EXHIBIT 10.1
AGREEMENT OF PURCHASE AND SALE OF ASSETS
AMONG
ORGANIC TO GO, INC.,
ORGANIC TO GO FOOD CORPORATION,
HIGH NOON HOLDINGS, LLC,
and
BALDUCCI’S, LLC
May 29, 2008
AGREEMENT OF PURCHASE AND SALE OF ASSETS
THIS
AGREEMENT OF PURCHASE AND SALE OF ASSETS is made as of May 29,
2008, by and among HIGH NOON HOLDINGS, LLC, a Delaware limited
liability company (“
Company ”),
BALDUCCI’S, LLC, a Delaware limited liability company
(“
Member ”),
ORGANIC
TO GO, INC., a Delaware corporation (“
Buyer ”)
and ORGANIC TO GO FOOD CORPORATION, a Delaware corporation
(“
Parent ”).
Company and Member
are
together referred to in this agreement as “
Selling Parties .”
This agreement is made under the following
circumstances:
A.
Buyer
is a wholly owned subsidiary of Parent.
B.
Buyer
desires to purchase from Company and Company desires to sell
to Buyer, on the terms and subject to the conditions set forth
in this agreement, certain business and properties of
Company.
C.
Selling
Parties desire that this transaction be consummated on the
terms and subject to the conditions of this
agreement.
NOW,
THEREFORE, in consideration of the mutual covenants,
agreements, representations, and warranties contained in this
agreement, the parties agree as follows:
ARTICLE 1
PURCHASE AND SALE OF ASSETS
1.1
SALE AND TRANSFER OF ASSETS
Subject
to the terms and conditions set forth in this agreement,
Company shall sell, convey, transfer, assign, and deliver to
Buyer, and Buyer shall purchase from Company, all of the
assets, properties, and business of Company of every kind,
character, and description, whether tangible, intangible,
personal, or mixed, and wherever located, including without
limitation the assets described under the heading
“Acquired Assets” on
Schedule 1 attached
to this agreement (the “
Acquired Assets ”),
excluding the assets, property and rights described under the
heading “Excluded Assets” on
Schedule 1 attached
to this agreement (the “
Excluded Assets ”).
1.2
CONSIDERATION FROM BUYER AT CLOSING
The
total purchase price of the Acquired Assets shall be Three
Million Seven Hundred Fifty Thousand Dollars
($3,750,000)
plus the
sum of: (a) the aggregate amount of the credits set forth on
Section 1.2 of
Schedule 1 (the
“
Purchase Price Credits ”),
(b) the actual cost to Company of Company’s inventory on hand
as of the close of business on the Closing Date (as hereinafter
defined) (the “
Inventory Cost ”),
and (c) $10,000 for supplies of Company (the “
Supply Cost ”).
As payment of such purchase price, Buyer shall deliver to Selling
Parties:
1.2(a)
Cash .
At the Closing (as hereinafter defined) by wire transfer to an
account designated in writing by Company of immediately available
funds in the amount of Three Million Five Hundred Thousand Dollars
($3,500,000)
plus the
sum of: (a) the Purchase
Price
Credits, (b) $23,408.00 (the “
Closing Inventory Payment ”),
representing the estimated Inventory Cost as of the Closing Date,
and (c) the Supply Cost.
1.2(b)
Parent Common Stock .
A stock certificate issued to Member (the “
Stock Certificate ”)
representing a total number of shares of the Common Stock of
Parent, par value $0.001 per share (the “
Parent Shares ”),
equal to shares having an aggregate Market Value (as hereinafter
defined) of Two Hundred Fifty Thousand Dollars ($250,000) which
shall be delivered to Company within five (5) business days after
the Closing Date. For purposes of this Agreement, the
“Market Value” of
the Parent Shares shall equal the average of the closing prices of
the Parent Shares in the over the counter market (or on any
national securities exchange if shares of Parent’s Common
Stock are listed on a national securities exchange) during the five
(5) consecutive trading days ending three (3) trading days before
the Closing.
1.3
ASSUMPTION OF LIABILITIES
Buyer
assumes no contracts, leases, obligations, debts or
liabilities under this agreement, other than those listed
on
Schedule 1.3 attached
to this agreement (the “
Assumed Contracts ”).
It is expressly understood and agreed that Buyer shall not be
liable for any of the contracts, leases, obligations, debts or
liabilities of Company of any kind and nature, other than those
listed on
Schedule 1.3 ,
if any.
1.4
INVENTORY ADJUSTMENT, PRORATIONS AND DEPOSITS
1.4(a)
The
Closing Inventory Payment is based on Company’s average
inventory. Immediately after the close of business on the
Closing Date, the parties shall determine the Inventory Cost
in an agreed-upon manner. Within three (3) days after the
Inventory Cost is determined, (i) if the Inventory Cost
exceeds the Closing Inventory Payment, Buyer shall pay Company
the difference between the Inventory Cost and the Closing
Inventory Payment, and (ii) if the Closing Inventory Payment
exceeds the Inventory Cost, then Selling Parties shall pay
Buyer the difference between the Closing Inventory Payment and
the Inventory Cost.
1.4(b)
Rents,
utility charges, prepaid items and other appropriate items
with respect to the Acquired Assets shall be prorated as of
the Closing Date under
the principle that the income, expense and liabilities
attributable to the Acquired Assets through 11:59 p.m. of the
Closing Date shall be for the account of Company and
thereafter such items shall be for the account of Buyer, and
taking into account the number of days before and after the
Closing Date to prorate any costs incurred during a period
which includes days before and after the Closing Date. Further
detail regarding the parties’ administration of this
Section 1.4(b) is set forth on Schedule 1.4.
1.4(c)
Within
ten (10) days after the Closing, Buyer shall deliver to the
landlord for the location at 1200 19
th Street,
N.W., Suite 105, Washington, DC (the “
19
th
Street Landlord ”)
a letter of credit satisfactory to the 19
th Street
Landlord, or cash (via cashier’s check or wire transfer), in
the amount of the letter of credit most recently provided by
Selling Parties to the 19
th Street
Landlord (the “
High Noon LC ”),
and ask the 19
th Street
Landlord to return the High Noon LC directly to
Company.
1.5
ALLOCATION OF PURCHASE PRICE
The
purchase price of the Acquired Assets shall be allocated as
follows:
|
1.
|
Inventory
|
Inventory
Cost plus Supply Cost
|
|
2.
|
Furniture,
Fixtures and Equipment
|
$186,000
|
|
3.
|
Goodwill,
Trade Name and Intangible Assets
|
$3,564,000
|
|
4.
|
Cash
and Deposits
|
Purchase
Price Credits
|
| |
Total
Purchase Price
|
$3,750,000
plus Purchase
Price Credits,
Inventory
Cost and Supply Cost
|
Each
of the parties shall report this transaction for federal and
state tax purposes in accordance with this allocation of the
purchase price.
1.6
TAXES
Buyer
shall pay all sales, use, and other transfer taxes arising out
of the transfer of the Acquired Assets, if any, and Company
shall pay its portion, prorated as of the Closing Date, of
state and local real and personal property taxes, and all
other taxes of Company. Buyer shall not be responsible for any
business, sales, occupation, withholding, or similar tax, or
any taxes of any kind related to any period before the Closing
Date.
ARTICLE 2
SELLING PARTIES’ REPRESENTATIONS AND
WARRANTIES
Selling
Parties, jointly and severally, represent and warrant that
except as set forth in the Disclosure Schedule attached to
this agreement as
Schedule 2 :
2.1
ORGANIZATION, STANDING AND QUALIFICATION OF
COMPANY
Company
is a limited liability company duly organized, validly
existing, and in good standing under the laws of the State of
Delaware, has all necessary powers to own its properties and
to operate its business as now owned and operated by it, and
is duly qualified to transact business and is in good standing
in those jurisdictions in which the nature of Company’s
business or of its properties makes such qualification
necessary, which are the District of Columbia and
Virginia.
2.2
OWNERSHIP OF COMPANY
Member
is the sole member of Company.
2.3
SUBSIDIARIES
Company
does not own, directly or indirectly, any interest or
investment (whether equity or debt) in any corporation,
partnership, limited liability company, business, trust, or
other entity.
2.4
F
INANCIAL
STATEMENTS
Section
2.4 of Schedule 2 to this
agreement includes the unaudited balance sheets of Company as
of January 27, 2008 and January 28, 2007 together with related
unaudited statements of income and retained earnings for the
periods then ended (collectively, the “
Financial Statements ”).
The Financial Statements fairly present in all material respects
the financial position of Company as of the respective dates of the
balance sheets included in the Financial Statements, and the
results of its operations for the respective periods indicated,
provided that (i) the
Financial Statements have not been prepared
in accordance with generally
accepted accounting principles (“
GAAP ”)
and (ii) the Financial Statements include allocations of costs with
Member that do not reflect the actual costs to the Company
.
2.5
ABSENCE OF SPECIFIED CHANGES
Except
as described in Section 2.5 of
Schedule 2 ,
since January 27, 2008, there has been no:
2.5(a)
Capital
expenditure by Company exceeding $25,000;
2.5(b)
Material
adverse change in the financial condition, liabilities, assets
or business of Company taken as a whole;
2.5(c)
Destruction,
damage to, or loss of any asset of Company (whether or not
covered by insurance) that materially and adversely affects
the financial condition or business of Company;
2.5(d)
Labor
trouble of any character materially and adversely affecting
the financial condition, business or assets of
Company;
2.5(e)
Material
change in accounting methods or practices (including, without
limitation, any change in depreciation or amortization
policies or rates) by Company;
2.5(f)
Revaluation
by Company of any of its assets;
2.5(g)
Increase
in the salary or other compensation payable or to become
payable by Company to any of its officers,
directors,
or employees, or the declaration, payment, or commitment or
obligation of any kind for the payment, by Company, of a bonus or
other additional salary or compensation to any such person, in each
case, other than in the ordinary course of business (provided that
salary increases have not exceeded five percent (5%) in the
aggregate);
2.5(h)
Sale
or transfer of any asset of Company, except in the ordinary
course of business;
2.5(i)
Amendment
or termination of any contract, agreement, or license to which
Company is a party, except in the ordinary course of
business;
2.5(j)
Loan
by Company to any person or entity, or guaranty by Company of
any loan;
2.5(k)
Mortgage,
pledge, or other encumbrance of any asset of
Company;
2.5(l)
Waiver
or release of any right or claim of Company except in the
ordinary course of business;
2.5(m)
Commencement
or notice of commencement of any civil litigation or any
governmental proceeding against or investigation of Company or
its affairs; or
2.5(n)
Agreement
entered into by Company to do any of the things described in
the preceding clauses (a) through (n).
2.6
TAX RETURNS AND AUDITS
Within
the times and in the manner prescribed by law, Company has
filed all federal, state, and local payroll, sales, use and
property tax returns required by law and has paid all such
taxes, assessments, and penalties due and payable. There are
no present disputes as to taxes of any nature payable by
Company. All tax returns and reports filed by Company are
true, correct and complete. All taxes that Company is or was
required to withhold, deduct or collect have been withheld,
deducted and collected and, to the extent required, have been
paid to the proper government agency or other
depository.
2.7
REAL PROPERTY
The
Company owns no real property. A complete list of all real
property leased to Company is provided in Section 2.7
of
Schedule 2 to
this agreement. Except as otherwise disclosed in Section 2.7
of
Schedule 2 ,
the
Company has a valid and enforceable leasehold interest in all
leased real property. Except as disclosed in Section 2.7 of
Schedule 2 ,
to the knowledge of the Selling Parties,
each
parcel of leased real property and any improvements thereon
conforms in its current use and occupancy to all material zoning
requirements without reliance upon a variance issued by any
governmental authority or a classification of the parcel in
question as a nonconforming use.
2.8
HAZARDOUS MATERIALS .
To
the knowledge of Selling Parties, (a) there are no underground
storage tanks located on the real property described in
Section 1.3 of
Schedule 2 in
which any hazardous material, as defined below, has been or is
being stored, nor has there been any spill, disposal, discharge or
release of any hazardous material into, upon, from or over that
real property or into or upon ground or surface water on that real
property, and (b) there are no asbestos-containing materials
incorporated into the buildings or interior improvements that are
part of that real property, or into other assets of Company, nor is
there any electrical transformer, fluorescent light fixture with
ballasts or other equipment containing Polychlorinated Biphenyls
(PCB’s) on that real property. As used in this paragraph,
“hazardous material” means any hazardous or toxic
substance, material or waste that is regulated by any federal
authority or by any state or local governmental authority where the
substance, material or waste is located.
2.9
ENVIRONMENTAL
Except
as disclosed in Section 2.9 of
Schedule 2 ,
(i) Company is in material compliance with all applicable federal,
state or local environmental, health and safety statutes and
regulations, (ii) Company is not the subject of any pending
judicial or administrative proceeding alleging the violation of any
federal, state or local environmental, health or safety statute or
regulation, (iii) Company is not the subject of any known federal
or state investigation evaluating whether any remedial action is
needed to respond to a release of any hazardous or toxic waste,
substance or constituent, or other substance into the environment,
(iv) Company has not filed any notice under any federal or state
law indicating past or present treatment, storage or disposal of
hazardous waste, or reporting a spill or release of a hazardous or
toxic waste, substance or constituent, or other substance into the
environment, nor does Company have or has it had any known problems
relating to toxic or hazardous wastes, and (v) Company does not
have any known contingent liability in connection with any release
of any hazardous or toxic waste, substance or constituent, or other
substance into the environment.
2.10
INVENTORY
The
inventories of raw materials and finished goods (collectively,
“
Inventories ”)
shown on Company’s balance sheet as of January 27, 2008,
included in the Financial Statements, consist of items that are
usable and salable in the ordinary course of business by Company.
The value of the Inventories has been determined based on the most
recent cost consistent with prior years. Except for sales made in
the ordinary course of business since that date, all the
Inventories are the property of Company. No items are subject to
any security interest, except for Permitted Liens or as set forth
in Section 2.10 of
Schedule 2 .
2.11
OTHER TANGIBLE PERSONAL PROPERTY
The
books and records of Company contain a complete and accurate
description in all material respects, and specify the
location, of all motor vehicles, machinery, equipment,
furniture, supplies, tools, and all other tangible personal
property owned by, in the possession of, or used by Company in
connection with its business. The tangible personal property
reflected in those books and records constitutes all such
tangible personal property necessary for the conduct by
Company of its business as now conducted. No personal property
used by Company in connection with its business is held under
any lease, security agreement, conditional sales contract, or
other title retention or security arrangement, or is other
than in the possession and under the control of Company except
for Permitted Liens or as stated in Section 2.11 of
Schedule 2 .
All such personal property, taken as a whole, is adequate and in a
condition sufficient to permit Company to conduct its business
in substantially the same manner as it is currently being
conducted, subject to ordinary wear and tear and routine
maintenance.
2.12
INTELLECTUAL PROPERTY
A
schedule of all intellectual property, including without
limitation, trade names, trademarks, service marks,
copyrights, patents and trade secrets and their registrations
as applicable, if any, owned by Company or in which it has any
rights or licenses, together with a brief description of each,
is provided in Section 2.12 of
Schedule 2 (“
Company Intellectual
Property ”).
Except as set forth in
Schedule 2 ,
Company is not a party to any license, agreement or arrangement,
whether as licensor, licensee or otherwise, with respect to any
intellectual property necessary for its business as now conducted
by it (including without limitation those listed in Section 2.12
of
Schedule 2 ).
To the knowledge of Selling Parties, Company has the right and
authority to use Company Intellectual Property as currently used by
it, and such current use does not, and will not, conflict with,
infringe on, or violate any intellectual property rights of others.
Each trade secret’s documentation is current, accurate, and
sufficient in detail and content to identify and explain it, and to
allow its full and proper use by Buyer without reliance on the
special knowledge or memory of others. To Selling Parties’
knowledge, Company’s customer list has been kept confidential
and only used in connection with Company’s
business.
2.13
TITLE TO ASSETS
Company
has good and marketable title to all its assets and interest
in assets, whether real, personal, mixed, tangible, or
intangible, which constitute all the assets and interests in
assets that are used in the business of Company. All these
assets are free and clear of mortgages, liens, pledges,
charges, encumbrances, equities, claims, easements, rights of
way, covenants, conditions, or restrictions, except for
(a) statutory liens for current taxes or assessments not
yet due and payable; (b) mechanics’,
carriers’, workers’, repairmen’s and other
similar liens arising or incurred in the ordinary course of
business with respect to charges not yet due and payable; and
(c) such other encumbrances which do not
materially detract from or interfere with the present use
of the property subject thereto (“
Permitted Liens ”).
2.14
CUSTOMERS AND SALES
Correct
and current lists of Company’s twenty (20)
largest
customers having accounts with Company together with summaries of
the sales made to each customer during the fiscal years ending
January 27, 2008 and January 28, 2007 are included in Section 2.14
of
Schedule 2 .
Except as indicated in Section 2.14 of
Schedule 2 ,
to the Selling Parties’ knowledge, no customer intends to
cease doing business with Company or materially alter the amount of
the business that such customer is presently doing with
Company.
2.15
EMPLOYMENT AGREEMENTS
A
list of all employment agreements, severance agreements,
pension, bonus, profit-sharing, stock option, or other
agreements providing for employee remuneration or benefits to
which Company is a party or is bound is included in Section
2.15 of
Schedule 2 .
Company is not a party to or bound by any collective bargaining
agreement. All of the agreements described in this paragraph are in
full force and effect, and neither Company, to the Selling
Parties’ knowledge, nor any other party is in default under
any of these agreements. There is no pending nor, to Selling
Parties’ knowledge, threatened labor dispute, strike,
slowdown, employee grievance process or work stoppage affecting
Company’s business. There is no pending organizational
activity or other labor dispute against Company, nor is any
application or petition for an election of or for certification of
a collective bargaining agent pending. Except as set forth on
Section 2.15 of
Schedule 2 ,
Company does not provide or sponsor any retirement plan or
retirement benefits for any of its current or past
employees.
2.16
OTHER CONTRACTS
Except
for the agreements listed in Section 2.16 of
Schedule 2 ,
copies of which have been furnished or made available to Buyer,
Company is not a party to, nor is its property bound by, any
representative or agency agreement, any output or requirements
agreement, any indenture, mortgage, deed of trust, lease, or any
agreement requiring the performance by Company of any obligation
for a period of time extending beyond six months from the Closing
Date or calling for consideration of more than $25,000. There is no
default or event that with notice or lapse of time, or both, would
constitute a default by Company or, to the Selling Parties’
knowledge, any other party to any of these agreements. Company has
received no written notice that any party to any of these
agreements intends to cancel or terminate any of these agreements
or to exercise or not exercise any options under any of these
agreements. Except as set forth in Section 2.16 of
Schedule 2 ,
no consent or approval of any other party is required in connection
with the assignment to and assumption by Buyer of the agreements
listed in Section 2.16 of
Schedule 2 .
2.17
COMPLIANCE WITH LAWS
Company
has complied in all respects with, and is not in violation of,
applicable federal, state, and local statutes, laws, and
regulations (including, without limitation, any applicable
employment, immigration, building, zoning or other law,
ordinance, or regulation) affecting or relating to its
properties, employees, or the operation of its business.
Except as set forth on Section 2.17 of
Schedule 2 ,
Company has all material licenses and permits required to operate
its business, and no governmental or third party approval is
required to assign and transfer such licenses and permits to Buyer
pursuant to this Agreement.
2.18
LITIGATION
There
is no suit, action, arbitration, or legal, administrative, or
other proceeding, or governmental investigation, pending or,
to the knowledge of the Selling Parties, threatened, against
or affecting Company or its businesses, assets, or financial
condition, except as set forth in Section 2.18 of
Schedule 2 .
Company is not in default with respect to any order, writ,
injunction, or decree of any federal, state, local, or foreign
court, department, agency, or instrumentality. Except as set forth
in Section 2.18 of
Schedule 2 ,
Company is not presently engaged in any legal action to recover
monies due to it or damages sustained by it.
2.19
AGREEMENT WILL NOT CAUSE BREACH OR VIOLATION
Except
as set forth on Section 2.19 of
Schedule 2 ,
the consummation of the transactions contemplated by this agreement
will not result in or constitute any of the following: (i) a
default or an event that, with notice or lapse of time or both,
would be a default, breach, or violation of the certificate of
formation or operating agreement of Company or any material lease,
license, promissory note, conditional sales contract, commitment,
indenture, mortgage, deed of trust, or other agreement, instrument,
or arrangement to which Member or Company is a party or by which
either of them or the property of either of them is bound; or (ii)
the creation or imposition of any lien, charge or encumbrance on
any of the properties of Company, other than Permitted
Liens.
2.20
AUTHORITY AND CONSENTS
Selling
Parties have the right, limited liability company power, legal
capacity, and authority to enter into, and perform their
respective obligations under this agreement. The execution and
delivery of this agreement by the Selling Parties has been
duly authorized by all necessary limited liability company
action.
2.21
INTEREST IN CUSTOMERS, SUPPLIERS, AND COMPETITORS
Neither
Member nor, to the Selling Parties’ knowledge, any
officer or manager of Company or any spouse or child of any of
them, has any direct or indirect ownership interest in any
competitor, supplier, or customer of Company or in any person
from whom or to whom Company leases or licenses any real or
personal property, or in any other person with whom Company is
doing business.
2.22
IDENTIFICATION AND COMPENSATION
A
list of all officers and employees of Company stating the
rates of compensation payable to them is included in Section
2.22 of
Schedule 2 .
2.23
COMPANY DOCUMENTS
Selling
Parties have furnished to Buyer, for its examination, a copy
of Company’s certificate of formation.
2.24
ACQUISITION OF SHARES FOR OWN ACCOUNT
The
Parent Shares are being acquired for investment for
Member’s own account, not as a nominee or agent, and not
with a view to the resale or distribution of any part thereof.
Member does not have any contract, undertaking, agreement or
arrangement with any person to sell, transfer or grant
participations to such person or to any third person, with
respect to any of the Parent Shares.
2.25
DISCLOSURE OF INFORMATION
Selling
Parties have had the opportunity to receive all of the
information they consider necessary or appropriate for
deciding whether to acquire the Parent Shares. Selling Parties
have had an opportunity to ask questions and receive answers
from Buyer regarding the terms and conditions of the issuance
of the Parent Shares and the business, properties, prospects
and financial condition of Buyer and Parent. The foregoing,
however, does not limit or modify the representations and
warranties of Buyer and Parent in Article 3 of this agreement
or the right of Selling Parties to rely thereon.
2.26
INVESTMENT EXPERIENCE
Selling
Parties can bear the economic risk of the ownership of the
Parent Shares, and have such knowledge and experience in
financial or business matters that they are capable of
evaluating the merits and risks of the acqu
