ASSET PURCHASE AGREEMENT

Exhibit 2.1

Execution Version

ASSET PURCHASE AGREEMENT

By

and

Among

GREEN MOUNTAIN COFFEE ROASTERS, INC.

(Buyer)

and

TULLY’S COFFEE CORPORATION

(Seller)

TULLY’S BELLACCINO, LLC

Dated as of September 15, 2008

TABLE OF CONTENTS

 

 

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Exhibits

 

 

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ASSET PURCHASE AGREEMENT

This Asset Purchase Agreement (the “ Agreement ”) is dated as of September 15, 2008, by and among GREEN MOUNTAIN COFFEE ROASTERS, INC., a Delaware corporation (the “ Buyer ”) and TULLY’S COFFEE CORPORATION, a Washington corporation (the “ Seller Parent ”) and Tully’s Bellaccino, LLC, a Washington limited liability company and wholly-owned subsidiary of the Seller (the “ Seller Subsidiary ” and together with the Seller Parent, the “ Seller ”). The Buyer, the Seller and the Seller Subsidiary are collectively referred to herein as the “ Parties .” Capitalized terms used in this Agreement are defined or otherwise referenced in Section 1.

Whereas, the Buyer desires to purchase and acquire the Acquired Assets from the Seller;

Whereas, subject to the terms and conditions contained in this Agreement, the Seller hereby shall sell and transfer and the Buyer hereby shall purchase the assets of the Wholesale Business in exchange for the cash Purchase Price described herein, of which a portion will be used to discharge Liens and other liabilities associated with such assets at or prior to the Closing;

Whereas, the Buyer and the Seller intend to enter into the License Agreement, the Supply Agreement, the Covenant Not to Compete, and the Escrow Agreement;

Whereas, simultaneously with the execution of this Agreement, and as an inducement to Buyer to enter into this Agreement, the Major Shareholders will have entered into Voting Agreements.

Whereas, the Buyer intends to offer employment to certain of the employees of the Wholesale Business; and

Now, therefore, in consideration of the premises and the mutual promises herein made, and in consideration of the representations, warranties, and covenants herein contained, the Parties agree as follows.

 

1.	DEFINITIONS; CERTAIN RULES OF CONSTRUCTION.

As used herein, the following terms will have the following meanings:

“ Acceptance Date ” has the meaning set forth in Section 5.12(c).

“ Accounting Principles ” means GAAP applied on a basis consistent with the basis on which GAAP was applied in the preparation of the Wholesale Segment Balance Sheet.

“Acquired Assets ” has the meaning set forth in Section 2.1.

“ Acquisition Proposal ” has the meaning set forth in Section 5.12(b).

“ Action ” means any claim, action, cause of action or suit (whether in contract or tort or otherwise), litigation (whether at law or in equity and whether civil or criminal), controversy, assessment, arbitration, investigation, hearing, charge, complaint, demand, notice or proceeding to, from, by or before any Governmental Authority.

“ Adverse Recommendation Change ” has the meaning set forth in Section 5.12(d).

“ Affiliate ” means, as to any specified Person at any time, each Person who is directly or indirectly controlling, controlled by or under direct or indirect common control with such specified Person at such time.

“ Agreement ” has the meaning set forth in the preamble.

“ Assumed Contracts ” has the meaning set forth in Section 2.1(c).

“ Assumed Liabilities ” has the meaning set forth in Section 2.3.

“ Berner ” has the meaning set forth in Section 6.1(t).

“ Berner Inventory ” has the meaning set forth in Section 6.1(t).

“ Bill of Sale ” has the meaning set forth in Section 2.7(a).

“ Business Day ” means a day, other than Saturday, Sunday or other day on which commercial banks in Waterbury, Vermont are authorized or required by law to close.

“ Buyer ” has the meaning set forth in the preamble.

“ Buyer Indemnified Person ” has the meaning set forth in Section 7.2(a).

“ Cap ” has the meaning set forth in Section 7.4(a).

“ CERCLA ” means the federal Comprehensive Environmental Response Compensation and Liability Act of 1980, as amended.

“ Closing ” has the meaning set forth in Section 2.6.

“ Closing Date ” has the meaning set forth in Section 2.6.

“ Closing Documents ” has the meaning set forth in Section 2.7.

“ Code ” means the Internal Revenue Code of 1986, as amended.

“ Coffee Business ” means, the business of roasting, packaging, brewing, selling, distributing or otherwise providing whole bean and ground coffees, hot or cold coffee beverages or related products including brewers in North America.

“ Confidential Information ” has the meaning set forth in Section 5.9(a).

“ Contemplated Transactions ” means the transactions as contemplated by this Agreement and the other Transaction Documents.

 

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“ Contractual Obligation ” means, with respect to any Person, any contract, agreement, purchase order, deed, mortgage, lease, license, commitment, undertaking, arrangement or understanding, or other document or instrument, including without limitation any document or written instrument evidencing or otherwise relating to any Debt or Guarantee, to which or by which such Person is a party or otherwise subject or bound or to which or by which any property or right of such Person is subject or bound.

“ Creditors ” means Benaroya Capital Company, LLC, Northrim Funding Services, a division of Northrim Bank, and Ueshima Coffee Corporation, Ltd.

“ Debt ” of any Person means all obligations of such Person (i) for borrowed money, (ii) evidenced by notes, bonds, debentures or similar instruments or upon which interest charges are customarily paid, (iii) for deferred purchase price of property or services, except current accounts payable arising in the ordinary course of business of such Person, (iv) under conditional sale or other title retention agreements relating to property purchased by such Person and all capitalized lease obligations, (v) arising out of obligations of a third party secured by property or assets of such Person (regardless of whether or not such Person is liable for repayment of such obligations), or (vi) any prepayment or similar penalties for any of the foregoing.

“ Disclosure Schedule ” has the meaning set forth in Section 3.

“ Disputes Auditor ” means Deloitte & Touche LLP or, if Deloitte & Touche LLP declines engagement under Section 2.8 or is unable to act at the time it would otherwise be engaged thereunder, any other nationally recognized, independent public accounting firm mutually agreed upon by Seller and Buyer.

“ Effective Date ” means the date of this Agreement.

“ Employee Plan ” means any “employee benefit plan” (as defined in Section 3(3) of ERISA, whether or not subject to ERISA), any other bonus, profit sharing, compensation, pension, retirement, savings, severance, deferred compensation, fringe benefit, insurance, welfare, post-retirement health or welfare benefit, health, life, stock option, stock purchase, restricted stock, tuition refund, service award, company car or car allowance, scholarship, housing or living allowances, relocation, disability, accident, sick pay, sick leave, accrued leave, vacation, holiday, termination, unemployment, individual employment, consulting, executive compensation, incentive, commission, payroll practices, retention, change in control, non-competition, and/or other material plan, agreement, policy, trust fund or arrangement (in each case, whether written or unwritten, insured or self-insured).

“ Enforceable ” means, with respect to any Contractual Obligation stated to be Enforceable by or against any Person, that such Contractual Obligation is a legal, valid and binding obligation of such Person enforceable by or against such Person in accordance with its terms, except to the extent that enforcement of the rights and remedies created thereby is subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws of general application affecting the rights and remedies of creditors and to general principles of equity (regardless of whether enforceability is considered in a proceeding in equity or at law).

 

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“ Environmental Laws ” means any law, regulation, or other applicable requirement relating to (a) releases or threatened release of Hazardous Substances; (b) pollution or protection of employee health or safety, public health or the environment; or (c) the manufacture, handling, transport, use, treatment, storage, or disposal of Hazardous Substances.

“ Equipment ” has the meaning set forth in Section 2.1(a).

“ ERISA ” means the Employment Retirement Income Security Act of 1974, as amended, and the rules and regulations promulgated thereunder, or any successor statute, rules and regulations thereto.

“ ERISA Affiliate ” of any entity (the “first entity”) means any other entity which, together with such first entity, is or at any relevant time would be treated as a single employer under Section 414 of the Code.

“ Escrow Agreement ” has the meaning set forth in Section 2.7(g).

“ Estimated Asset Adjustment ” means, without duplication, the amount, if any, by which (x) Wholesale Assets are less than Four Million Dollars ($4,000,000) or (y) Inventories are less than One Million Eight Hundred Thousand Dollars ($1,800,000).

“ Excluded Assets ” has the meaning set forth in Section 2.2.

“ Excluded Liabilities ” has the meaning set forth in Section 2.3.

“ GAAP ” means United States generally accepted accounting principles consistently applied.

“ Governmental Authority ” means any United States federal, state or local government or any foreign government, or political subdivision thereof, or any multinational organization or authority or any authority, agency or commission entitled to exercise any administrative, executive, judicial, legislative, police, regulatory or taxing authority or power, any court or tribunal (or any department, bureau or division thereof), or any arbitrator or arbitral body.

“ Guarantee ” means (i) any guarantee of the payment or performance of, or any contingent obligation in respect of, any Debt or other obligation of any other Person, (ii) any other arrangement whereby credit is extended to one obligor on the basis of any promise or undertaking of another Person (A) to pay the Debt or other obligation of such obligor, (B) to purchase any obligation owed by such obligor, (C) to purchase or lease assets under circumstances that would enable such obligor to discharge one or more of its obligations or (D) to maintain the capital, working capital, solvency or general financial condition of such obligor, or (iii) any liability as a general partner of a partnership or as a venturer in a joint venture in respect of indebtedness or other obligations of such partnership or venture.

“ Hazardous Substance ” has the meaning set forth in Section 3.12

“ Inventory ” has the meaning set forth in Section 2.1(a).

 

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“ Indemnified Party ” has the meaning set forth in Section 7.3.

“ Indemnifying Party ” has the meaning set forth in Section 7.3.

“ Instrument of Assignment and Assumption Agreement ” has the meaning set forth in Section 2.6.

“ Intellectual Property ” means all forms of intellectual property, however, denominated, throughout the world, including without limitation: (a) patents and applications thereof; (b) unregistered and registered Trademarks and applications thereof; (c) registered copyrights and applications thereof, and any associated moral rights; (d) Internet domains; (e) designs, whether or not patented or registered; (f) rights of privacy and publicity; (g) confidential and proprietary information, including without limitation trade secrets (such as coffee blends and recipes), research and development, know-how, recipes, processes and techniques, technical data, specifications, customer and supplier lists (including the customer mailing lists used by the Seller in connection with the conduct of the Wholesale Business), pricing and cost information, and business and marketing plans and proposals; (h) all administrative and legal rights arising therefrom and relating thereto, including the right to prosecute and perfect such interests and rights to sue, oppose, cancel, interfere, and enjoin based upon such interests; and (i) and any Contractual Obligations granting rights related to the foregoing (A) subsisting in, covering, reading on, directly applicable to, used in the production of or existing in the technology used in the Wholesale Business or (B) that are owned, licensed or controlled in whole or in part by the Seller and relate to the Wholesale Business.

“ IRS ” means the United States Internal Revenue Service or any successor thereto.

“ Lease ” means the lease between Seller and Rainer Common LLC, a Washington limited liability company dated August 16, 1999, as amended from time to time, for certain space located at 3100 South Airport Way, Seattle, Washington.

“ Leased Property ” means the premises located at 3100 Airport Way South, in Seattle, Washington.

“ Legal Requirement ” means any United States federal, state, local, or foreign law, statute, judicial opinion, standard, ordinance, code, rule, regulation, resolution or promulgation, or any order, judgment or decree of any Governmental Authority, or any similar provision having the force and effect of law.

“ Liability ” means, with respect to any Person, any liability or obligation of such Person whether known or unknown, whether asserted or unasserted, whether determined, determinable or otherwise, whether absolute or contingent, whether accrued or unaccrued, whether liquidated or unliquidated, whether incurred or consequential, whether due or to become due and whether or not required under GAAP to be accrued on the financial statements of such Person.

“ License Agreement ” has the meaning set forth in Section 2.7(b).

 

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“ Lien ” means, with respect to any property or asset, any mortgage, lien, pledge, charge, security interest, community or other marital property interest, equitable interest, license, option, right of way, easement, encroachment, servitude, right of first offer or first refusal, buy/sell agreement or other encumbrance with respect to the use, construction, voting (in the case of any security or equity interest), transfer, receipt of income or exercise of any other attribute of ownership in respect of such property or asset.

“ Losses ” means, collectively, any actions, Liabilities, governmental orders, encumbrances, losses, damages, bonds, dues, assessments, fines, penalties, Taxes, fees, costs (including costs of investigation, defense and enforcement of this Agreement), expenses or amounts paid in settlement (in each case, including reasonable attorneys’ and experts fees and expenses), whether or not involving a Third Party Claim.

“ Material Adverse Effect ” means any change in or effect on the Acquired Assets or Assumed Liabilities that, when considered either singly or in the aggregate, has or would reasonably be expected to result in a material adverse effect on the business, financial condition, operations, results of operations (including under the Lease relating to the Leased Property) and prospects of the Wholesale Business, provided, however, in no event shall any of the following be taken into account in determining whether there has been or will be a Material Adverse Effect: (i) any adverse change arising directly from the taking of any action required to comply with the terms of this Agreement; (ii) any change that results from changes affecting the industry in which Seller operates the Wholesale Business or in the United States economy generally (which changes in each case do not disproportionately affect the operation of the Wholesale Business in any material respect; and (iii) any natural disaster or any acts of terrorism, sabotage, military action or war (which events in each case do not disproportionately affect the operation of the Wholesale Business in any material respect).

“ Materials of Environmental Concern ” means (i) any pollutants, contaminants, or hazardous substances (as such terms are defined under CERCLA), pesticides, (as such term is defined under the Federal Insecticide, Fungicide and Rodenticide Act), hazardous wastes (as such term is defined under the Resource Conservation and Recovery Act), other hazardous, radioactive or toxic materials, oil, petroleum and petroleum products (and fractions thereof), or any other material listed or subject to regulation under any law, statute, rule, regulation, permit, or directive due to its potential, directly or indirectly, to harm the environment or the health of humans or other living beings, including, without limitation, those substances defined or regulated as hazardous or toxic under Environmental Laws.

“ Major Shareholders ” means the shareholders listed on Exhibit A hereto.

“ Net Accounts Receivable ” means Receivables less the sum of (x) allowance for doubtful accounts, and (y) estimated bill backs to customers relating to the Receivables, all as shown on the Wholesale Balance Sheet. For the avoidance of doubt, Receivables shall not include any accounts receivable subject to the Northrim Facility.

“ Net Equipment ” means Equipment, less any depreciation related thereto.

“ Noncompete Payment ” shall be the amount set forth in the Seller Covenant Not to Compete.

 

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“ North America ” means the United States of America, Canada, Mexico and the Islands of the Caribbean.

“ Northrim Facility ” the capital funding facility available to the Seller pursuant to the Contract of Sale and Security Agreement dated August 1, 2008, as amended from time to time, between the Seller and Northrim Funding Services, a division of Northrim Bank.

“ O’Keefe Covenant Not to Compete ” has the meaning set forth in Section 2.7(d).

“ Outside Date ” has the meaning set forth in Section 8.1(b)(iii).

“ Parties ” has the meaning set forth in the preamble above.

“ Party ” means any of the Parties individually.

“ Permitted Liens ” has the meaning set forth in Section 3.6.

“ Person ” means an individual, a partnership, a corporation, an association, a joint stock company, a limited liability company, a trust, a joint stock or venture, an unincorporated organization, a Governmental Authority, an estate or other entity or organization.

“ Post-Closing Date Tax Period ” means (a) all Tax periods beginning after the Closing Date and (b) with respect to any Straddle Period, the portion of such period beginning after the Closing Date.

“ Pre-Closing Date Tax Period ” means (a) all Tax periods ending on or before the Closing Date and (b) with respect to any Straddle Period, the portion of such period ending on Closing Date.

“ Prepaid Expenses ” means prepaid expenses as shown on the Wholesale Segment Balance Sheet.

“ Proxy Statement ” has the meaning set forth in Section 5.1.

“ Purchase Price ” has the meaning set forth in Section 2.4.

“ Purchase Price Adjustment ” has the meaning set forth in Section 2.8.

“ Recognition, Non-Disturbance and Attornment Agreement ” has the meaning set forth in 2.7(j).

“ Records ” has the meaning set forth in Section 2.1(f).

“ Related Person ” means, with respect to a particular individual:

(a) each other member of such individual’s Family (as defined below);

(b) any Person that is directly controlled by such individual or one or more members of such individual’s Family;

 

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(c) any Person in which such individual or members of such individual’s Family hold (individually or in the aggregate) a Material Interest (as defined below); or

(d) any Person with respect to which such individual or one or more members of such individual’s Family serves as a director, officer, manager, partner, executor or trustee (or in a similar capacity).

With respect to a specified Person other than an individual:

(a) any Person that holds a Material Interest in such specified Person (as defined below);

(b) each Person that serves as a director, officer, partner, executor or trustee of such specified Person (or in a similar capacity);

(c) any Person in which such specified Person holds a Material Interest (as defined below);

(d) any Person with respect to which such specified Person serves as a general partner or a trustee (or in a similar capacity); or

(e) any Related Person of any individual described in clause (a) or (b).

For purposes of this definition, (a) the “ Family ” of an individual includes (i) the individual, (ii) the individual’s spouse, (iii) any other natural person who is related to the individual or the individual’s spouse within the first degree of consanguinity, and (iv) any other natural person who resides with such individual, and (b) “ Material Interest ” means direct or indirect beneficial ownership (as defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended) of voting securities or other voting interests representing at least five percent (5%) of the outstanding voting power of a Person or equity securities or other equity interests representing at least five percent (5%) of the outstanding equity securities or equity interests in a Person.

“ Seller ” has the meaning set forth in the preamble.

“ Seller Consents ” has the meaning set forth in Section 3.8.

“ Seller Covenant Not to Compete ” has the meaning set forth in Section 2.7(d).

“ Seller Indemnified Person ” has the meaning set forth in Section 7.2(b).

“ Seller’s Knowledge ” means the actual knowledge of Tom T. O’Keefe, Carl Pennington, Andrew Wynne, Mark Dacosta, Ron Gai, Andrew Mun, John Radar or Dan Johnson after reasonable inquiry.

“ Seller Plan ” means an Employee Plan that the Seller or any ERISA Affiliate of the Seller sponsors or maintains, or to which Seller or any ERISA Affiliate of the Seller contributes or is obligated to contribute, or under which the Seller or any ERISA Affiliate of the Seller has

 

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or may have any liability, directly or indirectly, or that benefits any current or former employee, director, officer, consultant or independent contractor of the Seller or any ERISA Affiliate of the Seller or the beneficiaries or dependents of any such person, in each case that relates in whole or in part to the Wholesale Business.

“ Shareholder Approval ” has the meaning set forth in Section 5.1.

“ Straddle Period ” means a Tax period that begins on or prior to the Closing Date and ends after the Closing Date.

“ Sublease Agreement ” means the meaning set forth in Section 2.7(i).

“ Superior Proposal ” has the meaning set forth in Section 5.12(c).

“ Supply Agreemen t” has the meaning set forth in Section 2.7(c).

“ Tax ” or “ Taxes ” means (a) any United States federal, state, or local or any foreign income, gross receipts, license, payroll, service, employment, excise, severance, stamp, occupation, premium, windfall profits, customs duties, capital stock, franchise, profits, withholding, social security (or similar, including FICA), unemployment, disability, real property, personal property, sales, use, ad valorem, license, transfer, registration, recording, value added, alternative or add-on minimum, estimated, escheat obligations or other tax or governmental charge, including any interest, penalty, or addition with respect thereto, whether disputed or not, or with respect to any information reporting requirements imposed by any Governmental Authority whether arising before, on or after the Closing Date, (b) any liability for or in respect of the payment of any amounts of the type described in clause (a) of this definition as a result of being a member of an affiliated, consolidated, combined, or unitary, or other group for any period, and (c) any liability for or in respect of the payment of any amount described in clause (a) or (b) of this definition.

“ Tax Return ” means any return, declaration, report, claim for refund, or information return or statement relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof.

“ Third Party Claim ” has the meaning set forth in Section 7.5(a).

“ Threshold ” has the meaning set forth in Section 7.4.

“ Trademarks ” means any trademarks, service marks, trade dress, logos and other brand or source identifiers, together with all translations, adaptations, derivations, and combinations thereof and including all goodwill associated therewith.

“ Transaction Documents ” means this Agreement and each Closing Document.

“ Transaction Expenses ” means all out-of-pocket fees and expenses incurred by a party in connection with the Contemplated Transactions including the fees and expenses of attorneys’, accountants, agents, brokers and any other advisors and any payments made to Affiliates of such party.

 

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“ Transfer Taxes ” means all sales (including bulk sales), use, valued-added, transfer, recording, ad valorem, privilege, documentary, gross receipts, registration, conveyance, excise, license, stamp or similar Taxes and fees arising out of, in connection with or attributable to the transactions effectuated pursuant to this Agreement.

“ Transition Services Agreement ” has the meaning set forth in Section 2.7(f).

“ Treasury Regulations ” means the Treasury Regulations (including Temporary Regulations) promulgated by the United States Department of Treasury with respect to the Code or other United States federal Tax statutes.

“ Voting Agreements ” has the meaning set forth in Section 2.7(h).

“ Wholesale Assets ” shall mean the sum of (i) Net Accounts Receivable, (ii) Inventory, (iii) Prepaid Expenses, and (iv) Net Equipment, each of the Wholesale Business as of 12:01 a.m. (Eastern Time) on the Closing Date, in each case to the extent such accounts reflect Acquired Assets, calculated in accordance with the Accounting Principles and the methodologies used in preparation of Wholesale Segment Balance Sheet attached hereto as Exhibit M.

“Wholesale Business” means the operations in North America through which Seller, under brand names owned or licensed to Seller, sources, manufactures, sells and distributes whole bean and ground coffees, bottled beverages and single serve K-Cup portion packs to customers including franchisees, office coffee services, foodservice channels, supermarkets, convenience stores, independent food stores, restaurants and institutional channels, including without limitation through the operation of the Equipment at the Leased Property. Notwithstanding any other provision of this Agreement, the Wholesale Business excludes (a) Seller’s operations with respect to the sale of whole bean and ground coffees and other beverages and food products to end user consumers at (i) licensed retail kiosks including but not limited to retail kiosks operating in grocery stores, colleges and universities and hotels, (ii) licensed retail stores including but not limited to retail stores operating on the premises of Boeing and other similar business customers, (iii) franchised retail stores, and (b) all of Seller’s operations outside of North America.

“ Wholesale Segment Balance Sheet ” has the meaning set forth in Section 3.17(d).

 

2.	ACQUISITION OF ASSETS BY BUYER.

2.1. Purchase and Sale of Assets . The Seller agrees to sell and transfer to the Buyer, and the Buyer agrees to purchase and acquire from the Seller at the Closing, subject to and upon the other terms and conditions contained herein, all of Seller’s right, title and interest in and to all of the assets, properties and rights of the Seller which are primarily used, to be used or maintained in connection with the current conduct of the Wholesale Business of whatever nature, kind and description, whether tangible or intangible (including goodwill) wherever located (collectively, the “Acquired Assets”) free and clear of any Liens and Liabilities, other than Permitted Liens and Assumed Liabilities. The Acquired Assets shall include:

(a) all of the tangible personal property relating to the Wholesale Business including (i) all machinery, equipment, and tools utilized to conduct the Wholesale Business whether or not contained on the premises of the Leased Property, including all buildings and other structures, leasehold improvements and fixtures located on the Leased Property relating to the Wholesale Business (the “ Equipment ”) and (ii) inventories of finished goods, work-in-progress, goods in process, manufactured and purchased parts, supplies and raw materials, in each case owned or identified for use in the Wholesale Business, whether or not located on the Leased Property, or in transit inventory and supplies ordered by the Wholesale Business, but not yet received as of the Closing Date and packaging, marketing and other materials related thereto (the “ Inventories ”);

 

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(b) all of Seller’s accounts and notes receivable, deferred charges, trade receivables and other rights to receive payments existing as of the Closing Date and arising out of the Wholesale Business other than such receivables subject to the Northrim Facility as of the Closing Date (the “ Receivables ”);

(c) all rights of the Seller under any wholesale customer and vendor agreements relating to the Wholesale Business, including without limitation the License and Distribution Agreement, as amended to date, by and between the Seller and Keurig, Incorporated (the “ Assumed Contracts ”);

(d) all Intellectual Property, goodwill associated therewith, licenses and sublicenses granted in respect thereto and rights thereunder, remedies against past, current and future infringements thereof and rights to protection therein, in each case relating to or used in the past or current conduct of the Wholesale Business, including without limitation all worldwide rights to the Tully’s and Bellaccino names and brands, subject to the rights of third parties set forth on Schedule 2.1(d);

(e) all licenses, permits, consents, certificates, franchises or other governmental authorizations relating to or used in or relating to the current conduct of the Wholesale Business, other than any such licenses, permits, consents, certificates, franchises or other governmental franchises which cannot be legally transferred, which non-transferable governmental authorizations are listed on Schedule 2.1(e);

(f) all books, records, files, printouts, drawings, data, files, notes, notebooks, accounts, invoices, correspondence, specifications, creative materials, advertising or promotional materials, marketing materials, personnel records, studies, reports, memoranda, equipment repair, maintenance or service records, or papers (collectively, “ Records ”), whether in hard copy, electronic or other format, primarily relating to or used in the current or past conduct of the Wholesale Business;

(g) all customer, distributor, supplier and mailing lists used or created by the Wholesale Business;

(h) all rights in and with respect to the insurance policies listed on Schedule 2.1(h);

 

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(i) all goodwill associated with the Wholesale Business or the Acquired Assets, together with the right to represent to third parties that the Buyer is the successor to the Wholesale Business;

(j) all Acquired Assets listed on Schedule 2.1(j).

2.2. Excluded Assets . Notwithstanding any provision in the Transaction Documents to the contrary, the Buyer agrees that none of the following assets, properties, rights or interests of the Seller (the “Excluded Assets”) shall be Acquired Assets:

(a) the consideration delivered to the Seller by Buyer pursuant to the Transaction Documents;

(b) all rights of the Seller arising under the Transaction Documents;

(c) all rights in and with respect to insurance policies of the Seller, except for those insurance policies listed on Schedule 2.1(h)

(d) any governmental authorization listed in Schedule 2.1(e);

(e) any assets of any Employee Plan;

(f) refunds or claims for refunds of Taxes paid by the Seller;

(g) all Seller operated, license operated and franchise operated Tully’s Coffee branded retail stores or kiosks and the leases, licenses and franchise agreements with respect thereto, including footprint stores in special venues such as within the premises of manufacturing facilities, and kiosks and cafes located in grocery stores, hotels, hospitals, airports and university campuses (the “ Retail Stores ”) and all leased or owned properties relating to Retail Stores and personal property located at any Retail Stores;

(h) all tangible property located at any of the Retail Stores or the Leased Property, accounts receivable, notes receivable, prepaid expenses and other current assets of the Seller generated or held by the Seller on or prior to the Closing Date, that are not used in, or otherwise attributable to the Wholesale Business;

(i) any Cash owned by the Seller as of the Closing Date; and

(j) all of the Excluded Assets listed on Schedule 2.2(j).

2.3. Liabili t ies . Notwithstanding any provision in this Agreement or any other writing to the contrary, the Buyer is not assuming any Liability of the Seller of whatever nature, whether presently in existence or arising hereafter, other than (collectively, the “Assumed Liabilities”):

(a) all Liabilities of the Seller under the Assumed Contracts (other than those Liabilities that arose or accrued based on any act, event, or omission that occurred prior to the Closing Date, which shall in all cases be retained by the Seller irrespective of whether they are known at Closing or become known only after the Closing, or based on any breach or default of the Seller which occurred prior to the Closing Date);

 

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(b) all Liabilities arising out of ownership or operation of the Wholesale Business or the Acquired Assets after the Closing Date;

(c) all of the Liabilities listed on the attached Schedule 2.3(c);

provided , that the Buyer shall in no event assume any Liabilities of the Seller arising from or in connection with (i) any Excluded Asset; (ii) any transactions between the Seller and any Affiliate of a Seller; (iii) matters not relating to the Wholesale Business or the Acquired Assets; (iv) any Debt or Guarantee of the Seller; (v) the Seller’s breach or default of any obligation or agreement; (v) the Seller’s expenses in connection with the Contemplated Transactions; (vi) insurance policies of the Seller, (vii) obligations under Assumed Contracts that arose or accrued based on any act, event, or omission that occurred prior to the Closing Date, which shall in all cases be retained by Seller irrespective of whether they are known at Closing or become known only after the Closing or based on any breach or default of the Seller that occurred prior to the Effective Date, (viii) claims, costs or other Liabilities under any Employee Plans, including without limitation relating to health or retirement benefits, (ix) any Liability for or on account of Taxes arising prior to the Closing Date (whether known or unknown), (x) any Liability of the Seller to indemnify any Person by reason of the fact that such Person was a director, officer, employee, or agent of the Seller, or was serving at the request of such entity as a partner, trustee, director, officer, employee, or agent of another entity, (xi) any Liability of the Seller arising as a result of any legal or equitable action or judicial or administrative proceeding initiated at any time in respect of anything done, suffered to be done or omitted to be done by such Seller or any of their respective directors, officers, employees or agents, (xii) any Liability of the Seller arising out of the Transaction Documents, (xiii) any Liability relating to or arising out of products manufactured or sold or services rendered by the Seller prior to the Closing Date, whether or not related to the Wholesale Business, (xiv) any Liability of the Seller for making payments or providing, funding, insuring or administering benefits of any kind to it or its ERISA Affiliates’ employees or former employees, directors or officers, including without limitation any bonus, severance payment, change of control payment, retention payment or other compensation, benefit or payment that is created, accrues, accelerates or becomes payable to any present or former director, shareholder, employee or independent contractor, pursuant to any Contractual Obligation on or before the Closing Date as a result of the execution, delivery or consummation of the Contemplated Transactions (without regard to when any such compensation, benefit or payment is due and payable) (xv) any Liability not arising out of the operation of the Wholesale Business, (xvi) any Liability relating to compliance with the Worker Adjustment and Retraining Notification Act, 29 U.S.C. § 2101, et seq. (“WARN Act”) and any state laws concerning layoffs or the closing or relocation of worksites or the like, which arises on or before the Closing Date; or (xvii) any Liabilities of the Seller incurred (or resulting from any action occurring) prior to the Closing that is not otherwise an Assumed Liability. All Liabilities that are not expressly assumed (or are expressly excluded) hereunder shall be retained by and remain Liabilities of the Seller and satisfied by the Seller in accordance with their terms (all such Liabilities not being assumed being herein referred to as the “ Excluded Liabilities ”).

 

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2.4. Purchase Price .

(a) In consideration for the Acquired Assets, the Buyer shall assume the Assumed Liabilities and pay the Seller at Closing aggregate cash consideration of Forty Million Dollars ($40,000,000) (the “ Purchase Price ”) minus the Estimated Asset Adjustment, if any (the “ Net Purchase Price ”) plus the Noncompete Payment, consisting of (i) Three Million Five Hundred Thousand Dollars ($3,500,000) (the “ Escrow Amount ”) in cash payable by wire transfer to Bank of New York as escrow agent (“ Escrow Agent ”), to be held in escrow pursuant to the Escrow Agreement among the Parties and the Escrow Agent substantially in the form of Exhibit I hereto and (ii) the sum of the Net Purchase Price and the Noncompete Payment (less the Escrow Amount) in cash payable by wire transfer to the Seller in accordance with written instructions of the Seller given to the Buyer at least three business days prior to the Closing.

(b) No later than five (5) Business Days prior to the Closing Date, the Sellers shall deliver to the Buyer a written statement (the “ Estimated Asset Adjustment Statement ”), calculated in accordance with the Wholesale Segment Balance Sheet, that is reasonably acceptable to the Buyer and sets forth the Sellers’ good faith calculation, as of 12:01 a.m. (Eastern Time) on the Closing Date of the Estimated Asset Adjustment. The Sellers will make available to the Buyer and its representatives as requested by the Buyer, all books, records and other documents used by the Sellers in preparing the Estimated Asset Adjustment Statement and personnel of the Sellers responsible for preparing or maintaining such books, records and documents. The Estimated Asset Adjustment Statement shall be prepared in good faith and in a manner consistent with the Accounting Principles and the methodologies used in preparation of the Wholesale Segment Balance Sheet; provided , however , for purposes of calculating the Estimated Asset Adjustment Statement, the Preliminary Closing Statement and the Final Closing Statement Net Accounts Receivable shall not equal an amount less than zero; provided further that in the event Net Accounts Receivable are deemed to equal zero, Seller shall be responsible for all estimated bill backs relating to all of Seller’s receivables relating to any date occurring during the period prior to the Closing.

2.5. Allocation of Purchase Price . Buyer and Seller shall agree upon an allocation of the Purchase Price among the Acquired Assets in accordance with Code Section 1060 and the Treasury Regulations thereunder prior to the Closing Date.

2.6. The Closing . The closing (the “Closing”) of the purchase and sale of the Acquired Assets and the assumption of the Assumed Liabilities hereunder shall take place at the offices of Ropes & Gray LLP, One International Place, Boston, MA, 02110, commencing at 10:00 a.m. Boston time not later than five (5) business days after the date upon which all of the conditions to Closing set forth in Section 6 of this Agreement have been satisfied or waived by the applicable parties or such other date as the Parties may mutually determine (the “Closing Date”).

 

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2.7. Deliveries by Seller and Buyer .

At the Closing:

(a) The Seller shall deliver to the Buyer (i) a bill of sale in the form attached hereto as Exhibit B (the “ Bill of Sale ”) and (ii) such other instruments of sale, transfer, conveyance and assignment as the Buyer and its counsel have reasonably requested at the Closing. The Parties shall execute, acknowledge (if appropriate), and deliver the Instrument of Assignment and Assumption Agreement in the form attached hereto as Exhibit C and the Buyer will deliver the consideration specified in Section 2.4. Simultaneously with such delivery, and the Seller shall put Buyer in possession and operating control of the Acquired Assets, free and clear of all Liens and other encumbrances of any kind whatsoever.

(b) The Seller and the Buyer shall enter into a License Agreement in the form attached hereto as Exhibit G (the “ License Agreement ”).

(c) The Seller and Buyer shall enter into a Supply Agreement in the form attached hereto as Exhibit H (the “Supply Agreement” ).

(d) The Seller shall enter into a Covenant Not to Compete with Buyer with respect to the Coffee Business in the form attached hereto as Exhibit E (the “ Seller Covenant Not to Compete ”).

(e) The Seller will have delivered to the Buyer the O’Keefe Covenant Not to Compete executed by Tom O’Keefe in the form attached hereto as Exhibit F (the “ O’Keefe Covenant Not to Compete ”).

(f) The Seller and the Buyer shall enter into a Transition Services Agreement in form and substance reasonably satisfactory to the Buyer and the Seller which will provide the Buyer with the services set forth on Exhibit J (the “ Transition Services Agreement ”).

(g) The Seller and the Buyer shall enter into the Escrow Agreement substantially in the form attached hereto as Exhibit I (the “ Escrow Agreement ”).

(h) The Seller and Buyer shall enter into the Sublease Agreement in the form attached hereto as Exhibit D (the “ Sublease Agreement ”) .

(i) The Seller shall have caused Rainier Commons, LLC, a Washington limited liability company to enter into the Recognition, Non-Disturbance and Attornment Agreement in the form attached hereto as Exhibit L (the “ Recognition, Non-Disturbance and Attornment Agreement ”).

Each of the agreements and instruments referenced in clauses (a) through (i) shall be governed by and construed in accordance with the terms of this Agreement and, in the event that any provision of such agreements is construed to conflict with a provision in this Agreement, the provision in this Agreement shall be deemed to be controlling. As

 

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used in this Agreement, the term “ Closing Documents ” shall mean the documents described in clauses (a) through (j) and any other instruments of sale, transfer, conveyance, assignment, and assumption of liabilities executed and delivered by the Parties pursuant to this Section 2.7 or Section 5.7 (Future Assurances).

2.8. Adjustment to Purchase Price .

(a) Preparation of Preliminary Closing Statemen t.

 

(i)

As soon as reasonably practicable after the Closing Date but in any event within 120 days thereafter, Buyer shall prepare and deliver to Sellers a statement (the “ Preliminary Closing Statement ”) setting forth, as of 12:01 a.m. (Eastern Time) on the Closing Date, the Wholesale Assets.

 

(ii)

The Preliminary Closing Statement shall be prepared in accordance with the Accounting Principles and the methodologies used in preparation of the Wholesale Segment Balance Sheet; provided , however , for purposes of calculating the Preliminary Closing Statement, Net Accounts Receivable shall not equal an amount less than zero; provided further that in the event Net Accounts Receivable are deemed to equal zero, Seller shall be responsible for all bill backs relating to all of Seller’s receivables relating to any date occurring during the period prior to the Closing.

 

(iii)

Buyer will make available to Sellers and their representatives, including its independent certified public accountants, as requested by Sellers, all books, records and other documents pertaining to the Wholesale Business used by Buyer in preparing the Preliminary Closing Statement and personnel of Buyer responsible for preparing or maintaining such books, records and documents.

(b) Review of Preliminary Statements . The Preliminary Closing Statement shall be binding and conclusive upon, and deemed accepted by, Sellers unless Sellers shall have notified Buyer in writing within twenty (20) Business Days after receipt of the Preliminary Closing Statement of any objections thereto (the “ Seller Dispute Notice ”). The Seller Dispute Notice shall specify in reasonable detail the items of the Preliminary Closing Statement which are being disputed, shall set forth a reasonably detailed summary of the reasons for such dispute and shall include Sellers’ calculation of the Wholesale Assets. Sellers shall be deemed to have agreed with all other items of the Preliminary Closing Statement delivered by Buyer pursuant to Section 2.8(a) except as specified in the Seller Dispute Notice.

 

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(c) Disputes . At the request of Buyer or Sellers, any dispute between the Parties relating to the Preliminary Closing Statement that cannot be resolved by them within 30 days after Buyer’s receipt of the Seller Dispute Notice shall be referred to the Disputes Auditor for decision, and the decision of the Disputes Auditor shall be final and binding on both Parties. The Parties agree that they will require the Disputes Auditor to render its decision within 30 days after referral of the dispute to the Disputes Auditor for decision pursuant hereto. In making such decision, the Disputes Auditor shall consider only those items or amounts in the Preliminary Closing Statement as to which Sellers objected in the Seller Dispute Notice that remain in dispute between Buyer and Sellers. Before referring a matter to the Disputes Auditor, the Parties shall make a good faith attempt to agree on procedures to be followed by the Disputes Auditor (including procedures for presentation of evidence). If the Parties are unable to agree upon procedures before the end of ten (10) Business Days after Buyer’s receipt of the Seller Dispute Notice either Party may refer the dispute to the Disputes Auditor, and the Disputes Auditor shall render its decision as to such dispute in accordance with the terms of this Agreement, including, if the dispute relates to the Preliminary Closing Statement, the Accounting Principles. If the Parties are able to agree upon such procedures before the end of such ten (10) Business Day period, they shall, as promptly as practicable, submit evidence in accordance with the procedures agreed upon, and the Disputes Auditor shall decide the dispute in accordance therewith as promptly as practicable. The fees and expenses of the Disputes Auditor for, and relating to, the making of any such decision shall be borne by the Parties equally.

(d) Final Closing Statement . The Preliminary Closing Statement shall become final and binding on both Parties upon the earliest of (i) if no Seller Dispute Notice has been given, the expiration of the period within which Seller may notify Buyer of any objections to the Preliminary Closing Statement pursuant to Section 2.8(b), (ii) if the Seller Dispute Notice has been given, upon the agreement by Seller and Buyer that such Preliminary Closing Statement, together with any modifications thereto agreed to in writing by Seller and Buyer is final and binding, and (iii) if the Seller Dispute Notice has been given but there is no such agreement, the date on which the Disputes Auditor shall issue its decision with respect to any dispute relating to such Preliminary Closing Statement referred to the Disputes Auditor pursuant to Section 2.8(c), giving effect to any items reflected in the Seller Dispute Notice as to which Buyer and Seller were able to reach agreement prior to such referral. The Preliminary Closing Statement, as adjusted, if applicable, pursuant to any agreement between the Parties or pursuant to the decision of the Disputes Auditor, when final and binding on both Parties, is herein referred to as the “ Final Closing Statement .”

(e) Payment . The Net Purchase Price shall be decreased (A) by the amount, if any, by which the Wholesale Assets shown on the Estimated Assets Adjustment Statement exceed the Wholesale Assets shown on the Final Closing Statement, unless the Wholesale Assets shown on the Final Closing Statement are equal to at least Four Million Dollars ($4,000,000) or (B) by the amount, if any, by which Inventory shown on the Estimated Asset Adjustment Statement exceeds Inventory shown on the Closing Statement, unless Inventory shown on the Final Closing Statement is equal to at least One Million Eight Hundred Thousand Dollars ($1,800,000) each (a “ Shortfall ”). If the Net Purchase Price is required to be decreased in accordance with this Section 2.8(e), Seller shall promptly, but in any event within three (3) Business Days, pay the Shortfall

 

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to Buyer by wire transfer in immediately available funds to a bank account designed in writing by Buyer. To the extent an Estimated Asset Adjustment was made which, in accordance with the Final Closing Statement, was not required to be made (the “ Excess ”), Buyer shall promptly, but in any event within three (3) Business Days, pay the Excess of the Estimated Asset Adjustment to Sellers by wire transfer in immediately available funds to a bank account designated in writing by Sellers.

 

3.	REPRESENTATIONS AND WARRANTIES OF THE SELLER.

The Seller represents and warrants to the Buyer that the statements set forth in this Section 3 are true, correct and complete as of the date of this Agreement or such other date as may be referred to in any particular representation and warranty, except as set forth in the Disclosure Schedule attached to this Agreement (the “ Disclosure Schedule ”). The Disclosure Schedule has been arranged in sections and paragraphs corresponding to the sections and paragraphs contained in this Section 3.

3.1. Organization and Qualification of the Seller . The Seller is duly organized, validly existing and in good standing under the laws of its jurisdiction of organization and the Seller is qualified to do business and is in good standing as a foreign corporation in each jurisdiction listed in Section 3.1 of the Disclosure Schedule, which such jurisdictions are the only jurisdictions where the nature of the activities conducted by it or the character of the property leased or operated by it make such qualification necessary or appropriate.

3.2. Authorization of Transaction . The Seller has full corporate power and authority to execute and deliver each Transaction Document to which it is a party and all other instruments, agreements and documents contemplated thereby and has taken all corporate and other actions or proceedings necessary to authorize the consummation of the Contemplated Transactions and the performance of its obligations hereunder and thereunder. Each of the Transaction Documents has been duly executed and delivered by Seller and is Enforceable against Seller.

3.3. Governmental Authorization . The execution, delivery and performance by the Seller of each Transaction Document to which it is a party and the consummation of the Contemplated Transactions by the Seller require no action (including any authorization, registration, qualification, consent or approval) by or in respect of, or filing with, any Governmental Authority.

3.4. Noncontravention . The execution, delivery and performance by the Seller of each Transaction Document to which it is a party and the consummation of the Contemplated Transactions by the Seller do not and will not (i) violate, conflict with or result in a default under of the organizational documents of the Seller, (ii) violate in any material respect any applicable Legal Requirement, (iii) conflict with, constitute a default or breach under or give rise to any right of termination, cancellation or acceleration of any right or obligation or to a loss of any material benefit relating to the Wholesale Business or to any Acquired Asset to which the Seller is entitled under any provision of any Contractual Obligation binding upon the Seller Party or to which the Acquired Assets are bound or subject, (iv) result in the creation or imposition of any Lien on any Acquired Asset, except for Permitted Liens.

 

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3.5. Brokers’ Fees . The Seller shall be solely obligated for the payment of all fees or expenses of any broker, agent or finder engaged by them in connection with and for this Agreement or the Contemplated Transactions. The Seller represents and warrants that there are no Liabilities with respect to any brokers’ or finders’ fees or commissions relating to the Contemplated Transactions for which the Buyer could become liable or obligated due to the conduct of the Seller.

3.6. Purchased Assets .

(a) The Seller is the sole and lawful owner of and has good title to (or, in the case of the Leased Property, good and marketable leasehold title and a valid and subsisting leasehold interest in), and the power to sell, assign or transfer to the Buyer, all of the Acquired Assets (other than in transit Inventory) free and clear of all Liens, other than Permitted Liens listed on Schedule 3.6 (the “ Permitted Liens ”). None of the Acquired Assets are in the possession, custody, or control of any Person other than the Seller. No Person other than the Seller has any right, title, or interest in any profits, earnings, gains or losses with respect to the Wholesale Business, or any Acquired Asset. The Acquired Assets, including the Equipment and the Inventory, is sufficient to carry on the Wholesale Business.

(b) The Equipment is in good operating condition and repair, normal wear and tear excepted and has been maintained consistent with the standards generally followed in the industry.

(c) The Inventory is merchantable and fit or suitable and usable for the production or completion of merchantable products for sale. None of the Inventory is obsolete, below standard quality, damaged, or defective, subject only to the reserve for inventory write-down set forth on Schedule 3.6(c), as adjusted for the passage of time through the Closing Date in accordance with GAAP and the past custom and practice of Seller. Each item of such Inventory reflected in the books and records of Seller is reflected on the basis of a complete physical count and is valued at the lower of cost (on a first-in, first-out basis) or market in accordance with GAAP, consistently applied. Since March 31, 2008, no Inventory has been sold or disposed of except through sales in the ordinary course of business.

3.7. Legal and Other Compliance; Permits . The Seller has complied with, and since July 31, 2005 has been in compliance with, all applicable Legal Requirements relating to the conduct of the Wholesale Business, and no Action has been filed or commenced or, to the Seller’s Knowledge, threatened against it alleging any failure so to comply. Schedule 3.7(a) contains a complete list of all material permits required pursuant to Legal Requirements for the conduct of the Wholesale Business. Except as set forth on Schedule 3.7(b) the Seller has been granted all such material permits and, to the Seller’s Knowledge, the Seller is not in breach or violation of, or default under, any such material permit. Except as set forth on Schedule 3.7(c), all such material permits may be

 

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assigned by the Seller to the Buyer as contemplated in this Agreement. The Seller has not received any written notice that any Governmental Authority will revoke, cancel, rescind, intentionally modify or refuse to renew in the ordinary course any such material permit.

3.8. Consents . Schedule 3.8 sets forth each Contractual Obligation (including the Lease) that requires a consent, approval, waiver or other action by any Person as a result of the execution, delivery and performance of the Transaction Documents, and the identity of any Person who is entitled to consent to or receive notice of the Contemplated Transactions (all such required consents or other actions, the “Seller Consents”).

3.9. Property; Liens; Completeness of Acquired Assets .

(a) No Acquired Asset is subject to any Lien except Permitted Liens.

(b) The Acquired Assets constitute all of the material assets, properties and rights of every type and description, real, personal, tangible and intangible, used by the Seller, and necessary to the conduct of the Wholesale Business as it is currently operated.

(c) The Seller has delivered to the Buyer a correct and complete copy of the Lease. The Lease has not been amended, except as shown on Schedule 2.1(j). The Lease is (i) legal, valid, binding and enforceable against Seller, and (ii) to Seller’s Knowledge, is legal valid, binding and enforceable against the landlord named in the Lease, and (iii) is in full force and effect. No portion of the Leased Property is subleased to any other party nor is any other party in occupation of any portion of the Leased Property. Neither the tenant nor, to the Seller’s Knowledge, the landlord under the Lease is in default of its obligations under the Lease and no event has occurred which, with notice or lapse of time, would constitute a default under the Lease or permit cancellation or modification of the Lease. The Seller does not own any real property relating to or used in connection with the conduct of the Wholesale Business, nor does the Seller lease any real property relating to or used in connection with the conduct of the Wholesale Business other than the Leased Property.

(d) The improvements located on the Leased Property are in reasonably good condition. The Leased Property and the improvements located thereon do not violate in any material respect any applicable zoning ordinance, regulation, or other Legal Requirement or otherwise violate or conflict with, in any material respect, any covenant, restriction or other contractual obligation to which the Leased Property, the improvements thereon, or the Lease is subject.

3.10. Litigation . Schedule 3.10 sets forth each instance in which the Seller (i) is subject to any unsatisfied judgment, order, decree, stipulation, injunction or charge relating to the Wholesale Business, any Acquired Asset or Assumed Liability or involving any current or former employee, officer or director of the Wholesale Business, or (ii) is a party or, to the Seller’s Knowledge, is threatened to be made a party to, any charge, complaint, action, suit, proceeding, hearing or investigation of, or in any court or quasi-judicial or administrative agency of, any federal, state, local, or foreign jurisdiction

 

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or before any arbitrator. None of such charges, complaints, actions, suits, hearings and investigations question the validity of this Agreement or any of the other Transaction Documents or of any action taken or to be taken in connection with such transactions, nor, to the Seller’s Knowledge, is there any basis for such a claim. To the Seller’s Knowledge, there are no judgments, orders, decrees, citations, fines or penalties heretofore assessed against the Seller affecting the Wholesale Business, the Acquired Assets or the Assumed Liabilities under any applicable Legal Requirement.

3.11. Intellectual Proper t y .

(a) The Seller owns or has the right to use pursuant to license, sublicense, agreement, or permission all Intellectual Property necessary for the operation of the business of the Wholesale Business as presently conducted. Each item of Intellectual Property owned or used by the Wholesale Business immediately prior to the Closing hereunder will be owned or available for use by the Buyer on identical terms and conditions immediately subsequent to the Closing hereunder. Except as disclosed in Schedule 3.11(a), the Seller has taken all necessary and desirable action to maintain and protect each material item of Intellectual Property that the Wholesale Business uses.

(b) Except as disclosed in Schedule 3.11(b): (i) the continued operation of the Wholesale Business, as presently conducted by the Seller, will not interfere with, infringe upon, misappropriate, or otherwise come into conflict with, any Intellectual Property rights of third parties; (ii) the Seller has never received any written charges, complaints, claims, demands, or notices alleging any such interference, infringement, misappropriation or violation (including any claim that the Seller must license or refrain from using any Intellectual Property rights of any third party); (iii) no claims are pending or, to the Knowledge of the Seller threatened, that the Seller is infringing the Intellectual Property rights of any Person; and (iv) to the Knowledge of the Seller, no third party has interfered with, infringed upon, misappropriated, or otherwise come into conflict with any Intellectual Property rights of the Seller.

(c) Schedule 3.11(c) identifies (i) all issued patents and applications thereof, all registered Trademarks and applications thereof, all unregistered Trademarks, all registered copyrights and applications thereof, and all Internet domains owned by the Seller, and (ii) each license, agreement, or other permission which the Seller has granted to any third party with respect to any of the Intellectual Property (together with any exceptions). The Seller has delivered to the Buyer correct and complete copies of all such licenses, agreements, and permissions (as amended to date), and has made available to the Buyer correct and complete copies of all other written documentation evidencing ownership and prosecution (if applicable) of each such item to be identified in this subsection. With respect to each item of Intellectual Property required to be identified in this subsection, except as disclosed in Schedule 3.11(c):

 

(i)

Seller possess all right, title, and interest in and to the item, free and clear of any Lien, license, or other restriction;

 

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(ii)

the item is not subject to any outstanding injunction, judgment, order, decree, ruling, or charge;

 

(iii)

no action, suit, proceeding, hearing, investigation, charge, complaint, claim, or demand is pending or, to the Knowledge of the Seller, is threatened, which challenges the legality, validity, enforceability, use, or ownership of the item; and

 

(iv)

Seller has not agreed to indemnify any Person for or against any interference, infringement, misappropriation, or other conflict with respect to the item.

(d) Schedule 3.11(d) identifies each item of Intellectual Property that any third party owns and that the Seller uses pursuant to license, sublicense, agreement, or permission. The Seller has delivered to the Buyer correct and complete copies of all such licenses, sublicenses, agreements, and permissions (as amended to date).

(e) Schedule 3.11(e) identifies by name and general subject matter all material proprietary coffee blend and recipe formulations maintained as unregistered trade secrets by the Seller (the “ Trade Secret Formulations ”). Except as otherwise described in Section 3.11(e), all rights, title and interests in all material trade secrets included in the Intellectual Property, including the Trade Secret Formulations, are owned by the Seller.

(f) All employees and consultants who contributed to the discovery or development of any of Intellectual Property rights used in the conduct of the business of the Seller did so within the scope of his or her employment.

(g) The use and dissemination by the Seller of any and all data and information concerning consumers of its products or users of any web sites operated by the Seller is in compliance with all applicable privacy policies, terms of use, and laws except to the extent such failure to comply would not have a Material Adverse Effect. The transactions contemplated to be consummated hereunder as of the Closing will not violate any privacy policy, terms of use, or material laws relating to the use, dissemination, or transfer of such data or information. The Seller uses reasonable commercial measures to protect the secrecy of consumer information that its collects and maintains, including all consumer credit card information, and there have been no breaches to the securities systems of the Seller, and no unauthorized Person has obtained access to such consumer information.

3.12. Environmental Matters .

(a) The Seller is and has been in compliance with all Environmental Laws;

(b) There has been no release or threatened release of any pollutant, contaminant or toxic or hazardous material (including toxic mold), substance or waste, or petroleum or any fraction thereof, (each a “ Hazardous Substance ”) on, upon, into or from the Leased Property;

 

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(c) There have been no Hazardous Substances generated by the Seller that have been disposed of or come to rest at any site that has been included in any published U.S. federal, state or local “superfund” site list or any other similar list of hazardous or toxic waste sites published by any governmental authority in the United States;

(d) There are no underground storage tanks located on the Leased Property, no polychlorinated biphenyls or polychlorinated biphenyls containing equipment used or stored on the Leased Property, and no hazardous waste as defined by the Resource Conservation and Recovery Act, as amended, stored at the Leased Property, except for the storage of hazardous waste in compliance with Environmental Laws; and

(e) The Seller has made available to Buyer true a