Exhibit 1.1
Stock and Interests Purchase Agreement
THIS STOCK AND INTERESTS PURCHASE AGREEMENT (this "Agreement") is made as
of October 5, 2000 by and among Easyriders, Inc., a Delaware corporation
("Easyriders"); Newriders, Inc., a Nevada corporation and wholly owned
subsidiary of Easyriders ("Newriders," and together with Easyriders, the
"Sellers"); M&B Restaurants, L.C., a Texas limited liability company and wholly
owned subsidiary of Newriders ("M&B"); MBPCR, Inc., a Texas corporation and
wholly owned subsidiary of Easyriders ("MBPCR," and together with M&B, the
"Companies"); El Paso Bar-B-Que Company, Inc., a Delaware corporation (the
"Buyer"); and, with regard to the obligations specifically identified hereunder,
Culinary Holdings Incorporated, a Delaware corporation ("Culinary").
A. The Sellers and the Companies have solicited and considered various
proposals regarding the sale to, and purchase by, third parties of substantially
all of the business and assets of the Companies, representing the business of El
Paso Bar-B-Que Company, as currently conducted, which business consists of
restaurants located in Glendale, Arizona; Scottsdale, Arizona; Ahwatukee,
Arizona; Tucson, Arizona; Mesa, Arizona; and Tulsa, Oklahoma (the "Business").
B. Newriders owns all of the issued and outstanding membership interests
in M&B (the "M&B Membership Interests") and Easyriders owns all of the issued
and outstanding shares of capital stock of MBPCR (the "MBPCR Capital Stock").
C. The Sellers and their respective boards of directors have determined
that it is in the best interests of the Sellers and their stockholders to
complete the transactions contemplated by this Agreement.
D. In light of the foregoing, the Sellers desire to sell to the Buyer, and
the Buyer desires to purchase from the Sellers, all of the issued and
outstanding M&B Membership Interests and all of the issued and outstanding
shares of MBPCR Capital Stock for the aggregate consideration set forth below.
NOW, THEREFORE, in consideration of the representations, warranties and
covenants herein contained, the parties hereto hereby agree as follows:
Article I
Asset Purchase
1.1 Purchase and Sale of Capital Interests and Stock.
(a) M&B Membership Interests. Subject to the terms and conditions of
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this Agreement, the Buyer shall purchase, and Newriders shall sell to the Buyer
at the Closing (as defined below), all of the issued and outstanding M&B
Membership Interests owned by Newriders. The aggregate purchase price for all
of the issued and outstanding shares of M&B Membership Interests is
$3,995,000.00 (the "M&B Purchase Price").
(b) MBPCR Capital Stock. Subject to the terms and conditions of this
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Agreement, the Buyer shall purchase, and Easyriders shall sell to the Buyer at
the Closing (as defined below), all of the issued and outstanding shares of
MBPCR Capital Stock owned by Easyriders. The aggregate purchase price for all
of the issued and outstanding shares of MBPCR Capital Stock is $5,000.00 (the
"MBPCR Purchase Price").
1.2 The Closing .
(a) Closing Place and Time. The closing of the transactions
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contemplated by Section 1.1(a) of this Agreement (the "Closing") will take place
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at the offices of Xxxxxx, Xxxx & Xxxxxxxx LLP, 0 Xxxx Xxxxx, Xxxxxx, Xxxxxxxxxx
00000 at 5:00 p.m. local time on October 5, 2000 (the "Closing Date"), unless
another time, date or place is mutually agreed to by the parties hereto.
(b) Closing Deliveries. Subject to the terms of this Agreement and at
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the Closing:
(i) Newriders shall deliver to the Buyer all certificates or
memoranda, duly endorsed in blank (or accompanied by duly executed powers) (the
"M&B Membership Interests Documents"), representing all of the M&B Membership
Interests purchased by the Buyer from Newriders, against payment of the M&B
Purchase Price made by either (A) wire transfer to the account designated by
Newriders on Schedule 1.2(b)(i) hereto or (B) certified check made payable to
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Newriders. The M&B Membership Interests Documents must be sufficient to
effectively vest the Buyer with good and valid title to the M&B Membership
Interests, free and clear of all liens, claims, charges, encumbrances or adverse
claims.
(ii) Easyriders shall deliver to the Buyer all stock certificates,
duly endorsed in blank (or accompanied by duly executed stock powers) (the
"MBPCR Capital Stock Certificates"), representing all of the shares of MBPCR
Capital Stock purchased by the Buyer from Easyriders, against payment of the
MBPCR Purchase Price made by either (A) wire transfer to the account designated
by Easyriders on Schedule 1.2(b)(ii) hereto or (B) certified check made payable
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to Easyriders. The MBPCR Capital Stock Certificates must be sufficient to
effectively vest the Buyer with good and valid title to the M&B Membership
Interests, free and clear of all liens, claims, charges, encumbrances or adverse
claims.
(iii) The Buyer shall deliver to Newriders an executed instrument of
assumption of liabilities for the outstanding amount under the 8% convertible
debenture of Newriders, due March 31, 2001 (the "Knyal Note"), in favor of Xxxxx
X. Xxxxx.
1.3 Allocation of Purchase Price. The parties acknowledge that the
acquisition of the M&B Membership Interests will be treated as a purchase of all
of the M&B assets for federal and state income tax purposes. Based on this
treatment, the parties shall allocate the M&B Purchase Price (and all other
capitalizable costs) among the M&B assets for all purposes (including financial
accounting and tax purposes) in accordance with the allocation schedule attached
hereto as Schedule 1.3, which schedule will be delivered and attached hereto on
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or prior to the Closing. The parties hereto acknowledge that such allocation
has been made in the manner required by Section 1060 of the Internal Revenue
Code of 1986, as amended (the
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"Code"). The Buyer and the Sellers shall prepare and file an IRS Form 8594 in a
timely fashion in accordance with the rules under Section 1060 of the Code. To
the extent that the M&B Purchase Price is adjusted after the Closing Date, the
parties hereto shall revise and amend such Schedule and IRS Form 8594 in the
same manner and according to the same procedure as used in preparing Schedule
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1.3 attached hereto. The determination and allocation of the M&B Purchase Price
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derived pursuant to this Section 1.3 will be binding on the parties for all tax
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reporting purposes.
1.4 Further Assurances. At any time and from time to time after the
Closing Date, at the request of the Buyer and without further consideration,
each Seller shall execute and deliver such other instruments of sale, transfer,
conveyance and assignment and take such action as the Buyer may reasonably
request in order to transfer, convey and assign to the Buyer and to confirm
Buyer's rights to, title in and ownership of the M&B Membership Interests and
the shares of MBPCR Capital Stock.
Article II
Representations and Warranties of the Sellers
Except as set forth in the Sellers' Disclosure Schedule attached hereto as
Schedule 2 (the "Disclosure Schedule"), the Sellers, jointly and severally,
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represent and warrant to the Buyer and Culinary as set forth below. The
Disclosure Schedule will be arranged such that each exception will specifically
identify the numbered and lettered section of this Agreement to which the
exception relates.
2.1 Organization and Qualification.
(a) Organization. Each of the Sellers and the Companies is duly
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organized, validly existing and, except as set forth in Section 2.1(a) of the
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Disclosure Schedule, in good standing under the laws of the jurisdiction of its
incorporation or organization and has all requisite power and authority to own,
lease and operate its properties and to carry on its businesses as now being
conducted. Except as set forth in Section 2.1(a) of the Disclosure Schedule,
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the Sellers have heretofore delivered or made available to the Buyer accurate
and complete copies of the Articles of Organization, Articles of Incorporation,
Operating Agreement and Bylaws (or similar governing documents), as currently in
full force and effect, of each Seller and Company. Section 2.1(a) of the
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Disclosure Schedule specifically identifies each entity that contains any
material assets or through which either Company conducts any operations.
(b) Qualification. Each Company is duly qualified or licensed and in
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good standing to do business in each jurisdiction in which the property owned,
leased or operated by it or the nature of the business conducted by it makes
such qualification or licensing necessary, except in jurisdictions, if any,
where the failure to be so qualified (i) would not, individually or in the
aggregate, have a Material Adverse Effect (as defined below) on such Company or
(ii) would not result in a breach of any of the other representations,
warranties or covenants set forth in this Agreement.
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(c) Subsidiaries and Investments. Neither Company controls, directly
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or indirectly, or possesses any direct or indirect ownership, equity
participation or other interest in, any corporation, partnership, limited
liability company, trust or other business entity.
2.2 Capitalization.
(a) M&B. All of the issued and outstanding M&B Membership Interests
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have been duly authorized and validly issued, fully paid and nonassessable and
have been issued in compliance with all U.S. federal and state and foreign
securities laws. All of the M&B Membership Interests are owned, beneficially
and of record, by Newriders, free and clear of all liens, claims, charges,
encumbrances or adverse claims. There is no security, option, warrant, right
(including preemptive rights), put, call, subscription agreement, commitment,
understanding or claim of any nature whatsoever, fixed or contingent, to which
Easyriders, Newriders or M&B is a party or by which any of them is bound that
directly or indirectly (i) calls for the issuance, sale, pledge, delivery or
other disposition of any membership or ownership interest in M&B or any
securities convertible into, or other rights to acquire, any membership or
ownership interest in M&B, (ii) relates to the voting or control of any
membership or ownership interest in M&B or (iii) obligates Easyriders,
Newriders, M&B or their affiliates to grant, offer or enter into any of the
foregoing. There are also no obligations, contingent or otherwise, of the
Easyriders, Newriders, M&B or their affiliates to repurchase, redeem or
otherwise acquire any M&B Membership Interests or to make any investment (in the
form of a loan, capital contribution or otherwise) in any other entity.
Newriders has the absolute and unrestricted right, power, authority and capacity
to transfer the M&B Membership Interests to the Buyer and, upon the Closing,
without exception, the Buyer will acquire from Newriders legal and beneficial
ownership of, good and valid title to, and all rights to vote, the M&B
Membership Interests, free and clear of all liens, claims, charges, encumbrances
or adverse claims.
(b) MBPCR. The authorized MBPCR Capital Stock consists of only
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1,000,000 shares of common stock, par value $1.00 per share. Of the authorized
shares of MBPCR Capital Stock, 1,000 shares of common stock are issued and
outstanding. All issued and outstanding shares of MBPCR Capital Stock have been
duly authorized and validly issued, fully paid and nonassessable and have been
issued in compliance with all U.S. federal and state and foreign securities
laws. All of the shares of MBPCR Capital Stock are owned, beneficially and of
record, by Easyriders, free and clear of all liens, claims, charges,
encumbrances or adverse claims. There is no security, option, warrant, right
(including preemptive rights), put, call, subscription agreement, commitment,
understanding or claim of any nature whatsoever, fixed or contingent, to which
Easyriders, Newriders or MBPCR is a party or by which any of them is bound that
directly or indirectly (i) calls for the issuance, sale, pledge, delivery or
other disposition of any securities of MBPCR or any securities convertible into,
or other rights to acquire, any securities of MBPCR, (ii) relates to the voting
or control of any securities of MBPCR or (iii) obligates Easyriders, Newriders,
MBPCR or their affiliates to grant, offer or enter into any of the foregoing.
There are also no obligations, contingent or otherwise, of Easyriders,
Newriders, MBPCR or their affiliates to repurchase, redeem or otherwise acquire
any shares of MBPCR Capital Stock or to make any investment (in the form of a
loan, capital contribution or otherwise) in any other entity. Easyriders has
the absolute and unrestricted right, power, authority and capacity to transfer
the shares of MBPCR Capital Stock to the Buyer and, upon the Closing, without
exception, the Buyer will acquire from Easyriders legal and beneficial
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ownership of, good and valid title to, and all rights to vote, all the shares of
MBPCR Capital Stock, free and clear of all liens, claims, charges, encumbrances
or adverse claims.
(c) Voting Agreements. None of the Sellers or the Companies are a
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party to or subject to any proxy, agreement or understanding and there is no
agreement or understanding between any other persons that affects or relates to
the voting or giving of written consents with respect to any security or
ownership interest in either Company or the voting by a director or limited
liability company manager of either Company.
2.3 Authority and Enforceability. Each Seller and each Company has
obtained, prior to the date hereof, unanimous director or manager approval of
this Agreement and the transactions contemplated hereby, which approval has been
obtained in accordance with applicable law, each Seller's and Company's
Certificate of Incorporation, Articles of Incorporation or Articles of
Organization and its Bylaws or Operating Agreement. All other corporate action
on the part of each Seller and Company necessary for the authorization,
execution and delivery of this Agreement, the other agreements and documents
contemplated herein (the "Transaction Documents"), the performance of all of
each Seller's and Company's respective obligations hereunder and thereunder and
the authorization and approval of the transactions contemplated by this
Agreement have been or will be taken prior to the Closing Date. The Sellers
further represent that, after appropriate analysis, it has been determined that
the approval of the stockholders of the Sellers is not required under any
applicable law, rule, regulation or statute or any applicable charter or bylaw
provision in order to enter into this Agreement and the other Transaction
Documents and to complete the transactions contemplated hereby and thereby.
This Agreement and the other Transaction Documents, when executed and delivered,
will constitute valid and legally binding obligations of each Seller and Company
enforceable in accordance with their respective terms, subject to (a) laws of
general application relating to bankruptcy, insolvency and the relief of debtors
and (b) the availability of equitable remedies (clauses (a) and (b), the
"Enforceability Exceptions").
2.4 Consents and Approvals of Governmental Entities. No consent,
approval, order or authorization of, or registration, declaration or filing
with, any Governmental Entity is required to be made or obtained by the
Easyriders, Newriders, M&B or MBPCR in connection with the execution and
delivery of this Agreement by the Sellers or the completion by the Sellers of
the transactions contemplated hereby, except for (a) such consents, approvals,
orders, authorizations, registrations, declarations and filings as are listed on
Section 2.4 of the Disclosure Schedule and (b) such consents, approvals, orders
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or authorizations which if not obtained, or registrations, declarations or
filings which if not made, would not have a Material Adverse Effect.
2.5 No Breach. The execution of this Agreement by each Seller and the
completion of the transactions contemplated hereby by each Seller will not (a)
conflict with or result in a breach of any provision of the Certificate of
Incorporation or Bylaws of Easyriders, the Articles of Incorporation or Bylaws
of Newriders, the Articles of Organization or Operating Agreement of M&B or the
Articles of Incorporation or Bylaws of MBPCR; (b) conflict with, violate or
result in a breach of the terms, conditions or provisions of, or constitute a
default (or event which upon provision of notice or lapse of time or both would
become such a default) or result in the acceleration of any obligation under, or
result in the cancellation or modification of, or permit
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termination of, any agreement, lease, license, note, contract or instrument to
which any of the Sellers or the Companies is a party or by which it is bound;
(c) accelerate, or constitute an event entitling the holder of any indebtedness
of the Sellers or the Companies to accelerate the maturity of any such
indebtedness, permit subordination of any such indebtedness of any of the
Sellers or the Companies to any other indebtedness of the Sellers or the
Companies to which any of the Sellers or the Companies was not already
subordinated; (d) conflict with or violate the provisions of any law or any
judgment, decree, order, arbitration award, regulation or rule of any foreign,
federal, state or local governmental, regulatory or administrative authority or
agency, court or arbitrational tribunal (a "Governmental Entity") or any
covenant or restriction binding upon any of the Sellers or the Companies; (e)
violate or result in the modification, termination or loss of any Permit (as
defined below); or (f) result in the creation of any lien, charge or encumbrance
upon any equity interest in or assets of any of the Sellers or the Companies
under any agreement or instrument to which any of the Sellers or the Companies
is a party or by which any of the Sellers or the Companies is bound.
2.6 Ownership and Condition of Assets.
(a) Owned Assets. Except as set forth on Section 2.6(a) of the
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Disclosure Schedule, each Company is the true and lawful owner of, and has good
and marketable title to, all of the assets used in the Business, free and clear
of all liens, claims, charges, encumbrances or adverse claims. The tangible
assets used in the Business are, in the aggregate, free from material defects,
have been maintained in accordance with normal industry practice, are in good
operating condition and repair and are suitable for the purposes for which they
currently are used. Section 2.6(a) of the Disclosure Schedule lists (i) all
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assets of each Company which are fixed assets (as determined in accordance with
generally accepted accounting principles ("GAAP")) having a book value greater
than $10,000, indicating the cost, accumulated book depreciation (if any) and
the net book value of each such fixed asset as of July 31, 2000, and (ii) all
other assets of each Company of a tangible nature (other than inventories) whose
book value exceeds $10,000.
(b) Leased Assets. Each asset used in the Business which is not owned
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by either Company is in such condition that upon the return of such property to
its owner in its current condition at the end of the relevant lease term or as
otherwise contemplated by the applicable agreement between such Company and the
owner or lessor thereof, the obligations of such Company to such owner or lessor
will have been discharged.
2.7 Financial Statements. Section 2.7 of the Disclosure Schedule contains
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the unaudited consolidated balance sheet of each of M&B as of July 31, 2000 and
related statements of income and cash flow for the period then ended (the
"Financial Statements"). MBPCR possesses no assets, liabilities, profits or
losses and, as a result, does not maintain balance sheets, statements of income
and cash flow or any other type of financial statement. Except as set forth in
Section 2.7 of the Disclosure Schedule, the Financial Statements (a) were
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prepared in accordance with the books and records of M&B; (b) were prepared in
accordance with M&B's accounting policies and principles; (c) are in accordance
with GAAP in a manner consistent with M&B's historic accounting practices
applied on a consistent basis except that the Financial Statements are unaudited
and therefore do not have certain notes otherwise required by GAAP and may be
subject to certain immaterial audit adjustments; and (d) present fairly the
financial
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position and results of operations of M&B at the dates and for the period
covered thereby. The value of any fixed asset used by M&B in the operation of
the Business has not been written up or down, other than for depreciation or
amortization expenses in accordance with GAAP, applied on a consistent basis.
Section 2.7 of the Disclosure Schedule also sets forth a true and complete list
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of all of the indebtedness of M&B as of July 31, 2000. The internal books and
records of M&B from which the Financial Statements were prepared do not contain
any information which is false or misleading and the reserves set forth in the
Financial Statements are adequate for the Business in light of the contingencies
with respect to which they were established.
2.8 Absence of Certain Changes. Except as set forth in Section 2.8 of the
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Disclosure Schedule, since July 31, 2000, there has not been:
(a) Any Material Adverse Effect;
(b) The entering into of any Material Contract (as defined below),
commitment or transaction or the incurrence of any material liabilities outside
the ordinary course of business consistent with past practice;
(c) Any material increase in the compensation paid or payable by
either Company to any of its respective directors, officers, employees, agents
or consultants;
(d) Any recapitalization in respect of any equity interest in either
Company or any direct or indirect redemption, purchase or other acquisition of
any such equity interest or any agreement to do any of the foregoing;
(e) Any issuance, transfer, sale or pledge by either Company of its
capital stock or any other equity interest or of any commitments, options,
warrants, rights or privileges under which either Company is or may become
obligated to issue any shares of its capital stock or any other equity interest;
(f) Any liability, commitment or obligation incurred by either Company
exceeding $50,000, either individually or in the aggregate, except such as may
have been incurred or entered into in the ordinary course of business and
consistent with past practices;
(g) Any loan, capital contribution, or advance made or agreed to be
made by either Company exceeding $50,000, either individually or in the
aggregate, nor has either Company become liable or agreed to become liable as a
guarantor with respect to any obligation of a third party exceeding $50,000,
either individually or in the aggregate;
(h) Any waiver or discharge by either Company of any right or rights
exceeding $50,000, either individually or in the aggregate, or any payment,
direct or indirect, of any debt, liability or other obligation exceeding
$50,000, either individually or in the aggregate, before the same became due in
accordance with its terms other than in the ordinary course of business and
consistent with past practice;
(i) Any adoption, amendment or entering into by either Company of any
bonus, profit sharing, stock option, pension, retirement, severance, deferred
compensation or
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other employee benefit plan or agreement other than in the ordinary course of
business and consistent with past practice;
(j) Any amendment to M&B's Certificate of Organization or Operating
Agreement or MBPCR's Articles of Incorporation or Bylaws;
(k) Any amendment, cancellation or termination of any contract,
license or other instrument or arrangement material to either Company, other
than in the ordinary course of business and consistent with past practice;
(l) Any failure to repay any material obligation of either Company
when due;
(m) Any transaction entered into or committed to be entered into
between either Company and any Related Party (as defined in Section 2.23);
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(n) Any material change in the accounting methods, practices or
policies followed by either Company, whether for general financial or tax
purposes, from those in effect from inception;
(o) Any purchase or other acquisition of, or any sale, lease,
disposition of, mortgage, pledge or subjection to any lien or encumbrance on
(except for liens for current taxes not yet due and payable), any material
property or assets, whether tangible or intangible, of either Company or any
agreement to do any of the foregoing, other than licenses of products in the
ordinary course of business consistent with past practice;
(p) Any sale, assignment, transfer or licensing of any patents,
trademarks, copyrights, trade secrets or other proprietary or intangible assets
of either Company, other than in the ordinary course of business consistent with
past practice;
(q) Any capital expenditures or commitments for additions to property
or equipment of either Company constituting capital assets in an amount
exceeding $50,000, either individually or in the aggregate;
(r) Any change in any material election in respect of taxes, adoption
or change in any accounting method in respect of taxes, the entering into any
tax allocation agreement, tax sharing agreement, tax indemnity agreement or
closing agreement, any settlement or compromise of any claim or assessment in
respect of taxes, or any consent to any extension or waiver of the limitation
period applicable to any claim or assessment in respect of taxes with any taxing
authority or otherwise;
(s) Payment or declaration of any dividend or other distribution in
respect of any shares of the capital stock or any ownership interests of either
Company, or any incurrence of any obligation to make any such dividend or
distribution;
(t) Any agreement or commitment to do any of the foregoing; or
(u) Any physical damage, destruction or loss of any assets of either
Company in an amount exceeding $10,000 in the aggregate, not otherwise covered
by insurance.
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2.9 Accounts Receivable. All of the Companies' accounts receivable (the
"Accounts Receivable") reflected in the Financial Statements represent or will
represent valid obligations arising from sales actually made or services
actually performed in the ordinary course of business. Unless paid on or prior
to the Closing, the Accounts Receivable are or will be as of the Closing Date
current and, to the knowledge of the Sellers and the Companies, collectible net
of the respective reserves shown in the Financial Statements (which reserves are
adequate and calculated consistent with past practice and, in the case of the
reserve at the Closing Date, will not represent a material adverse change in the
composition of such Accounts Receivable in terms of aging), without any set-off.
The Sellers and the Companies have received no notice of any contest, claim, or
right of set-off, other than returns in the ordinary course of business, under
any contract with any obligor of an Accounts Receivable relating to the amount
or validity of such Accounts Receivable. Section 2.9 of the Company Disclosure
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Schedule contains a true and complete list of all Accounts Receivable as of July
31, 2000.
2.10 No Undisclosed Liabilities. The Companies do not, and as of the
Closing will not, have any liabilities, obligations or commitments (whether
absolute, accrued, known or unknown, contingent or otherwise) matured or
unmatured and there is no existing condition, situation or set of circumstances
which could reasonably be expected to result in such liability or obligation,
except (a) liabilities which are adequately reflected or fully reserved against
in the Financial Statements or (b) liabilities which have been incurred in the
ordinary course of business and consistent with past practice since July 31,
2000, which do not individually or in the aggregate have a Material Adverse
Effect.
2.11 Taxes.
(a) Tax Returns and Tax Payments. Except as set forth on Schedule
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2.11 of the Disclosure Schedule, each Company has (i) timely filed or caused to
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be timely filed all tax returns, statements, reports and forms (including
estimated tax returns and reports and information returns and reports)
(collectively, the "Tax Returns") required to be filed as of the date hereof
(after giving effect to any extension of time to file such Tax Returns) and (ii)
paid, when due, all taxes as shown to be due and payable on said Tax Returns.
All such previously-filed Tax Returns were complete and accurate in all material
respects when filed, and as of the date hereof no additional liability for
material taxes for periods covered by such previously-filed Tax Returns have
been assessed on or proposed to either Company. Each Company has either
delivered to the Buyer or made available for inspection by the Buyer or its
representatives or agents complete and correct copies of all tax audit reports
and statements of tax deficiencies with respect to any delinquent tax assessed
against or agreed to by either Company for all taxable periods from inception,
for which audit reports or statements of deficiencies have been received by
either Company.
(b) Tax Audits. There are no Tax Returns (i) that are currently being
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audited by a tax authority or (ii) as to which either Company has received a
written and/or oral notice from a tax authority that such tax authority intends
to commence an audit or examination of such Tax Return. There are no Tax Return
as to which either Company has given its consent to waive or extend the
applicable statute of limitations for such Tax Return or the assessment of taxes
required to be reported thereon. To the knowledge of the Sellers and the
Companies, there is no
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dispute or claim concerning any tax liability of either Company threatened,
claimed or raised by any tax authority.
(c) Unpaid Taxes. The tax liabilities of each Company (whether
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imposed before or after the Closing Date and whether imposed upon filing of a
Tax Return or as a result of an audit or examination) which are unpaid as of the
close of business on the Closing Date, and attributable to periods prior
thereto, will not exceed the reserves for tax liabilities as set forth in the
account for accrued taxes payable or similar account included in the Financial
Statements and taxes incurred in the ordinary course of business after July 31,
2000.
(d) Tax Sharing Agreements. Neither Company is a party to any tax-
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sharing or tax-indemnity agreement and has not otherwise assumed the tax
liability of any other person under contract.
(e) Section 481 Adjustments. Neither Company has agreed, and neither
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is required to make, any adjustment under Section 481(a) of the Code by reason
of a change in accounting method or otherwise.
(f) U.S. Real Property Holding Corporation. Neither Company is, and
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neither has ever been, a United States real property holding corporation as
defined in Section 897(c)(2) of the Code.
(g) No Liens. None of the assets of either Company are subject to any
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liens in respect of taxes (other than for current taxes not yet due and
payable).
(h) No Closing Agreements. Neither Company has executed or entered
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into any closing agreement pursuant to Section 7121 of the Code, or any
predecessor provisions thereof or any similar provision of state tax law.
(i) No Section 1374 Liability. Neither Company will be subject to any
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tax liability with respect to any net recognized built-in gain under Section
1374 of the Code.
(j) No Section 280G Liability. Neither Company has made, and neither
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is obligated to make, any payments or is a party to any contract that under
certain circumstances could require it to make any payments that are not
deductible as a result of the provisions set forth in Section 280G of the Code
or the treasury regulations thereunder or would result in an excise tax to the
recipient of any such payment under Section 4999 of the Code.
(k) Material Tax Elections. All material elections with respect to
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income taxes affecting each Company are set forth in Section 2.11 of the
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Disclosure Schedule.
(l) No Section 341(f) Consent. No consent under Section 341(f) of the
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Code has been made with respect to either Company.
2.12 Employee Compensation and Benefits.
(a) Employee Compensation and Change of Control Payments. Section
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2.12(a) of the Disclosure Schedule contains a true and complete list of the
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names of and
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current salaries, bonuses and other monetary benefits paid to or accrued by all
employees of each Company earning in excess of $50,000 per annum and describes
the terms of all agreements, commitments and arrangements pursuant to which
amounts may become payable by either Company to current or former directors,
officers or employees as a result of or in connection with the transactions
contemplated by this Agreement, including any termination of employment in
connection herewith.
(b) Employee Benefit Plans. Neither Company is involved in any labor
----------------------
discussion with any unit or group seeking to become the bargaining unit for any
of its employees and no such unit or group has notified either Company of an
intention to commence any organizational activities among the employees of
either Company. Section 2.12(b) of the Disclosure Schedule contains a listing
---------------
of (i) each collective bargaining agreement and other labor agreement to which
either Company is a party or by which it is bound, (ii) each employment,
consulting, severance, deferred compensation, bonus and any other employee
benefit plan or agreement providing for compensation or other benefits to
employees (including officers), or independent contractors, individually or as a
group, to which either Company is a party or by which either Company is bound;
(iii) each "employee pension benefit plan" as defined in Section 3(2) of the
Employee Retirement Income Security Act of 1974 ("ERISA") and not exempted under
Section 4(b) or 201 of ERISA maintained by either Company or to which either
Company is required to contribute, including any multiemployer pension plan; and
(iv) each "employee welfare benefit plan" as defined in Section 3(1) of ERISA
maintained by either Company or to which either Company contributes or is
required to contribute, including any multiemployer welfare plan, and each other
plan under which "fringe benefits" (including, without limitation, profit-
sharing, bonus, stock option, stock purchase, stock bonus, dependent care
assistance, excess benefit, incentive, salary continuation, and other
compensation arrangements, vacation plans or programs, severance benefits, sick
leave plans or programs, dental or medical plans or programs, and related or
similar benefits) are afforded to employees of, or otherwise required to be
provided by, either Company. All plans, programs and arrangements described in
clauses (ii), (iii) and (iv) of the previous sentence will be referred to as
"Employee Benefit Plans."
(c) Compliance. Each Company has complied in all material respects
----------
with all applicable laws, rules and regulations relating to employment,
including those relating to wages, hours, collective bargaining and the payment
and withholding of taxes and other sums as required by appropriate governmental
authorities. All Employee Benefit Plans in effect at any time since inception
of each Company are now, and have always been, established, maintained and
operated in accordance, in all material respects, with all applicable laws and
all regulations and interpretations thereunder and in accordance with their plan
documents. There is no liability of either Company under any insurance policy
or similar arrangement procured in connection with any Employee Benefit Plan in
the nature of a retroactive rate adjustment or loss sharing arrangement. There
are no investigations, proceedings, or lawsuits or other claims (other than
routine claims for benefits under the plan and qualified domestic relations
orders) pending against or involving any Employee Benefit Plan, or any fiduciary
of such plan brought on behalf of any participant, beneficiary, or fiduciary
thereunder, nor is there any reasonable basis for any such claim.
11
(d) Other Employee Benefit Matters. Except as specified in Section
------------------------------ -------
2.12(b) of the Disclosure Schedule, none of the Employee Benefit Plans or
--------
employment contracts with either Company provide any benefits that become
payable solely as a result of the completion of this transaction. None of the
persons performing services for either Company have been improperly classified
as independent contractors, leased employees, or as being exempt from the
payment of wages for overtime.
2.13 Litigation. There is no pending or, to the knowledge of the Sellers
or the Companies threatened, claim, suit, arbitration or other judicial or
regulatory proceeding or investigation of any character by or against either
Company, either Company's respective properties or assets, or either Company's
respective directors, limited liability company managers or officers (in their
capacities as such) before any Governmental Entity and, to the knowledge of the
Sellers or the Companies, there are no facts in existence which would reasonably
be expected to form the basis for any such claim, suit, arbitration or
proceeding. There are also no judgments, decrees, injunctions or orders of any
Governmental Entity against either Company, either Company's respective
properties or assets, or either Company's respective, directors, limited
liability company managers or officers (in their capacities as such).
2.14 Intellectual Property.
(a) Right to Intellectual Property. Except as set forth on Section
------------------------------ -------
2.14(a) of the Disclosure Schedule, each Company owns exclusively or has the
-------
exclusive right to use, free and clear of all liens, charges, claims and
restrictions, all technology, software, software tools, patents, trade secrets,
trademarks, service marks, trade names, copyrights, licenses, domain names,
know-how, specifications, financial and business plans, and other intangible
rights and proprietary information (the "Intellectual Property Rights") used in
the conduct of the Business as it is currently being conducted and listed on
Section 2.14(a) of the Disclosure Schedule. To the knowledge of the Sellers or
---------------
the Companies, neither Company is infringing upon or otherwise acting adversely
to the right or claimed right of any person under or with respect to any of the
Intellectual Property Rights. Section 2.14(a) of the Disclosure Schedule also
---------------
identifies each patent, trademark registration, service xxxx registration and
copyright registration with respect to the Intellectual Property Rights, or
application for any of the foregoing, which is owned or licensed by either
Company, has been issued to either Company or has been submitted by either
Company for issuance. To the knowledge of the Sellers or the Companies, all
applications for registration of such Intellectual Property Rights were true and
accurate at the time of filing and all fees to maintain such Intellectual
Property Rights, including without limitation, registration, maintenance,
prosecution and other professional fees incurred in connection therewith, have
been paid. The Intellectual Property Rights constitute all the intellectual
property used in the conduct of the Business as it is currently being conducted
and all intellectual property required for products and services under
development by either Company as of the date hereof.
(b) Protection. Each Company has taken all actions that are
----------
customary and reasonable in the industry to protect the confidentiality of all
trade secrets and confidential information (including, without limitation, know-
how, specifications, financial and business plans) comprising the Companies'
Intellectual Property Rights .
12
(c) Licenses of Intellectual Property Rights. There are no
----------------------------------------
outstanding licenses, options or agreements of any kind relating to the
Intellectual Property Rights of either Company held by any third party. Except
for publicly-available commercial software that the Companies may license for no
more than $100,000, neither Company is bound by or a party to any licenses,
options or agreements of any kind with respect to the Intellectual Property
Rights of any other person or entity.
(d) Disputes. To the knowledge of the Seller or the Companies, no
--------
person or entity has interfered with, infringed upon, misappropriated or
violated any of the Companies' Intellectual Property Rights. Neither Company
has received any communications alleging that either Company has violated or, by
conducting the Business as it is currently being conducted, would violate any
Intellectual Property Rights of any other person or entity. To the knowledge of
the Sellers or the Companies, there are no disputes involving contracts or
licenses between either Company and any other person with respect to the
Intellectual Property Rights.
(e) Restrictions. No Intellectual Property Rights or product,
------------
technology or service of either Company is subject to any order, action or
proceeding that restricts, or is reasonably expected to restrict in any manner,
the use, transfer, licensing or validity of any of such Intellectual Property
Rights, product, technology or service.
2.15 Insurance. Section 2.15 of the Disclosure Schedule sets forth a true
------------
and correct list of all insurance policies of any nature whatsoever maintained
by the Companies pertaining to the Business. Each Company maintains, with
responsible insurance carriers, fire, worker's compensation, property and
general liability insurance. Such policies are in full force and effect through
the Closing Date, all premiums with respect thereto have been paid to the extent
due and, except as otherwise set forth on Section 2.15 of the Disclosure
------------
Schedule, such policies, or other policies covering the same risks, have been in
full force and effect, without gaps, continuously since inception. Copies of
all such policies have been made available to the Buyer for its inspection.
Neither Company is in default under any of such policies, has not failed to give
any notice or to present any claim under any such policy in a due and timely
fashion and no notice of cancellation or termination has been received with
respect to such policy.
2.16 Property. Neither Company has ever owned or held title to any real
property other than leasehold estates. With respect to the property and assets
it leases, each Company is in material compliance with such leases and holds a
valid leasehold interest in such property and assets, free and clear of any
liens, encumbrances or claims of any kind whatsoever (except for liens for
current taxes not yet due and payable and liens of landlords that do not impair
either Company's leasehold interest). Section 2.16 of the Disclosure Schedule
------------
sets forth a list of (a) all leases or rental contracts under which either
Company is a lessee, lessor, sublessee or sublessor and (b) all owned or leased
equipment used by either Company in the operation of the Business. Each Company
has beneficial ownership of, and good and marketable title to or sufficient
rights to use for the purposes of the Business, all properties and assets used
in their operations or necessary for the conduct of the Business. Except as set
forth on Section 2.16 of the Disclosure Schedule, the properties and assets
------------
owned by the Companies are subject to no mortgages, liens, pledges, loans or
encumbrances of any kind whatsoever. All real and tangible personal property,
including equipment and fixtures currently used by the Companies in the
operation of the Business are, and at the Closing Date will be, in good
operating condition and repair and are
13
adequate and suitable for the purposes for which they are currently being used.
All improvements on leased property used by the Companies in the operation of
the Business and the current use thereof are in material accordance with all
applicable laws and the agreements under which such improvements are leased.
2.17 Material Contracts.
(a) List of Company Material Contracts. Section 2.17(a) of the
---------------------------------- ---------------
Disclosure Schedule sets forth, as of the date hereof, whether written or oral,
a true, correct and complete list of:
(i) Each contract between either Company and any party to whom such
Company provides products or services involving more than $10,000 in
consideration for any twelve month period;
(ii) Each contract (except for employment or personnel-related
agreements) between either Company and any party to whom such Company is
obligated to pay more than $10,000 in consideration for any twelve month period.
(iii) Each contract, agreement and commitment, whether or not fully
performed, pursuant to which either Company has acquired or disposed of a
material portion of its business or assets at any time since inception;
(iv) Each agreement containing covenants not to compete on the part
of either Company or otherwise restricting the ability of either Company in any
material way to engage in the Business and each confidentiality agreement to
which either Company is a party;
(v) Each note, mortgage, indenture, letter of credit, guarantee,
performance bond, sale-leaseback agreement and any other agreement or instrument
for or relating to any lending or borrowing (including assumed debt) entered
into by either Company or pursuant to which any properties or assets of the
Seller are pledged or mortgaged as collateral; and
(vi) Any other executory contracts and agreements which are material
to either Company (except for employment or personnel-related agreements).
The contracts and agreements which are heretofore required to be identified in
Section 2.17(a) of the Disclosure Schedule are hereinafter referred to as the
---------------
"Material Contracts." A true and complete copy of each Material Contract has
either been delivered to the Buyer by the Sellers or made available by the
Companies for inspection by the Buyer or its representatives or agents.
(b) Validity of Material Contracts.
------------------------------
(i) Each Material Contract is a valid, binding and enforceable
agreement and, to the knowledge of the Sellers or the Companies, the other
parties thereto;
14
(ii) There has not occurred any material breach or default (or event
which upon provision of notice or lapse of time or both would become such a
breach or default) under any of the Material Contracts on the part of either
Company;
(iii) To the knowledge of the Sellers or the Companies, there does
not exist any event that, with the giving of notice or the lapse of time or
both, would constitute a material breach of or a material default under such
Material Contract by any party other than the Companies and neither Company has
received or given notice of any such breach, default or event; and
(iv) As of the date hereof, to the knowledge of the Sellers or the
Companies, there is no reason to believe that either Company will be unable to
fulfill in all material respects all of its respective obligations under the
Material Contracts which remain to be performed after the date hereof.
(c) Third Party Consents. Except as set forth in Section 2.17(c) of
-------------------- ---------------
the Disclosure Schedule, no consent, waiver or approval of any party to a
Material Contract is necessary for the execution and delivery of this Agreement
or the completion by the Seller of the transactions contemplated hereby on the
Closing Date.
2.18 Governmental Permits and Licenses. Section 2.18 of the Disclosure
------------
Schedule contains a true and complete list of the governmental permits,
licenses, franchises and other certificates, consents and authorizations (the
"Permits") that are required for and are material to the operation of the
Business as such Business is currently conducted. All of the Permits are, and
as of the Closing Date will be, valid and in full force and effect and the
continuing validity and effectiveness of the Permits will not be affected by the
transactions contemplated by this Agreement. The Sellers and the Companies have
provided the Buyer with true, correct and complete copies of each Permit. Each
Company is and has been in compliance in all respects with all material
conditions or requirements of such Permits and have not been notified by any
Governmental Entity or licensing authority that such Governmental Entity or
licensing authority intends to cancel, terminate or modify any of such Permits.
2.19 Compliance with Law. The conduct of the Business by the Companies
has not violated and does not violate in any material respect any federal,
state, local or foreign laws, statutes, ordinances, rules, regulations, decrees,
orders, permits or other similar items in force on the date hereof including,
without limitation, federal, state, municipal and foreign laws and regulations
relating to (a) the protection of the health and safety of employees, (b) equal
employment opportunity, (c) the sale of food and beverages and (d) any aspect of
the Business. There are no unresolved notices of deficiency or charges of
violation brought or, to the knowledge of the Sellers or the Companies,
threatened against either Company, including under any federal, state, local or
foreign regulation or otherwise, which individually or in the aggregate will
have a Material Adverse Effect, or interfere with the maintenance or reissuance
of any of the Permits held by the Companies and there are no facts or
circumstances known to the Sellers or the Companies that would constitute a
reasonable basis on which any such proceedings, notices or actions may be
instituted, issued or brought hereafter.
15
2.20 Health Matters. Section 2.20 of the Disclosure Schedule sets forth a
------------
true and complete list of each health authority (including, without limitation,
the Department of Health) which either has conducted within the past two years,
or has informed either Company that it intends to conduct, a review, visit or
investigation of any of the Companies' sites that culminated, or will culminate,
in a written report or is otherwise known to the Sellers or the Companies,
including the date and specific subject matter of such review, visit or
investigation. In the case of a completed review, visit or investigation, a
detailed summary of the authority's findings is included in Section 2.20 of the
------------
Disclosure Schedule. There is no existing, or to the knowledge of the Sellers
or the Companies threatened, orders or requests by any health authority
requiring or requesting action by either Company in connection with the
operation of the Business. The Sellers and the Companies have provided the
Buyer with true and complete copies of all correspondence with any health
authority in connection with the operation of the Business.
2.21 Environmental Matters. Each Company is in material compliance with
all applicable federal, state, local and foreign laws and regulations relating
to pollution or the protection of human health or the environment (including,
without limitation, ambient air, surface water, ground water, land surface or
subsurface strata) (collectively, "Environmental Laws"), which compliance
includes, but is not limited to, the possession by each Company of all Permits
and other authorizations required under applicable Environmental Laws and
compliance with the terms and conditions thereof. To the knowledge of the
Sellers or the Companies, there are no circumstances relating to the Business as
it is currently conducted that are reasonably likely to prevent or interfere
with the Buyer from materially complying with all applicable Environmental Laws
after the Closing. Neither Company has received written notice of or is the
subject of any action, cause of action, claim, investigation, demand or notice
by any person or entity alleging liability under or noncompliance with any
Environmental Law (an "Environmental Claim"). There are no Environmental Claims
pending or, to the knowledge of the Sellers or the Companies, threatened against
either Company or any person or entity whose liability for any Environmental
Claim may be assumed by either Company, either by operation of law or otherwise.
2.22 Brokers or Finders. None of the Sellers or Companies have retained
any broker or finder or agreed to become obligated to pay any fee or commission
to any broker or finder for or on account of the transactions contemplated by
this Agreement.
2.23 Transactions with Affiliates. Except as set forth on Section 2.23 of
------------
the Disclosure Schedule, no affiliate, director, officer or employee of any of
the Sellers or the Companies nor any member of any such person's immediate
family or any entity in which any of the foregoing has an interest (each, a
"Related Party") is presently, or since December 31, 1999 has been, a party to
any Material Contract or, to the knowledge of the Sellers or the Companies, any
other arrangement (a) providing for the furnishing of services (other than as a
director, officer or employee) or assets by, (b) providing for the rental of
property from, or (c) otherwise requiring payments to (other than for (i)
dividends or distributions to any stockholder in his or her capacity as such or
(ii) compensation to any director, officer or employee in his or her capacity as
such) such Related Party. Each such transaction identified on Section 2.23 of
------------
the Disclosure Schedule is on terms no less favorable to the Companies than
could be obtained from an unaffiliated third party.
16
2.24 Various Relationships. Except as set forth on Section 2.24 of the
------------
Disclosure Schedule, neither Company has received any notice that any of the
material customers, distributors or suppliers of either Company or the Business
intends to cease retaining, purchasing from, selling to or dealing with either
Company in the manner in which such transactions have previously occurred or
that any such customer, distributor or supplier intends to alter in any
significant respect the amount of such retention, purchases or sales or the
extent of dealings with either Company.
2.25 Banking Facilities. Section 2.25 of the Disclosure Schedule contains
------------
a true and complete list of:
(a) Each bank, savings and loan or other institution in which each
Company has a deposit, custodial, trust or similar account or safety deposit or
lock box account and the numbers and types of the accounts or safety deposit
boxes maintained by the Companies at such institutions; and
(b) The names of all persons authorized to draw on each such account
or to have access to any such safety deposit or lock box facility, together with
a description of any limitations on such authority of each such person with
respect thereto.
2.26 Minute Books and Stock Records. Each Company has delivered or made
available to the Buyer true and complete copies of (a) the minute books of such
Company, which contain true and complete records of all meetings of the board of
directors, committees, limited liability company managers, stockholders, members
and all actions by written consent since the date of incorporation or
organization and reflect accurately in all respects all actions with respect to
all transactions referred to in such minutes and (b) the stock and membership
interest record books of such Company, which contain true and complete records
of all stock and membership interest transactions of such Company.
2.27 Totality of Assets. The assets of the Companies which the Buyer will
acquire at the Closing by virtue of the transactions contemplated under this
Agreement include all of the assets or rights used in connection with, or
necessary for, the continued operation of the Business in the same manner as
currently operated.
2.28 Disclosure. No statement by the Sellers or the Companies contained
in this Agreement, including, without limitation, the Disclosure Schedule and
the other exhibits and schedules attached hereto, contains any untrue statement
of a material fact or omits to state a material fact necessary in order to make
the statements contained herein or therein not misleading.
17
Article III
Representations and Warranties of the Buyer
The Buyer represents and warrants to the Sellers as set forth below.
3.1 Organization and Qualification.
(a) Organization. The Buyer is duly organized, validly existing and
------------
in good standing under the laws of the jurisdiction of its incorporation. The
Buyer has heretofore delivered or made available to the Seller accurate and
complete copies of its Certificate of Incorporation and Bylaws as currently in
full force and effect.
(b) Qualification. The Buyer is, or on or prior to the Closing will
-------------
be, duly qualified or licensed and in good standing to do business the States of
Arizona and Oklahoma.
3.2 Authority and Enforceability. All corporate action on the part of the
Buyer and its respective directors, officers and stockholders necessary for the
authorization, execution and delivery of this Agreement and the other
Transaction Documents, the performance of all of the Buyer's obligations
hereunder and thereunder and the authorization and approval of the transactions
contemplated by this Agreement have been or will be taken prior to the Closing
Date. This Agreement and the other Transaction Documents, when executed and
delivered, will constitute valid and legally binding obligations of the Buyer
enforceable in accordance with their respective terms, subject to the
Enforceability Exceptions.
3.3 Consents and Approvals of Governmental Authorities. No consent,
approval, order or authorization of, or registration, declaration or filing
with, any federal, state, local or foreign governmental or regulatory authority
is required to be made or obtained by the Buyer in connection with the execution
and delivery of this Agreement by the Buyer or the completion by the Buyer of
the transactions contemplated hereby, except for such consents, approvals,
orders or authorizations which if not obtained, or registrations, declarations
or filings which if not made, would not have a material adverse effect on the
Buyer.
3.4 No Breach. The execution of this Agreement by the Buyer and the
completion of the transactions contemplated hereby by the Buyer will not (a)
conflict with or result in a breach of any provision of the Buyer's Certificate
of Incorporation or Bylaws; (b) conflict with, violate or result in a breach of
the terms, conditions or provisions of, or constitute a default (or event which
upon provision of notice or lapse of time or both would become such a default)
or result in the acceleration of any obligation under, or result in the
cancellation or modification of, or permit termination of, any agreement, lease,
license, note, contract or instrument to which the Buyer is bound; (c)
accelerate, or constitute an event entitling the holder of any indebtedness of
the Buyer to accelerate the maturity of any such indebtedness, permit
subordination of any such indebtedness of the Buyer to any other indebtedness of
the Buyer to which the Buyer was not already subordinated; (d) conflict with or
violate the provisions of any law or any judgment, decree, order, arbitration
award, regulation or rule of any court or Governmental Entity or any covenant or
restriction binding upon the Buyer; (e) violate or result in the modification,
termination or loss of any permit, license or other authorization applicable to
the Buyer; or
18
(f) result in the creation of any lien, charge or encumbrance upon any equity
interest in or assets of the Buyer under any agreement or instrument to which
the Buyer is a party or by which the Buyer is bound.
3.5 Purchase for Own Account. The M&B Membership Interests and the shares
of MBPCR Capital Stock are being purchased for the Buyer's own account for long-
term investment purposes and not for the interest of any other person. The
Buyer has no current intention to resale, distribute or transfer the M&B
Membership Interests or the shares of MBPCR Capital Stock to any other person.
3.6 Brokers or Finders. The Buyer has not retained any broker or finder
or agreed to become obligated to pay any fee or commission to any broker or
finder for or on account of the transactions contemplated by this Agreement.
Article IV
Pre-Closing Covenants
4.1 Conduct of Business. Except to the extent that the Buyer may consent
in writing, until the earlier of (a) the Closing Date or (b) the termination of
this Agreement, each Company shall conduct the operations of the Business in
accordance with the ordinary and usual course of business, consistent with past
practice. Each Company shall use all reasonable efforts to preserve intact its
business organizations, to maintain its present and planned businesses, to keep
available the services of its officers and employees and to maintain
satisfactory relationships with licensors, licensees, suppliers, contractors,
distributors, consultants, customers, and others having business relationships
with such Company. Without limiting the generality of the foregoing, and except
as otherwise expressly provided in or contemplated by this Agreement, prior to
the Closing Date, neither Company may, without the prior written consent of the
Buyer:
(a) amend its Articles of Organization, Articles of Incorporation or
Bylaws;
(b) authorize for issuance, issue, sell, pledge, or deliver (whether
through the issuance or granting of additional options, warrants, commitments,
subscriptions, rights to purchase, or otherwise) any stock of any class,
ownership interest of any kind or any securities convertible into shares of
stock or ownership interests;
(c) split, combine, or reclassify any shares of its capital stock or
ownership interests, declare, set aside, or pay any dividend or other
distribution (whether in cash, stock, or property or any combination thereof) in
respect of its capital stock or equity interests, or redeem or otherwise acquire
any shares of its capital stock, other securities or equity interests, or amend
or alter any material term of any of its outstanding securities or equity
interests;
(d) create, incur, or assume any indebtedness for borrowed money, or
assume, guarantee, endorse, or otherwise become liable or responsible (whether
directly, contingently, or otherwise) for the obligations of any other person,
or make any loans, advances or capital contributions to, or investments in, any
other person; or create, incur or assume any lien on any material asset;
19
(e) (i) increase in any manner the compensation of any of its
directors, limited liability company managers, officers, employees,
stockholders, or consultants, or accelerate the payment of any such compensation
(whether or not any such acceleration is consistent with past practice); (ii)
pay or accelerate or otherwise modify the payment, vesting, exercisability,
matching amount, or other feature or requirement of any pension, retirement
allowance, severance, change of control, stock option, or other employee benefit
not required by any existing plan, agreement, or arrangement or by applicable
law to any such director, limited liability company manager, officer, employee,
stockholder, or consultant, whether past or present; or (iii) commit itself to
any additional or increased pension, profit-sharing, bonus, incentive, deferred
compensation, stock purchase, stock option, stock appreciation right, group
insurance, severance, change of control, retirement or other benefit, plan,
agreement, or arrangement, or to any employment or consulting agreement, with or
for the benefit of any person, or amend any of such plans or any of such
agreements in existence on the date hereof;
(f) (i) sell, transfer, mortgage, or otherwise dispose of or encumber
any real or personal property, (ii) pay, discharge, or satisfy any material
claim, liability, or obligation (absolute, accrued, contingent, or otherwise),
or (iii) cancel any debts or waive any claims or rights, which involve payments
or commitments to make payments that individually exceed $5,000 or, in the
aggregate, exceed $10,000;
(g) acquire or agree to acquire (i) by merging or consolidating with,
or by purchasing a substantial portion of the assets of, or by any other manner,
any portion of the assets of, or by any other manner, any business of any
corporation, partnership, joint venture, association, or other business
organization or division thereof or (ii) any assets except purchases of
inventory in the ordinary course of business consistent with past practice;
(h) make or agree to make any new capital expenditure or expenditures
beyond that, individually, is in excess of $5,000 or, in the aggregate, are in
excess of $10,000;
(i) enter into, amend, or terminate any joint ventures or any other
agreements, commitments or contracts;
(j) enter into or terminate, or amend, extend, renew, or otherwise
modify (including, but not limited to, by default or by failure to act) any
distribution, independent sales representative, noncompetition, licensing,
research and development, supply or similar contract, agreement or
understanding;
(k) remove or permit to be removed from any building, facility, or
real property any equipment, fixture, vehicle or other personal property or
parts thereof;
(l) alter or revise its accounting principles, procedures, methods,
or practices, except as required by a change in GAAP and concurred with by
Easyriders' independent public accountants;
(m) institute, settle, or compromise any claim, action, suit, or
proceeding pending or threatened by or against it involving amounts in excess of
$10,000, at law or in equity or before any federal, state, local, foreign, or
other governmental department, commission, board, bureau, agency, or
instrumentality;
20
(n) distribute or otherwise circulate any notices, directives or
other communications directed to all or groups of customers, vendors, employees,
distributors, or others associated with its business relating to the
transactions contemplated hereby or to the operation of the Business after the
Closing Date;
(o) knowingly take any action that would cause any condition set
forth in Article V not to be met; or
(p) agree, whether in writing or otherwise, to do any of the
foregoing.
4.2 No Solicitation.
(a) No Solicitation of Alternative Proposal. From the date hereof
---------------------------------------
until the earlier of (i) the Closing Date or (ii) the termination of this
Agreement, none of the Sellers or the Companies will, and none will permit their
respective affiliates, stockholders, directors, limited liability company
managers, officers, employees, or agents to, directly or indirectly, solicit,
encourage, initiate, or participate in any way in discussions or negotiations
with, or knowingly provide any information to, any corporation, partnership,
person, or other entity or group (other than the Buyer or any affiliate or agent
of the Buyer) concerning any merger, sale or licensing of any significant
portion of the assets, sale of shares of capital stock or capital interests
(including without limitation any proposal or offer to any of the Sellers'
stockholders or affiliates), or similar transactions involving either Company,
either Company's assets or the Business (an "Alternative Proposal"), or
otherwise facilitate any effort or attempt to make or implement an Alternative
Proposal.
(b) Notification. The Sellers and the Companies shall promptly
------------
communicate to the Buyer the terms of any proposal or inquiry that any of them
has received or may receive in respect of any transaction or of any information
requested from it or of any negotiations or discussions being sought to be
initiated with any of the Sellers or the Companies concerning either Company or
any of their respective assets and may inform any third party who contacts any
of the Sellers or the Companies on an unsolicited basis concerning an
Alternative Proposal that the Sellers and the Companies are obligated hereunder
to disclose the Alternative Proposal to the Buyer.
(c) Termination of Discussions. The Sellers and the Companies shall
--------------------------
immediately cease and cause to be terminated any existing activities,
negotiations or discussions with any third party conducted prior to the date of
this Agreement with respect to any Alternative Proposal.
4.3 Access to Management, Properties and Records.
(a) Access to Information. From the date of this Agreement until the
---------------------
earlier of (i) the Closing Date or (ii) the termination of this Agreement, the
Sellers and the Companies shall afford the officers, attorneys, accountants and
other authorized representatives of the Buyer free and full access upon
reasonable notice and during normal business hours to all management personnel,
offices, restaurants, sites, properties, books and records of the Companies, so
that the Buyer may have full opportunity to make such investigation as it may
desire to make of the management, business, properties and affairs of the
Companies, and the Buyer shall be permitted
21
to make abstracts from, or copies of, all such books and records. The Sellers
and the Companies shall furnish to the Buyer such financial and operating data
and other information relating to the Business as the Buyer may reasonably
request.
(b) Release of Official Records. From the date of this Agreement
---------------------------
until the Closing Date, the Sellers and the Companies shall authorize the
release to the Buyer of all files pertaining to the Companies or the Business or
the operations of the Companies held by any federal, state, county or local
authorities, agencies or instrumentalities.
(c) Breaches. The Sellers and the Companies shall give prompt notice
--------
to the Buyer of (i) the occurrence or nonoccurrence of any event the occurrence
or nonoccurrence of which has caused or would be likely to cause any condition
contained in Article V to not be satisfied at or prior to the Closing Date and
---------
(ii) any material failure by any of the Sellers or the Companies to comply with
or satisfy in any material respect any covenant, condition or agreement to be
complied with or satisfied by it hereunder; provided, however, that the delivery
-------- -------
of any notice pursuant to this Section 4.3(c) will not cure such breach or
--------------
noncompliance or limit or otherwise affect the remedies available hereunder to
the party receiving such notice.
4.4 Notices, Consents and Approvals . The Sellers shall obtain, at their
cost and expense (except for any costs and expenses associated with the transfer
of liquor licenses to the Buyer, which will be borne by the Buyer), all of the
waivers, Permits, consents, approvals, releases or other authorizations from
third parties and Governmental Entities, and effect all such registrations,
filings and notices with or to third parties or Governmental Entities as set
forth on Schedule 4.4 (the "Required Consents").
------------
4.5 Compliance with Laws and Regulations. Each Company shall comply, in
all material respects, with all laws, rules and regulations which are applicable
to it and its conduct of the Business, and shall perform and comply with all
contracts, commitments and obligations by which it is bound.
4.6 Insurance. Each Company shall maintain through and including the
Closing Date insurance coverage that is substantially similar to the insurance
coverage under the insurance policies identified in Section 2.14 of the
------------
Disclosure Schedule.
4.7 Takeover Statutes. If any "fair price," "moratorium," "control share
acquisition" or other similar antitakeover statute or regulation is or may
become applicable to the transactions contemplated by this Agreement or the
other Transaction Documents, the Sellers, the Companies and their respective
boards of directors shall promptly grant such approvals and use all reasonable
efforts to take such lawful actions as are necessary so that such transactions
may be completed as promptly as practicable on the terms contemplated by this
Agreement or the other Transaction Documents, as the case may be, and use all
reasonable efforts to otherwise take such lawful actions to eliminate or
minimize the effects of such statute, law, rule or regulation on the
transactions hereby contemplated.
4.8 Fairness Opinion. On or prior to the Closing, the Sellers shall
arrange to have a fairness opinion (the "Fairness Opinion") prepared and
delivered by a reputable firm with experience in such matters. The Fairness
Opinion must state that, in the opinion of such firm,
22
this Agreement and the transactions contemplated hereby are fair to the Sellers
and the stockholders of the Sellers, from a financial point of view. The cost of
the Fairness Opinion will be borne equally by the Sellers, on the one hand, and
the Buyer and Culinary, on the other hand. Promptly upon receipt of the invoice
for the Fairness Opinion, the Buyer and Culinary shall directly remit to such
firm their share of the cost of the Fairness Opinion.
4.9 Further Actions. Subject to the terms and conditions herein
provided and without being required to waive any conditions herein (whether
absolute, discretionary, or otherwise), each of the parties hereto shall use all
reasonable efforts to take, or cause to be taken, all action, and to do, or
cause to be done, all things necessary, proper, or advisable to complete and
make effective the transactions contemplated by this Agreement.
Article V
Closing Conditions
5.1 Conditions to Obligations of the Sellers and the Buyer. The
respective obligations of each party hereto to complete the transactions
contemplated by this Agreement will be subject to the fulfillment on or prior to
the Closing Date of the following conditions:
(a) No Injunction. Neither the Sellers nor the Buyer may be subject
-------------
to any statute, rule or regulation or any final order, decree or injunction of a
court of competent jurisdiction that (i) renders any transaction contemplated by
this Agreement illegal; (ii) would impose any material limitation on the ability
of the Buyer effectively to exercise full rights of ownership of either Company,
either Company's assets or the Business; or (iii) render the Seller or the Buyer
incapable of completing the transactions contemplated by this Agreement.
(b) No Pending Legal Action. No litigation seeking the issuance of a
-----------------------
final order, decree or injunction of a court of competent jurisdiction for
relief against the Seller or the Buyer if the transactions contemplated by this
Agreement are completed, may be pending which, in the good faith judgment of the
Seller or the Buyer has a reasonable probability of resulting in such order,
decree or injunction and such relief would have a Material Adverse Effect.
(c) Governmental Approvals. All authorizations, consents, orders or
----------------------
approvals of, or declarations or filings with, or expiration of waiting periods
imposed by, any Governmental Entity necessary for the completion of the
transactions contemplated by this Agreement must have been filed, occurred or
been obtained, other than filings and approvals relating to the transactions
contemplated by this Agreement if failure to make such filing or obtain such
approval would not have a Material Adverse Effect.
(d) No Increase in Liabilities. No increase in the liabilities of
--------------------------
the Companies has caused the aggregate long-term indebtedness of the Companies
to exceed $5,600,000.00 and the aggregate accounts payable liabilities of the
Companies to exceed $1,400,000.00.
5.2 Conditions to Obligations of the Buyer. The obligations of the Buyer
to complete the transactions contemplated by this Agreement at the Closing are
subject to the satisfaction of the following conditions, unless waived by the
Buyer:
23
(a) Representations and Warranties; Performance of Obligations. The
----------------------------------------------------------
representations and warranties made by the Sellers in Article II hereof must be
----------
true and correct in all material respects on the Closing Date, with the same
force and effect as if they had been made on and as of said date; provided,
--------
however, that if any portion of any such representation or warranty is already
-------
qualified by materiality, for purposes of determining whether this condition has
been satisfied with respect to such portion of such representation or warranty,
such portion of such representation or warranty as so qualified must be true and
correct in all respects. The Sellers and the Companies must have performed and
complied with all obligations, covenants and conditions herein required to be
performed or complied with by each of them on or prior to the Closing Date.
(b) No Material Adverse Effect. There must not have occurred any
--------------------------
event that would have a Material Adverse Effect from the date hereof through the
Closing Date.
(c) Opinion of the Sellers' Counsel. The Buyer must have received an
-------------------------------
opinion, on and dated as of the Closing Date, from Brand, Xxxxxx & Xxxxxxx LLP,
in substantially the form attached hereto as Exhibit A.
---------
(d) Financing. On or prior to the Closing, the Buyer must have
---------
obtained adequate financing, on commercially reasonable terms acceptable to the
Buyer, to complete the Closing.
(e) Consents. On or prior to the Closing, each Company must have
--------
obtained and delivered to the Buyer duly executed copies of all the Required
Consents, in form and substance reasonably satisfactory to the Buyer.
(f) Compliance Certificate. Each Seller must have delivered to the
----------------------
Buyer a compliance certificate executed by the President of each Seller, on and
dated as of the Closing Date, certifying to the fulfillment of the conditions
specified in Sections 5.2(a), (b) and (e).
----------------------------
(g) Solvency Certificate. Each Seller must have delivered to the
--------------------
Buyer a solvency certificate executed by the Treasurer of each Seller, on and
dated as of the Closing Date, in the form attached hereto as Exhibit B.
---------
(h) Fairness Opinion. The Sellers must have received the Fairness
----------------
Opinion.
(i) Resignations. Each Company must have delivered to the Buyer the
------------
resignations of the respective directors and officers of such Company, effective
as of the Closing Date.
(j) Good Standing Certificates. Each of the Sellers and the Companies
--------------------------
must have delivered to the Buyer a certificate of the Secretary of State of such
entity's jurisdiction of organization as to the legal existence and good
standing (including tax) of such entity in such jurisdiction, which certificate
must be accompanied by a bring-down confirmation on the Closing Date if the
certificate is not dated as of the Closing Date.
(k) Qualifications. Each Company must have delivered to the Buyer
--------------
certificates of appropriate governmental officials in each state in which such
Company is
24
required to qualify to do business as a foreign corporation as to the due
qualification and good standing (including tax) of such Company in each such
jurisdiction, which certificates must be accompanied by bring-down confirmations
on the Closing Date if the certificates are not dated as of the Closing Date.
(l) Cancellation of Indebtedness. Easyriders must have delivered to
----------------------------
the Buyer an instrument, in form and substance reasonably satisfactory to the
Buyer, irrevocably canceling and waiving the long-term intercompany obligation
of M&B in favor of Easyriders in the amount of approximately $977,474.00.
(m) Release of Pledges to Xxxxxx and Xxxxxx. Newriders must have
---------------------------------------
delivered to the Buyer an instrument of release, in the form attached hereto as
Exhibit C, from Xxxxxx Xxxxxx and Xxxx X. Xxxxxx with regard to the M&B
---------
Membership Interests pledged to Messrs. Xxxxxx and Xxxxxx.
(n) Proceedings and Documents. All corporate and other proceedings in
-------------------------
connection with the transactions contemplated at the Closing, and all documents
and instruments incident to such transactions, must be reasonably satisfactory
in substance and form to the Buyer's legal counsel.
5.3 Conditions to Obligations of the Sellers. The obligations of each
Seller to complete the transactions contemplated by this Agreement are subject
to the satisfaction of the following conditions, unless waived by such Seller:
(a) Representations and Warranties; Performance of Obligations. The
----------------------------------------------------------
representations and warranties made by the Buyer in Article III hereof must be
-----------
true and correct in all material respects on the Closing Date, with the same
force and effect as if they had been made on and as of said date; provided,
--------
however, that if any portion of any such representation or warranty is already
-------
qualified by materiality, for purposes of determining whether this condition has
been satisfied with respect to such portion of such representation or warranty,
such portion of such representation or warranty as so qualified must be true and
correct in all respects. The Buyer must have performed and complied with all
obligations, covenants and conditions herein required to be performed or
complied with by them on or prior to the Closing Date.
(b) Compliance Certificate. The Buyer must have delivered to each
----------------------
Seller a certificate executed by the President of the Buyer, on and dated as of
the Closing Date, certifying to the fulfillment of the conditions specified in
Section 5.3(a).
--------------
(c) Knyal Note. The Buyer must have assumed from Newriders the Knyal
----------
Note.
(d) Proceedings and Documents. All corporate and other proceedings
-------------------------
in connection with the transactions contemplated at the Closing, and all
documents and instruments incident to such transactions, must be reasonably
satisfactory in substance and form to the Seller's legal counsel.
25
Article VI
Post-Closing Covenants
6.1 Proprietary Information. From and after the Closing Date, the
Sellers shall hold in confidence, and shall cause their respective affiliates,
stockholders, directors, officers, employees and agents to hold in confidence,
all knowledge, information and documents of a confidential nature or not
generally known to the public with respect to the Companies and the Business to
be acquired hereby by the Buyer (including without limitation the financial
information, Intellectual Property Rights, technical information or data
relating to the materials, products or components sold, or the services offered,
by the Companies and names of customers of the Business) (collectively,
"Proprietary Information"). Neither Seller will disclose or make use of, and
both Sellers shall cause their respective affiliates, stockholders, directors,
officers, employees and agents not to disclose or make use of, Proprietary
Information without the prior written consent of the Buyer, except to the extent
that such knowledge, information or documents has become public knowledge other
than through a breach of this Agreement by the Sellers or their respective
affiliates, stockholders, directors, limited liability company managers,
officers, employees or agents.
6.2 Solicitation and Hiring of Employees . For a period of seven years
after the Closing Date, neither the Sellers nor any of their affiliates will,
either directly or indirectly as a stockholder, investor, partner, director,
officer, employee or otherwise, (a) solicit or attempt to induce any Restricted
Employee (as defined below) to terminate his employment with the Companies, the
Buyer or any affiliate of the Buyer or (b) hire or attempt to hire any
Restricted Employee without the prior written consent of the Buyer. For
purposes of this Agreement, a "Restricted Employee" means any person who was
employed by either Company on the date of this Agreement.
6.3 Noncompetition, Referral of Customers .
(a) Noncompete. For a period of seven years after the Closing Date,
----------
neither the Sellers nor any of their affiliates will either directly or
indirectly as a stockholder, investor, partner, director, officer, employee,
consultant or otherwise, (i) design, develop, manufacture, market, sell, perform
or offer anywhere in the world any material, product, component or service which
is similar to or competitive with any material, product, component or service
developed (or under development), manufactured, marketed, sold or offered by
either Company on or prior to the Closing Date or (ii) engage anywhere in the
world in any business similar to or competitive with the Business as conducted
on the date of this Agreement or during the two years prior to the Closing Date.
Notwithstanding the foregoing, the operation of Easyriders Cafe restaurants,
consistent with their past practice and theme (the "Cafes"), will not be deemed
to be prohibited by this Section 6.3(a); provided that (x) no Cafe is operated
-------------- --------
within ten miles of the Business and (y) no Cafe will carry a theme or dedicate
more than 10% of its menu items, product offerings or culinary concepts to any
theme, items, offerings or concepts that are similar to or competitive with any
theme, menu items, product offerings or culinary concepts of the Business on or
prior to the Closing Date, including, without limitation, Southwestern cuisine
and barbecue products.
26
(b) Reasonableness. Each Seller acknowledges that the duration and
--------------
geographic scope of the noncompetition provision set forth in this Section 6.3
-----------
are reasonable. In the event that any court determines that the duration or the
geographic scope, or both, are unreasonable and that such provision is to that
extent unenforceable, the provision shall remain in full force and effect for
the greatest time period and in the greatest area that would not render it
unenforceable. The parties hereto intend that this noncompetition provision
will be deemed to be a series of separate covenants, one for each and every
county of each and every state or province of each and every country.
(c) Referral. Each Seller shall, and shall cause its affiliates,
--------
stockholders, directors, officers, employees and agents to, refer all inquiries
regarding the Business to the Companies and the Buyer and neither Seller (nor
any of their respective affiliates) will independently pursue any such
inquiries. Each Seller shall notify its affiliates in writing promptly after
the Closing Date that the Companies and the Business have been sold to the
Buyer, and such notice will inform such affiliates of their obligations under
this Section 6.3(c). Such notice must be in such form and substance reasonably
--------------
satisfactory to the Buyer.
6.4 Transfer Taxes. The Sellers shall bear any direct or indirect
transfer taxes attributable to the transfer of the M&B Membership Interests or
the shares of MBPCR Capital Stock. The parties hereto shall cooperate in good
faith with each other, and to use their commercially reasonable efforts, to
minimize the transfer taxes.
6.5 Use of Name and Intellectual Property. The Sellers shall, on their
own behalf and on behalf of their affiliates, from and after the Closing, not
use any trademark, name or other proprietary right (including without limitation
the name "El Paso Bar-B-Que Company" and the Intellectual Property Rights
identified on Section 2.14(a) of the Disclosure Schedule) previously or
---------------
currently used by the Companies, or any derivation thereof. After the Closing,
the Sellers shall file all appropriate documentation with all Governmental
Entities in order to relinquish the their respective rights to any of the
foregoing.
6.6 Taxes.
(a) Filing of Tax Returns. All Tax Returns which relate to any taxes
---------------------
of either Company for periods ending on or before the Closing Date will be
prepared and filed by the Sellers. The Buyer shall reasonably cooperate with
the Sellers and upon the reasonable request of the Sellers shall make available
all necessary records and timely take all action necessary to allow the Sellers
to prepare and file the Tax Returns, in consultation with the Buyer, which they
are responsible for preparing.
(b) Refunds. The Sellers shall pay the Buyer any refund received by
-------
the Sellers in respect of any taxes for which the Sellers are not liable under
Section 8.1(a)(iii) hereof. Any such refund received by the Sellers for the
-------------------
account of the Buyer must be turned over to the Buyer within 30 days after such
refund is received.
(c) Section 338(h)(10) Election. If requested by the Buyer, the
---------------------------
Sellers shall join in making an election under Section 338(h)(10) of the Code
with respect to the acquisition of the MBPCR Capital Stock.
27
6.7 SEC Disclosures. For a period of one year after the Closing Date, the
Buyer shall use its commercially reasonable efforts to provide to Easyriders
such reasonable information concerning the Buyer, the Companies and the
transactions contemplated by this Agreement, as Easyriders may reasonably
request in writing, in order to fulfill Easyriders' disclosure obligations under
the Securities Exchange Act of 1934, as amended, as they relate to the
transactions contemplated by this Agreement.
6.8 Further Actions. In case at any time after the Closing Date any
further action is necessary or desirable to carry out the purposes of this
Agreement, the proper directors, limited liability company managers and officers
of the parties hereto shall take all such necessary action.
Article VII
Termination and Abandonment
7.1 Termination. This Agreement may be terminated at any time prior to
the Closing Date:
(a) by mutual written consent of the Buyer and Easyriders;
(b) by the Buyer (provided the Buyer is not in material breach of
this Agreement), if there has been a breach by any of the Sellers or the
Companies of any representation, warranty, covenant or agreement set forth in
this Agreement which is material and which the Sellers or the Companies fail to
cure within 10 business days after written notice thereof is given by the Buyer
(except that no cure period will be provided for a breach by the Sellers or the
Companies which by its nature cannot be cured);
(c) by Easyriders (provided neither Seller is in material breach of
this Agreement), if there has been a breach by the Buyer of any representation,
warranty, covenant or agreement set forth in this Agreement which is material
and which the Buyer fails to cure within 10 business days after written notice
thereof is given by the Sellers (except that no cure period will be provided for
a breach by the Buyer which by its nature cannot be cured);
(d) by the Buyer, by giving written notice to Easyriders, if the
Closing has not occurred on or before October 5, 2000 by reason of the failure
of any condition under Sections 5.1 or 5.2 (unless the failure results primarily
-------------------
from a breach of the Buyer of any representation, warranty, covenant or
agreement set forth in this Agreement or the Buyer's failure to fulfill a
condition to the Closing or other default);
(e) by Easyriders, by giving written notice to the Buyer, if the
Closing has not occurred on or before October 5, 2000 by reason of the failure
of any condition under Sections 5.1 or 5.3 (unless the failure results primarily
-------------------
from a breach of any of the Sellers or the Companies of any representation,
warranty, covenant or agreement set forth in this Agreement or any of the
Sellers' or any of the Companies' failure to fulfill a condition to the Closing
or other default); or
(f) by either the Buyer or Easyriders if a court of competent
jurisdiction or any Governmental Entity has issued a final nonappealable order,
decree, or ruling, or taken any
28
other action, having the effect of permanently restraining, enjoining, or
otherwise prohibiting any of the transactions contemplated by this Agreement.
7.2 Effect of Termination. In the event of the termination of this
Agreement pursuant to any paragraph of Section 7.1, the obligations of the
-----------
parties to complete the transactions contemplated by this Agreement will expire
and none of the parties will have any further obligations under this Agreement.
Notwithstanding the foregoing, (a) in the event of the termination of this
Agreement pursuant to any paragraph of Section 7.1 that is caused by a material
-----------
breach of a party, the party whose material breach was the basis for the
termination will not be relieved from any liability for its material breach
hereof, and the other party will have no further obligations under this
Agreement and (b) the rights and obligations of each party under Section 7.2
-----------
will survive and continue, if applicable.
Article VIII
Indemnification
8.1 Indemnification by the Sellers, the Buyer and Culinary.
(a) Indemnification by the Sellers. The Sellers, jointly and
------------------------------
severally, shall indemnify the Buyer in respect of, and hold the Buyer harmless
against, any and all debts, obligations and other liabilities (whether absolute,
accrued, contingent, fixed or otherwise, or whether known or unknown, or due or
to become due or otherwise), monetary damages, fines, fees, penalties, interest
obligations, deficiencies, diminutions in value of assets, losses and expenses
(including without limitation amounts paid in settlement, court costs, costs of
investigators, reasonable fees and expenses of attorneys, accountants, financial
advisors and other experts, and other expenses of litigation) ("Damages")
incurred or suffered by the Buyer or any of its affiliates resulting from,
relating to, constituting or arising out of:
(i) any misrepresentation or breach of warranty by any of the
Sellers or the Companies contained in this Agreement, any other Transaction
Document, the Disclosure Schedule or in any certificate, document or instrument
furnished by or on behalf of any of the Sellers or the Companies pursuant to
this Agreement or in connection with the transactions contemplated hereby;
(ii) any failure of any of the Sellers or the Companies to perform
any covenant or agreement contained in this Agreement or any other Transaction
Document;
(iii) the payment of any taxes (including interest and penalties) of
any kind or nature imposed, whether before or after the Closing (except such
taxes, if any, that are adequately reserved against in the Financial
Statements), by any government or subdivision thereof upon the Business prior to
the Closing or upon any of the Companies respective properties or assets as they
existed as of or any time prior to the Closing Date and the transactions
contemplated by this Agreement. Whenever it is necessary for the purposes of
this Section 8.1(a)(iii) to determine the portion of any taxes imposed on or
-------------------
incurred by either Company for a taxable period beginning on or before and
ending after the Closing Date which is allocable to the period prior to the
Closing, the determination will be made, the case of property or ad valorem
taxes or franchise taxes (which are not measured by, or based upon, net income),
29
on a per diem basis and, in the case of other taxes, by assuming that the period
prior to the Closing constitutes a separate taxable period of such Company and
by taking into account the actual taxable events occurring during such period
(except that exemptions, allowances and deductions for a taxable period
beginning on or before and ending after the Closing Date that are calculated on
an annual or periodic basis, such as a deduction for depreciation, will be
apportioned to the pre-Closing period ratably on a per diem basis). Any payment
made with respect to taxes pursuant to this Section 8.1(a)(iii) will be treated
-------------------
by the parties on their Tax Returns as an adjustment to the purchase price
hereunder;
(iv) the death of or injury to any person or damage to property that
occurred prior to the Closing and arose out of or in connection with the
Business (whether asserted, discovered or established before or after the
Closing, and whether or not such claim or action is disclosed in the Disclosure
Schedule); or
(v) any employment related claim or cause of action, and any other
claim or cause of action, that has arisen or arises out of or in connection with
the Business conducted prior to the Closing (whether asserted, discovered or
established before or after the Closing, and whether or not such claim or action
is disclosed in the Disclosure Schedule).
(b) Indemnification by the Buyer. The Buyer shall indemnify the
----------------------------
Seller in respect of, and hold the Seller harmless against, any and all Damages
incurred or suffered by the Seller or any of its affiliates resulting from,
relating to, constituting or arising out of:
(i) any misrepresentation or breach of warranty by the Buyer
contained in this Agreement, any other Transaction Document or in any
certificate, document or instrument furnished by or on behalf of the Buyer
pursuant to this Agreement or in connection with the transactions contemplated
hereby; or
(ii) any failure to perform any covenant or agreement of the
Buyer contained in this Agreement or any other Transaction Document.
(c) Indemnification by Culinary. Culinary shall indemnify the Seller
---------------------------
in respect of, and hold the Seller harmless against, any and all Damages
incurred or suffered by the Seller or any of its affiliates resulting from,
relating to, constituting or arising solely out of:
(i) any misrepresentation or breach of warranty by the Buyer
contained in this Agreement, any other Transaction Document or in any
certificate, document or instrument furnished by or on behalf of the Buyer
pursuant to this Agreement or in connection with the transactions contemplated
hereby that results in the termination of this Agreement pursuant to
Section 7.1(c); and
-------------
(ii) any failure to perform any covenant or agreement of the
Buyer contained in this Agreement or any other Transaction Document that results
in the termination of this Agreement pursuant to Section 7.1(c).
--------------
Notwithstanding the foregoing, the indemnification obligation of Culinary under
this Section 8.1(c) will terminate immediately upon the completion of the
--------------
Closing.
30
8.2 Claims for Indemnification. Whenever any claim shall arise for
indemnification hereunder, the indemnified party shall promptly notify the
indemnifying party of the claim and, when known, the facts constituting the
basis for such claim; provided, however, that no delay on the part of the
-------- -------
indemnified party in notifying the indemnifying party will relieve the
indemnifying party from any liability or obligation hereunder except to the
extent of any damage or liability caused by or arising out of such delay. In
the event of any such claim for indemnification hereunder resulting from or in
connection with any claim or legal proceedings by a third party, the notice to
the indemnifying party must specify, if known, the amount or an estimate of the
amount of the liability arising therefrom. Subject to Section 8.3(d), the
--------------
indemnified party shall not settle or compromise any claim by a third party for
which it is seeking indemnification hereunder without the prior written consent
of the indemnifying party (which shall not be unreasonably withheld), unless the
indemnifying party has not taken control of the defense of such claim as
provided in Section 8.3, after notification thereof pursuant to this Section
----------- -------
8.2, in which case the indemnified party may settle or compromise such claim
without the indemnifying party's consent.
8.3 Defense of Claims.
(a) Assumption of Defense. Subject to Section 8.3(d), in connection
--------------------- --------------
with any claim for indemnification hereunder resulting from or arising out of
any claim or legal proceeding by a third party, the indemnifying party at its
sole cost and expense may, upon written notice to the indemnified party given
within 10 days after the date of the notice of the claim from the indemnified
party pursuant to Section 8.2, assume the defense of such claim or legal
-----------
proceeding with counsel approved by the indemnified party (which approval shall
not be unreasonably withheld), if (i) the indemnifying party acknowledges to the
indemnified party in writing the indemnifying party's obligations to indemnify
the indemnified party with respect to all elements of such claim, (ii) the third
party seeks monetary damages only and (iii) an adverse resolution of the third
party's claim would not have a material adverse effect on the goodwill or the
reputation of the indemnified party or the future conduct of the business of the
indemnified party or the Business.
(b) Participation by the Indemnified Party. If the indemnifying party
--------------------------------------
so assumes such defense, the indemnified party shall be entitled to participate
in (but not control) such defense, with its counsel and at its own expense
(except that the indemnifying party will be responsible for the actual fees and
expenses of separate co-counsel to the extent the indemnified party reasonably
concludes that the counsel the indemnifying party has selected has a conflict of
interest). In addition, if the indemnifying party so assumes such defense, it
shall take all steps necessary in the defense or settlement thereof; provided,
--------
however, that the indemnifying party shall not consent to any settlement or to
-------
the entry of any judgment with respect to a claim or legal proceeding which does
not include a complete release of the indemnified party from all liability with
respect thereto or which imposes any liability or obligation on the indemnified
party without the written consent of the indemnified party.
(c) Defense by the Indemnified Party. If the indemnifying party does
--------------------------------
not (or is not permitted under the terms hereof to) assume the defense of any
such claim or legal proceeding, (i) the indemnified party may defend against
such claim or legal proceeding (with the indemnifying party responsible for the
actual fees and expenses of counsel for the
31
indemnified party) in such manner as it may deem appropriate, including, but not
limited to, settling such claim or legal proceeding on such terms as the
indemnified party may deem appropriate, and (ii) the indemnifying party will be
entitled to participate in (but not control) the defense of such action, with
its counsel and at its own expense.
(d) Satisfaction of Claims by the Buyer. If a customer or supplier of
-----------------------------------
the Business asserts that the Business or the Buyer is liable to such party for
a monetary or other obligation which may constitute or result in Damages for
which the Buyer may be entitled to indemnification pursuant to this Article VIII
------------
and the Buyer reasonably determines that it has a valid business reason to
fulfill such obligation, then (subject to notifying Easyriders in writing as to
the matter asserted by the customer or supplier) (i) the Buyer will be entitled
to satisfy such obligation, without consent from either Seller, provided that
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such satisfaction by the Buyer in no way operates as a waiver of any defenses
that such Seller may have had and could have asserted against such customer or
supplier, (ii) the Buyer may make a claim for indemnification pursuant to this
Article VIII in accordance with the provisions hereof and (iii) Easyriders shall
------------
reimburse the Buyer, in accordance with the provisions hereof, for any such
Damages for which the Buyer is entitled to indemnification pursuant to this
Article VIII.
------------
8.4 Payment of Indemnification Obligation. Except as set forth in
Section 8.7, all indemnification by any indemnifying party hereunder shall be
-----------
satisfied promptly as Damages are incurred, by payment of cash, delivery of a
cashier's or certified check or wire transfer of immediately available funds by
the indemnifying party to the indemnified party in the amount of the
indemnification liability.
8.5 Treatment of Indemnity Payments. Any payment made to the Buyer
pursuant to this Article VIII will be treated and reported by the Buyer and the
------------
Sellers as a reduction in the aggregate purchase price paid for the M&B
Membership Interests and MBPCR Capital Stock.
8.6 Survival. All representations, warranties, covenants, agreements
and obligations set forth in this Agreement, the other Transaction Documents,
the Disclosure Schedule or any other certificate, instrument or document
furnished in connection with this Agreement or the transactions contemplated
hereby will survive the Closing and the completion of the transactions
contemplated hereby. All such covenants, agreements and obligations will
survive the Closing for the period therein specified or, if no period is
specified, without limitation. All such representations and warranties will
expire on the date that is two years after the Closing Date. Any claim asserted
in writing prior to the expiration as provided in this Section 8.6 of the
-----------
representation or warranty that is the basis for such claim will survive until
finally resolved and satisfied in full. The rights to indemnification,
reimbursement or other remedy set forth in this Agreement will not be affected
by any investigation conducted by the Buyer with respect to, or any knowledge
acquired (or capable of being acquired) by the Buyer about, the accuracy or
inaccuracy of, or compliance with, any representation, warranty, covenant or
obligation.
8.7 Indemnification Threshold.
(a) Seller's Threshold. The Seller will have no liability to the
------------------
Buyer for indemnification pursuant to Section 8.1(a) until the aggregate Damages
--------------
to the Buyer exceed
32
$40,000.00 (at which point the Seller will be liable for the entire $40,000.00,
plus any Damages in excess thereof).
(b) Buyer's and Culinary's Threshold. Neither the Buyer nor Culinary
--------------------------------
will have any liability to the Seller for indemnification pursuant to Sections
--------
8.1(b) or (c) until the aggregate Damages to the Seller exceed $40,000.00 (at
-------------
which point the Buyer and Culinary will be liable for the entire $40,000.00,
plus any Damages in excess thereof). Notwithstanding the foregoing, the
indemnification obligation of Culinary under Section 8.1(c) will terminate
--------------
immediately upon the completion of the Closing.
Article IX
Miscellaneous
9.1 Certain Definitions.
(a) Material Adverse Effect. As used in this Agreement, "Material
-----------------------
Adverse Effect" means a material adverse effect on (i) the business, assets,
liabilities, financial condition or operating results of the Seller, together
with all of its subsidiaries taken as a whole or (ii) the ability of the Seller
to perform its obligations under this Agreement.
(b) Knowledge. As used in this Agreement, "knowledge of the Sellers
---------
or the Companies" means the knowledge of Xxxxxxx Xxxxxxx, including any
knowledge that Xx. Xxxxxxx should reasonably be expected to have, or the actual
knowledge (without any obligation to investigate) of the other directors,
officers and key employees of the Sellers and the Companies.
9.2 Amendment and Modification. Subject to applicable law, this Agreement
may be amended, modified, or supplemented only by written agreement of the
Sellers and the Buyer. This Agreement may not be amended except by an instrument
in writing signed on behalf of each of the parties hereto.
9.3 Waiver of Compliance; Consents. Any failure of either Seller on the
one hand, or the Buyer on the other hand, to comply with any obligation,
covenant, agreement, or condition herein may be waived by the Buyer or the
Sellers, respectively, only by a written instrument signed by an officer of the
party granting such waiver, but such waiver or failure to insist upon strict
compliance with such obligation, covenant, agreement, or condition shall not
operate as a waiver of, or estoppel with respect to, any subsequent or other
failure. Whenever this Agreement requires or permits consent by or on behalf of
any party hereto, such consent shall be given in writing.
9.4 Notices. All notices and other communications hereunder must be in
writing and will be deemed given when delivered personally by commercial courier
service, reputable overnight delivery service or by facsimile or email to the
parties at the following addresses (or at such other address for a party as may
be specified by like notice):
If to Easyriders, to: Easyriders, Inc.
00000 Xxxxxxx Xxxxx
Xxxxxx Xxxxx, Xxxxxxxxxx 00000
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Attn: J. Xxxxxx Fabregas
Facsimile: (000) 000-0000
Email: xxxxxxxxx@xxxxxxxxxx.xxx
If to Newriders, to: Newriders, Inc.
00000 Xxxxxxx Xxxxx
Xxxxxx Xxxxx, Xxxxxxxxxx 00000
Attn: Xxxxxx Xxxxx
Facsimile: (000) 000-0000
Email: xxxxxx@xxxxxxxxxx.xxx
with a copy to: Brand, Xxxxxx & Xxxxxxx LLP
000 Xxxxx Xxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attn.: Xxxxxxx X. Xxxxxxx
Facsimile: (000) 000-0000
Email: xxxxxxxx@xxxxxxxxxxx.xxx
If to the Buyer, to: El Paso Bar-B-Que Company, Inc.
c/o Culinary Holdings Incorporated
000 Xxx Xxxxxxxx Xxxxx, Xxxxx 000
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000
Attn: President
Facsimile: (000) 000-0000
Email: xxxxxxxx@xxxxxxxxxxxxxxxxxx.xxx
If to Culinary, to: Culinary Holdings Incorporated
000 Xxx Xxxxxxxx Xxxxx, Xxxxx 000
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000
Attn: President
Facsimile: (000) 000-0000
Email: xxxxxxxx@xxxxxxxxxxxxxxxxxx.xxx
with a copy to: Xxxxxx, Xxxx & Xxxxxxxx LLP
0 Xxxx Xxxxx
Xxxxxx, Xxxxxxxxxx 00000
Attn.: Xxxx X. Xxxxxxxx, Esq.
Facsimile: (000) 000-0000
Email: xxxxxxxxx@xxxxxx.xxx
9.5 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, but neither this Agreement nor any of the
rights, interests, or obligations hereunder may be assigned by any of the
parties hereto without the prior written consent of the other parties, nor is
this Agreement intended to confer upon any other person except the parties
hereto any rights or remedies hereunder.
34
9.6 Governing Law. This Agreement will be governed by, construed and
enforced in accordance with the internal laws of the State of California.
9.7 Fees, Costs and Expenses. Except as otherwise expressly provided in
this Agreement, all legal, accounting and other fees, costs and expenses
incurred in connection with this Agreement will be paid by the party incurring
such fees, costs and expenses. If any party to this Agreement brings any
action, suit, counterclaim, appeal, arbitration, mediation or other proceeding,
in equity or at law (an "Action"), to enforce this Agreement or the other
Transaction Documents or to declare rights under this Agreement or the other
Transaction Documents, in addition to any damages and costs which the prevailing
party or parties otherwise would be entitled, the losing party or parties in any
such Action shall pay to the prevailing party or parties reasonable attorneys'
fees and costs incurred in connection with such Action and/or enforcing any
judgment, order, ruling or award (collectively, a "Decision") granted by a
court, arbitrator or mediator, all of which must be paid whether or not such
Action is prosecuted to a Decision. "Prevailing party" means, without
limitation, any party who agrees to dismiss an action on the other party's
payment of the sum allegedly due or performance of the covenants allegedly
breached, or who obtains substantially the relief sought by it. If there are
multiple claims, the prevailing party is to be determined with respect to each
claim separately. The prevailing party is the party that has obtained the
greater relief in connection with any particular claim, although, with respect
to any claim, it may be determined by the court, arbitrator or mediator that
there is no prevailing party.
9.8 Construction. The captions and titles of the articles, sections and
subsections of this Agreement are for convenience of reference only and are not
to be considered in construing this Agreement. This Agreement will be construed
without regard to any presumption, or other rule requiring the resolution of any
ambiguity regarding the interpretation or construction hereof, against the party
causing this Agreement to be drafted.
9.9 Publicity. Upon execution of this Agreement by the Sellers and the
Buyer, the parties hereto may jointly issue a press release, as mutually agreed
upon by them. The parties intend that all future statements or communications
to the public or press regarding this Agreement or the transactions contemplated
by this Agreement must be mutually agreed upon by them and no party may, without
such mutual agreement or the prior consent of the others, issue any statement or
communication to the public or to the press regarding this Agreement, or any of
the terms, conditions, or other matters with respect to this Agreement, except
as required by law and then only (a) upon the advice of such party's legal
counsel; (b) to the extent required by law; (c) following prior notice to the
other party and an opportunity for the other party to discuss with the
disclosing party (which notice shall include a copy of the proposed statement or
communication to be issued to the press or public); and (d) if the statement or
communication is deemed by the releasing party to be required by law and the
other party opposes the release of such statement or communication, the
releasing party shall provide a reasonable time for the opposing party to obtain
an order prohibiting the release of such statement or communication. The
foregoing will not restrict the Sellers' or the Buyer's communications with
their employees or customers in the ordinary course of business.
9.10 Entire Agreement. This Agreement, including the exhibits and
schedules hereto and agreements referred to herein, embodies the entire
agreement and understanding of the
35
parties hereto in respect of the subject matter contained herein. This Agreement
supersedes all prior agreements and the understandings between the parties with
respect to such subject matter. No discussions regarding or exchange of drafts
or comments in connection with the transactions contemplated herein will
constitute an agreement among the parties hereto.
9.11 Specific Performance. The parties hereto acknowledge that
irreparable damage would occur in the event the obligations of the Sellers and
the Companies under Section 4.2 were not performed or complied with, in
-----------
accordance with the terms thereof, and that the Buyer will be entitled to
temporary, preliminary and permanent injunctive relief to restrain any violation
or threat of violation of, and will be entitled to specific performance of, the
terms thereof, in addition to any other remedy at law or in equity.
9.12 Counterparts. This Agreement may be executed in any number of
counterparts, each of which will be deemed an original, but all of which
together will constitute one instrument. Signatures transmitted electronically
or by facsimile will be deemed original signatures; provided that the party
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delivering such electronic or facsimile signature shall deliver to the other an
original signature page as soon thereafter as practicable.
[The remainder of this page has been intentionally left blank; signature page
follows.]
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IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the date first written above.
The Sellers:
Easyriders, Inc.,
a Delaware corporation
By: -------------------------------
Name: -----------------------------
Title: ----------------------------
Newriders, Inc.,
a Nevada corporation
By: --------------------------------
Name: ------------------------------
Title: -----------------------------
The Companies:
M&B Restaurants, L.C.,
a Texas limited liability company
By: --------------------------------
Name: ------------------------------
Title: -----------------------------
MBPCR, Inc.,
a Texas corporation
By: --------------------------------
Name: ------------------------------
Title: -----------------------------
37
The Buyer:
El Paso Bar-B-Que Company, Inc.
a Delaware corporation
By: -----------------------------
Name: ---------------------------
Title: --------------------------
* * *
With regard only to the specific obligations of Culinary expressly identified in
this Agreement and excluding, without limitation, post-Closing obligations,
obligations for indemnification and any other obligations of the Buyer.
Culinary:
Culinary Holdings Incorporated,
a Delaware corporation
By: -----------------------------
Name: ---------------------------
Title: --------------------------
38
