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EXHIBIT 10.19
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is entered
into this 14th day of July, 2000, by and among GREAT AMERICAN BARBECUE COMPANY,
a Missouri corporation (the "Seller"), the shareholders of Seller whose
signatures appear on the signature page to this Agreement (collectively, the
"Principal Shareholders"), THE GREAT AMERICAN BARBECUE FOOD COMPANY, a Delaware
corporation (the "Buyer"), and INTERNATIONAL MENU SOLUTIONS CORPORATION, a
Nevada corporation (the "Parent").
BACKGROUND:
A. The Seller is the owner of all of the outstanding common stock of
SevenJNev, Inc., a Nevada corporation ("SevenJNev"), and a one percent (1%)
general partnership interest in SevenJTex, Ltd., a Texas limited partnership
("SevenJTex," and collectively with SevenJNev, the "Acquired Subsidiaries") of
which SevenJNev holds a 99% limited partnership interest.
B. The Parent has formed the Buyer as its wholly owned subsidiary for
the purpose of negotiating to acquire substantially all of the assets and
business of Seller, including without limitation the Seller's interests in the
Acquired Subsidiaries.
C. The Seller and the Buyer have reached an understanding with
respect to the Seller's sale to Buyer of substantially all of Seller's assets
solely in consideration for (i) the Buyer's assumption of specifically disclosed
liabilities and obligations of Seller, and (ii) the Buyer's delivery to Seller
of voting stock of the Parent (collectively, the "Transaction").
D. The respective Boards of Directors of Seller, Buyer and Parent
have approved the execution and delivery of this Agreement and the completion of
the Transaction as being in the best interests of such corporations and their
respective shareholders, subject to the approval of the Transaction by the
shareholders of the Seller.
E. The Principal Shareholders have entered into this Agreement to
induce the Buyer and Parent to complete the Transaction and to evidence their
commitment to vote all stock of the Seller owned by them in favor of the
Transaction, subject to the terms and conditions set forth in this Agreement.
F. The parties intend that the Transaction shall constitute a
reorganization within the meaning of Section 368(a)(1)(C) of the Code (as
defined in Section 3.19 below).
NOW, THEREFORE, in consideration of these premises, the covenants and
agreements herein contained, and other good and valuable consideration, the
receipt and sufficiency of which hereby are acknowledged, the parties agree as
follows:
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Article 1
Purchase and Sale of Assets
1.1 Assets to be Sold. On the Closing Date (as defined in Article 8
hereof), subject to the terms and conditions set forth in this Agreement, Seller
shall sell to the Buyer, and the Buyer shall purchase from Seller, all of the
following categories of assets and properties of the Seller as of the Closing
Date, whether or not reflected on the books and records of the Seller
(collectively, the "Assets"), free and clear of all liens, mortgages, claims and
encumbrances other than Permitted Liens as defined in Section 3.7 below:
(a) All inventory of raw materials, work-in-process and
finished goods, and all packaging and shipping inventory of Seller;
(b) All accounts receivable and notes receivable of Seller, all
rebates due Seller and all other amounts refundable to or realizable by Seller
in connection with any aspect of its business, whether now existing or hereafter
arising, including without limitation the proceeds of insurance and amounts
receivable under interest rate protection arrangements;
(c) Except for a cash reserve (the "Cash Reserve") of $35,000
to be retained by Seller to satisfy the obligations set forth on Schedule 1.1(c)
(which amount and Schedule may be modified by mutual agreement of Seller and
Buyer prior to Closing), all cash, cash equivalents, prepaid expenses and other
current assets of Seller and the rights to any portion of the Cash Reserve
remaining unused after the date of the initial post-Closing adjustment payment
(or date on which it is determined that the adjustment is zero) pursuant to
Section 1.2(c)(ii) below;
(d) All machinery, equipment, vehicles, furniture, furnishings,
leasehold improvements, computer equipment and peripherals, and related spare
parts and supplies of Seller, together with all manuals, maintenance records,
written warranties and other similar documents relating thereto;
(e) All real property and interests in real property owned by
Seller, if any, together with all improvements, additions and systems attached
thereto or a part thereof;
(f) All right, title and interest of Seller in and to all
leases of real property or tangible personal property, if any, to which Seller
is a party and which are disclosed in this Agreement, including the schedules
hereto;
(g) All right, title and interest of Seller in and to
agreements by which any current or former employee or other third party agrees
to maintain the confidentiality of nonpublic information concerning Seller, or
to refrain from competing with Seller, or to refrain from soliciting the
employees or customers of Seller;
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(h) All right, title and interest of Seller in and to all other
executory contracts and commitments of Seller which are assumed by Buyer in
accordance with Section 2.1 below;
(i) All right, title and interest of Seller in and to its
corporate name and derivatives thereof, the "GABCO" name and logo, all
trademarks, trade names, trade dress, patents, copyrights, franchises,
discoveries, recipes, techniques, formulas, product formulations and other
know-how, all applications and licenses therefor, and all goodwill of Seller
relating thereto, used or usable in the Seller's business;
(j) All of Seller's designs, models, prototypes, plans,
specifications, drawings and everything related thereto;
(k) All of Seller's sales materials, catalogs, and advertising
materials;
(l) All records and files pertaining to Seller's business,
customers and suppliers, including, without limitation, sales records,
correspondence with customers, customer files and account histories, and records
of purchases from and correspondence with suppliers;
(m) All rights, claims, causes of action, privileges and
defenses of Seller against (i) any present or former insurer of risks relating
to the operations, liabilities, facilities, business or work force of the Seller
or the Acquired Subsidiaries, and (ii) any other third party with respect to any
of the other assets listed in this Section 1.1 and/or any of the Assumed
Liabilities;
(n) One hundred percent (100%) of the outstanding common stock
of SevenJNev; and
(o) The Seller's one percent (1%) general partnership interest
and related capital account in SevenJTex, together with all right, title and
interest of Seller under the certificate of limited partnership, limited
partnership agreement or other written instrument setting forth the rights and
privileges of the general and limited partners of SevenJTex; and
(p) All other assets of Seller of any kind or description,
excluding only the Seller's right to receive the consideration payable by Buyer
and Parent hereunder, and the Seller's right, title and interest in and to this
Agreement and each other agreement or instrument executed and delivered for the
benefit of Seller pursuant to the completion of the Transaction, and the
Seller's right to assert any claim for the enforcement of any of the foregoing.
The Assets identified in paragraphs (f), (g) and (h) are referred to herein
as the "Executory Contracts").
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1.2 Purchase Price.
(a) Amount. The aggregate consideration to be paid by Buyer to
the Seller for the Assets shall consist entirely of (i) one million five hundred
thousand (1,500,000) shares of common stock of Parent, par value $0.001 per
share (the "Parent Common Stock"), subject to reduction by the aggregate effect
of fractions of shares which are paid in cash and by the adjustment set forth in
Section 1.2(c), plus (ii) the additional shares of Parent Common Stock, if any,
issuable under Section 1.5 below, plus (iii) the assumption of the Assumed
Liabilities identified in Section 2.1 below. At the Closing, (A) two hundred
twenty-five thousand (225,000) shares of the Parent Common Stock shall be
delivered to Firstar Bank Missouri N.A. as escrow agent ("Escrow Agent") for the
parties pursuant to an Escrow Agreement substantially in the form attached
hereto as Exhibit A (the "Escrow Agreement"), such shares to be held pending
agreement on or determination by an arbitrator of the adjustment referenced in
Section 1.2(c) below, and ultimately distributed as set forth in the Escrow
Agreement and this Agreement, and (B) the remaining one million two hundred
seventy-five thousand (1,275,000) shares of Parent Common Stock shall be
delivered to the Seller Nominee identified in Section 1.2(b) below.
(b) Allocation. At the Closing, Seller shall deliver to Buyer a
list of all shareholders of Seller as of the Closing, which list shall be
certified by Seller's chief executive officer as accurately reflecting the
names, last known addresses and tax identification numbers of all shareholders
of the Seller as of the Closing (the "Shareholder Certification"). Prior to the
Closing, Seller and Buyer shall designate Liberty Transfer Corporation, the
transfer agent for Parent ("Transfer Agent") to receive from Buyer, for the
benefit of the Seller's shareholders, (i) certificates evidencing the shares of
Parent Common Stock required to be delivered hereunder (other than shares being
deposited pursuant to the Escrow Agreement), to be issued in the name of the
shareholders of Seller, and (ii) such amounts of cash as shall be required for
payment in lieu of fractional shares of Parent. Parent hereby undertakes to
deliver or cause to be delivered to the Transfer Agent such shares of Parent
Common Stock and such cash, and such delivery shall constitute delivery by Buyer
for purposes of this Agreement. As soon as practicable after the Closing, the
Transfer Agent shall deliver the cash paid in lieu of fractional shares of
Parent Common Stock to the shareholders of Seller, on behalf of Seller, as a
liquidating distribution, in proportion to their holdings of stock of Seller as
reflected on the Shareholder Certification, and shall hold the certificates
evidencing shares of Parent Common Stock in accordance with the terms of the
Registration Agreement, unless physical delivery of such certificate is
requested by a shareholder of Seller in his or her transmittal letter described
in Section 3(a) below.
(c) Adjustments Based on Working Capital Requirements. The
purchase price of the Assets shall be subject to adjustment after the Closing as
set forth in this Section 1.2(c). The definition of Working Capital Deficit is
contained in subsection (viii) of this Section 1.2(c).
(i) Projected Statements and Working Capital Deficit.
Attached hereto as Schedule 1.2(c) are projected financial
statements of the Buyer as of and for the fourteen month period
ending July 31, 2001 (the "Projected Financial
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Statements"). The Projected Financial Statements have been
developed jointly by the Seller and the Buyer, assume annualized
net sales of $24,000,000, and specify the amount of the projected
Working Capital Deficit as of the end of each calendar month
during such period. In this Section 1.2(c), the term "Three Month
Period" refers to the period of three full calendar months
immediately following the month in which the Closing occurs.
(ii) Initial Postclosing Adjustment. During the thirty
(30) day period following completion of Buyer's financial
statements for the Three Month Period, the Buyer and Seller
Representative, acting in good faith, (A) shall jointly reach
agreement on the accuracy of such statements (as so agreed, the
"Actual 3-Month Statements"), and (B) based on the Actual 3-Month
Statements, shall jointly compute the Working Capital Deficit as
of the end of the Three Month Period. To the extent the Working
Capital Deficit determined from the Actual 3-Month Statements
exceeds the projected Working Capital Deficit for such date on the
Projected Financial Statements, the purchase price for the Assets
shall be deemed reduced by an amount equal to such excess. In
addition, the purchase price shall be subject to reduction to the
extent provided in Section 6.9 below. To effect such reductions,
the Buyer shall be entitled to receive from the Escrow Agent a
number of shares of Parent Common Stock having an aggregate value,
computed at Three Dollars ($3.00) per share, equal to the
aggregate reductions in purchase price (or all of the shares held
by the Escrow Agent, if the reductions exceed the value of the
shares held by Escrow Agent; in such case that excess is referred
to below as the "Unrealized Price Reduction"). Shares of Parent
Common Stock remaining in escrow after such distribution to Buyer,
if any, shall be distributed by the Escrow Agent to the Transfer
Agent for the benefit of the Seller's shareholders as their
interests shall appear, free from escrow but subject to the terms
of the Registration Agreement. To the extent the Working Capital
Deficit determined from the Actual 3-Month Statements is less than
the projected Working Capital Deficit shown on the Projected
Financial Statements, there shall be no adjustment under this
subsection (ii) to the purchase price for the Assets, and (subject
to Section 6.9 below) the shares of Parent Common Stock in escrow
shall be distributed by the Escrow Agent to the Transfer Agent for
the benefit of the Seller's shareholders as their interests shall
appear, free from escrow but subject to the terms of the
Registration Agreement.
(iii) Subsequent Postclosing Adjustment. During the thirty
(30) day period following completion of Buyer's financial
statements for the Measuring Period, the Buyer and Seller
Representative, acting in good faith, (A) shall jointly reach
agreement on the accuracy of such statements (as so agreed, the
"Actual 12-Month Statements"), and (B) based on the Actual
12-Month Statements, shall jointly compute the Working Capital
Deficit as of the end of the Measuring Period. To the extent the
Working Capital Deficit determined from the Actual 12-Month
Statements exceeds the projected Working Capital Deficit for such
date in the Projected 12-Month Statements, the purchase price for
the Assets shall be
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deemed reduced by an amount equal to such excess. To effect such
reduction, the Buyer shall be entitled to offset, from the Earnout
Stock otherwise deliverable to the Seller's shareholders under
Section 1.5 below, a number of shares of Parent Common Stock
having an aggregate value, computed at Three Dollars ($3.00) per
share, equal to such reduction. To the extent the Working Capital
Deficit determined from the Actual 12-Month Statements is less
than the projected Working Capital Deficit in the Projected
Financial Statements, there shall be no adjustment under this
subsection (iii) to the purchase price for the Assets, and the
Earnout Stock (net of any adjustment under Section 6.9 and
indemnity claims by Buyer to the extent provided in this
Agreement) shall be delivered as provided in this Agreement, but
subject to the terms of the Registration Agreement.
(iv) Netting of Purchase Price Adjustments.
Notwithstanding the provisions of subsections 1.2(c)(ii) and (iii)
above, any Interim Price Reduction shall be credited in full
toward the 12-Month Price Reduction. For this purpose: the
"Interim Price Reduction" is that reduction (if any) in the
purchase price of the Assets taken by Buyer from the Escrow Agent
in the form of shares of Parent Common Stock based on the Three
Month Period under subsection 1.2(c)(ii); and the "12-Month Price
Reduction" is that reduction in purchase price, if any, to be
taken by Buyer for the Measuring Period under subsection
1.2(c)(iii). The Interim Price Reduction does not include any
Unrealized Price Reduction. If an Interim Price Reduction is taken
by Buyer and such Reduction exceeds the 12-Month Price Reduction,
then the Seller's shareholders shall be entitled to receive, in
addition to the Earnout Stock, additional shares of Parent Common
Stock having an aggregate value, computed at Three Dollars ($3.00)
per share, equal to the difference between the Interim Price
Reduction minus the 12-Month Price Reduction.
(v) Interim Financing Requirement; $300,000 PAC Loan. In
accordance with the cash flow projections included as part of
Schedule 1.2(c), Parent shall cause not less than $1,000,000 of
the Interim Financing described in Section 8.14 below to be
invested in the Buyer and/or the Acquired Subsidiaries. The
parties acknowledge that Seller has borrowed $300,000 on a
short-term basis from PAC, Inc. under documents dated May 30, 2000
(the "$300,000 PAC Loan") previously supplied to Parent, and that
PAC, Inc. has the right to convert all or part of the principal of
or interest on that loan into common shares of Seller.
(vi) Accounting Methods and Equitable Adjustments. The
Projected Financial Statements and all financial statements of
Buyer for periods relevant under this Section 1.2(c) have been and
shall be prepared in accordance with generally accepted accounting
principles consistently applied (but with footnote disclosures
omitted and monthly accruals made subject to year end adjustment
in accordance with Seller's past practice). The $3.00 stipulated
value per share of Parent Common Stock in this Section 1.2(c)
shall be subject to equitable adjustment for changes in
capitalization in the same manner as set forth in Section
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1.7 below, in the event of such a change occurring between the
Closing Date and the date for settlement of a purchase price
adjustment under this Section 1.2(c).
(vii) Resolution of Disputes. In the event the Buyer and
the Seller (prior to Closing) or the Buyer and the Seller
Representative (after Closing) are unable to agree on any matter
relevant to the determination of the Actual 3-Month Statements,
the Actual 12-Month Statements, the Working Capital Deficit as of
any date or the amount of an adjustment under this Section 1.2(c)
to the purchase price of the Assets, then the parties shall submit
their disagreement to binding arbitration before a single
commercial arbitrator, selected by joint agreement of Buyer and
Seller (prior to Closing) or Buyer and the Seller Representative
(after Closing), in St. Louis, Missouri. The costs and expenses of
such arbitration shall be borne by the party that does not prevail
in such arbitration, provided that the arbitrator shall be
empowered to allocate such costs equitably between the parties in
the event neither party's position is accepted in its entirety.
(viii) "Working Capital Deficit" of the Buyer as of any
date means an amount determined from the following formula:
(CL - [0.12 x ES] - EAP) minus (CA + CEX - CINV)
CL means the aggregate book value of the inventory
operating line, accounts payable and accrued liabilities
(excluding liabilities reflecting customer deposits) of
Buyer as of such date.
ES means the amount by which the net sales of the Buyer for
the relevant period ending on such date exceeds the
projected net sales of the Buyer reflected in the Projected
Financial Statements as of and for the period ending on
such date.
EAP means the accounts payable of Buyer as of such date for
non-financeable capital expenditures which were incurred in
order to achieve annual net sales in excess of $24,000,000.
CA means the book value of the current assets of Buyer as
of such date.
CEX means the cash paid by Buyer, during the relevant
period ending on such date, for non-financeable capital
expenditures to sustain annual net sales in excess of
$24,000,000.
CINV means the cash invested in Buyer at the request of the
Seller Representative, or as reasonably deemed necessary by
Parent, during the relevant period ending on such date, in
excess of the proceeds of the Interim Financing defined in
Section 8.14 of this Agreement, it being
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understood that Parent is not obligated to invest more than
$1,000,000 during any relevant period.
The parties acknowledge that in all projections of the Working
Capital Deficit in the Projected Financial Statements, the
variables in such formula other than CA and CL have been projected
at zero. The term "non-financeable capital expenditures" means
capital expenditures which are paid for in cash, and not
financeable either through customary long term indebtedness or
under customary capital lease arrangements.
1.3 Exchange Procedures.
(a) Letter of Transmittal; Representation Letter. At the Closing,
holders of record of certificates representing shares of stock of Seller (the
"Certificates") shall be instructed to tender such Certificates to the Transfer
Agent pursuant to a letter of transmittal that Buyer shall deliver or cause to
be delivered to such holders in a form similar to that attached hereto as
Exhibit B, it being the intent of Buyer that such letters of transmittal shall
be delivered as soon after the Closing Date as is reasonably practicable. In
addition, holders of Certificates shall be instructed to execute a statement of
representations in a form similar to that attached hereto as Exhibit C (the
"Representation Letter"). To the extent such holders have pledged their shares
of Seller and will pledge their shares of Parent Common Stock as substitute
collateral, such holders shall deliver a written acknowledgement of the pledgee,
in form and substance reasonably satisfactory to Parent, to the effect that the
shares of Parent Common Stock have not been registered under applicable
securities laws and may be transferred only in compliance with such laws.
(b) Payment. Subject to Section 1.3(c), after the Closing, each
previous holder of a Certificate that surrenders such Certificate to the
Transfer Agent, with a properly completed and executed letter of transmittal and
Representation Letter with respect to such Certificate, will be entitled to
receive from the Transfer Agent, on behalf of Seller, as a liquidating
distribution, (i) a certificate representing such number of whole shares of
Parent Common Stock to which such shareholder is entitled based on the
Shareholder Certification, such certificate to be deliverable as soon as
practicable after such shareholder complies with this Section 1.3(b) (if
physical delivery is requested), or otherwise at the times and in the manner set
forth in the Registration Agreement, and (ii) a cash payment for any fractional
share interest to which such shareholder would have otherwise been entitled.
(c) Outstanding Certificates. Each outstanding Certificate held by a
shareholder of Seller shall, until duly surrendered to the Transfer Agent, be
deemed to evidence the right to receive such shareholder's pro rata portion of
the liquidating distribution. After the Closing, holders of Certificates shall
cease to have rights with respect to the stock represented by such Certificates,
and their sole rights shall be to exchange such Certificates for (i) their pro
rata portion of the liquidating distribution as provided in Section 1.2(b) of
this Agreement, and (ii) the additional distributions, if any, to be made as set
forth in Section 1.5. Effective as of the Closing, there shall be no further
transfer of Certificates of Seller, and if such Certificates are
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presented to Seller for transfer, they shall be canceled against delivery of the
pro rata portion of the liquidating distribution to which the stock represented
by such Certificates are entitled as provided in this Agreement. The Transfer
Agent shall not be obligated to deliver the liquidating distribution, on behalf
of Seller, to any holder of stock of Seller until such holder surrenders the
Certificates as provided herein, together with the transmittal letter and
Representation Letter, and subject further to the restrictions set forth in the
Registration Agreement. No dividends declared on the Parent Common Stock, if
any, to be received in the liquidating distribution will be remitted to any
person entitled to receive such Parent Common Stock under this Agreement until
such person surrenders the Certificate representing the right to receive such
Parent Common Stock, at which time such dividends shall be remitted to such
person without interest and less any taxes that may have been imposed thereon.
No party to this Agreement nor any affiliate thereof shall be liable to any
holder of stock represented by any Certificate for any amount paid to a public
official pursuant to applicable abandoned property, escheat or similar laws.
Buyer and the Transfer Agent shall be entitled to rely upon the Shareholder
Certification to establish the identity of those persons entitled to receive the
liquidating distribution specified in Sections 1.2 and 1.5 of this Agreement,
which shall be conclusive with respect thereto. In the event of a dispute with
respect to ownership of stock represented by any Certificate, Buyer or the
Transfer Agent shall be entitled to deposit the liquidating distribution
represented thereby in escrow with an independent third party and thereafter be
relieved with respect to any claims thereto.
1.4 No Fractional Shares. Notwithstanding any other provision of this
Agreement, neither certificates nor scrip for fractional shares of Parent Common
Stock shall be issued in the Transaction. Each holder who otherwise would have
been entitled to a fraction of a share of Parent Common Stock at Closing shall
receive in lieu thereof cash (without interest) in an amount determined by
multiplying the fractional share interest to which such holder would otherwise
be entitled by the midpoint between the inside closing bid and offer prices of
Parent Common Stock on the OTC Bulletin Board on the second trading day
immediately preceding the date of Closing (the "Closing Share Value"). No such
holder shall be entitled to dividends, voting rights or any other rights in
respect of any fractional share.
1.5 Earnout Stock. Within thirty (30) days following the completion of
the Buyer's consolidated financial statements for the first twelve full calendar
months after the Closing (the "Measuring Period"), Buyer shall deliver to the
Transfer Agent, for the benefit of the shareholders of Seller (in proportion to
their holdings as reflected on the Shareholder Certification, and as additional
consideration for the Seller's Assets), a number of shares of Parent Common
Stock (the "Earnout Stock") equal to the result of the following formula:
5 x [EBITDA - $1,700,000]
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Z
In such formula, the variable "Z" shall mean the average of the published
closing price of the Parent Common Stock on the Parent's then principal stock
exchange or quotation service (currently the OTC Bulletin Board) for all
trading days in the last three (3) calendar months of the Measuring Period,
provided that the Menu Share Price for purposes of such formula shall not be
less than Two Dollars ($2.00) nor more than Five Dollars ($5.00) per share
(such amounts are
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referred to as the "Collars")(such average published closing price and Collars
shall be subject to adjustment as set forth in Section 1.7 below). In such
formula, the term "EBITDA" shall mean the net income of the Buyer from
operations during the Measuring Period (after elimination of gains and losses
resulting from extraordinary transactions and from adjustments made to Buyer's
opening balance sheet as part of the Transaction) as reflected on the Buyer's
consolidated income statement for the Measuring Period prepared in accordance
with generally accepted accounting principles consistently applied (and
separately from Parent's income statement), increased by the sum of (A) Buyer's
income and franchise tax expense during such period, plus (B) Buyer's interest
expense during such period, plus (C) Buyer's depreciation and amortization
expense during such period, plus (D) the excess, if any, of Buyer's so-called
"slotting fees" paid to retail supermarket customers during such period over
$112,000. To the extent any former shareholder of Seller otherwise would receive
a fraction of a share of Earnout Stock, such shareholder instead shall be
entitled to receive from Buyer cash in lieu of such fraction of a share,
calculated at the value ascribed to the variable "Z" above. Notwithstanding the
foregoing provisions of this Section 1.5, (1) the amount of Earnout Stock first
shall be subject to offset and/or adjustment to the extent set forth in Section
1.2(c)(iii) and (iv) above, (2) the amount of Earnout Stock next shall be
subject to offset by the Buyer's or Parent's indemnifiable Damages to the extent
provided in Article 11 below, and (3) the maximum amount of Earnout Stock, after
the adjustments in (1) and (2) of this sentence, shall not exceed 1,500,000
shares of Parent Common Stock (subject to adjustment as provided in Section
1.7). As soon as practicable following its receipt from Buyer of the
certificates evidencing the Earnout Stock and any cash in lieu of fractional
shares, the Seller Nominee shall deliver such cash received by it to the
shareholders of Seller, on behalf of Seller, as a liquidating distribution, in
proportion to their holdings of stock of Seller as reflected on the Shareholder
Certification, and shall hold the certificates evidencing the Earnout Stock
subject to the restrictions contained in the Registration Agreement.
1.6 Closing of Stock Transfer Books. The stock transfer books of
Seller shall be closed at the end of business on the business day immediately
preceding the Closing Date. In the event of a transfer of ownership of stock of
Seller which is not reflected in the Shareholder Certification prior to the
closing of such record books, the shares of Parent Common Stock issuable with
respect to such stock, as a liquidating distribution, may be delivered to the
transferee to the extent then distributable under the Registration Agreement, if
the Certificate or Certificates representing such stock are presented to the
Transfer Agent accompanied by all documents required by the Transfer Agent to
evidence and effect such transfer and if all applicable stock transfer taxes are
paid.
1.7 Adjustments for Changes in Capitalization. If, between the date of
this Agreement and the date on which shares of Parent Common Stock are
deliverable hereunder (a "Payment Date"), shares of Parent Common Stock shall be
changed into a different number of shares of Parent Common Stock or a different
class of shares by reason of reclassification, recapitalization, split-up,
spin-off, noncash distribution, exchange of shares or readjustment (including a
merger, consolidation, spin-off or noncash distribution involving Parent in
which the holders of Parent Common Stock receive securities of another entity or
other consideration), or if a stock dividend thereon shall be declared with a
record date within such period, then appropriate and proportionate adjustment or
adjustments will be made to the number of shares of Parent
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Common Stock required to be delivered under this Agreement such that each
shareholder of Seller shall be entitled to receive such number of shares of
Parent Common Stock or other securities as a liquidating distribution as such
shareholder would have received pursuant to such reclassification,
recapitalization, split-up, spin-off, noncash distribution, exchange of shares
or readjustment (including a merger, consolidation, spin-off or noncash
distribution involving Parent in which the holders of Parent Common Stock
receive securities of another entity or other consideration) or as a result of
such stock dividend had the record date therefor been immediately before such
Payment Date. Except as provided in this Section 1.7, no other adjustments shall
be made by reason of any issuance of Parent Common Stock after the date of this
Agreement.
1.8 Plan of Reorganization. The parties to this Agreement hereby adopt
this Agreement as a "plan of reorganization" within the meaning of Sections
1.368-2(g) and 1.368-3(a) of the United States Treasury Regulations. Each of the
parties hereto agrees to file any and all Tax Returns (as hereinafter defined),
in a manner consistent with the qualification of the transaction as a
reorganization under Section 368 of the Code.
1.9 Seller Representative.
(a) Powers. The Seller and the Principal Shareholders hereby
designate James Mueller to serve as representative of the shareholders of Seller
(in such capacity, the "Seller Representative") from and after the Closing of
the Transaction. The Seller Representative shall have power and authority, on
behalf of the shareholders of Seller, (i) to give and receive notices and
communications; (ii) to enter into and to authorize distributions to Buyer or
Parent pursuant to the Escrow Agreement, where Seller's consent is required, or
to object to distributions; (iii) to enter into and to give and receive notices
and communications required of him under the Registration Agreement, (iv) to act
as the observer contemplated by Section 7.5 below; (v) to agree to, negotiate,
defend, enter into settlements and compromises of, and demand arbitration and
comply with orders of courts and awards of arbitrators with respect to claims by
Buyer, Parent or any other person against Seller or its shareholders, whether
under this Agreement, the Escrow Agreement, the Registration Agreement or
otherwise; and (vi) to take all actions appropriate in his judgment to
accomplish the foregoing or to represent the financial interest of the Seller's
shareholders as a group. The identity of the Seller Representative may be
changed by the holders of at least sixty percent (60%) of the stock of Seller
(determined from the Shareholder Certification) from time to time upon not less
than 10 days' prior written notice to Parent. No bond shall be required of the
Seller Representative and the Seller Representative shall receive no
compensation for his services. Notices or communications to or from the Seller
Representative shall constitute notice to or from each of the Seller's
shareholders. The Seller Representative shall not be liable for any act done or
omitted hereunder as Seller Representative while acting in good faith and in the
exercise of reasonable judgment and any act done or omitted pursuant to the
advice of counsel shall be presumptive evidence of such good faith. Parent and
Buyer shall have no liability to any shareholder of Seller or otherwise arising
out of the acts or omissions of the Seller Representative or any disputes among
the shareholders of Seller with respect to the duties of the Seller
Representative. Parent and Buyer may rely entirely on their dealings with, and
notices to and from, the Seller Representative with respect to matters for which
the Seller Representative acts on behalf of the Seller's shareholders.
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(b) Actions of the Seller Representative. A decision, act,
consent or instruction of the Seller Representative shall constitute a decision
of all the shareholders of Seller for whom shares of Parent Common Stock
otherwise issuable to them are deposited with the Escrow Agent or Transfer Agent
and shall be final, binding and conclusive upon each shareholder of Seller, and
the Escrow Agent, Buyer and Parent may rely upon any decision, act, consent or
instruction of the Seller Representative as being the decision, act, consent or
instruction of each and every such shareholder of Seller. The Escrow Agent,
Transfer Agent, Buyer and Parent are hereby relieved from any liability to any
person for any acts done by them in accordance with such decision, act, consent
or instruction of the Seller Representative.
(c) Power to Sell Parent Common Stock; Expense Reserve. The parties
acknowledge that the Registration Agreement, as defined in Section 10.1(j),
provides for a mechanism by which the shareholders of Seller may sell shares of
Parent Common Stock pursuant to a registration statement in transactions through
a named broker. The Seller Representative may direct the Transfer Agent under
the Registration Agreement to establish an "Expense Reserve" from the Parent
Common Stock otherwise deliverable to the Seller's shareholders in the following
amounts: (i) 50,000 shares of Parent Common Stock shall be set aside in the
Expense Reserve at Closing; (ii) up to an additional 20,000 shares of Parent
Common Stock otherwise deliverable to Seller's shareholders following the
adjustment determinations pursuant to Section 1.2(c) shall be added to the
Expense Reserve, in the discretion of the Seller Representative if fewer than
50,000 shares then remain in the Expense Reserve; and (iii) that number of
shares of Parent Common Stock otherwise deliverable under Section 1.5 which is
necessary, after full depletion of the Expense Reserve, to pay any Expenses
which are not covered by the Expense Reserve. "Expenses" are those costs which
are paid or incurred by Seller Representative in connection with the liquidation
and winding up of Seller or the performance of the Seller Representative's
duties on behalf of the Seller's shareholders hereunder or under the
Registration Agreement, including (without limitation) any arbitration,
settlement, negotiation, or litigation of any matter arising hereunder or
thereunder which pursues or defends any interest of such shareholders as a
group. During the Restriction Period, the Seller Representative shall have the
power to instruct the broker under the Registration Agreement to sell shares out
of the Expense Reserve, for the proportionate benefit of the Seller's
shareholders, to fund (directly or by reimbursement) any out-of-pocket Expenses
not paid through the Cash Reserve. After the Restriction Period, the Seller
Representative shall continue to have the power to hold shares in the Expense
Reserve and to direct the sale of such shares to pay Expenses as needed from
time to time. Once the Earnout Stock computation is finally agreed and settled,
the Seller Representative shall pay or provide for any remaining unpaid Expenses
out of proceeds from the sale of shares held in the Expense Reserve, and shall
cause all excess shares remaining in the Expense Reserve to be distributed to
Seller's shareholders pro-rata as their interests shall appear as of that date.
Notwithstanding the foregoing, 10% of the net cash proceeds of any sales of
shares held in the Escrow Reserve shall be remitted pro-rata to the
shareholders, as their interests then shall appear, for the purpose of at least
partially covering any income taxes associated with such sales. If any
shareholder has duly designated to the Transfer Agent or Seller Representative
that proceeds from sales are to be remitted to a lienholder, the 10% cash
remittance due that shareholder shall be remitted to such lienholder, but the
remaining 90% of such proceeds shall be used to pay
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Expenses. The provisions of this Section 1.9(c) shall survive Closing and the
termination of the Restriction Period under the Registration Agreement.
Article 2
Assumption of Liabilities
2.1 Assumed Liabilities. Subject to the terms and conditions of this
Agreement, the Seller hereby agrees to transfer and assign, and Buyer hereby
agrees to assume, pay and perform subsequent to the Closing Date, the following
(collectively, the "Assumed Liabilities"): (a) all accrued expenses, accounts
payable and other current liabilities reflected on the books and records of
Seller as of the date of Closing ("Current Liabilities"), (b) subject to Section
8.16, all notes payable and other indebtedness of Seller for borrowed money
(including without limitation the current portion of long-term debt) reflected
on the books and records of Seller as of Closing ("Indebtedness"), (c) all
obligations of Seller to creditors of the Acquired Subsidiaries under written
guarantees executed for their benefit and disclosed in the schedules to this
Agreement, (d) all liabilities and obligations of the Seller under the Executory
Contracts (provided that such agreements are validly assigned to Buyer on or
after the Closing, and in the event such agreements are so assigned after the
Closing, Buyer shall assume such liabilities and obligations under such
agreements effective as of the Closing), (e) all liabilities and obligations of
Seller as the general partner of SevenJTex, under the LPA (as defined in Section
3.2) or otherwise (the "GP Liability"), and (f) those additional liabilities set
forth on Schedule 2.1 attached to this Agreement.
2.2 No Other Liabilities Assumed. Except for the liabilities and
obligations of Seller to be assumed by Buyer under Section 2.1, Buyer shall not
assume, and Seller shall remain liable for, any and all of Seller's liabilities,
obligations, claims and commitments which are not specifically set forth herein
as being expressly assumed by Buyer, whether the same are known or unknown,
disclosed or undisclosed, existing as of the Closing Date or contingent upon
future events or circumstances.
Article 3
Representations and Warranties of the Seller and Principal Shareholders
To induce the Buyer and Parent to complete the purchase of the Assets and
assumption of the Assumed Liabilities, the Seller and Principal Shareholders
hereby jointly and severally represent and warrant to Buyer as follows:
3.1 Organization and Qualification. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Missouri, has all requisite corporate power and authority to own, lease and
operate its properties and to carry on its business as it is now being
conducted, and is duly qualified and in good standing as a foreign corporation
in the State of Texas. SevenJNev is a corporation duly organized, validly
existing and in good standing under the laws of the State of Nevada, and has all
requisite corporate power and
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authority to own, lease and operate its properties and to carry on its business
as it is now being conducted. SevenJTex is a limited partnership duly organized,
validly existing and in good standing under the laws of the State of Texas, and
has all requisite power and authority to own, lease and operate its properties
and to carry on its business as it is now being conducted. Except as set forth
on Schedule 3.1, neither Acquired Subsidiary is, nor does the nature or extent
of its activities, require it to be, qualified to do business in any
jurisdiction other than its state of organization.
3.2 Constituent Documents. Attached hereto as Schedule 3.2 are true
and complete copies, with all amendments to date, of each of the following
(collectively, the "Constituent Documents"): (a) the certificate of
incorporation of SevenJNev, (b) the bylaws of SevenJNev, (c) the Certificate of
Limited Partnership of SevenJTex, (d) the Limited Partnership Agreement of
SevenJTex (the "LPA"), (e) the Articles of Incorporation of Seller, and (f) the
Bylaws of Seller.
3.3 Capitalization and Ownership.
(a) SevenJNev. The authorized capital stock of SevenJNev
consists only of 30,000 shares of common stock, par value $1.00 per share. The
issued capital stock of SevenJNev consists only of 1,000 shares of such common
stock (the "SevenJNev Shares"), all of which are outstanding and none of which
are held in treasury. Seller is the only legal and beneficial owner of capital
stock or other securities of any kind or class of SevenJNev, and is transferring
the SevenJNev Shares to Buyer free and clear of all liens, claims, encumbrances
and transfer restrictions, other than restrictions imposed by federal and state
securities laws and legends consistent therewith. All of the SevenJNev Shares
are fully paid and non-assessable. There is no option, warrant, subscription,
put, call or other right, commitment, undertaking or understanding to acquire,
or restrict the transfer of, any capital stock or other securities of any kind
or class of SevenJNev or any rights, obligations or undertakings convertible
into securities of any kind or class of SevenJNev which has been authorized or
which is outstanding other than restrictions imposed by federal and state
securities laws and legends consistent therewith.
(b) SevenJTex. The partners of SevenJTex consist solely of
Seller, which owns a 1% general partnership interest in SevenJTex (the "GP
Interest"), and SevenJNev, which owns a 99% limited partnership interest in
SevenJTex (the "LP Interest"). Subject to the terms of the LPA, (i) Seller owns,
and is transferring to Buyer, the GP Interest and Seller's related capital
account free and clear of all liens, claims, encumbrances and transfer
restrictions, and (ii) SevenJTex owns the LP Interest and its related capital
account free and clear of all liens, claims, encumbrances and transfer
restrictions. Except as expressly contained in the LPA, there is no option,
warrant, subscription, put, call or other right, commitment, undertaking or
understanding to acquire, or restrict the transfer of, any general or limited
partnership interest or other profit participation in SevenJTex.
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3.4 Authorization and Consents.
(a) Seller has all requisite corporate power and authority to
own the Assets, to enter into and to consummate the sale of the Assets
contemplated by this Agreement, and otherwise to perform its obligations
hereunder. The execution and delivery of this Agreement by Seller and the
performance by Seller of its obligations hereunder have been duly and
effectively authorized and approved by all requisite corporate action of Seller.
Assuming the shareholders of Seller approve this Agreement pursuant to the BCL
as contemplated by Section 6.5 below, no other corporate or shareholder act or
proceeding on the part of Seller is necessary to authorize Seller's performance
of its obligations hereunder. This Agreement constitutes a valid and legally
binding obligation of Seller, enforceable against Seller in accordance with its
terms.
(b) Except as disclosed on Schedule 3.4, neither the execution
and delivery of this Agreement by Seller nor the consummation by Seller of the
transactions contemplated hereby will (i) 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, or
result in the termination of, or accelerate the performance required by, or
result in the creation of any lien, security interest, charge or encumbrance
upon any of the Assets or any of the properties of the Acquired Subsidiaries
under, any term, condition or provision of the Constituent Documents, or any
note, bond, mortgage indenture, deed of trust, lease, license, agreement or
other instrument or obligation to which Seller or either Acquired Subsidiary is
bound, or by which any of them or their respective properties may be bound or
affected, or (ii) violate any order, writ, injunction, decree, statute, rule or
regulation applicable to the Seller or the Assets, or to either Acquired
Subsidiary or its properties. No consent or approval by, notice to or
registration with any governmental authority or other third party, other than
those disclosed on Schedule 3.4, is required on the part of Seller or either
Acquired Subsidiary in connection with the execution and delivery of this
Agreement or the consummation by Seller of the sale of the Assets and the other
transactions contemplated hereby.
3.5 Financial Statements. Attached hereto as Schedule 3.5 are true and
complete copies of (a) the audited consolidated balance sheets and related
audited consolidated statements of income and cash flows as of and for the
Seller's fiscal years ended October 31, 1997, 1998 and 1999, together with the
auditor's report thereon (collectively, the "Audited Financial Statements"), and
(b) the unaudited consolidated balance sheet and related unaudited consolidated
statement of income of Seller as of, and for the six-month period ended, April
30, 2000 (collectively, the "Interim Financial Statements"). The Audited
Financial Statements and Interim Financial Statements (i) have been prepared
from the books and records of the Seller and Acquired Subsidiaries in accordance
with generally accepted accounting principles consistently applied (except that
the Interim Financial Statements lack of footnotes and are subject to ordinary
year end adjustments), and (ii) fairly present the consolidated financial
position and results of operations of the Seller and Acquired Subsidiaries as of
the dates thereof and for the periods covered thereby.
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3.6 Absence of Certain Changes or Events. Since October 31, 1999, and
except as disclosed on Schedule 3.6, or in the Audited Financial Statements or
Interim Financial Statements (including the footnotes attached thereto), or as
contemplated by this Agreement, there has not been, with respect to the Seller
or either Acquired Subsidiary:
(a) any material adverse change in its assets, operations,
liabilities, earnings, business or condition (financial or otherwise) which is
not fully reflected in the Interim Financial Statements;
(b) any damage, destruction or casualty loss (whether or not
covered by insurance) which has been or which can reasonably be expected to have
a material adverse effect on its assets, operations, liabilities, earnings,
business or condition (financial or otherwise);
(c) any increase in the compensation payable to any of its
directors, officers, employees or agents other than routine increases made in
the ordinary course of business consistent with past practice, or any bonus,
incentive compensation, service award or other like benefit, granted, made or
accrued, contingently or otherwise, to or to the credit of any of such director,
officer, employee or agent, or any employee welfare, pension, retirement or
similar payment or arrangement made or agreed to with respect to any such
director, officer, employee or agent, other than pursuant to the existing plans
disclosed on Schedule 3.14;
(d) any labor controversies or unsettled grievances pending or,
to Seller's knowledge, threatened with any of its employees or a collective
bargaining organization representing or seeking to represent such employees, or
any entrance into any collective bargaining agreement with respect to any such
employees;
(e) any addition to, or modification of, any profit sharing,
bonus, deferred compensation, retirement or other employee benefit plan,
arrangement or practice described on Schedule 3.14, other than accruals made for
fiscal year 2000 in accordance with its normal practices;
(f) any sale, assignment or transfer (including without
limitation any collateral assignment or the granting or permitting of any lien,
charge or encumbrance) of any material asset, property or right, or any
conducting of its business other than in the ordinary course consistent with
past practice;
(g) any amendment, modification, waiver or cancellation of any
material debt owed to, or claim of, Seller or such Acquired Subsidiary, or
settlement of any dispute involving any material payment or other obligation due
to or owed by Seller or such Acquired Subsidiary to be made or performed after
the Closing Date;
(h) any new borrowing or increase in any existing indebtedness,
or the incurrence of any obligation or liability (whether absolute or
contingent), other than (i) current liabilities (excluding intercompany debt)
incurred in the ordinary course of business, and (ii) borrowings under existing
Loan Documents which are itemized in Schedule 3.10;
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(i) any prepayment of principal or interest on any indebtedness
for borrowed money;
(j) any capital expenditure or commitment to make a capital
expenditure (exclusive of expenditures for repair or maintenance of equipment in
the ordinary course of business) or the execution of any lease or similar
arrangement with respect to any aspect of its business, or incurring of
liability therefor;
(k) any incurrence of any extraordinary loss or knowing waiver
of any rights of substantial value in connection with an aspect of its business
whether or not in the ordinary course of business;
(l) any cancellation, termination or material amendment of any
material contract, agreement, license or other instrument to which it is a party
or by which it or any of its properties is bound;
(m) any lending or advance of money in connection with any
aspect of its business, except normal and reasonable expense advances to any
employee of Company in the ordinary course of business;
(n) any direct or indirect declaration, reservation, setting
aside or payment of any dividend, distribution or return of capital of any kind,
or any split, reverse split, combination, reclassification, repurchase or
redemption of any stock or other equity interest;
(o) any distributions, fees or other payments of any kind to or
for the benefit of any officer, director or shareholder of Seller or either
Acquired Subsidiary, except only payments of regular salary for services
rendered at the salary rate specified for such person in Schedule 3.14;
(p) any change in its system of accounting employed in
preparing the Audited Financial Statements;
(q) any agreement by, or commitment of, Seller or an Acquired
Subsidiary to do or permit any of the foregoing; or
(r) any other event or condition of any character which, in any
one case or in the aggregate, has materially adversely affected, or can
reasonably be expected to materially adversely affect in the future, the assets,
operations, liabilities, earnings, business or condition of the Seller or either
Acquired Subsidiary.
3.7 Title to Assets; Condition of Equipment.
(a) Except as set forth in Schedule 3.7, the Seller does not
own any real property, leasehold in real property or other interest of any kind
with respect to real property.
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Schedule 3.7(a) contains a description of all items of tangible personal
property owned by Seller or leased by Seller from third parties. The Seller has
good and marketable title to all such tangible personal property, free and clear
of all liens, security interests, claims and encumbrances other than Permitted
Liens.
(b) SevenJNev does not own any real property, leasehold in real
property or other interest of any kind with respect to real property. Schedule
3.7(b) contains a description of all items of tangible personal property owned
by SevenJNev or leased by SevenJNev from third parties. SevenJNev has good and
marketable title to all such tangible personal property, free and clear of all
liens, security interests, claims and encumbrances other than Permitted Liens.
(c) Schedule 3.7(c) contains a true and complete list of all
real property owned by SevenJTex (with an accurate legal description and a
description of the buildings and other improvements thereon). Schedule 3.7(c)
contains a description of all items of tangible personal property (excluding
inventory) owned by SevenJTex or leased by SevenJTex from third parties ("Fixed
Assets"). SevenJTex has good and marketable title to all of its owned assets and
properties, and has a valid first leasehold interest in all assets and
properties leased by it from third parties. Except for Permitted Liens, none of
the assets or properties of SevenJTex is subject to any lease, lien, security
interest, mortgage, charge, easement or encumbrance, right of first refusal,
option or other restriction of any nature whatsoever, nor subject to any pending
or, to Seller's knowledge, threatened condemnation proceedings. None of the
plants, buildings, structures and appurtenances of SevenJTex or the operation or
maintenance thereof as now operated and maintained, contravenes any applicable
zoning ordinance or other administrative regulation or violates any restrictive
covenant or any provision of law. Except as set forth in Schedule 3.7(c), all of
the plants, buildings, structures, appurtenances and Fixed Assets of SevenJTex
are in good operating condition, subject to ordinary wear and tear.
3.8 Inventory. All items of inventory of SevenJTex are priced at the
lower of cost on a first-in first-out basis or market, and, if purchased on or
before April 30, 2000, were so reflected on the Interim Financial Statements.
The inventory reflected on the books and records of SevenJTex is usable or
salable in the ordinary course of its business, except only to the extent of the
reserves for obsolescence and excess inventory reflected on such books and
records. SevenJTex holds no inventory of third parties on consignment and no
inventory of SevenJTex is in the possession or control of any other person.
3.9 Cash and Receivables.
(a) Set forth on Schedule 3.9(a) are (i) a list of all bank
lines, credit arrangements, bank accounts, money market and securities brokerage
accounts, and safe deposit boxes maintained by the Seller and each Acquired
Subsidiary together with the names of all authorized signatories on each such
arrangement or account, and (ii) a list of all certificates of deposit, money
market fund investments, other cash equivalents, marketable securities of other
persons and investment companies and similar temporary investments.
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(b) All of the accounts receivable of the Seller and each
Acquired Subsidiary reflected on the Interim Balance Sheet, and all accounts
receivable arising subsequent to the date thereof and prior to the date of this
Agreement, (i) represent actual indebtedness incurred by the applicable
licensees or account debtors, (ii) have arisen in the ordinary course of the
Seller's or such Acquired Subsidiary's business, and (iii) are collectible in
the ordinary course of business, except only to the extent of the allowance for
doubtful accounts reflected on the books and records of Seller and the Acquired
Subsidiaries.
3.10 Executory Contracts; Absence of Defaults. Except as disclosed on
Schedule 3.10, neither the Seller nor either Acquired Subsidiary (or its assets
and properties) is a party to or bound by: (a) any loan agreement, note,
mortgage, deed of trust, security agreement, conditional sales agreement,
capital lease, guaranty, letter of credit arrangement or other document or
instrument reflecting present or contingent indebtedness or for which any of its
properties are mortgaged or pledged as collateral (all such items are referred
to collectively as the "Loan Documents"); (b) any employment agreement,
consulting agreement, sales agency agreement, distributor agreement or other
contractual arrangement for its receipt of services or for the sale of its
products; (c) any collective bargaining agreement covering any of its employees;
(d) any contract, agreement, lease, license, outstanding bid or offer or other
commitment (whether formal or informal, written or oral) calling for the payment
or receipt of property or services valued at $10,000 or more (and the aggregate
value of all such items described in this clause (d) which are not required to
be disclosed on Schedule 3.10 is less than $50,000); or (e) any other contract,
agreement, lease, license, outstanding bid or offer or other commitment (whether
formal or informal, written or oral), the loss of which would have a material
adverse effect on the Seller's or such Acquired Subsidiary's assets, operations,
liabilities, earnings, business or condition. Seller has made available for
inspection by Buyer a true and complete copy of each agreement, instrument or
other document (as amended) referenced or cross-referenced in Schedule 3.10.
Except as disclosed on Schedule 3.10, neither the Seller nor either Acquired
Subsidiary is in default under any Loan Document, contract, agreement, lease,
license, outstanding bid or offer or other commitment (whether formal or
informal, written or oral) required to be listed on Schedule 3.10, nor has any
event occurred which, upon notice or passage of time or both, will result in
such a default. Except as disclosed on Schedule 3.10, all payments required to
be made by the Seller or either Acquired Subsidiary pursuant to the Loan
Documents on or prior to the date hereof have been paid in full.
3.11 Intellectual Property.
(a) Disclosure. Schedule 3.11 identifies each patent or
registered Intellectual Property owned by the Seller or either Acquired
Subsidiary and pending applications therefor, and each written license agreement
(excluding off-the-shelf software license agreements) pursuant to which the
Seller or either Acquired Subsidiary have granted to any third party, or
received from any third party a grant of, any rights in any of the Intellectual
Property which it owns or uses. Each item of Intellectual Property owned or used
by the Seller or either Acquired Subsidiary immediately prior to the Closing
hereunder will be owned or available for use on identical terms and conditions
immediately subsequent to the Closing hereunder. The Seller has
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made available to the Buyer correct and complete copies of all items required to
be identified on Schedule 3.11.
(b) Adverse Claims. Except as set forth on Schedule 3.11, with
respect to each item of Intellectual Property required to be identified therein:
(i) Seller and Acquired Subsidiaries possess all right,
title and interest thereto, free and clear of any lien, claim,
security interest, encumbrance, license or other restriction;
(ii) Such Intellectual Property is not subject to any
outstanding injunction, judgment, order, decree, ruling or charge;
(iii) No action, suit, proceeding, hearing, investigation,
written claim or written demand against the Seller or either
Acquired Subsidiary is pending or, to the knowledge of Seller is
threatened, which challenges the legality, validity,
enforceability, use or ownership of such Intellectual Property;
and
(iv) To the knowledge of the Seller, no party to any
license agreement relating thereto is in breach or default, and no
event has occurred which with notice or lapse of time would
constitute a material breach or default or permit termination,
modification or acceleration thereunder.
(c) Specific Intellectual Property. Without limiting the generality of
the foregoing provisions of this Section 3.11:
(i) All computer software owned or used by the Seller or
either Acquired Subsidiary in its business is either (A) owned
free and clear of any claims by persons contributing the
development of such software, or (B) validly licensed from third
parties on terms which are commercially reasonable and do not
require the payment of any royalty, license fee or other charge
for the continued use thereof. Schedule 3.11 contains a true and
complete list or description of all software used by Seller or
either Acquired Subsidiary in the conduct of its business.
(ii) All recipes and formulations used by the Seller or
either Acquired Subsidiary in the manufacture of its products or
in connection with its business are in written form and itemized
on Schedule 3.11. Seller has delivered to Buyer a true and
complete copy of each such recipe and formulation. All such
recipes and formulations are owned by Seller or an Acquired
Subsidiary and were developed by employees of Seller or an
Acquired Subsidiary, or developed by a consultant under an
appropriate work-for-hire agreement set forth in Schedule 3.11, in
each case without infringing on the intellectual property rights
of any other person.
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3.12 No Violation of Statute, Decree or Order. Except as disclosed on
Schedule 3.12 or Schedule 3.17, neither the Seller nor either Acquired
Subsidiary is in default under or in breach or violation of any statute, law,
ordinance, decree, order, rule or regulation of any governmental body applicable
to it or its properties. The sale of the Assets to Buyer and the consummation of
the other transactions contemplated by this Agreement will not constitute or
result in any default under or breach or violation of any statute, law,
ordinance, decree, order, rule or regulation of any governmental body applicable
to Seller or either Acquired Subsidiary or their respective properties.
3.13 Litigation. Except as listed in Schedule 3.13, there is not, and
during the three (3) years preceding the date of this Agreement there has not
been, any suit, claim, action, proceeding or governmental investigation against
or involving the Seller or either Acquired Subsidiary or its business or
properties ("Third Party Litigation") pending; and, to Seller's and the
Principal Shareholders' knowledge, there is no Third Party litigation threatened
and there is no condition or set of facts which can reasonably be expected to
give rise to any Third Party Litigation. There are no decrees, injunctions or
orders of any court, administrative or regulatory body, arbitration panel or
governmental agency outstanding against the Seller or either Acquired
Subsidiary. There is no suit, claim, action, proceeding or governmental
investigation now pending or, to Seller's knowledge, threatened against Seller
which contests the validity of this Agreement or the ability of the Seller to
sell the Assets and to consummate the other transactions contemplated by this
Agreement. Seller has delivered to Buyer true and correct copies of all audit
response letters received by the Seller for its most recent full fiscal year
from legal counsel devoting substantive attention to matters which may result in
any liability or obligation of the Seller or either Acquired Subsidiary.
3.14 Employee Benefit Plans; Recent Employment History. Attached
as Schedule 3.14 hereto is a complete list of each "employee welfare benefit
plan" as defined in Section 3(1) of the Employee Retirement Income Security Act
of 1974 ("ERISA") (collectively, the "Employee Welfare Plans"), each "employee
pension benefit plan" as defined in Section 3(2) of ERISA (collectively, the
"Employee Pension Plans"), and all deferred compensation arrangements in which
any employees of the Seller or either Acquired Subsidiary are participants. Each
of the Employee Welfare Plans and Employee Benefit Plans is maintained in
compliance with the applicable provisions of ERISA, the Code (as defined in
Section 3.19) and any other applicable laws. Neither the Seller nor either
Acquired Subsidiary contributes, or has any obligation to contribute, to any
Multiemployer Plan (as defined in Section 4001(a)(3) of ERISA) on behalf of any
of its employees. There is no pending or, to Seller's and the Principal
Shareholders' knowledge, threatened action, claim, suit or proceeding by any
person or governmental instrumentality concerning any Employee Pension Plan or
Employee Welfare Plan. Except as set forth on Schedule 3.14, all payments due
from the Seller or either Acquired Subsidiary (on account of employment
contracts or otherwise) for Employee Pension Plans and Employee Welfare Plans
have been paid for all periods ended on or prior to the Closing Date. Schedule
3.14 contains a true and complete list of the employees of the Seller and each
Acquired Subsidiary on the date of this Agreement together with their wage rates
and/or salary, which list identifies the plans in which they are entitled to
participate and any other employment benefits to which they are entitled. Except
as noted on Schedule 3.14, all of such employees are employees
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at will or for periods not exceeding the frequency of payment whose employment
may be terminated without liability for severance or termination pay or any
similar payment.
3.15 Discrimination, Occupational Safety, Labor and Other Statutes and
Regulations. Except as disclosed on Schedule 3.15, no person, party or labor
organization (including, but not limited to, governmental agencies of any kind)
has any claim, action or proceeding pending or, to Seller's and the Principal
Shareholders' knowledge, threatened or available to it against the Seller or
either Acquired Subsidiary arising out of any statute, ordinance or regulation
relating to the payment of wages or benefits, plant closing laws, discrimination
in employment, employment practices, immigration, continuation of health
insurance benefits or occupational safety and health standards (including, but
without limiting the foregoing, any applicable state statutes, the Fair Labor
Standards Act, National Labor Relations Act, Title VII of the Civil Rights Act
of 1964, as amended, or the Age Discrimination in Employment Act of 1967, as
amended). Except as disclosed on Schedule 3.15, there is not presently pending
or, to Seller's and the Principal Shareholders' knowledge, threatened any
proceeding, hearing or investigation with respect to the adoption by any state,
county or municipality where a facility of the Seller or either Acquired
Subsidiary, of amendments or modifications to existing local or municipal laws,
ordinances, regulations or restrictions with respect to such matters which, if
adopted, would have a material adverse effect on its present business or
operations. In the three (3) years preceding the date of this Agreement, neither
the Seller nor either Acquired Subsidiary has violated, and is presently not in
violation of, any rules, regulations or other similar standards of the
Occupational Health and Safety Administration.
3.16 Insurance Policies. Set forth on Schedule 3.16 is a list of
insurance policies and bonds in force covering the Seller and each Acquired
Subsidiary and their respective properties, operations and personnel. Upon
request, each of said policies, together with all records and documents relating
to insured losses and claims (other than under any group health insurance
policy) paid or made during the past three years will be made available to Buyer
for its review. Unless otherwise disclosed on Schedule 3.16, all such policies
are in full force and effect, neither the Seller nor either Acquired Subsidiary
is in default of its obligations thereunder, and no insurer has given notice of
cancellation, any material increase in premiums or any material reduction of
coverage. Schedule 3.16 contains a true and complete list of all worker's
compensation claims which are pending or which have been settled under terms
which obligate the Seller, either Acquired Subsidiary or any insurer to make
future payments in respect of claims.
3.17 Environmental Matters.
(a) Except as disclosed on Schedule 3.17, no person or party
(including, but not limited to, governmental agencies of any kind) has asserted
any claim, or to Seller's knowledge has any basis for any action or proceeding,
against the Company relating to any Environmental Matter, and the Seller has not
received oral or written notice of, nor does Seller have reason to believe there
is, any existing or pending violation, citation, claim or complaint relating to
the business of the Seller or either Acquired Subsidiary or any facility now or
previously owned or operated by any of them arising under the Resource
Conservation and
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Recovery Act, the Comprehensive Environmental Response Compensation and
Liability Act, the Superfund Amendments and Reauthorization Act, the Toxic
Substances Control Act, the Safe Drinking Water Act, the Federal Water Pollution
Control Act (Clean Water Act), the Clean Air Act, the Powerplant and Industrial
Fuel Use Act of 1978, the National Environmental Policy Act (Environmental
Impact Statement) and antipollution, waste control and disposal and
environmental "clean-up" provisions of similar statutes of any federal, state or
local governmental authorities, and all regulations and standards enacted
pursuant thereto and all permits and authorizations issued in connection
therewith (collectively, "Environmental Matters"). Schedule 3.17 sets forth all
Environmental Matters and all such violations, citations, claims and complaints.
(b) Except as set forth in Schedule 3.17, no underground tanks
are now or have been located at any facility now or previously owned or operated
by the Seller or either Acquired Subsidiary. Except as set forth in Schedule
3.17, no toxic or hazardous substances have been generated, treated, stored,
disposed of on or from or otherwise deposited in or on, located at or allowed to
emanate from any such facility (irrespective of whether such substances remain
at the facility or were transferred to or otherwise disposed of off site),
including, without limitation, the surface waters and subsurface waters thereof,
which may support a claim or cause of action under any federal, state or local
environmental statutes, ordinances, regulations or guidelines.
(c) Seller has delivered to Buyer a true and complete copy of
each environmental assessment, appraisal, study, compliance report, or other
document of any kind in the possession of Seller or either Acquired Subsidiary
which relates to the environmental condition of any present or former facility
of an Acquired Subsidiary. Unless otherwise disclosed on Schedule 3.17, Seller
is not aware of any other assessment, appraisal, study, compliance report, or
other document of any kind that has been prepared in the last ten (10) years
with respect to any such facility. Seller has never applied for and been denied
environmental impairment coverage relating to any present or former facility of
an Acquired Subsidiary.
3.18 Licenses and Permits. Schedule 3.18 contains a listing of all
licenses, franchises, permits (including without limitation environmental
permits) and other governmental authorizations held by the Seller or either
Acquired Subsidiary. All of such licenses, franchises, permits and governmental
authorizations are in full force and effect, and there is no basis for any
governmental body to deny or rescind any such license, franchise, permit or
governmental authorization. The respective businesses of the Seller and each
Acquired Subsidiary as presently conducted do not require any other license,
franchise, permit or other governmental authorization from any governmental
body, whether federal, state, local or foreign.
3.19 Taxes.
(a) Definitions. For purposes of this Agreement:
(i) the term "Code" shall mean the Internal Revenue Code
of 1986, as amended. All citations to the Code or to the
regulations promulgated
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thereunder shall include any amendments or any substitute or
successor provisions thereto.
(ii) the term "Group" shall mean, individually and
collectively, (A) Seller, (B) each Acquired Subsidiary, and (C)
any individual, trust, corporation, partnership, limited liability
company or any other entity as to which either Acquired Subsidiary
is or may be liable for Taxes incurred by such individual or
entity as a partner or member or as a transferee, or pursuant to
Treasury Regulations Section 1.1502-6, or pursuant to any other
provision of Federal, territorial, state, local or foreign law or
regulations.
(iii) the term "Returns" shall mean, collectively, all
reports, declarations, estimates, returns, information statements,
and similar documents relating to, or required to be filed in
respect of, any Taxes, including information returns or reports
with respect to backup withholding or other payments to (or from)
third parties, and the term "Return" means any one of the
foregoing Returns.
(iv) the term "Taxes" shall mean (A) all taxes measured
with respect to net income, gross income, gross receipts or
taxable income, and all sales, use, ad valorem, transfer,
franchise, profits, license, registration, lease, service, service
use, withholding, employment, payroll, excise, severance, stamp,
occupation, environmental, premium, property, windfall, profits,
customs, duties, and other taxes, fees, assessments or charges of
any kind whatever, together with any interest, penalties and other
additions with respect thereto, imposed by any Federal,
territorial, state, local or foreign government; (B) any
penalties, interest, or other additions to tax for the failure to
collect, withhold, or pay over any of the foregoing, or to
accurately file any Return; and (C) other taxes, fees, assessments
and charges of the same or of a similar nature to any of the
foregoing, and the term "Tax" mean any one of the foregoing Taxes.
(b) Returns Filed and Taxes Paid. Except as set forth in
Schedule 3.19, (i) each of Seller, the Acquired Subsidiaries and Group has duly
filed or caused to be filed, in a timely manner, with the appropriate taxing
authorities, all Returns required to be filed on or before the date hereof; (ii)
each such Return is true, correct, and complete in all material respects; and,
(iii) all Taxes due with respect to, or shown to be due on, Returns (or in
respect of subsequent assessments with regard thereto), have been timely paid,
or an adequate reserve has been established therefor in the Interim Financial
Statements. Seller has delivered to Buyer true copies of the federal, state and
local income, sales, use and employment tax Returns (and amended Returns,
revenue agents' reports, and other notices from state taxing authorities) of
Seller and each Acquired Subsidiary for the last four taxable years.
(c) Tax Reserves and Tax Liabilities. The amount of
Group's liability for unpaid Taxes for all periods ending on or before the date
of the Interim Balance Sheet does not, in the aggregate, exceed the amount of
the current liability accruals for Taxes (excluding
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reserves for deferred Taxes), as such accruals are reflected on the Interim
Balance Sheet, and the amount of Group's liability for unpaid Taxes for all
periods ending on or before the Closing Date shall not, in the aggregate, exceed
the amount of the current liability accruals for Taxes (excluding reserves for
deferred Taxes), as such accruals are reflected on the books and records of
Seller on the Closing Date. No other Taxes or amounts in respect of Taxes for
which Company is or becomes liable, whether to taxing authorities (as, for
example, under law), or to other persons or entities (as, for example, under tax
allocation agreements), are due or payable with respect to any taxable periods
or portions of periods ending on or before the date hereof. Neither the Seller
nor either Acquired Subsidiary is a party to or bound by any Tax indemnity, Tax
sharing, Tax allocation or distribution agreement, except as otherwise set forth
in Schedule 3.19.
(d) Audit History. Except as set forth in Schedule 3.19,
there are no pending or, to Seller's and the Principal Shareholders' knowledge,
threatened audits, investigations, claims, proposals or assessments for or
relating to any material liability in respect of Taxes, and there are no matters
under discussion with any governmental authorities with respect to Taxes that
could result in any additional amount of Taxes. No audit of Federal, state or
local Returns for Taxes by any relevant taxing authority has been conducted for
any Tax period beginning after December 31, 1996. Except as set forth in
Schedule 3.19, no extension of a statute of limitations relating to Taxes is in
effect.
(e) Claims. Except as set forth in Schedule 3.19, no
claim has ever been made by any authority in any jurisdiction where the Seller
or the Group does not file Returns that it is or may be subject to taxation by
that jurisdiction. There are no liens on any of the Seller's or the Group's
assets that have arisen in connection with any failure (or alleged failure) to
pay any Taxes. The Seller and the Group have no knowledge of any basis for the
assertion of any claim which, if adversely determined, would result in liens on
any of the Seller's or the Group's assets relating to Taxes.
(f) Tax Elections.
(i) Except as set forth in Schedule 3.19 or as reflected
in Seller's consolidated federal income tax Returns, there are no
material elections with respect to Taxes affecting Seller or
either Acquired Subsidiary as of the date hereof.
(ii) No member of the Group: (A) has agreed to make any
adjustment under section 481(a) of the Code by reason of a change
in accounting method or otherwise; (B) has made an election, or is
required, to treat any of its assets as owned by another person
for Federal income tax purposes or as tax-exempt bond financed
property or tax-exempt use property within the meaning of section
168 of the Code; (C) has made any payments, is obligated to make
any payments, or is a party to any agreement that could obligate
it to make any payments that will not be deductible under section
280G, 162, or 404 of the Code; (D) has been a United States real
property holding corporation within the meaning
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of section 897(c)(2) of the Code during the applicable periods
specified in section 897(c)(1)(A)(ii) of the Code; (E) has
violated any of the COBRA continuation coverage requirements set
forth in section 4980B of the Code; (F) has failed to disclose on
its federal income Tax Return all positions taken therein that
could give rise to substantial understatement of federal income
Taxes within the meaning of section 6662 of the Code; or (G)
holds, or has acquired, any "section 197 intangible" within the
meaning of section 197(c) of the Code that is not amortizable in
the hands of such member by reason of having been acquired by such
member pursuant to the nonrecognition transactions described in
section 197(f)(2)(B) of the Code or the anti-churning rules of
section 197(f)(9) of the Code and the regulations thereunder.
(g) Miscellaneous. SevenJTex has been properly
classified as a partnership for all federal and state income Tax purposes for
all periods since its inception, and SevenJTex has never realized any income
that is subject to Tax at the SevenJTex level by any state or other jurisdiction
that imposes a Tax on the gross receipts income, net income or taxable income of
a business. Since its inception, SevenJTex has never had any partners other than
SevenJNev and Seller. Except as otherwise set forth in Schedule 3.19, (A) the
net carrying value of all assets of the Acquired Subsidiaries are equal in all
material respects to the adjusted bases of those assets for federal income tax
purposes; (B) except as part of the Group, SevenJNev has never been a member of
an affiliated group of corporations within the meaning of Section 1504 of the
Code; and (C) except as part of the Group, neither Acquired Subsidiary has ever
been a member of any combined, consolidated, or unitary group for state income
or franchise tax purposes, or is required to file combined, consolidated, or
unitary Returns for state income or franchise tax purposes. The transactions
contemplated by this Agreement are not subject to the Tax withholding provisions
of Code section 3406, or of subchapter A of Chapter 3 of the Code, or of any
other comparable provision of law.
3.20 Subsidiaries and Investments. Except for Seller's ownership of the
SevnJNev Stock and the GP Interest in SevenJTex, and SevenJNev's ownership of
the LP Interest in SevenJTex, neither the Seller nor either Acquired Subsidiary
has any subsidiary or holds any equity or debt security, profit participation or
other interest in any other corporation, partnership, limited liability company,
joint venture or other business enterprise.
3.21 Corporate Minutes and Stock Transfer Records; Stock Ownership.
Seller has furnished to Buyer for review the corporate minutes of the Seller and
SevenJNev, in each case which are current, complete and correct and which
contain a complete and accurate record of all actions taken by their respective
Boards of Directors and shareholders. Seller has furnished to Buyer for review
the stock ledger and stock records of the Seller and SevenJNev, which are
current, complete and correct and which accurately reflect all transactions
involving equity securities of each corporation and any options, warrants, and
other securities exercisable for or convertible into equity securities of either
corporation. Schedule 3.21 contains a true and complete list of the shareholders
of Seller and the holders of any outstanding option, warrant, convertible
instrument or other security or right exercisable for or convertible into stock
of
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Seller, with the current state of residence of each such holder as far as is
known to Seller. No more than 35 of such holders is not an "accredited investor"
for purposes of Regulation D under the Securities Act of 1933, as amended.
SevenJTex does not maintain its own records of the actions taken by Seller on
behalf of SevenJTex as its general partner, and no formal actions have been
taken by its limited partner.
3.22 Suppliers and Customers. Schedule 3.22 contains, with respect to
the most recent fiscal year, a true and complete list of the ten largest
suppliers and customers (in dollar volume) of SevenJTex. SevenJTex has not
received any oral or written indication from any of such suppliers or customers
of an intention to terminate or adversely modify its relationship with
SevenJTex.
3.23 Transactions With Affiliates. Except as disclosed on Schedule
3.23, in the last three full fiscal years, neither the Seller, either Acquired
Subsidiary, or any Principal Shareholder, officer, director, or employee of
Seller or either Acquired Subsidiary (a) has had any direct or indirect
interest, except through ownership of less than two percent (2%) of the
outstanding securities of corporations listed on a national securities exchange
or registered under the Securities Exchange Act of 1934, in any entity which
does business or competes with SevenJTex or in any property, asset or right
which is used by SevenJTex in the conduct of its business, or (b) has been a
party to any transaction with SevenJTex relating to any aspect of its business,
including, without limitation, any contract, agreement or other arrangement (i)
providing for the furnishing or services, by, (ii) providing for lease,
management, rental or purchase or real or personal property to or from, or (iii)
otherwise requiring payments to (other than for services as employees, officers
or directors) any such person, any member of the immediate family of any such
person or any corporation, partnership, limited liability company, trust or
other entity in which any such person has a substantial interest or is an
officer, director, partner or trustee.
3.24 Assurances Regarding Tax Matters. To induce Buyer to enter into
this Agreement and to complete the Transaction, the Seller and Principal
Shareholders hereby jointly and severally warrant that:
(a) Liquidation. Immediately after the transfer of Assets
contemplated by Section 1.1, Seller will cease engaging in any business
activities, except for paying its liabilities, and will immediately liquidate
and distribute all Parent Common Stock and rights thereto received or receivable
in the Transaction and any other Assets not transferred to Buyer pursuant to
this Agreement, provided that Seller may, in its discretion, establish a
liquidating trust, having a term of less than three years, reserving a
reasonable fund for the purpose of satisfying obligations owed to creditors of
Seller with unliquidated claims, provided that such trust is treated as such for
federal income tax purposes.
(b) Continuity. Pursuant to the Transaction, Seller will
transfer to Buyer at least ninety percent (90%) of the fair market value of the
net assets and at least seventy percent (70%) of the fair market value of the
gross assets held by Seller immediately prior to the Transaction. For the
purpose of determining the percentage of Seller's net and gross assets
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acquired by Buyer pursuant to the Transaction, the following assets will be
treated as assets held by Seller immediately prior to the Transaction: (i)
assets disposed of by Seller prior to the Transaction and in contemplation
thereof; (ii) assets used by Seller to pay shareholders perfecting dissenters'
rights or other expenses or liabilities incurred in connection with the
Transaction; (iii) assets used by Seller to pay the expenses of entering into
the Transaction; and (iv) assets used to make payments in respect of stock of
the Seller or warrants or other rights to acquire such stock (including payments
treated as such for Tax purposes) that are made in contemplation of the
transaction or that are related thereto.
Seller shall certify these facts and warranties as of Closing as reasonably
requested by Thompson Coburn LLP.
3.25 No Broker. No person, firm or corporation other than Wedbush
Morgan Securities has acted in the capacity of broker, advisor, investment
banker or finder on behalf of Seller to bring about the negotiation or
consummation of this Agreement or the purchase of any of the Assets.
3.26 Accuracy of Statements. Neither this Agreement nor any Schedule
hereto nor any certificate furnished by Seller or the Principal Shareholders to
Buyer in connection with this Agreement or any of the transactions contemplated
hereby (including, without limitation, information furnished by Seller for use
by Parent in any proxy statement or offering memorandum used in connection with
obtaining the approval of the Seller's shareholders for the Transaction and
other matters contemplated hereby) contains or will contain an untrue statement
of a material fact or omits or will omit to state a material fact necessary to
make the statements contained herein or therein, in light of the circumstances
in which they are made, not misleading.
Article 4
Representations and Warranties of Buyer and Parent
Buyer and Parent hereby jointly and severally represent and warrant to
the Seller as follows:
4.1 Organization. Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of Missouri. Parent is
a corporation duly organized, validly existing and in good standing under the
laws of the State of Nevada.
4.2 Authorization and Consents. Each of Buyer and Parent has all
requisite corporate power and authority to own or lease and use its properties
and assets, to carry on its business as proposed to be conducted, to own enter
into and to consummate the transactions contemplated by this Agreement and to
perform its obligations hereunder. Upon approval of this Agreement by the Board
of Directors of Parent, the execution, delivery and performance of this
Agreement by Buyer and Parent shall have been duly and effectively authorized
and approved by all requisite corporate action of Buyer and Parent, and no other
corporate or shareholder act or proceeding on the part of either Buyer or Parent
shall be necessary to authorize this Agreement
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or the transactions contemplated hereby. This Agreement constitutes a valid and
legally binding obligation of the Buyer and Parent, enforceable against each of
them in accordance with its terms. Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby nor
compliance by Buyer or Parent with any of the provisions hereof will violate or
conflict with any of the terms, conditions or provisions of the Certificate or
Articles of Incorporation or Bylaws of Buyer or Parent, or violate any order,
writ, injunction, decree, statute, rule or regulation applicable to Buyer or
Parent. Except as set forth in Schedule 4.2, no consent or approval by, notice
to or registration with any governmental authority or other third party is
required on the part of the Buyer or Parent in connection with the execution and
delivery of this Agreement or the consummation by Buyer or Parent of the
transactions contemplated hereby.
4.3 Parent Common Stock. All shares of Parent Common Stock to be
issued to the shareholders of Seller pursuant to this Agreement at the Closing
or thereafter are and shall be duly authorized, validly issued, fully paid and
non-assessable.
4.4 Information Regarding Parent. Buyer has delivered or made
available to Seller true and complete copies of all reports filed by Parent with
the Securities and Exchange Commission (the "SEC") pursuant to the Exchange Act
within the last two (2) years, commencing with its Annual Report on Form 10-SB,
as amended. To the best of Parent's knowledge and belief, none of the foregoing
reports, nor any other filing made by Parent with the SEC, contained, at the
time thereof, any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make the
statements therein not misleading.
4.5 Litigation. Except as set forth on Schedule 4.5, there are no
actions, suits, proceedings, claims, investigations or inquiries of any kind
pending or, to the knowledge of Buyer and Parent, threatened against Buyer or
Parent before any court, commission, agency or other administrative or judicial
authority which could have a material adverse effect on the financial condition,
results of operations, assets, liabilities or business of Buyer or Parent.
Neither Buyer nor Parent is the subject of any judicial or governmental order or
decree, other than those of general application.
4.6 Parent Financial Statements. Parent's audited financial statements
as at December 31, 1999 contained in its Form 10-KSB, and Parent's unaudited
financial statements as at March 31, 2000 contained in its Form 10-Q SB
(collectively, the "Parent Financial Statements") are true and complete copies
of such statements. The Parent Financial Statements, taken together with the
other disclosures in those filings, present fairly in all material respects the
consolidated financial position and consolidated results of operations of Buyer
as of the respective dates and for the respective periods indicated, and have
been prepared in conformity with generally accepted accounting principles
applied on a basis consistent (except as otherwise noted) with prior periods,
except that the unaudited statements lack full footnote disclosures and are
subject to year end adjustment. Since December 31, 1999, there has been no
material adverse change in the financial condition, results of operations,
assets, liabilities or business of Parent and its subsidiaries, taken as a
whole.
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4.7 Transactional Approvals. Except as set forth on Schedule 4.7, no
approval, authorization, order, license, permit, franchise or consent of, or
registration, qualification or filing with, or notice to, any judicial or
governmental agency or authority, or any other person or entity, is required in
connection with the execution, delivery or performance by Buyer and Parent of
this Agreement.
4.8 Assurances Regarding Tax Matters. To induce Seller and the
Principal Shareholders to enter into this Agreement, Parent and Buyer hereby
represent and warrant that:
(a) Prior to the Closing, Parent will be in control of Buyer,
i.e., will own at least 80 percent of the total combined voting power of all
classes of Buyer stock entitled to vote and at least 80 percent of the total
number of shares of all other classes of Buyer stock ("Control").
(b) Following the Closing, Buyer shall not issue additional
shares of its stock that would result in Parent losing Control of the Buyer.
(c) Following the Closing, Buyer shall continue the historic
business of Seller or use a significant portion of Seller's business assets in a
business.
Parent and Buyer shall certify these facts and warranties as of Closing as
reasonably requested by Thompson Coburn LLP.
4.9 Litigation. There is no suit, claim, action, proceeding or
governmental investigation now pending or, to Buyer's and Parent's knowledge,
threatened against Buyer or Parent which contests the validity of this Agreement
or the ability of the Buyer or Parent to consummate the transactions
contemplated by this Agreement.
4.10 No Broker. Except for Wedbush Morgan Securities, no person, firm
or corporation has acted in the capacity of broker, advisor, investment banker
or finder on behalf of the Buyer or Parent to bring about the negotiation or
consummation of this Agreement, the sale of the Parent Common Stock or the
purchase of the Assets of Seller.
4.11 Accuracy of Statements. Neither this Agreement nor any Schedule
hereto nor any certificate furnished by Buyer or Parent to Seller or the
Principal Shareholders in connection this Agreement or any of the transactions
contemplated hereby (including, without limitation, information furnished in any
proxy statement or offering memorandum used in connection with obtaining the
approval of the Seller's shareholders for the Transaction and other matters
contemplated hereby, but excluding information furnished by Seller) contains or
will contain an untrue statement of a material fact or omits or will omit to
state a material fact necessary to make the statements contained herein or
therein, in light of the circumstances in which they are made, not misleading.
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Article 5
Closing and Closing Date
The closing of the transactions contemplated by this Agreement
("Closing") shall take place at the office of Thompson Coburn LLP, One Firstar
Plaza, St. Louis, Missouri, commencing at 9:00 a.m. local time on July 17, 2000
(the "Closing Date"), or at such other time and place as the Seller and Buyer
shall agree in writing. To the extent conditions to Closing have not been
fulfilled or waived as of the scheduled Closing Date, the Closing Date shall
automatically be extended to the first business day after which such conditions
have been satisfied or waived on or before July 29, 2000.
Article 6
Covenants of Seller
6.1 Conduct of Business. The Seller and the Principal Shareholders
hereby covenant, warrant and agree that from the date hereof to the Closing
Date, except for transactions which are expressly approved in writing by the
Buyer:
(a) Neither the Seller nor either Acquired Subsidiary shall
subject any of the Assets or other properties to any lien, charge or encumbrance
of any kind, except in the ordinary course of business and for Permitted Liens;
(b) Neither the Seller nor either Acquired Subsidiary shall
sell, assign, transfer or otherwise dispose of any of the Assets or its
properties, except inventory held for sale in the ordinary course of business
and tangible personal property being replaced in the ordinary course of
business;
(c) Neither the Seller nor either Acquired Subsidiary shall
modify, amend, alter or terminate (whether by written or oral agreement, or any
manner of action or inaction) any of the Executory Contracts or any of the
Constituent Documents, except in the ordinary course of business for reasonably
equivalent consideration;
(d) Neither the Seller nor either Acquired Subsidiary shall
make any material change in the number of its employees or any change in their
compensation or benefits which is outside of the ordinary course of business;
(e) Neither the Seller nor either Acquired Subsidiary shall
declare or pay any dividend, distribution or other return of capital to its
partners or shareholders; and
(f) Neither the Seller, either Acquired Subsidiary nor any
Principal Shareholder shall negotiate, discuss, solicit or contract with any
person (except Buyer and its designees) with respect to a transaction involving
the sale of any of the assets or stock (whether
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or not outstanding) of, or other equity interests in, the Seller or either
Acquired Subsidiary; provided that Seller may, without the Buyer's approval, (i)
issue its common stock pursuant to the exercise of any option disclosed in this
Agreement, including the Schedules hereto, and (ii) issue its common stock in
connection with the resolution of any disputes between Seller and holders of any
class of Seller's stock, or any security convertible into or exercisable for
Seller's stock.
6.2 Affirmative Covenants. The Seller and the Principal Shareholders
hereby covenant, warrant and agree that from the date hereof to the Closing
Date, unless otherwise expressly approved in writing by the Buyer:
(a) The Seller and the Acquired Subsidiaries shall keep their
respective properties continuously insured in amounts and with coverage at least
as great as the amounts and coverage in effect on the date of this Agreement;
(b) The Seller and the Acquired Subsidiaries shall maintain and
use diligent efforts to preserve their possession and control of their
respective properties consistent with past practice, and shall use diligent
efforts to keep in faithful service their respective employees and to preserve
the goodwill of customers, suppliers and others having business relations with
them;
(c) The Seller and the Acquired Subsidiaries shall maintain
their books, accounts and records in a manner consistent with past practice;
(d) The Seller and the Acquired Subsidiaries shall allow, at
all reasonable times, Buyer's employees, attorneys, auditors, accountants and
other authorized representatives, reasonable full access to the land, plants,
properties, books, records, documents and correspondence of the Seller and each
Acquired Subsidiary, in order that Buyer may have full opportunity to make such
investigation as it may desire of their respective businesses;
(e) The Seller and each Acquired Subsidiary shall comply with
all laws applicable to them or to the conduct of their respective businesses,
and shall use diligent efforts to conduct their businesses in such a manner so
that on the Closing Date the representations and warranties contained in this
Agreement shall be true as though such representations and warranties were made
on and as of such date;
(f) The Seller shall provide Buyer with prompt written notice
of (i) any material adverse change the Assets, properties, liabilities,
earnings, business or condition (financial or otherwise) of the Seller or either
Acquired Subsidiary, and (ii) any event or circumstance which causes, or can
reasonably be expected to cause, any of the representations and warranties in
Article 3 to be inaccurate;
(g) The Seller shall deliver its regularly prepared monthly
financial statements to Buyer promptly following completion thereof, and in any
event no later than 45 days after the end of each month; and
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(h) The Seller and Principal Shareholders shall use diligent
efforts (i) to obtain such consents from third parties as may be required in
order to fulfill the conditions to Closing which are reasonably within Seller's
or the Principal Shareholders' control, and (ii) to cause the representations
and warranties in Article 3 to be true and correct on the Closing Date.
6.3 Clearance Certificates. On or prior to the Closing Date, the
Seller shall deliver to Buyer such clearance certificates or similar document(s)
of any state taxing authority that Buyer shall reasonably designate, in order to
relieve Buyer of any duty to withhold any portion of the consideration payable
pursuant to this Agreement.
6.4 No Solicitation. From the date hereof until the Closing or the
valid termination of this Agreement, Seller and the Principal Shareholders shall
not, directly or indirectly, through any officer, director, agent or
representative (including without limitation investment bankers, attorneys,
accountants and consultants) solicit, initiate or further the submission of
proposals or offers from negotiate with or enter into any agreement with, any
firm, corporation, partnership, association, group (as defined in Section
13(d)(3) of the Securities and Exchange Act of 1934 (the "Exchange Act")) or
other person or entity, individually or collectively, other than Buyer (a "Third
Party"), relating to any direct or indirect acquisition or purchase of all or
substantially all of the assets of, or any equity interest in, Seller or either
Acquired Subsidiary, or any merger, consolidation or business combination with
Seller or either Acquired Subsidiary.
6.5 Shareholders Meeting. Promptly following the execution of this
Agreement, the Seller will duly call, give notice of, and convene and hold a
special meeting of shareholders on or before July 17, 2000, for the purpose of,
among other things, considering the approval of the Transaction as set forth in
this Agreement and resolving to dissolve the Seller under the BCL. The Seller
will, through its Board of Directors, recommend to its shareholders adoption or
approval of such matters, as the case may be, shall use all reasonable efforts
to solicit such approvals by its shareholders and shall not withdraw such
recommendation. Each Principal Shareholder agrees to attend such meeting and any
adjournment thereof and to vote all shares owned or controlled by such Principal
Shareholder in favor of the Transaction and the dissolution of Seller.
6.6 Representation Letters; Residency. Concurrently with their
execution of this Agreement, each Principal Shareholder shall execute and
deliver to Parent a Representation Letter in the form attached as Exhibit C.
6.7 Employees. Effective as of Closing, Seller shall release all of
its employees from their employment with Seller, in order that Buyer may extend
offers of employment to such employees as Buyer shall deem appropriate. Prior to
Closing, Seller shall make its employees available to, and otherwise shall
cooperate with, Buyer in connection with the Buyer's interview process.
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6.8 Tax Matters.
(a) The Seller shall, at the Seller's expense, timely prepare
and file (or cause to be prepared and filed) with the appropriate Tax
authorities all Returns for the Seller and the Group for all taxable periods
ending on or before the Closing and the portion ending on the Closing of any
taxable period that includes (but does not end on) such day (the "Pre-Closing
Tax Period") whether such Returns are required to be filed on or before or after
the Closing; and the Seller shall pay all Taxes due prior to the Closing with
respect to all such Returns. All Returns filed by the Seller or the Group
pursuant to the preceding sentence shall be prepared using accounting methods
that were used in preparing the relevant Returns for prior taxable periods and
in a manner which does not have the effect of distorting Taxes due for any such
period. All such Returns shall be made available to Buyer for review a
reasonable period of time prior to filing.
(b) To the extent not prepared and filed by the Seller or
Group, Buyer, consistent with past practice of the Seller and the Group, shall
timely prepare and file (or cause to be prepared and filed) with the appropriate
Tax authorities, at Seller's or the Principal Shareholders' expense, all Returns
for the Seller and Group that the Seller or Group is required to file prior to
the Closing for any Pre-Closing Tax Period, and, to the extent not required to
be paid prior to the Closing as described in this Section 6.8(a), shall cause
the Seller or Principal Shareholders to pay all Taxes due with respect thereto
(to the extent the Buyer is liable therefor); and provided further, if any such
Return will cause the Principal Shareholders to incur any obligation to
indemnify Parent in accordance with Section 11.1 hereof, Buyer shall provide the
Principal Shareholders with copies of such returns within a reasonable time
prior to filing and shall provide the Principal Shareholders a reasonable
opportunity to comment thereon. Buyer and the Principal Shareholders shall
attempt in good faith mutually to resolve any disagreements regarding such
Returns prior to the due date for filing thereof.
(c) As soon as practicable, but in any event within 15 days
after a request of a party to this Agreement (the "Requesting Party"), from and
after the Closing, the other parties shall use all reasonable efforts to
cooperate with the Requesting Party and to deliver to the Requesting Party such
information and data concerning the Pre-Closing operations of the Seller and the
Group as it shall have and shall use all reasonable efforts to make available
such knowledgeable persons as may be requested in order to enable the Requesting
Party to complete and file all Returns which it may be required to file or to
respond to audits by any taxing authorities with respect to such period. Such
cooperation and information shall include provision of powers of attorney for
the purpose of signing Returns and defending audits of the Seller and the Group
and promptly forwarding copies of appropriate notices and forms or other
communications received from or sent to any taxing authority which relate to the
Seller and the Group and providing copies of all relevant Returns, together with
accompanying schedules and related workpapers, documents relating to rulings or
other determinations by any taxing authority and records concerning the
ownership and tax basis of property of the Seller and the Group.
(d) All Tax sharing or Tax indemnity agreements to which the
Seller or the Group is a party shall be terminated prior to the Closing.
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(e) In the event the Seller or Buyer receive notice of any
audit, examination, proceeding or litigation with respect to any Tax for any
Pre-Closing Tax period which will or may result in the Seller or the Principal
Shareholders incurring any indemnity obligation pursuant to Section 11.1 hereof
(a "Tax Contest"), Buyer shall immediately notify the Principal Shareholders of
such Tax Contest at such time and in such manner as will enable the Principal
Shareholders to exercise the rights created hereunder, provided that any failure
or delay in providing such notice shall not limit the obligations of the
Principal Shareholders to indemnify Buyer under this Agreement if such failure
or delay does not have a material adverse affect on the ability of the Principal
Shareholders to exercise the rights granted herein. The Principal Shareholders,
shall assume the responsibility of conducting any audit, examination, proceeding
or litigation with respect to any Tax (a "Tax Contest") involving a Tax Return
for a period which ends prior to the Closing if the Principal Shareholders would
be liable, or obligated to reimburse Buyer, for any Taxes determined to be due
as a result of the Tax Contest, and Buyer shall have the responsibility, at its
expense, for conducting any other Tax Contest. The Principal Shareholders and
Buyer shall keep the other informed with respect to all matters relating to any
Tax Contest. Notwithstanding the foregoing, if any issue raised in a Tax Contest
would have a material adverse impact on the party other than the one responsible
for conducting such Tax Contest, such other party shall be entitled, at its
expense, to participate in such Tax Contest and such Tax Contest shall not be
settled, compromised or otherwise conceded without the written consent of both
parties, which consent shall not be unreasonably withheld. Each of the Principal
Shareholders and Buyer agree to cooperate fully and in good faith in the conduct
of any Tax Contest. Any expenses of the Principal Shareholders which are
attributable to that portion of any Tax Contest for which the Principal
Shareholders are ultimately required to indemnify Parent pursuant to Section
11.1 hereof shall be treated as part of the loss incurred by Buyer for which it
is entitled to indemnification.
6.9 Certain Environmental Matters. Included on Schedule 3.17 to this
Agreement is a list of environmental issues being addressed by Seller, and it is
anticipated that such environmental issues shall continue to be addressed by the
Buyer or Acquired Subsidiaries after the Closing. Buyer accepts the risk that
the aggregate expense associated with the resolution of such issues (including
any fines or penalties for noncompliance through periods prior to Closing) will
be up to $25,000. To the extent the resolution of such issues requires incurring
expense greater than $25,000, such excess shall result in a reduction of
purchase price for the Assets, to be effected by offset against the amount of
Parent Shares otherwise distributable under Section 1.2(c)(ii) above, and the
Buyer shall be entitled to instruct the Escrow Agent to return shares of Parent
Stock to Buyer in order to effect such reduction. To the extent such
environmental issues have not been resolved by the date of the distribution from
escrow pursuant to Section 1.2(c)(ii) above, then the Buyer and Seller
Representative shall jointly instruct the Escrow Agent to withhold 25,000 Parent
Shares (or such lesser amount as Buyer and Seller Representative, acting in good
faith, shall jointly approve as being a reasonable estimate of that the
aggregate remaining expense of resolving such issues) pending resolution of such
issues. Thereafter, Buyer shall be entitled (a) to instruct the Escrow Agent to
return to Buyer shares of Parent Stock, and/or (b) to offset its unrealized
purchase price reduction against the Earnout Stock otherwise deliverable under
Section 1.5. Any such shares retained by Escrow Agent under
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this Section and not to be returned to Buyer in reduction of the purchase price
under this Section shall be distributed by Escrow Agent for the benefit of the
Seller Shareholders promptly following resolution of such environmental issues,
and in no event later than the time for the distribution under Section
1.2(c)(iii) above. No further reserve of Parent Shares shall be made for
estimated expenses of resolving any then unresolved environmental issues. All
offsets and distributions of Parent Stock and Earnout Stock under this Section
shall be at a value of Three Dollars ($3.00) per share, subject to adjustment as
set forth in Section 1.7.
Article 7
Covenants of Buyer and Parent
Buyer and Parent hereby jointly and severally covenant, warrant and agree
as follows:
7.1 Confidentiality of Information. Prior to the Closing Date, Buyer,
Parent and their employees, agents, auditors, attorneys and other authorized
representatives shall not, without the prior written consent of the Seller,
communicate or divulge to any person or entity or use for its benefit any
information, other than information becoming public other than by action of the
Buyer or Parent, concerning any confidential business information possessed,
owned or used by the Seller or the Acquired Subsidiaries that may be
communicated to, acquired by or learned by Buyer and Parent pursuant to this
Agreement or their investigations contemplated hereby.
7.2 Consents. Buyer and Parent shall use their reasonable best efforts
(i) to obtain such consents from third parties as may be required in order to
fulfill the conditions to Closing which are reasonably within their control, and
(ii) to cause the representations and warranties in Article 4 to be true and
correct on the Closing Date.
7.3 Blue Sky Approvals. Parent shall use its best efforts to take such
steps as may be required and complete all filings to obtain approvals required
under state securities or "blue sky" laws of the states of residence of the
shareholders of Seller for the issuance of the Parent Common Stock in connection
with the Transaction.
7.4 Rule 144. Parent will use commercially reasonable efforts to file
the reports required to be filed by it under the Securities Act and the Exchange
Act and the rules and regulations adopted by the SEC thereunder to the extent
required from time to time to enable each shareholder of Seller to sell Parent
Common Stock without registration under the Securities Act within the limitation
of the exemptions provided by (a) Rule 144 or (b) any similar rule or regulation
hereinafter adopted by the SEC. If any Parent Common Stock is disposed of in
accordance with Rule 144 under the Securities Act, Parent may require that each
shareholder disposing of such shares shall deliver to Parent at or prior to the
time of such disposition an executed copy of Form 144 (if required by Rule 144)
and such other documentation as Parent reasonably requires in connection with
such disposition.
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7.5 Observer Rights. For a period of one (1) year after the Closing, a
representative of the shareholders of Seller (initially Scott Underwood) shall
be entitled to attend regularly scheduled meetings of the Board of Directors of
Parent as an observer (or to designate an alternate acceptable to Parent, if he
is unavailable), provided such representative (and any alternate) shall execute
such documents as the Parent shall reasonably require to assure the
confidentiality of matters discussed and materials distributed during such
meetings. Attendance by conference telephone shall be permissible only if the
meeting is to be conducted in such manner according to the notice of meeting. It
is understood that such documents shall prohibit the disclosure of nonpublic
information concerning Parent and its subsidiaries to the shareholders of
Seller.
7.6 Operations After Closing. From the date of the Closing through the
end of the Measuring Period, Buyer shall, and Parent shall cause Buyer to, (a)
operate the business comprised of the Assets in the ordinary course of business
in a manner no less diligent than Seller's past practice, and (b) maintain
separate accounting records with respect to such business, in order for the
parties to accurately compute the EBITDA of Buyer as required by Section 1.5
above. After the Closing, any transactions between Buyer, on the one hand, and
Parent or any subsidiary or affiliate of Parent, on the other hand, shall be on
terms not materially less favorable to Buyer than can be obtained in
transactions between Buyer and a third party not affiliated with Parent.
Specifically, and without limiting the generality of the foregoing, Parent shall
not permit the transfer of any products or product lines of Seller out of Buyer
without appropriately crediting Buyer with the income from such products or
product lines or as otherwise agreed by Parent and the Seller Representative.
7.7 Sales Representatives. Without limiting in any way the right of
Buyer or either Acquired Subsidiary to terminate the employment of any person in
the ordinary course of Buyer's business, the Buyer shall cause the Acquired
Subsidiaries following the Closing to continue the employment of the existing
sales representatives identified on Schedule 7.7 attached to this Agreement, and
shall empower such sales representatives to market the products of Parent, in
addition to the historical products of Seller to be offered by Buyer. At the
sole discretion of Buyer, during the Measuring Period, it is understood that
Buyer shall have the option of either (a) purchasing product from Parent or
Parent's subsidiaries for resale to food service suppliers, or (b) marketing
such product to supermarket retailers and receiving a commission equal to 2% of
the total sales price. In the event that Buyer elects to purchase product from
Parent, no commission shall be paid by Parent and Buyer shall be responsible for
all sales expenses associated with the marketing and representation of Parent
products. Furthermore, Buyer shall purchase Parent's products on a negotiated
basis, and shall be responsible for all billing, sales and marketing expenses.
In the event Buyer elects to market such products to supermarket retailers,
Parent shall be responsible for reimbursing Buyer for all pre-approved sales
expenses associated with representation of Parent's or Parent's subsidiaries'
Products. All products or services that are coordinated, marketed, and sold by
Sales Representatives listed in Schedule 7.7 and any current or future employees
of Buyer shall be credited to Buyer during the Measuring Period. Parent shall
agree that all Sales Representatives listed in Schedule 7.7 shall only be
compensated by Buyer during the Measuring Period, with the exception of a stock
pool or bonus program granted to multiple Buyer employees. During the
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Measuring Period, Buyer shall not materially reduce, increase or alter the
compensation or size of the sales force of the Buyer or either Acquired
Subsidiary without the prior written approval of the Seller Representative.
7.8 Wedbush Fee. The fee(s) and expenses of Wedbush Morgan Securities
relating to the Transaction, whether in representing Seller, Parent or Buyer,
shall be paid by Parent and not charged to Buyer during the Measuring Period.
The parties acknowledge that at the date of this Agreement the unpaid fee still
owed to Wedbush is $170,000.
Article 8
Buyer's and Parent's Conditions to Closing
The obligations of Buyer and Parent to consummate the transactions
contemplated by this Agreement shall be subject to the fulfillment to Buyer's
and Parent's reasonable satisfaction of each of the following conditions, unless
waived in writing by Buyer or Parent:
8.1 Continued Truth of Warranties. The representations and warranties
of the Seller and Principal Shareholders contained herein shall be true in all
material respects on and as of the Closing Date with the same force and effect
as though made as of such date, except for any variations permitted by this
Agreement.
8.2 Performance of Covenants. The Seller and Principal Shareholders
shall in all material respects have performed all covenants and obligations and
complied with all conditions required by this Agreement to be performed or
complied with by them on or prior to the Closing Date.
8.3 No Adverse Change. There shall not have been any:
(a) material adverse change in the condition, quantity or value
of the Assets or properties of the Seller or either Acquired Subsidiary since
the date of this Agreement;
(b) material adverse change in the financial condition or
prospects of the Seller or either Acquired Subsidiary since the date of this
Agreement;
(c) litigation or claim pending or threatened against either of
the Acquired Subsidiaries; or
(d) failure on the part of Seller or either Acquired Subsidiary
to operate in the ordinary course of business.
8.4 Permits and Consents. In the case of governmental authorities, the
parties hereto shall have secured all appropriate orders, consents, approvals
and clearances, in form and substance satisfactory to Buyer and Parent, by and
from all parties, including, but not limited to, regulatory agencies and other
governmental authorities and agencies, whose order, consent and
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approval or clearance is required by contract or law for the consummation of the
transactions herein contemplated. In the case of other third parties, the
parties hereto shall have secured all consents, approvals, waivers and estoppels
as Buyer shall reasonably deem necessary and in form and substance satisfactory
to Buyer, to consummate the purchase of the Assets and assumption of Assumed
Liabilities of Seller.
8.5 Full Investigation. Buyer and its employees, attorneys,
accountants and other agents shall have been permitted to conduct a full
investigation of the books, records, assets, liabilities, operations, business
and condition of the Seller and Acquired Subsidiaries, including environmental
assessments if Buyer deems it appropriate to obtain the same, and Buyer shall
not have discovered any condition or set of facts which (a) in the reasonable
judgment of Buyer represents a material environmental liability or risk of
environmental liability, or (b) in the reasonable judgment of Buyer is in
material violation of one or more of the covenants, representations and
warranties of Seller set forth herein, and which is not remedied to Buyer's
satisfaction prior to the Closing Date.
8.6 Closing Documents. The Seller shall have delivered all documents
required to be delivered by Seller at Closing, as more specifically set forth in
Article 10 of this Agreement, in each case in form and substance reasonably
satisfactory to Buyer.
8.7 Employment Agreements. Buyer shall have received from each of the
employees identified on Schedule 8.7, an employment agreement with
noncompetition obligations extending beyond the period of employment, in form
and substance satisfactory to Buyer.
8.8 Noncompetition Agreements. Buyer shall have received (a) from John
Mueller a noncompetition agreement substantially in the form attached hereto as
Exhibit I, and (b) from James Mueller a noncompetition and nonsolicitation
agreement substantially in the form attached hereto as Exhibit J (collectively,
the "Noncompetition Agreements").
8.9 Legal Opinion. Buyer shall have received a legal opinion from The
Stolar Partnership, as to the matters set forth in Exhibit D attached hereto.
8.10 Absence of Litigation. No suit, claim, action, proceeding or
governmental investigation shall have been commenced or threatened against any
of the parties to this Agreement which challenges the validity, legality or
enforceability of this Agreement or the performance by the parties hereto of
their respective obligations hereunder, or which, if determined adversely to the
defendant(s), could have a material adverse effect on Buyer, Parent, either of
the Acquired Subsidiaries, or the business comprised of the Assets.
8.11 Audited Financial Statements. Parent shall have received
unqualified audited financial statements for the Seller for the three fiscal
years ended October 31, 1999, 1998 and 1997, and any other such three-year
fiscal period (of Seller or any other person acquired by Seller), which
financial statements shall satisfy the requirements of the SEC and the audit
report which shall report financial statements which are the same in all
material respects to the financial
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statements of Seller, including the Seller's proxy statement used in connection
with obtaining shareholder approval of the Transaction.
8.12 Lender Approval. Parent's current senior lenders shall have
approved the structure of the Transaction as reflected in this Agreement,
including without limitation, the Buyer's assumption of the Assumed Liabilities
and, if necessary, the Parent's guaranty of certain of the Assumed Liabilities.
8.13 Board Approval. No later than the date of the shareholder meeting
to be called pursuant to Section 6.5 above, the Board of Directors of Buyer
shall have approved the Transaction and the other matters contemplated by this
Agreement.
8.14 Additional Investment. An investor acceptable to Parent shall have
completed a debt or equity transaction providing for not less than $1,000,000 of
funding for Buyer during at least the Measuring Period, on terms satisfactory to
Buyer (the "Interim Financing").
8.15 Agreements with Seller's Lenders.
(a) Buyer shall have received an agreement with Civic Ventures
Investment Fund, L.P. on the assumption of Seller's debentures held by them and
the immediate redemption thereof for common stock, and/or warrants for common
stock, of Parent, on terms satisfactory to Buyer.
(b) Buyer shall have reached an agreement with Bank of America
N.A. and First National Bank of Eagle Lake on the assumption of Seller's
indebtedness to them, on terms satisfactory to Buyer.
8.16 PAC, Inc. PAC, Inc. shall have converted the $300,000 PAC Loan to
equity of Seller as part of the Closing, in accordance with the terms of such
Loan.
8.17 Approval. The shareholders of Seller shall have approved the
Transaction and the dissolution of Seller at the meeting called pursuant to
Section 6.5 above.
8.18 Estoppel Letters. Buyer and Parent shall have received from each
of the Principal Shareholders and the current officers and directors of Seller
estoppel letters reasonably satisfactory to Buyer to the effect that such
persons have no undisclosed claims or rights against the Acquired Subsidiaries
and are not parties to any undisclosed contract or agreement with the Acquired
Subsidiaries.
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Article 9
Seller's Conditions to Closing
The obligation of the Seller to consummate the transactions contemplated
by this Agreement shall be subject to the fulfillment to the Seller's reasonable
satisfaction of the following conditions, unless waived in writing by the
Seller:
9.1 Continued Truth of Warranties. The representations and warranties
of Buyer and Parent herein contained shall be true in all material respects on
and as of the Closing Date with the same force and effect as though made as of
such date, except for any variations permitted by this Agreement.
9.2 Performance of Covenants. Buyer and Parent shall in all material
respects have performed all covenants and obligations and complied with all
conditions required by this Agreement to be performed or complied with by Buyer
or Parent on or prior to the Closing Date.
9.3 Closing Documents. Buyer shall have delivered all documents
required to be delivered by Buyer at Closing, as more specifically set forth in
Article 10 hereof, in each case in form and substance reasonably satisfactory to
the Seller.
9.4 Absence of Litigation. No suit, claim, action, proceeding or
governmental investigation shall have been commenced or threatened against any
of the parties to this Agreement which challenges the validity, legality or
enforceability of this Agreement or the performance by the parties hereto of
their respective obligations hereunder.
9.5 Approval. The shareholders of Seller shall have approved the
Transaction and the dissolution of Seller at the shareholder meeting called
pursuant to Section 6.5 above.
9.6 Board Approval. No later than the date of the shareholder meeting
called pursuant to Section 6.5 above, the Board of Directors of Parent shall
have approved the Transaction and the other matters contemplated by this
Agreement.
9.7 Tax Opinion. The Seller shall have received an opinion of Thompson
Coburn LLP dated as of the Closing, to the effect that the Transaction will
constitute a reorganization for federal income tax purposes within the meaning
of Section 368 of the Code and which opines on the tax consequences to the
Seller. In rendering its opinion, such firm may reasonably require and rely upon
factual representations contained in certificates of officers of Buyer, Seller
and the Group dated on or before the date of such opinion.
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Article 10
Documents to be Delivered at Closing
10.1 Documents to be Delivered by Seller. At the Closing:
(a) Seller shall execute and deliver to Buyer a warranty Bill
of Sale, substantially in the form attached hereto as Exhibit E, conveying to
Buyer good and marketable title to the Assets;
(b) Seller shall execute and deliver to Buyer an Assignment and
Assumption Agreement substantially in the form of Exhibit F attached hereto and
made a part hereof;
(c) Seller shall execute and deliver (i) an assignment of the
GP Interest, and (ii) one or more original certificates evidencing the
Subsidiary Stock, each in form reasonably satisfactory to Buyer;
(d) Seller shall execute and deliver to Buyer such other
documents, including instruments of sale, transfer and assignment transferring,
assigning and conveying the Assets being purchased as shall be reasonably
requested by Buyer to permit Buyer to use Seller's corporate name or to evidence
the transfer of any of the Assets or to vest in the Buyer good, marketable,
indefeasible and recordable title to the Assets, free and clear of all liens,
claims and encumbrances of third parties except for Permitted Liens;
(e) Seller shall execute and deliver the Escrow Agreement and
the Shareholder Certification, as contemplated by Section 1.2 hereof;
(f) Seller shall deliver a certified copy of the resolutions
adopted by its Boards of Directors and by its shareholders authorizing the
execution and delivery of this Agreement and the consummation of the Transaction
contemplated hereby (including the dissolution of Seller), duly certified as of
the Closing Date by the Secretary or any Assistant Secretary of Seller;
(g) Seller shall deliver Certificates of Good Standing or their
equivalent, dated not more than ten days prior to the Closing Date, attesting to
the good standing of Seller as a corporation under the laws of the State of
Missouri and as a foreign corporation in the State of Texas, and attesting to
the good standing of SevenJNev and SevenJTex in the States of Nevada and Texas,
respectively;
(h) Seller shall deliver a certificate, executed by the
President or any Vice President on behalf of Seller, dated as of the Closing
Date, certifying (i) that all of the representations and warranties of Seller
herein contained are true and correct on the Closing Date, and (ii) that the
audited financial statements delivered under Section 8.11 comport with the
warranties made with respect to the Unaudited Financial Statements in Section
3.5;
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(i) To the extent any consents or approvals shall be necessary
to the Transaction herein contemplated, or to the effective transfer or
assignment of any of the Assets being purchased by Buyer from Seller, the Seller
shall deliver to Buyer copies of all such consents or approvals as obtained by
the Seller;
(j) The Seller shall execute and deliver a Registration Rights
Agreement substantially in the form of Exhibit G attached hereto and made a part
hereof (the "Registration Agreement");
(k) Seller shall deliver to Buyer the opinion of The Stolar
Partnership as provided in Section 8.9 above;
(l) The Seller shall deliver to Buyer the resignations of such
officers and directors of the Acquired Subsidiaries as Buyer shall request;
(m) The Seller shall execute and deliver (i) appropriate
articles of dissolution, in form acceptable for filing with the Missouri
Secretary of State, by which the Seller shall dissolve its corporate existence,
and (ii) appropriate notices or certificates of withdrawal in form acceptable
for filing in each other jurisdiction in which Seller is qualified to do
business; and
(n) Seller shall deliver to Buyer the original corporate minute
books, stock transfer books and corporate seal of SevenJNev, and any other
business records or property of SevenJNev and SevenJTex that is in the
possession of Seller.
10.2 Documents to be Delivered by Buyer. At the Closing, the Buyer
shall:
(a) Deliver to the Seller certified copies of the resolutions
adopted by the Boards of Directors of Buyer and of Parent, authorizing the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby, duly certified as of the Closing Date by the
Secretary of Buyer and Secretary of Parent, respectively;
(b) Deliver to the Seller Certificate of Good Standing or their
equivalent, dated not more than ten days prior to the Closing Date, attesting to
the good standing of Buyer as a corporation under the laws of the State of
Delaware and as a foreign corporation under the laws of the State of Texas, and
attesting to the good standing of Parent in the State of Nevada;
(c) Deliver to the Seller certificates, respectively executed
by an officer or any Vice President of Buyer and Parent, dated as of the Closing
Date, certifying that all of the representations and warranties of Buyer and
Parent contained herein are true and correct on the Closing Date;
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(d) To the extent any consents or approvals shall be necessary
to any of the transactions herein contemplated, or to the effective transfer of
any of the Assets, deliver to the Seller copies of all such consents or
approvals as obtained by Buyer;
(e) Execute and deliver the Escrow Agreement, the Registration
Agreement and the Noncompetition Agreements;
(f) Deliver the applicable number of shares of Parent Common
Stock to the Escrow Agent and Transfer Agent, respectively, as required by
Section 1.2 hereof; and
(g) Deliver to the Seller opinions of Thompson Coburn LLP and
of Nevada counsel to the Parent, in form reasonably satisfactory to the Seller
as to the matters set forth in Exhibit H attached hereto and made a part hereof.
Article 11
Indemnification
11.1 General Indemnification by Seller. Subject to the other provisions
of this Article 11, by execution of this Agreement, the Seller hereby agrees to
indemnify the Buyer, the Parent and their respective successors and assigns and
hold them harmless against and in respect of:
(a) any and all loss, liability, cost, expense or damage
(including judgments and settlement payments) incurred by Buyer or Parent
incident to, arising in connection with or resulting from (i) any breach,
nonperformance or inaccuracy of any representation, warranty, or covenant by the
Seller or Principal Shareholders made or contained in this Agreement or in any
Schedule hereto or any certificate or other document executed by Seller or any
Principal Shareholder and delivered to Buyer or Parent pursuant to this
Agreement or the transactions contemplated herein (all of which survive the
Closing for the period during which a claim may be asserted under Section 11.5
below); (ii) any Environmental Matter set forth on Schedule 3.17 or which is
based on conditions existing or events occurring immediately preceding the
Closing to the extent such loss, liability, cost, expense or damage exceeds
$25,000; and/or (iii) any liability or obligations of Seller, known or unknown,
existing or hereafter arising, which is not among the Assumed Liabilities;
(b) any and all loss, liability, cost, expense or damage (i)
arising out of any Taxes of Seller or either Acquired Subsidiary (A) with
respect to any Pre-Closing Tax Period, or (B) resulting, directly or indirectly,
from any transaction contemplated in this Agreement, or (C) resulting, directly
or indirectly, from a material breach of any representation, warranty or
covenant set forth in Section 3.19 of this Agreement; and (ii) and any
reasonable cost or expense or professional fee incurred in connection with any
examination or investigation by a taxing authority or any administrative or
judicial proceeding involving a Tax period (or part of a Tax period) ending on
or before the Closing Date; and
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(c) any and all reasonable costs, expenses and all other actual
damages incurred by Buyer or Parent in enforcing this indemnity or in remedying
any breach, misrepresentation, non-performance or inaccuracy described above,
including, by way of illustration and not limitation, all reasonable legal and
accounting fees, other reasonable professional expenses and all filing fees, and
collection costs incident thereto and all such fees, costs and expenses incurred
in defending claims which, if successfully prosecuted, would have resulted in
Damages (as defined herein).
Any and all of the items set forth in clauses (a) through (c) for which Buyer
or Parent is entitled to be indemnified hereunder are called "Damages."
11.2 General Indemnification by Buyer and Parent. Subject to the other
provisions of this Article 11, by execution of this Agreement, the Buyer and
Parent hereby agree, jointly and severally, to indemnify the Seller and its
successors and assigns and hold them harmless against and in respect of:
(a) any and all loss, liability, cost, expense or damage
(including judgments and settlement payments) incurred by Seller incident to,
arising in connection with or resulting from (i) any breach, nonperformance or
inaccuracy of any representation, warranty, or covenant by the Buyer or Parent
made or contained in this Agreement or in any Schedule hereto or any certificate
or other document executed by Buyer or Parent and delivered to Seller pursuant
to this Agreement or the transactions contemplated herein (all of which survive
the Closing for the period during which a claim may be asserted under Section
11.5 below), and/or (ii) any liability or obligations of Seller included among
the Assumed Liabilities (provided that the assumption of the GP Liability shall
not vitiate, limit or affect the right of Buyer or Parent to be indemnified
under Section 11.1 with respect to the matters described therein); and
(b) any and all reasonable costs, expenses and all other actual
damages incurred by Seller in enforcing this indemnity or in remedying any
breach, misrepresentation, non-performance or inaccuracy described above,
including, by way of illustration and not limitation, all reasonable legal and
accounting fees, other reasonable professional expenses and all filing fees, and
collection costs incident thereto and all such fees, costs and expenses incurred
in defending claims which, if successfully prosecuted, would have resulted in
Damages (as defined herein).
Any and all of the items set forth in clauses (a) through (c) of Section 11.1
or (a) and (b) of Section 11.2 for which a party is entitled to be
indemnified hereunder are called "Damages."
11.3 Notice of, and Procedures for, Collecting Indemnification.
(a) Initial Notice. When a party becomes aware of a matter
which may result in Damages for which it would be entitled to be indemnified
hereunder, such party (the "Indemnitee") shall deliver a written notice to such
effect to each party with the indemnification obligation ("Indemnitor") with
reasonable promptness after it first becomes aware of such matter, and shall
furnish the Indemnitor with such information as it has available
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demonstrating its right or possible right to receive indemnity. Such notice
shall, if feasible, contain a reasonable estimate by the Indemnitee of the
losses, costs, liabilities and expenses (including, but not limited to, costs
and expenses of litigation and attorneys' fees) which the Indemnitee may incur.
If the potential claim is predicated on legal action by a third party, such
notice shall name, when known, the person or persons making the assertions which
are the basis for such claim. Failure by the Indemnitee to deliver such notice
or an update thereof in a timely manner shall not relieve the Indemnitor of any
of its obligations under this Agreement except to the extent that actual
monetary prejudice can be demonstrated.
(b) Statement of Damages. At such time as Damages for which an
Indemnitor is liable hereunder are incurred by Indemnitee by actual payment
thereof or by entry of a final award or judgment, Indemnitee shall forward a
written statement to the Indemnitor setting forth the amount of such Damages in
reasonable detail on an itemized basis, which Damages shall be net of insurance
proceeds received by Indemnitee on such claim under policies of insurance on
which premiums were paid by such Indemnitee. Indemnitee shall supplement the
written statement with appropriate supporting proof of loss (e.g. vouchers,
canceled checks, accounting summaries, judgments, settlement agreement, etc.).
11.4 Satisfaction of Indemnity; Basket. In no event shall any
Indemnitee be entitled to indemnification under this Article 11 unless and until
the aggregate amount of otherwise indemnifiable Damages sustained by such
Indemnitee (with respect to all indemnifiable matters) exceeds $50,000 (the
"Basket"), and at such time as Damages in excess of the Basket are sustained,
the Indemnitor shall be responsible for all Damages sustained without regard to
the Basket. The shareholders of Seller, following Seller's dissolution, shall be
treated as one Indemnitee for purposes of the Basket, and shall bear the
economic loss represented by the Basket ratably in accordance with their
holdings of stock of Seller. Where the Seller is the Indemnitor, the Buyer or
Parent shall be entitled to offset against the Earnout Stock a number of shares
of stock of Parent having an aggregate value, based on the Closing Share Value,
equal to the Damages for which it is entitled to be indemnified. Where the Buyer
or Parent is the Indemnitor, the amounts reflected on such statement shall be
paid to Indemnitee by the Indemnitor within thirty (30) days after receipt of
the written statement and all supporting documentation.
11.5 Time and Amount Limitations. Any claim for indemnification under
this Agreement must first be asserted in writing to the Indemnitor no later than
the date on which the number of shares of Earnout Stock, net of indemnifiable
Damages sustained by Parent and/or Buyer, has been agreed to by the parties or
determined by arbitration as set forth in Section 1.2(c) of this Agreement. Any
claim for indemnification not asserted in writing before such time shall be
barred. The aggregate indemnification liability of Seller, on the one hand, and
the Parent and Buyer, on the other hand, under Sections 11.1 and 11.2 shall not
exceed an amount equal to the value of the Earnout Stock ultimately issuable to
Seller's shareholders in accordance with this Agreement.
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Article 12
Termination
12.1 Basis for Termination. Prior to the Closing, this Agreement may be
terminated as follows:
(a) By mutual written consent of Parent and Seller;
(b) By Buyer, pursuant to written notice by Buyer to Seller, if
either (i) any condition set forth in Article 8 above has not been fulfilled or
waived by July 29, 2000 through no fault of Buyer or Parent, which notice shall
set forth the conditions not yet satisfied, or (ii) Seller or the Principal
Shareholders are in default under this Agreement, which default has continued
for a period of more than ten (10) business days after written notice of default
has been delivered to Seller;
(c) By Seller, pursuant to written notice by Seller to Buyer
and Parent, if either (i) any condition set forth in Article 9 above has not
been fulfilled or waived by July 29, 2000 through no fault of Seller or the
Principal Shareholders, which notice shall set forth the conditions not yet
satisfied, or (ii) Buyer or Parent is in default under this Agreement, which
default has continued for a period of more than ten (10) business days after
written notice of default has been delivered to Buyer and Parent.
12.2 Effect of Termination. Upon any termination of this Agreement
pursuant to Section 12.1, all obligations of the parties to proceed with the
Transaction shall terminate; provided, however, that the provisions of Section
7.1, this Article 12 and Article 13 shall survive termination of this Agreement.
The termination of this Agreement shall not affect or impair the right of any
party to bring an action for a breach of this Agreement that occurred prior to
or in connection with such termination. Promptly following termination, the
Parent shall cause the Buyer's corporate name to be changed to a name that bears
no similarity to Seller's corporate name.
Article 13
Miscellaneous
13.1 Notices. Any notices or other communications required or permitted
hereunder (including, by way of illustration and not limitation, any notice
permitted or required under Article 11 hereof) to any party hereto shall be
sufficiently given if delivered in person or sent by certified or registered
mail, postage prepaid, addressed as follows:
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In the case of Buyer or Parent:
International Menu Solutions Corporation
350 Creditstone Road
Concord, Ontario L4K 3Z2
Canada
Attn: Michael Steele, President
Telephone: (416) 366-6368
Fax: (905) 760-9443
With a copy to:
Thomas D. Beynon, Q.C.
McCarter Grespan Robson Beynon Thompson LLP
675 Riverbend Drive
Kitchener, Ontario N2K 3S3
Canada
Telephone: (519) 571-8800
Fax: (519) 742-1841
And with a copy to:
Thompson Coburn LLP
One Firstar Plaza
St. Louis, Missouri 63101
Attention: Thomas A. Litz
Telephone: (519) 571-8800
Fax: (519) 742-1841
In the case of the Seller:
James Mueller
1330 Boly Lane
St. Louis, Missouri 63021
Telephone:
Fax:
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With a copy to:
The Stolar Partnership
911 Washington Avenue
St. Louis, Missouri 63101
Attention: John Niemoeller
Telephone: (314) 231-2800
Fax: (314) 436-8400
or such substituted address as any party shall have given notice to the others
in writing in the manner set forth in this Section 13.1.
13.2 Amendment. This Agreement may be amended or modified in whole or
in part only by an agreement in writing executed by all parties hereto and
making specific reference to this Agreement.
13.3 Counterparts. This Agreement may be executed in one or more
counterparts, all of which taken together shall constitute one instrument.
13.4 Binding on Successors and Assigns. This Agreement shall be binding
upon, inure to the benefit of and be enforceable by and against the parties
hereto and their respective successors and assigns in accordance with the terms
hereof. The Seller may not assign its rights their respective interests under
this Agreement except only in connection with its dissolution. Buyer shall have
the right to assign its rights under this Agreement, in whole or in part, to
Parent or any direct subsidiary of Parent, provided such assignee assumes at its
primary obligation all obligations of the Buyer under this Agreement. Parent may
assign its rights under this Agreement at any time in connection with any sale,
disposition, business combination, merger or similar transaction involving
Parent.
13.5 Severability. In the event that any provision contained in this
Agreement or any application thereof shall be invalid, illegal or unenforceable
in any respect, the validity, legality or enforceability of the remaining
provisions of this Agreement and any other application thereof shall not in any
way be affected or impaired thereby; provided, however, that to the extent
permitted by applicable law, any invalid, illegal, or unenforceable provision
may be considered for the purpose of determining the intent of the parties in
connection with the other provisions of this Agreement.
13.6 Headings. The headings in the sections and subsections of this
Agreement and in the Schedules are inserted for convenience only and in no way
alter, amend, modify, limit or restrict the contractual obligations of the
parties.
13.7 Expenses. Except to the extent otherwise provided in this
Agreement (including the schedules hereto), each party to this Agreement shall
bear its own expenses incurred in connection with this Agreement and the
transactions herein contemplated, including,
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but not limited to, legal and accounting fees and expenses. It is understood
that the legal and accounting expenses incurred by Seller in this transaction
shall be accrued as accounts payable and be part of the Assumed Liabilities (to
the extent not exceeding the limits committed to by those vendors), and
therefore have been taken into account in developing the Projected Financial
Statements described in Section 1.2(c).
13.8 Entire Agreement; Law Governing. All prior negotiations and
agreements between the parties hereto are superseded by this Agreement, and
there are no representations, warranties, understandings or agreements other
than those expressly set forth herein or in an Exhibit or Schedule delivered
pursuant hereto, except as modified in writing concurrently herewith or
subsequent hereto. This Agreement shall be governed by and construed and
interpreted according to the internal laws of the State of Missouri, determined
without reference to conflicts of law principles.
13.9 Shareholder Authorization. If the shareholders of Seller approve
this Agreement and the transactions contemplated thereby, such approval shall
constitute authorization by the shareholders of Seller and its Board of
Directors and management to waive any condition to Closing, to negotiate and
settle with lenders and other third parties to satisfy conditions to Closing
required by Parent, and to modify Schedule 1.1(c) and the Cash Reserve, all
without further approval or re-approval of the shareholders.
[THE BALANCE OF THIS PAGE HAS BEEN LEFT BLANK INTENTIONALLY.]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement
and Plan of Reorganization to be executed by their duly authorized
representatives on the day and year first above written.
GREAT AMERICAN BARBECUE COMPANY
By
---------------------------------------
-----------------,---------------------
(Name, Title)
THE GREAT AMERICAN BARBECUE FOOD
COMPANY
By
---------------------------------------
-----------------,---------------------
(Name, Title)
INTERNATIONAL MENU SOLUTIONS
CORPORATION
By
---------------------------------------
-----------------,---------------------
(Name, Title)
PRINCIPAL SHAREHOLDERS:
------------------------------------------
Blake Ashby
------------------------------------------
Scott Foelsch
------------------------------------------
James Mueller
------------------------------------------
John Mueller
PAC, INC.
By
----------------------------------------
Authorized Officer
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