Share Purchase Agreement - Wild Oats Markets Inc. and Kathy's Natural Food Ranch Market Inc. and Kathy's Natural Food Ranch Market-West Inc.
SHARE PURCHASE AGREEMENT
This SHARE AND PURCHASE AGREEMENT (the "Agreement") is made as of
July 14, 1994, by and among WILD OATS MARKETS, Inc., a Delaware corporation
with its principal office at 1668 Valtec Lane, Boulder, Co. 80301 ("Buyer"), and
the holders of the Common Stock of KATHY'S NATURAL FOOD RANCH MARKET, INC. and
KATHY'S NATURAL FOOD RANCH MARKET-WEST, INC. (Nevada corporations referred to
collectively herein as the "Corporations"); (The holders of the Common Stock of
the Corporations are referred to collectively as the "Selling Stockholders");
KATHY MELBY, an individual; and RICH ARCARIS, an individual. Certain other
individual employees of the Corporations listed on Exhibit A attached hereto
(the "Key Employees"), and also listed on Exhibit A, holders of options on the
Selling Stockholder's stock ("Option-holders") are also signatories to this
agreement for the limited purpose of relinquishing their claim to stock, if any,
and receipt of consideration therefor.
RECITALS
A. Selling Stockholders own, in aggregate, all of the issued and
outstanding shares of capital stock of the Corporations (the "Shares"), and the
Selling Stockholders desire to sell all such Shares to Buyer for cash and other
consideration.
B. The parties previously entered into the Option Agreement dated July
14, 1994 (the "Option Agreement") in which the parties agreed to enter into
this Agreement upon the satisfaction of certain conditions, and a Management
Agreement dated July 14, 1994 (the "Management Agreement") pursuant to which
the Buyer is operating the Stores.
C. This Agreement has been approved by the Boards of Directors of the
Corporations and is hereby approved by the Selling Stockholders, who constitute
all the shareholders of Corporations.
AGREEMENT
NOW, THEREFORE, in consideration of their mutual covenants, promises, and
obligations set forth in this Agreement, the parties agree as follows:
1. DESCRIPTION OF TRANSACTION
1.1 Purchase Price. The Purchase Price of the Shares is as follows:
a) Two Million Four Hundred Thousand Dollars ($2,400,000) cash or
certified funds, paid upon execution of the Option Agreement and held in escrow
until the Closing, as defined below, plus One Hundred Thousand Dollars
($100,000) plus accumulated interest, which Buyers paid to Selling Stockholders
as earnest money; all to be distributed, one-half to the Option-holders and
one-half to the Selling Stockholders, at closing;
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b) Four Hundred Eighty Thousand Dollars ($480,000) in cash/common stock
of Buyer, to be paid or distributed to the Key Employees, in increments no less
favorable than to the Selling Stockholders, as specified on the attached
Exhibit 1.1(b)(i), and with respect to the sale of the Common Stock, pursuant
to the forms of the investment letter attached as Exhibit 1.1(b)(ii);
c) One Million Five Hundred Thousand Dollars ($1,500,000), one-half to be
paid to the Selling Stockholders and one-half to the Option-holders in cash or
certified funds on or before April 14, 1995. Such payment shall be secured by
a One Million Five Hundred Thousand Dollar ($1,500,000) stand-by irrevocable
letter of credit, which Selling Stockholders may draw down only in the event
that Buyer does not pay the $1,500,000 when due. Said letter of credit is to
be obtained from a federally insured bank;
d) One Million Six Hundred Thousand Dollars ($1,600,000), one-half to be
paid to the Selling Stockholders and one-half to the Option-holders in cash or
certified funds on or before October 14, 1995;
e) The amount, if any, in cash or certified funds to be paid on or before
April 14, 1995, by which the Wholesale Value (as defined herein) of the
Inventory (as defined herein) of the Corporations' retail stores exceed the sum
of Seven Hundred Thousand Dollars ($700,000), as determined in accordance with
Paragraph 1.4 of this Agreement. Said amount is to be paid one-half to Selling
Stockholders and one-half to Option-holders;
f) Assumption of certain long-term debts, the specifics of which are
detailed in the attached Exhibit 1.1(f). Subject to the terms of the
agreements with the third parties to whom the debts are owed, Buyer may prepay
such debts, without penalty. Such debts shall be paid in full on or before the
time for payment called for under the last paragraph of Section 1.1, pertaining
to Buyer's IPO. However, if Buyer has not raised capital through an IPO prior
to October 15, 1995, Buyer shall pay off such debts or direct that the Escrow
Shares, as defined in Section 2 of this Agreement, remain in Escrow until the
long term debts are paid off in full;
g) Cash or certified funds at Closing, to be paid one-half to Selling
Stockholders and one-half to Option-holders, in the amount of any lease
deposits for the Stores, utility deposits, sales tax deposits, pro-rated
insurance premiums and other deposits of like nature, as described in Exhibit
1.6(f).
In the event Buyer raises capital through an initial public offering ("IPO"),
all amounts of the Purchase Price then outstanding shall be paid in full within
seven days of Buyer's receipt of the proceeds.
1.2 Closing. The closing of the purchase and sale of the Stock hereunder
shall take place at a closing ("Closing"), which shall be held at the offices
of Thomas KLC, 4625 South 2300 East, Salt Lake City. The Closing shall take
place at 10:00 a.m. or such time and place as the Buyer and Seller may agree.
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1.3 Assets of the Corporations. The primary assets of the Corporations
include two retail natural foods stores in Las Vegas, Nevada, located at 3455
East Flamingo Road (the "East Store") and 6720 West Sahara Boulevard (the "West
Store") (The East Store and the West Store are referred to collectively as the
"Stores") and the fixtures, equipment, inventories and leases pertaining to the
Stores. An equipment list is attached as Exhibit 1.3
1.4 Inventory. On July 13th and 14th, 1994, representatives of Buyer and
the Corporations will be present at the West Store and East Store,
respectively, and shall simultaneously and together perform an Inventory (as
defined below) of the Stores for purposes of Section 1.1(e). The Wholesale
Value shall be determined as either (i) the Corporations' cost or (ii) a
percentage of suggested retail price (which may be different from the
Corporations' acquisition cost, which may be better than wholesale) for the
different departments of inventory as follows:
Department Description Cost or %
1 Grocery 67.5%
2 Vitamins 55.0
3 Cosmetics 60.0
4 Books 65.0
5 Cafe & Deli Cost
6 Produce Cost
7 Meat Cost
8 Frozen & Dairy 70.0
9 Grocery Taxable 67.5
10 Bakery 67.5
Inventory shall include (a) the product held in the Stores; (b) fresh dates
held at R.M.C. Foods; (c) less than a truckload of juice held at Nature's Best;
and (d) the product held in two trailers behind the West Store and one trailer
behind the East Store.
1.5 Action by Selling Stockholders at Closing. At Closing, subject to
the terms and conditions of this Agreement and pursuant to documents reasonably
satisfactory in form and substance to Buyer and its counsel, Selling
Stockholders shall deliver to Buyer:
(a) Certificates representing the Shares, duly endorsed or accompanied by
stock powers duly executed in blank and otherwise in form acceptable for
transfer on the books of the Corporations, with such stock certificates to be
delivered to the escrow agent;
(b) The stock books, stock ledgers, minute books, and corporate seal, if
any, of the Corporations and all other books and records of the Corporations
being located at the corporate premises of the Corporations;
(c) Resignations of the Corporations' directors and officers, as
identified on attached Exhibit 1.5(c);
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(d) Copies of any books and records pertaining to the Stores' operations.
Buyer recognizes that the original documents including cancelled checks, bank
statements, invoices, accounting records, along with the work papers are held
in control by Management Accounting in Salt Lake City, Utah. Said Management
Accounting shall either continue to hold all of such papers for the benefit of
the corporations, or at Wild Oats expense copies of the same may be provided.
It is necessary, since Management Accounting has previously prepared tax
returns and other documents for the corporations, that it retain such documents
as backup for the same. Nevertheless, full cooperation at the expense of Wild
Oats, will be freely given;
(e) Certified copies of all Board of Directors and Shareholders actions
and approvals required for Selling Stockholders to consummate the transactions
contemplated hereunder;
(f) A list setting forth the known accrued vacation and sick time of
employees of the Corporations as of the Closing;
(g) Buyer may obtain, if desired, letters from Nevada Sales Tax
authorities certifying that the Stores' sales tax accounts are current.
1.6 Action by Buyer at Closing. At Closing, subject to the terms and
conditions of the Agreement and pursuant to documents reasonably satisfactory
in form and substance to Selling Stockholders, Buyer shall:
(a) Pay the Two Million Five Hundred Thousand Dollars ($2,500,000) [with
interest accrued] pursuant to the Option Agreement, which amount shall be
deemed paid against the purchase price.
(b) Pay, in cash or certified funds, and distribute Buyer's common stock
to the Key Employees, pursuant to the attached Exhibit 1.1(b)(i), and provide
documentation (satisfactory to Key Employees) of future payments and
distributions, pursuant to said Exhibit 1.1(b)(i). The form of the Promissory
Notes are attached as Exhibit 1.6(b);
(c) Deliver to the Selling Stockholders and Option-holders Promissory
Notes in the total amount of One Million Five Hundred Thousand Dollars
($1,500,000), payable in full April 14, 1995, and secured by the letter of
credit, as set forth in Section 1.1(c). The form of said Note is attached as
Exhibit 1.6(c);
(d) Deliver to the Selling Stockholders and Option-holders Promissory
Notes in the total amount of One Million Six Hundred Thousand Dollars
($1,600,000), payable in full October 15, 1995. The form of said Notes is
attached as Exhibit 1.6(d);
(e) Deliver to the Selling Stockholders and Option-holders Promissory
Notes, pursuant to Section 1.1(e), in the amount, if any, of the excess
Wholesale Value of the Inventory calculated pursuant to Section 1.4, payable in
full April 15, 1995. The form of said Notes is attached as Exhibit 1.6(e).
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(f) Pay to the Selling Stockholders and Option-holders, in cash or
certified funds, the amount of any lease deposits for the Stores, utility
deposits, sales tax deposits, pro-rated insurance premiums and other deposits
of like nature, in the amounts described in Exhibit 1.6(f);
(g) Grant to Selling Stockholders a subordinated security interest (in
form satisfactory to Selling Stockholders) in all fixtures, equipment and
assets of the Corporations in existence immediately prior to Closing, as
additional security for Buyer's obligations under 1.6(d) and 1.6(e).
2. ESCROW OF SHARES
At Closing, Selling Stockholders and Buyer shall deliver to Zions First
National Bank, as Escrow Agent ("Escrow Agent") a certificate representing 100%
of the Shares (the "Escrow Shares") for the purpose of securing the payment of
the Purchase Price set forth in the Escrow Agreement attached as Exhibit 2.0
(the "Escrow Agreement"). The Escrow Shares shall be held by the Escrow Agent
under the Escrow Agreement pursuant to the terms thereof. The Escrow Shares
shall be held as a trust fund and shall not be subject to any lien, attachment,
trustee process or any other judicial process of any creditor of any party, and
shall be held and disbursed solely for the purposes in accordance with the
terms of the Escrow Agreement.
3. TRANSITION OF BUSINESS
3.1 Trade Names, Trademarks, and Service Marks. The parties understand
and agree that Buyer may use the name "Kathy's" (in any form or derivative) as
a tradename, trademark or servicemark but only in the city of Las Vegas and all
other rights to such name shall remain with some or all of the Selling
Stockholders/Corporations. The Selling Stockholders/Corporations agree that
upon request by Buyer, the Selling Stockholders/Corporations shall execute a
license agreement for use of the Kathy's name in accordance with this Section
3.1.
3.2 Store Operations. The parties entered into a Management Agreement
dated July ____, 1994, under which Buyer has operated the stores since
_______________, 1994. Until Closing, Buyer shall continue to operate the
Stores in the ordinary and usual course of business. After Closing, Buyer
shall be responsible for the operation of the Stores.
3.3 Employees. Selling Stockholders do not warrant or represent that any
of the employees will agree to continue to work at the Stores or otherwise work
for Buyer. Buyer agrees to pay sick and vacation pay, accrued as of Closing.
Prior to Closing, Selling Stockholders will make available to Buyer all records
concerning the Corporations' employee compensation and benefits.
3.4 Transition Assistance. From the execution of the Option Agreement,
Arcaris and Melby each hereby agree to assist Buyer in the transition of the
business to Buyer for which assistance Arcaris and Melby shall be paid
$78,003.00 and $43,002.00, respectively, Melby's assistance shall be limited
to organizing seminars and coordinating the quarterly "Kathy's" newsletter.
Arcaris' assistance shall consist of performance of functions as previously
performed
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and such assistance shall not require more than two days per week in Las Vegas
and one day per week in Salt Lake City. Arcaris' assistance shall not extend
beyond April 15, 1995, and Melby's shall not extend beyond January 15, 1995.
Melby's fees hereunder shall be paid in advance. Both shall be payable
regardless of whether Buyer makes any requests for transition assistance.
Arcaris' fees hereunder shall be aid in equal monthly payments of $8,667.00.
4. REPRESENTATIONS AND WARRANTIES OF THE SELLING STOCKHOLDERS
Selling Stockholders, represent and warrant as follows:
4.1 Organization, Good Standing, Enforceability. To the best of their
knowledge, the Corporations are duly organized, validly existing, and in good
standing under the laws of the State of Nevada and have full corporate power
and authority to carry on business in the State of Nevada and to own or hold
under lease or similar agreement the properties and assets they now own or
hold; and have full corporate power and authority to carry out the transactions
contemplated hereby. This Agreement has been duly executed and delivered by
Selling Stockholders and is a valid, binding and legal obligation of Selling
Stockholders enforceable against Selling Stockholders in accordance with its
terms. Selling Stockholders have the power and authority to enter into and
perform their obligations under this Agreement.
4.2 Capitalization and Subsidiaries. As of the date of this Agreement,
the total authorized capital stock of Kathy's Natural Food Ranch Market, Inc.
consists of 25,000 shares of stock, no par value per share. As of July 14,
1994, 6667 and 2/3 shares were issued and outstanding and 333 and 1/3 shares
were held in the treasury.
As of the date of this Agreement, the authorized capital stock of Kathy's
Natural Ranch Market-West, Inc. consists of 25,000 shares of stock,
no par value per share. As of July 14, 1994, 100 shares were issued and
outstanding and no shares were held in the treasury.
All issued and outstanding shares and other securities of the Corporations
are duly authorized, validly issued, issued in compliance with federal and
state laws, fully paid, nonassessable and free of preemptive rights. Except as
set forth in this Agreement, there are no outstanding options, warrants,
conversion privileges, contracts or other rights to purchase or acquire any
shares of either Corporation.
Neither Corporation holds an interest in any subsidiary or affiliate
corporation.
4.3 No Approvals or Notices Required; No Conflicts with Other Agreements
or Orders. The execution and delivery of this Agreement do not, and the
consummation of the transactions contemplated hereby will not, violate any
provision of the Articles of Incorporation or Bylaws of the Corporations.
Except with regard to the consent of the landlord of the East Store (referenced
in Section 11.3 of this Agreement) and the consent of the bank and the SBA in
connection with the real estate loan on the West Store (referenced in Section
11 of this Agreement), the execution, performance and delivery of this Agreement
do not and the consummation of the
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transactions contemplated hereby will not (a) require any consent, approval or
authorization of any person or governmental authority, the failure to obtain
which could have a material adverse effect upon the transactions contemplated
hereby; (b) constitute a material violation of any provision of law applicable
to Selling Stockholders; or (c) violate any provision of, or result in the
acceleration of any obligation under, any material mortgage, lien, lease,
agreement, instrument, order arbitration award, judgment or decree to which
Selling Stockholders or the Corporations are a party or by which Selling
Stockholders or the Corporations are bound.
4.4 Financial Statements. Selling Stockholders have delivered to Buyer
financial statement information dated (1) as of December 31, 1990, 1991, 1992,
and 1993 and (2) as of May 31, 1994 (collectively "Financial Statements"). The
information from which the financial statements have been prepared are true and
accurate. Such financials have not been prepared in accordance with generally
accepted accounting principles.
4.5 Undisclosed Liabilities. To the best of Selling Stockholders'
knowledge, except as disclosed to Buyer in writing, there are no undisclosed
liabilities or obligations arising from contracts or otherwise with respect to
the Selling Stockholders and the Corporations that are not covered by
insurance.
4.6 Leaseholds. The Lease for the East Store (the "Store Lease") and the
equipment lease rights and obligations (collectively the "Leaseholds")
pertaining to the Stores are as set forth in the Store Lease and the equipment
leases, true and complete copies of which are attached as Exhibit 4.6 and which
have previously been provided to Buyer.
4.7 Equipment. To the best of their knowledge, the Corporations have
good and marketable title to all equipment listed on attached Exhibit 1.3, free
and clear of any liens, mortgages, pledges, encumbrances, claims and charges of
any kind except those that have been disclosed to Buyer in writing.
5. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants as follows:
5.1 Organization, Good Standing, Enforceability. Buyer is duly
organized, validly existing, and in good standing under the laws of the State
of Delaware and has, or will soon have, full corporate power and authority to
carry on business in the State of Nevada and to own or hold under lease or
similar agreement the properties and assets it will own or hold; and has full
corporate power and authority to carry out the transactions contemplated
hereby. This Agreement has been duly executed and delivered by Buyer and is a
valid, binding and legal obligation of Buyer enforceable in accordance with its
terms. Buyer has the power and authority to enter into and perform its
obligations under this Agreement.
5.2 No Approvals or Notices Required; No Conflicts with Other Agreements
or Orders. The execution and delivery of this Agreement do not, and the
consummation of the transactions contemplated hereby will not, violate any
provision of the Certificate of Incorporation or Bylaws
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of Buyer. The execution, performance and delivery of this Agreement do not and
the consummation of the transactions contemplated hereby will not (a) require
any consent, approval or authorization of any person or governmental authority,
the failure to obtain which could have a material adverse effect upon the
transactions contemplated hereby; (b) constitute a material violation of any
provision of law applicable to Buyer; or (c) violate any provision of, or result
in the acceleration of any obligation under, any material mortgage, lien, lease,
agreement, instrument, order, arbitration award, judgment or decree to which
Buyer is a party or by which Buyer is bound.
5.3 Brokers. Neither Buyer nor anyone acting on its behalf has retained
any broker, finder, or agent, or agreed to pay any brokerage fees, finder's
fees, or commissions with respect to the transactions contemplated by this
agreement.
5.4 Financial Statements. Buyer acknowledges that Selling Stockholders
are relying upon Buyer's financial statements provided to them as being a fair
and accurate representation of the financial condition of Buyer. Selling
Stockholders further rely on Buyer's business experience and expertise to
ensure that the Agreement and the transactions related thereto strictly comply
with any and all federal securities or state blue sky laws.
6. ACCESS AND INFORMATION
6.1 Access and Information. Selling Stockholders have provided and will
give Buyer and its counsel, accountants, and other representatives reasonable
access, during normal business hours throughout the period prior to Closing, to
all of the Assets, and all books, contracts, commitments, and records of the
Corporations and will furnish Buyer during such period with all information as
Buyer may reasonably request. Buyer shall advise Sellers in writing prior to
Closing of any information it has obtained as a result of its investigation
which it believes has or may result in a breach of any representation or
warranty of Sellers set forth in this Agreement or the Exhibits attached
hereto.
6.2 Confidentiality; Return of Documents. Buyer and Selling Stockholders
will hold in confidence all confidential information obtained by them from the
other party under this Agreement. If the transaction contemplated by this
Agreement is not consummated buyer and Selling Stockholders will continue to
hold such information in confidence and will return all documents and records
containing such information.
7. CONDUCT OF BUSINESS PRIOR TO CLOSING
7.1 Ordinary Course. Except with respect to the obligations which Buyer
has expressly assumed pursuant to the Management Agreement, following the
execution of this Agreement.
5.2 No Approvals or Notices Required; No Conflicts with Other Agreements
or Orders. The execution and delivery of this Agreement do not, and the
consummation of the transactions contemplated hereby will not, violate any
provision of the Certificate of Incorporation or Bylaws of Buyer. The
execution, performance and delivery of this Agreement do not and the
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consummation of the transactions contemplated hereby will not (a) require any
consent, approval or authorization of any person or governmental authority, the
failure to obtain which could have a material adverse effect upon the
transactions contemplated hereby; (b) constitute a material violation of any
provision of law applicable to Buyer; or (c) violate any provision of, or
result in the acceleration of any obligation under, any material mortgage,
lien, lease, agreement, instrument, order, arbitration award, judgment or
decree to which Buyer is a party or by which Buyer is bound.
5.3 Brokers. Neither Buyer nor anyone acting on its behalf has retained
any broker, finder, or agent, or agreed to pay any brokerage fees, finder's
fees, or commissions with respect to the transactions contemplated by this
Agreement.
5.4 Financial Statements. Buyer acknowledges that Selling Stockholders
are relying upon Buyer's financial statements provided to them as being a fair
and accurate representation of the financial condition of Buyer. Selling
Stockholders further rely on Buyer's business experience and expertise to
ensure that the Agreement and the transactions related thereto strictly comply
with any and all federal securities or state blue sky laws.
6. ACCESS AND INFORMATION
6.1 Access and Information. Selling Stockholders have provided and will
give Buyer and its counsel, accountants, and other representatives reasonable
access, during normal business hours throughout the period prior to Closing, to
all of the Assets, and all books, contracts, commitments, and records of the
Corporations and will furnish Buyer during such period with all information as
Buyer may reasonably request. Buyer shall advise Sellers in writing prior to
Closing of any information it has obtained as a result of its investigation
which it believes has or may result in a breach of any representation or
warranty of Sellers set forth in this Agreement or the Exhibits attached
hereto.
6.2 Confidentiality; Return of Documents. Buyer and Selling Stockholders
will hold in confidence all confidential information obtained by them from the
other party under this Agreement. If the transaction contemplated by this
Agreement is not consummated Buyer and Selling Stockholders will continue to
hold such information in confidence and will return all documents and records
containing such information.
7. CONDUCT OF BUSINESS PRIOR TO CLOSING
7.1 Ordinary Course. Except with respect to the obligations which Buyer
has expressly assumed pursuant to the Management Agreement, following the
execution of this Agreement and prior to the Closing, Selling Stockholders
will:
(a) Not commit to any employment agreements or employee benefit plans, or
increase employee compensation;
(b) Not incur any indebtedness materially affecting the Corporations;
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(c) Not solicit any offers or engage in any discussions with any third
parties regarding any sale of any material portion of the assets of the
Corporations or the sale of any of the Shares.
8. CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS
The obligations of Buyer under this Agreement are subject to the satisfaction
(or waiver in writing by Buyer), prior to or at Closing, of each of the
following conditions:
8.1 Correctness of Representations and Warranties. Buyer shall not have
discovered any material error, misstatement, or omission in the representations
and warranties made by Selling Stockholders in this Agreement or in any
Schedules or Exhibits attached hereto. The representations and warranties of
Selling Stockholders contained in this Agreement shall be deemed to have been
made again at and as of the time of the Closing and shall be true and accurate
in all material respects at such time, except as to such normal adjustments
that may occur.
8.2 Compliance with Agreement. Selling Stockholders shall have performed
and complied with all obligations and requirements of this Agreement to be
performed or complied with by Selling Stockholders prior to or at Closing.
8.3 Authorization. Buyer shall have received copies of corporate
resolutions authorizing Selling Stockholders to enter into this Agreement and
perform the terms and conditions hereof.
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLING STOCKHOLDERS
The obligations of Selling Stockholders under this Agreement are subject to the
satisfaction (or waiver in writing by Sellers), prior to or at Closing, of each
of the following conditions:
9.1 Correctness of Representations and Warranties. Selling Stockholders
shall not have discovered any material error, misstatement, or omission in the
representations and warranties made by Buyer in this Agreement. The
representations and warranties of Buyer in this Agreement shall be deemed to
have been made again at and as of the time of the Closing and shall be true and
accurate in all material respects at such time.
9.2 Compliance with Agreement. Buyer shall have performed and complied
with all obligations and requirements of this Agreement to be performed or
complied with by Buyer prior to or at Closing.
9.3 Authorization. Selling Stockholders shall have received copies of
corporate resolutions authorizing Buyer to enter into this Agreement and
perform the terms and conditions hereof.
10. CONDITION PRECEDENT TO OBLIGATION OF BUYER
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10.1 Discharge of Loans on West Store. The obligations of Buyer under
this Agreement is subject to the satisfaction prior to or at the Closing of the
condition that Selling Stockholders shall have good and marketable title to the
premises from which the West Store operates. Selling Stockholders shall have
discharged the Corporations from liability under the Loans (as defined in
Section 11.1 below) by either (i) obtaining from the lending bank (which holds
a Deed of Trust on the West Store) (the "Bank") and the S.B.A., their consent
to the transfer of the West Store to the Selling Stockholders and the
assumption of the obligations under the Loans by the Selling Stockholders; (ii)
obtaining a new loan on the West Store; or (iii) paying off all loans on the
West Store. Any assets of the Corporations which previously served as
collateral for the Loans (except the West Store premises) shall be released and
all appropriate lending banks shall provide a complete and unconditional
release of the Corporations from any liability under the Loans.
10.2 Buyer's Obligations Regarding Discharge of Loans on West Store.
Buyers shall be responsible for the following in connection with the discharge
of the Corporation from liability under the Loans:
(a) Buyer shall assist Selling Stockholders in obtaining the
consent of the Bank and the S.B.A. as described in Section 10.1(i) above; and
(b) Buyer shall pay all administrative costs incurred in
connection with either (i), (ii), or (iii) of paragraph 10.1 above, including,
but not limited to, paying any prepayment penalties, reasonable attorneys' and
accountants' fees, points, loan fees, and any additional amounts that Seller
may have to pay with regard to such property over and above the amount that
would have been paid if the original loans were kept in place (for example, a
differential in total payments arising from a change in interest rates.
10.3 Release of Escrow of Advance. Selling Stockholders and
Option-Holders shall be entitled to receive the Two Million Five-Hundred
Thousand Dollars ($2,500,000.00) deposited into escrow and given as earnest
money upon closing, if not sooner.
11. REAL ESTATE
11.1 Real Estate Not to be Included as Asset. Buyer will not acquire the
real property of the Corporations located at 6720 West Sahara Boulevard, which
was recently acquired and improvements constructed thereon and for which
Selling Stockholders will be obtaining permanent financing pursuant to Section
10 above. The existing financing for the West Store premises consists of a
$1,000,000 loan from the Bank and a $726,000 S.B.A. loan (collectively the
"Loans"). Buyer and Selling Stockholders, who are unrelated parties dealing at
arms-length, agree that the value of such property is equal to the book value
of the same.
11.2 Real Estate Lease for West Store Premises. On or before Closing, by
Lease Agreement satisfactory to both Buyer and Selling Stockholders (attached
as Exhibit 11.1), Buyer shall lease from Selling Stockholders the premises from
which the West Store conducts its operations. The Lease shall have a ten-year
primary term with minimum rent (triple net) of
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Seventeen Thousand Five Hundred dollars ($17,500) per month and Buyer shall be
responsible for taxes, insurance, maintenance and all other costs (normally
borne by tenant in a triple net lease) associated with increases in the
Consumer Price Index for the previous five years immediately prior to the
inception of each option period, respectively. It is the intent that the
rental amount shall be sufficient for Selling Stockholders to make the payments
under such loans. In the event Selling Stockholders default and are unable to
cure such loans, Buyers shall have first right to cure or otherwise acquire
such real estate.
11.3 Landlord Consent. Buyer shall use its best efforts to obtain any
necessary consents, including, but not limited to, the consent of the Landlord
of the East Store (if required) and non-disturbance agreements from the Lenders
who finance the west Store. If the consent and non-disturbance agreement of
the Landlord of the East Store is required and despite good faith effort of
Buyer to obtain same such is determined to be not reasonably obtainable, Buyer,
at its option, may terminate this Agreement. Buyer has communicated directly
with the Landlord of the East store regarding such Landlord's consent and has
received correspondence from such Landlord as to the requirements thereof.
Selling Stockholders, in any event, will retain the $100,000 earnest money
previously paid in full satisfaction of any claims arising directly or
indirectly out of this agreement.
12. DISCOUNTS FROM SUPPLIERS
12.1 Supplier Discounts. For a period of 5 years from the date of this
Agreement, Buyer shall make full effort to enable Selling Stockholders related
corporation, at their present Utah location, to receive the same product
discounts that Buyer receives from suppliers which discounts are generally at
least 15.5% off the book price. Such will be accomplished by Selling
Stockholders either coupling onto Buyer's buying power or by Selling
Stockholders' corporation buying through Buyer. The rights granted under this
Section are intended to extend only to Selling Stockholders' corporation and
their currently existing related parties and such rights shall immediately
expire in the event Selling Stockholders acquire, are acquired by, merge with
or into, any other entity whereby Selling Stockholders no longer have control.
Selling Stockholders rights hereunder are conditioned upon Selling
Stockholders' corporation's ability to pay for products on purchase terms
acceptable to suppliers or Buyer, as the case may be and Selling Stockholders'
corporations' timely payments of all invoices when due. Notwithstanding the
foregoing, Buyer will not be required to extend credit to Selling Stockholders'
corporation or to assume any obligations with respect to selling Stockholders'
corporations' purchases from vendors.
13. CLASSICS SOUTHWEST
13.1 Shelf Space. For a period of 5 years, Selling Stockholders' related
company, Classics Southwest, Inc. (or other such entity as Selling Stockholders
may designate) shall be given shelf space for the display and sale of its
products in Buyer's stores. For the two Las Vegas Stores, such shelf space
shall be a section of two and one-half linear feet, extending up and down (top
to bottom) from those two and one-half linear feet. For Buyer's other stores,
the shelf space shall be a section one and one-half linear feet, extending up
and down (top to bottom)
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from this one and one-half linear feet. The shelf space contemplated herein
shall be located in the stores in areas comparable to that which Classics
Southwest currently displays its products in the existing Las Vegas Stores.
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14. MISCELLANEOUS
14.1 Covenant Not to Compete. Each of the Selling Stockholders hereby
agree that it will not at any time within the five year period immediately
following Closing, directly or indirectly engage in, or have any interest in
any person, firm, corporation, or business (whether as an employee, officer,
director, agent, security holder, creditor, consultant, or otherwise) that
engages in any activity which is the same as or competitive with activity
engaged in by the Corporations within a twenty (20) mile radius of the Stores
in Las Vegas, Nevada.
14.2 Arbitration; Litigation. Any controversy or claim arising out of or
relating to this Agreement, or the breach thereof, shall be settled by
arbitration in Las Vegas, Nevada, in accordance with the Rules of the American
Arbitration Association, and any judgment upon the arbitration award may be
entered in any court having jurisdiction thereof; provided, however, that
Selling Stockholders shall have no obligation to submit to arbitration any
claim based on Buyer's failure to pay the Purchase Price. In the event of any
litigation, the prevailing party shall be entitled to an award of reasonable
attorney fees and expenses.
14.3 Survival of Representations and Warranties. All representations,
covenants, and warranties set forth herein shall be deemed to be material and
to have been relied upon by the Parties hereto and shall survive Closing.
14.4 Payment of Fees and Expenses. The Corporations shall pay for the
reasonable legal, accounting and other expenses of Selling Stockholders related
to this transaction and accrued as of Closing. Otherwise, each party shall pay
and be responsible for all of the fees and expenses of its own counsel,
financial advisors, accountants, and other experts and all other expenses
incurred by it incident to the negotiation, preparation, and execution of this
Agreement and the consummation of the transactions contemplated herein.
14.5 Entire Agreement. This Agreement and all schedules referenced
herein and documents delivered pursuant hereto, and all schedules referenced
therein and documents delivered pursuant thereto, constitute the entire
agreement of the parties as to the subject matter hereof, and supersede all
prior discussions, negotiations, and agreements, whether written or oral,
between the parties with respect to the subject matter of this Agreement.
14.6 Modification. This Agreement may not be modified except by a
writing executed by duly authorized representatives of both parties.
14.7 Waiver. The failure of any party to exercise any of its rights
hereunder or to enforce any of the terms and conditions of this agreement on
any occasion shall not constitute or be deemed a waiver of that party's rights
thereafter to exercise any rights hereunder or to enforce each and every term
and condition of this Agreement.
14.8 Severability. A determination that any portion of this Agreement is
unenforceable shall not affect the enforceability or validity of any of the
remaining portions of the Agreement
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or of this Agreement as a whole. In the event that any portion of this
Agreement is determined to be unenforceable, the parties agree that a
reasonable provision shall be substituted in place of the unenforceable
provision and that, as so modified, this Agreement shall be enforceable.
14.9 Notices. All notices, consents, requests, demands, or other
communications hereunder shall be in writing and shall be deemed to have been
duly given upon receipt, if hand delivered, or three (3) days after mailing, if
sent by certified mail, return receipt requested, addressed as follows:
(a) If to Selling Stockholders:
Thomas J. KLC
4625 South 2300 East, Suite 207
Salt Lake City, Utah 84117
(b) If to Buyer:
Wild Oats Markets, Inc.
1668 Valtec Lane
Boulder, CO 80301
Attn: Michael C. Gilliland
If a party changes its address, written notice shall be given promptly to the
other party under this Section.
14.6 Binding Effect; Assignment. This Agreement shall inure to the
benefit of and be binding upon the parties hereto, their successors and
assigns; provided, however, that no party may, without the written consent of
the other, assign or transfer any interest under this Agreement.
14.7 Governing Law. This Agreement shall be construed, interpreted, and
enforced in accordance with the laws of the State of Nevada.
14.8 Headings. The parties agree that the Article and Section headings
are inserted only for ease of reference, shall not be construed as part of this
Agreement, and shall have no effect upon the construction of interpretation of
any part hereof.
14.9 Representation by Counsel and Construction. The parties hereto
represent that in the negotiation and drafting of this Agreement they have been
represented by and relied upon the advice of counsel of their choice. The
parties affirm that their counsel have had a substantial role in the drafting
and negotiation of this Agreement and, therefore, the rule of construction to
the effect that any ambiguities are to be resolved against the drafting party
shall not be employed in the interpretation of this Agreement or any schedule
hereto.
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14.10 Cooperation. Buyer and Selling Stockholders agree to actively
cooperate in consummation of this transaction and to comply with any reasonable
request for execution and delivery of any additional instruments or documents
that may be needed.
14.11 Time of Possession. Buyer shall be entitled to possession of the
Store premises and contracts at Closing; provided, however, that all sales and
expenses shall be deemed to accrue to Buyer from 00:01 a.m. on the date of
Closing.
14.12 Late Payments. Any payment required of Buyer under the terms of
this Agreement shall be timely made. If any payment is not timely made there
shall be a late payment penalty of the lesser of (i) 10% of such amount or (ii)
the maximum amount permissible under Nevada law. Interest will begin to accrue
upon default of any obligation at a 1.5% per month interest rate.
14.13 Personal Guarantees. Buyer's obligations under this Agreement
shall be jointly and severally personally guaranteed by Michael C. Gilliland,
Elizabeth C. Cook and Mark R. Clapp, the form of each such guarantee is
attached as Exhibit 14.13.
14.14 Counterpart Signatures. This Agreement may be executed in
counterpart.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
SELLING STOCKHOLDERS:
s/Kathy Melby by Thomas J. KLC A T T E S T :
-------------------------------
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s/Rich Arcaris by Thomas J. KLC A T T E S T :
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OPTION-HOLDERS:
s/Kasey Enterprises, Inc. A T T E S T :
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s/W. M. Jones
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s/Metro Management A T T E S T :
--------------------------------
s/W. M. Jones
--------------------------------
BUYER: WILD OATS MARKETS, INC.
s/Michael C. Gilliand A T T E S T :
--------------------------------
--------------------------------
KEY EMPLOYEES:
s/Mike Circuit
-------------------------------
Mike Circuit
s/John Fisher
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John Fisher
s/John Heavey
-------------------------------
John Heavey
s/Robert M. Stone
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Bob Stone
s/Harmony Sun ATTEST: s/Mj Hall
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Harmony Sun
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