and Golden
Swirl. The representations and warranties set forth in this Section 2.4 shall
constitute the only representations and warranties by the Stockholders with
respect to Intellectual Property Rights.
Section 2.5. Consents and Approvals.
(a) To the Stockholders' knowledge, except as set forth on
Schedule 2.5(a), the execution, delivery and performance of this
Agreement by the Stockholders does not and will not, as of the Closing,
require any consent, approval, authorization or other action by, or
filing with or notification to, any federal, state, local, or any
foreign government, governmental, regulatory or administrative
authority, agency or commission or any court, tribunal, or judicial or
arbitral body (a "Governmental Authority"), except (i) where failure to
obtain such consent, approval, authorization or action, or to make such
filing or notification, would not, individually or in the aggregate,
have (A) a Material Adverse Effect or (B) a Stockholder Material
Adverse Effect, or (ii) as may be necessary as a result of any facts or
circumstances relating solely to Buyer (including its sources of
financing). Notwithstanding the foregoing, except as set forth on
Schedule 2.5(a), the execution, delivery and performance of this
Agreement by the Stockholders does not and will not, as of the Closing,
require any consent, approval, authorization or other action by, or
filing with or notification to, any Governmental Authority in the
United States, except as may be necessary as a result of any facts or
circumstances relating solely to Buyer (including its sources of
financing).
(b) To the Stockholders' knowledge, except as set forth on
Schedule 2.5(b), the execution, delivery and performance of this
Agreement by the Stockholders does not and will not, as of the Closing,
require any third-party consents, approvals, authorizations or actions
(under any agreements relating to the Included Franchise Business in
the United States.
Section 2.6. Brokers. Except for the fees payable to Duff & Phelps,
LLC, which fees shall be paid by the Stockholders, none of the Companies or the
Subsidiaries has incurred or
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become liable for any broker's commission or finder's fee relating to or in
connection with the transactions contemplated by this Agreement.
Section 2.7. Compliance with U.S. Franchise Laws. The Included
Franchise Business in the United States as operated on the date hereof is
operated in accordance with all applicable U.S. franchise laws, statutes,
regulations and rules, except for any such conflicts, defaults or violations
that would not, individually or in the aggregate, have a Material Adverse
Effect. Notwithstanding the foregoing, the representations and warranties in
this Section 2.7 do not apply to matters covered by Section 2.4 (Intellectual
Property), which matters are covered exclusively in such Section.
Section 2.8. Properties; Absence of Lien and Debt. Except as set forth
on Schedule 2.8, the assets of the Included Franchise Business and the Company
Shares, as of the Closing Date, will be free and clear of all liens,
encumbrances or restrictions ("Encumbrances") other than those under licenses,
franchise agreements or leases, materialmen's or mechanics' liens or liens with
respect to Taxes not yet due and payable. As of the Closing, the Companies and
the Subsidiaries will not be liable for any amounts owed with respect to any
obligations for borrowed money from any third party financial institutions, nor
will the Companies or any of the Subsidiaries be liable for any amounts owed to
the Stockholders or any Affiliates of the Stockholders (except for amounts owed
for trade payables and other similar commercial transactions between and among
such entities in the ordinary course of business).
Section 2.9. Taxes.
(a) Except as set forth on Schedule 2.9, each of the Companies
and the Subsidiaries has, as of the date hereof, (a) paid all Taxes due
and payable by it, (b) paid all assessments it has received in respect
of Taxes, and (c) paid all Tax installments due and payable by it.
(b) There are no assessments of Taxes that have been issued
and are outstanding in respect of any of the Companies or the
Subsidiaries.
Section 2.10. Included Franchise Business Trust Funds. Schedule 2.10
sets out a complete list of all lease deposit funds, franchise deposits and
advertising fund monies paid by current U.S. and Canadian franchisees to the
Stockholders or their Affiliates (the "Included Franchise Business Trust Funds")
currently held, maintained or administered by the Stockholders or their
Affiliates (including the Companies and the Subsidiaries). All of the Included
Franchise Business Trust Funds shall be conveyed to the Companies or the
Subsidiaries at or prior to Closing.
Section 2.11. Liabilities. At Closing there shall be no liabilities or
obligations of any of the Companies or the Subsidiaries carried on the books and
records of the Companies or the Subsidiaries which do not relate to the Included
Franchise Business.
Section 2.12. Disclaimer of Other Representations and Warranties;
Knowledge; Disclosure
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(a) NEITHER THE STOCKHOLDERS NOR THEIR REPRESENTATIVES HAVE
MADE ANY REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, OF ANY
NATURE WHATSOEVER RELATING TO THE COMPANIES, THE SUBSIDIARIES OR THEIR
RESPECTIVE BUSINESSES OR OTHERWISE IN CONNECTION WITH THE TRANSACTIONS
CONTEMPLATED HEREBY, OTHER THAN THOSE REPRESENTATIONS AND WARRANTIES
EXPRESSLY SET FORTH IN THIS ARTICLE II AND ARTICLE III HEREOF.
(b) Without limiting the generality of the foregoing, neither
the Stockholders nor their representatives have made, and shall not be
deemed to have made, any representations or warranties in the materials
relating to the business of the Companies or the Subsidiaries made
available to Buyer or in any presentation of the business of the
Companies and the Subsidiaries in connection with the transactions
contemplated hereby, and no statement contained in any of such
materials or made in any such presentation shall be deemed a
representation or warranty hereunder or otherwise. It is understood
that any cost estimates, projections or other predictions, any data,
any financial information or any memoranda or offering materials or
presentations made available by the Stockholders or their
representatives are not and shall not be deemed to be or to include any
representations or warranties.
(c) Whenever a representation or warranty made by the
Stockholders herein refers to the knowledge of the Stockholders, such
knowledge shall be deemed to consist only of the actual knowledge on
the date hereof and on the Closing Date, as applicable, of any of David
Stein, Gary Stevens, Chris Taylor and Frank Persaud, and expressly
excluding any knowledge of Aaron Serruya.
(d) Notwithstanding anything to the contrary contained in this
Agreement or in the Disclosure Schedules, any information disclosed in
one Section thereof shall be deemed to be disclosed in the entire
Disclosure Schedule. Certain information set forth in the Disclosure
Schedule is included solely for informational purposes and may not be
required to be disclosed pursuant to this Agreement. The disclosure of
any information shall not be deemed to constitute an acknowledgment
that such information is required to be disclosed in connection with
the representations and warranties made by the Stockholders in this
Agreement or that such information is material, nor shall such
information be deemed to establish a standard of materiality, nor shall
it be deemed an admission of any liability of, or concession as to any
defense available to, the Stockholders.
(e) From time to time prior to the Closing, the Stockholders
shall amend or supplement the Disclosure Schedule with respect to any
matter that, if existing or occurring at or prior to the Closing Date,
would have been required to be set forth or described therein or that
is necessary to complete or correct any information in any
representation or warranty contained in this Article II or Article III
hereof; provided that no such amendment or supplement shall be deemed
to have amended such representations for purposes of the
Indemnification provisions of Article VIII hereof.
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(f) Notwithstanding anything to the contrary contained herein,
the representations and warranties set forth in Article II and Article
III do not apply to any assets, liabilities or operations of the
Included Franchise Business, the Companies or the Subsidiaries which
are located or engaged in such business or any portion thereof outside
of the United States.
Article III - REPRESENTATIONS AND WARRANTIES REGARDING THE STOCKHOLDERS
-----------------------------------------------------------------------
The Stockholders, jointly and severally, hereby make to Buyer each of
the representations and warranties set forth in this Article III.
Section 3.1. Company Shares. The Stockholders own of record and
beneficially all of the Company Shares. Such Company Shares are, and when
delivered by the Stockholders to Buyer pursuant to this Agreement will be, free
and clear of any and all Encumbrances, other than Encumbrances resulting from
this Agreement.
Section 3.2. Authority.
(a) The Stockholders have full right, power and authority
under their respective organizational documents to execute and deliver
this Agreement and each agreement, document and instrument to be
executed and delivered by them pursuant to this Agreement and to carry
out the transactions contemplated hereby and thereby. This Agreement
and each agreement, document and instrument executed and delivered by
the Stockholders pursuant to this Agreement constitutes a valid and
binding obligation of the Stockholders, enforceable in accordance with
their respective terms (except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights generally and by general equitable
principles), and has been duly authorized by all necessary corporate
action of the Stockholders, and the Stockholders have the corporate
power and authority to transfer, sell and deliver the Company Shares to
Buyer pursuant to this Agreement.
(b) Neither the execution and delivery by the Stockholders of
this Agreement and the other agreements, documents and instruments
contemplated hereby, nor the consummation of the transactions in
accordance with the terms hereof and thereof, conflicts with or results
in a breach of any provisions of the Stockholders' organizational
documents. The execution and delivery by the Stockholders of this
Agreement and the other agreements, documents and instruments
contemplated hereby, and the consummation of the transactions in
accordance with the terms hereof and thereof, will not violate, or
conflict with, or result in a breach of any provision of, or constitute
a default (or an event which, with notice or lapse of time or both,
would constitute a default) under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, deed of trust,
lease, contract or other agreement to which any of the Stockholders is
a party, or by which them or their respective properties is bound,
except, in each case, as would not have a Stockholder Material Adverse
Effect on the ability of the Stockholders to perform their obligations
under this Agreement.
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Article IV - REPRESENTATIONS AND WARRANTIES OF BUYER
----------------------------------------------------
Buyer hereby makes to the Stockholders the representations and warranties in
this Article IV.
Section 4.1. Existence; Good Standing; Authority.
(a) Buyer is an Ontario corporation validly existing and in
good standing under the laws of the Province of Ontario. Buyer is duly
licensed or qualified to do business as a foreign corporation under the
laws of any other jurisdiction in which the character of its properties
or in which the transaction of its business makes such qualification
necessary, except where the failure to be so licensed or qualified
would not, individually or in the aggregate, have a Buyer Material
Adverse Effect. Buyer has all requisite corporate power and authority
to own, operate, lease and encumber its properties and carry on its
business as currently conducted.
(b) Buyer has the corporate power and authority to execute and
deliver this Agreement and each agreement, document and instrument to
be executed and delivered by or on behalf of Buyer pursuant to this
Agreement and to carry out the transactions contemplated hereby and
thereby. The execution and delivery of this Agreement, the performance
by Buyer of its obligations hereunder and the consummation of the
transactions contemplated hereby have been duly authorized by all
requisite corporate action on the part of Buyer. This Agreement has
been duly executed and delivered by Buyer and, assuming the due
authorization, execution and delivery of this Agreement by the
Stockholders, this Agreement constitutes a legal, valid and binding
obligation of Buyer, enforceable against Buyer in accordance with its
terms, except as such enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting
creditors' rights generally and by general equitable principles.
Section 4.2. No Conflict. Neither the execution and delivery by Buyer
of this Agreement and the other agreements, documents and instruments
contemplated hereby, nor the consummation by Buyer of the transactions in
accordance with the terms hereof and thereof, conflicts with or results in a
breach of any provisions of Buyer's organizational documents. Except as set
forth on Schedule 4.2, the execution and delivery by Buyer of this Agreement and
the other agreements, documents and instruments contemplated hereby, and the
consummation by Buyer of the transactions in accordance with the terms hereof
and thereof, will not violate, or conflict with, or result in a breach of any
provision of, or constitute a default (or an event which, with notice or lapse
of time or both, would constitute a default) under any of the terms, conditions
or provisions of any note, bond, mortgage, indenture, deed of trust, lease,
contract or other agreement to which Buyer is a party, or by which Buyer or any
of its properties is bound, except, in each case, as would not have a Buyer
Material Adverse Effect.
Section 4.3. Consents and Approvals.
(a) Except as set forth on Schedule 4.3(a), the execution,
delivery and performance of this Agreement by Buyer will not, as of the
Closing Date, require any consent, approval, authorization or other
action by, or filing with or notification to, any
10
Governmental Authority, except (i) where failure to obtain such
consent, approval, authorization or action, or to make such filing or
notification, would not have a Buyer Material Adverse Effect, or (ii)
as may be necessary as a result of any facts or circumstances relating
solely to the Stockholders.
(b) To Buyer's knowledge, except as set forth on Schedule
4.3(b), the execution, delivery and performance of this Agreement by
Buyer will not, as of the Closing Date, require any third-party
consents, approvals, authorizations or actions, except where failure to
obtain such consents, approvals, authorizations or actions would not
have a Buyer Material Adverse Effect.
Section 4.4. Litigation. To Buyer's knowledge, as of the date of this
Agreement, there is no Action against Buyer, as to which there is a reasonable
likelihood of an adverse determination and which, if adversely determined (a)
would delay, hinder or prevent the consummation of the transactions contemplated
by this Agreement by Buyer, or (b) would have in the aggregate a Buyer Material
Adverse Effect. Except as set forth in Schedule 4.4, to the knowledge of Buyer
as of the date of this Agreement there is no Action against any of the Companies
or their direct or indirect subsidiaries which arises out of the operation of
the Included Franchise Business outside of the United States and Buyer has no
knowledge of any existing facts or circumstances that are reasonably likely to
give rise to any such Action. No representation is made with respect to any
Action which relates to the ownership or operation of the Included Franchise
Business within the United States.
Section 4.5. Financing. Buyer has sufficient funds to purchase the
Company Shares and pay the Purchase Price on the terms and conditions
contemplated by this Agreement.
Section 4.6. Brokers. Buyer has not incurred or become liable for any
broker's commission or finder's fee relating to or in connection with this
Agreement or the transactions contemplated hereby.
Section 4.7. Investment Intent. Buyer is acquiring the Company Shares
solely for the purpose of investment and not with a view to, or for offer or
sale in connection with, any distribution thereof. Buyer has had no discussions
with any Person regarding any resale of, and has no present intention to resell
all or any part of, the Included Franchise Business to any third party during
the two year period following the Closing, save and except for the sale by the
Buyer of any single, multi area or master franchise for a particular location or
territory in the ordinary course of the business consistent with past practice
and not as a means of Transferring all or substantially all rights to any
trademarks or franchise concepts constituting a part of the Included Franchise
Business. Buyer is an "accredited investor" as such term is defined in Rule 501
under the Securities Act (United States) and under National Instrument 45-106
Prospectus and Registration Exemptions applicable in Canada. Buyer acknowledges
that the Company Shares to be acquired by Buyer pursuant to the transactions
contemplated hereby have not been registered under the Securities Act (United
States) or the securities laws of any state or other jurisdiction and cannot be
disposed of unless they are subsequently registered under the Securities Act
(United States) and the securities laws of any applicable state or other
jurisdiction or an exemption from such registration is available.
11
Section 4.8. Inspection; No Other Representations. Buyer has no
knowledge of any material breach of any representations or warranties made by
Stockholders in this Agreement or any other conditions or circumstances that
would excuse Buyer from the timely performance of its obligations hereunder.
Buyer's principal stockholder has been a director and officer of the Parent and
has been a senior executive involved in the management and operations of the
business of the Companies and their subsidiaries. Accordingly, Buyer has
substantial knowledge of the business and operations of the Companies and the
Subsidiaries outside of the United States, including their respective assets,
liabilities, condition (financial or otherwise), results of operations, business
or prospects, and is an informed and sophisticated purchaser, and has engaged
expert advisors, experienced in the evaluation and purchase of companies such as
the Companies and their subsidiaries as contemplated hereunder. Buyer agrees to
accept the Company Shares and the Companies and the Subsidiaries on an AS-IS,
WHERE-IS basis without reliance upon any express or implied representations or
warranties of any nature, whether in writing, orally or otherwise, made by or on
behalf of or imputed to the Stockholders, except as expressly set forth in
Article II or Article III of this Agreement.
Article V - CERTAIN COVENANTS OF BUYER AND THE STOCKHOLDERS
-----------------------------------------------------------
Section 5.1. Conduct of Business Prior to Closing. The Stockholders
agree to, and shall cause the Companies, between the date hereof and the Closing
Date to, operate their respective business in the ordinary course, consistent
with past practices, except as contemplated by this Agreement, including Section
5.4 hereof. In furtherance of the foregoing, the Stockholders agree to, and
shall cause the Companies, between the date hereof and the Closing Date, to not
knowingly and intentionally take any action that would breach any of the
representations and warranties set forth in Articles II and III.
Section 5.2. Access to Information. Without undue disruption of its
business, between the date of this Agreement and the Closing Date, the
Stockholders shall give Buyer and its representatives reasonable access upon
reasonable notice and during times mutually convenient to Buyer and senior
management of the Companies to the facilities, properties, employees, books, and
records of the Companies and their subsidiaries as from time to time may be
reasonably requested. Any such investigation by Buyer shall not unreasonably
interfere with any of the businesses or operations of the Companies or their
subsidiaries.
Section 5.3. Regulatory and Other Authorizations; Consents.
(a) The Stockholders and Buyer shall use their good faith
commercially reasonable efforts to obtain the authorizations, consents,
orders and approvals necessary for their execution and delivery of, and
the performance of their obligations pursuant to, this Agreement.
(b) Buyer shall use its good faith commercially reasonable
efforts to assist the Stockholders in obtaining the consents of third
parties listed in Schedule 2.5(b), including (i) providing to such
third parties such financial statements and other financial information
as such third parties may reasonably request, (ii) agreeing to
commercially
12
reasonable adjustments to the terms of the agreements with such third
parties (provided that neither party hereto shall be required to agree
to any increase in the amount payable with respect thereto) and (iii)
executing agreements to effect the assumption of such agreements on or
before the Closing Date.
Section 5.4. Reorganization. Prior to the Closing, the Stockholders
shall take all action, reasonably necessary in order to accomplish the transfer
of the Included Franchise Business, and the retention of the Excluded Franchise
Business, by way of transfer of the Company Shares, including as set forth
below, and the Buyer shall cooperate (and shall cause its officers and employees
to cooperate) with the Stockholders to accomplish the same.
(a) To the extent that any contracts, leases or other assets
or liabilities primarily related to the Included Franchise Business
(including any and all Intellectual Property Rights and the Included
Franchise Business Trust Funds) are held in the name of any entity
other than the Companies or the Subsidiaries, the Stockholders shall
cause all right, title and interest in and to such item to be assigned
and transferred to the Companies and the Companies shall assume all
liabilities and obligations related thereto, including all such
contracts, real estate, auto or other leases or other obligations
related to the Included Franchise Business.
(b) The Stockholders shall take all action necessary to
eliminate all extraordinary intercompany payables and receivables
between the Companies and their subsidiaries engaged in the Included
Franchise Business and the Stockholders and their remaining
subsidiaries by way of dividend.
(c) The Stockholders shall take all action necessary to
distribute upstream to the Stockholders all cash of the Companies or
their subsidiaries as of the Closing, save and except for Included
Franchise Business Trust Funds.
(d) To the extent that any contracts, leases or other assets
or liabilities primarily related to the Excluded Franchise Business or
any other business of the Stockholders other than the Included
Franchise Business are held in the name of any of the Companies or any
of the Subsidiaries, the Stockholders shall cause all right, title and
interest in and to such items to be assigned and transferred to the
Stockholders or their Affiliates (other than the Companies or the
Subsidiaries) and the Stockholders or their other subsidiaries shall
assume all liabilities and obligations related thereto, including the
equity interests in, and assets and liabilities of, Jerry Tucci's Pizza
Pasta, Inc., CoolBrands Smoothies LLC and Northern Lights Frozen
Desserts, Inc. and any other assets or liabilities relating to
Tropicana Smoothies. For avoidance of doubt, the parties agree that
Buyer is acquiring only the trademarks and tradenames expressly
included in the definition of Included Franchise Business and is not
acquiring (i) any right, title or interest in or to any of the
trademarks or tradenames utilized in the Excluded Franchise Business or
(i) any right, title or interest in or to any trademark or trade names
utilized in any other business of Stockholders (or products
manufactured, distributed or sold under any such trademarks or
tradenames), including CoolBrands, Eskimo Pie, Tropicana, Northern
Lights and Light N Lively.
13
(e) The Stockholders shall cause all employees engaged
primarily in providing services on behalf of the Included Franchise
Business outside of the United States who are not currently employees
of YF Canada or a subsidiary thereof to become employees of one or more
of such entities and for all obligations relating thereto (including
all employee benefits and perquisites) to be assigned to and assumed by
such entities.
Section 5.5. Further Action. Each of the parties hereto shall, from
time to time after the Closing Date, without further consideration, and as
expeditiously as reasonably possible, execute and deliver such documents, other
papers and instruments, and take such other action as may reasonably be required
to more effectively carry out the provisions and intent of this Agreement and to
make effective the transactions contemplated by this Agreement.
Section 5.6. Press Releases. The parties hereto will, and will cause
each of their Affiliates and representatives to, maintain the confidentiality of
this Agreement and will not, and will cause each of their Affiliates not to,
issue or cause the publication of any press release or other public announcement
with respect to this Agreement or the transactions contemplated hereby without
the prior written consent of the other parties hereto which consent shall not be
unreasonably withheld; provided, however, that a party may, without the prior
consent of the other parties hereto, issue or cause publication of any such
press release or public announcement to the extent that such party reasonably
determines, after consultation with outside legal counsel, such action to be
required by law or by the rules of any applicable self-regulatory organization,
in which event such party will use its commercially reasonable efforts to allow
the other parties hereto reasonable time to comment on such press release or
public announcement in advance of its issuance.
Section 5.7. Notice of Certain Facts. From the date of this Agreement
until the Closing, Buyer shall promptly notify and inform the Stockholders of
any material variance or incorrect statement in the representations and
warranties contained in Article II and Article III of this Agreement discovered
by Buyer or its representatives or agents.
Section 5.8. Cooperation with Respect to Actions. Each of the parties
agrees to cooperate with the other Stockholders with respect to any Action now
existing or hereafter arising and whether or not subject to indemnification
hereunder, including, without limitation, to provide reasonable access to all
books, records or personnel as may be reasonably necessary to assist in
defending, pursuing or settling any such matters, including, without limitation,
any matters disclosed on the schedules hereto.
Article VI - ADDITIONAL COVENANTS
---------------------------------
Section 6.1. Employees; Benefits Buyer shall ensure that all persons
who were employed by any of the Companies and their subsidiaries
outside of the United States immediately preceding the Closing Date or
who primarily provided services to the Included Franchise Business
outside of the United States, including those on vacation, leave of
absence or disability (the "Non-U.S. Company Employees"), will remain
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employed by the Included Franchise Business in a comparable position on
and immediately after the Closing Date, at not less than the same base
rate of pay. Buyer will have no obligation to hire any employees of the
Companies or their subsidiaries resident in the United States except
for employees who work for Company-owned stores or as set forth on
Schedule 6.1 hereof (collectively, the "US Hired Employees" and
together with the Non-US Company Employees, the "Transferred Company
Employees"). Buyer shall ensure that any such US Hired Employees will
(i) remain employed in a comparable position on and immediately after
the Closing Date, at not less than the same base rate of pay, if
employed by the Companies or their subsidiaries that are included in
this transaction prior to Closing or (ii) if employed by Integrated
Brands or another subsidiary thereof prior to the Closing, be hired by
Buyer for a comparable position, at not less than the same base rate of
pay.
(b) To the extent that service is relevant for purposes of
eligibility, vesting, calculation of any benefit, or benefit accrual
under any employee benefit plan, program or arrangement established or
maintained by Buyer (other than any defined benefit pension plan)
following the Closing Date for the benefit of Transferred Company
Employees, such plan, program or arrangement shall credit such
Transferred Company Employees for service on or prior to the Closing
Date that was recognized by any of the Companies or their subsidiaries
or affiliates, as the case may be, for purposes of employee benefit
plans, programs or arrangements maintained by any of them.
(c) From and after the Closing Date, Buyer shall provide the
Transferred Company Employees with benefits (including retirement and
welfare benefits) that are substantially comparable, in the aggregate,
to the benefits provided under the benefit plans of the Stockholders as
in effect immediately prior to the Closing Date.
(d) From and after the Closing Date, Buyer shall, and shall
cause the Company to, honor in accordance with their terms all
severance arrangements applicable to the Transferred Company Employees
which are in effect prior to the Closing Date in the event Buyer
terminates the employment of any Transferred Company Employees.
Schedule 6.1 lists such severance arrangements in effect as of the date
hereof with respect to employees of the Included Franchise Business
within the United States.
Section 6.2. Conveyance Taxes; Costs. Buyer shall be liable for and
shall hold the Stockholders harmless against any transfer, value added, excise,
stock transfer, stamp, recording, registration and any similar Taxes that become
payable in connection with the acquisition by Buyer of the Company Shares and
other transactions contemplated hereby, and the applicable parties shall file
such applications and documents as shall permit any such Tax to be assessed and
paid on or prior to the Closing Date in accordance with any available pre-sale
filing procedure.
Section 6.3. Books and Records. Buyer shall, and shall cause any of the
Companies and the Subsidiaries to, until the seventh anniversary of the Closing
Date, retain all books, records and other documents pertaining to the business
of the Companies and the Subsidiaries in existence on the Closing Date and to
make the same available for inspection and copying by the
15
Stockholders or any representative of the Stockholders at the expense of the
Stockholders during the normal business hours of Buyer upon reasonable request
and upon reasonable notice. No such books, records or documents shall be
destroyed after the seventh anniversary of the Closing Date by Buyer or any of
the Companies or their subsidiaries, without first advising the Stockholders in
writing and giving the Stockholders a reasonable opportunity to obtain
possession thereof.
Section 6.4. Cooperation for Tax Matters. Buyer and the Stockholders
shall cooperate fully, as and to the extent reasonably requested by the other
party, in connection with the preparation and filing of any tax returns with
respect to any of the Companies or the Subsidiaries (including the tax returns
to be filed by the Stockholders in respect of the Companies in respect of the
year end of the Companies) and any audit, litigation or other proceeding with
respect to any Taxes. Such cooperation shall include the retention and (upon the
other party's request) the provision of records and information that are
reasonably relevant to any such audit, litigation or other proceeding and making
employees available on a mutually convenient basis to provide additional
information and explanation of any material provided hereunder. Buyer agrees
(and shall cause the Companies and the Subsidiaries) to retain all books and
records with respect to Tax matters pertinent to the Companies or the
Subsidiaries relating to any taxable period beginning before the Closing Date
until the expiration of the statute of limitations (and, to the extent notified
by Buyer or the Stockholders, any extensions thereof) of the respective taxable
periods, and to abide by all record retention agreements entered into with any
taxing authority.
Section 6.5. Tax Returns and Payment.
(a) Except as otherwise expressly provided herein, the
Stockholders shall be responsible for, and shall indemnify and hold
Buyer, the Company and the Subsidiaries harmless from and against, all
Taxes of the Companies and the Subsidiaries attributable to the
Pre-Closing Tax Period, and Buyer, the Companies and the Subsidiaries
shall be responsible for, and shall indemnify and hold the Stockholders
harmless from and against, all Taxes of the Companies and their
Subsidiaries attributable to periods other than the Pre-Closing Tax
Period.
(b) Where it is necessary to apportion between the
Stockholders and Buyer the Tax liability of the Companies and their
Subsidiaries for a Straddle Period, such liability shall be apportioned
between the period deemed to end at the close of business on the
Closing Date and the period deemed to begin at the beginning of the day
immediately following the Closing Date on the basis of an interim
closing of the books, except that non-income Taxes that are calculated
on a periodic or annual basis shall be allocated on a daily basis.
(c) Buyer shall be responsible for preparing and filing all
tax returns of the Companies and their Subsidiaries which are due after
the Closing Date.
(d) Tax returns prepared and filed by Buyer with respect to a
Pre-Closing Tax Period or a Straddle Period shall be prepared in a
manner generally consistent with past practices to the extent
consistent with requirements of applicable law. Buyer shall provide the
Stockholders with a copy of such Pre-Closing Tax Period
16
tax returns and Straddle Period tax returns in the form proposed to be
filed by Buyer at least fifteen (15) business days in advance of the
due date for such tax returns and within a reasonable period of time
prior to the due date for all other tax returns. Buyer shall make such
corrections or changes to such Tax Returns as the Stockholders may
reasonably request.
(e) Buyer shall promptly notify Stockholders in writing upon
receipt by Buyer or the Companies or their Subsidiaries of notice of
any pending or threatened Tax audits or assessments that may affect the
Tax liabilities of the Companies or their Subsidiaries for which
Stockholders would be required to indemnify Buyer hereunder.
Stockholders shall have the right to represent any Company's or
Subsidiary's interests in any Tax audit or administrative or court
proceeding relating to the Pre-Closing Tax Period and to employ counsel
of its choice at its expense, subject to Buyer's right (i) to review
and approve any actions, decisions or proposed settlements that could
affect Buyer's and the Company's or Subsidiary's interests, with such
approval not being unreasonably withheld by Buyer; and, (ii) at Buyer's
option, to participate fully and equally in any such Tax audit or
administrative or court proceeding and to employ counsel of its choice
at its expense.
(f) Buyer shall pay to the Stockholders (i) all refunds of
Taxes received after the Closing Date that are attributable to Taxes
paid by the Companies or their Subsidiaries prior to the Closing Date
with respect to the Pre-Closing Tax Period, (ii) the portion of any Tax
refund received after the Closing Date that is attributable to Taxes
paid by the Company prior to the Closing Date with respect to any
Straddle Period (such portion allocated consistent with the principles
set forth in Section 6.5(b)) and (iii) any Taxes (including estimated
Taxes) paid by or on behalf of any of the Companies and the
Subsidiaries on or prior to the Closing Date in excess of the Taxes of
the Companies and the Subsidiaries in fact attributable to the
Pre-Closing Tax Period.
Section 6.6. Officers' and Directors' Indemnification . The
Stockholders and Buyer agree that all rights to exculpation and indemnification
existing in favor of, and all limitations on the personal liability of, the
directors, officers, employees of any of the Companies and the Subsidiaries (the
"Indemnified Persons") provided for in their organizational documents as in
effect as of the date hereof with respect to matters occurring prior to and
through the Closing, and specifically including the transactions contemplated
hereby, shall continue in full force and effect for a period of six (6) years
from the Closing; provided, however, that all rights to indemnification in
respect of any claims (each a "Claim") asserted or made within such period shall
continue until the disposition of such Claim. Following the Closing, Buyer shall
not, and shall not permit any of the Companies or the Subsidiaries to, amend or
modify their organizational documents, except as required by applicable law, if
the effect of such amendment or modification would be to lessen or otherwise
adversely affect the indemnification rights of such Indemnified Persons as
provided therein, and Buyer shall cause the Companies and the Subsidiaries to
advance expenses to each such Indemnified Person in connection with any
proceeding involving such Indemnified Person to the fullest extent so permitted
upon receipt of any undertaking required by law or in the organizational
documents thereof.
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Article VII - CONDITIONS TO CLOSING
-----------------------------------
Section 7.1. Conditions to Obligations of the Stockholders. The
obligations of the Stockholders to consummate the transactions contemplated by
this Agreement for the Closing shall be subject to the satisfaction or waiver,
at or prior to the Closing, of each of the following conditions:
(a) All covenants contained in this Agreement to be complied
with by Buyer on or before the Closing shall have been complied with in
all respects except where the failure to so comply would not have a
Buyer Material Adverse Effect, and the Stockholders shall have received
a certificate of Buyer to such effect signed by a duly authorized
officer of Buyer.
(b) Each of the representations and warranties of Buyer
contained in Article IV shall be true and correct in all material
respects as of the Closing Date as though made on and as of the Closing
Date; except as (i) would not, delay, hinder or prevent the
consummation of the transactions contemplated by this Agreement by
Buyer, or (ii) would not have in the aggregate a Buyer Material Adverse
Effect; and Buyer shall have delivered to the Stockholders a
certificate of Buyer dated as of the Closing Date to the effect that
the statements set forth in this Section 7.1(b) are true and correct.
(c) No Governmental Authority or court of competent
jurisdiction shall have enacted, issued, promulgated, enforced or
entered any statute, rule, regulation, injunction or other order
(whether temporary, preliminary or permanent) that is in effect and has
the effect of making the transactions contemplated by this Agreement
for the Closing illegal or otherwise restraining or prohibiting
consummation of such transactions.
(d) Parent shall have received a fairness opinion from Duff &
Phelps, LLC.
(e) The Buyer and Stockholders shall have entered into the
following agreements:
(i) a mutually acceptable supply agreement;
(ii) a mutually acceptable license for the use by
Stockholders and their Affiliates and franchisees of the marks
included in the Included Franchise Business;
(iii) a mutually acceptable letter agreement
regarding office space in Toronto; and
(iv) such other appropriate agreements and
instruments of sale, transfer or assignment as are necessary
to consummate the transaction contemplated by Section 5.4
hereof.
(f) The Stockholders and their subsidiaries that are not
included in the transaction contemplated hereby shall be released from
any continuing obligations under
18
any real estate, auto or other leases or guarantees relating primarily
to the Included Franchise Business.
(g) The Stockholders shall have received the resignations of
Aaron Serruya and Simon Serruya as officers of the Stockholders and any
of their subsidiaries (other than the Companies and the Subsidiaries)
and shall have received releases of all further obligations to either
such individuals, except, in the case of Aaron Serruya, as a director
of Parent or, in the case of either Aaron Serruya and Simon Serruya, as
a stockholder of Parent.
(h) The Buyer and Stockholders shall have entered into
mutually acceptable Noncompetition and Nonsolicitation Agreement.
Section 7.2. Conditions to Obligations of Buyer. The obligations of
Buyer to consummate the transactions contemplated by this Agreement for the
Closing shall be subject to the satisfaction or waiver, at or prior to the
Closing, of each of the following conditions:
(a) All covenants contained in this Agreement to be complied
with by the Stockholders on or before the Closing shall have been
complied with in all material respects, except where the failure to so
comply would not, individually or in the aggregate, have (A) a Material
Adverse Effect or (B) a Stockholder Material Adverse Effect, and Buyer
shall have received a certificate of the Stockholders to such effect
signed by a duly authorized officer thereof.
(b) Each of the representations and warranties of the
Stockholders contained in Article II and Article III hereof shall be
true and correct in all material respects as of the Closing Date as
though made on and as of the Closing Date; and the Stockholders shall
have delivered to Buyer a certificate of the Stockholders dated as of
the Closing Date to the effect that the statements set forth in this
Section 7.2(b) above are true and correct.
(c) No Governmental Authority or court of competent
jurisdiction shall have enacted, issued, promulgated, enforced or
entered any statute, rule, regulation, injunction or other order
(whether temporary, preliminary or permanent) which is in effect and
has the effect of making the transactions contemplated by this
Agreement for the Closing illegal or otherwise restraining or
prohibiting consummation of such transactions.
(d) The Stockholders shall have received the authorizations,
orders, approvals and consents of Governmental Authorities and third
parties described in Schedule 2.5(a) and in Part III of Schedule 2.5(b)
in form and substance reasonably satisfactory to Buyer (subject to
Section 5.3 above), except where the failure to so receive would not
have (A) a Material Adverse Effect or (B) a Stockholder Material
Adverse Effect; it being understood that none of the matters set forth
in Parts I or II of Schedule 2.5(b) shall be a condition to the
obligation of the parties to close the transactions contemplated
hereby.
19
(e) The Buyer and Stockholders shall have entered into a
mutually acceptable Transition Services Agreement.
(f) The Stockholders shall have caused all liens in favor of
JP Morgan Chase Bank, N.A. and other lenders on any of the assets of
the Included Franchise Business, the Company Shares or any equity
interests of the Companies in the Subsidiaries to be released and all
guarantees provided to JP Morgan Chase Bank, N.A. and any other lenders
by any of the Companies and the Subsidiaries to be terminated.
(g) The Buyer and Stockholders shall have entered into the
Supply Agreement in Sections 7.1(e)(i) above.
(h) The Stockholders shall have obtained a license for the
benefit of Schrafft's of New York, Inc. to continue to use the
Schrafft's name solely with respect to the location at the New York-New
York Hotel in Las Vegas, Nevada.
(i) The Buyer and Stockholders shall have entered into a
mutually acceptable Noncompetition and Nonsolicitation Agreement.
Article VIII - SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
--------------------------------------------------------------------------
Section 8.1. Survival. Subject to the limitations and other provisions
of this Agreement, the representations and warranties of the parties hereto
contained herein, as the case may be, shall survive the Closing and shall remain
in full force and effect until the first anniversary of the Closing Date, save
and except for the representation and warranties contained in Section 2.9, which
shall survive the Closing and remain in full force and effect until the
expiration of the statute of limitations with respect thereto.
Section 8.2. Indemnification by the Stockholders.
(a) The Stockholders agree, jointly and severally, subject to
the other terms and conditions of this Agreement, to indemnify Buyer
and its Affiliates, officers, directors and employees (each a "Buyer
Indemnified Party") against and hold them harmless to the extent of any
Losses resulting from (i) the breach of any representation or warranty
of the Stockholders contained in Articles II and III herein, (ii) any
breach of any covenant or agreement of the Stockholders contained
herein, (iii) failure to obtain the consents listed in Part I of
Schedule 2.5(b) and (iv) any Action arising on or prior to the third
anniversary of the Closing Date to the extent arising out of or
relating to the operation of the Included Franchise Business in the
United States prior to the Closing, whether or not disclosed on any
schedule hereto (any such Action, a "Stockholder Indemnified Action").
(b) The indemnification obligations of the Stockholders
pursuant to Section 8.2(a) shall be limited as follows:
20
(i) The Stockholders shall have no obligation to
provide any indemnification until the aggregate dollar amount
of all Losses that would otherwise be indemnifiable pursuant
to Section 8.2(a)(i) and (iii) exceeds $100,000 (the
"Threshold Amount"), and then only to the extent such
aggregate amount exceeds such Threshold Amount, provided,
however, that the Threshold Amount shall not apply to breaches
of Sections 2.2, 2.8 or Article III hereof (the "Excluded
Representations").
(ii) The Stockholders shall not be obligated to
indemnify any Buyer Indemnified Party pursuant to Section
8.2(a)(i) and (iii) (other than with respect to Losses arising
out of breach of any Excluded Representations) for any amount
of indemnifiable Losses in excess of 50% of Purchase Price in
the aggregate (the "Maximum Amount").
(iii) No indemnification shall be payable to a Buyer
Indemnified Party with respect to claims asserted by such
Buyer Indemnified Party pursuant to Section 8.2(a)(i) after
the first anniversary of the Closing Date (or, with respect to
Section 2.9, such later date as set forth in Section 8.1) and
no indemnification shall be payable to a Buyer Indemnified
Party with respect to claims asserted by a Buyer Indemnified
Party pursuant to Section 8.2(a)(iii) after the third
anniversary of the Closing Date.
(iv) The indemnification limitations set forth in
this Section 8.2(b) shall not apply to any indemnification
claims under Section 8.2(a)(ii).
(c) Payments by the Stockholders pursuant to Section 8.2(a)
shall be further limited to the amount of any liability or damage that
remains after deducting therefrom any insurance proceeds and any
indemnity, contribution or other similar payment actually received by
Buyer Indemnified Parties from any third party with respect thereto;
provided however, that a Buyer Indemnified Party shall not be obligated
to exhaust all of its remedies against applicable insurers, indemnitors
or contributors prior to seeking indemnification hereunder. The amount
of Losses otherwise recoverable under this Section 8.2 shall be
adjusted to the extent to which any insurance, indemnification,
contribution or other similar benefits or federal, state, local or
foreign Tax liabilities or benefits are realized by the Buyer
Indemnified Parties by reason of any Loss or indemnity payment
hereunder and to the extent Buyer Indemnified Parties recover any such
amounts after receiving payment hereunder from the Stockholders, Buyer
Indemnified Parties shall promptly remit such amounts to the
Stockholders in reimbursement of amounts previously paid.
(d) A Buyer Indemnified Party shall give the Stockholders
written notice of any claim, assertion, event or proceeding by or in
respect of a third party as to which such Buyer Indemnified Party may
request indemnification hereunder or as to which the Threshold Amount
may be applied as soon as is practicable and in any event within thirty
(30) days of the time that such Buyer Indemnified Party learns of such
claim, assertion, event or proceeding; provided, however, that the
failure to so notify the Stockholders shall not affect rights to
indemnification hereunder except to the extent that
21
the Stockholders are prejudiced by such failure. The Stockholders shall
have the right to direct, through counsel of its own choosing, the
defense or settlement of any such claim or proceeding at its own
expense. If the Stockholders elect to assume the defense of any such
claim or proceeding, the Stockholders shall consult with the Buyer
Indemnified Party for the purpose of allowing the Buyer Indemnified
Party to participate in such defense, but in such case the expenses of
the Buyer Indemnified Party shall be paid by the Buyer Indemnified
Party. A Buyer Indemnified Party shall provide and shall cause the any
of the Companies and their subsidiaries to provide, as applicable, the
Stockholders and counsel with access to its records and personnel
relating to any such claim, assertion, event or proceeding during
normal business hours and shall otherwise cooperate with the
Stockholders in the defense or settlement thereof, and the Stockholders
shall reimburse Buyer Indemnified Party for all its reasonable
out-of-pocket expenses in connection therewith. If the Stockholders
elect to direct the defense of any such claim or proceeding, Buyer
Indemnified Party shall not pay, or permit to be paid, any part of any
claim or demand arising from such asserted liability unless the
Stockholders consents in writing to such payment or unless the
Stockholders, subject to the last sentence of this Section 8.2(d),
withdraw from the defense of such asserted liability or unless a final
judgment from which no appeal may be taken by or on behalf of the
Stockholders is entered against Buyer Indemnified Party for such
liability. If the Stockholders fail to defend or if, after commencing
or undertaking any such defense, the Stockholders fail to prosecute or
withdraws from such defense, Buyer Indemnified Party shall have the
right to undertake the defense or settlement thereof, at the
Stockholders' expense. If the Buyer Indemnified Party assumes the
defense of any such claim or proceeding pursuant to this Section 8.2(d)
and proposes to settle such claim or proceeding prior to a final
judgment thereon or to forego any appeal with respect thereto, then the
Buyer Indemnified Party shall give the Stockholders prompt written
notice thereof, and the Stockholders shall have the right to
participate in the settlement or assume or reassume the defense of such
claim or proceeding.
(e) No Buyer Indemnified Party shall be entitled to any
indemnification hereunder with respect to any breach of any
representation, warranty or covenant with respect to which (i) any
director, officer, employee, representative or agent of Buyer or its
Affiliates had actual knowledge, at any time prior to the Closing, of
such breach, that such breach was threatened or of the events,
circumstances or conditions constituting or resulting in such breach,
or (ii) to the extent Buyer or such Buyer Indemnified Party could have,
with reasonable efforts, mitigated or prevented the Loss with respect
to such breach.
(f) Anything herein to the contrary notwithstanding, no breach
of any representation, warranty, covenant or agreement contained herein
shall give rise to any right on the part of Buyer or a Buyer
Indemnified Party, after the consummation of the transactions
contemplated hereby, to rescind this Agreement or any of the
transactions contemplated hereby.
(g) None of the Stockholders or any of their post-Closing
Affiliates shall have any liability under any provision of this
Agreement for any consequential, exemplary or punitive damages or any
multiple of damages or diminution in value.
22
Buyer and each Buyer Indemnified Party shall take all reasonable steps
to mitigate Losses for which indemnification may be claimed by them
pursuant to this Agreement upon and after becoming aware of any event
that could reasonably be expected to give rise to any such Losses.
Any liability for indemnification under this Section 8.2 shall be determined
without duplication of recovery by reason of the state of facts giving rise to
such liability constituting a breach of more than one representation, warranty,
covenant or agreement.
Section 8.3. Indemnification by Buyer.
(a) Buyer agrees, subject to the other terms and conditions of
this Agreement, to indemnify the Stockholders and their Affiliates,
officers, directors and employees (each a "Stockholder Indemnified
Party") against and hold them harmless from all Losses resulting from
(i) the breach of any representation or warranty of Buyer contained
herein, (ii) any breach of any covenant or agreement of Buyer contained
herein, (iii) failure to obtain the consents listed in Part II of
Schedule 2.5(b) and (iv) any Action arising out of or relating to the
Included Franchise Business, other than a Stockholder Indemnified
Action, whether arising before, on or after the Closing.
(b) The indemnification obligations of the Buyer pursuant to
Section 8.3(a) shall be limited as follows:
(i) The Buyer shall have no obligation to provide any
indemnification with respect to Losses that would otherwise be
indemnifiable pursuant to Section 8.3(a)(i) (solely with
respect to Losses arising out of breach of Section 4.4) and
(iii) until the aggregate dollar amount of such Losses exceeds
the Threshold Amount, and then only to the extent such
aggregate amount exceeds such Threshold Amount.
(ii) The Buyer shall have no obligation to provide
indemnification with respect to Losses that would otherwise be
indemnifiable pursuant to Section 8.3(a)(i) (solely with
respect to Losses arising out of breach of Section 4.4) and
(iii) in excess of the Maximum Amount.
(iii) No indemnification shall be payable to a
Stockholder Indemnified Party with respect to claims asserted
by such Stockholder Indemnified Party pursuant to Section
8.3(a)(i) after the first anniversary of the Closing Date (or,
with respect to Losses related to Taxes, until the expiration
of the statute of limitations with respect thereto) and no
indemnification shall be payable to a Stockholder Indemnified
Party with respect to claims asserted by a Stockholder
Indemnified Party pursuant to Section 8.3(a)(iii) after the
third anniversary of the Closing Date.
(iv) The indemnification limitations set forth in
this Section 8.3(b) shall not apply to any indemnification
claims under Section 8.3(a)(ii) or to
23
any Losses arising out of or related to a breach of any
representations or warranties of Buyer other than Section 4.4.
(c) Payments by Buyer pursuant to Section 8.3(a) shall be
limited to the amount of any liability or damage that remains after
deducting therefrom any insurance proceeds and any indemnity,
contribution or other similar payment actually recovered by Stockholder
Indemnified Parties from any third party with respect thereto; provided
however that the Stockholder Indemnified Parties shall not be obligated
to exhaust all remedies against applicable insurers or indemnitors or
contributors prior to seeking indemnification hereunder. The amount of
Losses otherwise recoverable under this Section 8.3 shall be reduced to
the extent to which any Federal, state, local or foreign tax
liabilities of the Stockholder Indemnified Parties, or any of its
respective affiliates is decreased by reason of any Loss in respect of
which such Stockholder Indemnified Party shall be entitled to indemnity
under this Agreement and to the extent Stockholder Indemnified Parties
recover any such amounts after receiving payment hereunder from the
Buyer, Stockholder Indemnified Parties shall promptly remit such
amounts to Buyer in reimbursement of amounts previously paid.
(d) A Stockholder Indemnified Party shall give Buyer written
notice of any claim, assertion, event or proceeding by or in respect of
a third party as to which such Stockholder Indemnified Party may
request indemnification hereunder or as to which the Threshold Amount
may be applied as soon as is practicable and in any event within thirty
(30) days of the time that such Stockholder Indemnified Party learns of
such claim, assertion, event or proceeding; provided, however, that the
failure to so notify Buyer shall not affect rights to indemnification
hereunder except to the extent that Buyer is actually prejudiced by
such failure. Buyer shall have the right to direct, through counsel of
its own choosing, the defense or settlement of any such claim or
proceeding at its own expense. If Buyer elects to assume the defense of
any such claim or proceeding, Buyer shall consult with the Stockholder
Indemnified Party, the Stockholder Indemnified Party may participate in
such defense, but in such case the expenses of the Stockholder
Indemnified Party shall be paid by the Stockholder Indemnified Party.
The Stockholder Indemnified Party shall provide Buyer with access to
its records and personnel relating to any such claim, assertion, event
or proceeding during normal business hours and shall otherwise
cooperate with Buyer in the defense or settlement thereof, and Buyer
shall reimburse the Stockholder Indemnified Party for all the
reasonable out-of-pocket expenses of such Stockholder Indemnified Party
in connection therewith. If Buyer elects to direct the defense of any
such claim or proceeding, the Stockholder Indemnified Party shall not
pay, or permit to be paid, any part of any claim or demand arising from
such asserted liability, unless Buyer consents in writing to such
payment or unless Buyer, subject to the last sentence of this Section
8.3(c), withdraws from the defense of such asserted liability, or
unless a final judgment from which no appeal may be taken by or on
behalf of Buyer is entered against the Stockholder Indemnified Party
for such liability. If Buyer fails to defend or if, after commencing or
undertaking any such defense, Buyer fails to prosecute or withdraws
from such defense, the Stockholder Indemnified Party shall have the
right to undertake the defense or settlement thereof, at Buyer's
expense. If the Stockholder Indemnified Party assumes the defense of
any such claim or proceeding pursuant to this Section 8.3(c) and
proposes to settle such claim or proceeding prior to a
24
final judgment thereon or to forego appeal with respect thereto, then
such Stockholder Indemnified Party shall give Buyer prompt written
notice thereof and Buyer shall have the right to participate in the
settlement or assume or reassume the defense of such claim or
proceeding.
(e) Anything herein to the contrary notwithstanding, no breach
of any representation, warranty, covenant or agreement contained herein
shall give rise to any right on the part of the Stockholders, after the
consummation of the transactions contemplated by this Agreement, to
rescind this Agreement or any of the transactions contemplated hereby.
(f) Buyer shall not have any liability under any provision of
this Agreement for any consequential, exemplary or punitive damages or
any multiple of damages or diminution of value. The Stockholders and
Stockholder Indemnified Parties shall take all reasonable steps to
mitigate Losses for which indemnification may be claimed by them
pursuant to this Agreement upon and after becoming aware of any event
that could reasonably be expected to give rise to any such Losses.
Any liability for indemnification under this Section 8.3 shall be determined
without duplication of recovery by reason of the state of facts giving rise to
such liability constituting a breach of more than one representation, warranty,
covenant or agreement.
Section 8.4. Treatment of Indemnity Payments. All payments made by the
Stockholders or Buyer, as the case may be, to or for the benefit of the other
parties pursuant to this Article VIII shall be treated as adjustments to the
Purchase Price for tax purposes, and such agreed treatment shall govern for
purposes of this Agreement.
Section 8.5. Remedies Exclusive.
(a) Buyer hereby acknowledges and agrees that prior to the
Closing, Buyer shall have no right or remedy to take any action in
respect of, and the Stockholders shall have no liability to Buyer in
respect of, any breach by the Stockholders of any of their
representations or warranties contained herein or a material failure to
comply with any of their covenants, conditions or agreements contained
herein, except (i) to terminate this Agreement pursuant to Section 9.1
hereof, in which event, the Stockholders shall thereupon have no
obligation or liability to Buyer whatsoever hereunder or (ii) seek
specific performance or injunctive relief.
(b) From and after the Closing, the rights of the parties to
indemnification relating to this Agreement or the transactions
contemplated hereby shall be strictly limited to those contained in
this Article VIII, and such indemnification rights shall be the
exclusive remedies of the parties subsequent to the Closing Date with
respect to any matter in any way relating to this Agreement or arising
in connection herewith. To the maximum extent permitted by law, the
parties hereby waive all other rights and remedies with respect to any
matter in any way relating to this Agreement or arising in connection
herewith, whether under any laws (including any right or remedy under
the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901 et
seq., the
25
Comprehensive Environmental Response Compensation and Liability Act, 42
U.S.C. Section 9602 et seq., or any other Environmental Law), at common
law or otherwise. Except as provided in this Article VIII, no claim,
action or remedy shall be brought or maintained by any party against
any other party, and no recourse shall be brought or granted against
any of them, by virtue of or based upon any alleged misstatement or
omission respecting an inaccuracy in or breach of any of the
representations, warranties or covenants of any of the parties hereto
set forth or contained in this Agreement, except to the extent that the
same shall have been the result of fraud in the inducement by any party
hereto, in which case the other parties hereto shall have, in addition
to the remedies set forth in this Article VIII (which remedies therein
shall be the sole legal remedies of such other parties in respect of
such fraud in the inducement), such equitable remedies to which such
other parties may be otherwise entitled, including the ability to apply
to any court of competent jurisdiction for specific performance or
injunctive relief.
Article IX - TERMINATION
------------------------
Section 9.1. Termination. This Agreement may be terminated:
(a) at any time, by the mutual written consent of the
Stockholders and Buyer;
(b) by the Stockholders, if it is not then in material breach
of any term of this Agreement, upon written notice to Buyer, upon a
material breach of any representation, warranty or covenant of Buyer
contained in this Agreement, provided that such breach is not capable
of being cured or has not been cured within thirty (30) days after the
giving of notice thereof by the Stockholders to Buyer;
(c) by Buyer, if it is not then in material breach of any term
of this Agreement, upon written notice to the Stockholders, upon a
material breach of any representation, warranty or covenant of the
Stockholders contained in this Agreement, provided that such breach is
not capable of being cured or has not been cured within thirty (30)
days after the giving of notice thereof by Buyer to the Stockholders;
and
(d) by Buyer or the Stockholders at any time after December
31, 2005, if the Closing has not occurred as of such date and the party
seeking termination is not then in breach of any of the terms of this
Agreement.
Section 9.2. Effect of Termination. In the event of termination of this
Agreement as provided in Section 9.1, this Agreement shall forthwith become void
and there shall be no further liability or obligations hereunder on the part of
any party hereto or their respective Affiliates except for the obligations of
the parties pursuant to this Section 9.2 and Article X; provided, however, that
nothing herein shall relieve either party from liability for any willful breach
of this Agreement existing at the time of such termination.
Section 9.3. Waiver. At any time prior to the Closing, Buyer and the
Stockholders may (a) extend the time for the performance of any of the
obligations or other acts of the other
26
party hereto, (b) waive any inaccuracies in the representations and warranties
of the other party contained herein or in any document delivered by the other
party pursuant hereto or (c) waive compliance with any of the agreements of the
other party or conditions to its own obligations contained herein. Any such
extension or waiver shall be valid only if set forth in an instrument in writing
signed by the party to be bound thereby. Waiver of any term or condition of this
Agreement by a party shall not be construed as a waiver of any subsequent breach
or waiver of the same term or condition by such party, or a waiver of any other
term or condition of this Agreement by such party.
Article X - GENERAL PROVISIONS
------------------------------
Section 10.1. Notices. All notices, requests, claims, demands and other
communications under this Agreement will be in writing and will be deemed given
if delivered personally, sent by overnight courier (providing proof of
delivery), or via facsimile to the parties at the following addresses (or at
such other address for a party as specified by like notice):
(a) if to the Stockholders, to:
Integrated Brands
4175 Veterans Highway
Ronkonkoma, NY 11779
Attention: David J. Stein
Fax: (631) 737-9792
With a copy to:
Goodwin Procter LLP
599 Lexington Avenue
New York, NY 10022
Attention: Lori S. Smith, Esq.
Fax: 212-355-3333
(b) If to Buyer, to:
International Franchise Corp.
8300 Woodbine Avenue
Suite 500
Markham, Ontario L3R 9Y7
Attention: Aaron Serruya
Fax: 905-479-5235
27
with a copy to:
Bernard Gropper
Barrister and Solicitor
Suite 300
261 Davenport Road
Toronto, Ontario M5R 1K3
Fax: 416-487-3002
Section 10.2. Fees and Expenses. Except as provided otherwise herein,
each of Buyer and the Stockholders shall bear their own expenses in connection
with the negotiation and the consummation of the transactions contemplated by
this Agreement.
Section 10.3. Certain Definitions. For purposes of this Agreement:
(a) An "Affiliate" of any Person means another Person that
directly or indirectly, through one or more intermediaries, controls,
is controlled by, or is under common control with, such first Person;
(b) "Buyer Material Adverse Effect" means a material adverse
effect on the ability of Buyer to perform its obligations under this
Agreement;
(c) "GAAP" means generally accepted accounting principles,
consistently applied;
(d) "Losses" of a Person means any and all losses,
liabilities, damages, claims, awards, judgments, costs and expenses
(including reasonable attorneys' fees) actually suffered or incurred by
such Person;
(e) "Material Adverse Effect" means a material adverse effect
on the financial condition or business of the Companies and their
subsidiaries, taken as a whole, except for any such effects resulting
from (i) this Agreement, the transactions contemplated hereby or the
announcement thereof, (ii) changes in general economic or political
conditions or the securities markets in general, or (iii) changes,
after the date of this Agreement, in conditions generally applicable to
businesses in the same industries of the Companies and their
subsidiaries including (A) changes in laws generally applicable to such
businesses or industry and (B) changes in U.S. or Canadian GAAP or its
application;
(f) "Person" means an individual, corporation, partnership,
limited liability company, joint venture, association, trust,
unincorporated organization or other entity;
(g) "Pre-Closing Tax Period" means all tax periods ending on
or before the Closing Date and the portion of any Straddle Period which
precedes and includes the Closing Date;
28
(h) "Stockholder Material Adverse Effect" means a material
adverse effect on the ability of the Stockholders to perform their
obligations under this Agreement;
(i) "Straddle Period" means a taxable year or period beginning
before the Closing Date and ending after the Closing Date; and
(j) "Taxes" means all U.S. or Canadian taxes imposed of any
nature including any United States (whether federal, territorial, state
or local), Canadian (whether federal, territorial, provincial or local)
or foreign income tax, alternative or add-on minimum tax, profits or
excess profits tax, franchise tax, gross income, adjusted gross income
or gross receipts tax, employment related tax (including employee
withholding or employer payroll tax or employer health tax), capital
tax, real or personal property tax or ad valorem tax, sales or use tax,
excise tax, stamp tax or duty, any withholding or back up withholding
tax, value added tax, GST, prohibited tax, premiums tax, occupation
tax, customs and import duties, together with any interest or any
penalty, addition to tax or additional amount imposed by any
Governmental Authority responsible for the imposition of any such tax
or in respect of or pursuant to any United States (whether federal,
territorial, state or local), Canadian (whether federal, territorial,
provincial or local) or other applicable law.
Section 10.4. Interpretation. When a reference is made in this
Agreement to an Article, Section, Schedule or Exhibit, such reference will be to
an Article or Section of, or a Schedule or Exhibit to, this Agreement unless
otherwise indicated. The table of contents and headings contained in this
Agreement are for reference purposes only and will not affect in any way the
meaning or interpretation of this Agreement. Whenever the words "include",
"includes" or "including" are used in this Agreement, they will be deemed to be
followed by the words "without limitation." The words "hereof," "herein" and
"hereunder" and words of similar import when used in this Agreement will refer
to this Agreement as a whole and not to any particular provision of this
Agreement. All terms used herein with initial capital letters have the meanings
ascribed to them herein and all terms defined in this Agreement will have such
defined meanings when used in any certificate or other document made or
delivered pursuant hereto unless otherwise defined therein. The definitions
contained in this Agreement are applicable to the singular as well as the plural
forms of such terms and to the masculine as well as to the feminine and neuter
genders of such term. Any agreement, instrument or statute defined or referred
to herein or in any agreement or instrument that is referred to herein means
such agreement, instrument or statute as from time to time amended, modified or
supplemented, including (in the case of agreements or instruments) by waiver or
consent and (in the case of statutes) by succession of comparable successor
statutes and references to all attachments thereto and instruments incorporated
therein. References to a Person are also to its permitted successors and
assigns.
Section 10.5. Counterparts. This Agreement may be executed in one or
more counterparts, all of which will be considered one and the same agreement
and will become effective when one or more counterparts have been signed by each
of the parties and delivered to the other parties.
29
Section 10.6. Amendments. This Agreement may not be amended or
modified, nor may compliance with any condition or covenant set forth herein be
waived, except by a writing duly and validly executed by Buyer and the
Stockholders, or in the case of a waiver, the party waiving compliance.
Section 10.7. Entire Agreement; Severability. This Agreement (including
the exhibits, schedules, documents and instruments referred to herein)
constitute the entire agreement, and supersede all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter of this Agreement. If any term, condition or other provision of
this Agreement is found to be invalid, illegal or incapable of being enforced by
virtue of any rule of law, public policy or court determination, all other
terms, conditions and provisions of this Agreement shall nevertheless remain in
full force and effect.
Section 10.8. Third Party Beneficiaries. Except as expressly provided
in this Agreement, each party hereto intends that this Agreement shall not
benefit or create any right or cause of action in or on behalf of any Person
other than the parties hereto.
Section 10.9. Governing Law. This Agreement will be governed by, and
construed in accordance with, the laws of the Province of Ontario and the
federal laws of Canada applicable therein, regardless of the laws that might
otherwise govern under applicable principles of conflict of laws.
Section 10.10. Assignment. Neither this Agreement nor any of the
rights, interests or obligations under this Agreement may be assigned, in whole
or in part, by operation of law or otherwise by the parties hereto. Any
assignment in violation of the preceding sentence will be void. Subject to the
preceding sentence, this Agreement will be binding upon, inure to the benefit
of, and be enforceable by, the parties and their respective successors and
assigns.
Section 10.11. Consent to Jurisdiction; Waiver of Jury Trial. The
parties agree that jurisdiction and venue in any action brought by any party
pursuant to this Agreement, any related documents or the transactions
contemplated hereby or thereby shall lie exclusively in the applicable court
located in the Province of Ontario. By execution and delivery of this Agreement,
each party irrevocably submits to the exclusive jurisdiction of such courts for
itself and in respect of its property with respect to such action. The parties
irrevocably agree that venue would be proper in such court, and hereby waive any
objection that such court is an improper or inconvenient forum for the
resolution of such action. The parties further agree that the mailing by
certified or registered mail, return receipt requested, of any process required
by any such court shall constitute valid and lawful service of process against
them, without necessity for service by any other means provided by statute or
rule of court.
EACH OF THE PARTIES HERETO HEREBY WAIVES TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY WITH
RESPECT TO ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN
CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT. EACH OF THE PARTIES HERETO HEREBY (A) CERTIFIES THAT NO
REPRESENTATIVE, AGENT OR ATTORNEY OF THE OTHER PARTY HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK
TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES
30
THAT IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT, AS APPLICABLE, BY, AMONG OTHER THINGS, THE
MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 10.11.
Section 10.12. Mutual Drafting. The parties hereto are sophisticated
and have been represented by attorneys throughout the transactions contemplated
hereby who have carefully negotiated the provisions hereof. As a consequence,
the parties do not intend that the presumptions of laws or rules relating to the
interpretation of contracts against the drafter of any particular clause should
be applied to this Agreement or any agreement or instrument executed in
connection herewith, and therefore waive their effects.
Section 10.13. Remedies. It is specifically understood and agreed that
any breach of the provisions of this Agreement or any other agreement executed
and delivered pursuant to this Agreement by any party hereto will result in
irreparable injury to the other parties hereto, that the remedy at law alone
will be an inadequate remedy for such breach, and that, in addition to any other
remedies which they may have, such other parties may enforce their respective
rights by actions for specific performance (to the extent permitted by law).
[Remainder of page intentionally left blank]
31
IN WITNESS WHEREOF, the parties hereto have caused this Stock Purchase
and Sale Agreement to be signed by their respective officers thereunto duly
authorized, all as of the date first written above.
STOCKHOLDERS:
COOLBRANDS INTERNATIONAL INC.
By: ("Signed" David J. Stein)
-------------------------------
Name: David J. Stein
Title: President
INTEGRATED BRANDS INC.:
By: ("Signed" Gary P. Stevens)
--------------------------------
Name: Gary P. Stevens
Title: President
BUYER:
INTERNATIONAL FRANCHISE CORP.
By: ("Signed" Aaron Serruya)
-------------------------------
Name: Aaron Serruya
Title: President
Signature Page to Purchase Agreement
SCHEDULES TO
STOCK PURCHASE AND SALE AGREEMENT
Introduction:
- -------------
These disclosure schedules (the "Schedules") are being delivered by
CoolBrands International Inc. ("CoolBrands") and Integrated Brands, Inc.
("Integrated") as Stockholders pursuant to the Stock Purchase and Sale
Agreement, dated as of December 23, 2005, by and among International Franchise
Corp., as Buyer ("Buyer"), CoolBrands and Integrated (the "Agreement").
Capitalized terms used herein and not otherwise defined shall have the
respective meanings ascribed to such terms in the Agreement.
The disclosure of any information shall not be deemed to constitute
an acknowledgment that such information is required to be disclosed in
connection with the representations and warranties made by the Stockholders in
the Agreement or that such information is material, nor shall such information
be deemed to establish a standard of materiality, nor shall it be deemed an
admission of any liability of, or concession as to, any defense available to the
Stockholders. The section number headings used in these Schedules correspond to
the section numbers in the Agreement and any information disclosed in any
section of these Schedules shall be deemed to be disclosed and incorporated into
any other section of these Schedules where such disclosure would be appropriate
and reasonably apparent.
These Schedules are qualified in their entirety by reference to
specific sections of the Agreement and are not intended to constitute, and shall
not be construed as constituting, representations or warranties of the
Stockholders, except as and to the extent expressly provided in the Agreement.
The information contained herein is being provided on a confidential
basis and may not be disclosed except with the prior written consent of the
Stockholders.
Schedule 2.1 Organization and Good Standing
None.
Schedule 2.2 Capitalization
None.
Schedule 2.3 Litigation
None.
Schedule 2.4 Intellectual Property
Bresler's
- ---------
1. Bresler's (1513125)
2. Bresler's Ice Cream & Yogurt (1603940)
I Can't Believe It's Yogurt
- ---------------------------
1. I Can't Believe It's Yogurt (1358561 and 1634273)
2. I Can't Believe It's Yogurt! & Design (1580343 and 1393438)
3. Miscellaneous Design (Bubble Talk Design)
Swensen's
- ---------
1. Swensen's: Algeria (048185), Argentina (1604630, 1169801), Australia
(B435458, B435460, B435459, B435457), Bahamas (10983, 11312), Barbados
(81/2863), Benelux (426283, 385959, 404070, 358479), Bolivia (48709A,
48708A, 48710A), Chile (712751, 475207), China (293320, 239607,
239606, 239608), Colombia (277357), Cuba (122502, 112501), Denmark (VR
198502513), Dominican Republic (36721, 37894), El Salvador (165),
France (1551753), Germany (1024239), Greece (78241), Guatemala (48756,
48669), Haiti (66/99, 65/99), Honduras (48178, 551), Hong Kong
(474/85), Iceland (138/1985), Indonesia (353921, 204511), Ireland
(B112838, B114369), Israel (52570, 52887), Italy (374844), Japan
(1807878, 1444196), Kingdom of Cambodia (7322, 7323), Republic of
Korea (398783, 40341), Kuwait (17731, 13325), Laos (4538), Lebanon
(70173), Macau (00638), Malaysia (84003175), Malaysia/West Malaya
(M/81267), Morocco (36338), Myanmar (IV53722001), New Zealand (153274,
186876, 139487), Oman (9494, 9493), Panama (31156, 37362), Papua New
Guinea (A54191, A54190, A 54189, A54192), Peru (3802, 1085),
Philippines (65860), Portugal (228734), Puerto Rico (25240), Qatar
(2573), Saudi Arabia (117/35, 131/100), Singapore (78970, T9208179A),
Spain (908799, 908798), Sri Lanka (46774, 47652), Switzerland
(300639), Taiwan (877522, 121374), Thailand (78542, KOR15754),
Trinidad and Tobago (14235), Tunisia (EE.85.162), Turkey (84484),
United Arab Emirates (2011, 2010), United Kingdom (1277053), United
States (1195836, 1034008, 1195835), Venezuela (18900-D, 111994-F),
Vietnam (15637)
2. Swensen's Design: Hong Kong (1968/1980), Taiwan (883365, 124366),
Thailand (KOR148158)
3. Swensen's & Design: United States (1257441), Vietnam (15636)
4. Swensen's and Design: United States (1146477)
5. Swensen's & Sundae Design: Australia (B323163), Fiji (17676), Finland
(89061), Hong Kong (1967/1980), Indonesia (285697), Japan (1701078),
Kingdom of Cambodia (7324, 7325), Laos (4540), Malaysia/West Malaya
(M81268), Myanmar (IV53732001), New Zealand (144821), Singapore
(78971), Sweden (181149), Thailand (KOR148158), United Kingdom
(B1165026, B1229351), Vietnam (15635)
6. Swensen's Sundae Design: Denmark (3034/1982), Japan (3167748)
7. Swensen's & Stained Glass Design: Australia (A333954), Brunei
Darussalam (9280), Hong Kong (351/1981), Japan (1701077),
Malaysia/West Malaya (M81266), Portugal (202024), Singapore (78969)
8. Swensen's In Stained Glass Design: Australia (A323162), Malaysia
(1275/79), Malaysia - Sarawak (19483)
9. Swensen's Ice Cream: United States (975174)
10. Swensen's Ice Cream Factory: Japan (1701079)
11. Swensen's In Chinese Characters: Hong Kong (1857/83), Singapore
(3952/84)
12. Swensen's Logo: Taiwan (134036, 883366)
13. Swens: Italy (45345345345), Singapore (T9208180E)
14. Swensen's Sundae Device: Norway (114427)
15. Earle Swensen's Ice Cream Est. 1948 & Design: United States
(Published, 78/426213)
16. In The Rich Tradition Of Old San Francisco: United States (1130961)
17. Swensen's In The Rich Tradition Of Old San Francisco & Design: United
States (1150568)
[REDACTED]
According to publicly available information, Yogen Fruz World Wide, Inc.
acquired the assets of Ice Cream Churn Inc. and Ice Cream Churn Enterprises Inc.
in January 1998. It appears, however, that Ice Cream Churn Inc. is still listed
in the Missouri trademark registration files as the owner of two related Ice
Cream Churn marks.
Schedule 2.5 Consents and Approvals
(a)
None.
(b)
Part I
Lease Agreement, dated July 19, 2002, by and between Fashion Show Expansion LLC
and Swensen's Las Vegas, Inc. t/a Tropicana Smoothies, Juices & More.
Lease Agreement, dated September 7, 1979, by and between Paradise Village
Investment Company and Loel Ice Cream (now under Swensen's of Arizona).
Part II
Lease Agreement, dated July 10, 2001, by and between Mare-Bear, Inc. and
CoolBrands Operating Company. (Stardust).*
The Companies own 50% of Schrafft's of Nevada, Inc. (document mistakenly
refers to Schrafft's of New York). The consent of the owner of the
remaining 50% may be required with respect to any transfers thereof.*
Part III
Consent of JP Morgan Chase.
(*) [REDACTED]
Schedule 2.8 Encumbrances
1. JP Morgan Chase has a lien on substantially all of the assets of the
Stockholders. Such lien will be released with respect to the assets of
the Included Franchise Business as of the closing. In addition, the
Companies and Subsidiaries are guarantors of the loans from JP Morgan
Chase, which will be terminated as of the closing.
2. Yogen Fruz Canada Inc. Lien File No. 615484161, securing Holand
Leasing 1995 Ltd.'s interest in a 2003 Yukon Denali.
3. Yogen Fruz Canada Inc. Lien File No. 613103652, securing Holand
Leasing 1995 Ltd.'s interest in a 2005 Porsche Cayenne.
4. Yogen Fruz Canada Inc. Lien File No. 611890497, securing Holand
Leasing 1995 Ltd.'s interest in a 2003 Yukon Denali.
5. Yogen Fruz Canada Inc. Lien File No. 60330207, securing Holand Leasing
1995 Ltd.'s interest in a 2004 Porsche 911.
6. Yogen Fruz Canada Inc. Lien File No. 895140684, securing Holand
Leasing 1995 Ltd.'s interest in a 2003 Mercedes SL55.
7. Yogen Fruz Canada Inc. Lien File No. 890210664, securing Holand
Leasing 1995 Ltd.'s interest in a 2003 Mercedes SL500.
8. Yogen Fruz Canada Inc. Lien File No. 890153838, securing Holand
Leasing 1995 Ltd.'s interest in a 2002 Chevrolet Suburban.
9. Yogen Fruz Canada Inc. Lien File No. 606673143, securing Holand
Leasing 1995 Ltd.'s interest in a 2004 Bentley Cont GT.
10. Yogen Fruz Canada Inc. Lien File No. 605854953, securing Holand
Leasing 1995 Ltd.'s interest in a 2005 Dodge Caravan.
Schedule 2.09 Taxes
None.
Schedule 2.10 Included Franchise Business Trust Funds
The Included Franchise Business Trust Funds consist of the lease deposits set
forth below and all amounts in the Yogen Fruz Canada, Inc. advertising trust
account. As of November 30, 2005, the amount was $[REDACTED].
- ---------------------- --------------------------- ---------------------------------- ---------- ---------------
CURRENT
- ---------------------- --------------------------- ---------------------------------- ---------- ---------------
SHOP # DEPOSITOR MALL NAME STATE BALANCE
- ---------------------- --------------------------- ---------------------------------- ---------- ---------------
[REDACTED]
Schedule 4.2 Conflicts of Buyer
None.
Schedule 4.3 Buyer Consents
(a) Governmental Consents
None.
(b) Third-Party Consents
None.
Schedule 4.4 Buyer Litigation
None.
Schedule 6.1 U.S. Hired Employees and Severance Arrangements
U.S. Hired Employees (in addition to employees at stores owned or operated by
the Companies or their subsidiaries): [REDACTED]