EXHIBIT 10.1
ASSET PURCHASE AGREEMENT
BY AND AMONG
CASA OLE EAST, LTD.
AS BUYER,
AND
MEXICAN RESTAURANTS, INC.,
AS GUARANTOR,
CASA OLE OF BEAUMONT, INC.,
CASA OLE OF LAKE XXXXXXX, INC.,
HARKEN REAL ESTATE COMPANY, INC.,
CRAZY JOSE'S RESTAURANT GROUP, INC., AND
CRAZY JOSE'S FRANCHISING, INC.,
AS SELLER,
AND
XXXXXX X. AND XXXXX XXXXXX AND
XXXXXX X. AND XXXXXXX XXXXXXXX,
AS SHAREHOLDERS
SEPTEMBER 25, 2003
Table of Contents
Page
ARTICLE 1 BASIC TRANSACTION.......................................................................................1
1.1 Definitions..............................................................................................1
1.2 Purchase and Sale of Restaurant Assets...................................................................2
1.2.1 Owned Real Property.............................................................................2
1.2.2 Fixtures and Improvements.......................................................................2
1.2.3 Equipment.......................................................................................2
1.2.4 Licenses and Permits............................................................................2
1.2.5 Restaurant Intellectual Property................................................................2
1.2.6 Goodwill........................................................................................2
1.2.7 Contracts.......................................................................................2
1.2.8 Inventories.....................................................................................2
1.2.9 Leases..........................................................................................2
1.2.10 Claims, Rights, Etc.............................................................................2
1.2.11 Computers.......................................................................................3
1.2.12 Personal Goodwill; Characters...................................................................3
1.2.13 Other Tangibles.................................................................................4
1.2.14 Acknowledgement of Franchisor Interests.........................................................4
1.3 Purchase Price...........................................................................................4
1.3.1 Seller Allocation...............................................................................4
1.3.2 Note Allocation.................................................................................4
1.3.3 Adjustment for Cash.............................................................................4
1.4 Assumption of Liabilities................................................................................5
1.5 Prorations 1.3.1.........................................................................................5
1.6 Purchase Price Allocation................................................................................6
1.7 Royalty Interests........................................................................................6
ARTICLE 2 CLOSING; TERMINATION....................................................................................6
2.1 Closing Date.............................................................................................6
2.2 Deliveries at the Closing................................................................................6
2.3 Conditions to Buyer's Obligations to Close...............................................................7
2.4 Conditions to Seller's Obligations to Close.............................................................11
2.5 Termination.............................................................................................13
2.6 Effect of Termination...................................................................................14
ARTICLE 3 REPRESENTATIONS AND WARRANTIES.........................................................................14
3.1 Representations and Warranties of Seller and Shareholders...............................................14
3.1.1 Organization...................................................................................14
3.1.2 Authority Relative to This Agreement; Non-Contravention........................................15
3.1.3 Financial Statements...........................................................................16
3.1.4 Absence of Certain Changes.....................................................................16
3.1.5 Litigation.....................................................................................16
3.1.6 Broker's or Finder's Fees......................................................................16
3.1.7 Subsidiaries...................................................................................17
3.1.8 Benefit Plans..................................................................................17
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3.1.9 Compliance with Laws...........................................................................17
3.1.10 Contracts; Debt Instruments....................................................................17
3.1.11 Properties.....................................................................................18
3.1.12 Intellectual Property..........................................................................18
3.1.13 Certain Employee Matters.......................................................................19
3.1.14 Insurance......................................................................................19
3.1.15 Taxes..........................................................................................20
3.1.16 Promotions.....................................................................................20
3.1.17 Inventory......................................................................................20
3.1.18 Permits........................................................................................20
3.1.19 Disclosure.....................................................................................20
3.2 Representations and Warranties of the Buyer and Guarantor...............................................20
3.2.1 Organization and Qualification of the Buyer and Guarantor......................................20
3.2.2 Authorization of Transaction...................................................................21
3.2.3 Noncontravention...............................................................................21
3.2.4 Continuity of Business.........................................................................21
3.2.5 SEC Filings....................................................................................22
ARTICLE 4 PRE-CLOSING COVENANTS..................................................................................22
4.1 General............................................................................................... 22
4.2 Notices and Consents....................................................................................22
4.3 Full Access.............................................................................................23
4.4 Confidentiality.........................................................................................23
4.4.1 Confidential Information.......................................................................23
4.4.2 Press Releases and Announcements...............................................................24
4.5 Communication with Seller's Employees...................................................................24
4.6 Removal of Excluded Assets..............................................................................24
4.7 Risk of Loss............................................................................................24
4.8 Delivery of Information to Buyer........................................................................24
4.9 Delivery of Information by Seller.......................................................................25
4.10 Title...................................................................................................26
4.11 No Shop.................................................................................................27
ARTICLE 5 POST-CLOSING COVENANTS.................................................................................27
5.1 General.................................................................................................27
5.2 Covenant Not to Compete and Confidentiality.............................................................27
5.2.1 Restrictive Covenants..........................................................................28
5.2.2 Definitions....................................................................................28
5.2.3 General........................................................................................29
5.2.4 Ancillary to Enforceable Agreements............................................................29
5.2.5 Non-Competition................................................................................29
5.2.6 Solicitation of Customers......................................................................29
5.2.7 Solicitation of Transactions...................................................................29
5.2.8 Reformation....................................................................................29
5.2.9 Approved Transactions..........................................................................30
5.2.10 Survival.......................................................................................30
5.2.11 Remedies.......................................................................................30
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5.2.12 Miscellaneous..................................................................................30
5.2.13 Confidentiality of Information.................................................................30
5.2.14 Enforcement....................................................................................31
5.2.15 Notice and Cure................................................................................32
5.2.16 Miscellaneous..................................................................................32
5.3 Employees...............................................................................................32
5.4 Litigation Support......................................................................................32
5.5
Texas Certificate of No Tax Due.........................................................................33
5.6 Amendment to Articles of Incorporation; Change of Name .................................................33
ARTICLE 6 REMEDIES FOR BREACH OF AGREEMENT.......................................................................33
6.1 Indemnification Provisions for Benefit of the Buyer.....................................................33
6.2 Indemnification Provisions for Benefit of the Seller and Shareholders...................................33
6.3 Procedures for Matters Involving Third Parties..........................................................34
6.4 Limitation of Representations and Warranties............................................................35
6.4.1 Condition of the Business and Property.........................................................35
6.4.2 Limitation.....................................................................................36
6.5 Threshold...............................................................................................36
6.6 Limitation on Liability.................................................................................36
6.7 Miscellaneous...........................................................................................36
6.8 Survival................................................................................................37
ARTICLE 7 MISCELLANEOUS..........................................................................................37
7.1 Entire Agreement........................................................................................37
7.2 No Third-Party Beneficiaries............................................................................37
7.3 Succession and Assignment...............................................................................37
7.4 Notices.................................................................................................37
7.5 Amendments and Waivers..................................................................................38
7.6 Severability............................................................................................38
7.7 Construction............................................................................................39
7.8 Independent Obligations.................................................................................39
7.9 Expenses................................................................................................39
7.10 Headings................................................................................................39
7.11 Time....................................................................................................39
7.12 Legal Representation....................................................................................39
7.13 Counterparts............................................................................................40
7.14 Facsimile Signatures....................................................................................40
7.15 Governing Law...........................................................................................40
7.16 Dispute Resolution......................................................................................40
7.17 Survival of Representations, Warranties and Covenants...................................................41
7.18 Solicitation of Employees...............................................................................41
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ASSET PURCHASE AGREEMENT
This
Asset Purchase Agreement (this "Agreement") is made and entered
into effective as of, September 25, 2003 (the "Effective Date") by and among
Casa Ole East, Ltd., a
Texas limited partnership (the "Buyer"), and Mexican
Restaurants, Inc. (the "Guarantor"), and Casa Ole of Beaumont, Inc., Casa Ole of
Lake Xxxxxxx, Inc., Harken Real Estate Company, Inc., Crazy Jose's Restaurant
Group, Inc., and Crazy Jose's Franchising, Inc., each a
Texas corporation
(collectively, the "Seller"), and Xxxxx and Xxxxxx X. Xxxxxx, individually, and
Xxxxxx X. and Xxxxxxx Xxxxxxxx, individually (collectively, the "Shareholders").
RECITALS
A. The Seller is engaged in the business of operating Casa Ole and
Crazy Xxxx restaurants at various locations in
Texas and Louisiana (the
"Restaurants"). The Casa Ole Restaurants are each operated under a Protected
Location Franchise Agreement with Casa Ole Franchise Services, Inc. or any
successor(s) thereto (the "Franchisor"). Certain Seller owned and certain Seller
leased real property and improvements that are used in connection with the
Restaurant Business (collectively, such owned interests are referred to as the
"Owned Real Property" and such leasehold interests are referred to as the
"Leased Real Property", and collectively, such Owned Real Property and Leased
Real Property are referred to as the "Real Property").
B. This Agreement contemplates a transaction pursuant to which (i) the
Buyer will purchase all or substantially all of the assets (including goodwill)
associated with the Restaurants from the Seller in return for cash (and the
assumption of certain liabilities, including but not limited to the leases of
Leased Real Property) and Notes, (ii) the Buyer will purchase the Owned Real
Property from the Seller that is the owner of such Real Property in return for
cash and Notes, and (iii) Buyer will purchase certain personal goodwill from the
Shareholders in return for cash and promissory notes.
NOW THEREFORE, in consideration of the Recitals, and the mutual
benefits to be derived hereunder, the receipt and sufficiency of which are
hereby acknowledged, the Parties agree as follows:
ARTICLE 1
BASIC TRANSACTION
1.1 DEFINITIONS. Unless otherwise stated in this Agreement, capitalized
terms used in this Agreement shall have the meaning set forth in Exhibit 1.1
attached to this Agreement. Unless the context shall require otherwise: (a)
words importing the singular number or plural number shall include the plural
number and singular number respectively; (b) words importing the masculine
gender shall include the feminine and neuter genders and vice versa; (c)
reference to "include," "includes," and "including" shall be deemed to be
followed by the phrase "without limitation"; (d) reference in this Agreement to
"herein," "hereby" or "hereunder," or any similar formulation, shall be deemed
to refer to this Agreement as a whole, including all Exhibits and Schedules to
this Agreement; (e) reference to "and" and "or" shall be deemed to mean
"and/or"; (f) references to Articles and Sections refer to Articles and Sections
of this Agreement; and (g) references to Exhibits and Schedules are to the
Exhibits and Schedules attached to this Agreement, each of which is made a part
hereof for all purposes.
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1.2 PURCHASE AND SALE OF RESTAURANT ASSETS. On and subject to the terms
and conditions of this Agreement, and in consideration of the delivery of the
Purchase Price to Seller and Shareholders and the assumption of the Assumed
Liabilities by Buyer, the Seller agrees to sell, assign, transfer, convey, and
deliver to the Buyer, and the Buyer agrees to purchase and acquire from the
Seller, at the Closing, all of the Restaurant Assets free and clear of all
liens, claims, and encumbrances, subject to Permitted Encumbrances. For purposes
hereof, the term "Restaurant Assets" means all assets and property rights of any
kind or character, wherever located, whether tangible or intangible (including
goodwill), whether or not reflected on the Seller's books or records, currently
used by the Seller in connection with the Restaurant Business, as further
described in the following clauses 1.2.1 through 1.2.13, as they exist on the
Closing Date; provided, however, that the Restaurant Assets shall not include
the excluded assets listed on Exhibit 1.2 ("Excluded Assets"):
1.2.1 "OWNED REAL PROPERTY" shall mean the parcels of Owned
Real Property described by metes and bounds or other legal description,
including the Restaurant sites and adjacent properties, as set forth in
Exhibit 1.2.1;
1.2.2 "FIXTURES AND IMPROVEMENTS" shall mean all Fixtures and
Improvements owned by Seller and located on the Real Property;
1.2.3 "EQUIPMENT" shall mean all Equipment owned by Seller and
located on the Real Property;
1.2.4 "LICENSES AND PERMITS" shall mean all right, title and
interest of Seller in, to and under all Licenses and Permits relating
to the Restaurant Business or to all or any of the Restaurant Assets,
but only to the extent such Licenses and Permits are transferable under
applicable law. Seller and Buyer understand that Seller's liquor, beer
and wine permits are not transferable, and nothing in this Agreement
shall obligate Seller to permit Buyer to operate after Closing under
such permits and Buyer agrees it will not attempt to do so;
1.2.5 "RESTAURANT INTELLECTUAL PROPERTY" shall mean all of
Seller's and the Shareholders' right, title and interest in and to
Restaurant Intellectual Property;
1.2.6 "GOODWILL" shall mean all of Seller's and the
Shareholders' right, title and interest in and to the goodwill of the
Restaurant Business;
1.2.7 "CONTRACTS" shall mean all right, title and interest of
Seller in, to and under the Contracts, and all rights (including rights
of refund and offset), privileges, deposits, claims, causes of action
and options relating or pertaining to the Contracts;
1.2.8 "INVENTORIES" shall mean all Inventories of Seller and
of the Big Thicket Social Club;
1.2.9 "LEASES" shall mean Seller's leasehold estate as tenant
under the Leases of the Leased Real Property ("Leased Real Property")
listed in Exhibit 1.2.9;
1.2.10 "CLAIMS, RIGHTS, ETC." shall mean all rights to
insurance claims for property damage, prior to closing, to the
Restaurant Assets under Seller's property casualty insurance in effect
prior to closing, if, and to the extent assignable and/or
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transferable, the benefit of and the right to enforce the covenants and
warranties, if any, that Seller is entitled to enforce with respect to
the Restaurant Assets against Seller's predecessors in title to the
Restaurant Assets. This clause does not apply to Excluded Assets.
1.2.11 COMPUTERS. All right, title and interest of Seller in
computer equipment and hardware, including, without limitation, all
cash registers, all central processing units, terminals, disk drives,
tape drives, electronic memory units, printers, keyboards, screens,
peripherals (and other input/output devices), modems and other
communication controllers, and any and all parts and appurtenances
thereto, together with all right, title and interest of Seller in all
Intellectual Property used by the Seller in the operation of such
computer equipment and hardware, including, without limitation, all
software, all of Seller's rights under any licenses related to the
Seller's use, at any time, of such computer equipment, hardware or
software, and all leases pursuant to which Seller leases any computer
equipment, hardware or software; insofar and only insofar as any of the
foregoing are used in a Restaurant or otherwise in connection with the
Restaurant Business;
1.2.12 PERSONAL GOODWILL; CHARACTERS. All right, title and
interest of Seller and the Shareholders in and to, including the use
and portrayal of, all characters previously used to promote the
Restaurant Business, including all scripts, names, tapes, videos,
sketches, including the names and concepts "Poppee," "Crazy Jose's",
"Grandson", (Seller to deliver, at Closing, a letter of consent from
the applicable Shareholders' family members (grandchildren) to the
Intellectual Property transfers contemplated in this Agreement) "Snap
of the Finger Magic", "Gatorman", "Whiporito", "Caricatures (on
restaurant walls or in commercial advertisements)" and all similar such
commercial advertisements, together with all goodwill associated
therewith (collectively the "Character"). Each Seller and each
Shareholder specifically acknowledge and agree that this Section 1.2.12
specifically contemplates the sale to Buyer of the "Poppee" character
(Xxxxxx X. Xxxxxx) and all mannerisms and other identifying
characteristics related to the Character and all goodwill associated
therewith, and that from and after the Closing, neither the Seller nor
the Shareholders shall have any right to use such Character, whether in
promoting a business or otherwise. Personal goodwill shall not include
the personal goodwill of the children or grandchildren of Xxxxxx X.
Xxxxxx or Xxxxxx X. Xxxxxxxx, nor rights to the use of the names of
Xxxxxx X. or Xxxxx Xxxxxx or such children or grandchildren, except
that Buyer shall be entitled to use and at Closing shall be conveyed
the use of all existing advertisements related to the Restaurant
Business which have such persons, children or grandchildren or such
names in them, for a period of two (2) years after Closing. Nothing in
this Agreement shall obligate such children or grandchildren or Xxxxxx
X. Xxxxxx or Xxxxxx X. Xxxxxxxx to perform any service for or to agree
to any additional use of their images beyond that which is specifically
contemplated herein, or to restrict or to limit in any way their future
activities or the use by them or their licensees of their names and
images in any endeavor of any kind or type except as expressly provided
in Section 5.2 as to Xxxxxx X. and Xxxxx Xxxxxx. Seller shall retain
and Buyer shall not be entitled to use the name "Harken Real Estate
Company" or any derivatives thereof; and
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1.2.13 OTHER TANGIBLES. All right, title and interest of
Seller in, to and under all rights, privileges, claims, causes of
action, and options relating or pertaining to the foregoing Restaurant
Assets.
1.2.14 ACKNOWLEDGEMENT OF FRANCHISOR INTERESTS. As elsewhere
stated, the parties acknowledge and agree that Seller's assets being
sold under this Agreement are assets used in connection with, both,
franchised and licensed (Casa Ole) and non-franchise owned restaurant
businesses. The parties agree that nothing in this Agreement is
intended to assert claim, right or title to any of the Marks or
proprietary System or the goodwill associated with the Marks or System
of the Franchisor, Casa Ole Franchise Services, Inc. as set forth in
the Casa Ole Franchise Agreements and that any reference in this
Agreement to the assets of Seller specifically exclude any and all
assets of the Franchisor.
1.3 PURCHASE PRICE. As full and complete consideration for the sale and
transfer of the Restaurant Assets to the Buyer, the noncompetition covenants of
the Shareholders contained herein, and the sale and transfer of the personal
goodwill of the Shareholders to the Buyer, the Buyer shall pay and deliver to
the Seller and the Shareholders at the Closing the aggregate amount of
$13,750,000, which amount shall be allocated in accordance with Section 1.6 and
shall be payable at Closing in the following manner:
1.3.1 SELLER ALLOCATION. The portion of the Purchase Price
allocated to Seller shall be payable to Seller all in cash
($10,750,000.00) at Closing by wire transfer or delivery of other
immediately available funds.
1.3.2 NOTE ALLOCATION. The Three Million Dollars
($3,000,000.00) portion of the Purchase Price allocated to the
Shareholders shall be paid at Closing in the form of Promissory Notes
("Notes") executed by Buyer. The forms, principal and interest amounts,
payees and amortization of the Notes shall be as set forth on Exhibit
1.6 A. with note forms 1.3.2 A, B, C, D and E are attached. Guarantor
agrees to execute and deliver a guaranty of such Notes in the form set
forth in Exhibit 1.6 B. If requested to do so, the Shareholders shall
agree in writing to subordinate payment obligations under the Notes to
obligations to Buyer's lenders under such terms as Buyer, Shareholders
and Buyer's lender shall reasonably agree; provided that in no event
shall the obligations under the Notes be required to be subordinated to
obligations exceeding $10,000,000.00 plus interest and collection
costs. Buyer and Guarantor understand and agree that the Notes are
negotiable, and without limitation may be distributed or assigned by
the initial entity payees to owner(s) of the entity.
1.3.3 ADJUSTMENT FOR CASH. The Purchase Price shall be
increased on a dollar-for-dollar basis in respect of (i) all cash and
cash equivalents physically present in the Restaurants on the Closing
Date, and (ii) all deposits and pre-paid items that relate to Assumed
Liabilities (such as security deposits for the Leases) or the
Restaurant Assets that are transferred to Buyer hereunder. The deposits
owned by Seller are set forth on Schedule 1.3.3 attached hereto. Seller
shall report the amounts of such items on per-Restaurant basis and
Seller and Shareholders shall certify such report to Buyer at Closing.
The adjustment for such items shall be paid in cash to Seller within
sixty (60) days after Seller reports the amounts of such items to
Buyer. The Purchase Price shall be decreased by any outstanding gift
certificates and catering credits sold by Seller prior to Closing, to
the extent not redeemed by the purchasers of same, prior to Closing. At
Closing, Seller
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shall certify, to Seller's best information and belief, to Buyer the
cash equivalent amount of such unredeemed gift certificates and
catering credits, which amount shall be applied as a credit to Buyer on
the sooner of (i) when verified or (ii) at the final adjustment within
sixty (60) days of Closing.
1.4 ASSUMPTION OF LIABILITIES. On and subject to the terms and
conditions of this Agreement, the Buyer agrees to assume and become responsible
for all of the Assumed Liabilities (as listed on Exhibit 1.4) at the Closing.
The Guarantor agrees to guarantee such assumption and to execute and deliver at
closing the guaranty thereof in the form set forth in Exhibit 1.6 B. The Buyer
will not assume or have any responsibility, however, with respect to any other
obligation or liability of the Seller not included within the definition of
Assumed Liabilities, including all Excluded Liabilities. The Guarantor agrees to
execute and deliver direct guaranties of the Assumed Liabilities to the Lessors
and other parties to such Assumed Liabilities as may be reasonably required by
such Lessors and other parties to comply with the conditions for assignment and
assumption thereof and as may be reasonably required to obtain reasonable
consents to the assignments and assumptions and releases of Seller and
Shareholders.
1.5 PRORATIONS.
(a) Seller shall be responsible for and shall pay all personal property
taxes, ad valorem taxes and assessments which are past due or have become due
with respect to any of the Restaurant Assets or the Real Property on or before
the Closing Date, together with any penalty or interest thereon. The Seller and
Buyer shall cause to be prorated through the Closing Date all (i) applicable
personal property taxes and ad valorem taxes arising with respect to the
Restaurant Assets or the Real Property for the current assessment period and
(ii) accrued vacation attributable to Seller's employees (and hired by Buyer)
and not yet due or paid as of the Closing Date. Seller shall, at Closing, pay
Buyer an amount equal to the Seller's prorated portion of such taxes and/or
accrued vacation, and Buyer thereafter shall timely pay such amount to the
appropriate taxing authority or employee, respectively. If current tax bills are
not available as of the Closing Date, the prior year's tax bills will be used
for purposes of making a tentative proration at the Closing, and a final
proration shall be made promptly when the current tax bills are received. The
Seller shall (and the Shareholders shall cause Seller to) remit any additional
amounts due to Buyer within sixty (60) days of receipt of written notice thereof
from Buyer (which notice shall include reasonable evidence of the taxes owed and
a statement of the amount claimed of Seller). The Buyer shall remit to the
Seller any excess amounts previously paid by Seller (as well as reasonable
evidence of the taxes owed and a statement regarding the excess amounts)
promptly upon receiving the current year's tax bills and determining the amount
of such excess.
(b) Except for insurance premiums on the policies being retained by
Seller, at the Closing, all normal and customarily prorated items, including
without limitation, maintenance fees and assessments, rent, prepaid Yellow Pages
advertisements and other prepaid obligations and, to the extent available at
Closing, utility services being continued to the Real Property, shall be
prorated as of the Closing Date. Seller (or the landlord under any leases, as
appropriate) shall be charged for and credited with all prorated items up to and
including the Closing Date and Buyer shall be charged for and credited with all
of same from and after the Closing Date.
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(c) Premiums for Seller's insurance will not be prorated since Buyer
will not assume the coverage maintained by Seller. Buyer hereby acknowledges
that Buyer will be solely responsible for obtaining Buyer's own insurance
coverage.
(d) If Buyer desires to have existing utility services continued to the
Real Property after the Closing, Buyer shall use its reasonable efforts to make
arrangements for such continuation, including advising the provider of such
utility services of changes in billing name and address and paying security
deposits, if any, are required by the provider of such utility services. Buyer
shall be fully responsible and shall pay on time all utility charges after
Closing. If Buyer shall not have completed all changes in billing from Seller to
Buyer within fifteen (15) days after Closing, Seller may, after ten (10) days
notice and opportunity to cure to Buyer, take actions it deems appropriate to
absolve itself of further liability to the utility companies, including but not
limited to instructions to terminate services. Whether existing utility services
to the Real Property are continued or discontinued, all deposits held by the
providers of such utility services shall be paid to Seller.
(e) The provisions of this Section 1.5 shall survive the Closing.
(f) Buyer and Seller shall share, co-equally, all real property/title
company closing costs including, but not limited to, title insurance, surveys,
filing fees and document preparation.
1.6 PURCHASE PRICE ALLOCATION. The Purchase Price (and all other
capitalizable costs) shall be allocated among (i) the Restaurant Assets
(including goodwill), (ii) the Covenant Not to Compete and (iii) the personal
goodwill in accordance with their relative fair market values as set forth on
Exhibit 1.6. Each of the Buyer, Seller and Shareholders agrees to use the
allocations set forth on Exhibit 1.6 for purposes of all tax returns or
statements filed with any taxing authority, including preparation of IRS Form
8594, and all financial accounting.
1.7 ROYALTY INTERESTS. Seller's claims for royalties due from Buyer,
specifically including Xxxxxx X. Xxxxxx'x royalties received from Buyer on the
business operations in Lufkin and Nacogdoches,
Texas, shall be terminated
effective with the Closing.
ARTICLE 2
CLOSING; TERMINATION
2.1 CLOSING DATE. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of XxXxxxx, Xxxx and
Xxxxxx, L.L.P., located at 0000 Xxxx Xxxx Xxxxx, Xxxxx 0000, Xxxxxxx, Xxxxx
00000, commencing at 9:00 a.m. local time on or before December 19, 2003, or
such other location or time as the Parties may mutually determine (the "Closing
Date"). All actions taken at the Closing shall be deemed to have been taken
simultaneously at the time the last of any such actions is taken or completed,
except as the Parties otherwise mutually agree.
2.2 DELIVERIES AT THE CLOSING. At the Closing:
(a) Seller and the Shareholders, as appropriate, will execute,
acknowledge, and/or deliver (as appropriate) to the Buyer: (i) the
various certificates, instruments, and documents referenced below in
Section 2.3; (ii) evidence, satisfactory to the Buyer, that all
consents, approvals and authorizations required for the consummation by
the Seller of the transactions contemplated by
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this Agreement have been obtained; and (iii) assignments and other
instruments of sale, transfer, and conveyance, including special
warranty deeds conveying the Owned Real Property and Bills of Sale and
Assignment assigning, conveying, and transferring the Buyer the Leased
Real Property and other Restaurant Assets, all subject only to
Permitted Encumbrances and in form and substance mutually agreed upon
by Seller and Buyer.
(b) Buyer will execute, acknowledge, and/or deliver (as
appropriate) to the Seller: (i) the various certificates, instruments,
and documents referenced below in Section 2.4; (ii) the Purchase Price,
pursuant to Section 1.3; (iii) an assumption of the Assumed
Liabilities; and (iv) all such assignments, assumption agreements and
other instruments of sale, transfer, and conveyance in form and
substance mutually agreed upon by Seller and Buyer.
(c) As may be reasonably requested, Guarantor will execute and
deliver to the Seller and Shareholders and others: (i) the various
guaranties (other than the Guaranty in the form of Exhibit 1.6.B which
has been agreed upon), certificates, instruments, and documents
referred to in Sections 1.3, 1.4, and 2.4.
2.3 CONDITIONS TO BUYER'S OBLIGATIONS TO CLOSE. The obligation of the
Buyer to consummate the transactions to be performed by it in connection with
the Closing is subject to satisfaction of the following conditions, any of which
Buyer may waive by execution of a writing so stating at or prior to the Closing:
(a) the representations and warranties set forth in Section
3.1 below shall be true and correct in all material respects at and as
of the Closing Date;
(b) the Seller shall have performed and complied with all of
its covenants hereunder in all material respects through the Closing;
(c) the Seller shall provide evidence satisfactory to the
Buyer that there have been obtained all consents, approvals and
authorizations required for the consummation by the Seller of the
transactions contemplated by this Agreement for transfer of the
Restaurant Assets;
(d) no action, suit, or proceeding shall be pending before any
court or quasi-judicial or administrative agency of any federal, state,
local, or foreign jurisdiction or before any arbitrator wherein an
unfavorable injunction, judgment, order, decree, ruling, or charge
would (A) prevent consummation of any of the transactions contemplated
by this Agreement, (B) cause any of the transactions contemplated by
this Agreement to be rescinded following consummation, or (C) affect
adversely the right of the Buyer to own the Restaurant Assets, and no
such injunction, judgment, order, decree, ruling, or charge shall be in
effect;
(e) the Seller and Shareholders shall have delivered to the
Buyer a certificate dated as of the Closing Date and executed by the
chief executive officer of the Seller and each Shareholder to the
effect that each of the conditions specified above in Section
2.3(a)-(d) is satisfied in all material respects;
7
(f) the Buyer shall have received all material authorizations,
consents, and approvals of governments and governmental agencies
necessary or appropriate in connection with consummating the
transactions contemplated by this Agreement for transfer of the
Restaurant Assets;
(g) the Buyer's due diligence investigation of the Seller as
contemplated by Section 4.5 hereof shall have been completed to the
satisfaction of Buyer no later than November 19, 2003 (the "Due
Diligence Period");
(h) the Buyer shall have received the following in form and
substance satisfactory to Buyer in Buyer's sole discretion with respect
to each Equipment Lease:
(i) a written Assignment ("Assignment") of each
Equipment Lease; and
(ii) a written consent of the lessors of said
Equipment Lease approving same; provided however, in
the event that Seller is not able to secure said
consent prior to Closing and Buyer waives said
requirement, Seller shall transfer to Buyer all
equitable rights in said Equipment Lease.
(i) the Buyer shall have received the following in form and
substance satisfactory to Buyer in Buyer's sole discretion with respect
to each Lease:
(i) a written Assignment ("Assignment") of all
Leases, executed by the Tenant or Lessee thereof with
respect to each parcel of Leased Real Property;
(ii) a written consent of the Landlord or Lessor with
respect to the Assignment of Tenant's or Lessee's
leasehold interest with respect to each such Lease
Agreement;
(iii) an Estoppel Agreement ("Estoppel") executed by
Landlord or Lessor with respect to each Lease
Agreement;
(iv) in the event of the existence of any lien,
encumbrance, deed of trust or mortgage existing on or
with respect to any parcel of Leased Real Property, a
Non-Disturbance Agreement executed by such lien
holder, encumbrancer or mortgagee;
(v) evidence reasonably satisfactory to Buyer that
all Land and Improvements on each parcel of Leased
Real Property is in compliance with all applicable
zoning ordinances and other laws, rules and/or
regulations governing the use of each such property;
(vi) evidence reasonably satisfactory to Buyer that
each parcel of Leased Real Property is not in
violation of any law, rule regulation or code,
including without limitation all applicable
environmental and/or hazardous substances laws, and
all applicable building codes and ordinances,
together with any other applicable law, ordinance,
rule or regulation pertaining to or governing the
ownership, occupancy and/or use of such property;
8
(vii) Buyer shall have received copies of
Certificates of Occupancy with respect to all parcels
of Leased Real Property evidencing lawful occupancy
of each such parcel by Seller;
(viii)Buyer shall have received title commitments and
title exception documents from the Title Company
evidencing that there are no violations of deed
restrictions or other recorded documents with respect
to any such property and that there are no mortgages,
liens, encumbrances or other matters of record which
would, hinder or interfere with the current use
and/or occupancy of any parcel of Leased Real
Property which has not been satisfied to Buyer's sole
satisfaction at or prior to Closing;
(ix) Buyer shall have received a survey of each
parcel of Leased Real Property duly prepared or
updated to a date not more than 60 days prior to
Closing, together with a certificate executed by
Seller at Closing certifying to Buyer that there have
been no material changes with respect to the Land or
the Improvements upon the Land constituting each
parcel of Leased Real Property; and
(x) Buyer shall have received and approved all
Closing documents including without limitation all
deeds to the Owned Real Property, Assignments of
Leases with respect to the Leased Real Property and
any and all other documents, certificates,
resolutions and agreements which may be necessary or
appropriate to close and carry out the terms of the
transaction set forth in this Agreement.
(j) Xx. Xxxxxxxx shall have entered into an employment
agreement with the Buyer in the form of Exhibit 2.3(j);
(k) there shall not have been any material adverse change in
the financial condition, business of the Restaurants, or in the
condition of the Restaurant Assets;
(l) the Seller shall have delivered to the Buyer a Certificate
of Good Standing for each entity comprising the Seller issued by the
State of
Texas no more than thirty (30) days prior to Closing;
(m) all necessary director and shareholder resolutions,
waivers and consents, and all other actions to be taken by the Seller
and the Shareholders in connection with consummation of the
transactions contemplated by this Agreement, and all certificates,
instruments, and other documents required to effect the transactions
contemplated hereby, including deeds and bills of sale, will be
reasonably satisfactory in form and substance to the Buyer and its
counsel;
(n) Buyer shall have received all keys to all locks on the
Real Property;
(o) Buyer shall have received an Owner's Policy of Title
Insurance underwritten by the Title Company in the amount of the
Purchase Price allocated to the Owned Real Property issued by Title
Company, insuring that Buyer is the owner thereof subject only to the
Permitted Encumbrances and the standard printed exceptions included in
a
Texas standard form owner's policy of title insurance; provided,
however, that (i) the
9
standard exception for discrepancies, conflicts, or shortages in area
shall be deleted except for "shortages in area", (ii) such policy shall
have "None of Record" endorsed regarding restrictions except for
restrictions that are Permitted Encumbrances, (iii) the rights of
parties in possession shall be deleted, and (iv) the standard exception
for taxes shall be limited to the year in which the Closing occurs,
marked "not yet due and payable", and subsequent years and subsequent
assessments for prior years due to change in land usage or ownership;
(p) Current certificate issued by company acceptable to Buyer
reflecting that since the date of the searches furnished pursuant to
Section 4.8(c) hereof no Uniform Commercial Code filings, chattel
mortgages, assignments, pledges, or other encumbrances have been filed
in the offices of the Secretary of State of the State of
Texas or the
County Clerk of each county where the Real Property is located, with
reference to the Real Property;
(q) the Seller and the Shareholders shall have delivered or
caused to be delivered the items referenced in Section 2.2(a);
(r) fee titles and all leasehold interests (if any) in and to
all parcels of Owned Real Property and all leasehold interests in and
to Leased Real Property shall be conveyed to Buyer at Closing free of
all leases, tenants, lessees or other occupants, whether permitted or
unpermitted, other than Permitted Encumbrances;
(s) Seller shall have delivered or be prepared to
unconditionally deliver to Buyer at Closing possession of all parcels
of Owned Real Property, Leased Real Property and all other restaurant
assets free and clear of all liens, encumbrances, mortgages,
restrictions, conditions and other matters affecting title/occupancy of
the restaurant assets, subject only to the Permitted Encumbrances;
(t) a legal opinion from Seller's counsel, dated the date of
Closing to the effect that:
(i) Each entity comprising Seller is a corporation
validly existing and in good standing under the laws
of the State of
Texas (as to which opinion, such
counsel may rely upon certificates from officials of
the State of
Texas) and each has all requisite power
and authority to own its assets and to conduct the
Business in the manner heretofore conducted;
(ii) The consummation of the transactions
contemplated hereby have been duly authorized by all
necessary corporate action on the part of each Seller
and its Shareholders;
(iii) The execution and delivery of this Agreement
and the consummation of the transactions contemplated
hereby will not result in any violation of, or be in
conflict with provision of law, the Articles of
Incorporation or Bylaws of each Seller;
(iv) No consent, approval, authorization, order,
registration, declaration, filing or qualification by
or with any court or governmental authority
10
which has not been obtained is required of Seller
under existing law to authorize the execution or
delivery of this Agreement by Seller; and
(v) To the best of such counsel's knowledge, there is
no action, suit, proceeding or investigation pending
or threatened against Seller or any of their
properties or assets which questions the validity of
this Agreement or any action taken or to be taken
pursuant hereto.
(u) Seller shall have provided Buyer with evidence
satisfactory to Buyer that Seller has terminated its Equipment Lease
with respect to its point of sale cash register system and that Seller
has received title to said assets, free and clear of any liens, claims
or encumbrances and that same are included as part of Restaurant
Assets;
(v) Buyer and Seller recognize and agree that the
facilitation/application of liquor licenses shall begin immediately
subsequent to the Effective Date and continue cooperatively and
expeditiously until completion. However, in the event that Buyer shall
not have secured from the Texas Alcoholic Beverage Commission all wine,
beer and liquor permits to sell beverages at each of the restaurant
locations, Seller shall enter into a Interim Management Agreement and
Interim Concession Agreement as to any location that Buyer does not
have a required permit in the forms set forth as Exhibits 2.3(v)-1 and
2.3(v)-2 attached hereto and made a part hereof for all purposes; and
(w) Buyer, Guarantor, Seller and Shareholders shall have
reached mutual agreement on all documents reasonably necessary for
consummation of the transactions contemplated by this Agreement,
including but not limited to the documents referred to in Sections
2.2(a), (b) and (c) and Sections 1.3.1 and 2.3(u) (exclusive of the
Exhibits which have been agreed upon).
2.4 CONDITIONS TO SELLER'S OBLIGATIONS TO CLOSE. The obligations of the
Seller and the Shareholders to consummate the transactions to be performed by it
in connection with the Closing is subject to satisfaction of the following
conditions, any of which Seller may waive by execution of a writing so stating,
at or prior to the Closing:
(a) the representations and warranties set forth in Section
3.2 below shall be true and correct in all material respects, at and as
of the Closing Date;
(b) the Buyer and Guarantor shall have performed and complied
with all of their covenants hereunder in all material respects through
the Closing;
(c) the Buyer and Guarantor shall provide evidence
satisfactory to the Seller that there have been obtained all consents,
certified copies of resolutions, approvals and authorizations required
for the consummation by the Buyer and Guarantor of the transactions
contemplated by this Agreement, including, but not limited to, the
Notes, Guaranty and such other documentation arising in connection
herewith;
(d) the Buyer and Guarantor shall have delivered to the Seller
a certificate dated as of the Closing Date and executed by the
authorized officer of
11
the Buyer and Guarantor, respectively, to the effect that each of the
conditions specified above in Section 2.4(a)-(c) is satisfied in all
respects;
(e) all actions to be taken by the Buyer and Guarantor (as
applicable) in connection with consummation of the transactions
contemplated by this Agreement, and all certificates, instruments, and
other documents required to effect the transactions contemplated
hereby, will be reasonably satisfactory in form and substance to the
Seller and its counsel;
(f) the Seller and the Shareholders shall have received (1)
all consents to assignment of the Leases and (2) full releases of the
Seller and the Shareholders from all liability after Closing under the
Leases and guaranties thereof;
(g) The Guarantor shall have executed and delivered to the
Seller and Shareholders guaranties of the Notes and Assumed Liabilities
in the form attached as Exhibit 1.6 B hereto and the guaranties
described in Section 1.4;
(h) the Buyer and Guarantor shall have executed (where
applicable) and delivered or caused to be delivered the items
referenced in Section 2.2(b) and (c);
(i) Buyer, Guarantor and Seller shall have reached mutual
agreement on all documents reasonably necessary for consummation of the
transactions contemplated by this Agreement, including, but not limited
to, the documents (other than agreed upon exhibits attached hereto)
referred to in Section 2.2(a), (b) and (c), and Sections 1.3.1 and
2.3(u) and the Subordination Agreement and the Change of Control
provisions in the Notes referred to in Section 1.3.2;
(j) No action, suit or proceeding shall be pending or
threatened before any court or quasi-judicial or administrative agency
of any federal, state, local, or foreign jurisdiction or before any
arbitrator wherein an unfavorable injunction, judgment, order, decree,
ruling, or charge would (A) prevent consummation of any of the
transactions contemplated by this Agreement, (B) cause any of the
transactions contemplated by this Agreement to be rescinded following
consummation, (C) affect adversely the right of the Seller to sell the
Restaurant Assets or (D) impose any Liability upon Seller based upon
the sale or any action or inaction of Seller relating in any way to the
sale, and no such injunction, judgment, order, decree, ruling, or
charge shall be threatened or in effect;
(k) Buyer and Seller shall have reached mutual agreement on
Exhibit 1.4;
(l) Seller and Shareholders shall have received from Buyer, as
franchisor, or licensor (including but not limited to Guarantor and
Casa Ole Franchise Services, Inc.) (excluding the mix license which has
already been reissued to Marco Products, L.P.) terminations and full,
complete and unconditional releases of Seller and the Shareholders for
liabilities arising in connection with any franchise and/or license by
or among them;
12
(m) A license agreement between Casa Ole Franchise Services,
Inc. and Marco Products, L.P. shall have been consummated and executed
by both parties;
(n) a legal opinion from Buyer's counsel, dated the date of
Closing to the effect that:
(i) Each entity comprising Buyer and Guarantor are a limited
partnership and corporation respectively, validly existing and
in good standing under the laws of the State of Texas (as to
which opinion, such counsel may rely upon certificates from
officials of the State of Texas) and each has all requisite
power and authority to own its assets and to conduct the
Business in the manner heretofore conducted;
(ii) The consummation of the transactions contemplated hereby
have been duly authorized by all necessary corporate action on
the part of each Buyer and Guarantor;
(iii) The execution and delivery of this Agreement and the
Guaranty and the consummation of the transactions contemplated
hereby will not result in any violation of, or be in conflict
with provision of law, the Articles of Incorporation or Bylaws
of Buyer and Guarantor;
(iv) No consent, approval, authorization, order, registration,
declaration, filing or qualification by or with any court or
governmental authority which has not been obtained (or will
not by Closing) is required of Buyer or Guarantor under
existing law to authorize the execution or delivery of this
Agreement by Buyer or Guarantor; and
(v) To the best of such counsel's knowledge, there is no
action, suit, proceeding or investigation pending or
threatened against Buyer or Guarantor or any of their
properties or assets which questions the validity of this
Agreement or any action taken or to be taken pursuant hereto.
(o) There shall not have been any material adverse changes in
the financial conditions of the Buyer or Guarantor since the Effective
Date; and
(p) Casa Ole Franchising Services, Inc. shall mutually agree
with Seller and Xxxxxx X. Xxxxxx as to the definitive terms and have
executed and delivered to Seller and Xxxxxx X. Xxxxxx an Agreement
relating to Franchises with terms similar to those forms attached as
Exhibits 2.4(p)-1 and 2.4(p)-2.
2.5 TERMINATION. The Parties may terminate this Agreement as provided
below:
(a) the Buyer, the Seller and the Shareholders may terminate
this Agreement by mutual written consent at any time prior to the
Closing;
(b) the Buyer may terminate this Agreement by giving written
notice to the Seller (i) at any time prior to the Closing in the event
(a) Buyer discovers a material environmental issue affecting the Leased
Real Property or Owned Real
13
Property or (b) any of the Shareholders or Seller has breached any
material representation, warranty, or covenant contained in this
Agreement in any material respect, the Buyer has notified the Seller of
the breach, and the environmental condition or breach has continued
without cure (or adequate protection has been otherwise given to Buyer)
for a period of ten (10) days (Closing to be extended to allow such ten
(10) days cure, if necessary and applicable) after the notice of
breach, (ii) at any time prior to the Closing if the Closing shall not
have occurred on or before December 19, 2003, by reason of the failure
of any condition precedent under Section 2.3 above (unless the failure
results from the Buyer or Guarantor breaching any representation,
warranty, or covenant contained in this Agreement), (iii) prior to
November 19, 2003, for any reason in the Buyer's sole discretion; (iv)
in the event Buyer is unsuccessful in securing financing on or before
November 19, 2003, with terms acceptable to it in its sole discretion,
or (v) at any time after the Effective Date, for any reason not set
forth herein, upon the payment to Seller of a termination fee of
$50,000.00; and
(c) the Seller may terminate this Agreement by giving written
notice to the Buyer at any time prior to the Closing (i) in the event
the Buyer or Guarantor has breached any material representation,
warranty, or covenant contained in this Agreement in any material
respect, the Seller has notified the Buyer and Guarantor of the breach,
and the breach has continued without cure for a period of ten (10) days
(Closing to be extended to allow such ten (10) days cure, if necessary
and applicable) after the notice of breach, (ii) at any time prior to
the Closing, if the Closing shall not have occurred on December 19,
2003, by reason of the failure of any condition precedent under Section
2.4 above (unless the failure results from the Seller breaching any
representation, warranty, or covenant contained in this Agreement), or,
(iii) at any time after the Effective Date, for any reason not set
forth herein, upon the payment to Buyer of a termination fee of
$50,000.00.
2.6 EFFECT OF TERMINATION. If any Party terminates this Agreement
pursuant to Section 2.5 above, all rights and obligations of the Parties
hereunder shall terminate without any Liability of any Party to any other Party
and the sole remedy of the Parties shall be for payment of amounts due, if any,
under Section 2.5 and Section 7.9 of this Agreement.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
3.1 REPRESENTATIONS AND WARRANTIES OF SELLER AND SHAREHOLDERS. Each
Seller and Shareholders represent and warrant to the Buyer and Guarantor that
the statements contained in this Section 3.1 are correct and complete as of the
date of this Agreement and will be correct and complete as of the Closing Date
(as though made then and as though the Closing Date were substituted for the
date of this Agreement throughout this Section 3.1).
3.1.1 ORGANIZATION. Seller is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of Texas
and/or Louisiana, as applicable, and has the corporate power to own its property
and to carry on its business as now being conducted. Seller is duly qualified
and/or licensed, as may be required, and in good standing in each of the
14
jurisdiction in which the nature of the business conducted by it or the
character o the property owned, leased or used by it makes such qualification
and/or licensing necessary.
3.1.2 AUTHORITY RELATIVE TO THIS AGREEMENT; NON-CONTRAVENTION.
(a) Seller has the requisite corporate power and authority to
enter into this Agreement and to carry out its obligations hereunder.
The execution and delivery of this Agreement by Seller, the performance
by Seller of its obligations hereunder and the consummation by Seller
of the transactions contemplated herein have been duly authorized by
the Board of Directors and Shareholders of Seller, and no other
corporate proceeding on the part of Seller are necessary to authorize
the execution and delivery of this Agreement, the performance by Seller
of its respective obligations hereunder. This Agreement has been duly
executed and delivered by Seller and Shareholders and, subject to the
terms and conditions hereof, constitutes a valid and binding obligation
of it, enforceable against them in accordance with its terms, except to
the extent that such enforceability may be limited by applicable
bankruptcy, insolvency, fraudulent transfer, reorganization or similar
laws affecting the rights of creditors generally or by general
principals of equity.
(b) Neither the execution and delivery of this Agreement by
Seller, nor the consummation by Seller of the transactions contemplated
herein nor compliance by Seller with any of the provisions hereof will
materially (i) conflict with or result in any breach of the articles of
incorporation or by-laws of Seller, (ii) subject to the receipt of
required consents to assignments of real property leases and other
Restaurant Assets, result in a violation or breach of any provisions
of, or constitute a default (or an event which, with notice or lapse of
time or both, would constitute a default) under, or result in the
termination of, or accelerate the performance required by, or result in
a right of termination or acceleration under, or result in the creation
of any Lien upon any of the Assets under, or result in the loss of a
material benefit under, any of the terms, conditions or provisions of
any note, bond, mortgage, indenture, deed of trust, license, contract,
lease, agreement or other instrument or obligation of any kind to which
the Seller is a party or by which Seller or any of its properties or
assets may be bound, or any permit, concession, franchise or license
applicable to it or its properties or assets or (iii) subject to the
receipt of required consents to assignments of real property leases and
other Restaurant Assets, conflict with or violate any judgment, ruling,
order, writ, injunction, decree, law, statute, rule or regulation
applicable to Seller or any of its properties or assets, other than any
such event described in items (ii) or (iii) which could not reasonably
be expected to prevent the consummation of the transactions
contemplated hereby.
(c) No action by any governmental authority is necessary for
Seller's execution and delivery of this Agreement or the consummation
by Seller or Shareholders of the transactions contemplated hereby,
except where the failure to obtain or take such action would not
reasonably be expected to prevent the consummation of the transactions
contemplated hereby, subject to the receipt of required consents to
assignments of governmental licenses or permits, if any.
(d) To the best knowledge of Seller and Shareholder's, no
consents, approvals, orders, registrations, declarations, filings or
authorizations are required on the
15
part of Seller for or in connection with the execution and delivery of
this Agreement or the consummation by Seller of the transactions
contemplated on its part hereby, except required consents to
assignments of real property leases and other Restaurant Assets.
3.1.3 FINANCIAL STATEMENTS. Seller has delivered to Buyer copies
of the following financial statements which have been prepared in accordance
with accounting principles consistently followed as of and for the periods
indicated:
(a) the internally generated balance sheets and income statements
of Seller, and Seller's applicable related entities, dated as of
December 31, 2002, which balance sheets and income statements present
fairly the operations and the assets and liabilities at such date; and
(b) the internally generated balance sheet and income statement
of Seller at June 30, 2003, which balance sheet and income statement
present fairly the operations and assets and liabilities of Seller at
such date.
Except as set forth in such financial statements, Seller has no
liabilities or obligations of any nature (whether accrued, absolute, contingent
or otherwise), which have not been set forth on the balance sheets (and except
for liabilities incurred since June 30, 2003), as may be required by accounting
principles consistently applied by Seller to be reflected on a such balance
sheet or in such notes. Such financial statements present fairly the financial
condition and operations of Seller as of the indicated dates and the results of
operations of Seller for the indicated periods are correct and complete in all
material respects and are consistent with the books and records of Seller. Such
financial statements have accurate accruals of all employee benefit costs
including, but not limited to, payroll, bonuses, and retirement benefits.
Schedule 3.1.3 describes the (i) variance between Seller's "consistently
applied" financial reporting practices and "generally accepted accounting
principles (GAAP)" and (ii) Seller's liabilities (including leases and notes
payable) not included on such financial statements.
3.1.4 ABSENCE OF CERTAIN CHANGES. Since December 31, 2002, Seller
has conducted its business only in the ordinary course and there has not been
any change by Seller in accounting principles or methods except for internal
reallocations from restaurants to administration or vice versa as attached in
Exhibit 3.1.4.
3.1.5 LITIGATION. Except as noted on Schedule 3.1.5, there is no
suit, action or legal, administrative, arbitration or other proceeding, or
governmental investigation or review pending or, to the knowledge of Seller or
Shareholders, threatened, to which Seller is, or would be, a party or by which
it is or would be affected (and Seller and Shareholders are not aware of any
basis for any such action, suit, or proceeding that has a reasonable likelihood
of being brought). Except as noted on Schedule 3.1.5, no product liability or
tort claims have been made, or to Seller's or Shareholders' knowledge,
threatened against the Seller relating to products sold or services performed by
Seller.
3.1.6 BROKER'S OR FINDER'S FEES. No agent, broker, person or firm
acting on behalf of Seller or Shareholders or under any of their authority is or
will be entitled to any advisor's or broker's commission or finder's fee from
Seller or Shareholders in connection with any of the transactions contemplated
herein.
16
3.1.7 SUBSIDIARIES. Except for the ownership of Crazy Xxxx
Restaurant Group Inc. by Casa Ole, of Beaumont, Inc. and the Excluded Assets,
Seller does not (i) own, directly or indirectly, any capital stock or other
ownership interest in any corporation, partnership, joint venture or other
entity and (ii) will not own prior to Closing, directly or indirectly, any
capital stock or other ownership interest in any corporation, partnership, joint
venture or other entity.
3.1.8 BENEFIT PLANS. No lien imposed under Section 401(a)(29) or
Section 412(n) of the Code, Section 302(f) or Section 4068 of ERISA, or arising
out of any action filed under ERISA Section 4301(b), exists upon the Restaurant
Assets. Neither Seller nor any ERISA Affiliate has terminated any employee
pension benefit plan (within the meaning of Section 3(2) of ERISA) subject to
Title IV of ERISA (herein referred to as a "Title IV Plan") under circumstances
giving rise to, or that would give to any actual or potential liability to the
Pension Benefit Guaranty Corporation ("PBGC") or any other person, (ii) no event
or condition exists which presents a risk of termination of any Title IV Plan by
the PBGC, (iii) there is no actual or potential liability to the PBGC or any
other person expected by the Seller or any ERISA Affiliate to be incurred with
respect to any Title IV Plan, including, but not limited to, any liability for
any accumulated funding deficiency as defined in Section 302 of ERISA or for any
minimum funding contribution under Section 302 of ERISA, and (iv) no Title IV
Plan has applied for or obtained a waiver from the Internal Revenue Service of
any minimum funding requirement under Section 412 of the Code. Neither Seller
nor any ERISA Affiliate is required, or has been required during the past five
(5) years, to contribute to any "multiemployer plan" as such term is defined by
ERISA Section 3(37) (other than Seller companies). "ERISA Affiliate" means any
member of any "controlled group of corporations" as defined by Section 414(b) of
the Code that includes Seller, any member of any group of "trades or businesses
under common control" as defined by Section 414(c) of the Code that includes the
Seller, or any member of any "affiliated service group" as defined in Section
414(m) of the Code that includes Seller.
3.1.9 COMPLIANCE WITH LAWS. Seller has not violated or failed to
comply with any statute, law, ordinance, regulation, rule, judgment, decree or
order of any governmental entity applicable to its business or operations in any
material respect which has not been resolved. Seller has not received any
written communication from a governmental entity that alleges that it is not in
compliance with any applicable law that has not been resolved. Except taxes not
yet due and payable, Seller is not required to make, and Seller has no
reasonable expectation that it will be required to make, any expenditures to
achieve or maintain compliance with existing applicable law (this representation
does not apply to any such requirements that may result from the consummation of
this transaction, including but not limited to requirements that may be imposed
on Buyer as a new owner under applicable fire codes, XXX xxxx, etc.). Seller is
in material compliance with all immigration and other laws relating to the
employment or retention of persons who are not citizens of the United States.
3.1.10 CONTRACTS; DEBT INSTRUMENTS. The contracts which are
included in the Assumed Liabilities (the "Contracts") constitute all of the
contracts or agreements to which Seller is a party that are material to the
business, properties, assets, condition (financial or otherwise) and results of
operations of Seller that are to be assigned and assumed. Each Contract is in
full force and effect and is a legal, valid and binding agreement of the
applicable company and Seller, to the knowledge of Seller and Shareholders, of
each other party thereto, enforceable in accordance with its terms except to the
extent that its enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, fraudulent conveyance or similar laws affecting the
rights of creditors generally and subject to general principles of equity.
Seller is not
17
in violation of or in default in any material respect (nor does there exist any
condition which upon the passage of time or the giving of notice would cause
such a violation of or default under) any loan or credit agreement, note, bond,
mortgage, indenture, lease, permit, concession, franchise, license or any other
Contract to which it is a party or by which it or any of its properties or
assets is bound.
3.1.11 PROPERTIES.
(a) Seller has good and marketable title to, or valid leasehold
interests in their respective assets and properties, including the
Restaurant Assets, are free and clear of all liens and encumbrances
except for (i) upon Closing, any Assumed Liabilities, and (ii)
properties and assets retired and disposed of in the ordinary course of
business since the most recent Financial Statement, (iii) Existing
Security Interest, if any, on Restaurant Assets to be released at or
prior to Closing, and (iv) easements, rights of way, conditions,
covenants, reservations, exclusions, leases, landlord rights, and other
matters of record which will be subject to objections by Buyer pursuant
to section 4.10. The tangible personal property used by Seller is in
good operating condition and repair, ordinary wear and tear excepted,
and all personal property leased by Seller is in the condition required
of such property by the terms of the lease applicable thereto during
the term of such lease and upon the expiration thereof.
(b) Seller has complied in all material respects with the terms
of all Leases to which it is a party and under which it is in
occupancy, and all such Leases are in full force and effect.
(c) None of Seller's property is subject to a lease which is not
included in Exhibit 1.4.
3.1.12 INTELLECTUAL PROPERTY.
(a) To the best of Seller's knowledge, Seller owns or has the
express or common law right to use pursuant to registration, filing or
applicable law all Intellectual Property necessary for the operation of
the business of Seller, as presently conducted, all as more fully
described on Schedule 3.1.12(a) hereto. Seller's rights in each item of
Intellectual Property owned or used by Seller immediately prior to the
Closing hereunder will be owned or available for use by Buyer, by
assignment thereof, on identical terms and conditions, if any,
immediately subsequent to the Closing Date hereunder. Seller has taken
action to maintain and protect the name of "Crazy Jose's".
(b) To the best of Seller's knowledge, since January 1, 2001,
Seller has not interfered with or infringed upon, misappropriated or
otherwise come into conflict with, any Intellectual Property rights of
third parties; Seller has not received any charge, complaint, claim,
demand, or notice alleging any such interference, infringement,
misappropriation, or violation (including any claim that Seller must
license or refrain from using any Intellectual Property rights of any
third party); and, to the knowledge of Seller and Shareholders, no
third party has interfered with, infringed upon, misappropriated, or
otherwise come into conflict with any Intellectual Property rights of
Seller or Shareholders.
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(c) Schedule 3.1.12(c) identifies each registration which has
been issued to Seller with respect to any of its Intellectual Property,
identifies each pending application for registration which Seller has
made with respect to any of its Intellectual Property, and identifies
each license, agreement, or other permission which Seller has granted
to any third party with respect to any of its Intellectual Property
(together with any exceptions). Seller has delivered to Buyer correct
and complete copies of all such registrations, applications, licenses,
agreements, assumed names and permissions (as amended to date).
Schedule 3.1.12(c) also identifies each trade name or unregistered
trademark used by Seller in connection with its business. Except as set
forth on Schedule 3.1.12(c), with respect to each item of Intellectual
Property required to be identified in Schedule 3.1.12(c) and with
respect to each item of copyrightable Intellectual Property (whether or
not registration has been sought), to the best of Seller's knowledge:
(i) Seller possesses all right, title, and interest in and to the
item, free and clear of any lien, license, or other restriction;
(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
Seller and Shareholders if threatened which challenges the
legality, validity, enforceability, use;
(iv) ownership of the item; and
(v) Seller has never agreed to indemnify any person for or
against any interference, infringement, misappropriation, or
other conflict with respect to the item.
None of the Intellectual Property is owned by a third party or
used pursuant to license, sublicense, agreement, or permission, except as
provided in Section 1.2.14 and Schedule 3.1.12(c).
3.1.13 CERTAIN EMPLOYEE MATTERS. No employee, agent, consultant
or contractor of Seller who has contributed to or participated in the conception
and development of Intellectual Property of Seller has asserted or threatened
any claim against Seller, since January 1, 2001, in connection with such
person's involvement in the conception and development of the proprietary rights
of Seller and, to the knowledge of Seller and Shareholders, no such person has a
reasonable basis for any such claim.
3.1.14 INSURANCE. All of the policies of fire, liability,
worker's compensation, health and other forms of insurance presently in effect
with respect to Seller's business are valid and outstanding policies and provide
insurance coverage for the properties, assets and operations of Seller, of the
kinds, in the amounts and against the risks as management of Seller deems to be
adequate. No notice of cancellation or termination has been received with
respect to any such policy. To the knowledge of Seller, the activities and
operations of Seller have been conducted in a manner so as to conform in all
material respects to all applicable provisions of such insurance policies.
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3.1.15 TAXES.
(a) Seller has timely filed with the appropriate taxing authority
all tax returns required to be filed on or prior to the date hereof,
including sales taxes, and each such tax return was properly completed
and correct in all material respects at the time of filing. All taxes,
including sales taxes, if any, for which tax returns are required, or
not required, to be filed by Seller, for which Seller (or Buyer) is or
could otherwise be held liable, or which are or could otherwise become
chargeable as an encumbrance upon the Restaurant Assets (the taxes
referred to in this Section being "Covered Taxes"), have been duly and
timely paid through Closing or will be paid within thirty (30) days
after Closing.
(b) Seller has withheld and paid over all taxes required to have
been withheld and paid over and complied with all material information
reporting and backup withholding requirements, including maintenance of
required records with respect thereto, in connection with material
amounts paid or owing to any employee, independent contractor,
creditor, shareholder or other third party.
3.1.16 PROMOTIONS. Schedule 3.1.16 sets forth all promotions
currently in effect which promotions include discount coupons, free meals and
the like which schedule shall be certified/updated by Seller at Closing.
3.1.17 INVENTORY. Each Restaurant is currently stocked and will
at Closing be stocked with an adequate amount of inventory, which is consistent
with historical and seasonal levels.
3.1.18 PERMITS. To the best of its knowledge, Seller has in
effect mixed drink, beer or wine sale permits necessary to conduct its business.
No representation is made as to whether such permits will be obtainable by Buyer
as a new owner or what requirements will be imposed. Seller is aware that a
"Local Option Choice" circumstance has developed with respect to its store in
Port Xxxxxx, Texas that may affect the ability of new applicants to obtain mixed
beverage permits possibly limiting such store to beer and wine only. The
Restaurant Assets are in compliance with TABC Regulations, liquor license
requirements and applicable law.
3.1.19 DISCLOSURE. Seller has fully provided Buyer and Guarantor
with all the information it requested in connection with the transactions
contemplated hereby. Neither the representations and warranties in this Article
3, the Schedules and Exhibits attached hereto, nor any other written statements
or certificates made or delivered herewith or therewith, contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements contained herein or therein not misleading.
3.2 REPRESENTATIONS AND WARRANTIES OF THE BUYER AND GUARANTOR. The
Buyer and Guarantor represent and warrant to the Seller and Shareholders that
the statements contained in this Section 3.2 are correct and complete as of the
date of this Agreement and will be correct and complete as of the Closing Date
(as though made then and as though the Closing Date were substituted for the
date of this Agreement throughout this Section 3.2).
3.2.1 ORGANIZATION AND QUALIFICATION OF THE BUYER AND GUARANTOR.
Buyer and Guarantor (a) are corporations duly organized and validly existing
under the laws of Texas,
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and (b) are duly authorized to conduct business and are in good standing under
the laws of each jurisdiction where such qualification is required.
3.2.2 AUTHORIZATION OF TRANSACTION. Buyer and Guarantor have full
power and authority to execute and deliver this Agreement, and the other
documents executed or required to be executed, delivered and performed by the
Buyer and Guarantor in connection with this Agreement, and to perform their
obligations hereunder and thereunder. Without limiting the generality of the
foregoing, the governing bodies of Buyer and Guarantor have (or will have) duly
authorized the execution, delivery, and performance by the Buyer and Guarantor
of this Agreement and the other documents executed, or required to be executed,
delivered and performed by the Buyer and Guarantor in connection with this
Agreement. To their best knowledge, no proceeding on the part of the Buyer or
Guarantor, and, except for the approvals of the lessors under the Leases, and
certain lenders, no notice, consent, authorization, order or approval of, or any
bank, bonding company, surety, customer, supplier, or any other Person
whatsoever is required for, or in connection with the Buyer's or Guarantor's
execution, delivery and performance of this Agreement or the other documents
executed or required to be executed, delivered and performed by the Buyer or
Guarantor in connection with this Agreement, except where, in accordance with
applicable law, a notice, consent, authorization, order or approval, filing or
registration is required to consummate the transactions contemplated by this
Agreement or the other documents executed or required to be executed, delivered
and performed in connection with this Agreement. This Agreement constitutes the
valid and legally binding obligation of the Buyer and Guarantor, enforceable in
accordance with its terms and conditions.
3.2.3 NONCONTRAVENTION. Neither the execution and the delivery of
this Agreement and the other documents executed or required to be executed,
delivered and performed in connection with this Agreement, nor the consummation
of the transactions contemplated hereby and thereby, will materially (i) violate
any constitution, statute, regulation, rule, injunction, judgment, order,
decree, ruling, charge, or other restriction of any government, governmental
agency, or court to which the Buyer or Guarantor is subject, (ii) violate any
provision of the organizational documents of the Buyer or Guarantor, or (iii)
violate or breach or result in (whether with the giving of notice or the lapse
of time or both) the violation or breach of any provision of, or result in the
acceleration of or entitle any party to accelerate (whether after the giving of
notice or lapse of time or both) any obligation under, or result in the creation
or imposition of any Security Interest or other encumbrance upon, any of the
Buyer's or Guarantor's assets pursuant to any provision of (or create in any
party the right to cancel or terminate) any mortgage, lien, lease, contract,
agreement, license, or instrument to which the Buyer or Guarantor is a party or
by which any of the Buyer's or Guarantor's assets is bound. The execution,
delivery and performance of this Agreement, and the other documents executed or
required to be executed, delivered and performed in connection with this
Agreement, by the Buyer and Guarantor do not, and the consummation by the Buyer
and Guarantor of the transactions contemplated hereby and thereby will not,
materially violate or conflict with any other restriction of any kind or
character to which the Buyer or Guarantor is subject or bound.
3.2.4 CONTINUITY OF BUSINESS. Buyer represents to Seller and its
officers that it is Buyer's present intention to (i) continue Seller's
operations for the immediately foreseeable future at the same facilities, (ii)
to offer employment to at least 75% of the employees terminated by Seller at
Closing and (iii) to retain those who accept employment in Buyer's active employ
for a period of at least sixty (60) days from and after the date of Closing.
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3.2.5 SEC FILINGS. Guarantor will make available to the Seller
and the Shareholders, forms, statements and documents, as may be reasonably
requested by Seller and the Shareholders, filed by Guarantor with the SEC since
September 1, 2002, (collectively, the "Guarantor SEC Reports"). The Guarantor
SEC Reports (including any financial statements filed as a part thereof or
incorporated by reference therein) (i) at the time filed, complied in all
material respects with the applicable requirements of the Securities Act and the
Exchange Act, as the case may be, and (ii) did not, at the time they were filed
(or if amended or superseded by a filing prior to the date of this Agreement,
then on the date of such filing), contain any untrue statement of a material
fact or omit to state a material fact required to be stated in such Guarantor
SEC Reports or necessary in order to make the statements in such Guarantor SEC
Reports, in the light of the circumstances under which they were made, not
misleading.
(i) Each of the consolidated financial statements (including, in
each case, any related notes) of Guarantor contained in the Guarantor
SEC Reports complied as to form in all material respects with the
applicable rules, regulations and practices of the SEC with respect
thereto, was prepared in accordance with "GAAP" applied on a consistent
basis throughout the periods involved (except as may be indicated in
the notes to such financial statements or, in the case of unaudited
statements, as permitted by Form 10-Q under the Exchange Act) and
fairly presented the consolidated financial position of Guarantor and
its Subsidiaries as of the dates and the consolidated results of its
operations and cash flows for the periods indicated, except that the
unaudited interim financial statements were or are subject to normal
and recurring year-end adjustments which were not or are not expected
to be material in amount. The audited balance sheet of Guarantor as of
December 31, 2002, is referred to herein as the "Guarantor Balance
Sheet."
(ii) Guarantor maintains a system of accounting controls
sufficient to provide reasonable assurances that (A) its transactions
and those of its subsidiaries are executed in accordance with
management's general or specific authorization, (B) its transactions
and those of its subsidiaries are recorded as necessary to permit
preparation of financial statements in accordance with GAAP and to
maintain accountability for assets, (C) access to its assets and those
of its subsidiaries is permitted only in accordance with management's
general or specific authorization, and (D) the recorded accountability
for its assets and those of its subsidiaries is compared with existing
assets at reasonable intervals and appropriate action is taken with
respect to any differences.
ARTICLE 4
PRE-CLOSING COVENANTS
4.1 GENERAL. Each of the Parties will use its reasonable best efforts
to take all action and to do all things necessary or appropriate in order to
consummate and make effective the transactions contemplated by this Agreement
(including satisfaction, but not waiver, of the closing conditions set forth in
Article 2).
4.2 NOTICES AND CONSENTS. The Seller and Shareholders, Buyer and
Guarantor will use their reasonable best efforts to obtain any third party
authorizations, consents, terminations, and approvals that may be necessary or
appropriate, or are requested by Seller or the Shareholders in connection with
consummating the transactions contemplated by this Agreement. Each of the
Parties will give any notices to, make any filings with, and use its best
22
efforts to obtain any authorizations, consents, and approvals of governments and
governmental agencies required for the transactions contemplated by this
Agreement.
4.3 FULL ACCESS. The Seller will permit representatives of the Buyer
and Guarantor to have full access at all reasonable times, and in a manner so as
not to unduly interfere with the normal business operations of the Seller, to
all premises, properties, personnel, books, records (including tax records),
contracts, and documents of, or pertaining to, the Restaurant Assets and Real
Property. The Buyer and Guarantor shall maintain the confidence of the items and
information obtained pursuant to this Section 4.3 in accordance with the
requirements of Section 4.4.1. The Buyer and Guarantor and their representatives
shall not, without the Seller's prior consent (which shall not be unreasonably
withheld), communicate with any of the Seller's employees or representatives
regarding the nature of this Agreement. The Seller shall use commercially
reasonable efforts to cause all information requested by Buyer and Guarantor in
connection with its due diligence investigation of the Restaurant Assets and
Real Property to be timely made available to Buyer and Guarantor so that Buyer
and Guarantor will have a commercially reasonable opportunity to evaluate the
information prior to expiration of the Due Diligence Period. In the event that
Buyer and Guarantor timely request certain information from Seller and the
Seller fails to make available the information to the Buyer and Guarantor in a
manner that provides the Buyer and Guarantor with a commercially reasonable
opportunity to evaluate the information prior to expiration of the Due Diligence
Period, the Due Diligence Period will be extended by a commercially reasonable
amount of time to be mutually determined by the Buyer, Guarantor and Seller.
Buyer and Guarantor agree to deliver to Seller, promptly after receipt thereof,
copies of any written inspection reports regarding Restaurant Assets prepared
for Buyer and Guarantor by consultants, engineers, or other inspectors. Buyer
and Guarantor shall give Xxxxxx X. Xxxxxx or Xxxxxx X. Xxxxxxxx twenty-four (24)
hours prior notice of any on-site inspections or interviews and Seller shall
have the right to have a representative accompany the inspector or interviewer.
4.4 CONFIDENTIALITY. The provisions of this Section 4.7 shall supersede
and replace all prior agreements and understandings of the parties with respect
to the subject matter hereof.
4.4.1 CONFIDENTIAL INFORMATION. Until the Closing of the
transactions contemplated herein, all Confidential Information acquired
by Buyer or Guarantor with respect to the Seller or the Shareholders,
or by the Seller or the Shareholders with respect to the Buyer or
Guarantor, shall be (i) maintained in strict confidence, (ii) used only
for the purpose of and in connection with evaluating the transactions
contemplated herein, and (iii) disclosed only (A) to employees and duly
authorized agents and representatives who have been informed of the
obligations of the Parties under this Section 4.4.1 with respect to
such Confidential Information, who have a need to know the information
in connection with consummating the transactions contemplated herein,
and who agree to keep such information confidential, or (B) as required
in the opinion of counsel to any Party in order for the Party to meet
the requirements of any applicable law or regulations, or the
determination of any court (of which the other Parties shall be given
prompt written notice). The Buyer, Guarantor, Seller and Shareholders
each shall take all commercially reasonable measures to prevent its
employees and representatives from making any unauthorized disclosure
of any Confidential Information. If the transactions contemplated
herein are not consummated, except as the Parties otherwise mutually
agree, all Confidential Information in written, printed or other
tangible form (whether copies or originals) shall be returned to the
Party of origin, and all documents,
23
memoranda, notes and other writings whatsoever prepared by any Party or
its representatives based on Confidential Information shall be
destroyed; and each Party and its representatives will thereafter hold
all Confidential Information concerning each Party in strict
confidence.
4.4.2 PRESS RELEASES AND ANNOUNCEMENTS. No press release,
public announcement, confirmation or other information regarding this
Agreement or the contents hereof or the consummation of the
transactions contemplated hereby shall be made by the Buyer, Guarantor,
Seller or Shareholders except with the mutual consent of all parties or
as required by applicable law.
4.5 COMMUNICATION WITH SELLER'S EMPLOYEES. The Seller, Shareholders,
Buyer and Guarantor shall cooperate with each other in connection with any
communications made to the Seller's employees regarding this Agreement or the
transactions contemplated hereby. Neither Seller nor the Shareholders will take,
or fail to take, any action that would materially interfere with Buyer's
opportunity to hire or employ a commercially reasonable number of qualified
employees for purposes of operating the Restaurants immediately following the
Closing.
4.6 REMOVAL OF EXCLUDED ASSETS. The Seller shall remove the personal
property constituting Excluded Assets from the premises of the Restaurants
(including the Real Property), prior to five (5) days after the Closing Date,
and shall give reasonable prior notice to the Buyer of the date and time(s) of
such removal activities. Any items of Excluded Assets that thereafter remain on
the premises of the Restaurants (including the Real Property) shall become the
property of the Buyer, and Buyer shall have no obligation or duty of any kind to
the Seller with respect thereto.
4.7 RISK OF LOSS. The Seller shall bear the risk of loss associated
with any damage or destruction to the Restaurant Assets, or any part thereof, by
theft, vandalism, fire, act of God, other loss or casualty, or through
condemnation or sale in lieu thereof, until the Closing.
4.8 DELIVERY OF INFORMATION TO BUYER. As soon as practicable after the
date of this Agreement:
(a) Buyer shall obtain (1) commitment for Title Insurance
("Title Commitment") from Commonwealth Land Title Company ("Title
Company") issued by an office or agency of the Title Company selected
by Buyer setting forth the status of the title of the Real Property
(including all parcels of Owned Real Property and Leased Real Property)
and showing all liens, claims, encumbrances, easements, rights-of-way,
encroachments, reservations, restrictions, and all other matters of
record affecting the Real Property; and (2) a true, complete, and
legible copy of all documents referred to in the Title Commitment
("Title Commitment Documents").
(b) Buyer shall obtain a survey ("Survey") for each parcel of
Owned Real Property and Leased Real Property consisting of a plat and
field notes prepared by a licensed surveyor acceptable to Buyer and
Title Company, which Survey shall (i) reflect the actual dimensions of,
and area within, the Land, the location of any easements, setback
lines, encroachments, or overlaps thereon or thereover, and the outside
boundary lines of all Improvements, (ii) identify by recording
reference all easements, set back lines, and other matters referred to
in the Title Commitment, (iii) include the surveyor's
24
registered number and seal, the date of the Survey, and a certificate
satisfactory to Buyer, (iv) reflect that there is access to and from
the Land from a publicly dedicated street or road, (v) be sufficient to
cause the Title Company to delete (except for "shortages in area") the
printed exception for "discrepancies, conflicts or shortages in area or
boundary lines, or encroachments, or any overlapping of improvements"
in the Owner's Title Policy to be delivered at Closing, (vi) reflect
any area within the Land that has been designated by the Federal
Insurance Administration, the Army Corps of Engineers, or any other
governmental agency or body as being subject to special or increased
flooding hazards, and (vii) in general, comply with the requirements of
the Texas Surveyor's Association for a Category lA, Condition II survey
or other applicable Category and/or Condition survey in accordance with
the rule and regulations promulgated by the Texas Surveyor's
Association and the Texas Land Title Association. For purposes of the
property description to be included in the special warranty deed to be
delivered at Closing, the field notes prepared by the surveyor shall
control any conflicts or inconsistencies and such field notes shall be
incorporated herein by this reference upon their completion and
approval by Buyer.
(c) Buyer shall request the Title Company to deliver to Buyer
current searches of all Uniform Commercial Code financing statements
filed with the Office of the Secretary of State of Texas and the County
Clerk of each County within which the Real Property is located against
Seller and Seller's predecessors in title reflecting all effective
financing statements then of record relating to the Property or any
part thereof.
(d) Seller shall make available to Buyer for inspection (i)
copies of all agreements relating to the Real Property and (ii) copies
of all engineering and technical reports in the possession of Seller or
its representatives that concern the Real Property, including soils
testing reports, property condition reports, and reports of
environmental or hazardous waste inspections or surveys.
4.9 DELIVERY OF INFORMATION BY SELLER. As soon as reasonably
practicable after the Effective Date of this Agreement, Seller shall deliver,
and shall certify completion of delivery, at its corporate office in Beaumont,
Texas, the following information and documentation to Buyer or Buyer's legal
counsel:
(a) copies of all Leases, addenda, exhibits and amendments to
all Leases with respect to all of the parcels of Leased Real Property;
(b) copies of all correspondence, notices, memoranda or other
written communications to Seller or any agent or representative of
Seller pertaining to any violation by Seller or any of the parcels of
Owned Real Property or Leased Real Property of any ordinance, law, rule
or regulation of any governmental authority during the two year period
immediately preceding the Effective Date this Agreement;
(c) copies of all Certificates of Occupancy with respect to
each parcel of the Owned Real Property and Leased Real Property;
(d) any and all correspondence, memoranda, notices and/or
other written communications to Seller or any agent or representative
of Seller received since August
25
1, 2001, regarding any alleged violation, breach or default of any
agreement or covenant pertaining to any parcel of Owned Real Property
and Leased Real Property;
(e) copies of any subordination agreement, non-disturbance
agreement, attornment agreement, lien priority agreement or any other
agreement, in Seller's possession, with any lender holding a lien,
encumbrance, deed of trust or mortgage on any parcel of the Leased Real
Property affecting the leasehold interest with respect to such
Property;
(f) copies of all pleadings, citations, correspondence,
memoranda or other written instruments or communications pertaining to
any existing or threatened litigation or administrative proceedings
received since August 1, 2001, with respect to any parcel of the Owned
Real Property or Leased Real Property;
(g) all contracts, agreements, commitments or other
undertaking of Seller with respect to or affecting any of the parcels
of Owned Real Property or Leased Real Property;
(h) any and all reports or other written materials,
correspondence, memoranda or other written communications pertaining to
any hazardous material (as defined by applicable Federal or State of
Texas law or regulation) or other environmental matter affecting or
potentially affecting any parcel of Owned Real Property or Lease Real
Property;
(i) all water, sewer and waste water agreements, capacity
agreements, capacity letters, usage agreements or any other written
matters pertaining to the obtaining, use and/or discharge of water,
sewage and/or waste water with respect to any parcel of Owned Real
Property or Leased Real Property;
(j) if not set forth in the Lease Agreements with respect to
the parcels of Leased Real Property, written waivers of the statutory
Landlord's lien and any contractual Landlord's lien with respect to
each such Lease Agreement; and
(k) copies of all currently existing franchise and/or license
agreements, not with Buyer, Guarantor, or their affiliates, regarding
the business operations of Seller at each parcel of Owned Real Property
or Leased Real Property.
4.10 TITLE. Buyer shall have the right, at any time within twenty (20)
days after receipt of each of the items described in Section 4.8 and 4.9
inclusive, to object in writing to any liens, encumbrances and/or other matters
reflected by such items. All items to which Buyer so objects are hereinafter
referred to as the "Non-Permitted Encumbrances"; if no such notice of objection
is given within such time period, then it shall be deemed that all matters
reflected by such items are "Permitted Encumbrances." Seller shall have the
right, but not the obligation, at its sole cost, to cure or remove all
Non-Permitted Encumbrances and give Buyer written notice thereof prior to
Closing; provided, however, that Seller, at its sole cost, shall be obligated to
cure or remove at or before Closing all mortgages, deeds of trust, judgment
liens, mechanics and materialmen's liens, and/or other liens against the Owned
Real Property and against the Seller's leasehold interests (as distinguished
from the fee interests) of each parcel of Leased Real Property, ("Existing
Security Interests"), whether or not Buyer objects thereto during the
aforestated time
26
period. If Seller does not timely cause all of the Non-Permitted Encumbrances to
be removed or cured, and timely written notice thereof to be given to Buyer,
then Buyer shall have the right either (i) to terminate this Agreement in
accordance with Section 2.5(b) hereof by delivering notice to Seller before
Closing, or (ii) to elect to close the purchase contemplated under this
Agreement subject to the Non-Permitted Encumbrances, other than liens that
Seller is obligated to cure or remove, and the Non-Permitted Encumbrances (other
than liens that Seller is obligated to cure or remove) subject to which Buyer
elects to purchase the Property shall thereafter be Permitted Encumbrances and
all conveyances and assignments shall be expressly subject thereto.
4.11 NO SHOP. Commencing with the date of this Agreement and continuing
for a period of sixty (60) days following termination hereof, Seller and
Shareholders shall not directly or indirectly enter into any discussions with
any other party for any "Takeover Proposal". In the event that Seller or any
Shareholder receives any inquiries related to same, Seller or such Shareholder
shall immediately notify Buyer of same. As used herein, the term "Takeover
Proposal" means any proposal or offer (whether or not in writing and whether or
not delivered to the Shareholders or owners of the Seller generally) for a
merger or other business combination involving the Seller or to acquire in any
manner, directly or indirectly, a material equity interest in, any voting
securities of, or a substantial portion of the assets of the Seller, other than
the transactions contemplated by this Agreement. This provision shall survive
the termination of this Agreement."
ARTICLE 5
POST-CLOSING COVENANTS
5.1 GENERAL. If at any time after the Closing any further action is
necessary or desirable to carry out the purposes of this Agreement, each of the
Parties will take such further action (including the execution and delivery of
such further instruments and documents) as any other Party reasonably may
request, all at the sole cost and expense of the requesting Party (unless the
requesting Party is entitled to indemnification therefor under Article 6 below).
The Seller and each of the Shareholders acknowledge and agree that from and
after the Closing, the Buyer will be entitled to access, at reasonable times,
and upon reasonable notice thereto, and shall be entitled to make photocopies at
the Buyer's expense of, all Books and Records that constitute Excluded Assets;
Seller and the Shareholders further agree to maintain such books and records in
their entirety for a period of seven years after the Closing Date. The Seller
and the Shareholders shall be entitled to access at reasonable times and upon
reasonable notice, and shall be entitled to make photocopies at
Seller's/Shareholders' expense of, all Books and Records constituting part of
the Restaurant Assets, to the extent necessary for defense of audits or
litigation or preparation of tax returns. Further, for a period of ten (10) days
after Closing, Seller and Shareholders shall be granted access, upon at least
twenty-four (24) hours notice, to the computers and related hardware and
software constituting part of the Restaurant Assets for the purpose of
completing accounts payable and payroll runs through the Closing Date. In no
event shall Seller or Shareholders be obligated hereby to take any action, make
any agreements or covenants, or execute and deliver any instrument or documents
which would impose upon or any of them or result in any new or additional
liability inconsistent with Section 6.1 or 6.2.
5.2 COVENANT NOT TO COMPETE AND CONFIDENTIALITY.
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5.2.1 RESTRICTIVE COVENANTS. In consideration of the Purchase
Price and the other benefits to be provided to Seller and the
Shareholders by Buyer under this Agreement, the Seller and each
Shareholder hereby covenants and agrees, severally and not jointly,
that the covenants, agreements, and restrictions contained in this
Section 5.2 are necessary to protect the business goodwill, business
interests and proprietary rights of Buyer, and that the Seller and
Shareholders have independently discussed, reviewed, and had the
opportunity of legal counsel to consider these covenants. The parties
hereby agree and acknowledge that Buyer has spent considerable sums of
money to acquire the Restaurant Assets and that the customers and
customer goodwill developed by Seller, and sold to Buyer hereby, are
worth a considerable amount of money and therefore is a benefit which
Buyer seeks to protect. The parties further acknowledge and agree that
Seller and the Shareholders have previously been obligated pursuant to
restrictive covenants and confidentiality requirements set forth in the
Casa Ole Franchise Agreements and modifications, amendments and waivers
affecting such agreements, if any. The parties to this Agreement, with
the consent of the Franchisor, do hereby agree that the restrictive
covenants and confidentiality requirements contained in this Agreement
shall substitute and replace those set forth in the Franchise
Agreements. Such protection is hereby agreed and acknowledged by these
parties as being reasonable consideration for establishing this
restrictive covenant. Further, the parties hereto agree that this
covenant is fair and reasonable in its geographical area, length of
time, and scope of activity being restrained. For good and valuable
consideration acknowledged to have been received on the date of
execution hereof, and as an inducement to the Buyer to enter into this
Purchase and Sale transaction, the undersigned agrees as follows:
5.2.2 DEFINITIONS:
(i) The term "Competing Business" as used herein shall refer
to any business (whether conducted through an individual or an
entity) which conducts the business of the sale of any type of
food in restaurants or catering in the geographic areas as
described in Section 5.2.5;
(ii) The term "Non-Compete Period" as used herein shall refer
to the four (4) year period commencing on the Closing (two (2)
years for the three (3) restaurants located at (i) 0000 Xxxx
Xxxxxx, Xxxxxxx, Xxxxxxxxx, (ii) 0000 Xxxx Xxxxxx, Xxxx
Xxxxxxx, Xxxxxxxxx and (iii) 2312 Xxxxxxx Xxxxxx, Lafayette,
Louisiana) provided that in the event the Seller and/or
Shareholders violate any aspect of this Section 5.2, the
Non-Compete Period shall be extended by the number of days
during the period from the commencement of the violation
through the time when the Seller and/or Shareholder cease
violating this Section 5.2;
(iii) The term "solicit" as used herein shall refer, in
addition to its common usage, to communications or
transactions whether initiated by Seller and/or Shareholder's
or by a third party; and
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(iv) The term "Covenant Trigger" as used herein shall refer to
the Closing Date.
5.2.3 GENERAL. Seller and Shareholders hereby acknowledge that
there are legitimate protectable business interests at stake (such as
protection of the Buyer's goodwill, customers, employees and trade
secrets and other confidential information), that breach of this
Section would harm the Buyer and that the restrictions and restraints
contained in this covenant are reasonable.
5.2.4 ANCILLARY TO ENFORCEABLE AGREEMENTS. Seller and
Shareholders stipulate, acknowledge and agree that these restrictive
covenants are ancillary to and an integral part of an enforceable
agreement and are prior or ancillary to the interests sought to be
protected hereby.
5.2.5 NON-COMPETITION. Seller and Shareholders, severally and
not jointly, agree that, during the Non-Compete Period, Seller and
Shareholders will not, directly or indirectly, for themselves or on
behalf of or in conjunction with any other person, company,
partnership, corporation or business of whatever nature, engage in any
Competing Business within Calcasieu or Lafayette Parishes, Louisiana,
or if outside Louisiana, within One Hundred (100) miles of any
restaurant, or food catering business, now owned, operated, leased or
franchised by Buyer, or by Guarantor, or any of their subsidiaries or
affiliates, all of which stores are described on Schedule 5.2.5, which
areas are, again, hereby specifically acknowledged by Seller and
Shareholders to be reasonable and necessary for Buyer to protect its
interests.
5.2.6 SOLICITATION OF CUSTOMERS. Seller and Shareholders,
severally and not jointly, agree that, during the Non-Compete Period,
Seller and Shareholders will not, directly or indirectly, for
themselves or on behalf of or in conjunction with any other person,
company, partnership, corporation or business of whatever nature,
knowingly contact, solicit or otherwise conduct business involving a
Competing Business with any person or entity that has been, at any time
during the one year period preceding the Covenant Trigger, or is then
contemplated to be, a customer of the Seller and/or Shareholders (the
"Customer"), to purchase or otherwise acquire goods and/or services
offered by any Competing Business.
5.2.7 SOLICITATION OF TRANSACTIONS. Seller and Shareholders,
severally and not jointly, agree that, during the Non-Compete Period,
Seller and Shareholders will not, directly or indirectly, for
themselves or on behalf of or in conjunction with any other person,
company, partnership, corporation or business of whatever nature,
solicit (either directly or indirectly through a broker or otherwise)
any person or entity that has been in contact, verbally or in writing,
with the Seller and/or Shareholders, or any representative of the
Seller and/or Shareholders at any time during the two year period
preceding the Closing, regarding any existing or potential opportunity,
project or venture with the Seller and/or Shareholders for any
Competing Business.
5.2.8 REFORMATION. Should any court of competent jurisdiction
determine that, consistent with the established precedent of the forum
jurisdiction, the public policy of such jurisdiction requires a more
limited restriction in geographic area, duration, nature
29
of restricted activity, or any combination thereof, it would be in
furtherance of the intentions of the parties hereto for the court to so
interpret and construe the terms of this Section 5.2 to apply only to
the extent of such limited restriction. The parties acknowledge and
agree to the applicability of the Texas Covenants Not to Compete Act
(TX Bus & Com Section 15.50 et seq) relative to the interpretation and
enforcement of the restrictive covenants set forth in this Agreement.
5.2.9 APPROVED TRANSACTIONS. Notwithstanding the foregoing
requirements of this Section 5.2, a Shareholder may purchase or
otherwise acquire up to (but not more than) one percent of any class of
securities of any enterprise (but without otherwise participating in
the activities of such enterprise) if such securities are listed on any
national or regional securities exchange or have been registered under
Section 12(g) of the Exchange Act.
5.2.10 SURVIVAL. The Buyer, the Seller, and each Shareholder
agree that the agreements set forth in this Section 5.2 each constitute
separate agreements independently supported by good and adequate
consideration and shall be severable from the other provisions of, and
shall survive, this Agreement.
5.2.11 REMEDIES. The Seller, each Shareholder, and the Buyer
agree that the remedy at law for any breach by the Seller or any
Shareholder of this Section 5.2 will be inadequate and that the Buyer
shall be entitled to injunctive relief without a posting of bond. Such
remedy with respect to Seller shall be in addition to such other
remedies as may be available to Buyer at law or in equity.
5.2.12 MISCELLANEOUS. As to Xx. Xxxxxxxx only, the covenants
under the Section 5.2 shall continue to apply to Xx. Xxxxxxxx for an
additional time period in accordance with the Employment Agreement
entered into under Section 2.3(j) to the fullest extent possible under
applicable law. The time period reflected in Section 5.2.5 shall
constitute the minimum time period as regards such covenants of Xx.
Xxxxxxxx.
5.2.13 CONFIDENTIALITY OF INFORMATION. Seller and
Shareholders, severally recognize that the business interests of Buyer
require the fullest protection and confidential treatment of the trade
secrets, know how, and other business knowledge developed, conceived
and learned by Seller and/or Shareholders (as distinguished from
Buyer's trade secrets, know how and other business knowledge), such
trade secrets, know how and other business knowledge including, without
limitation, customer lists, bids and proposals, price lists, products,
recipes, manuals, documentation, forms, techniques, methods,
procedures, systems, data processes, plans, computer programs, other
intangible assets and other information of the Seller, including
evaluations and use or non-use of other technical or business
information not in the public domain (collectively referred to herein
as the "Seller's Information") and that such Seller's Information
constitutes valuable, special and unique assets acquired by Buyer in
this transaction. Accordingly, Seller and Shareholders severally agree
that during the Non-Compete Period they will cause the Seller's
Information to be treated as strictly confidential and held in trust
solely for the use and benefit of the Buyer. Seller and Shareholders
severally agree that during the Non-Compete Period they shall not
directly or indirectly use or knowingly permit others to use any such
Seller's Information in a Competing Business, or for Seller and
Shareholders own account in a Competing Business, and shall not
directly or indirectly
30
disclose any such Seller's Information to any person, firm,
corporation, association or other entity for use in a Competing
Business for any reason or purpose whatsoever unless consented to in
writing by Buyer. For purposes hereof, authorized representatives of
the Buyer shall be directors and officers of the Buyer. The obligations
of this Section 5.2.13 shall not apply (a) to Seller's Information that
(i) is in the public domain; or (ii) is or becomes generally available
in the public domain other than pursuant to a breach by Seller or
Shareholder's of their obligations under this Section 5.2.13, or (b) to
the use of Seller's Information in a "non-commercial" manner (personal
consumption, etc.), or (c) to the use of Seller's Information for
Seller's or Shareholder's use in the operation of a restaurant outside
the non-compete zone of One Hundred (100) miles or (d) as may be
legally required in accordance with applicable law.
Additionally, with respect to Seller's and Shareholder's
existing franchisee relationships with Buyer's affiliate, Casa Ole
Franchise Services, Inc. ("COFSI"), Seller and Shareholders severally
acknowledge and agree that with respect to COFSI's trade secrets, know
how and other business knowledge developed, conceived and learned by
COFSI (" COFSI's Information" as distinguished from Seller's
Information), such COFSI's Information being previously franchised and
licensed to Seller by COFSI, that such COFSI's Information shall remain
confidential as previously provided for under those franchise
agreements and Seller and Shareholders covenant not to directly or
indirectly reveal nor use same, such COFSI's Information remaining the
exclusive property of COFSI.
5.2.14 ENFORCEMENT. Seller and Shareholders acknowledge that
the rights reserved to the Buyer under this Section 5.2 are necessarily
of a special, unique and extraordinary nature and that the loss arising
from a breach or threatened breach thereof cannot reasonably and
adequately be compensated by money damages and will cause the Buyer to
suffer irreparable harm and that a remedy at law for any breach thereof
will be inadequate. Accordingly, Seller and Shareholders hereby agree
that the Buyer shall be entitled to injunctive or other extraordinary
relief in case of any such breach or threatened breach prohibiting such
breach or attempted or threatened breach and commanding compliance with
any such Section, but only after notice and opportunity to cure have
been given in accordance with section 5.2.15, merely by proving the
existence of such breach or threatened or attempted breach, and without
the necessity of proving irreparable harm or inadequacy of legal
remedies. Further, Seller and Shareholders hereby stipulate that, as
liquidated damages for Seller and/or Shareholders, as applicable,
violation of Sections 5.2.5, and 5.2.13 only, Buyer, by virtue of such
conduct of a Seller or a Shareholder, severally, shall suffer, at
minimum, fixed and liquidated damages of One Million and No/l00 Dollars
($1,000,000.00) (the "Liquidated Damages"), which amount Seller and
Shareholders acknowledge would be a minimum amount of damages suffered
by Buyer, and which liquidated damages claim may be satisfied by
Buyer's offset of such claim against any indebtedness it may have with
Seller and/or Shareholders, as applicable, including, but not limited
to, those certain Promissory Notes, of even date herewith, by and
between Buyer and/or Shareholders. It being agreed that such amount is
not a penalty but same constitutes the parties best estimate of the
damages that Buyer would sustain as lost profits in the event of such
breach. However, this provision shall in no way limit any other rights
or remedies, which the Buyer may have under the terms of this Agreement
or at law or in equity. In case of breach by Seller or
31
Shareholders, as applicable, of any other provision of this Section 5.2
(other than Section 5.2.5 and 5.2.13) or Section 7.18, then Buyer shall
be entitled to recover its actual damages allowed by law.
Notwithstanding anything contained in Section 5.2.13 and/or this
Section 5.2.14 to the contrary, the Liquidated Damages shall only apply
if a Section 5.2.5 or Section 5.2.13 breach occurs within the
non-compete zone of One Hundred (100) miles.
5.2.15 NOTICE AND CURE. Notwithstanding any provision of this
Agreement to the contrary, the Buyer will not be liable for any
liquidated damages under this Agreement unless the Seller shall have
notified the Buyer in advance of such breach and the Buyer shall have
at least fifteen (15) days to cure such breach. For the purposes of
this Section, the Buyer shall be deemed to have cured the breach if the
Buyer ceases the activities that are alleged to be the grounds giving
rise to such liquidated damages within fifteen (15) days of receipt of
notice from the Seller.
5.2.16 MISCELLANEOUS. The covenants and restrictions in this
Section 5.2 shall survive Closing and remain in full force and effect.
5.3 EMPLOYEES. The Buyer shall have the right, but is not obligated, to
offer employment to any person employed by the Seller in connection with the
Restaurant Business except as provided in Section 3.2.4; provided, however, that
Buyer agrees that it will offer employment to Xxxx Xxxx and Xxxxxx Xxxxxxxxxxx
which provides for their employment for not less than one (1) year after Closing
(subject to termination for Cause or without Cause upon payment of severance
with base salaries for such period in the same amount as each such person was
paid for the Seller's last fiscal year ended prior to Closing) so long as the
restaurants in the aggregate have the same or greater economic performance
(without allocation of general administrative expenses) as that achieved in such
fiscal year and with bonuses and benefits equal to or better than those offered
by Buyer or Guarantor to their employees. Except as otherwise expressly provided
in this Agreement, the Buyer and Seller each hereby acknowledge and agree that
the Buyer does not hereby assume any past or future obligation of the Seller to
any person who is, was, or becomes an employee of Seller, whether or not the
Buyer offers employment to such person. Seller agrees to be responsible for
bonuses due, if any, to Xxxxxx X. Xxxxxxxx, Xxxx Xxxx, and Xxxxxx Xxxxxxxxxxx,
for the applicable bonus period pro-rated through the Closing Date, but not for
any bonuses that may be due thereafter. Buyer agrees that following the Closing
and continuing until at least March 31, 2004, Buyer will (if available to Buyer
or Guarantor in accordance with their current coverages) provide to Xxxxxx X.
Xxxxxxxx, Xxxx Xxxx and Xxxxxx Xxxxxxxxxxx, and all other employees of Seller
who are covered under Seller's medical and hospitalization coverage at the time
of Closing, and who are employed by Buyer, equal or better coverage to that
provided by Seller. Following such date, Buyer shall provide its employees with
reasonable medical and hospitalization coverage (if available to Buyer or
Guarantor in accordance with their current coverages) equal or better than that
provided by Buyer or Guarantor to its own employees of similar corporate
position and salary, with no gaps in coverage, no waiting periods, and no
exclusions for prior conditions. All benefits provided for Xxxxxx X. Xxxxxxxx,
Xxxx Xxxx and Xxxxxx Xxxxxxxxxxx shall take into account, and given credit for
prior service with Seller.
5.4 LITIGATION SUPPORT. In the event and for so long as any Party
actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge,
32
complaint, claim, or demand by or against a third party (not between the
Parties) in connection with (i) any transaction contemplated under this
Agreement or (ii) any fact, situation, circumstance, status, condition,
activity, practice, plan, occurrence, event, incident, action, failure to act,
or transaction on or prior to the Closing Date involving the Restaurant Assets
or the Restaurant Business, each of the other Parties will cooperate with him or
it and his or its counsel in the contest or defense, make available their
personnel, and provide such testimony and access to their books and records as
shall be necessary in connection with the contest or defense, all at the sole
cost and expense of the contesting or defending Party (unless the contesting or
defending Party is entitled to indemnification therefor under Article 6 below).
5.5 TEXAS CERTIFICATE OF NO TAX DUE. On or before the expiration of
thirty (30) days after the Closing Date, Seller shall have requested a Texas
Certificate of No Tax Due - Sales and Use Tax, which will show no sales and use
tax due in respect of Seller as of the Closing Date. Seller and the Shareholders
shall cooperate and facilitate any audit or other proceedings incident to the
issuance of such Texas Certificate of No Tax Due - Sales and Use Tax. Seller and
the Shareholders shall deliver a certified copy of such Texas Certificate of No
Tax Due - Sales and Use Tax immediately upon receipt of same.
5.6 AMENDMENT TO ARTICLES OF INCORPORATION; CHANGE OF NAME. On the
Closing Date, the Seller and the Shareholders shall cause each entity included
within the Seller to amend its articles of incorporation and any certificates of
assumed names, d/b/a's and the like to eliminate the use of the name "Casa Ole,"
"Crazy Xxxx" and any other similar name.
ARTICLE 6
REMEDIES FOR BREACH OF AGREEMENT
6.1 INDEMNIFICATION PROVISIONS FOR BENEFIT OF THE BUYER. Seller and
each Shareholder (jointly and severally) hereby agree to indemnify and hold
harmless Buyer and Guarantor for all Adverse Consequences incurred, arising out
of, based upon or resulting from (i) the inaccuracy as of the date hereof or as
of the Closing Date of any representation or warranty of the Seller in Section
3.1 or (ii) the breach of, or failure to perform by the Seller of any of its
agreements, covenants or obligations contained in or made pursuant to this
Agreement, or (iii) any liability or obligation of, or claim against Buyer
arising out of, or resulting from any act, or failure to act, by Seller as of
and prior to the Closing Date including without limitation any failure of Seller
to pay its debts or obligations or trade payables (except Assumed Liabilities),
Covered Taxes, any product liability claims, or negligence claims arising prior
to Closing; or (iv) any liability or obligation of, or claim against, Buyer or
Guarantor in connection with any claim, demand or cause of action made by any
person or entity and arising out of any event, directly or indirectly related to
(a) the conduct by Seller or Shareholder's of their business, (b) Adverse
Consequences, or (c) the use or misuse of the Restaurant Assets prior to the
Closing, including but not limited in kind or type, to any claim filed by any
Employee under applicable Worker's Compensation Laws as a result of any injury
or illness covered by such laws that occurs prior to Closing, or any product
liability claim or negligence claim in connection with matters arising prior to
the Closing.
6.2 INDEMNIFICATION PROVISIONS FOR BENEFIT OF THE SELLER AND
SHAREHOLDERS. Buyer and Guarantor (jointly and severally) hereby agree to
indemnify and hold harmless Seller and Shareholders from any Adverse
Consequences incurred, arising out of, based upon, or resulting from (i) the
inaccuracy as of the date hereof or as of the Closing Date of any representation
or
33
warranty of the Buyer or Guarantor which is contained in or made pursuant to
this Agreement, (ii) the breach of, or failure to perform by, the Buyer or
Guarantor of any of its respective agreements, covenants or obligations
contained in this Agreement, including but not limited to, the failure by Buyer
or Guarantor to perform and satisfy all Assumed Liabilities, (iii) guaranties by
Seller and Shareholders of Assumed Liabilities, or (iv) any liability or
obligation of, or claim against, Seller or Shareholders in connection with any
claim, demand or cause of action made by any person or entity and arising out of
any event directly or indirectly related to (a) the conduct by Buyer or
Guarantor of their business, (b) Adverse Consequences, or (c) the use or misuse
of the Restaurant Assets subsequent to the Closing, including but not limited in
kind or type to any claim filed by any employee under applicable worker's
compensation laws as a result of any injury or illness covered by such laws that
occurs subsequent to the Closing, or any product liability claim or negligence
claim arising after the Closing.
6.3 PROCEDURES FOR MATTERS INVOLVING THIRD PARTIES.
(a) Notice. The Party (the "Indemnified Party") that may be
entitled to indemnity hereunder shall give prompt notice to the Party
obligated to give indemnity hereunder (the "Indemnifying Party") of the
assertion of any claim, or the commencement of any suit, action or
proceeding by any third party in respect of which indemnity may be
sought hereunder. Any failure on the part of any Indemnified Party to
give the notice described in this Section 6.3 shall relieve the
Indemnifying Party of its obligations under this Article 6 only to the
extent that such Indemnifying Party has been prejudiced by the lack of
timely and adequate notice (except that the Indemnifying Party shall
not be liable for any expenses incurred by the Indemnified Party during
the period in which the Indemnified Party failed to give such notice).
Thereafter, the Indemnified Party shall deliver to the Indemnifying
Party, promptly (and in any event within 10 days thereof) after the
Indemnified Party's receipt thereof, copies of all notices and
documents (including court papers) received by the Indemnified Party
relating to such claim, action, suit or proceeding.
(b) Legal Defense. The Indemnifying Party shall be responsible
for the defense or settlement of any third-party claim, suit, action or
proceeding in respect of which indemnity may be sought hereunder,
provided that (i) the Indemnified Party shall at all times have the
right, at their option, to participate fully therein, and (ii) if the
Indemnified Party does not proceed diligently to defend the third-party
claim, suit, action or proceeding within 10 days after receipt of
notice of such third-party claim, suit, action or proceeding, the
Indemnifying Party shall have the right, but not the obligation, to
undertake the defense of any such third-party claim, suit, action or
proceeding.
(c) Settlement. The Indemnifying Party shall not be required
to indemnify the Indemnified Party with respect to any amounts paid in
settlement of any third-party suit, action, proceeding or investigation
entered into without the written consent of the Indemnifying Party;
provided, however, that if the Indemnified Party is a Buyer Indemnified
Party, such third-party claim, suit, action, proceeding or
investigation may be settled without the consent of the Indemnifying
Party on 10 days' prior written notice to the Indemnifying Party if
such third-party suit, action, proceeding or investigation is then
unreasonably interfering with the business or operations of the Company
and the settlement is commercially reasonable under the circumstances;
and provided further, that if the Indemnifying Party gives 10 days'
prior written notice to the Indemnified Party of a
34
settlement offer which the Indemnifying Party desires to accept and to
pay all Adverse Consequences with respect thereto ("Settlement Notice")
and the Indemnified Party fails or refuses to consent to such
settlement within 10 days after delivery of the Settlement Notice to
the Indemnified Party, and such settlement otherwise complies with the
provisions of this Section 6.4 the Indemnifying Party shall not be
liable for Adverse Consequences arising from such third-party claim,
suit, action, proceeding or investigation in excess of the amount
proposed in such settlement offer. Notwithstanding the foregoing, no
Indemnifying Party will consent to the entry of any judgment or enter
into any settlement without the consent of the Indemnified Party, if
such judgment or settlement imposes any obligation or liability upon
the Indemnified Party other than the execution, delivery or approval
thereof and customary releases of claims with respect to the subject
matter thereof.
(d) Cooperation. The Parties shall cooperate in defending any
such third-party claim, suit, action, proceeding or investigation, and
the defending party shall have reasonable access to the books and
records, and personnel in the possession or control of the Indemnified
Party that are pertinent to the defense. The Indemnified Party may join
the Indemnifying Party in any suit, action, claim or proceeding brought
by a third party, as to which any right of indemnity created by this
Agreement would or might apply, for the purpose of enforcing any right
of the indemnity granted to such Indemnified Party pursuant to this
Agreement.
6.4 LIMITATION OF REPRESENTATIONS AND WARRANTIES:
6.4.1 CONDITION OF THE BUSINESS AND PROPERTY. The term
"Condition of the Business and Property" means and includes all facts
and circumstances about the Restaurant Assets and Restaurant Business,
including without limitation:
(a) The quality, nature and adequacy of the physical
condition of the Restaurant Assets, including without
limitation defects, latent and patent, the presence of
hazardous substances, and the mechanical and operating
condition of the Restaurant Assets;
(b) The merchantability, fitness, suitability and
adequacy and fitness of the Restaurant Assets for any
particular use or purpose;
(c) The development potential, economic feasibility,
cash flow, earnings and profits and expenses, and future
prospects, of or related to the Restaurant Assets and
Restaurant Business being purchased hereunder; and
(d) Any and all other aspects relating to the
Restaurant Assets and Restaurant Business, including without
limitation, the risks associated with this transaction, the
competition with businesses competing with the Restaurant
Assets and Restaurant Business, the number of customers and
clients of Seller's Restaurant Business and all other matters
relating to or concerning the Seller's Restaurant Business or
the Restaurant Assets.
35
6.4.2 LIMITATION. Other than the express representations and
warranties made in this Agreement, Seller, Shareholders, Buyer and
Guarantor hereby agree that Seller and Shareholders make no
representations or warranties whatsoever, express or implied, with
respect to Seller's Restaurant Business, the Restaurant Assets or the
Condition of same. Buyer and Guarantor further represents and warrants
that Buyer has or will, prior to Closing, independently inspect or
cause to be inspected on Buyer's behalf Seller's Restaurant Business,
the Restaurant Assets and every aspect of the Condition of same. Buyer
and Guarantor have not entered into this Agreement and will not close
this transaction based upon any representation, warranty, agreement,
statement or expression of opinion by Seller, by the Shareholders, or
by any person or entity acting or allegedly acting for or on behalf of
Seller as to Seller's Restaurant Business, the Restaurant Assets, or
the Condition of same Buyer and Guarantor agree that Seller's
Restaurant Business and the Restaurant Assets will be sold and conveyed
to and accepted by Buyer at the Closing in its then present condition,
AS IS, WHERE IS, WITH ALL FAULTS AND WITHOUT REPRESENTATIONS OR
WARRANTIES WHATSOEVER, EXPRESS OR IMPLIED, other than the limited
special warranty of title to be included in the Special Warranty Deeds
and Bills of Sale. Buyer and Guarantor represent and warrant to Seller
and Shareholders that Buyer and Guarantor have knowledge and expertise
in financial and business matters and in the Restaurant Business that
enable Buyer and Guarantor to evaluate the merits and risks of the
transaction contemplated by this Agreement and that Buyer and Guarantor
are not in a significantly disparate bargaining position. The
provisions of this Section 6.4 shall survive the Closing or a
termination of this Agreement and shall continue until terminated as
provided in Section 7.17.
6.5 THRESHOLD. The Seller and the Shareholders shall not have any
Liability for Adverse Consequences under this Article 6 until the aggregate of
all Buyer's and Guarantor's claims for Adverse Consequences hereunder exceeds
$50,000.00 and, in such event, Seller and the Shareholder's shall be liable,
retroactively, for the full amount of any and all such damages incurred by Buyer
from such Adverse Consequences.
6.6 LIMITATION ON LIABILITY. Any and all amounts due to Buyer and
Guarantor as Indemnified Party under this Article 6 for breach of any warranty
or representation made in this Agreement, by Seller or Shareholders, shall be
limited to an aggregate amount of $250,000.00 (the "First Liability Threshold")
during the first six months following the Closing Date (the "First Liability
Period"). During the second six months following the Closing Date (the "Second
Liability Period"), but only if the aggregate amounts paid by Seller and/or by
Shareholders to Buyer under this Section during the First Liability Period ("the
Actual Indemnity Payments") are less than the First Liability Threshold, then
during the Second Liability Period any and all amounts due to Buyer or Guarantor
as Indemnified Party under this Article 6 for breach of any warranty or
representation made in this Agreement, by Seller or Shareholders under Sections
3.1.11 (Properties) or 3.1.15 (Taxes) of this Agreement shall be limited to the
lesser of (i) the difference between the First Liability Threshold and the
Actual Liability Payments or (ii) the sum of $125,000.00. Except for breach of
the restrictive covenants in Section 5.2, Buyer and Guarantor shall have no
right to offset any sum they believe due against the Buyer Notes or Guarantor's
guaranty.
6.7 MISCELLANEOUS. The provisions of this Agreement, particularly this
Article 6, represent the sole remedy available to any Party hereto for a
misstatement or omission from any representation, or a breach of any warranty or
covenant or agreement contained in this
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Agreement, and each Party hereby unconditionally waives any other rights that
they may have at law or in equity for a misstatement or omission from any
representation, or a breach of any warranty or covenant or agreement contained
in this Agreement.
6.8 SURVIVAL. The provisions of this Article 6 shall survive Closing.
ARTICLE 7
MISCELLANEOUS
7.1 ENTIRE AGREEMENT. This Agreement (including the documents referred
to herein) constitutes the entire agreement among the Parties and supersedes any
prior understandings, agreements, or representations by or among the Parties,
written or oral, to the extent they related in any way to the subject matter of
this Agreement.
7.2 NO THIRD-PARTY BENEFICIARIES. This Agreement shall not confer any
rights or remedies upon any Person other than the Parties and their respective
successors and permitted assigns.
7.3 SUCCESSION AND ASSIGNMENT. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. No Party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written approval
of the other Party; provided, however, that the Buyer may (i) assign any or all
of its rights and interests hereunder to one or more of its Affiliates and (ii)
designate one or more of its Affiliates to perform its obligations hereunder (in
any or all of which cases the Buyer nonetheless shall remain responsible for the
performance of all of its obligations hereunder), and (iii) collaterally assign
its rights under this Agreement to its source of financing.
7.4 NOTICES. All notices, requests, demands, claims, and other
communications pertaining to this Agreement ("Notices") must be in writing, must
be sent to the addressee at the address set forth in this Section, or at such
other address as the addressee has designated by a Notice given in the manner
set forth in this Section, and must be sent by facsimile, electronic mail,
courier, or prepaid, certified U.S. mail. Notices will be deemed given (a) when
received, if sent by facsimile or electronic mail, and if received between the
hours of 8:00 a.m. and 5:00 p.m., local time of the destination address, on a
business day (with confirmation of completed transmission sufficing as prima
facie evidence of receipt of a notice sent by facsimile or electronic mail), and
(b) when delivered and receipted for (or when attempted delivery is refused at
the address where sent) if sent by courier or by certified U.S. mail. Notices
sent by facsimile or electronic mail and received between 12:01 a.m. and 7:59
a.m., local time of the destination address, on a business day will be deemed
given at 8:00 a.m. on that same business day. Notices sent by facsimile or
electronic mail and received between the hours of 5:00 p.m. and 12:00 a.m.,
local time of the destination address, on any day will be deemed given at 8:00
a.m. on the next following business day after the day of receipt. The addresses
for Notice are as follows:
If to the Buyer or Guarantor: CASA OLE EAST, INC. OR MEXICAN RESTAURANTS, INC.
0000 Xxxxxxxxx
Xxxxxxx, Xxxxx 00000
Telephone: 000-000-0000
Fax: 000-000-0000
Attention: Xxxxxx Xxxxxxx
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Copy to: XxXxxxx, Xxxx & Xxxxxx
0000 Xxxx Xxxx Xxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Telephone: 000-000-0000
Fax: 000-000-0000
Attention: Xxxxxx X. XxXxxxx
If to the Seller or the Shareholder: Xxxxxx X. Xxxxxx
0000 Xxxxxxxxxx
Xxxxxxxx, Xxxxx 00000
Telephone: 000-000-0000
Fax: 000-000-0000
Copy to: Xxxxxx, Xxxx & Xxxxxx, LLP
000 Xxxxxxx Xx.
Xxxxxxxx, XX 00000
Telephone: 000-000-0000
Fax: 000-000-0000
Attention: Xxxxx Xxxxxx
Schlanger, Mills, Xxxxx & Silver, L.L.P.
000 Xxxxx Xxxx Xxx Xxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Telephone: 000-000-0000
Fax: 000-000-0000
Attention: Xxxx Xxxxx
7.5 AMENDMENTS AND WAIVERS. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Buyer and the Seller. No waiver by any Party of any default, misrepresentation,
or breach of warranty or covenant hereunder, whether intentional or not, shall
be deemed to extend to any prior or subsequent default, misrepresentation, or
breach of warranty or covenant hereunder or affect in any way any rights arising
by virtue of any prior or subsequent such occurrence.
7.6 SEVERABILITY. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction. Whenever possible, each provision of
this Agreement shall be interpreted in such manner as to be effective and valid
under applicable law. A determination that any provision of this Agreement is
unenforceable or invalid shall not affect the enforceability or validity of any
other provision, and any determination that the application of any provision of
this Agreement to any person or circumstance is illegal or unenforceable shall
not affect the enforceability or validity of such provision as it may apply to
any other person or circumstances. If any provision of this
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Agreement is held to be illegal, invalid, or unenforceable under present or
future laws effective during the term hereof, such provision shall be fully
severable; and this Agreement shall be construed and enforced as if such
illegal, invalid, or unenforceable provision had never comprised a part hereof;
and the remaining provisions hereof shall remain in full force and effect and
shall not be affected by the illegal, invalid, or unenforceable provision or by
its severance herefrom. Furthermore, in lieu of such illegal, invalid, or
unenforceable provisions there shall be added automatically as a part of this
Agreement a provision as similar in terms to such illegal, invalid, or
unenforceable provision as may be possible and be legal, valid, and enforceable
and that shall not be more restrictive than the one severed herefrom.
7.7 CONSTRUCTION. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent, or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement.
7.8 INDEPENDENT OBLIGATIONS. The Parties intend that each
representation, warranty, and covenant contained herein shall have independent
significance. If any Party has breached any representation, warranty, or
covenant contained herein in any respect, the fact that there exists another
representation, warranty, or covenant relating to the same subject matter
(regardless of the relative levels of specificity) which the Party has not
breached shall not detract from or mitigate the fact that the Party is in breach
of the first representation, warranty, or covenant.
7.9 EXPENSES. Each of the Parties will bear its own costs and expenses
(including legal, accountant and consultant fees and expenses and expenses of
inspection) incurred in connection with this Agreement, the inspection of the
Restaurant Assets, and the transactions contemplated by this Agreement, whether
the transaction is consummated or the Agreement is terminated for any reason;
provided, however, that whether the transaction is consummated or not, all costs
related to or in the nature of the Owner's Policy of Title Insurance to be
delivered to Buyer under Section 2.3(n) (including the cost of any surveys
required by the Title Company ), along with all costs incident to the deliveries
contemplated by Section 4.8, shall be borne 50% by the Seller, on the one hand,
and 50% by the Buyer, on the other hand.
7.10 HEADINGS. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
7.11 TIME. Time is of the essence. In computing any period of time
pursuant to this Agreement, the day of the act, event or default from which the
designated period of time begins to run shall not be included, but the time
shall begin to run on the next succeeding day. The last day of the period so
computed shall be included, unless it is a Saturday, Sunday or legal holiday, in
which event the period shall run until the end of the next day which is not a
Saturday, Sunday or legal holiday.
7.12 LEGAL REPRESENTATION. All of the Parties' acknowledge that they
have been advised that they should seek and have had the opportunity to seek
counsel to review this Agreement and to obtain the advice of such counsel
relating thereto.
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7.13 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
7.14 FACSIMILE SIGNATURES. The transmission of an executed copy of this
Agreement, or any document referenced in this Agreement, or the signature
page(s) hereof or thereof, by facsimile or telecopy shall be treated in all
manner and respects as the delivery of an original counterpart of this Agreement
or such document bearing the original signature(s) of the Party (ies) utilizing
any such transmission device. At the request of any Party, any document or
signature page that is subject to this Section, including without limitation to
this Agreement, shall be re-executed and delivered in original form by the
effected Party(ies).
7.15 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the domestic laws of the State of Texas, and specifically
including but not limited to the Texas Covenants Not to Compete Act (TX Bus &
Com Section 15.50 et seq) without giving effect to any choice or conflict of law
provision or rule (whether of the State of Texas or any other jurisdiction) that
would cause the application of the laws of any jurisdiction other than the State
of Texas. Venue for any cause of action arising under this Agreement shall lie
in Xxxxxx County, Texas.
7.16 DISPUTE RESOLUTION.
(a) Any and all disputes among the Parties to this Agreement
(defined for the purpose of this provision to include their principals,
partners, agents and/or affiliates) arising out of or in connection
with the negotiation, execution, interpretation, performance or
nonperformance of this Agreement, the transactions contemplated herein
and any other instrument, agreement or certificate delivered in
connection herewith, shall be solely and finally settled by
arbitration, which shall be conducted in Houston, Xxxxxx County, Texas,
by a single arbitrator selected by the Parties. The arbitrator shall be
a lawyer familiar with business transactions of the type contemplated
in this Agreement who shall not have been previously employed by or
affiliated with any of the Parties hereto or their respective legal
counsel. If the Parties fail to agree on the arbitrator within thirty
(30) days of the date one of them invokes this arbitration provision,
either Party may apply to the American Arbitration Association to make
the appointment.
(b) The Parties hereby renounce all recourse to litigation as
to arbitrated matters and agree that the award of the arbitrator shall
be final and subject to no judicial review. The arbitrator shall
conduct the proceedings pursuant to the Commercial Arbitration Rules of
the American Arbitration Association, as now or hereafter amended (the
"Rules").
(c) The arbitrator shall decide the issues submitted (i) in
accordance with the provisions and commercial purposes of this
Agreement, and (ii) with all substantive questions of law determined
under the laws of the State of Texas (without regard to its principles
of conflicts of laws). The arbitrator shall promptly hear and determine
(after giving the Parties due notice and a reasonable opportunity to be
heard) the issues submitted and shall render a decision in writing
within sixty (60) days after the appointment of the arbitrator.
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(d) The Parties agree to facilitate the arbitration by (i)
conducting arbitration hearings to the greatest extent possible on
successive days, and (ii) observing strictly the time periods
established by the Rules or by the arbitrator for submission of
evidence or briefs.
(e) Judgment on the award of the arbitrator may be entered in
any court having jurisdiction over the Party against which enforcement
of the award is being sought and the Parties hereby irrevocably consent
to the jurisdiction of any such court for the purpose of enforcing any
such award. The arbitrator shall divide all costs (other than fees and
expenses of counsel) incurred in conducting the arbitration in the
final award in accordance with what the arbitrator deems just and
equitable under the circumstances.
(f) The Parties hereto agree that the provisions of this
Section 7.16 shall not be construed to prohibit any Party from
obtaining, in the proper case, specific performance or injunctive
relief with respect to the enforcement of any covenant or agreement of
another Party to this Agreement.
7.17 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. Except as
otherwise specifically provided herein, all of the representations and
warranties of the Parties contained in this Agreement shall survive the Closing
and continue in full force and effect for a period of one (1) year thereafter
unless the Actual Indemnity Payments made by Seller and/or Shareholders to Buyer
during the First Liability Period pursuant to Article 6 equal the First
Liability Threshold, then the representations and warranties of Seller and
Shareholders under Article 3 and its obligations for breach of same under
Article 6 shall terminate on the first day of the Second Liability Period. The
representations and warranties regarding Seller's title to the Restaurant
Assets, subject to Permitted Encumbrances, shall survive the Closing and
continue in full force and effect forever thereafter.
7.18 SOLICITATION OF EMPLOYEES. Seller and Shareholders, severally and
not jointly, agree that during the Non-Compete Period, Seller and/or
Shareholders will not, directly or indirectly, contact or solicit any person,
excluding employees named on Schedule 7.18, who at any time within the one year
period preceding the Covenant Trigger, has been an employee of the Seller and/or
Shareholders (the "Employee") to become an employee of the Seller and/or
Shareholders, in any Competing Business, or otherwise become engaged in any
capacity on behalf of the Seller and/or Shareholders in any Competing Business.
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