Stock Purchase Agreement - Whole Foods Market Group Inc., Nature's Heartland Inc. and Leo Kahn
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement") is made as of April
30, 1999, by and among Whole Foods Market Group, Inc., a Delaware corporation
("Purchaser"), Nature's Heartland, Inc., a Massachusetts corporation (the
"Company"), Leo Kahn ("Kahn") and the other shareholders of the Company who are
signatories hereto (such persons, together with Kahn, being referred to herein
collectively as the "Sellers").
WHEREAS, the Purchaser and the Company have executed and delivered an
Asset Purchase Agreement dated March 15, 1999 (the "Asset Purchase Agreement");
and
WHEREAS, the Purchaser and the Company desire to restructure the
transactions contemplated by the Asset Purchase Agreement, and upon the
execution and delivery of this Agreement, the parties intend that the Asset
Purchase Agreement be superseded by this Agreement in all respects; and
WHEREAS, the Sellers own all of the issued and outstanding shares of
capital stock and any other securities, options, warrants or other rights to
acquire shares of the Company's capital stock (collectively the "Shares") of the
Company; and
WHEREAS, the Purchaser desires to purchase the Shares from the Sellers,
and the Sellers desire to sell the Shares to Purchaser, subject to the terms and
provisions hereof;
In consideration of the mutual covenants and agreements herein
contained, the parties hereto agree as follows:
1. SALE AND PURCHASE OF SHARES
1.1. Purchase and Sale of Shares. Upon the terms and subject to the
conditions set forth in this Agreement, at the Closing (as defined in Section
2.2 hereof), the Sellers shall assign, transfer, convey and deliver to
Purchaser, and Purchaser shall purchase from the Sellers, all right, title and
interest in and to all of the Shares, free and clear of all liens, security
interests, charges, encumbrances and rights of others.
1.2 Excluded Liabilities. The parties further intend that as of the
Closing the Company shall only be liable, in respect of periods prior to the
Closing, for the liabilities and obligations set forth below (the "Assumed
Liabilities") and that the Company shall be indemnified by the Sellers for all
other liabilities and obligations of the Company in respect of periods prior to
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the Closing (the "Excluded Liabilities"):
(i) The current trade accounts payable and other
current liabilities incurred in the operation of the Stores in
the "Accounts Payable," "Accrued Liabilities" and "Withholding
Taxes" categories on the 1998 Balance Sheet (as defined
herein), to the extent (X) the same have been properly
recorded in the general ledger of the Company through the
Closing Date and (Y) the Company at the Closing shall have
provided a complete listing of the same as recorded on the
general ledger through the Closing Date;
(ii) The store leases, office lease and other
specified contractual obligations listed as "Assumed
Contracts" on Schedule 1.2(b) hereto, as the same may be
amended through the Closing Date with the mutual consent of
the Company and Purchaser; and
(iii) The liabilities for severance, accrued
vacation, sick time and COBRA that are set forth in Article 5
hereof.
1.3 Non-Competition Agreement. Contemporaneously with the purchase and
sale of the Shares at the Closing, Purchaser and Kahn shall enter into a
Non-Competition Agreement in the form of Exhibit A hereto (the "Non-Competition
Agreement").
1.4. Purchase Price. The consideration to be received by the Sellers at
Closing in exchange for the Shares (the "Purchase Price") shall be
$24,950,000.The Purchase Price shall be paid in cash at the Closing, except as
follows:
(i) The Purchaser shall retain the sum of $450,000 and shall
pay $90,000 to the Sellers on each of the five succeeding anniversary
dates of the Closing, provided that on each payment date and for the
year then ended, Kahn is not then, and has not been, in default under
the Non-Competition Agreement; and upon such default all remaining
unpaid installments of such $450,000 sum shall be forfeited by the
Sellers. In the event of the death of Kahn prior to any such default,
the Purchaser shall pay to the Sellers all remaining unpaid
installments of such $450,000 amount; and
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(ii) The Sellers and Purchaser will deposit the sum of $2.0
million into an escrow account pursuant to terms of the escrow
agreement (the "Escrow Agreement") substantially in the form of Exhibit
A attached hereto.
The Purchase Price shall be delivered to Kahn as the duly authorized
representative of all of the Sellers.
2. CLOSING
2.1 Closing. A closing (the "Closing") to effect the purchase and sale
of the Shares shall be held at the offices of the Company on the date hereof
(the "Closing Date"). At the Closing, the Sellers shall deliver the certificates
representing the Shares, duly endorsed to Purchaser or accompanied by stock
powers so endorsed, against delivery of the amount of the Purchase Price as
described in Section 1.4 hereof. All actions taken at the Closing shall be
deemed to have been taken simultaneously at the time the last of any such
actions is taken or completed.
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2.2. Section 338(h)(10)Election; Payment of Taxes.
(a) Contemporaneously with the execution and delivery of this
Agreement, the Purchaser and the Sellers have joined in making an
election under Section 338(h)(10) of the Internal Revenue Code of 1986,
as amended (the "Code"), and any comparable elections, with respect to
the purchase of the Shares, under any state or local income tax law
(each a "Section 338(h)(10) Election"). The Purchaser represents and
warrants that it is qualified to make such election. The Purchaser and
the Sellers further agree to (i) allocate the Purchase Price among the
assets of the Company that are deemed to have been acquired pursuant to
Section 338(h)(10) of the Code and comparable state income tax
provisions (the "Section 338 Asset Allocation Schedule") and (ii)
exchange, complete and properly execute copies of Internal Revenue
Service Form 8023A, the required schedules related thereto, and
comparable state forms and schedules, all of which have been prepared
on a basis consistent with the Section 338 Asset Allocation Schedule.
The Section 338 Asset Allocation Schedule shall be based upon the
allocations set forth on Schedule 2.2 hereto. If any changes are
required to be made to these forms or schedules (including the Section
338 Asset Allocation Schedule) as a result of the valuation of fixed
assets to be undertaken by the Purchaser after the Closing or of
information that becomes available after the Closing Date, the parties
shall promptly and in good faith reach an agreement as to the precise
changes required to be made. The Purchaser will prepare and file all
further documents and materials necessary in connection with making a
Section 338(h)(10) Election, and the Sellers agree to assist the
Purchaser and cooperate with the Purchaser in connection therewith.
(b) The Purchaser and the Sellers will prepare and file all
tax returns and reports with respect to taxes including if necessary,
Internal Revenue Service Form 8594 and comparable state forms in a
manner consistent with the Section 338(h)(10) Election and the
valuation of the assets as set forth in the Section 338 Asset
Allocation Schedule. All taxes imposed on the deemed sale of assets
resulting from the Section 338(h)(10) Election will be included in
Sellers' tax returns as applicable and will be paid by Sellers.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SELLERS. The
Company and the Sellers, jointly and severally (but subject to the provisions of
Section 7.7), hereby represent and warrant to Purchaser as follows.
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3.1. Organization and Good Standing of the Company. The Company is a
corporation duly organized and validly existing and in good standing under the
laws of the Commonwealth of Massachusetts.
3.2. Binding Effect. This Agreement has been or will have been duly
authorized, executed and delivered by the Company and is the legal, valid and
binding obligation of the Company and each of the Sellers enforceable in
accordance with its terms except that (i) enforceability may be limited by
bankruptcy, insolvency or other similar laws affecting creditors' rights and
(ii) the availability of equitable remedies may be limited by equitable
principles of general applicability.
3.3. Compliance with Other Instruments. Neither the execution and
delivery by the Company or the Sellers of this Agreement nor the consummation by
any of them of the transactions contemplated hereby will violate, breach, be in
conflict with, or constitute a default under, or permit the termination or the
acceleration of maturity of, or result in the imposition of any lien, claim, or
encumbrance upon any property or asset of the Company pursuant to (i) the
Company's articles of organization or bylaws or (ii) any note, bond, indenture,
mortgage, deed of trust, evidence of indebtedness, loan or lease agreement,
other agreement or instrument which is material to the operation of the four
Nature's Heartland natural foods supermarkets that are owned by or under the
control of the Company (the "Stores") or any judgment, order, injunction, or
decree by which the Company or any Seller is bound, to which any of them is a
party, or to which any of their respective assets are subject.
3.4. Financial Statements and Records of the Company.
(a) The Company has delivered to Purchaser true, correct and
complete copies of the following financial statements (the "Company
Financial Statements"): the compiled balance sheet of the Company as of
December 26, 1998 (the "1998 Balance Sheet"), and the related
statements of operations for the year then ended. The Company Financial
Statements present fairly the assets, liabilities and financial
position of the Company as of the dates thereof and the results of
operations thereof for the periods then ended. The books and records of
the Company have been and are being maintained in accordance with good
business practice, reflect only valid transactions, are complete and
correct in all material respects, and present fairly in all material
respects the basis for the financial position and results of operations
of the Company set forth in the Company Financial Statements.
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(b) The accounts receivable set forth on the 1998 Balance
Sheet are reflected thereon in accordance with good business practice
and on a basis consistent with prior periods. The allowance for
collection losses on the 1998 Balance Sheet has been determined in
accordance with past practice. The amounts receivable arising since the
date of the 1998 Balance Sheet are, to the knowledge of the Sellers,
valid and genuine and have been properly recorded in the general ledger
of the Company.
(c) All inventory used in the conduct of the operations of the
Stores reflected on the 1998 Balance Sheet, or acquired since the date
thereof, was acquired and has been maintained in the ordinary course of
business, consists substantially of good and merchantable quality and,
other than after acquired inventory, has been recorded on the 1998
Balance Sheet in accordance with good business practice and on a basis
consistent with prior periods. Inventory acquired since the date of the
1998 Balance Sheet consists of good and merchantable quality and has
been properly recorded in the general ledger of the Company.
(d) The accounts payable and accrued expenses reflected on the
1998 Balance Sheet includes all trade liabilities and accrued expenses
incurred in the ordinary course of business as of that date, and have
been recorded on the 1998 Balance Sheet in accordance with good
business practice and on a basis consistent with prior periods. All
trade accounts payable and accrued expenses incurred since the date of
the 1998 Balance Sheet have been recorded in the general ledger of the
Company. As of the Closing Date, none of the trade accounts payable
included in the Assumed Liabilities will relate to invoices incurred
for purposes other than the operation of the Stores.
3.5. Absence of Certain Changes. Since December 26, 1998, the Company
has not (except as may result from the transactions contemplated by this
Agreement or as set forth on the Company Financial Statements):
(i) suffered any adverse change in its results of operations or
financial condition, other than changes in the ordinary course of
business that, individually or in the aggregate, have not had a
material adverse effect on the Stores;
(ii) suffered any damage or destruction to or loss of the its
material assets not covered by insurance;
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(iii) forgiven, compromised, canceled, released, waived or
permitted to lapse any material rights or claims; or
(iv) except as set forth on Schedule 3.5, entered into or
terminated any material agreement, commitment or transaction, or
agreed or made any changes in the Assumed Contracts.
3.6. No Material Undisclosed Liabilities. There are no material
liabilities or obligations of the Company of any nature, whether absolute,
accrued, contingent or otherwise, other than (i) the liabilities and obligations
that are fully reflected, accrued, or reserved against on the Company Financial
Statements, for which the reserves are appropriate and reasonable, or incurred
in the ordinary course of business and consistent with past practices since
December 26, 1998; or (ii) liabilities or obligations not required to be
disclosed in financial statements prepared in accordance with generally accepted
accounting principles.
3.7. Tax Liabilities. The Company has filed all federal, state, county
and local tax returns and reports required to be filed by it, including those
with respect to income, payroll, property, withholding, social security,
unemployment, franchise, excise and sales taxes, to the extent that the same
relate to the assets or the operations of the Company; has either paid in full
all such taxes that have become due as reflected on any return or report and any
interest and penalties with respect thereto or has fully accrued on its books or
has established adequate reserves for all taxes payable but not yet due; and has
made required cash deposits with appropriate governmental authorities
representing estimated payments of taxes, including income taxes and employee
withholding tax obligations. No extension or waiver of any statute of
limitations or time within which to file any return has been granted to or
requested by the Company with respect to any such tax. No unsatisfied
deficiency, delinquency or default for any tax, assessment or governmental
charge has been assessed (or, to the knowledge of the Sellers, claimed or
proposed) against the Company, nor has the Company received notice of any such
deficiency, delinquency or default.
3.8. Title to Properties. The Company has good and marketable fee or
leasehold title to its material assets, free and clear of any lien, claim or
encumbrance, except as reflected in the Company Financial Statements or notes
thereto and except for the following liens and encumbrances ("Permitted Liens"):
(i) liens for taxes, assessments or other governmental charges
not yet due and payable;
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(ii) statutory liens incurred in the ordinary course of business
with respect to liabilities that are not yet due and payable;
(iii) landlord liens contained in the leases set forth on
Schedule 3.14 hereto; and
(iv) such imperfections of title and/or encumbrances as are not
material in character, amount or extent and do not materially detract
from the value or interfere with the use of the properties and assets
subject thereto or affected thereby.
3.9. Condition of Assets. All of the material assets of the
Company (other than inventory) viewed as a whole and not on an asset by asset
basis are in good condition and working order, ordinary wear and tear excepted,
and are reasonably suitable for the uses for which intended, free from any
defects known to the Company, except such minor defects, as do not substantially
interfere with the continued use thereof.
3.10 Real Estate.
(a) The Company has a valid, binding and enforceable leasehold
interest, free and clear of liens, claims, encumbrances, subleases or
other restrictions, in and to the real estate on which the operations
of the Stores are conducted and the buildings, structures and
improvements situated thereon (the "Real Estate"), other than Permitted
Liens. A true, complete and correct copy of the Store Leases has been
furnished to Purchaser; each Store Lease is currently, or prior to the
Closing Date will be, in the name of the Company.
(b) The Company has not received any notice of, and has no
actual knowledge of, any material violation of any zoning, building,
health, fire, water use or similar statute, ordinance, law, regulation
or code in connection with the leasehold interest in the Real Estate.
To the knowledge of the Sellers, no fact or condition exists which
would result in the termination or impairment of access to the Real
Estate or discontinuation of necessary sewer, water, electrical, gas,
telephone or other utilities or services.
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(c) To the knowledge of the Sellers, except as noted in the
environmental reports listed on Schedule 3.10 annexed hereto, no
hazardous or toxic material (as hereinafter defined) exists in any
structure located on, or exists on or under the surface of, any of the
Real Estate which is, in any case, in material violation by the Company
of applicable environmental law. For purposes of this Section,
"hazardous or toxic material" shall mean waste, substance, materials,
smoke, gas or particulate matter designated as hazardous, toxic or
dangerous under any environmental law. For purposes of this Section,
"environmental law" shall include the Comprehensive Environmental
Response Compensation and Liability Act, the Clean Air Act, the Clean
Water Act and any other applicable federal, state or local
environmental, health or safety law, rule or regulation relating to or
imposing liability or standards concerning or in connection with
hazardous, toxic or dangerous waste, substance, materials, smoke, gas
or particulate matter.
3.11. Litigation and Government Claims. Except as set forth on
Schedule 3.11, there is no pending suit, action or litigation, or
administrative, arbitration or other proceeding or governmental investigation or
inquiry, to which the Company is a party or to which its assets are subject
which would, if decided against the Company, individually or in the aggregate,
have a material adverse effect on the results of operations of the Stores. To
the knowledge of the Sellers, there are no such proceedings threatened which
would, if decided against the Company, individually or in the aggregate, have a
material adverse effect on the results of operations or financial condition of
the Stores.
3.12. No Violations or Defaults. To the knowledge of the Sellers, the
Company is not in violation of or default under nor has any event occurred that,
with the lapse of time or the giving of notice or both, would constitute a
violation of or default under, or permit the termination or the acceleration of
maturity of, or result in the imposition of a lien, claim or encumbrance upon
the assets of the Company pursuant to, the articles of incorporation of the
Company or any loan or lease agreement, other agreement or instrument, judgment,
order, injunction, or decree to which it is a party, by which it is bound, or to
which any of its assets is subject, except where such violation or default would
not have a material adverse effect on the results of operations or financial
condition of the Company. To the knowledge of the Sellers, there are no existing
violations of any law applicable to the Stores.
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3.13. Labor Matters. The Company is not party to any collective
bargaining agreements with any union, and no collective bargaining agreement is
currently being negotiated by the Company. There is no labor strike or similar
material dispute pending or, to the knowledge of the Sellers, threatened against
or involving the Company.
3.14. Material Contracts. Set forth on Schedule 3.14 are complete and
accurate lists of all of the following categories of contracts and commitments
to which the Company is a party or bound:
(i) contracts with any labor union; employee benefit plans or
contracts; and employment, severance, consulting or similar contracts,
including confidentiality agreements;
(ii) leases, whether as lessor or lessee;
(iii) agreements providing for liens, claims or encumbrances on
the assets of the Company;
(iv) contracts (other than purchase orders in the ordinary course
of business) with third parties that involve aggregate payments by the
Stores of more than $50,000; and
(v) other contracts that are material to the operations of the
Stores.
To the extent requested, the Company has furnished or made available accurate
and complete copies of the foregoing contracts and agreements to Purchaser. All
such contracts are valid, binding, subsisting and enforceable obligations of the
Company. No contracts or commitments have been made by the Company granting any
person any right to develop, franchise, license, own, manage or operate the
Stores or any future store. The Company has not entered into any commitment or
understanding for the lease of real property other than the Real Estate.
3.15. Transaction with Affiliates. Upon the occurrence of the Closing,
no Seller or any Affiliate of the Company will have any material interest in or
will own any material property or material right used principally in the conduct
of the business of the Company (it being understood that the Company will have
engaged in the transactions described on Schedule 3.15 immediately prior to the
Closing). The term "Affiliate" shall mean any current officer or director of the
Company, any member of the immediate family (including brother, sister,
descendant, ancestor or in-law) of the forgoing persons or any corporation,
partnership, trust or other entity in which the Company, the Company's
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stockholders, the officer and directors of the Company or any of such family
member of such persons has a substantial interest or is a director, officer,
partner or trustee. The Company constitutes the sole legal entity which operates
the Stores.
3.16. Brokers and Finders. Except for Fulham & Company (the fees of
which shall be borne solely by the Sellers from its receipt of the Purchase
Price hereunder) the Company has not engaged any person to act or render
services as a broker, finder or similar capacity in connection with the
transactions contemplated herein and no other person has, as a result of any
agreement or action by the Company, any right or valid claim against the
Sellers, the Company, Purchaser or any of Purchaser's affiliates for any
commission, fee or other compensation as a broker or finder, or in any similar
capacity in connection with the transactions contemplated herein.
3.17. Capitalization. Schedule 3.17 sets forth the authorized capital
stock of the Company. All of the issued and outstanding Shares have been duly
authorized and validly issued and are fully paid and nonassessable. As of the
Closing, there will be no voting trusts, shareholder agreements or other voting
arrangements related to the Company's capital stock. There is no outstanding
subscription, contract, convertible or exchangeable security, option, warrant,
call or other right obligating the Company to issue, sell, exchange, or
otherwise dispose of, or to purchase, redeem or otherwise acquire, shares of, or
securities convertible into or exchangeable for, capital stock of the Company.
3.18. Title to Shares. All of the outstanding Shares are owned of
record and beneficially by the Sellers, free and clear of all liens, claims and
encumbrances.
4. REPRESENTATIONS AND WARRANTIES OF PURCHASER. Purchaser hereby
represents and warrants to the Company and the Sellers as follows:
4.1. Organization and Good Standing. Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and is in good standing as a foreign corporation under the laws of the
Commonwealth of Massachusetts.
4.2. Corporate Power and Authority. Purchaser has the corporate power
and authority and all licenses and permits required by governmental authorities
to execute, deliver and perform this Agreement.
4.3. Binding Effect. This Agreement has been duly authorized, executed
and delivered by Purchaser and is the legal, valid and binding obligation of it,
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enforceable in accordance with its terms except that (i) enforceability may be
limited by bankruptcy, insolvency, or other similar laws affecting creditors'
rights and (ii) the availability of equitable remedies may be limited by
equitable principles of general applicability.
4.4. Compliance with Other Instruments. Neither the execution and
delivery by Purchaser of this Agreement nor the consummation by it of the
transactions contemplated hereby will violate, breach, be in conflict with, or
constitute a default under, or permit the termination or the acceleration of
maturity of, or result in the imposition of any lien, claim or encumbrance upon
any property or asset of Purchaser pursuant to, its certificate of incorporation
or bylaws, or any note, bond, indenture, mortgage, deed of trust, evidence of
indebtedness, loan or lease agreement, other agreement or instrument, judgment,
order, injunction or decree by which Purchaser is bound, to which it is a party,
or to which its assets are subject.
4.5. Brokers and Finders. Purchaser has not engaged any person to act
or render services as a broker, finder or similar capacity in connection with
the transactions contemplated herein and no person has, as a result of any
agreement or action by Purchaser any right or valid claim against the Sellers,
the Company, Purchaser or any of the Company's affiliates for any commission,
fee or other compensation as a broker or finder, or in any similar capacity in
connection with the transactions contemplated herein.
4.6. Bellingham Letter of Credit. Purchaser has provided a guarantee
to the Company's landlord for the Bellingham Store in the form requested by such
landlord.
5. CERTAIN COVENANTS.
5.1. Continuing Employees. On the Closing Date, the Purchaser will
cause the Company to continue the at will employment of persons (the "Continuing
Employees") constituting the majority of the Store employees of the Company as
of the Closing Date. For the benefit of each non-officer of the Company as of
the Closing Date who is a full-time employee of the Company as of the Closing
Date and is not a Continuing Employee (the "Non-Continuing Employees"), the
Purchaser will:
(i) upon the execution and delivery by such persons of a
customary severance agreement in form satisfactory to the Purchaser,
pay a severance benefit equal to (X) four weeks' base salary for
Non-Continuing Employees who have been employed by the Company (as of
the Closing Date) for more than one year and (Y) two weeks' base
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salary for Non-Continuing Employees who have been employed by the
Company (as of the Closing Date) for one year or less; and
(ii) provide Non-Continuing Employees and Richard Kleinberg (as
well the seven former employees of the Company who have previously
elected COBRA) the opportunity to purchase health insurance in
accordance with the requirements of COBRA.
Schedule 5.1 sets forth all of the severance arrangements offered to employees
of the Company in excess of the amounts set forth above, it being understood
that the amounts set forth on such Schedule 5.1 shall be deemed Excluded
Liabilities and therefore excluded from the Basket described in Section 6.4
below. It is further understood that Kahn will fund such amounts prior to the
required disbursement dates.
5.2. Officers of the Company. Effective as of the Closing Date, each of
the officers and directors of the Company shall have resigned his position with
the Company and shall have provided the Company with a full and complete release
of liability. The Company shall have provided such officers with a full and
complete release of liability; provided, however, that such release will not
diminish the obligations of Kahn under Article 6.
5.3. Purchaser Benefit Plans. Effective as of the Closing Date, the
Purchaser shall make available to the Continuing Employees the employee benefit
plan(s) maintained by Whole Foods Market for its Team Members (the "WFM Plans")
in accordance with their terms. To the extent permitted by the terms of the WFM
Plans, the Purchaser will (i) waive all deductibles, waiting periods and
limitations with respect to pre-existing conditions and other conditions
applicable to employees of the Company under the WFM Plans, and (ii) grant full
past service credit (including credit for eligibility, benefit accrual and for
vesting) to the Continuing Employees for service with the Company under any and
all of the WFM Plans, including but not limited to bonus, severance, and similar
employment policies. Neither this Agreement nor the consummation of the
transactions contemplated by this Agreement will entitle any employee, including
but not limited to, Continuing Employees, to any other severance benefits nor
will it accelerate compensation due any such Continuing Employee as of the
Closing Date. The Purchaser will further credit each Continuing Employee with
the accrued vacation and sick time owing to such Continuing Employee by the
Company as of the Closing Date, provided that the same has been recorded in
either the general ledger or payroll records of the Company in accordance with
good business practice and on a basis consistent with prior periods. Subject to
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the foregoing, the Purchaser shall have the right in the good faith exercise of
operations and managerial discretion to make changes or cause changes to be made
after the Closing Date in compensation, benefits and other terms of employment
and to terminate any such employee.
5.4. Bellingham Letter of Credit. The Purchaser will use its best
efforts to cause the landlord of the Bellingham Store to return to Kahn the
letter of credit currently held by such landlord.
6. INDEMNIFICATION.
6.1. Indemnification of Purchaser. Subject to the limitations set forth
in Sections 6.3 and 6.4, Kahn shall indemnify and hold Purchaser harmless from,
against, for and in respect of (i) any and all damages, losses, settlement
payments, obligations, liabilities, claims, actions or causes of action and
encumbrances suffered, sustained, incurred or required to be paid by Purchaser,
net of any resulting income tax benefits to Purchaser, (A) because of the breach
of any written representation, warranty, agreement or covenant of the Company
contained in this Agreement or (B) in respect of the Excluded Liabilities, and
(ii) all reasonable costs and expenses (including, without limitation,
attorneys' fees, interest and penalties) incurred by Purchaser in connection
with any action, suit, proceeding, demand, assessment or judgment incident to
any of the matters indemnified against in this Section 6.1 (collectively
"Purchaser's Damages").
6.2. Indemnification of Sellers. Subject to the limitations set forth
in Sections 6.3 and 6.4, Purchaser shall indemnify and hold the Sellers harmless
from, against, for and in respect of: (i) any and all damages, losses,
settlement payments, obligations, liabilities, claims, actions or causes of
action and encumbrances suffered, sustained, incurred or required to be paid by
the Sellers, net of any resulting income tax benefits to the Sellers, (A)
because of the breach of any written representation, warranty, agreement or
covenant of Purchaser contained in this Agreement or (B) in respect of any of
the Assumed Liabilities; and (ii) all reasonable costs and expenses (including,
without limitation, attorneys' fees, interest and penalties) incurred by the
Sellers in connection with any action, suit, proceeding, demand, assessment or
judgment incident to any of the matters indemnified against in this Section 6.2
(collectively "Sellers' Damages").
6.3. Survival of Representations, Warranties and Covenants. All
representations, warranties, covenants and agreements made by any party to this
Agreement or pursuant hereto shall be deemed to be material and to have been
relied upon by the parties hereto, and shall survive until the 18 month
anniversary of the Closing Date. Notice of any claim, whether made under the
indemnification provisions hereof or otherwise, based on a breach of a
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representation, warranty, covenant or agreement must be given prior to the
expiration of such representation, warranty, covenant or agreement; and any
claim not made within such period shall be of no force or effect. The
representations and warranties hereunder shall not be affected or diminished by
any investigation at any time by or on behalf of the party for whose benefit
such representations and warranties were made.
6.4. General Rules Regarding Indemnification. The obligations and
liabilities of each indemnifying party hereunder with respect to claims
resulting from the assertion of liability by the other party shall be subject to
the following terms and conditions:
(a) The indemnified party shall give prompt written notice
(which in no event shall exceed 30 days from the date on which the
indemnified party first became aware of such claim or assertion) to the
indemnifying party of any claim which might give rise to a claim by the
indemnified party against the indemnifying party based on the indemnity
agreements contained in Sections 6.1 or 6.2 hereof, stating the nature
and basis of said claims and the amounts thereof, to the extent known;
(b) If any action, suit or proceeding is brought against the
indemnified party with respect to which the indemnifying party may have
liability under the indemnity agreements contained in Sections 6.1 or
6.2 hereof, the action, suit or proceeding shall, at the election of
the indemnifying party, be defended (including all proceedings on
appeal or for review which counsel for the indemnified party shall deem
appropriate) by the indemnifying party. The indemnified party shall
have the right to employ its own counsel in any such case, but the fees
and expenses of such counsel shall be at the indemnified party's own
expense unless the employment of such counsel and the payment of such
fees and expenses both shall have been specifically authorized in
writing by the indemnifying party in connection with the defense of
such action, suit or proceeding. Notwithstanding the foregoing, (A) if
there are defenses available to the indemnified party which are
inconsistent with those available to the indemnifying party to such
extent as to create a conflict of interest between the indemnifying
party and the indemnified party, the indemnified party shall have the
right to direct the defense of such action, suit or proceeding insofar
as it relates to such inconsistent defenses, and the indemnifying party
shall be responsible for the reasonable fees and expenses of the
indemnified party's counsel insofar as they relate to such inconsistent
defenses, and (B) if such action, suit or proceeding involves or could
have an effect on matters beyond the scope of the indemnity agreements
contained in Sections 6.1 and 6.2 hereof, the indemnified party shall
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have the right to direct (at its own expense) the defense of such
action, suit or proceeding insofar as it relates to such other matters.
The indemnified party shall be kept fully informed of such action, suit
or proceeding at all stages thereof whether or not it is represented by
separate counsel.
(c) The indemnified party shall make available to the
indemnifying party and its attorneys and accountants all books and
records of the indemnified party relating to such proceedings or
litigation and the parties hereto agree to render to each other such
assistance as they may reasonably require of each other in order to
ensure the proper and adequate defense of any such action, suit or
proceeding.
(d) The indemnified party shall not make any settlement of any
claims without the written consent of the indemnifying party.
(e) An indemnified party shall not make any claim hereunder
unless and until it has incurred Sellers' Damages or Purchaser's
Damages (as the case may be) of a cumulative aggregate of $250,000 (the
"Basket") and shall thereafter be entitled to make a claim only for
amounts incurred in excess of such Basket; provided, however, that the
provisions of this clause (e) shall not apply to any of Purchaser's
Damages arising from (i) the termination or settlement of the Company's
agreements with New Mexico Coffee (it being understood any agreement
made by Purchaser to continue coffee orders from New Mexico Coffee for
a future period shall not be considered Purchaser's Damages), (ii) any
claim by the landlord of the Bedford Store in respect of the change of
control of the Company as a result of the sale of the Shares, (iii)
unpaid use taxes in respect of periods prior to the Closing or (iv)
unpaid sales taxes in respect of periods prior to 30 days prior to the
Closing, all of which shall be made on a dollar-for-dollar basis.
(f) In no event shall the cumulative liability of the Sellers
in respect of Purchaser's Damages exceed $5.0 million; provided,
however, that (i) such aggregate maximum shall not apply in respect of
Purchaser's Damages arising from a breach of the representations and
warranties set forth in Sections 3.7 and 3.18 or arising from the
fraudulent conduct of the Sellers and/or their representatives and (ii)
the cumulative liability of the Sellers in respect of Purchaser's
Damages relating to the leases of the Stores shall not exceed $2.5
million.
(g) If any claims are made by third parties against an
indemnified party for which an indemnifying party would be liable, and
it appears likely that such claims might also be covered by the
indemnified party's insurance policies, the indemnified party shall
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make a timely claim under such policies and to the extent that such
party obtains any recovery from such insurance, such recovery shall be
offset against any sums due from an indemnifying party (or shall be
repaid by the indemnified party to the extent that an indemnifying
party has already paid any such amounts).
7. MISCELLANEOUS.
7.1. Expenses. The Purchaser shall pay its own expenses incurred in
connection with the negotiation, execution and delivery of the Asset Purchase
Agreement and this Agreement and the transactions contemplated hereby, and the
Sellers shall pay their expenses and those of the Company incurred in connection
with the negotiation, execution and delivery of the Asset Purchase Agreement and
this Agreement and the transactions contemplated hereby.
<PAGE>
7.2. Entire Agreement. This Agreement and the exhibits hereto contain
the complete agreement among the parties with respect to the transactions
contemplated hereby and supersede all prior agreements and understandings, oral
or written, among the parties with respect to such transactions. Section and
other headings are for reference purposes only and shall not affect the
interpretation or construction of this Agreement. The parties hereto have not
made any representation or warranty except as expressly set forth in this
Agreement or in any certificate or schedule delivered pursuant hereto.
7.3. Public Announcements. No party to this Agreement shall issue any
press release relating to, or otherwise publicly disclose, the transactions
contemplated by this Agreement without the prior approval of the other parties.
Notwithstanding the foregoing, any party may make such disclosure as may be
required by law, provided the disclosing party obtains from the other party
prior approval of the substance of the proposed disclosure (such as the content
of a proposed press release), which approval may not be unreasonably withheld or
delayed.
7.4. Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed an
original, and such counterparts together shall constitute only one original.
7.5. Notices. All notices, demands, requests or other communications
that may be or are required to be given, served or sent by any party to any
other party pursuant to this Agreement shall be in writing and shall be mailed
by first-class, registered or certified mail, return receipt requested, postage
prepaid, or transmitted by a reputable overnight courier service or by hand
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delivery or facsimile transmission, addressed as follows:
(i) If to the Purchaser or the Company:
601 N. Lamar Blvd., Suite 300
Austin, Texas 78703
Attn: Chief Financial Officer
Fax: 512-477-1069
(ii) If to the Sellers:
c/o United Properties
One DeAngelo Drive
Bedford, Massachusetts 01730
Attn: Mr. Leo Kahn
Fax: 781-275-3023
Each party may designate by notice in writing a new address to which any notice,
demand, request or communication may thereafter be so given, served, or sent.
Each notice, demand, request or communication that is mailed, delivered, or
transmitted in the manner described above shall be deemed sufficiently given,
served, sent and received for all purposes at such time as it is delivered to
the addressee (with the return receipt, the delivery receipt, fax confirmation
sheet or the affidavit of courier or messenger being deemed conclusive evidence
of such delivery) or at such time as delivery is refused by the addressee upon
presentation.
7.6. Assignment; Successors and Assigns. This Agreement may not be
assigned by either of the parties hereto without the written consent of all the
other parties; provided, however, that the Purchaser shall be entitled to assign
this Agreement to any subsidiary corporation so long as the Purchaser remains
liable for the obligations of Purchaser hereunder. Subject to the preceding
sentence, this Agreement and the rights, interests and obligations hereunder
shall be binding upon and shall inure to the benefit of the parties hereto and
their respective successors and assigns.
7.7. Remedies of the Company. After the Closing, the Company shall have
the same rights and benefits under this Agreement as does the Purchaser with
respect to the representations, warranties and covenants of the Sellers
contained herein, as fully as if such representations, warranties and covenants
had been made to or with the Company in lieu of Purchaser. In any proceedings by
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Purchaser to assert or prosecute any claims under, or to otherwise enforce, this
Agreement or any other agreement contemplated hereby or any transaction
contemplated hereby or thereby, the Sellers agree that they shall not assert as
a defense or bar to recovery by the Company and hereby waive any right so to
assert such defense or bar such recovery, that (a) before the date of this
Agreement the Company (as opposed to Purchaser) had knowledge of the
circumstances giving rise to the claim being pursued by it; (b) before the date
of this Agreement the Company engaged in conduct or took action that caused or
brought about the circumstances giving rise to its claim or otherwise
contributed thereto; (c) the Company is estopped from asserting or recovering
upon its claim by reason of having joined in the representations, warranties,
and covenants made by Sellers in this Agreement; or (d) Sellers have a right of
contribution from or indemnification by the Company to the extent that there is
any recovery against it. The Sellers further agree that they shall not under any
circumstances whatsoever affirmatively seek any contribution from or
indemnification by the Company for any losses, damages, expenses or other
claims, regardless of form, suffered by them arising out of, related to or in
connection with this Agreement or any other agreement contemplated hereby
(except pursuant to Section 6.2) or any transaction contemplated hereby or
thereby.
7.8. Waiver and Other Action. This Agreement may be amended, modified,
or supplemented only by a written instrument executed by the parties against
which enforcement of the amendment, modification or supplement is sought.
7.9. Severability. If any provision of this Agreement is held to be
illegal, invalid, or unenforceable, such provision shall be fully severable, and
this Agreement shall be construed and enforced as if such illegal, invalid or
unenforceable provision were never a part hereof; the remaining provisions
hereof shall remain in full force and effect and shall not be affected by the
illegal, invalid or unenforceable provision or by its severance; and in lieu of
such illegal, invalid or unenforceable provision, there shall be added
automatically as part of this Agreement, a provision as similar in its terms to
such illegal, invalid or unenforceable provision as may be possible and be
legal, valid and enforceable.
7.10. Third-Party Beneficiaries. This Agreement and the rights,
obligations, duties and benefits hereunder are intended for the parties hereto,
and no other person or entity shall have any rights, obligations, duties and
benefits pursuant hereto.
7.11. Governing Law; Arbitration. This Agreement shall be governed by,
and construed in accordance with, the laws of the Commonwealth of Massachusetts.
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Any controversy or dispute among the parties arising in connection with this
Agreement shall be submitted to a panel of three arbitrators and finally settled
by arbitration in accordance with the commercial arbitration rules of the
American Arbitration Association. Each of the disputing parties shall appoint
one arbitrator, and these two arbitrators shall independently select a third
arbitrator. Arbitration shall take place in Boston, Massachusetts, or such other
location as the arbitrators may select. The prevailing party in such arbitration
shall be entitled to the award of all costs and attorneys' fees in connection
with such action. Any award for monetary damages resulting from nonpayment of
sums due hereunder shall bear interest from the date on which such sums were
originally due and payable. Judgment upon the award rendered may be entered in
any court having jurisdiction or application may be made to such court for
judicial acceptance of the award and an order of enforcement, as the case may
be.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
Whole Foods Market Group, Inc.
By /s/ Glenda Flanagan
--------------------
Nature's Heartland, Inc.
By /s/ Leo Kahn
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Shareholders:
/s/ Leo Kahn
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Leo Kahn
/s/ Joseph Kahn
---------------
Joseph Kahn
/s/ Daniel Kahn
---------------
Daniel Kahn
/s/ Elizabeth Kahn
------------------
Elizabeth Kahn