Purchase Agreement - Alfalfa's Inc., Alfalfa's Canada Inc. and Capers Management Holdings Inc.
EXECUTION COPY
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PURCHASE AGREEMENT
by and among
ALFALFA'S, INC.,
ALFALFA'S CANADA, INC.,
THE SHAREHOLDERS OF
CAPERS MANAGEMENT HOLDINGS INC.
and
CAPERS MANAGEMENT HOLDINGS INC.
As of June 30, 1994
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PURCHASE AGREEMENT
PURCHASE AGREEMENT (this "Agreement") dated as of June 30,
1994, by and among Alfalfa's, Inc., a Colorado corporation ("Alfalfa's"),
Alfalfa's Canada, Inc., a British Columbia corporation ("NewCorp")
(collectively referred to herein with Alfalfa's as "Buyer"), the undersigned
shareholders of Capers Management Holdings Inc. ("Sellers") and Capers
Management Holdings Inc., a British Columbia corporation ("Capers").
RECITALS:
A. Sellers own shares of capital stock, consisting of
common stock (the "Common Stock") and preferred stock (the "Preferred Stock",
and together with the Common Stock, the "Shares") of Capers.
B. Capers owns all of the outstanding shares of capital
stock of Encore Resources Ltd., a British Columbia corporation ("Encore").
Capers and Encore are sometimes referred to herein as the "Companies".
C. Encore owns and operates two natural health food and
specialty gourmet food deli and supermarkets located in Greater Vancouver,
British Columbia, Canada (the "Business").
D. NewCorp is a wholly owned subsidiary of Alfalfa's
which owns and operates natural health food and specialty gourmet food
supermarkets.
E. Sellers desire to sell and transfer to Buyer and
Buyer desires to purchase from Sellers the Shares on the terms contained
herein.
NOW THEREFORE, in consideration of the foregoing and the
respective representations, warranties, covenants and agreements set forth
herein, the parties agree as follows.
AGREEMENT
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II.
SALE OF SHARES
II. A. Sale of Shares.
1. On the terms and subject to the conditions of this
Agreement, on the Closing Date (as hereinafter defined), each Seller shall
sell, assign, convey, transfer and deliver to NewCorp, and NewCorp shall
purchase from each Seller, the number of shares of Common Stock owned by such
Seller as set forth on Exhibit A hereto. The obligations of each Seller to
sell its shares of Common Stock are several and not joint. The performance of
each Seller individually is not dependent upon the performance or failure to
perform of any other Seller.
2. On the terms and subject to the conditions of this
Agreement, on the Closing Date, each Seller owning shares of Preferred Stock
shall sell, assign, convey, transfer and deliver to NewCorp, and NewCorp shall
purchase from each Seller, the Preferred Stock owned by such Seller as set
forth on Exhibit A hereto. The obligations of each such Seller to sell its
shares of Preferred Stock, if any, are several and not joint. The performance
of each Seller individually is not dependent upon the performance or failure to
perform of any other Seller.
3. The purchase of Shares by NewCorp from the Sellers are
deemed by the parties hereto to be separate purchases and sales and this
Agreement is deemed by the parties hereto to be separate agreements between the
Buyer on the one hand and each Seller on the other. Unless waived by Newcorp,
it is a condition to the effectiveness of this Agreement that all shareholders
of Capers execute this Agreement.
II. A. Consideration.
1. The full amount of the consideration due to each
Seller to be paid at the Closing (as hereinafter defined) by NewCorp is set
forth opposite each Seller's name on Exhibit A hereto (the "Purchase Price").
The obligation of NewCorp to each Seller is individual to each Seller.
(b) The full consideration to be paid at the Closing by
NewCorp for each share of Preferred Stock (the "Preferred Purchase Price")
shall be $1.00 in cash plus accrued and unpaid dividends on the Preferred Stock
to the Closing Date. Each Seller of shares of Preferred Stock hereby
acknowledges that the Preferred Purchase Price is less than each of the
redemption price and liquidation value of the Preferred Stock. The aggregate
consideration to be paid to each Seller for the shares of Preferred Stock shall
be the Preferred Purchase Price multiplied by the number of shares of Preferred
Stock owned by such Seller as set forth on Exhibit A hereto.
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1.3 Purchase of Alfalfa's Common Stock. On the Closing Date and
following the purchase and sale of the Shares pursuant to Section 1.1 of this
Agreement, each Seller will purchase from Alfalfa's the number of shares of the
common stock of Alfalfa's (the "Alfalfa's Common Stock") set forth opposite
such Seller's name on Exhibit A hereto. The purchase price for each share of
Alfalfa's Common Stock is $41.96. The aggregate purchase price to be paid by a
Seller for such shares of Alfalfa's Common Stock shall be $41.96 multiplied by
the number of such shares to be purchased. Alfalfa's agrees to deliver to each
Seller desiring to purchase Alfalfa's Common Stock certificates representing
the number of shares paid for by such Seller, provided that immediately prior
to such delivery, each Seller purchasing such shares executes and delivers to
Alfalfa's a copy of the Shareholders' Agreement of Alfalfa's (the "Alfalfa's
Shareholders' Agreement") which is attached hereto as Exhibit B. Such share
certificates shall be in the respective name of each Seller purchasing shares
of Alfalfa's Common Stock.
1.4 The Closing.
(a) The closing of the transactions contemplated by this
Agreement, including the purchase of any shares of Alfalfa's Common Stock (the
"Closing") will take place at the offices of Brownstein Hyatt Farber &
Strickland, P.C., 410 17th Street, Twenty-Second Floor, Denver, Colorado
80202-4437, at 10:00 A.M. M.S.T. on July 23, 1994 (the "Closing Date"), or at
such other place and on such other date as is mutually agreeable to Buyer and
the Majority Sellers (as defined in Article 2 hereof). The Closing shall be
effective as of the close of business on the Closing Date.
(b) Subject to the conditions set forth in this
Agreement, the parties agree to consummate the following "Closing Transactions"
on the Closing Date:
a. Each Seller will assign and transfer to
NewCorp good and valid title in and to the shares of Common Stock
owned by such seller, free and clear of all Liens (as defined in
Section 2.5), by delivering to NewCorp a stock certificate or
certificates representing such Common Stock, duly endorsed for
transfer or accompanied by duly executed stock powers endorsed in
blank; and
b. Each Seller owning shares of Preferred Stock
will assign and transfer to NewCorp good and valid title in and to
such shares of Preferred Stock, free and clear of all Liens, by
delivering to NewCorp a stock certificate or certificates representing
such shares of Preferred Stock owned by such Seller duly endorsed for
transfer or accompanied by duly executed stock powers endorsed in
blank; and
c. NewCorp shall deliver to each Seller the
aggregate Purchase Price and, if applicable, the aggregate Preferred
Purchase Price, payable to such Seller pursuant to
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Section 1.2 (as applicable) in cash by wire transfer of immediately
available funds to the account designated by counsel to the Sellers,
McCarthy Tetrault, in trust for the Sellers, which account shall be
so designated at least two business days prior to Closing.
III.
REPRESENTATIONS AND WARRANTIES OF SELLERS AND CAPERS
Each of Capers and each of Russell Precious, Teresa Precious and Barry
Perzow (collectively, the "Majority Sellers") hereby, severally and not
jointly, represent and warrant to Buyer the following, except as set forth in
the Disclosure Schedule delivered to Buyer within seven days of the date hereof
(the "Disclosure Schedule") (which Disclosure Schedule shall set forth the
exceptions to the representations and warranties contained in this Article 2
under captions referencing the Sections to which such exceptions apply). In
addition, each Seller hereby, severally and not jointly , represent and warrant
to Buyer with respect to Sections 2.2, 2.3, 2.4, 2.5, 2.27 and 2.28 solely as
such Sections relate to such Seller.
III. A. Organization and Corporate Power. Capers and Encore
are duly organized corporations, validly existing and in good standing under
the laws of the Province of British Columbia in Canada with all requisite
corporate power and authority and all authorizations, licenses, permits and
certifications necessary to own and operate their properties and to carry on
the Business as now conducted and presently proposed to be conducted, except
such licenses, permits and certifications that are not material to the conduct
of the Business. The copies of Capers' and Encore's Memorandum and Articles
attached to Section 2.1 of the Disclosure Schedule reflect all amendments made
thereto and are correct and complete as of the date hereof. All material
financial transactions of the Companies have been accurately recorded in the
books and records of the Companies.
III. B. Execution, Delivery; Valid and Binding Agreements.
This Agreement has been duly executed and delivered by each Seller and Capers
and constitutes the valid and binding obligation of each Seller and Capers,
enforceable in accordance with its terms, except that the enforceability of
this Agreement may be limited by (i) bankruptcy, insolvency, reorganization,
moratorium and other similar laws now or hereafter in effect relating to
creditors' rights generally, and (ii) general principles of equity (regardless
of whether such enforceability is considered in a proceeding in equity or at
law).
III. C. No Breach. The execution, delivery and performance
of this Agreement by each Seller and Capers and the consummation by each Seller
and Capers of the transactions contemplated hereby do not conflict with or
result in any breach of any of the provisions of, constitute a default under,
result in a violation of, result in the creation of a right of termination or
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acceleration or any lien, security interest, charge or encumbrance upon any
assets of Sellers or the Companies or require any authorization, consent,
approval, exemption or other action by or notice to any court or other
governmental body, under the Memorandum and Articles of the Companies, as
applicable, or any indenture, mortgage, lease, loan agreement or other
agreement or instrument by which any of the Companies or Sellers is bound or
affected, or any law, statute, rule or regulation or order, judgment or decree
to which any of the Companies, Sellers or the Business (including but not
limited to the properties related to the Business) is subject.
III. D. Governmental Authorities; Consents. Sellers and
Capers are not required to submit any notice, report or other filing with any
governmental authority in connection with the execution or delivery by them of
this Agreement or the consummation of the transactions contemplated hereby. No
consent, approval or authorization of any governmental or regulatory authority
or any other party or person is required to be obtained by Sellers or Capers in
connection with their execution, delivery and performance of this Agreement or
the transactions contemplated hereby. Each Seller waives any right of first
refusal he may have pursuant to the Shareholders' Agreement dated November 10,
1993 among Sellers, Alfalfa's, Capers and Encore (the "Capers Shareholders'
Agreement").
III. E. Ownership of Capital Stock. Each Seller owns all
right, title and interest in and to their Shares, beneficially and of record,
free and clear of any security interests, claims, liens, pledges, options
(including rights of first refusal, other than those set forth in the Capers
Shareholders' Agreement), encumbrances, charges, agreements, voting trusts,
proxies or other arrangements (collectively, the "Liens"), restrictions or
limitations of any kind and on the Closing Date, through the delivery of a
certificate or certificates in the manner set forth in Section 1.4(b) hereof,
will transfer, subject to approval by the Board of Directors of Capers, good
and valid title to the Shares to NewCorp, free and clear of any Liens of any
kind.
III. F. Subsidiaries. Except for the stock of Encore owned
by Capers, neither Capers nor Encore owns any stock, partnership interest,
joint venture interest or any other security or ownership interest issued by
any other corporation, organization or entity.
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III. G. Capital Stock.
1. Capers. The authorized capital stock of Capers
consists of 10,000,000 shares of common stock, of which, as of the date hereof,
1,000,000 shares are issued and outstanding, and 875 shares of Preferred Stock,
of which, as of the date hereof, all are issued and outstanding, all of which
Common stock and Preferred Stock are owned beneficially and of record by
Sellers (other than the shares of Common Stock and Preferred Stock owned by
Alfalfa's) free and clear of any Liens of any kind. All of the shares of
Common Stock and Preferred Stock have been duly authorized and are validly
issued, fully paid and nonassessable and free of preemptive rights, except as
required by law. Other than the above-described Common and Preferred Stock,
Capers has no other equity securities or securities containing any equity
features authorized, issued or outstanding. There are no agreements or other
rights or arrangements existing which provide for the sale or issuance of
capital stock by Capers and there are no rights, subscriptions, warrants,
options, conversion rights or agreements of any kind outstanding to purchase or
otherwise acquire from Capers any shares of capital stock or other securities
of Capers of any kind. There are no agreements or other obligations
(contingent or otherwise) which may require Capers to repurchase or otherwise
acquire any shares of its capital stock, other than as set forth in the
Articles of Capers.
2. Encore. Section 2.7 of the Disclosure Schedule will
set forth the authorized capital stock of Encore and the number of shares
issued and outstanding, all of which are owned beneficially and of record by
Capers, free and clear of any Liens of any kind. All of Encore's common stock
has been duly authorized and is validly issued, fully paid and nonassessable
and free of preemptive rights, except as required by law. Other than the
above-described common stock, Encore has no other equity securities or
securities containing any equity features authorized, issued or outstanding.
There are no agreements or other rights or arrangements existing which provide
for the sale or issuance of capital stock by Encore and there are no rights,
subscriptions, warrants, options, conversion rights or agreements of any kind
outstanding to purchase or otherwise acquire from Encore any shares of capital
stock or other securities of Encore of any kind. There are no agreements or
other obligations (contingent or otherwise) which may require Encore to
repurchase or otherwise acquire any shares of its capital stock.
III. H. Financial Statements. Section 2.8 of the Disclosure
Schedule will contain copies of the unaudited consolidated balance sheet of the
Companies, as of June 4, 1994 and the unaudited consolidated statements of
earnings and shareholders' equity and cash flows for the eleven periods ended
June 4, 1994 (the June 4, 1994 Financial Statements are referred to herein as
the "Latest Financial Statements"). The Latest Financial Statements are based
upon the information contained in the books and records of the Companies and
fairly present the financial condition of the Companies as of the date thereof
and results of operations for the periods referred to therein. The Latest
Financial Statements have been prepared in accordance with Canadian generally
accepted accounting principles, consistently applied throughout the periods
indicated.
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III. I. Absence of Undisclosed Liabilities. Neither of the
Companies has liabilities (whether accrued, absolute, contingent, unliquidated
or otherwise, whether due or to become due, whether known or unknown, and
regardless of when asserted) arising out of transactions or events heretofore
entered into, or any action or inaction, or any state of facts existing, with
respect to or based upon transactions or events heretofore occurring, except
(i) as reflected in the Latest Financial Statements, and (ii) liabilities which
have arisen after the date of the Latest Financial Statements in the ordinary
course of business (none of which is a material uninsured liability for breach
of contract, breach of warranty, tort, infringement, claim or lawsuit).
III. J. No Material Adverse Changes. Since the date of the
Latest Financial Statements there has been no change materially adverse,
individually or in the aggregate, to the assets, financial condition, operating
results, customers, employees or supplier relations, business condition or
prospects of either of the Companies.
III. K. Absence of Certain Developments. Other than pursuant
to this Agreement, since the date of the Latest Financial Statements none of
the Companies has:
1. borrowed any amount or incurred or become subject to
any liability, except (i) current liabilities incurred in the ordinary course
of business and (ii) liabilities under contracts entered into in the ordinary
course of business;
2. mortgaged, pledged or subjected to any lien, charge
or any other encumbrance, any of their assets except (i) liens for current
property taxes not yet due and payable, (ii) liens imposed by law and incurred
in the ordinary course of business for obligations not yet due to carriers,
warehousemen, laborers, materialmen and the like, and (iii) liens in respect of
pledges or deposits under workers' compensation laws.
3. discharged or satisfied any lien or encumbrance or
paid any liability, other than current liabilities paid in the ordinary course
of business or listed on the Latest Financial Statements;
4. sold, assigned or transferred (including, without
limitation, transfers to any employees, affiliates or shareholders) any
tangible assets (other than inventory in the ordinary course of business) or
cancelled any debts or claims;
5. sold, assigned or transferred (including, without
limitation, transfers to any employees, affiliates or shareholders) any
patents, trademarks, trade names, copyrights, trade secrets or other intangible
assets;
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6. waived any rights of value or suffered any losses or
adverse changes in collection loss experience, whether or not in the ordinary
course of business or consistent with past practice;
7. declared or paid any dividends or other distributions
with respect to any shares of the Companies' capital stock or redeemed or
purchased, directly or indirectly, any shares of the Companies' capital stock
or any options;
8. issued, sold or transferred any of the Companies'
equity securities, securities convertible into or exchangeable for any of the
Companies' equity securities or warrants, options or other rights to acquire
any of the Companies' equity securities, or any bonds or debt securities;
9. taken any other action or entered into any other
transaction other than in the ordinary course of business and in accordance
with past custom and practice, or entered into any transaction with any insider
(as defined in Section 2.22) other than the transactions contemplated by this
Agreement;
10. suffered any material theft, damage, destruction or
loss of or to any property or properties owned or used by the Companies,
whether or not covered by insurance;
11. made or granted any bonus or any wage, salary or
compensation increase to any director, officer, or consultant or made or
granted any increase in any employee benefit plan or arrangement, or amended or
terminated any existing employee benefit plan or arrangement, or adopted any
new employee benefit plan or arrangement or made any commitment or incurred any
liability to any labor organization;
12. made any single capital expenditure or commitment in
excess of Three Thousand and No/100 Dollars ($3,000) therefor;
13. made any loans or advances to, or guarantees or
financial assistance for the benefit of, any persons;
14. made charitable contributions or pledges in excess of
One Thousand and no/100 Dollars ($1,000.00) individually or Five Thousand and
no/100 Dollars ($5,000.00) in the aggregate; or
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15. made any change in accounting principles or practices
from those utilized in Canada and in the preparation of the Latest Financial
Statements.
III. L. Title to Properties.
1. The real property demised by the leases to be
described (including the term thereof) in Section 2.12 of the Disclosure
Schedule constitutes all of the real property used or occupied by the Companies
(the "Real Property"). The Real Property has access, sufficient for the
conduct of the Business as now conducted or as presently proposed to be
conducted, to public roads and to all utilities, including electricity,
sanitary and storm sewer, potable water, natural gas and other utilities, used
in the operation of the Business at that location.
2. The leases to be described in Section 2.12 of the
Disclosure Schedule are in full force and effect, and Capers and Encore that is
a party to each such lease holds a valid and existing leasehold interest under
each of such leases for the term set forth in Section 2.12 of the Disclosure
Schedule. Capers and Encore have delivered to Buyer complete and accurate
copies of each of the leases described in Section 2.12, and none of such leases
has been modified in any respect, except to the extent that such modifications
are disclosed by the copies delivered to Buyer. To the best knowledge of the
Majority Sellers, neither of the Companies is in default, and no circumstances
exist which, if unremedied, would, either with or without notice or the passage
of time or both, result in such default under any of such leases; nor, to the
best knowledge of Sellers and the Companies, is any other party to any of such
leases in default.
3. Section 2.12 of the Disclosure Schedule will disclose
the aggregate value of the tangible properties and tangible assets of Capers
and Encore as reflected on the Latest Financial Statements. Each of Capers and
Encore owns good and marketable title to its tangible properties and tangible
assets described in Section 2.12 of the Disclosure Schedule and as reflected on
the Latest Financial Statements or acquired since the date thereof, free and
clear of all liens and encumbrances, except for (i) liens for current taxes not
yet due and payable, (ii) the properties subject to the leases to be listed in
Section 2.12 of the Disclosure Schedule, (iii) as otherwise disclosed in
Section 2.12 of the Disclosure Schedule, and (iv) inventory disposed of since
the date of the Latest Financial Statements in the ordinary course of business.
4. The Companies own, or lease under valid leases, all
buildings, machinery, equipment and other tangible assets necessary or
desirable for the conduct of the Business.
5. To the best knowledge of the Majority Sellers,
neither Capers nor Encore is in violation of any applicable zoning ordinance or
other law, regulation or requirement that is material to the operation of any
properties used in the operation of the Business, and neither Sellers nor any
of the Companies has received any notice of any such violation, or the
existence of any condemnation proceeding with respect to any of the Real
Property.
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6. Neither the Majority Sellers nor either of the
Companies has knowledge of improvements made or contemplated to be made to the
Real Property by any public or private authority, the costs of which are to be
assessed as special levies, taxes or charges against any of the Real Property,
and there are no present assessments for which either of the Companies would be
responsible.
III. M. Accounts Receivable. The accounts receivable
reflected on the Latest Financial Statements are valid receivables, are not
subject to valid counterclaims or setoffs, and are collectible in accordance
with their terms, except to the extent of the bad debt reserve reflected on the
Latest Financial Statements.
III. N. Inventory. The inventory of Capers and Encore
consists of items of a quality and quantity salable at each of Capers' and
Encore's normal profit levels, in each case, in the ordinary course of the
Business. The values at which such inventory is carried on the Latest
Financial Statements are in accordance with Canadian generally accepted
accounting principles. Section 2.14 of the Disclosure Schedule will contain a
complete and accurate statement of the Capers' and Encore's inventory as of
June 4, 1994.
III. O. Tax Matters.
(a) Each of the Companies has duly filed in a timely
manner (i) all federal and provincial income tax returns and election forms and
the tax returns of any other jurisdiction required to be filed and all such
returns and forms have been completed accurately and correctly in all respects;
and (ii) all Workers' Compensation Board returns, corporation capital tax
returns, social services tax returns, goods and service tax returns and other
reports and information required to be filed with all applicable government
authorities, agencies or regulatory bodies. Each of the Companies (i) has paid
all taxes (including all federal, provincial and local taxes, custom or duty
taxes, assessments or other imposts in respect of its income, business, assets
or property) and all interest and penalties thereon, for all previous years and
all required quarterly or monthly installments, as applicable, due for the
current fiscal year has been paid; and (ii) has provided adequate reserves for
all taxes for the periods covered by, and such reserves are reflected in, the
Financial Statements. There is no agreement, waiver or other arrangement
providing for an extension of time with respect to the filing of any tax
return, or payment of any tax, governmental charge or deficiency by the
Companies nor is there any action, suit, proceeding, investigation or claim now
threatened or pending against the Companies in respect of, or discussions
underway with any governmental authority relating to, any such tax or
governmental charge or deficiency.
(b) Capers and Encore have not:
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(i) made any election under Section 85 of the Income
Tax Act of Canada in effect on the date of this Agreement (the "Income
Tax Act") with respect to the acquisition or disposition of any
property;
(ii) made any election under Section 83 of the
Income Tax Act with respect to the payment out of their capital
dividend account;
(iii) acquired or had the use of any material
property from a person with whom it was not dealing at arm's length
other than at fair market value;
(iv) disposed of any material property to a person
with whom it was not dealing at arm's length for proceeds less than
the fair market value thereof; or
(v) discontinued carrying on any business in respect
of which non-capital losses were incurred, and any non-capital losses
which the company has are not losses from property or business
investment losses.
(c) The Companies have made all elections required to be
made pursuant to Part III of the Income Tax Act in connection with any
distributions by them and all such elections were true and correct and in the
prescribed form and were made within the prescribed time periods.
(d) Capers and Encore are and have been since their
respective incorporation, a "Canadian-controlled private corporation" within
the meaning of such term under the Income Tax Act.
(e) Neither Capers nor Encore have filed with the
Minister of National Revenue any agreement or form pursuant to Section 125(3)
of the Income Tax Act for the current taxation year and Capers has never
carried on business as a member of a partnership.
(f) To the best knowledge of the Majority Sellers, there
are not any contingent tax liabilities nor any grounds which would prompt a
reassessment including aggressive treatment of income and expenses in filing
earlier tax returns.
(g) The financial statements and schedules attached to
the corporate income tax returns as filed by Capers and Encore for each of its
taxation years reflect and disclose all transactions to which Capers or Encore
was party as required by the Income Tax Act or other applicable revenue laws
and all of the transactions to which Capers or Encore was or is a party are
reflected or disclosed in such financial statements and schedules and the
corporate income tax returns and schedules have been duly and accurately
completed as required by such acts.
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(h) None of the Sellers (other than Mr. James Wilson,
Eleanor H. Wilson Trust No. 1 and Stuart Abelson) is a "non-resident" of Canada
within the meaning of Section 116 of the Income Tax Act.
III. P. Contracts and Commitments.
1. Section 2.16 of the Disclosure Schedule will list the
following agreements, whether oral or written, to which any of the Companies is
a party, which is currently in effect, and which relate to the operation of the
Business (such list to set forth the commencement date and termination or
expiration date of such agreement): (i) collective bargaining agreement or
contract with any labor union; (ii) bonus, pension, profit sharing, retirement
or other form of deferred compensation plan, other than as described in Section
2.20 hereof or Section 2.20 of the Disclosure Schedule; (iii) hospitalization
insurance or other welfare benefit plan or practice, whether formal or
informal, other than as described in Section 2.20 hereof or Section 2.20 of the
Disclosure Schedule; (iv) stock purchase or stock option plan; (v) contract for
the employment of any officer, individual employee or other person on a full-
time, part-time or consulting basis or relating to severance pay for any such
person, other than contracts with hourly employees; (vi) confidentiality
agreement; (vii) contract, agreement or understanding relating to the voting of
common stock or the election of directors of either of the Companies; (viii)
agreement or indenture relating to the borrowing of money or to mortgaging,
pledging or otherwise placing a lien on any of the assets of the Companies;
(ix) guaranty of any obligation for borrowed money or otherwise; (x) lease or
agreement under which either of the Companies is lessee of, or holds or
operates any property, real or personal, owned by any other party; (xi) lease
or agreement under which any of the Companies is lessor of, or permits any
third party to hold or operate, any property, real or personal; (xii) contract
or group of related contracts with the same party for the purchase of products
or services, other than in the ordinary course of business; (xiii) contract or
group of related contracts with the same party (other than any contract or
group of related contracts for the purchase or sale of products or services)
continuing over a period of more than six months from the date or dates
thereof, not terminable by it on 30 days or less notice without penalty; (xiv)
contract which prohibits either of the Companies from freely engaging in
business anywhere in the world; (xv) contract for the distribution of either of
the Companies' products (including any distributor or sales contract); (xvi)
any franchise agreements; (xvii) contracts or commitments for capital
expenditures; (xviii) agreements for the sale of any capital asset; (xix)
contracts with any affiliate which in any way relates to either of the
Companies; or (xx) other agreements which are either material to the Business
or were not entered into in the ordinary course of business.
2. The Companies have performed all material obligations
required to be performed by them in connection with the contracts or
commitments required to be disclosed in Section 2.16 of the Disclosure Schedule
and they are not in receipt of any claim of default under any such contract or
commitment; none of the Companies has any present expectation or intention of
not fully performing any material obligation pursuant to any such contract or
commitment; and
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neither Sellers nor either of the Companies has knowledge of any breach or
anticipated breach by any other party to any such contract or commitment.
3. Prior to the Closing Date, Buyer will have been
supplied with a true and correct copy of each written contract or commitment
disclosed in Section 2.16 of the Disclosure Schedule, and a written description
of each oral contract or commitment disclosed in Section 2.16 of the Disclosure
Schedule, together with all amendments, waivers or other changes thereto.
III. Q. Intellectual Property Rights. Section 2.17 of the
Disclosure Schedule will describe all registered rights in patents, trademarks,
trade names, and copyrights owned by, licensed to or otherwise controlled by
any of the Companies and used in, developed for use in or necessary to the
conduct of the Business as now conducted or planned to be conducted. The
Companies own and possess all right, title and interest, or hold a valid
license, in and to the registration to be set forth in Section 2.17 of the
Disclosure Schedule and none of such rights has been licensed or assigned to
any third party. The Companies have taken all necessary action to obtain the
registrations with respect to the intellectual property rights set forth under
such caption. None of the Companies has received any notice of, nor are there
any facts known to the Majority Sellers or any of the Companies which indicate
a likelihood of, any infringement or misappropriation by, or conflict from, any
third party with respect to the intellectual property rights which are listed;
no claim by any third party contesting the validity of any intellectual
property rights listed under such caption has been made, is currently
outstanding or, to the best knowledge of the Majority Sellers, is threatened;
none of the Companies has received any notice of any infringement,
misappropriation or violation by any of the intellectual property rights of any
third parties and, to the best knowledge of the Companies and the Majority
Sellers, neither of the Companies has infringed, misappropriated or otherwise
violated any such intellectual property rights; and no infringement, illicit
copying, misappropriation or violation has occurred with respect to products
currently being sold by the Companies or with respect to the products currently
under development (in their present state of development) or with respect to
the conduct of the Business as now conducted.
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III. R. Litigation. There are no actions, suits,
proceedings, orders or investigations pending or, to the best knowledge of
Sellers, threatened against either of the Companies, at law or in equity, or
before or by any federal (Canadian), provincial, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
domestic (Canadian) or foreign.
III. S. Employees.
1. To the best knowledge of the Majority Sellers and the
Companies, no executive employee of either of the Companies and no group of
either of the Companies' employees has any plans to terminate his or its
employment; (b) the Companies have complied with all laws relating to the
employment of labor, including provisions thereof relating to wages, hours,
equal opportunity, collective bargaining and the payment of social security and
other taxes and to the best knowledge of the Majority Sellers and the
Companies, there does not exist any union organization efforts being made or
contemplated; (c) all amounts required to be withheld and paid to any
governmental authority have been paid or are assumed to have been paid; (d)
none of the Companies has any material labor relations problem pending and
labor relations are satisfactory; (e) there are no workers' compensation claims
pending against any of the Companies nor are the Majority Sellers or either of
the Companies aware of any facts that would give rise to such a claim; (f) to
the best knowledge of the Majority Sellers, no employee of the Companies is
subject to any confidentiality or non-competition agreement or any other
agreement or restriction of any kind that would impede in any way the ability
of such employee to carry out fully all activities of such employee for the
benefit of the Companies, other than the letter of intent among Alfalfa's,
Capers and certain shareholders of Capers dated April 28, 1994; and (g) no
employee or former employee has any claim with respect to any intellectual
property rights of the Companies to be set forth in Section 2.17 of the
Disclosure Schedule.
III. T. Employee Benefit Plans.
1. Except for the Canada Pension Plan or other
statutorily mandated plan with respect to all employees and former employees of
the Companies and all dependents and beneficiaries of such employees and former
employees, none of the Companies maintains or contributes to any employee
benefit or pension plan.
(b). All such employee benefit and pension plans that will
be disclosed in the Disclosure Schedule are registered where required by and
are in good standing under all applicable legislation.
III. U. Insurance. Section 2.21 of the Disclosure Schedule
will list and briefly describes each insurance policy maintained by the
Companies as of the date of the Latest Financial Statements with respect to
their properties, assets and operations and sets forth the date of expiration
of each such insurance policy. All of such insurance policies are, as of the
date hereof,
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and, unless Capers or the Majority Sellers notify Buyer in writing otherwise,
as of the Closing Date will be, in full force and effect and issued by insurers
of recognized responsibility and are for amounts and cover risks customarily
insured against by prudent operators of enterprises engaged in similar
business. None of the Companies is in default with respect to its obligations
under any of such insurance policies.
III. V. Affiliate Transactions.
(a) To the best knowledge of the Companies and the
Majority Sellers, other than pursuant to this Agreement and the Capers
Shareholders' Agreement, no officer, director or employee of the Companies or
any member of the immediate family of any such officer, director or employee,
or any entity in which any of such persons owns any beneficial interest (other
than any publicly-held corporation whose stock is traded on a national
securities exchange or in the over-the counter market and less than one percent
of the stock of which is beneficially owned by any of such persons)
(collectively "insiders"), has any agreement with any of the Companies or the
Majority Sellers or any interest in any property, real, personal or mixed,
tangible or intangible, used in or pertaining to the Business (other than
ownership of capital stock of Capers). To the best knowledge of the Companies
and the Majority Sellers, none of the insiders has any direct or indirect
interest in any competitor, supplier or customer of the Companies or in any
person, firm or entity from whom or to whom any of the Companies leases any
property, or in any other person, firm or entity with whom any of the Companies
transacts business of any nature. For purposes of this Section 2.22, the
members of the immediate family of an officer, director or employee shall
consist of the spouse, parents, children, siblings, mothers- and
fathers-in-law, sons- and daughters-in-law, and brothers- and sisters-in-law of
such officer, director or employee.
(b) Except for the payment of salaries and reimbursement
for out-of-pocket expenses in the ordinary course, neither Capers nor Encore
will immediately following the Closing be indebted to any of the Sellers or any
directors, officers or employees of Capers or Encore on any account whatsoever.
III. W. Customers and Suppliers. Section 2.23 of the
Disclosure Schedule will list the current 10 largest suppliers of inventory of
Encore and sets forth opposite the name of each such supplier the approximate
percentage of net sales or purchases by Encore attributable to such supplier
for each such period. Since the date of the Latest Financial Statements, no
supplier to be listed in Section 2.23 of the Disclosure Schedule has indicated
that it will stop or decrease the rate of business done with Encore except for
changes in the ordinary course of the Business.
III. X. Officers and Directors; Bank Accounts. Section 2.24
of the Disclosure Schedule will list all officers and directors of the
Companies and all of the Companies' bank accounts (designating each authorized
signer).
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III. Y. Compliance with Laws; Permits.
1. Each of the Companies and their officers, directors,
agents and employees have complied in all material respects with all applicable
laws, judgments, decrees, orders, injunctions, rules, statutes, and regulations
of all courts, arbitrators or governmental authorities including, but not
limited to, federal (Canadian), provincial, local and foreign laws, ordinances,
rules, regulations and other requirements pertaining to product labeling,
consumer products safety, equal employment opportunity, employee retirement,
affirmative action and other hiring practices, occupational safety and health,
workers' compensation, unemployment and building and zoning codes, which
materially affect the Business or the Real Property and to which either of the
Companies may be subject, and no claims have been filed against any of the
Companies alleging a violation of any such laws, regulations or other
requirements, in each case except as are not material to the conduct of the
Business. Each Majority Seller has no knowledge of any action, pending or
threatened, to change the zoning or building ordinances or any other laws,
rules, regulations or ordinances affecting the Real Property. None of the
Companies is relying on any exemption from or deferral of any such applicable
law, regulation or other requirement that would not be available to Buyer after
it acquires the Shares.
2. Each of the Companies has in full force and effect,
all licenses, permits and certificates, from federal (Canadian), provincial,
local and foreign authorities (including, without limitation, federal and state
agencies regulating the environment, occupational health and safety) material
to the conduct of the Business and own and operate its respective properties
(collectively, the "Permits"). A true, correct and complete list of all the
Permits will be set forth in Section 2.25 of the Disclosure Schedule. Capers
and Encore have conducted the Business in compliance with all material terms
and conditions of the Permits. None of the Permits will be effected by, and no
consent will be required as a prerequisite to, the purchase of the Shares.
3. Neither of the Companies has made or has agreed to
make gifts of money, other property or similar benefits (other than incidental
gifts of articles of nominal value) to any actual or potential customer,
supplier, governmental employee or any other person in a position to assist or
hinder the Companies in connection with any actual or proposed transaction.
4. In particular, but without limiting the generality of
the foregoing, none of the Companies has violated, has liability or has
received a notice or charge asserting any violation of or liability under
federal (Canadian) or provincial acts (including rules and regulations
thereunder) regulating or otherwise affecting employee health and safety.
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III. Z. Environmental Matters.
1. As used in this Section 2.26, "Hazardous Substances"
means any contaminants, pollutants, dangerous substances, liquid wastes,
individual wastes, hauled liquid wastes, toxic substances, hazardous wastes,
hazardous materials, or hazardous substances as defined in or pursuant to any
law, judgment, decree, order, injunction, rule, statute and regulation of any
court, arbitrator or governmental authority by which the Companies' businesses,
the Companies' assets or the Companies are bound or to which the Companies'
businesses, the Companies' assets or the Companies are subject;
(b) The Companies have not used any of their properties or
assets, or permitted them to be used, to generate, manufacture, refine, treat,
transport, store, handle, dispose of, transfer, produce or process Hazardous
Substances, except in compliance with applicable laws, judgments, decrees,
orders, injunctions, rules, statutes and regulations of all courts, arbitrators
or governmental authorities, including all environmental, health and safety
statutes and regulations, and to the best knowledge of the Majority Sellers,
neither has any lessee, prior owner or other person.
(c) The businesses of the Companies and their property and
assets comply in all material respects with all applicable laws, judgments,
decrees, orders, injunctions, rules, statutes and regulations of all courts,
arbitrators or governmental authorities, including all environmental, health
and safety statutes and regulations.
(d) None of the Companies' businesses, assets or properties
are subject to any pending judicial or administrative proceeding alleging the
violation of any applicable environmental, health or safety law, judgment,
decree, order, injunction, rule, statute or regulation.
(e) To the best knowledge of the Companies and the Majority
Sellers, none of the Companies' businesses, assets or properties are the
subject of investigation by any governmental authority evaluating whether any
remedial action is needed to respond to a release of any Hazardous Substance
into the environment.
(f) Neither the Majority Sellers nor the Companies has filed
any notice under any applicable environmental, health or safety law, judgment
decree, order, injunction, rule, statute or regulation indicating past or
present treatment, storage or disposal of a Hazardous Substance or constituent,
or other substance into the environment.
(g) Neither the Majority Sellers nor the Companies has any
contingent liability in connection with the release of any Hazardous Substance
or constituent, or other substance into the environment.
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(h) To the best knowledge of the Companies and the Majority
Sellers, no underground storage tanks or surface impoundments are located on
any of the Companies' assets or properties.
(i) To the best knowledge of the Companies and the Majority
Sellers, the Real Property and any improvements thereon, contain no asbestos,
urea, formaldehyde, radon, polychlorinated byphenyls (PCBs) or pesticides, at
levels above natural background levels.
2.27 Brokerage. No third party shall be entitled to receive any
brokerage commissions, finder's fees, fees for fairness opinions or financial
advisory services or similar compensation in connection with the transactions
contemplated by this Agreement based on any arrangement or agreement made by or
on behalf of Sellers.
2.28 Investment Intent. Each Seller is purchasing the Alfalfa's
Common Stock for their own account with the present intention of holding the
Alfalfa's Common Stock for investment purposes and not with a view to or for
sale in connection with any distribution of the Alfalfa's Common Stock in
violation of any applicable securities law. Sellers will refrain from
transferring or otherwise disposing of any of the Alfalfa's Common Stock, or
any interest therein, in such manner as to cause Buyer to be in violation of
the registration requirements of the Securities Act of 1933, as amended, or
applicable state securities or blue sky laws or applicable Canadian securities
laws. Each Seller understands that the shares of Alfalfa's Common Stock which
may be sold to such Seller will bear a legend restricting transfers of such
shares, including, but not limited to, a right of first refusal for the benefit
of Alfalfa's, all as required by Canadian or United States securities laws or
set forth in the Alfalfa's Shareholders' Agreement.
IV.
REPRESENTATIONS AND WARRANTIES OF BUYER
Alfalfa's and NewCorp, jointly and severally, represent and warrant to
Sellers that, except as set forth in the disclosure schedule delivered to
Sellers on the date hereof (the "Buyer Disclosure Schedule") (which Buyer
Disclosure Schedule sets forth the exceptions to the representations and
warranties contained in this Article 3 under captions referencing the Sections
to which such exceptions apply):
3.1 Organization and Corporate Power. Each of Alfalfa's and
Alfalfa's Subsidiaries is a duly organized corporation, validly existing and in
good standing under the laws of the jurisdiction of organization in the United
States and the Province of British Columbia in Canada, as applicable, with all
requisite corporate power and authority and all authorizations, licenses,
permits and certifications necessary to own and operate their properties and to
carry on their respective business
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as now conducted and presently proposed to be conducted, except such licenses,
permits and certifications that are not material to the conduct of such
business. The copies of Alfalfa's Articles of Incorporation and Bylaws and
NewCorp's Memorandum and Articles attached to Section 3.1 of the Buyer
Disclosure Schedule reflect all amendments made thereto and are correct and
complete as of the date hereof. All material financial transactions of
Alfalfa's and Alfalfa's Subsidiaries (as defined in Section 3.6 below) have
been accurately recorded in the books and records of Alfalfa's.
3.2 Execution, Delivery; Valid and Binding Agreement. This
Agreement has been duly executed and delivered by Buyer and constitutes the
valid and binding obligation of Buyer, enforceable in accordance with its
terms, except that the enforceability of this Agreement may be limited by (i)
bankruptcy, insolvency, reorganization, moratorium and other similar laws now
or hereafter in effect relating to creditors' rights generally, and (ii)
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
3.3 No Breach. Except as disclosed in Section 3.3 of the Buyer
Disclosure Schedule, the execution, delivery and performance of this Agreement
by Buyer and the consummation by Buyer of the transactions contemplated hereby
do not conflict with or result in any breach of any of the provisions of,
constitute a default under, result in a violation of, result in the creation of
a right of termination or acceleration or any lien, security interest, charge
or encumbrance upon any assets of Buyer or any Alfalfa's Subsidiary or require
any authorization, consent, approval, exemption or other action by or notice to
any court or other governmental body, under the Articles of Incorporation and
Bylaws of Alfalfa's or any Alfalfa's Subsidiary or the Memorandum and Articles
of NewCorp, as applicable, or any indenture, mortgage, lease, loan agreement or
other agreement or instrument by which Buyer or any Alfalfa's Subsidiary is
bound or affected, or any law, statute, rule or regulation or order, judgment
or decree to which Buyer or any Alfalfa's Subsidiary or the respective
businesses of Buyer or any Alfalfa's Subsidiary (including but not limited to
the properties related to the business of Alfalfa's and Alfalfa's Subsidiaries)
is subject. Alfalfa's waives any right of first refusal it may have pursuant
to the Capers Shareholders' Agreement.
3.4 Governmental Authorities; Consents. Neither Alfalfa's nor
NewCorp is required to submit any notice, report or other filing with any
governmental authority (other than informational filings required to be made
under the Investment Canada Act) in connection with the execution or delivery
by them of this Agreement or the consummation of the transactions contemplated
hereby. No consent, approval or authorization of any governmental or
regulatory authority or any other party or person is required to be obtained by
Alfalfa's or NewCorp in connection with their execution, delivery and
performance of this Agreement or the transactions contemplated hereby, other
than such consents which will be obtained on or prior to the Closing Date.
3.5 Alfalfa's Common Stock. Except as disclosed in Section 3.5 of
the Buyer Disclosure Schedule or as described in Section 2.28 hereof, the
Alfalfa's Common Stock to be purchased by Sellers will be free and clear of any
Liens, restrictions or limitations of any kind and,
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on the Closing Date, the delivery of a certificate or certificates representing
such common stock will transfer good and valid title to such common stock to
such Sellers free and clear of any Liens of any kind (except as disclosed in
Section 3.5 of the Buyer Disclosure Schedule) and any restrictions on transfer
pursuant to any applicable law.
3.6 Subsidiaries. Except as disclosed in Section 3.6 of the Buyer
Disclosure Schedule ("Alfalfa's Subsidiaries"), neither Alfalfa's nor any
Alfalfa's Subsidiary owns any stock, partnership interest, joint venture
interest or any other security or ownership interest issued by any other
corporation, organization or entity.
3.7 Capital Stock.
1. Alfalfa's. The authorized capital stock of Buyer
consists of 20,000,000 shares of common stock and 5,000,000 shares of preferred
stock, of which, as of the date hereof, 317,452 shares of common stock are
issued and outstanding and no shares of preferred stock are issued and
outstanding. All of the shares of Alfalfa's Common Stock have been duly
authorized and are validly issued, fully paid and nonassessable and free of
preemptive rights, except as required by law. Alfalfa's has no other equity
securities or securities containing any equity features authorized, issued or
outstanding. Except as set forth in Section 3.7 of the Buyer Disclosure
Schedule, there are no agreements or other rights or arrangements existing
which provide for the sale or issuance of capital stock by Alfalfa's and there
are no rights, subscriptions, warrants, options, conversion rights or
agreements of any kind outstanding to purchase or otherwise acquire from
Alfalfa's any shares of capital stock or other securities of Alfalfa's of any
kind. Except as set forth in Section 3.7 of the Buyer Disclosure Schedule,
there are no agreements or other obligations (contingent or otherwise) which
may require Alfalfa's to repurchase or otherwise acquire any shares of its
capital stock, other than as set forth in the Alfalfa's Shareholders'
Agreement.
2. Subsidiaries. All of the issued and outstanding
shares of capital stock of Alfalfa's Subsidiaries are owned beneficially and of
record by Alfalfa's, free and clear of any Liens of any kind. All of the
shares of capital stock of Alfalfa's Subsidiaries have been duly authorized and
is validly issued, fully paid and nonassessable and free of preemptive rights,
except as required by law. Except as set forth in Section 3.7 of the Buyer
Disclosure Schedule, there are no agreements or other rights or arrangements
existing which provide for the sale or issuance of capital stock by Alfalfa's
Subsidiaries and there are no rights, subscriptions, warrants, options,
conversion rights or agreements of any kind outstanding to purchase or
otherwise acquire from Alfalfa's Subsidiaries any shares of capital stock or
other securities of Alfalfa's Subsidiaries of any kind. Except as set forth in
Section 3.7 of the Buyer Disclosure Schedule, there are no agreements or other
obligations (contingent or otherwise) which may require Alfalfa's Subsidiaries
to repurchase or otherwise acquire any shares of their capital stock.
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3.8 Financial Statements. Section 3.8 of the Buyer Disclosure
Schedule contains copies of the unaudited consolidated balance sheet of
Alfalfa's as of May 29, 1994, and the unaudited consolidated statements of
earnings and shareholders' equity and cash flows for the eleven-month period
ended May 29, 1994 (the May 29, 1994 Financial Statements are referred to
herein as the "Buyer's Latest Financial Statements"). The Buyer's Latest
Financial Statements are based upon the information contained in the books and
records of Alfalfa's and fairly present the financial condition of Alfalfa's as
of the date thereof and results of operations for the period referred to
therein. The Buyer's Latest Financial Statements have been prepared in
accordance with United States generally accepted accounting principles,
consistently applied throughout the period indicated.
3.9 Absence of Undisclosed Liabilities. Except as disclosed in
Section 3.9 of the Buyer Disclosure Schedule, neither Alfalfa's nor any of
Alfalfa's Subsidiaries has liabilities (whether accrued, absolute, contingent,
unliquidated or otherwise, whether due or to become due, whether known or
unknown, and regardless of when asserted) arising out of transactions or events
heretofore entered into, or any action or inaction, or any state of facts
existing, with respect to or based upon transactions or events heretofore
occurring, except (i) as reflected in the Buyer's Latest Financial Statements,
and (ii) liabilities which have arisen after the date of the Buyer's Latest
Financial Statements in the ordinary course of business (none of which is a
material uninsured liability for breach of contract, breach of warranty, tort,
infringement, claim or lawsuit).
3.10 No Material Adverse Changes. Except as disclosed in Section
3.10 of the Buyer Disclosure Schedule, since the date of Buyer's Latest
Financial Statements there has been no change materially adverse, individually
or in the aggregate, to the assets, financial condition, operating results,
customers, employees or supplier relations, business condition or prospects of
Alfalfa's or Alfalfa's Subsidiaries taken as a whole.
3.11 Absence of Certain Developments. Other than pursuant to this
Agreement or disclosed in Section 3.11 of the Buyer Disclosure Schedule, since
the date of Buyer's Latest Financial Statements, neither Alfalfa's nor any
Alfalfa's Subsidiary has:
(a) borrowed any amount or incurred or become subject to
any liability, except (i) current liabilities incurred in the ordinary course
of business, (ii) liabilities under contracts entered into in the ordinary
course of business and (iii) borrowings under existing bank agreements;
(b) mortgaged, pledged or subjected to any lien, charge
or any other encumbrance, any of their assets except (i) liens for current
property taxes not yet due and payable, (ii) liens imposed by law and incurred
in the ordinary course of business for obligations not yet due to carriers,
warehousemen, laborers, materialmen and the like, and (iii) liens in respect of
pledges or deposits under workers' compensation laws;
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3. discharged or satisfied any lien or encumbrance or
paid any liability, other than current liabilities paid in the ordinary course
of business or listed on the Buyer's Latest Financial Statements;
4. sold, assigned or transferred (including, without
limitation, transfers to any employees, affiliates or shareholders) any
tangible assets (other than inventory and other tangible assets in the ordinary
course of business) or cancelled any debts or claims;
5. sold, assigned or transferred (including, without
limitation, transfers to any employees, affiliates or shareholders) any
patents, trademarks, trade names, copyrights, trade secrets or other intangible
assets;
6. waived any rights of value or suffered any losses or
adverse changes in collection loss experience, whether or not in the ordinary
course of business or consistent with past practice;
7. declared or paid any dividends or other distributions
with respect to any shares of Alfalfa's capital stock or redeemed or purchased,
directly or indirectly, any shares of Alfalfa's capital stock or any options;
8. issued, sold or transferred any of Alfalfa's equity
securities, securities convertible into or exchangeable for any of Alfalfa's
equity securities or warrants, options or other rights to acquire any of
Alfalfa's equity securities, or any bonds or debt securities (other than as
otherwise permitted hereunder);
9. taken any other action or entered into any other
transaction other than in the ordinary course of business and in accordance
with past custom and practice, or entered into any transaction with any insider
(as defined in Section 3.22) other than the transactions contemplated by this
Agreement;
10. suffered any material theft, damage, destruction or
loss of or to any property or properties owned or used by Alfalfa's or any
Alfalfa's Subsidiary, whether or not covered by insurance;
11. other than pursuant to existing employee benefit
plans, made or granted any bonus or any wage, salary or compensation increase
to any director, officer, or consultant or made or granted any increase in any
employee benefit plan or arrangement, or amended or terminated any existing
employee benefit plan or arrangement, or adopted any new employee benefit plan
or arrangement or made any commitment or incurred any liability to any labor
organization;
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12. made any single capital expenditure in excess of Ten
Thousand and No/100 Dollars ($10,000) therefor;
13. other than in the ordinary course of business and as
contemplated by the Management Agreements with each of Mr. Barry Perzow and Mr.
Russell Precious (collectively, the "Management Agreements"), made any loans or
advances to, or guarantees or financial assistance for the benefit of, any
persons;
14. made charitable contributions or pledges in excess of
Ten Thousand and no/100 Dollars ($10,000.00) in the aggregate; or
15. made any change in accounting principles or practices
from those utilized in the United States and in the preparation of the Buyer's
Latest Financial Statements.
3.12 Title to Properties.
(a) The real property owned or demised by the leases
described (including the term thereof) in Section 3.12 of the Buyer Disclosure
Schedule constitutes all of the real property used or occupied by Alfalfa's or
Alfalfa's Subsidiaries (the "Alfalfa's Real Property"). The Alfalfa's Real
Property has access, sufficient for the conduct of the business of Alfalfa's or
Alfalfa's Subsidiaries as now conducted or as presently proposed to be
conducted, to public roads and to all utilities, including electricity,
sanitary and storm sewer, potable water, natural gas and other utilities, used
in the operation of the business of Alfalfa's or any Alfalfa's Subsidiary at
that location.
(b) The leases described in Section 3.12 of the Buyer
Disclosure Schedule are in full force and effect, and Alfalfa's or one of
Alfalfa's Subsidiaries that is a party to each such lease holds a valid and
existing leasehold interest under each of such leases for the term set forth in
Section 3.12 of the Buyer Disclosure Schedule. To the best knowledge of Buyer,
neither Alfalfa's nor any Alfalfa's Subsidiary is in default, and no
circumstances exist which, if unremedied, would, either with or without notice
or the passage of time or both, result in such default under any of such
leases; nor, to the best knowledge of Alfalfa's or any Alfalfa's Subsidiary, is
any other party to any of such leases in default.
(c) Section 3.12 of the Buyer Disclosure Schedule
discloses the aggregate value of the tangible properties and tangible assets of
Alfalfa's as reflected on the Buyer's Latest Financial Statements. Alfalfa's
and Alfalfa's Subsidiaries owns good and marketable title to its tangible
properties and tangible assets described in Section 3.12 of the Buyer
Disclosure Schedule and as reflected on the Buyer's Latest Financial Statements
or acquired since the date thereof, free and clear of all liens and
encumbrances, except for (i) liens for current taxes not yet due and payable,
(ii) the properties subject to the leases listed in Section 3.12 of the Buyer
Disclosure Schedule, (iii)
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as otherwise disclosed in Section 3.12 of the Buyer Disclosure Schedule, and
(iv) inventory disposed of since the date of Buyer's Latest Financial
Statements in the ordinary course of business.
(d) Either Alfalfa's or an Alfalfa's Subsidiary owns, or
leases under valid leases, all buildings, machinery, equipment and other
tangible assets necessary or desirable for the conduct of the business of
Alfalfa's or Alfalfa's Subsidiaries.
(e) To the best knowledge of Buyer, neither Alfalfa's nor
any Alfalfa's Subsidiary is in violation of any applicable zoning ordinance or
other law, regulation or requirement that is material to the operation of any
properties used in the operation of the business of Alfalfa's or an Alfalfa's
Subsidiary, and neither Alfalfa's nor an Alfalfa's Subsidiary has received any
notice of any such violation, or the existence of any condemnation proceeding
with respect to any of the Alfalfa's Real Property.
(f) Buyer has no knowledge of improvements made or
contemplated to be made to the Alfalfa's Real Property by any public or private
authority, the costs of which are to be assessed as special levies, taxes or
charges against any of the Alfalfa's Real Property, and there are no present
assessments for which Alfalfa's or any Alfalfa's Subsidiary would be
responsible.
3.13 Accounts Receivable. The accounts receivable reflected on
Buyer's Latest Financial Statements are valid receivables, are not subject to
valid counterclaims or setoffs, and are collectible in accordance with their
terms, except to the extent of the bad debt reserve reflected on the Buyer's
Latest Financial Statements.
3.14 Inventory. The inventory of Alfalfa's and Alfalfa's
Subsidiaries consists of items of a quality and quantity salable at Alfalfa's
normal profit levels, in each case, in the ordinary course of the business of
Alfalfa's and Alfalfa's Subsidiaries. The values at which such inventory is
carried on Buyer's Latest Financial Statements are in accordance with United
States generally accepted accounting principles. Section 3.14 of the Buyer
Disclosure Schedule discloses the value of Alfalfa's inventory as of May 1,
1994 obtained by the physical count of such inventory.
3.15 Tax Matters.
(a) Alfalfa's has: (i) timely filed all returns,
declarations, reports, estimates, information returns, and statements
("Returns") required to be filed or sent by it in respect of any Taxes (as
defined in subsection (e) below) or required to be filed or sent by it by any
taxing authority having jurisdiction; (ii) timely and properly paid (or has had
paid on its behalf) all Taxes shown to be due and payable on such Returns;
(iii) established on Buyer's Latest Financial Statements (and until the Closing
will establish on its books and record), in accordance with generally accepted
accounting principles, reserves that are adequate for the payment of any Taxes
not yet due and payable; (iv) complied with all applicable laws, rules, and
regulations relating to the
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withholding of Taxes and the payment thereof (including, without limitation,
withholding of Taxes under Sections 1441 and 1442 of the Internal Revenue Code
of 1986, as amended (the "Code"), and timely and properly withheld from
individual employee wages and paid over to the proper governmental authorities
all amounts required to be so withheld and paid over under all applicable laws.
(b) There are no liens for Taxes upon any assets of
Alfalfa's or any Alfalfa's Subsidiary, except for liens for Taxes not yet due.
(c) No deficiency for any Taxes has been proposed,
asserted or assessed against Alfalfa's that has not been resolved and paid in
full. No waiver, extension or comparable consent given by Alfalfa's regarding
the application of the statute of limitations with respect to any Taxes or
Returns is outstanding, nor is any request for any such waiver or consent
pending. There has been no Tax audit or other administrative proceeding or
court proceeding with regard to any Taxes or Returns, nor is any such Tax audit
or other proceeding pending, nor has there been any notice to Alfalfa's by any
Taxing authority regarding any such Tax, audit or other proceeding, or, to the
best knowledge of Buyer, is any such Tax audit or other proceeding threatened
with regard to any Taxes or Returns. Alfalfa's does not expect the assessment
of any additional Taxes and is not aware of any unresolved questions, claims or
disputes concerning the liability for Taxes of Alfalfa's which would exceed the
estimated reserves established on its books and records.
(d) All transactions that could give rise to an
understatement of federal income tax (within the meaning of Section 6661 of the
Code as it applied prior to repeal) or an underpayment of tax (within the
meaning of Section 6662 of the Code) were reported in a manner for which there
is substantial authority or were adequately disclosed (or, with respect to
Returns filed before the Closing Date, will be reported in such a manner or
adequately disclosed) on the Returns required in accordance with Sections
6661(b)(2)(B) and 6662(d)(2)(B) of the Code.
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(e) For purposes of this Section 3.15, the term "Tax" or
"Taxes" means all taxes, charges, fees, levies, or other assessments,
including, without limitation, all net income, gross income, gross receipts,
sales, use, ad valorem, transfer, franchise, profits, license, withholding,
payroll, employment, social security, unemployment, excise, estimated,
severance, stamp, occupation, property, or other taxes, customs duties, fees,
assessments, or charges of any kind whatsoever, including, without limitation,
all interest and penalties thereon, and additions to tax or additional amounts
imposed by any taxing authority, domestic or foreign, upon Alfalfa's or any
Alfalfa's Subsidiary.
3.16 Contracts and Commitments.
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(a) Section 3.16 of the Buyer Disclosure Schedule lists
the following agreements, whether oral or written, to which Alfalfa's or any
Alfalfa's Subsidiary is a party, which is currently in effect, and which relate
to the operation of the business of Alfalfa's or any Alfalfa's Subsidiary (such
list to set forth the commencement date and termination or expiration date of
such agreement): (i) collective bargaining agreement or contract with any labor
union; (ii) bonus, pension, profit sharing, retirement or other form of
deferred compensation plan, other than as described in Section 3.20 hereof or
Section 3.20 of the Buyer Disclosure Schedule; (iii) hospitalization insurance
or other welfare benefit plan or practice, whether formal or informal, other
than as described in Section 3.20 hereof or Section 3.20 of the Buyer
Disclosure Schedule; (iv) stock purchase or stock option plan, other than as
described in Section 3.20 hereof or Section 3.20 of the Buyer Disclosure
Schedule; (v) contract for the employment of any officer, individual employee
or other person on a full-time, part-time or consulting basis or relating to
severance pay for any such person; (vi) confidentiality agreement other than in
the ordinary course of business; (vii) contract, agreement or understanding
relating to the voting of common stock or the election of directors of
Alfalfa's (other than the Management Agreements); (viii) agreement or indenture
relating to the borrowing of money or to mortgaging, pledging or otherwise
placing a lien on any of the assets Alfalfa's or any Alfalfa's Subsidiary; (ix)
guaranty of any obligation for borrowed money or otherwise; (x) lease or
agreement under which Alfalfa's or any Alfalfa's Subsidiary is lessee of, or
holds or operates any property, real or personal, owned by any other party;
(xi) lease or agreement under which Alfalfa's or any Alfalfa's Subsidiary is
lessor of, or permits any third party to hold or operate, any property, real or
personal; (xii) contract or group of related contracts with the same party for
the purchase of products or services other than in the ordinary course of
business; (xiii) contract or group of related contracts with the same party
(other than any contract or group of related contracts for the purchase or sale
of products or services) continuing over a period of more than six months from
the date or dates thereof, not terminable by it on 30 days or less notice
without penalty; (xiv) contract which prohibits Alfalfa's or any Alfalfa's
Subsidiary from freely engaging in business anywhere in the world; (xv)
contract for the distribution of Alfalfa's or any Alfalfa's Subsidiary's
products (including any distributor or sales contract); (xvi) any franchise
agreements; (xvii) contracts or commitments for capital expenditures which are
in excess of $10,000 individually; (xviii) agreements for the sale (other than
such sales in the ordinary course of business) of any capital asset in excess
of $10,000; provided, that such sales in the aggregate do not exceed
$200,000.00; (xix) contracts with any affiliate which in any way relates to
Alfalfa's or any Alfalfa's Subsidiary; or (xx) other agreements which are
either material to the business of Alfalfa's and Alfalfa's Subsidiaries taken
as a whole or were not entered into in the ordinary course of business.
(b) Alfalfa's and any Alfalfa's Subsidiary, as
applicable, have performed all obligations required to be performed by them in
connection with the contracts or commitments required to be disclosed in
Section 3.16 of the Buyer Disclosure Schedule and they are not in receipt of
any claim of default under any such contract or commitment; neither Alfalfa's
nor any Alfalfa's Subsidiary has any present expectation or intention of not
fully performing any material
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obligation pursuant to any such contract or commitment; and neither Alfalfa's
nor any Alfalfa's Subsidiary has knowledge of any breach or anticipated breach
by any other party to any such contract or commitment.
(c) Prior to the Closing Date of this Agreement,
Alfalfa's will make available to each Seller, at such Seller's request, a true
and correct copy of each written contract or commitment disclosed in Section
3.16 of the Buyer Disclosure Schedule, and a written description of each oral
contract or commitment disclosed in Section 3.16 of the Buyer Disclosure
Schedule, together with all amendments, waivers or other changes thereto.
3.17 Intellectual Property Rights. Section 3.17 of the Buyer
Disclosure Schedule describes all rights in patents, patent applications,
trademarks, service marks, trade names, corporate names, copyrights, trade
secrets, know-how or other intellectual property rights owned by, licensed to
or otherwise controlled by Alfalfa's or any Alfalfa's Subsidiary or used in,
developed for use in or necessary to the conduct of the business of Alfalfa's
or any Alfalfa's Subsidiary as now conducted, directly or indirectly, or
planned to be conducted. Alfalfa's or an Alfalfa's Subsidiary owns and
possesses all right, title and interest, or hold a valid license, in and to the
rights set forth in Section 3.17 of the Buyer Disclosure Schedule and none of
such rights has been licensed or assigned to any third party. Alfalfa's or an
Alfalfa's Subsidiary has taken all necessary action to protect the intellectual
property rights set forth under such caption. Neither Alfalfa's nor any
Alfalfa's Subsidiary has received any notice of, nor are there any facts known
to Alfalfa's or any Alfalfa's Subsidiary which indicate a likelihood of, any
infringement or misappropriation by, or conflict from, any third party with
respect to the intellectual property rights which are listed; no claim by any
third party contesting the validity of any intellectual property rights listed
under such caption has been made, is currently outstanding or, to the best
knowledge of Alfalfa's or any Alfalfa's Subsidiary, is threatened; neither
Alfalfa's nor any Alfalfa's Subsidiary has received any notice of any
infringement, misappropriation or violation by any of the intellectual property
rights of any third parties and, to the best knowledge of Alfalfa's or any
Alfalfa's Subsidiary, neither Alfalfa's nor any Alfalfa's Subsidiary has
infringed, misappropriated or otherwise violated any such intellectual property
rights; and no infringement, illicit copying, misappropriation or violation has
occurred with respect to products currently being sold by Alfalfa's or an
Alfalfa's Subsidiary with respect to the products currently under development
(in their present state of development) or with respect to the conduct of the
business of Alfalfa's or any Alfalfa's Subsidiary as now conducted.
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3.18 Litigation. Except as set forth in Section 3.18 of the Buyer
Disclosure Schedule, there are no actions, suits, proceedings, orders or
investigations pending or, to the best knowledge of Alfalfa's, threatened
against Alfalfa's or any Alfalfa's Subsidiary, at law or in equity, or before
or by any federal, state, provincial, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign.
3.19 Employees.
(a) To the best knowledge of Buyer, no executive employee
of Alfalfa's and no group of employees of Alfalfa's or any Alfalfa's
Subsidiaries has any plans to terminate his or its employment; (b) Alfalfa's
and each Alfalfa's Subsidiary has complied with all laws relating to the
employment of labor, including provisions thereof relating to wages, hours,
equal opportunity, collective bargaining and the payment of social security and
other taxes; (c) all amounts required to be withheld and paid to any
governmental authority have been paid or are assumed to have been paid; (d)
neither Alfalfa's nor any Alfalfa's Subsidiary has a material labor relations
problem pending and labor relations are satisfactory; (e) there are no material
workers' compensation claims pending against Alfalfa's or any Alfalfa's
Subsidiary nor is Buyer aware of any facts that would give rise to such a
claim; (f) to the best knowledge of Buyer, no employee of Alfalfa's or any
Alfalfa's Subsidiary is subject to any confidentiality or non-competition
agreement or any other agreement or restriction of any kind that would impede
in any way the ability of such employee to carry out fully all activities of
such employee for the benefit of Alfalfa's or any Alfalfa's Subsidiary; and (g)
no employee or former employee has any claim with respect to any intellectual
property rights of Alfalfa's or any Alfalfa's Subsidiary set forth in Section
3.17 of the Buyer Disclosure Schedule.
3.20 Employee Benefit Plans. Except as disclosed in Section 3.20
of the Buyer Disclosure Schedule and except for any statutorily mandated plan
with respect to all employees and former employees of Alfalfa's and all
dependents and beneficiaries of such employees and former employees, neither
Alfalfa's nor any Alfalfa's Subsidiary maintains or contributes to any employee
benefit or pension plan. No such plans are required to be registered under any
state or federal (United States) law.
3.21 Insurance. Section 3.21 of the Buyer Disclosure Schedule
lists and briefly describes each insurance policy maintained by Alfalfa's as of
the date of Buyer's Latest Financial Statements with respect to its properties,
assets and operations and sets forth the date of expiration of each such
insurance policy. All of such insurance policies are, as of the date hereof,
and, unless Buyer notifies Sellers in writing otherwise, as of the Closing Date
will be, in full force and effect and issued by insurers of recognized
responsibility and are for amounts and cover risks customarily insured against
by prudent operators of enterprises engaged in similar business. Alfalfa's is
not in default with respect to its obligations under any of such insurance
policies.
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3.22 Affiliate Transactions.
To the best knowledge of Buyer, other than pursuant to this
Agreement, no officer, director or employee of Alfalfa's or any Alfalfa's
Subsidiary or any member of the immediate family of any such officer, director
or employee, or any entity in which any of such persons owns any beneficial
interest (other than any publicly-held corporation whose stock is traded on a
national securities exchange or in the over-the counter market and less than
one percent of the stock of which is beneficially owned by any of such persons)
(collectively "insiders"), has any agreement with Alfalfa's or any Alfalfa's
Subsidiary or any interest in any property, real, personal or mixed, tangible
or intangible, used in or pertaining to the business of Alfalfa's or any
Alfalfa's Subsidiary (other than ownership of capital stock of Alfalfa's). To
the best knowledge of Alfalfa's, none of the insiders has any direct or
indirect interest in any competitor, supplier or customer of Alfalfa's or any
Alfalfa's Subsidiary or in any person, firm or entity from whom or to whom
Alfalfa's or any Alfalfa's Subsidiary leases any property, or in any other
person, firm or entity with whom Alfalfa's or any Alfalfa's Subsidiary
transacts business of any nature. For purposes of this Section 3.22, the
members of the immediate family of an officer, director or employee shall
consist of the spouse, parents, children, siblings, mothers- and
fathers-in-law, sons- and daughters-in-law, and brothers- and sisters-in-law of
such officer, director or employee.
3.23 Customers and Suppliers. Since the date of Buyer's Latest
Financial Statements, no material supplier of Alfalfa's or any Alfalfa's
Subsidiary has indicated that it will stop or decrease the rate of business
done with Alfalfa's or such Alfalfa's Subsidiary except for changes in the
ordinary course of the business of Alfalfa's or Alfalfa's Subsidiary.
3.24 Officers and Directors. Section 3.24 of the Buyer Disclosure
Schedule lists all officers and directors of Alfalfa's.
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3.25 Compliance with Laws; Permits.
(a) Alfalfa's and, to the best knowledge of Alfalfa's,
its officers, directors, agents and employees have complied in all material
respects with all applicable laws, judgments, decrees, orders, injunctions,
rules, statutes, and regulations of all courts, arbitrators or governmental
authorities including, but not limited to, federal (United States), state,
local and foreign laws, ordinances, rules, regulations and other requirements
pertaining to product labeling, consumer products safety, equal employment
opportunity, employee retirement, affirmative action and other hiring
practices, occupational safety and health, workers' compensation, unemployment
and building and zoning codes, which materially affect the business of
Alfalfa's and Alfalfa's Subsidiaries or the Alfalfa's Real Property and to
which Alfalfa's or any Alfalfa's Subsidiary may be subject, and no claims have
been filed against Alfalfa's or an Alfalfa's Subsidiary alleging a violation of
any such laws, regulations or other requirements, in each case except as are
not material to the conduct of the business of Alfalfa's and Alfalfa's
Subsidiaries, taken as a whole. Alfalfa's has no knowledge of any action,
pending or threatened, to change the zoning or building ordinances or any other
laws, rules, regulations or ordinances affecting the Alfalfa's Real Property.
(b) Alfalfa's and Alfalfa's Subsidiaries have in full
force and effect, all licenses, permits and certificates, from federal (United
States), state, local and foreign authorities (including, without limitation,
federal and state agencies regulating the environment, occupational health and
safety) material to the conduct of the business of Alfalfa's and the Alfalfa's
Subsidiaries, respectively, and to own and operate their respective properties
(collectively, the "Permits"). Alfalfa's has conducted its business in
compliance with all material terms and conditions of the Permits. None of the
Permits will be effected by, and no consent will be required as a prerequisite
to, the purchase of the Shares.
(c) Neither Alfalfa's nor any Alfalfa's Subsidiary has
made or agreed to make gifts of money, other property or similar benefits
(other than incidental gifts of articles of nominal value) to any actual or
potential customer, supplier, governmental employee or any other person in a
position to assist or hinder Alfalfa's or an Alfalfa's Subsidiary in connection
with any actual or proposed transaction.
(d) In particular, but without limiting the generality of
the foregoing, neither Alfalfa's nor any Alfalfa's Subsidiary has violated, has
any liability or received a notice or charge asserting any violation of or
liability under federal (United States) or state acts (including rules and
regulations thereunder) regulating or otherwise affecting employee health and
safety.
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3.26 Environmental Matters.
(a) As used in this Section 3.26, "Hazardous Substances"
means any contaminants, pollutants, dangerous substances, liquid wastes,
individual wastes, hauled liquid wastes, toxic substances, hazardous wastes,
hazardous materials, or hazardous substances as defined in or pursuant to any
law, judgment, decree, order, injunction, rule, statute and regulation of any
court, arbitrator or governmental authority by which Alfalfa's business,
Alfalfa's or any Alfalfa's Subsidiary assets, Alfalfa's or any Alfalfa's
Subsidiary is bound or to which Alfalfa's or any Alfalfa's Subsidiary business,
Alfalfa's or any Alfalfa's Subsidiary assets, Alfalfa's or any Alfalfa's
Subsidiary is subject;
(b) Except as disclosed in Section 3.26 of the Buyer
Disclosure Schedule:
(i) neither Alfalfa's nor any Alfalfa's Subsidiary
has used any of their properties or assets, or permitted them to be
used, to generate, manufacture, refine, treat, transport, store,
handle, dispose of, transfer, produce or process Hazardous Substances,
except in compliance with applicable laws, judgments, decrees, orders,
injunctions, rules, statutes and regulations of all courts,
arbitrators or governmental authorities, including all environmental,
health and safety statutes and regulations, and to the best knowledge
of Alfalfa's, neither has any lessee, prior owner or other person;
(ii) the business of Alfalfa's or any Alfalfa's
Subsidiary and the property and assets of Alfalfa's and Alfalfa's
Subsidiaries comply in all material respects with all applicable laws,
judgments, decrees, orders, injunctions, rules, statutes and
regulations of all courts, arbitrators or governmental authorities,
including all environmental, health and safety statutes and
regulations;
(iii) to the best knowledge of Alfalfa's, none of
the businesses, assets or properties of Alfalfa's or Alfalfa's
Subsidiaries is subject to any pending judicial or administrative
proceeding alleging the violation of any applicable environmental,
health or safety law, judgment, decree, order, injunction, rule,
statute or regulation;
(iv) to the best knowledge of Alfalfa's, none of the
businesses, assets or properties of Alfalfa's and Alfalfa's
Subsidiaries is the subject of investigation by any governmental
authority evaluating whether any remedial action is needed to respond
to a release of any Hazardous Substance into the environment;
(v) neither Alfalfa's nor any Alfalfa's Subsidiary
has filed any notice under any applicable environmental, health or
safety law, judgment decree, order, injunction, rule, statute or
regulation indicating past or present treatment, storage or disposal
of a Hazardous Substance or constituent, or other substance into the
environment;
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(vi) neither Alfalfa's nor any Alfalfa's Subsidiary
has any contingent liability in connection with the release of any
Hazardous Substance or constituent, or other substance into the
environment;
(vii) to the best knowledge of Alfalfa's, no
underground storage tanks or surface impoundments are located on any
of the assets or properties of Alfalfa's and Alfalfa's Subsidiaries;
and
(viii) to the best knowledge of Alfalfa's, the
Alfalfa's Real Property and any improvements thereon, contain no
asbestos, urea, formaldehyde, radon, polychlorinated byphenyls (PCBs)
or pesticides, at levels above natural background levels.
3.27 Brokerage. No third party shall be entitled to receive any
brokerage commissions, finder's fees, fees for fairness opinions or financial
advisory services or similar compensation in connection with the transactions
contemplated by this Agreement based on any arrangement or agreement made by or
on behalf of Buyer.
1
COVENANTS OF CAPERS AND SELLERS
V. A. Conduct of the Business. As applicable, Sellers and
Capers agree to, and Capers shall cause Encore to, observe each term set forth
in this Section 4.1 and agree that, from the date hereof until the Closing
Date, unless otherwise consented to by Buyer in writing:
(a) The Business shall be conducted only in, and neither
Sellers nor the Companies shall take any action except in, the ordinary course,
on an arm's-length basis and in accordance in all material respects with all
applicable laws, rules and regulations and the Companies' past custom and
practice;
(b) Neither of the Companies shall, directly or indirectly,
do or permit to occur any of the following: (i) issue or sell any additional
shares of, or any options, warrants, conversion privileges or rights of any
kind to acquire any shares of, any of their capital stock, (ii) sell, pledge,
dispose of or encumber any of its assets, except in the ordinary course of
business; (iii) amend or propose to amend their Memorandum and Articles; (iv)
split, combine or reclassify any outstanding shares of their common stock, or
declare, set aside or pay any dividend or other distribution payable in cash,
stock, property or otherwise with respect to shares of their common stock; (v)
redeem, purchase or acquire or offer to acquire any shares of their common
stock or other of their securities; (vi) acquire (by merger, exchange,
consolidation, acquisition of stock or assets or otherwise) any
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corporation, partnership, joint venture or other business organization or
division or material assets thereof; (vii) incur any indebtedness for borrowed
money or issue any debt securities except borrowings pursuant to existing bank
lines of credit identified on Section 2.9 or 2.16 of the Disclosure Schedule,
the proceeds of which are used in the ordinary course of business of the
Companies; (viii) permit any accounts payable owed to trade creditors to remain
outstanding more than 60 days; (ix) accelerate, beyond the normal collection
cycle, collection of accounts receivable; or (x) enter into or propose to enter
into, or modify or propose to modify, any agreement, arrangement or
understanding with respect to any of the matters set forth in this subparagraph
(b).
(c) Neither of the Companies shall, directly or indirectly,
(i) enter into or modify any employment, severance or similar agreements or
arrangements with, or grant any bonuses, salary increases, severance or
termination pay to, any officers or directors or consultants; or (ii) take any
action with respect to the grant of any bonuses, salary increases, severance or
termination pay or with respect to any increase of benefits payable in effect
on the date hereof other than in the ordinary course of business for a
non-manager employee consistent with past practices.
(d) Neither of the Companies shall adopt or amend any bonus,
profit sharing, compensation, stock option, pension, retirement, deferred
compensation, employment or other employee benefit plan, trust, fund or group
arrangement for the benefit or welfare of any employees or any bonus, profit
sharing, compensation, stock option, pension, retirement, deferred
compensation, employment or other employee benefit plan, agreement, trust, fund
or arrangements for the benefit or welfare of any director.
(e) Neither of the Companies shall cancel or terminate
their current insurance policies or cause any of the coverage thereunder to
lapse, unless simultaneously with such termination, cancellation or lapse,
replacement policies providing coverage equal to or greater than the coverage
under the cancelled, terminated or lapsed policies for substantially similar
premiums are in full force and effect.
(f) Until the Closing Date, Capers shall, and shall cause
Encore to, (i) preserve intact the Business, organization and goodwill, and,
other than pursuant to the ordinary course of business consistent with past
practices, keep available the services of each of the Companies' officers and
employees as a group and maintain satisfactory relationships with suppliers,
distributors, customers and others having business relationships with the
Companies; (ii) confer on a regular and frequent basis with representatives of
Buyer to report operational matters and the general status of ongoing
operations; (iii) not intentionally take any action which would render, or
which reasonably may be expected to render, any representation or warranty made
in this Agreement untrue at the Closing; (iv) notify Buyer of any emergency or
other material change in the normal course of the Business or in the operation
of any of the Companies' properties and of any governmental or third party
complaints, investigations or hearings; and (v) promptly notify
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Buyer in writing if either of the Companies discover that any representation or
warranty made in this Agreement was when made, or has subsequently become,
untrue in any respect.
(g) Until the Closing Date, the Companies shall (i) file any
returns, elections or information statements with respect to any liabilities
for taxes (including all federal (Canadian), provincial and local taxes) or
other matters relating to taxes which pursuant to applicable law must be filed
prior to the Closing Date; (ii) promptly upon filing, provide copies of any
such tax returns, elections or information statements to Buyer; (iii) make any
such tax elections or other discretionary positions with respect to taxes taken
by or affecting the Companies only upon prior consultation with and consent of
Buyer, such consent not to be unreasonably withheld; and (iv) not amend any
return.
(h) The Companies will cooperate fully with Buyer and will
use their best efforts to make available any necessary individuals with regard
to the filing of any future tax returns and any future audits which require
such cooperation or availability. The filing of any tax returns or responding
to any audit after the Closing Date shall be done at the Buyer's sole
discretion and direction.
(i) The Companies shall not perform any act referenced by (or
omit to perform any act which omission is referenced by) the terms of Section
2.11.
4.2 Access to Books and Records. Between the date hereof and the
Closing Date, the Companies shall afford to Buyer and its authorized
representatives (the "Buyer's Representatives") full access at all reasonable
times and upon reasonable notice to the offices, properties, books, records,
officers, employees and other items of the Companies and otherwise provide such
assistance as is reasonably requested by Buyer in order that Buyer may have a
full opportunity to make such investigation and evaluation as it shall
reasonably desire to make of the Business and affairs of the Companies.
4.3 Regulatory Filings. The Companies shall, as promptly as
practicable after the execution of this Agreement, make or cause to be made all
filings and submissions under any laws or regulations applicable to any of the
Companies for the consummation of the transactions contemplated herein. The
Companies will coordinate and cooperate with Buyer in exchanging such
information, will not make any such filing without providing to Buyer a final
copy thereof for its review and consent at least two full business days in
advance of the proposed filing and will provide such reasonable assistance as
Buyer may request in connection with all of the foregoing.
4.4 Conditions. The Companies and each of the Sellers shall take
all actions necessary or desirable to cause the conditions set forth in Section
6.1 to be satisfied (other than such conditions that are solely the obligation
of each individual Sellers) and to consummate the
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transactions contemplated herein as soon as reasonably possible after the
satisfaction thereof (but in any event within three business days of such
date).
4.5 No Negotiations of the Companies, etc. Until the earlier of 90
days from the date hereof, the Closing Date or the date on which this Agreement
is terminated pursuant to Section 7.1 hereof, the Companies shall not, directly
or indirectly, through any officer, director, agent or otherwise, solicit,
initiate or encourage submission of any proposal or offer from any person or
entity (including any of its or their officers or employees) relating to any
liquidation, dissolution, recapitalization, merger, consolidation or
acquisition or purchase of all or a material portion of the assets of, or any
equity interest in any of the Companies or other similar transaction or
business combination involving any of the Companies or furnish to any other
person any information with respect to, or otherwise cooperate in any way with,
or assist or participate in, facilitate or encourage, any effort or attempt by
any other person or entity to do or seek any of the foregoing. The Companies
shall promptly notify Buyer if any such proposal or offer, or any inquiry from
or contact with any person with respect thereto, is made and shall promptly
provide Buyer with all information regarding such proposal, offer, inquiry or
contact.
4.6 No Negotiations of Sellers, etc. Until the earlier of 90 days
from the date hereof, the Closing Date or the date on which this Agreement is
terminated pursuant to Section 7.1 hereof, the no Seller shall, directly or
indirectly, through any officer, director, agent or otherwise, solicit,
initiate or encourage submission of any proposal or offer from any person or
entity (including any of its or their officers or employees) relating to any
liquidation, dissolution, recapitalization, merger, consolidation or
acquisition or purchase of all or a material portion of the assets of, or any
equity interest in any of the Companies or other similar transaction or
business combination involving either of the Companies or furnish to any other
person any information with respect to, or otherwise cooperate in any way with,
or assist or participate in, facilitate or encourage, any effort or attempt by
any other person or entity to do or seek any of the foregoing. Each Seller
agrees to promptly notify Buyer if any such proposal or offer, or any inquiry
from or contact with any person with respect thereto, is made and shall
promptly provide Buyer with all information regarding such proposal, offer,
inquiry or contact.
4.7 Taxes. Each Seller agrees to be responsible for any and all
of their individual taxes (including all federal (United States or Canadian),
provincial, state and local taxes) resulting from their individual sale of the
Shares and the transactions contemplated by this Agreement.
4.8 Termination of Capers Shareholders' Agreement. Each Seller
and Alfalfa's hereby waives all rights of first refusal and any other
restrictions on transfer of the Shares by all of the Sellers hereunder and any
and all other rights such Seller or Alfalfa's may have, pursuant to the Caper's
Shareholders' Agreement which may be affected by this Agreement and the
transactions contemplated hereby. Each Seller further consents to the
termination of the Capers' Shareholders'
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Agreement which consent shall be automatically effective upon the Closing of
the sale of the Shares hereunder without further documentation.
VI.
COVENANTS OF BUYER
VI. A. Conduct of the Business. As applicable, Alfalfa's
agrees to, and shall cause the Alfalfa's Subsidiaries to, observe each term set
forth in this Section 5.1 and agrees that, from the date hereof until the
Closing Date, unless otherwise consented to by the Majority Sellers in writing
and after notice to all of the other Sellers:
(a) The business of Alfalfa's shall be conducted only in, and
Alfalfa's shall not take any action except in, the ordinary course, on an
arm's-length basis and in accordance in all material respects with all
applicable laws, rules and regulations and Alfalfa's past custom and practice;
(b) Neither Alfalfa's nor any Alfalfa's Subsidiary shall,
directly or indirectly, do or permit to occur any of the following: (i) issue
or sell any additional shares of, or any options, warrants, conversion
privileges or rights of any kind to acquire any shares of, any of their capital
stock, other than (x) pursuant to employee stock plans, (y) up to 5% of the
outstanding common stock of Alfalfa's (on a fully diluted basis) and (z)
pursuant to this Agreement; (ii) sell, pledge, dispose of or encumber any of
its assets, except in the ordinary course of business; (iii) amend or propose
to amend their Articles of Incorporation and Bylaws or Memorandum and Articles,
as applicable (other than amendments relating to the number of directors or as
a result of the effectiveness of the new corporation laws of the State of
Colorado); (iv) split, combine or reclassify any outstanding shares of their
common stock, or declare, set aside or pay any dividend or other distribution
payable in cash, stock, property or otherwise with respect to shares of their
common stock; (v) redeem, purchase or acquire or offer to acquire any shares of
their common stock or other of their securities, other than pursuant to the
Alfalfa's Shareholders' Agreement; (vi) incur any indebtedness for borrowed
money or issue any debt securities except borrowings pursuant to existing bank
agreements identified in Section 3.9 of the Buyer Disclosure Schedule, the
proceeds of which are used in the ordinary course of business of Alfalfa's or
Alfalfa's Subsidiaries (other than borrowings necessary to consummate the
transactions contemplated by this Agreement); (vii) permit any accounts payable
owed to trade creditors to remain outstanding more than 60 days; (viii)
accelerate, beyond the normal collection cycle, collection of accounts
receivable; or (ix) enter into or propose to enter into, or modify or propose
to modify, any agreement, arrangement or understanding with respect to any of
the matters set forth in this subparagraph (b).
(c) Neither Alfalfa's nor any Alfalfa's Subsidiary shall
cancel or terminate their current insurance policies or cause any of the
coverage thereunder to lapse, unless simultaneously
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with such termination, cancellation or lapse, replacement policies providing
coverage equal to or greater than the coverage under the cancelled, terminated
or lapsed policies for substantially similar premiums are in full force and
effect.
(d) Until the Closing Date, Alfalfa's shall (i) preserve
intact the business of Alfalfa's, organization and goodwill, keep available the
services of Alfalfa's and any Alfalfa's Subsidiary's officers and employees as
a group and maintain satisfactory relationships with suppliers, distributors,
customers and others having business relationships with Alfalfa's; (ii) not
intentionally take any action which would render, or which reasonably may be
expected to render, any representation or warranty made in this Agreement
untrue at the Closing; (iii) notify Sellers of any emergency or other material
change in the normal course of the business of Alfalfa's or in the operation of
Alfalfa's or any Alfalfa's Subsidiary's properties and of any governmental or
third party complaints, investigations or hearings; and (iv) promptly notify
each Seller in writing if either of Alfalfa's or Alfalfa's Subsidiaries
discover that any representation or warranty made in this Agreement was when
made, or has subsequently become, untrue in any respect.
(e) Until the Closing Date, Alfalfa's shall file any returns,
elections or information statements with respect to any liabilities for taxes
(including all federal (United States), state and local taxes) or other matters
relating to taxes which pursuant to applicable law must be filed prior to the
Closing Date.
(f) Neither Alfalfa's nor any Alfalfa's Subsidiary shall
perform any act referenced by (or omit to perform any act which omission is
referenced by) the terms of Section 3.11.
5.2 Access to Books and Records. Between the date hereof and the
Closing Date, Alfalfa's shall afford to each Seller and their authorized
representatives (the "Sellers' Representatives") full access at all reasonable
times and upon reasonable notice to the offices, properties, books, records,
officers, employees and other items of Alfalfa's and otherwise provide such
assistance as is reasonably requested by such Seller in order that such Seller
may have a full opportunity to make such investigation and evaluation as it
shall reasonably desire to make of the business and affairs of Alfalfa's and of
Alfalfa's Subsidiaries.
5.3 Regulatory Filings. Alfalfa's shall, as promptly as
practicable after the execution of this Agreement, make or cause to be made all
filings and submissions under any laws or regulations applicable to Alfalfa's
for the consummation of the transactions contemplated herein.
5.4 Conditions. Alfalfa's shall take all actions necessary or
desirable to cause the conditions set forth in Section 6.2 to be satisfied and
to consummate the transactions contemplated herein as soon as reasonably
possible after the satisfaction thereof (but in any event within three business
days of such date).
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5.5 Taxes. Buyer agrees to be responsible for any and all of its
separate taxes (including all federal (United States or Canadian), provincial,
state and local taxes) resulting from the purchase of the Shares and the
transactions contemplated by this Agreement.
5.6 Loans. On the Closing Date, NewCorp shall have caused the
principal amount of the loans from any Seller or Alfalfa's to Capers or Encore
to be paid in full in cash, plus any accrued and unpaid interest thereon to the
Closing Date.
5.7 Release of Personal Guarantees of Certain Sellers. Alfalfa's
agrees to cooperate with Capers in obtaining releases of any personal
guarantees of Mr. Russell Precious, Mrs. Teresa Precious, Mr. Barry Perzow and
Ms. Linda Link with respect to obligations of Capers or Encore and discharges
of security granted by a Seller in favor of a lender to Capers or Encore. In
the event such releases or discharges are unable to be obtained, Alfalfa's,
NewCorp, Capers and Encore will, jointly and severally, agree to indemnify the
Seller for any liability incurred under any such guaranty or security
agreement.
5.8 Guarantee. Alfalfa's consents and agrees to the terms,
covenants, provisions, stipulations and conditions contained in this Agreement
and is a party and joins in all covenants with NewCorp severally as well as
jointly in the same manner and to the same extent as NewCorp and, without
restricting the generality hereof, Alfalfa's covenants and agrees (without
prejudice to any rights of Alfalfa's against NewCorp) that it shall not be
discharged nor shall the liability of Alfalfa's be affected by any giving of
time for payment of monies hereby payable, nor any agreement not to call in the
monies hereby payable or any part thereof before a specified time or
substitution of any new covenant for payment or any variation expressed or
implied in any one of the terms or provisions of the Agreement, or any
omissions on the part of a Seller to enforce any covenant or stipulations
contained in the Agreement and on the part of NewCorp to be performed or
observed, or any arrangement created by the Agreement or the performance or
observance of any of NewCorp's covenants herein contained. Alfalfa's shall
have the ability to enforce any rights of NewCorp hereunder even if NewCorp
elects not to enforce such right.
VII.
CONDITIONS TO CLOSING
VII. A. Conditions to Buyer's Obligations. The obligation of
Buyer to consummate the transactions contemplated by this Agreement is subject
to the satisfaction of the following conditions on or before the Closing Date
(unless waived by Buyer):
(a) The representations and warranties set forth in
Article 2 hereof shall be true and correct at and as of the date hereof and the
Closing Date, except that any such representation or
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warranty made as of a specified date (other than the date hereof) shall only
need to have been true on and as of such date;
(b) Each Seller shall have performed all of the covenants
and agreements required to be performed and complied with by such Seller under
this Agreement prior to the Closing;
(c) The Companies shall have obtained, or caused to be
obtained, each consent and approval necessary in order that the transactions
contemplated herein not constitute a breach or violation of, or result in a
right of termination or acceleration of, or creation of any encumbrance on any
of the Companies' assets pursuant to the provisions of, any agreement,
arrangement or undertaking of or affecting any of the Companies or any license,
franchise or permit of or affecting any of the Companies;
(d) All governmental filings, authorizations and
approvals that are required for the consummation of the transactions
contemplated hereby will have been duly made and obtained;
(e) Other than any threatened action by Harley Rothstein,
there shall not be threatened, instituted or pending any action or proceeding,
before any court or governmental authority or agency, domestic (Canadian) or
foreign, (i) challenging or seeking to make illegal, or to delay or otherwise
directly or indirectly restrain or prohibit, the consummation of the
transactions contemplated hereby or seeking to obtain damages in connection
with such transactions, (ii) seeking to prohibit direct or indirect ownership
or operation by Buyer of all or a portion of the Business or assets of the
Companies or to compel Buyer or any of its affiliates or the Companies to
dispose of or to hold separately all or a portion of the business or assets of
Buyer and its affiliates or Business or assets of the Companies as a result of
the transactions contemplated hereby, (iii) seeking to require direct or
indirect transfer or sale by Buyer of any of the Common Stock, (iv) seeking to
invalidate or render unenforceable any provision of this Agreement or any of
the other agreements attached as exhibits hereto (collectively, the "Related
Agreements"), or (v) otherwise relating to and adversely affecting the
transactions contemplated hereby;
(f) There shall not be any action taken, or any statute,
rule, regulation, judgment, order or injunction enacted, entered, enforced,
promulgated, issued or deemed applicable to the transactions contemplated
hereby by any federal (Canadian), provincial or foreign court, government or
governmental authority or agency, which would reasonably be expected to result,
directly or indirectly, in any of the consequences referred to in Section
6.1(e) hereof;
(g) Buyer shall not have discovered any fact or
circumstance existing as of the date of this Agreement which has not been
disclosed to Buyer as of the date of this Agreement regarding the Business,
assets, properties, condition (financial or otherwise), results of operations
or prospects of either of the Companies or Sellers which is, individually or in
the aggregate with other
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such facts and circumstances, materially adverse to either of the Companies,
the Business or to the value of the Common Stock;
(h) There shall have been no damage, destruction or loss of
or to any property or properties owned or used by either of the Companies,
whether or not covered by insurance, which, in the aggregate, has, or would be
reasonably likely to have, a material adverse effect on either of the Companies
or the Business;
(i) Buyer shall have received from counsel for the
Companies and Sellers a written opinion, dated as of the Closing Date,
addressed to Buyer and reasonably satisfactory in form and substance to Buyer's
counsel;
(j) Capers' Board of Directors shall have approved this
Agreement, the transfer of the Shares by Sellers and the transactions
contemplated hereby;
(k) On the Closing Date, Capers shall have delivered to
NewCorp all of the following:
a. certificates of the President of each of the
Companies dated the Closing Date, stating that the conditions
precedent set forth in subsections (a), (c), (d) and (h) above have
been satisfied;
b. copies of the third party and governmental
consents and approvals referred to in subsections (c) and (d) above;
c. the stock certificate or certificates issued
to Sellers representing the Common Stock, duly endorsed for transfer
or accompanied by a duly executed stock power;
d. each of the Companies' minute books, stock
transfer records, corporate seal and other materials related to the
Companies' corporate administration;
e. resignations (effective as of the Closing
Date) from such of the Companies' officers and members of the Boards
of Directors as Buyer shall have requested prior to the Closing Date;
f. a copy of the Memorandum and Articles of all
of the Companies, certified by the Registrar of Companies for British
Columbia and a certificate of Status from the Registrar of Companies
for British Columbia dated no less than 10 days prior to the Closing
Date;
g. executed copies of each of the Management
Agreements;
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h. resolutions of the Capers Board of Directors
approving this Agreement, the transfer of the Shares by Sellers and
the transactions contemplated hereby;
i. a stock certificate or certificates in the
name of NewCorp;
j. a certified copy of the Register of Members
of Capers showing NewCorp to be the sole shareholder of Capers;
k. releases, in form and substance satisfactory
to NewCorp, acting reasonably, executed by each Seller in favor of
Capers and Encore releasing Capers and Encore from any and all manner
of actions, causes of action, suits, proceedings, debts, dues,
projects, expenses, contracts, damages, claims demands, and
liabilities whatsoever (other than salaries, accrued vacation or
similar liabilities incurred by Capers or Encore in the ordinary
course of business consistent with past practices), in law or equity,
which such Seller ever had, now has, or may have against Capers and
Encore or by reason of any matter, cause or thing whatsoever done or
omitted to be done by Capers or Encore up to the Closing other than in
respect of obligations of Capers or Encore to such Seller agreed to in
writing by NewCorp; and
l. such other certificates, documents and
instruments as Buyer reasonably requested relating to the transactions
contemplated hereby;
(l) Messrs. Perzow and Precious shall have delivered
executed copies of their respective Management Agreement; and
(m) Immediately following the purchase of the Shares by
NewCorp and as a condition subsequent thereto, each Seller shall purchase
shares of Alfalfa's Common Stock and Alfalfa's shall deliver such shares in
accordance with Section 1.3 hereof and the other conditions of such Section 1.3
shall be satisfied; and
(n) Capers shall have delivered to Buyer a list of fixed
assets of Capers and Encore.
VII. B. Conditions to Sellers' Obligations. The obligations
of each Seller to consummate the transactions contemplated by this Agreement
are subject to the satisfaction of the following conditions on or before the
Closing Date (unless waived by such Seller):
(a) The representations and warranties set forth in
Article 3 hereof shall be true and correct at and as of the date hereof and the
Closing Date, except that any such representation or
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warranty made as of a specified date (other than the date hereof) shall only
need to have been true on and as of such date;
(b) Alfalfa's shall have performed all of the covenants
and agreements required to be performed and complied with by Alfalfa's under
this Agreement prior to the Closing;
(c) Alfalfa's shall have obtained, or caused to be
obtained, each consent and approval necessary in order that the transactions
contemplated herein not constitute a breach or violation of, or result in a
right of termination or acceleration of, or creation of any encumbrance on any
of Alfalfa's or Alfalfa's Subsidiaries assets pursuant to the provisions of,
any agreement, arrangement or undertaking of or affecting Alfalfa's or
Alfalfa's Subsidiaries or any license, franchise or permit of or affecting
Alfalfa's or Alfalfa's Subsidiaries;
(d) All governmental filings, authorizations and
approvals that are required for the consummation of the transactions
contemplated hereby will have been duly made and obtained;
(e) Other than any threatened action by Harley Rothstein,
there shall not be threatened, instituted or pending any action or proceeding,
before any court or governmental authority or agency, domestic (Canadian) or
foreign, (i) challenging or seeking to make illegal, or to delay or otherwise
directly or indirectly restrain or prohibit, the consummation of the
transactions contemplated hereby or seeking to obtain damages in connection
with such transactions, (ii) seeking to prohibit direct or indirect ownership
or operation by Buyer of all or a portion of the Business or assets of the
Companies or to compel Buyer or any of its affiliates or the Companies to
dispose of or to hold separately all or a portion of the business or assets of
Buyer and its affiliates or Business or assets of the Companies as a result of
the transactions contemplated hereby, (iii) seeking to require direct or
indirect transfer or sale by Buyer of any of the Common Stock, (iv) seeking to
invalidate or render unenforceable any provision of the Related Agreements, or
(v) otherwise relating to and adversely affecting the transactions contemplated
hereby;
(f) There shall not be any action taken, or any statute,
rule, regulation, judgment, order or injunction enacted, entered, enforced,
promulgated, issued or deemed applicable to the transactions contemplated
hereby by any federal (Canadian), provincial or foreign court, government or
governmental authority or agency, which would reasonably be expected to result,
directly or indirectly, in any of the consequences referred to in Section
6.2(e) hereof;
(g) Such Seller shall not have discovered any fact or
circumstance existing as of the date of this Agreement which has not been
disclosed to Buyer as of the date of this Agreement regarding the business,
assets, properties, condition (financial or otherwise), results of operations
or prospects of Alfalfa's and Alfalfa's Subsidiaries taken as a whole which is,
individually or in the aggregate with other such facts and circumstances,
materially adverse to Alfalfa's and Alfalfa's
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Subsidiaries taken as a whole, their businesses on a consolidated basis or to
the value of the Alfalfa's Common Stock;
(h) There shall have been no damage, destruction or loss of
or to any property or properties owned or used by Alfalfa's or any Alfalfa's
Subsidiary, whether or not covered by insurance, which, in the aggregate, has,
or would be reasonably likely to have, a material adverse effect on Alfalfa's
and any Alfalfa's Subsidiary taken as a whole or their businesses on a
consolidated basis;
(i) Such Seller shall have received from counsel for
Alfalfa's a written opinion, dated as of the Closing Date, addressed to such
Seller and reasonably satisfactory in form and substance to Sellers' counsel
relating to the due authorization and issuance of the Alfalfa's Common Stock;
(j) Alfalfa's Board of Directors shall have approved this
Agreement and the transactions contemplated hereby.
(k) On the Closing Date, Alfalfa's shall have delivered
to such Seller all of the following:
(i) certificate of the President of Alfalfa's
dated the Closing Date, stating that the conditions precedent set
forth in subsections (a), (c), (d) and (h) above have been satisfied;
(ii) copies of the third party and governmental
consents and approvals referred to in subsections (c) and (d) above;
(iii) a copy of the Articles of Incorporation of
Alfalfa's, certified by the Secretary of State of the State of
Colorado and a certificate of good standing from the Secretary of
State of the State of Colorado dated no less than 10 days prior to the
Closing Date;
(iv) resolutions of the Alfalfa's Board of Directors
approving this Agreement and the transactions contemplated hereby; and
(v) such other certificates, documents and
instruments as Sellers' Representatives have reasonably requested
relating to the transactions contemplated hereby.
(l) Immediately following the Closing of the purchase and
sale of the Shares hereunder and as a condition subsequent thereto, Alfalfa's
shall have delivered the shares of
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Alfalfa's Common Stock required to be delivered under Section 1.3 hereof, upon
payment therefor, and the other conditions set forth in Section 1.3 shall have
been satisfied;
(m) Any indemnity of Alfalfa's, NewCorp, Capers and
Encore which may be required under Section 5.7 hereof shall have been provided
by Alfalfa's in such form that is reasonably satisfactory to the persons to be
indemnified pursuant to Section 5.7; and
(n) Clearance certificates under Section 116 of the
Income Tax Act (Canada) shall have been issued for those Sellers, who are
"non-residents" of Canada, it being understood that this condition to Closing
is solely for the benefit of such Sellers and waivable solely by such Sellers
on their individual behalf.
VIII.
TERMINATION
VIII. A. Termination. This Agreement, as a separate
agreement with respect to Buyer and each Seller, may be terminated at any time
prior to the Closing:
1. by the mutual consent of Buyer and a Seller;
2. by either Buyer or a Seller if there has been a
misrepresentation, breach of warranty or breach of covenant on the part of the
other in the representations, warranties and covenants set forth in this
Agreement;
3. by either Buyer or a Seller if, due to the discovery
of material adverse information based upon documents or information regarding
Capers or Encore, in the case of Buyer, or Alfalfa's, in the case of a Seller,
received after the date hereof, such party determines, in its sole discretion,
not to pursue the consummation of the transactions contemplated hereby; or
4. by Buyer if, after the date hereof, there shall have
been a material adverse change in the financial condition or business of either
of the Companies or the Business or if an event shall have occurred which, so
far as reasonably can be foreseen, would result in any such change, except to
the extent such change is directly caused by Buyer; or
5. by a Seller if, after the date hereof, there shall
have been a material adverse change in the financial condition or business of
Alfalfa's and Alfalfa's Subsidiaries taken as a whole or if an event shall have
occurred which, so far as reasonably can be foreseen, would result in any
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such change, except to the extent such change is caused by either of the
Companies or one or more Sellers; or
(f) by Buyer, at its sole discretion, if any other Seller
or Sellers default in their obligations under their respective Agreement or
terminate their respective Agreement pursuant thereto, and all such Agreements
shall terminate without liability on the part of any non-defaulting Seller or
Buyer; or
(g) by Buyer, within seven days of receipt by Buyer of
the Disclosure Schedule, if the Disclosure Schedule discloses any fact that
Buyer determines, in its sole judgment, to be adverse or potentially adverse to
Buyer.
VIII. B. Effect of Termination. In the event of termination
of this Agreement by either Buyer or a Seller as provided in Section 7.1, this
Agreement shall become void and there shall be no liability on the part of
either Buyer or such Seller, or their respective stockholders, officers, or
directors, except that Sections 9.2 and 9.10 hereof shall survive indefinitely.
Without limiting the generality of the immediately preceding sentence, in the
event a Seller elects to terminate this Agreement pursuant to Section 7.1(c) or
(e), Buyer shall not be liable to such Seller for any amount whatsoever.
Nothing contained in this Section 7.2 shall relieve any party hereto from any
liability for any breach of this Agreement. The termination of this Agreement
by a Seller with respect to the purchase and sale of his Shares of Capers shall
in no way effect the obligations of any other Seller hereunder.
IX.
SURVIVAL; INDEMNIFICATION
IX. A. Survival of Representations and Warranties.
Notwithstanding any investigation made by or on behalf of any of the parties
hereto or the results of any such investigation and notwithstanding the
participation of such party in the Closing, the representations and warranties
contained in Article 2 and Article 3 hereof shall survive the Closing for three
years subsequent to the Closing Date.
IX. B. Indemnification by Sellers. Subject to Section 8.4,
each Seller, severally and not jointly, agree to indemnify Buyer and its
officers, directors, employees, agents and stockholders (collectively, the
"Buyer Indemnified Parties") and hold them harmless against any loss,
liability, deficiency, damage, expense or cost (including reasonable accounting
or legal expenses, or any tax liabilities, deficiencies or penalties due to any
governmental authority by a Seller), whether or not actually incurred or paid
(collectively, "Losses"), which Buyer Indemnified Parties may suffer, sustain
or become subject to, as a result of (i) any misrepresentation in any of the
representations
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and warranties of such Seller contained in this Agreement or in any exhibits,
schedules, certificates or other documents delivered or to be delivered by or
on behalf of such Seller pursuant to the terms of this Agreement or otherwise
referenced or incorporated in this Agreement (collectively, the "Related
Documents"), or (ii) any breach of, or failure to perform, any agreement of
such Seller contained in this Agreement or any of the Related Documents (other
than the Management Agreements and the Alfalfa's Shareholders' Agreement)
(collectively, "Buyer Losses"); provided that, such Seller will be so liable to
the Buyer Indemnified Parties for any such Buyer Losses:
1. only if the Buyer Indemnified Party delivers written
notice thereof setting forth in reasonable detail the identity, nature and
amount of Buyer Losses related to such claim or claims prior to the third
anniversary of the Closing Date. Buyer's failure to provide such detail shall
not constitute either a breach of this Agreement by Buyer or any basis for any
Seller to assert that Buyer did not comply with the terms of this Section 8.2
sufficient to cause Buyer to have waived its rights under this Section 8.2; and
2. only if, individually or in the aggregate, the amount
of Buyer Losses exceeds $5,000.00, in which case such Seller shall be obligated
to indemnify Buyer only for the excess of the amount of such Buyer Losses over
$5,000.00; provided that, it is understood that such amount need be satisfied
only once with respect to all Sellers collectively and not each Seller
individually;
3. only to the extent that Buyer actually incurs or pays
such Buyer Losses;
(d) only for the net amounts after any applicable
withholding of goods and service taxes; and
(e) the liability of each Seller to Buyer shall be
limited to the aggregate Purchase Price received by such Seller for his Shares.
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IX. C. Indemnification by Buyer. Subject to Section 8.4,
Buyer agrees to indemnify each Seller and hold him harmless against any Losses
which such Seller may suffer, sustain or become subject to as a result of (i)
any misrepresentation in any of the representations and warranties of Buyer
contained in this Agreement or in any exhibits, schedules, certificates or
other documents delivered or to be delivered by or on behalf of Buyer hereunder
or otherwise referenced or incorporated in this Agreement (collectively, the
"Buyer's Related Documents"), (ii) any breach of, or failure to perform, any
agreement of Buyer contained in this Agreement or any of the Buyer's Related
Documents, or (iii) any claims or threatened claims against such Seller arising
out of the actions or inactions of Buyer with respect to the Business or the
Real Property after the Closing Date (collectively, "Sellers Losses"); provided
that, Buyer will be so liable to the Sellers for any such Sellers Loss:
1. only if a Seller delivers to Buyer written notice
thereof, setting forth in reasonable detail the identity, nature and amount of
Sellers Losses related to such claim or claims prior to the third anniversary
of the Closing Date. A Seller's failure to provide such detail shall not
constitute either a breach of this Agreement by such Seller or any basis for
Buyer to assert that such Seller did not comply with the terms of this Section
8.3 sufficient to cause such Seller to have waived his rights under this
Section 8.3;
2. only if individually or in the aggregate, the amount
of Sellers Losses exceeds $5,000.00, in which case Buyer shall be obligated to
indemnify a Seller only for the excess of the amount of such Sellers Losses
over $5,000.00;
3. only to the extent that a Seller actually incur or
pay such Sellers Losses;
(d) only for the net amounts after any applicable
withholding of goods and services taxes; and
(e) the liability of Buyer to each Seller shall be
limited to the amount of the Purchase Price received by such Seller.
IX. D. Method of Asserting Claims. As used herein, an
"Indemnified Party" shall refer to a "Buyer Indemnified Party" or "Sellers," as
applicable. The "Indemnifying Party" shall refer to the party hereto obligated
to indemnify such Indemnified Party.
1. In the event that any of the Indemnified Parties is
made a defendant in or party to any action or proceeding, judicial or
administrative, instituted by any third party for the liability under which or
the costs or expenses of which are Losses (any such third party action or
proceeding being referred to as a "Claim"), the Indemnified Party shall give
the Indemnifying Party notice thereof. The failure to give such notice shall
not affect any Indemnified Party's ability to seek reimbursement under this
Article 8 unless such failure has materially and adversely affected the
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Indemnifying Party's ability to defend successfully a Claim. The Indemnifying
Party shall be entitled to contest and defend such Claim; provided that the
Indemnifying Party (i) has a reasonable basis for concluding that such defense
may be successful and (ii) diligently contests and defends such Claim. Notice
of the intention so to contest and defend shall be given by the Indemnifying
Party to the Indemnified Party within 20 business days after the Indemnified
Party's notice of such Claim (but, in all events, at least five business days
prior to the date that an answer to such Claim is due to be filed). Such
contest and defense shall be conducted by reputable attorneys employed by the
Indemnifying Party. The Indemnified Party shall be entitled at any time, at
its own cost and expense (which expense shall not constitute a Loss unless the
Indemnified Party reasonably determines that the Indemnifying Party is not
adequately representing or, because of a conflict of interest, may not
adequately represent, any interests of the Indemnified Parties, and only to the
extent that such expenses are reasonable), to participate in such contest and
defense and to be represented by attorneys of its or their own choosing. If the
Indemnified Party elects to participate in such defense, the Indemnified Party
will cooperate with the Indemnifying Party in the conduct of such defense.
Neither the Indemnified Party nor the Indemnifying Party may concede, settle or
compromise any Claim without the consent of the other party, which consents
will not be unreasonably withheld. Notwithstanding the foregoing, (i) if a
Claim seeks equitable relief or (ii) if the subject matter of a Claim relates
to the ongoing business of any of the Indemnified Parties, which Claim, if
decided against any of the Indemnified Parties, would materially adversely
affect the ongoing business or reputation of any of the Indemnified Parties,
then, in each such case, the Indemnified Parties alone shall be entitled to
contest, defend and settle such Claim in the first instance without any loss of
right to indemnification hereunder and, if the Indemnified Parties do not
contest, defend or settle such Claim, the Indemnifying Party shall then have
the right to contest and defend (but not settle) such Claim.
2. In the event any Indemnified Party should have a
claim against any Indemnifying Party that does not involve a Claim, the
Indemnified Party shall deliver a notice of such claim with reasonable
promptness to the Indemnifying Party. If the Indemnifying Party notifies the
Indemnified Party that it does not dispute the claim described in such notice
or fails to notify the Indemnified Party within 30 days after delivery of such
notice by the Indemnified Party whether the Indemnifying Party disputes the
claim described in such notice, the Loss in the amount specified in the
Indemnified Party's notice will be conclusively deemed a Liability of the
Indemnifying Party and the Indemnifying Party shall pay the amount of such Loss
to the Indemnified Party on demand.
3. After the Closing, the rights set forth in this
Article 8 shall be each party's sole and exclusive remedies against the other
party hereto for misrepresentations or breaches of covenants contained in this
Agreement and the Related Documents. Notwithstanding the foregoing, nothing
herein shall prevent any of the Indemnified Parties from bringing an action
based upon allegations of fraud or other intentional breach of an obligation of
or with respect to either party in
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connection with this Agreement and the Related Documents. In the event such
action is brought, the prevailing party's attorneys' fees and costs shall be
paid by the non-prevailing party.
X.
MISCELLANEOUS
X. A. Press Releases and Announcements. Prior to the
Closing Date, neither party hereto shall make a public announcement of the
transactions contemplated hereby except if (a) Buyer and Capers agree to
jointly make such an announcement, or (b) required by law, provided that
nothing herein shall prevent disclosure by Buyer or Sellers of the transactions
contemplated hereby to their respective agents, accountants, counsel, board of
directors, shareholders or employees. If any such public announcement is
required by law, the party making such disclosure shall consult with the other
party prior to making such disclosure, and the parties shall use all reasonable
efforts, acting in good faith, to agree upon a text for such disclosure which
is satisfactory to both parties.
X. B. Expenses. Except as otherwise expressly provided for
herein, Sellers and Buyer will pay all of their own expenses (including
attorneys' and accountants' fees (and, in the case of Sellers, the expenses of
the Companies)) in connection with the negotiation of this Agreement, the
performance of their respective obligations hereunder and the consummation of
the transactions contemplated by this Agreement (whether consummated or not).
X. C. Further Assurances. Sellers agree that, on and after
the Closing Date, they shall take all appropriate action and execute any
documents, instruments or conveyances of any kind which may be reasonably
necessary or advisable to carry out any of the provisions hereof, including,
without limitation, obtaining all necessary consents with respect to the
Permits as are necessary as a result of the transactions contemplated by this
Agreement.
X. D. Amendment and Waiver. This Agreement may not be
amended or waived except in a writing executed by the party against which such
amendment or waiver is sought to be enforced. No course of dealing between or
among any persons having any interest in this Agreement will be deemed
effective to modify or amend any part of this Agreement or any rights or
obligations of any person under or by reason of this Agreement.
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X. E. Notices. All notices, demands and other
communications to be given or delivered under or by reason of the provisions of
this Agreement will be in writing and will be deemed to have been given when
personally delivered or mailed by first class mail, return receipt requested,
or when receipt is acknowledged, if sent by facsimile, telecopy or other
electronic transmission device. Notices, demands and communications to Buyer
and Sellers will, unless another address is specified in writing, be sent to
the address indicated below:
Notices to Buyer: with a copy to:
----------------- ---------------
Alfalfa's, Inc. Brownstein Hyatt Farber &
1645 Broadway Strickland, P.C.
Boulder, Colorado 80302 410 17th Street, 22nd Floor
Attention: Caryn D. Ellison Denver, Colorado 80202-4437
Telecopy: (303) 440-5404 Attention: Nesa E. Hassanein
Telecopy: (303) 623-1956
Alfalfa's Canada, Inc.
c\o Alfalfa's, Inc.
1645 Broadway
Boulder, Colorado 80302
Attention: Caryn D. Ellison
Telecopy: (303) 440-5404
Notices to Companies: with a copy to:
-------------------- --------------
Capers Management Holdings Inc. McCarthy Tetrault
224-2211 West 4th Avenue P. O. Box 10424
Vancouver, B.C. VGK 4S2 Pacific Center
Telecopy (604) 739-6649 1300-777 Dunsmuir Street
Vancouver, B.C. Canada V7Y 1K2
Attn: Mitchell Gropper, Q.C.
Telecopy: (604) 643-7900
Notices to Sellers: with a copy to:
------------------- --------------
At their respective McCarthy Tetrault
addresses set forth below P. O. Box 10424
their names on the signature Pacific Centre
pages hereto 1300-777 Dunsmuir Street
Vancouver, BC Canada V7Y 1K2
Attn: Mitchell Gropper, Q.C.
Telecopy: (604) 643-7900
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X. F. Assignment. This Agreement and all of the provisions
hereof will be binding upon and inure to the benefit of the parties hereto and
their respective successors and permitted assigns, except that neither this
Agreement nor any of the rights, interests or obligations hereunder may be
assigned by either party hereto without the prior written consent of the other
party hereto.
X. G. Severability. Whenever possible, each provision of
this Agreement will be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement is held to be
prohibited by or invalid under applicable law, such provision will be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of
this Agreement.
X. H. Complete Agreement. This Agreement and the Related
Agreements and other exhibits hereto, the Disclosure Schedule and the Buyer
Disclosure Schedule and the other documents referred to herein contain the
complete agreement between the parties and supersede any prior understandings,
agreements or representations by or between the parties, written or oral, which
may have related to the subject matter hereof in any way.
X. I. Counterparts. This Agreement may be executed in one
or more counterparts, any one of which need not contain the signatures of more
than one party, but all such counterparts taken together will constitute one
and the same instrument.
X. J. GOVERNING LAW. THE INTERNAL LAW, AND NOT THE LAW OF
CONFLICTS, OF THE STATE OF COLORADO WILL GOVERN ALL QUESTIONS CONCERNING THE
CONSTRUCTION, VALIDITY AND INTERPRETATION OF THIS AGREEMENT AND THE PERFORMANCE
OF THE OBLIGATIONS IMPOSED BY THIS AGREEMENT. THE PARTIES HERETO SUBMIT AND
CONSENT TO THE NON-EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF
COLORADO.
X. K. Time. Time shall be of the essence hereof.
9.12 Currency. All references to dollar amounts and "$" are
references to United States dollars.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
BUYER:
ALFALFA'S CANADA, INC., a British
Columbia corporation
By: /s/ S. M. Hassan
-------------------------------------
S. M. HASSAN, PRESIDENT
ALFALFA'S, INC., a Colorado
corporation
By: /s/ S. M. Hassan
-------------------------------------
S. M. HASSAN, PRESIDENT
SELLERS:
/s/ Stuart Abelson
----------------------------------------
STUART ABELSON
Address: c/o Kipnis Kahn
30 North La Salle Street
Suite 2024
Chicago IL 60602-2504
/s/ Carol Journeay
----------------------------------------
CAROL JOURNEAY
Address: Great Pacific Ventures
c/o Bull Housser & Tupper
P. O. Box 11130
30th Floor
1055 West Georgia Street
Vancouver, B.C. V6E 3R3
/s/ Linda Link
----------------------------------------
LINDA LINK
Address: Cape Mudge Road
Quanthiaski Cove, B.C.
V0P 1N0
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/s/ Barry Perzow
----------------------------------------
BARRY PERZOW
Address: 1418 Haywood Avenue
W. Vancouver, B.C. V7T 1V6
/s/ Russell Precious
----------------------------------------
RUSSELL PRECIOUS
Address: Fire #2711
Upper 6 Mile Lake Road
Nelson. B.C. V1L 5P4
/s/ Teresa Precious
----------------------------------------
TERESA PRECIOUS
Address: Fire #2711
Upper 6 Mile Lake Road
Nelson. B.C. V1L 5P4
/s/ Lorne Rubinoff
----------------------------------------
LORNE RUBINOFF
Address: 5762 Larson Place
W. Vancouver, B.C. V7W 1S4
/s/ James Wilson
----------------------------------------
JAMES WILSON
Address: 07 Camino Alta
Santa Fe, NM 87505
ELEANOR H. WILSON TRUST NO.1
By: /s/ James Wilson
----------------------------------------
JAMES WILSON, TRUSTEE
Address: 07 Camino Alta
Santa Fe, NM 87505
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COMPANY:
CAPERS MANAGEMENT HOLDINGS INC.
By: /s/ Russell Precious
----------------------------------------
RUSSELL PRECIOUS, PRESIDENT
55