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AGREEMENT AND PLAN OF MERGER
AMONG
PJ AMERICA, INC.,
PJAM ACQUISITION SUBSIDIARY, INC.,
OHIO PIZZA DELIVERY CO.,
AND
XXXXX X. XXXXXXXX, XXXX XXX XXXXXXXX,
XXXXX X. XXXXXXXX, XXXXXX X. XXXXXXXX,
XXXX XXXXXXXXX, XXXXXXX XXXXXXXXX
AND XXX XXXXXXX
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May 30, 1997
TABLE OF CONTENTS
Section Page
1. The Merger.............................................................. 1
1.1 Merger of Acquisition Subsidiary into the Company.................. 1
1.2 The Closing........................................................ 1
1.3 Charter and Management of Surviving Corporation.................... 2
1.4 Conversion of Shares............................................... 2
1.5 Adjustment of Formula Price........................................ 3
1.6 Exchange of Certificates Representing the Company Shares........... 4
1.7 Indemnification Escrow............................................. 5
1.8 Unregistered Securities............................................ 6
2. Certain Representations and Warranties of Shareholders.................. 6
2.1 Title to Shares; Share Restrictions................................ 6
2.2 Authority.......................................................... 6
2.3 Completeness of Statements......................................... 6
3. Representations and Warranties of the Company and the Shareholders...... 7
3.1 Organization and Standing of the Company........................... 7
3.2 Subsidiaries....................................................... 7
3.3 Authority.......................................................... 7
3.4 No Violations; Consents............................................ 7
3.5 Capitalization; Stock Ownership and Rights......................... 8
3.6 Financial Statements............................................... 8
3.7 Absence of Undisclosed Liability................................... 9
3.8 Absence of Certain Events.......................................... 9
3.9 Properties......................................................... 11
3.10 Assets Necessary to Business....................................... 12
3.11 Bank Accounts, etc................................................. 12
3.12 Absence of Other Business Operations; Restrictive Covenants........ 12
3.13 Contracts; Contract Status......................................... 12
3.14 Copyrights, Trademarks, Trade Names, Etc........................... 13
3.15 Current Employees and Compensation; Officers and Directors......... 13
3.16 Employee Benefits.................................................. 14
3.17 Environmental Matters.............................................. 15
3.18 Indebtedness to or from Officers, Directors, Etc................... 16
3.19 Insider Interests.................................................. 16
3.20 Insurance.......................................................... 16
3.21 Labor Matters...................................................... 16
3.22 Leases............................................................. 17
3.23 Licenses and Permits............................................... 17
3.24 Litigation......................................................... 17
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TABLE OF CONTENTS
Section Page
3.25 Real Property..................................................... 18
3.26 Payments.......................................................... 18
3.27 Tax Returns; Tax Elections........................................ 18
3.28 Compliance........................................................ 20
3.29 Books and Records................................................. 20
3.30 Securities Representations........................................ 20
3.31 Completeness of Statements........................................ 21
4. Representations and Warranties of PJAM.................................. 21
4.1 Incorporation; Corporate Power..................................... 21
4.2 Authorization; No Violation........................................ 22
4.3 Securities Documents............................................... 22
4.4 Litigation......................................................... 23
4.5 Issuance of PJAM Shares............................................ 23
5. Covenants of the Parties 23
5.1 Operation of the Company Pending Closing........................... 23
5.2 Tax Treatment...................................................... 24
5.3 Non-Competition Agreement.......................................... 24
5.4 Release and Resignation............................................ 24
5.5 Registration Rights Agreement...................................... 25
5.6 Health Care Continuation........................................... 25
5.7 Employee Bonuses................................................... 27
5.8 Shareholders Agreement............................................. 27
5.9 Substitute Guaranty................................................ 27
5.10 Compliance with Conditions......................................... 27
5.11 Further Actions.................................................... 27
6. Conditions to the Obligations of PJAM and Acquisition Subsidiary........ 28
6.1 Representations and Warranties Correct............................. 28
6.2 Compliance with Covenants.......................................... 28
6.3 Necessary Consents................................................. 28
6.4 No Material Adverse Change......................................... 28
6.5 Comparable Store Sales............................................. 28
6.6 No Litigation...................................................... 28
6.7 Maximum Price of PJAM Shares....................................... 28
6.8 Pooling of Interests............................................... 28
6.9 Xxxx Employment Agreement.......................................... 29
7. Conditions to Obligations of the Shareholders and the Company........... 29
7.1 Representatives and Warranties Correct............................. 29
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TABLE OF CONTENTS
Section Page
7.2 Compliance with Covenants ..................................... 29
7.3 No Litigation ................................................. 29
7.4 Minimum Closing Price ......................................... 29
7.5 Necessary Consents ............................................ 29
7.6 No Material Adverse Change .................................... 29
8. Termination .......................................................... 29
8.1 Termination Events ............................................ 29
8.2 Effect of Termination ......................................... 30
9. Deliveries and Actions Taken at Closing .............................. 31
9.1 Deliveries by the Shareholders and the Company ................ 31
9.2 Deliveries by PJAM and Acquisition Subsidiary ................. 31
9.3 Deliveries by PJAM and the Shareholders ....................... 32
10. Survival of Representations and Warranties; Indemnities .............. 32
10.1 Survival ...................................................... 32
10.2 General Indemnities of the Shareholders ....................... 32
10.3 Additional Indemnities of the Shareholders .................... 32
10.4 Indemnity by PJAM ............................................. 33
10.5 Exclusive Remedy .............................................. 33
10.6 Limitations on the Shareholders' Indemnification Obligations .. 34
10.7 Claims Procedure .............................................. 34
10.8 Defense of Third Party Claim .................................. 35
10.9 Arbitration ................................................... 36
11. Miscellaneous Provisions ............................................. 37
11.1 Expenses ...................................................... 37
11.2 Shareholders' and Company's Knowledge Defined ................. 37
11.3 Notice ........................................................ 37
11.4 Exhibits; Entire Agreement .................................... 38
11.5 Amendment; Waiver ............................................. 38
11.6 Binding Effect; Assignment .................................... 38
11.7 Captions ...................................................... 38
11.8 Severability of Provisions .................................... 38
11.9 Confidentiality ............................................... 39
11.10 Governing Law ................................................. 39
11.11 Publicity; No Disclosure ...................................... 39
11.12 Post-Closing Access ........................................... 40
11.13 Counterparts .................................................. 40
11.14 Waiver of Conflict ............................................ 40
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EXHIBITS
Description Exhibit
Certificate of Merger .................................................. A
PJAM Shares ............................................................ B
Escrow Agreement ....................................................... C
Non-Competition Agreements ............................................. D
Release Letter ......................................................... E
Registration Rights Agreement .......................................... F
SCHEDULES
Description Schedule
Ownership of Shares .................................................... 2.1
Organization and Good Standing ......................................... 3.1
Subsidiaries ........................................................... 3.2
No Violations; Consents ................................................ 3.4
Capitalization; Stock Ownership ........................................ 3.5
Financial Statements ................................................... 3.6
Liabilities Not Disclosed on Acquisition Balance Sheet ................. 3.7
Absence of Certain Events .............................................. 3.8
Properties ............................................................. 3.9
Bank Accounts .......................................................... 3.11
Absence of Other Business Activities ................................... 3.12
Contracts .............................................................. 3.13
Current Employees and Compensation, Directors and Officers ............. 3.15
Employee Benefits ...................................................... 3.16
Environmental Matters .................................................. 3.17
Indebtedness ........................................................... 3.18
Insider Interests ...................................................... 3.19
Insurance .............................................................. 3.20
Labor Matters .......................................................... 3.21
Leases ................................................................. 3.22
Litigation ............................................................. 3.24
Real Property .......................................................... 3.25
Taxes .................................................................. 3.27
Buyer's Required Authorizations ........................................ 4.2
Substitute Guaranty .................................................... 5.9
Necessary Consents ..................................................... 7.5
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AGREEMENT AND PLAN OF MERGER
This Agreement And Plan Of Merger is entered into as of May 30, 1997, by
and among (i) PJ America, Inc., a Delaware corporation ("PJAM"), (ii) PJAM
Acquisition Subsidiary, Inc., an Ohio corporation ("Acquisition Subsidiary"),
(iii) Ohio Pizza Delivery Co., an Ohio corporation ("Company"), and (iv) Xxxxx
X. Xxxxxxxx, Xxxx Xxx Xxxxxxxx, Xxxxx X. Xxxxxxxx, Xxxxxx X. Xxxxxxxx (each an
Indiana resident), Xxxx Xxxxxxxxx, Xxxxxxx Xxxxxxxxx and Xxx Xxxxxxx (each a
Kentucky resident) (individually, a "Shareholder" and collectively, the
"Shareholders").
Recitals:
A. The Company owns, operates and manages restaurants as a franchisee of
Papa John's International Inc. ("PJI"). The Shareholders own all of the issued
and outstanding capital stock of the Company.
B. PJAM has formed Acquisition Subsidiary as a wholly-owned subsidiary
corporation of PJAM prior to the "Closing" (as defined herein) of the
transactions described in this Agreement. PJAM desires to exchange its common
stock for all of the issued and outstanding capital stock of the Company, all
pursuant to the terms of this Agreement.
C. For federal income tax purposes, the parties intend that the merger for
which this Agreement provides is a reorganization within the meaning of section
368(a)(2)(E) of the Internal Revenue Code of 1986, as amended (the "Code").
Agreement:
Now, Therefore, the parties hereby agree as follows:
1. The Merger.
1.1 Merger of Acquisition Subsidiary into the Company. Upon the terms and
subject to the conditions set forth in this "Agreement" (as defined in Section
11.4), at the "Effective Time" (as defined in Section 1.2) Acquisition
Subsidiary shall be merged with and into the Company (the "Merger") and the
separate corporate existence of Acquisition Subsidiary shall thereupon cease.
The Company shall be the surviving corporation and its separate corporate
existence shall continue unaffected and unimpaired by the Merger. For purposes
of reference to the Company at and after the Effective Time, the Company is
hereinafter sometimes referred to as the "Surviving Corporation." The Merger
shall be pursuant to the provisions of, and have the effect provided in, the
applicable laws of the State of Ohio.
1.2 The Closing.
(a) The closing of the Merger ("Closing") shall take place at the
offices of XXXXXXXXXX XXXX & XxXXXXXX, pllc, 0000 Xxxxxxxx Xxxx Xxxxx,
Xxxxxxxxxx, Xxxxxxxx 00000, at 11:00 a.m., local time, on the later of (1) the
third business day immediately following
the day on which the last condition set forth in Sections 6 and 7 (other than
the conditions described in Sections 6.7 and 7.4) is fulfilled or satisfied in
accordance herewith or waived by the party entitled to the benefit of such
condition or (2) June 6, 1997, but in no event later than June 30, 1997. Each
party shall notify the others on the date that all the conditions precedent to
such party's obligation to close the transactions described in this Agreement
have been satisfied, fulfilled or waived.
(b) The date on which the Closing occurs is hereinafter referred to as
the "Effective Date." On the Effective Date, the parties shall cause a
Certificate of Merger in the form of Exhibit A necessary to effect the Merger
and all other such documents that may be required by applicable Ohio law to be
filed with the Ohio Secretary of State. The Merger shall be effective at the
opening of business ("Effective Time") on the Effective Date. The Merger shall
have the effect set forth in the Ohio General Corporation Law.
1.3 Charter and Management of Surviving Corporation.
(a) From and after the Effective Time and until further amended in
accordance with applicable Ohio law, the Articles of Incorporation of
Acquisition Subsidiary shall be the Articles of Incorporation of the Surviving
Corporation. The By-Laws of Acquisition Subsidiary, as in effect immediately
prior to the Effective Time, shall be the By-Laws of the Surviving Corporation
until amended in accordance with applicable Ohio law.
(b) From and after the Effective Time, the Board of Directors of the
Surviving Corporation shall consist of those persons who are the directors of
Acquisition Subsidiary immediately before the Effective Time, with each such
person continuing to serve as a director of the Surviving Corporation in
accordance with the provisions of Surviving Corporation's Articles of
Incorporation and By-Laws and applicable Ohio law. From and after the Effective
Time, the officers of the Surviving Corporation shall consist of those persons
who are the officers of Acquisition Subsidiary immediately before the Effective
Time, with each such person continuing to serve as an officer of Surviving
Corporation in accordance with the provisions of the Surviving Corporation's
Articles of Incorporation and By-Laws and applicable Ohio law.
1.4 Conversion of Shares.
(a) At the Effective Time, all of the Company's common shares, having
no par value per share (the "Company Shares"), issued and outstanding
immediately prior to the Effective Time shall be converted into that number of
shares of PJAM common stock, $.01 par value per share ("PJAM Shares") equal to
$4,588,379 ("Formula Price") divided by $16.50 (the parties acknowledge that
they agreed to such conversion value as of May 20, 1997). The Formula Price
shall be subject to adjustment computed in accordance with Section 1.5. The
Company Shares held by each Shareholder shall be exchanged for the percentage of
PJAM Shares set forth on Exhibit B.
(b) The common stock, having no par value per share, of Acquisition
Subsidiary that is issued and outstanding immediately prior to the Effective
Time and owned by PJAM, shall
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remain issued and outstanding and shall represent all of the issued and
outstanding capital stock of Surviving Corporation immediately following the
Effective Time.
1.5 Adjustment of Formula Price.
(a) Preparation of Draft Effective Date Balance Sheet. The Surviving
Corporation shall cause Masters and Associates to prepare and deliver to the
Shareholders, within 30 days after the Effective Date, a draft balance sheet
(the "Draft Effective Date Balance Sheet") for the Company as of the close of
business on (i) May 25, 1997, if the Closing shall occur on or prior to June 6,
1997, or (ii) the date immediately prior to the Effective Date if the Closing
occurs after June 6, 1997. The Surviving Corporation shall prepare the Draft
Effective Date Balance Sheet in accordance with generally accepted accounting
principles applied on a basis consistent with the preparation of the
"Acquisition Balance Sheet" (as defined in Section 3.6) ("GAAP"), provided, that
assets, liabilities, gains, losses, revenues and expenses during the period from
December 30, 1996 to the Effective Time or as of dates other than year-end
(which normally are determined through the application of so-called interim
accounting conventions or procedures) shall be determined, for purposes of the
Draft Closing Date Balance Sheet, through full application of the procedures
used in preparing the Acquisition Balance Sheet as though the Merger had not
occurred. Additionally, in the event the Draft Effective Date Balance Sheet is
prepared as of the close of business on May 25, 1997, as provided herein, then
the Draft Effective Date Balance Sheet shall be adjusted to reflect any of the
following that occur between May 25, 1997 and the Effective Date: (i) dividends
or distributions to the Shareholders declared or paid; (ii) payments of accrued
vacation; (iii) payments of the special bonuses described in Section 5.7(a)
hereof; (iv) payments to Xxxxxxx Xxxx with respect to the amendment to the "Xxxx
Employment Agreement" (as defined in Section 6.9); (v) the expenses described in
Section 11.1(b) hereof; (vi) incurring of debt described in item 35 of Schedule
3.7; and (vii) any other debt or obligation incurred other than in the ordinary
course of the Company's business.
(b) Preparation of Effective Date Balance Sheet. If the Shareholders
have any objections to the Draft Effective Date Balance Sheet, they shall
deliver a detailed statement describing their objections to the Surviving
Corporation within 15 days after receiving the Draft Closing Date Balance Sheet.
The parties shall use their "Best Efforts" (as defined below in this Section
1.5(b) to resolve any such objections themselves. If the parties do not obtain a
final resolution within 30 days after Buyer has received the statement of
objections, PJAM and the Shareholders have selected Xxxxxx Xxxxxxxx & Co.,
Cleveland, Ohio, to resolve any remaining objections. The determination of such
accounting firm shall be made on the basis of the requirements of this
Agreement, will be set forth in writing and will be conclusive and binding upon
the parties hereto. The Surviving Corporation shall revise the Draft Effective
Date Balance Sheet as appropriate to reflect the resolution of any objections
thereto pursuant to this Section 1.5(b). As used in this Agreement, the term
"Effective Date Balance Sheet" shall mean the Draft Effective Date Balance
Sheet, together with any revisions thereto pursuant to this Section 1.5(b); the
term "Best Efforts" shall mean the efforts that a prudent "Person" desirous of
achieving a result would use in similar circumstances to ensure that such result
is achieved as expeditiously as possible; the term "Person" shall mean any
individual, corporation (including any non-profit corporation), general or
limited partnership, limited liability partnership or company, joint
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venture, estate, trust, association, organization, labor union, or other entity
or Governmental Body; and the term "Governmental Body" shall mean any (A)
nation, state, county, city, town, village, district or other jurisdiction of
any nature; (B) federal state, local, municipal, foreign or other government;
(C) governmental or quasi-governmental authority of any nature (including any
governmental agency, branch, department, official or entity and any court or
other tribunal); (D) multi-national organization or body; or (E) body
exercising, or entitled to exercise, any administrative, executive, judicial,
legislative, police, regulatory or taxing authority or power of any nature) or
any other Person.
(c) Payment of Fees and Expenses of Accounting Firm. In the event the
parties submit any unresolved objections to an accounting firm for resolution as
provided in Section 1.5(b), the Surviving Corporation, on the one hand, and the
Shareholders, on the other hand, shall each pay one-half the fees and expenses
of such accounting firm.
(d) Adjustment to Formula Price. If the excess of the assets over the
liabilities ("Stockholders Equity") as shown on the Effective Date Balance Sheet
(the "Effective Date Equity") is less than or greater than $490,299, then the
amount of the Formula Price shall be reduced or increased by the amount by which
the Effective Date Equity is less than or greater than $490,299 and the number
of PJAM Shares to be issued to the Shareholders in the Merger shall be reduced
or increased accordingly.
1.6 Exchange of Certificates Representing the Company Shares.
(a) On the Effective Date, PJAM shall deposit with National City
Bank, Cleveland, Ohio ("Transfer Agent") for the benefit of the Shareholders
certificates representing 80% of that whole number of PJAM Shares determined in
accordance with Section 1.4(a).
(b) At the Closing, PJAM shall cause the Transfer Agent to deliver to
each Shareholder (1) a letter of transmittal which shall specify that delivery
shall be effected, and risk of loss and title to the Company Shares shall pass,
only upon delivery of the certificates representing Company Shares (the
"Certificates") to the Transfer Agent and shall be in such form and have such
other provisions as PJAM may reasonably specify, and (2) instructions for use in
effecting the surrender of the Certificates in exchange for certificates
representing PJAM Shares and cash in lieu of fractional shares. Upon surrender
of a Certificate for cancellation to the Transfer Agent by a Shareholder,
together with such letter of transmittal, duly executed and completed in
accordance with the instructions thereto, that Shareholder shall be entitled to
receive in exchange therefor certificates representing his or her proportionate
share of 80% of that number of whole PJAM Shares determined in accordance with
Section 1.4(a). PJAM shall use its best efforts to cause the Transfer Agent to
deliver the certificates for such PJAM Shares and cash at the Closing, pursuant
to this Section 1.6(b).
(c) Within 20 days following final determination of the Formula
Price, pursuant to the provisions of Section 1.5 (the "Adjustment Date"):
(1) PJAM shall deliver or cause to be delivered to the
Shareholders
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(A) certificates representing his or her proportionate share of
whole PJAM Shares determined in accordance with Section 1.4, as adjusted
pursuant to Section , and not delivered pursuant to Section 1.06(b), less
the "Escrow Deposit" (as defined in Section 1.7), and
(B) immediately available funds in lieu of any fraction of a
PJAM share; or
(2) If the number of PJAM Shares issued to the Shareholders pursuant
to Section 1.6(b) exceeds the total number of PJAM Shares the Shareholders
are entitled to receive following the adjustments described in Section 1.5,
then the Shareholders shall deliver to the Surviving Corporation
certificates for the number of whole PJAM Shares (plus cash in lieu of
surrender of any fractional shares) the Shareholders were issued pursuant
to Section 1.6(b) in excess of the total number of PJAM Shares such
Shareholders were entitled to receive as a result of the adjustment
described in Section 1.5.
(d) No fractional PJAM Shares shall be issued pursuant hereto. In
lieu of the issuance or return of any fractional PJAM Share, cash adjustments
will be paid to or by Shareholders for such fractional PJAM Share that would
otherwise be issuable or returnable. No interest will be paid or accrued on the
amounts due in lieu of fractional shares.
1.7 Indemnification Escrow.
(a) At the Closing, the Shareholders, PJAM and PNC Bank, Louisville,
Kentucky, as escrow agent (the "Indemnification Escrow Agent"), shall execute
and deliver to an escrow agreement (the "Indemnification Escrow Agreement") in
the form of Exhibit C attached hereto, providing for 15% of the total number of
PJAM Shares to be issued to each of the Shareholders pursuant to this Agreement
(collectively, the "Escrow Deposit") to be placed in escrow to satisfy claims
for indemnification made by PJAM pursuant to this Agreement.
(b) Notwithstanding the foregoing, on the Adjustment Date, (i) PJAM
shall deliver or cause to be delivered to the Escrow Agent certificates
representing each Shareholder's proportionate share of the Escrow Deposit, and
(ii) each Shareholder shall deliver to the Escrow Agent a stock power duly
endorsed by such Shareholder, with signature properly guaranteed, for transfer
to the Escrow Agent of certificates representing such Shareholder's
proportionate share of the Indemnification Deposit. If the number of PJAM Shares
issued to the Shareholders pursuant to Section 1.6(b) exceeds 85% of the number
of PJAM Shares the Shareholders are entitled to receive following the
adjustments described in Section 1.5, then, in addition to the return of PJAM
Shares described in Section 1.6(c)(2) above, each Shareholder shall deliver to
the Escrow Agent such Shareholder's proportionate share of the Escrow Deposit,
so that following all of the adjustments described herein, the Escrow Deposit
shall equal 15% of the total number of PJAM Shares to be issued to the
Shareholders pursuant to this Agreement.
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1.8 Unregistered Securities.
(a) The PJAM Shares to be issued to Shareholders in the Merger will
not be registered under the Securities Act of 1933, as amended (the "Act"), or
under the laws of any other jurisdiction.
(b) Additionally, each Shareholder agrees that such Shareholder shall
not sell, pledge, transfer or otherwise dispose of any of the PJAM Shares to be
issued to such Shareholder pursuant to the terms of this Agreement until such
time ("Publication Date") as financial results covering at least 30 days of
combined operations of PJAM and the Surviving Corporation have been published
within the meaning of Section 201.01 of the Securities Exchange Commission's
Codification of Financial Reporting Policies. All certificates representing PJAM
Shares shall bear a legend setting forth the restrictions described in this
Section 1.8(b); provided, as of the Publication Date, PJAM shall instruct the
Transfer Agent, and provide such other additional items that such Transfer Agent
may need, to remove such restrictive legend from certificates representing the
PJAM Shares.
2. Certain Representations and Warranties of Shareholders. Each of the
Shareholders hereby severally represents and warrants to PJAM as follows:
2.1 Title to Shares; Share Restrictions. The Shareholder is the sole
record, lawful and beneficial owner of that number of Company Shares set forth
opposite such Shareholder's name on Exhibit B, and has good and marketable title
to such Company Shares. Except as disclosed on Schedule 2.1, the Shareholder
owns such Company Shares free and clear of all "Encumbrances" (which, as used in
this Agreement, shall mean any charge, claim, community property interest,
condition, equitable interest, lien, mortgage, easement, servitude, right-of-
way, option, pledge, security interest, right of first refusal or restriction of
any kind, including any restriction on use, voting, transfer, receipt of income
or exercise of any other attribute of ownership), other than restrictions on
transfer under applicable state and federal securities laws.
2.2 Authority. The Shareholder has full right, power, authority and
capacity to execute, deliver and perform this Agreement in accordance with its
terms. This Agreement and each and every agreement, document and instrument to
be executed, delivered and performed by the Shareholder in connection herewith
or in connection therewith constitutes, or will, when executed and delivered,
constitute, the valid and legally binding obligation of the Shareholder,
enforceable against the Shareholder in accordance with their respective terms,
except as enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the enforcement of creditors' rights
generally.
2.3 Completeness of Statements. To the knowledge of the Shareholder,
no representation or warranty of the Shareholder in this Section 2 contains any
untrue statement of a material fact, any misstatement of a material fact, or
omits to state a material fact necessary to make the statements herein or
therein not misleading in light of the circumstances under which they were made.
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3. Representations and Warranties of the Company and the Shareholders. The
Company and each of the Shareholders, jointly and severally, hereby make the
following representations and warranties to PJAM.
3.1 Organization and Standing of the Company. The Company is duly
organized, validly existing and in good standing under the laws of the state of
Ohio. Neither the nature of the business of the Company nor the character or
location of the properties of the Company requires the Company to be qualified
as a foreign corporation in any jurisdiction. The Company has full power and
authority, corporate or otherwise, to own and lease its properties as such
properties are now owned and leased and to conduct its business as and where
such business is conducted. Schedule 3.1 contains true and complete copies of
the articles of incorporation and by-laws of the Company, as amended through the
date hereof.
3.2 Subsidiaries. Except as set forth on Schedule 3.2, the Company does
not, directly or indirectly, own any capital stock of, nor does it have any
interest or investment (whether debt or equity) of any nature in, any other
corporation, partnership, business trust, joint venture, association or other
business organization.
3.3 Authority. The Company has all necessary corporate power and
authority to execute, deliver and perform this Agreement in accordance with its
terms. This Agreement and each and every agreement, document and instrument to
be executed, delivered and performed by the Company in connection herewith has
been duly and validly authorized, executed and delivered by the Company and
constitutes or will, when executed and delivered, constitute, the valid and
binding obligation of the Company, enforceable against the Company in accordance
with their terms, except as enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights generally.
3.4 No Violations; Consents. Except for the consent of PJI, which has
consented to the Merger, and except as set forth on Schedule 3.4, the execution,
delivery and performance of this Agreement the consummation of the transactions
described in this Agreement, and the fulfillment of and compliance with the
terms and provisions of this Agreement, do not and will not: (i) conflict with
or violate the terms or conditions of, result in the breach of or constitute a
default under, (A) any material law, rule or regulation of any government or
agency or department of any government, or any material judgment, order, writ,
award, decree, permit or license of any court or other agency of any government
to which the Company, or any of its properties or assets, may be subject, (B)
any material agreement, instrument, mortgage, commitment, franchise or
restriction to which the Company is a party or by which the Company, or any of
its properties or assets, is bound or committed, or (C) the charter, bylaws or
any other organizational documents of the Company; (ii) constitute an event
which could, or with the lapse of time or action by a third party could, result
in any material manner in any default under or modify any of the foregoing,
provide any third party the right to cancel any of the foregoing, or result in
the creation of any lien, charge or encumbrance upon any of the Company's assets
or properties that could have a material adverse effect on its business, assets,
financial condition or results of operations; (iii) constitute an event which
could, or with the lapse of time or action by a third party could, result in the
creation of any lien, charge or encumbrance upon any of the issued and
outstanding capital
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stock of the Company; or (iv) require any consent, authorization or approval of
any federal, state or local court, governmental authority or regulatory body, or
of any creditor or any party to any such material agreement, instrument,
mortgage, contract or commitment, or any other person or entity; or (v) give any
party with rights under any material agreement, instrument, mortgage, franchise,
commitment, judgment, order, writ, award, decree, permit, license or other
restriction to which the Company or any of its properties or assets are subject
or bound the right to terminate, accelerate, modify or otherwise alter the
rights or obligations of the Company thereunder.
3.5 Capitalization; Stock Ownership and Rights.
(a) The authorized capital stock of the Company consists of 750 Company
Shares. The Shareholders are the sole record and beneficial owners of all the
issued and outstanding Company Shares in the amounts set forth on Exhibit B
attached hereto. Each outstanding Company Share is duly authorized, validly
issued, fully-paid and non-assessable.
(b) As of the date of this Agreement, (i) the Company has no outstanding
class of capital stock other than the Company Shares identified on Exhibit B,
and (ii) except as identified on Schedule 3.5, there are no, nor is there any
arrangement not yet fully performed which would result in any, outstanding
options, warrants, conversion or exchange rights, subscriptions, agreements or
other commitments of any kind obligating the Company to issue or sell, or to
redeem, purchase or otherwise acquire, directly or indirectly, any Company
Shares or other capital stock of the Company or any outstanding restrictions,
agreements or commitments of any kind to which the Company is a party or by
which the Company is bound, which relate to or restrict in any way the issuance
or sale, or purchase, redemption or other acquisition, of any Company Shares.
(c) None of the issued and outstanding Company Shares has been issued in
violation of any federal, state or other law pertaining to the issuance of
securities, or in violation of any rights, preemptive or otherwise, of the
Company or any present Shareholder or past shareholder of the Company.
3.6 Financial Statements. Included as Schedule 3.6 are selected Financial
Statements of the Company (collectively, the "Company Financial Statements")
including the following: (i) the audited balance sheet of the Company as of
December 29, 1996, together with a statement of income for the period ending
December 29, 1996 (the "Year End Financials"); and (ii) the unaudited interim
balance sheet of the Company as of April 27, 1997, together with a statement of
income for the four-month period ending April 27, 1997 (the "Stub Period
Financials"). The balance sheet dated December 29, 1996 that is included in the
Year End Financials is referred to herein as the "Acquisition Balance Sheet."
The Company Financial Statements have been prepared, from the books and records
of the Company, represent actual, bona fide transactions and were prepared in
conformity with generally accepted accounting principles applied on a consistent
basis. The balance sheets included in the Company Financial Statements present
fairly the financial condition of the Company as of the respective dates of the
Company Financial Statements, and the statements of income included in the
Company Financial Statements present fairly the results of operation of the
Company for the respective periods covered thereby and do
-8-
not contain any material items of special or nonrecurring income or expense,
except as specifically identified therein.
3.7 Absence of Undisclosed Liability. As of the date of the Acquisition
Balance Sheet, the Company had no debts, obligations (including, but not limited
to, obligations as a guarantor) or liabilities of any nature, secured or
unsecured (including, but not limited to, debts, obligations or liabilities
which are fixed, absolute, accrued or contingent), whether known or unknown to
the Shareholders, except (a) as shown (and in the amounts shown) on the
Acquisition Balance Sheet, or (b) for those obligations or liabilities which are
not required to be disclosed on the Acquisition Balance Sheet under generally
accepted accounting principles, but are otherwise disclosed to PJAM in any other
provision of this Agreement or the Schedules attached hereto, (c) obligations
under contracts not required to be disclosed pursuant to this Agreement, or (d)
liabilities not material in amounts in the aggregate, which have not and will
not adversely effect the reputation of the Company or its products, and which
are fully covered by insurance. Except as disclosed on Schedule 3.7, since the
date of the Acquisition Balance Sheet, the Company has not incurred any debts,
obligations (including, but not limited to, obligations as a guarantor) or
liabilities of any nature, secured or unsecured (including, but not limited to,
debts, obligations or liabilities which are fixed, absolute, accrued or
contingent) whether known or unknown to the Company or the Shareholders, other
than (a) obligations under contracts not required to be disclosed pursuant to
this Agreement, (b) debts, obligations and liabilities incurred in the ordinary
course of business consistent with past practices, all of which have been paid
in full in the ordinary course of business or are reflected on the regular books
of account of the Company on the date hereof, and (c) liabilities not material
in amounts in the aggregate, which have not and will not adversely effect the
reputation of the Company or its products, and which are fully covered by
insurance; and none of which (i) is inconsistent with the representations,
warranties and covenants of the Company and the Shareholders contained herein or
in any other provisions of this Agreement, (ii) has had or may be expected to
have any material adverse effect on the business, assets, financial condition or
prospects of the Company, or (iii) constitutes a guarantee of any form or type.
3.8 Absence of Certain Events. Since the date of the Acquisition Balance
Sheet, the Company has not, except as set forth on Schedule 3.8:
(a) issued, sold, purchased or redeemed any stocks, bonds, debentures,
notes, partnership interests or other securities or interests, or issued, sold
or granted any option, warrant or right to acquire any thereof;
(b) waived or released any debts, claims, rights of value or suffered
any extraordinary loss or written down the value of any inventories or other
assets, or written down or off any receivable, in excess of $10,000, in the
aggregate;
(c) declared, set aside or paid any dividend or distributions on any of
the Company Shares;
(d) made any capital expenditures or commitment for capital expenditures
in excess of $10,000 for any single item or in excess of $25,000 in the
aggregate;
-9-
(e) made any change in its operations, other than changes in the lawful
and ordinary course of business, none of which has, and which in the aggregate
have not had, a material adverse effect on its business, operations, financial
condition, or results of operations or prospects;
(f) suffered any casualty, damage, destruction or loss to any of its
assets in excess of $10,000 for any one event or in excess of $25,000 in the
aggregate;
(g) suffered any material adverse change in its revenues or expenses,
financial position, assets, results of operations, business or cash flow, or
experienced any occurrence or event which alone or together with other
occurrences or events experienced by it has had or might reasonably be expected
to have a material adverse effect upon its revenues or expenses, financial
position, assets, results of operations, business or cash flow;
(h) disposed of any of its properties or assets other than sales of
products in the ordinary course of business consistent with past practices or
which have been replaced with assets of similar utility that are of equal or
greater value;
(i) terminated, placed on probation, disciplined, warned, or experienced
any resignation of any executive officer or experienced any resignations of, or
had any disputes involving the employment relationship with, any store manager,
supervisor or operating partner of the Company ("Management Employee");
(j) paid or obligated itself to pay any bonuses or extraordinary
compensation to, or made any increase (except increases in the ordinary course
of business) in the compensation payable (or to become payable by it) to, any
officer, director or employee, or entered into any contract of employment not
terminable by it without notice, penalty or termination payment;
(k) terminated or amended or suffered the termination or amendment of
(i) any lease, bids, contracts, commitments and other agreements of the Company,
or (ii) any permits, licenses, concessions, authorizations, franchises
(including any PJI franchises) or similar rights granted to or held by the
Company, which are necessary or are material and related to its operations;
(l) incurred any indebtedness for borrowed money or subjected any of its
properties or assets to any Encumbrances or to any other similar charge of any
nature whatsoever;
(m) made any loan or advance to any person or entity (except normal
travel or other reasonable expense advance to its employees);
(n) made any change in accounting principles, methods or practices;
(o) adopted, modified or amended any plan, contract or arrangement
providing for management or consulting services, severance, employee insurance,
bonuses, pension, profit sharing, stock purchase, deferred compensation or other
employee benefits;
-10-
(p) entered into any agreement, arrangement or transaction (other than
transactions involving the sale of the Company's products in the ordinary course
of business) with any of the Shareholders, or any of the officers, directors,
agents or representatives of the Company, or any family members of any of the
foregoing, or any business or entity in which any of the foregoing has a direct
or indirect interest;
(q) merged or consolidated with, or acquired all or any substantial
portion of the business or property of, any other entity, or entered into any
transactions other than in the ordinary course of business, consistent with past
practices;
(r) entered into any agreement, contract, lease or license (or series of
related agreements, contracts, leases or licenses) involving more than $10,000;
(s) entered into any agreement or commitment (whether or not in writing)
to do any of the above;
and the Company has:
(t) continued its operations in the ordinary course consistent with its
past practices and maintained its operations, assets, books of account, records
and files in substantially the same manner as before the Acquisition Balance
Sheet Date;
(u) used its reasonable efforts to preserve its business.
3.9 Properties. The Company has good and marketable title to all of its
properties, interests in properties, and assets, tangible and intangible,
(excluding leased real properties for which the Company has good and valid
leasehold title), free and clear of all Encumbrances of any nature whatsoever,
except for statutory or similar governmental liens securing payments of ad
valorem property taxes or local taxes on income or profits not yet due and
payable by the Company but accrued on the Effective Date Balance Sheet, or for
those items set forth in Schedule 3.9. Except as set forth on Schedule 3.9,
each store owned or operated by the Company is equipped in all material respects
with equipment and other property and assets in material compliance with the
specifications of the "Papa John's Franchise Agreements" (defined in Section
3.13(e)) and the Papa John's Operations Manual, and such equipment will be in
operating condition on the Effective Date. Except for the foregoing
representation, the Company and the Shareholders make no representation as to
the condition, quality, fitness for use or merchantability or state of repair of
any of the tangible personal property of the Company. Neither the whole nor any
portion of such assets has been condemned or otherwise taken by public
authority, and the Company and the Shareholders have no knowledge that any such
condemnation or taking is threatened.
3.10 Assets Necessary to Business. The Company owns or leases all
properties and assets, real, personal and mixed, tangible and intangible; has
area development rights or franchise rights relating to operation of the Papa
John's pizza delivery and carry-out restaurants operated or under development by
it and the markets serviced by such restaurants stores; and is party to all
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other contracts and agreements necessary and appropriate to permit it to carry
on its business as presently conducted and at the locations where presently
conducted.
3.11 Bank Accounts, etc. Included as Schedule 3.11 is a true and complete
list of the name of each bank, brokerage firm or other financial institution
with which the Company has a depository, trading, margin, purchase, lending or
similar account, a line of credit, or from which the Company is authorized to
effect loans, or any safe deposit box, and the names of all persons authorized
by the Company to draw on such accounts, effect such loans or to have access to
such safe deposit box.
3.12 Absence of Other Business Operations; Restrictive Covenants. The
only business activity in which the Company has ever engaged has been the
business of owning, developing and operating Papa John's pizza delivery and
carry-out restaurants. Neither the Company nor any of its Shareholders is a
party to, or subject to, any contract, arrangement or commitment containing
covenants not to compete in the business of owning, developing or operating
restaurants with any person or entity or restricting the area in which it may
own, operate or franchise restaurants, except as set forth on Schedule 3.12 of
the Company.
3.13 Contracts; Contract Status. The Company is not currently a party to,
or subject to, any of the following, whether written or oral, except as set
forth on Schedule 3.13:
(a) any management or employment contract or agreement, or any contract,
arrangement or commitment with any director, officer, employee, shareholder or
representative;
(b) any contracts, arrangements or commitments for capital expenditures
in excess of $10,000 as to any single expenditure or in excess of $25,000 for
all expenditures;
(c) any contract, arrangement or commitment relating to borrowed money
or creating or providing for long-term debt or continuing credit or any
guaranty, indemnity or suretyship obligation with respect thereto or power of
attorney;
(d) any contract, arrangement or commitment in which it or any of its
employees or officers has covenanted to keep any information confidential (other
than the Papa John's Franchise Agreements);
(e) any franchise, development or license agreement with any person or
entity, including, without limitation, the franchise and development agreements
with PJI set forth on Schedule 3.13 (the "Papa John's Franchise Agreements"); or
(f) any other material contract, arrangement or commitment, or contract
agreement of commitment not made in the ordinary course of business.
The Company is not in default under the Papa John's Franchise Agreements, or any
other contract, arrangement or commitment described on Schedule 3.13
(collectively, the "Material Contracts"), nor has any event occurred which, with
notice or passage of time, or both, would constitute a
-12-
default by the Company or, to the knowledge of the Company and the Shareholders,
any other party, under any of the Material Contracts, and (A) there is no basis
for any of the other parties to the Material Contracts to assert that the
Company is in default thereunder and (B) to the knowledge of the Company and the
Shareholders, the other parties to such Material Contracts are not in default
thereunder. There are no existing disputes between the Company and any other
party to a Material Contract. Except as set forth on Schedule 3.13, neither this
Agreement nor the consummation of the Merger, or the other transactions
contemplated by this Agreement will cause a default under any Material Contract
and, following consummation of the transactions contemplated by this Agreement
(including, without limitation, the Merger), the Company (and its successors)
will continue to be entitled to the full benefit of all the Material Contracts.
The Company has delivered to PJAM a true and complete copy of each of the
Material Contracts, except as indicated on Schedule 3.13.
3.14 Copyrights, Trademarks, Trade Names, Etc. The Company does not own
or use any trade names, trademarks, trade dress, copyrights, service marks,
registrations or applications therefor, and other similar rights
("Intangibles"), except for its corporate name and such Intangibles as the
Company is authorized and licensed to use pursuant to the Papa John's Franchise
Agreements ("PJI Intangibles"). The Company is not and has not been in
violation or infringement of any Intangible owned by any person or entity other
than the Company or in which any person or entity other than the Company has any
right, and there are no actual or threatened claims pending or, to the knowledge
of the Company and the Shareholders, contemplated against the Company relating
thereto; provided, with respect to matters arising out of the Company's duly
authorized use of the PJI Intangibles, the foregoing representations shall be
limited to the knowledge of the Company and the Shareholders. The Company has
not agreed to indemnify any person (other than PJI) for or against infringement
of any Intangibles. No Intangible owned or used by the Company is subject to
any outstanding order, award, writ, injunction, decree, or judgment of which the
Company or any Shareholder has knowledge.
3.15 Current Employees and Compensation; Officers and Directors.
(a) Set forth on Schedule 3.15 is a complete list of the Company's
directors, officers, and Management Employees on the date hereof along with the
amount of the current annual salaries or hourly rate for each Management
Employee. Except as disclosed on Schedule 3.15, the Company has not, because of
past practices or previous commitments with respect to its Management Employees,
established any rights on the part of such employees to receive additional
compensation inconsistent with past practices with respect to any period after
the date hereof or established any rights on the part of such employees or
officers to continued employment.
(b) Except as set forth on Schedule 3.15, neither the execution and
delivery of this Agreement nor the consummation of the transactions described
herein will (a) result in any payment (whether severance pay, unemployment
compensation or otherwise) becoming due from the Company to any employee,
director or officer or former employee, director or officer of the Company, (b)
increase any benefits otherwise payable to any employee, director or officer or
former employee, director or officer of the Company, or (c) result in the
acceleration of the time of payment or vesting of any such benefits.
-13-
(c) Except as set forth on Schedule 3.15, to the knowledge of the
Company and the Shareholders, no Management Employee or officer of the Company
is a party to or subject to any contract, arrangement or commitment containing
covenants by such employee or officer not to compete in any line of business
with any Person or restricting the customers from whom or the area in which the
Management Employee or officer may solicit or conduct business.
3.16 Employee Benefits.
(a) Except as set forth on Schedule 3.16, the Company does not
maintain or contribute to, and has never maintained or contributed to, (a) any
"employee pension benefit plans" ("Pension Plans") or any "employee welfare
benefit plans" ("Welfare Plans") (as described in sections 3(2) and 3(1),
respectively, of Title I of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), or (b) any other form of plan or agreement with any of its
present or former employees, officers, directors, agents or representatives
providing for present or future employee benefits or deferred compensation of
any nature whatsoever, any golden parachute or other severance protection
agreement, or similar agreement, or any plans or agreements providing stock
options, stock purchase or any other employee benefits of any nature whatsoever
("Compensation Plans").
(b) Each of the Welfare Plans has been administered in material
compliance with the requirements of the Code and ERISA, and all reports required
by any governmental agency for each of such plans have been timely filed, except
as identified on Schedule 3.16.
(c) On and after January 1, 1975, neither the Company nor any of its
employees who is a fiduciary of any Welfare Plan, has engaged in any transaction
in violation of Section 406(a) or Section 406(b) of ERISA (for which no
exemption exists under Section 408 of ERISA) or any "prohibited transaction" (as
defined in Section 4975(c)(1) of the Code) for which no exemption exists under
Sections 4975(c)(2) or 4975(d) of the Code.
(d) On or after July 1, 1986, each group health plan (as defined in
Section 5000(b)(1) of the Code) maintained by the Company has been administered
in material compliance with the continuation coverage and notice requirements of
Title I, Subtitle B, Part 6 of ERISA and Section 4980B of the Code (and the
regulations thereunder).
(e) The Company and its Shareholders have furnished to PJAM a true
and complete copy of each Welfare Plan and Compensation Plan described on
Schedule 3.16 and the most recent Annual Report (Form 5500 Series) required by
ERISA and the current summary plan description for each of the Welfare Plans. No
representation has been made to participants or beneficiaries with respect to
benefits under any of the Welfare Plans that would entitle them to benefits
greater than or in addition to the benefits provided by the actual terms of such
plans.
(f) The Company is not presently required to contribute to, or
during the period of five years ending on the date hereof has not been required
to contribute to, any multi-employer plan (as defined in Section 4001(a)(3) of
ERISA) which does or did cover any employee of the Company and the Company is
not, and will not be on account of the consummation of the
-14-
transactions described in this Agreement, subject to any withdrawal or partial
withdrawal liability within the contemplation of Section 4201 of ERISA.
3.17 Environmental Matters. Except as set forth on Schedule 3.17, to the
actual knowledge of the Company and the Shareholders:
(a) there are no toxic, hazardous or carcinogenic substances or wastes
disposed of, stored, or are present on, in or under, any real property owned or
leased by the Company or utilized by the Company in the conduct of its business,
nor have any such substances or wastes been sent by the Company for storage,
treatment, reuse or recycling, or disposal to any other sites prior to the date
hereof;
(b) there are no releases or threats of releases of any toxic, hazardous
or carcinogenic substances or wastes to the environment from or at any store or
other facility owned or operated by the Company, including, without limitation,
any migration or any release or threatened release of such substances or wastes
from one environmental medium to another environmental medium;
(c) the Company is in compliance with all applicable federal, state, and
local statutes, rules, ordinances and other laws and regulations relating to
protection of the environment, including, without limitation, the Solid Waste
Disposal Act, as amended by the Resource Conservation and Recovery Act, 42
U.S.C. (S)6901, et seq.; the Clean Air Act, 42 U.S.C. (S)7401, et seq.; the
Clear Xxxxx Xxx, 00 X.X.X. (X)0000, et seq.; the Safe Drinking Water Act, 42
U.S.C. (S)300f, et seq.; the Toxic Substances Control Act, 15 U.S.C. (S)2601, et
seq.; the Federal Insecticide, Fungicide, and Xxxxxxxxxxx Xxx, 0 X.X.X. (X)000,
et seq.; the Emergency Planning and Community Right-To-Know Act, 42 U.S.C.
(S)11001, et seq.; and the Comprehensive Environmental Response, Compensation
and Liability Act, as amended, 42 U.S.C. (S)9601, et seq. ("CERCLA"), and any
foreign laws, statutes, rules, orders, ordinances and other laws and regulations
thereunder, relating to or regulating hazardous or toxic substances or air,
water or land quality, waste, or other similar environmental matters
("Environmental Laws");
(d) no conditions exist at the stores or other facilities owned, leased
or used by the Company which would necessitate remedial action under CERCLA or
any other Environmental Law;
(e) no conditions exist on any other property for which the Company is,
or may be, responsible for all or any portion of costs or expenses associated
with the reclamation or clean-up of such property under CERCLA or any other
Environmental Laws;
(f) no liens have been asserted against any assets of the Company, for
all or any portion of the costs or expenses associated with the reclamation or
clean-up of any waste disposal site or other property under CERCLA or any other
Environmental Laws; and
(g) there are no pending or threatened claims, assessments, or
litigation against the Company with respect to any alleged noncompliance with
any Environmental Laws.
-15-
3.18 Indebtedness to or from Officers, Directors, Etc. Except as set
forth on Schedule 3.18, none of the Shareholders nor any of the directors,
officers or employees of the Company, nor any family member of any of them, is
now indebted to the Company, nor is the Company indebted or obligated to any of
them, except for accrued salary and wages and normal employee benefits arising
in the ordinary course of its business. For purposes of this Agreement, the term
"family members" shall mean the current spouse, parents, siblings and children
of any persons, officers or employees of the Company.
3.19 Insider Interests. Except as set forth on Schedule 3.19, no
Shareholder, officer or director of the Company, nor any family member of any
of them:
(a) owns, directly or indirectly, any interest in, or is an officer,
director, employee or principal of any corporation, partnership, firm,
association or other person or entity which is a competitor in the pizza
delivery and carry out business or a supplier of the Company (other than PJI);
(b) has any interest, directly or indirectly, in any contract,
arrangement, commitment or property material to the business, operations,
property or assets of the Company; or
(c) has, directly or indirectly, within the two-year period immediately
prior to the date hereof, engaged in any transaction with the Company except
transactions inherent in the capacity of such person as a shareholder, officer
or director of the Company, or the purchase of the Company's products in the
ordinary course of the Company's business.
3.20 Insurance. Attached to Schedule 3.20 are certificates or other
information evidencing each insurance policy (including policies providing
property, casualty, liability, health and workers' compensation coverage and
bond and surety arrangements but excluding policies of insurance insuring the
life of any Shareholder) to which the Company is a party, a named insured, or
otherwise the beneficiary of coverage.
With respect to each such insurance policy: (1) the policy is in full force and
effect; (2) the Company is not in breach or default (including with respect to
the payment of premiums or the giving of notices) under the policy; and (3) the
policy (or any other policy to which the Company has been a party) does not
provide for any retrospective premium adjustment or other experience-based
liability on the part of the Company. Schedule 3.20 describes any self-insurance
arrangements affecting the Company. Also attached to Schedule 3.20 are loss runs
describing workers' compensation claims and claims made against the Company's
property and casualty insurance during the three year period prior to the date
hereof.
3.21 Labor Matters. The Company is not a party to, or negotiating, any
collective-bargaining agreement. There are no union organizational or
representation efforts underway or threatened, nor are there any existing or
threatened labor strikes, slow downs, disputes, grievances, or disturbances
involving the Company's employees which might have a material adverse affect on
the Company's business or operations. Except as set forth on Schedule 3.21, the
Company has complied with the National Labor Relations Act, as amended, Title
VII of the Civil Rights Act of
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1964, as amended, the Occupational Safety and Health Act, Executive Order 11246,
the regulations under such acts and all other federal, state and local statutes,
rules, orders, regulations, ordinances, codes and other laws relating to
employment; and no proceedings before any court, governmental agency or
instrumentality or arbitrator relating to such matters, including any unfair
labor practice claims, are pending, or to the knowledge of the Company and the
Shareholders, threatened.
3.22 Leases. The Company is not a party to or bound by any personal
property leases. Schedule 3.22 includes a true and complete list of all leases
of real property and all options to lease such property (oral or written) to
which the Company is a party, as lessor, lessee or otherwise (the "Leases"), and
addresses of the property so leased. True and correct copies of the Leases
(each as amended through the date hereof) have been delivered to PJAM, and each
of the Leases is in good standing, valid, binding, in full force and effect, and
enforceable in accordance with its terms against the lessor, except to the
extent that such enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors' rights generally. Except as disclosed on Schedule 3.22 of the
Company, subject to the landlord's or lessor's rights set forth in the Leases,
the rights of the Company in the property covered thereby (including any
improvements and appurtenances thereto) are, to the knowledge of the Company and
the Shareholders, paramount to the rights of any other person or entity. The
Company is not in default under any of such Leases, nor is there any material
dispute between the Company and any other party to any of such Leases, nor, to
the knowledge of the Company or the Shareholders, is any other party to any of
such Leases in default thereunder. No event has occurred which, with the passage
of time, notice, or both, could give the lessor or landlord under any of the
Leases the right to claim a default thereunder. Except as disclosed on Schedule
3.22, neither the execution and delivery of this Agreement, nor the consummation
of the transactions contemplated by this Agreement will cause a default under
any of the Leases.
3.23 Licenses and Permits. The Company possesses all permits,
concessions, licenses, franchises (including Papa John's franchises),
certificates of compliance, consents, approvals, orders, certificates and
authorizations required or necessary to permit the Company to carry on its
business or operations at the locations where such business is conducted,
without material interference or interruption (the "Licenses"). The Company has
furnished PJAM a true and complete copy of each of the Licenses. To the
knowledge of the Company and the Shareholders no suspension or cancellation of
any License is threatened, and the consummation of the transactions contemplated
by this Agreement will not cause the suspension or cancellation of any License.
3.24 Litigation. Except as set forth on Schedule 3.24, there are no
investigations, actions, suits, claims, arbitrations or proceedings, either
judicial, administrative or otherwise, pending or, to the knowledge of the
Company or the Shareholders, threatened against or affecting (a) the Company, or
any Shareholder concerning the Company, or any of the properties, business,
assets, or operations of the Company, (b) any employee, officer or director of
the Company (in his capacity as such), (c) the transactions contemplated
hereunder, or (d) the ownership of any securities of the Company, by or before
any court, governmental department, commission, board, bureau, agency, mediator,
arbitrator or other person or instrumentality that would have a material adverse
effect on the business or operations of the Company.
-17-
3.25 Real Property. To the actual knowledge of the Company and the
Shareholders:
(a) the Company's operations on and use of the real property leased by
the Company under the Leases (the "Real Property") conforms in all material
respects to applicable zoning regulations, including use, set-back and area
requirements, and other restrictions and covenants on the use thereof;
(b) All improvements to the Real Property are adequate and sufficient
for the operation of the Papa John's pizza and delivery restaurants thereon, and
comply in all material respects with the standards and specifications of PJI;
(c) All applicable zoning ordinances, building codes and other federal,
state and local laws with respect to the Real Property, and the improvements
thereon, permit the existence of the presently existing improvements and the
continuation of the operation of the Papa John's pizza and delivery restaurants
as presently conducted; and
(d) The Real Property and all improvements located thereon comply in all
material respects with all other applicable municipal, county and other
governmental laws, orders, regulations and restrictions, and neither the Company
nor any of the Shareholders has any knowledge or information which would lead it
or any of them to believe that the use of any of the Real Property will be
adversely affected by any pending or proposed zoning or use changes.
3.26 Payments. Neither the Company nor any of the Shareholders has,
directly or indirectly, paid or delivered any fees, commissions or other sums of
money or items of property, however characterized, to any finders, agents,
customers, suppliers, governmental officials or other parties that in any manner
are related to the business or operations of the Company and which the
Shareholder or any officer or director of the Company knows, or had reason to
believe, were illegal under any federal, state or local laws.
3.27 Tax Returns; Tax Elections.
(a) Except as set forth on Schedule 3.27, the Company has prepared,
signed and filed all federal, state, local and other tax returns and reports
required to be filed by all applicable statutes, laws, rules and regulations on
or before the date hereof, and has paid all taxes or installments thereof,
interest, penalties, assessments and deficiencies of every kind and nature
whatsoever which were due and owing on such tax returns and reports or which
were or are otherwise due and owing under all applicable statutes, laws, rules
and regulations for any periods for which returns or reports were due. The
provisions for taxes in the Acquisition Balance Sheet are sufficient for the
payment of all federal, state, local, foreign and other taxes attributable to
all periods ended on or before the date of the Acquisition Balance Sheet, and
adequate and proper accruals have been made by the Company for all liabilities
for taxes accruing since the date of the Acquisition Balance Sheet. Except as
set forth on Schedule 3.27, the Company has timely paid in full all ad valorem
property taxes and other assessments levied on its assets and properties which
have heretofore become due and payable. There are in effect no agreements,
waivers or other arrangements providing for an extension of time with regard to
the assessment of any tax,
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or any deficiency with respect thereto, against the Company. Except as set forth
on Schedule 3.27 of the Company, there are no actions, suits, proceedings,
arbitrations, examinations, investigations or claims now pending, nor, to the
knowledge of the Company and the Shareholders, proposed, against the Company,
nor are there any matters under discussion between the Company and the Internal
Revenue Service, or other federal, state, local or other governmental authority,
relating to any taxes or assessments, or any claims or deficiencies with respect
thereto. The Company has never received notice of an audit, review or
examination of any of its federal income tax returns by the Internal Revenue
Service or any other governmental agency of the federal government, nor have its
federal income tax returns been audited by the Internal Revenue Service. The
Company has never received notice of an audit, review or examination of any of
its state income tax returns, ad valorem property tax returns, license tax
returns, employee withholding returns, sales tax returns or any and all other
returns filed with states in which the Company is doing business, nor have any
such returns been audited by any department or agency, whether local or state,
charged with revenue and taxation, except as set forth on Schedule 3.27 of the
Company.
(b) Except for the election under Section 1362 of the Code to be taxed
as an Subchapter S corporation, which the Company and its Shareholders
acknowledge and agree will be terminated upon consummation of the Merger, there
are no material elections or consents filed with the Internal Revenue Service or
any other taxing authorities affecting the Company. The Company has delivered to
PJAM true and complete copies of all federal and state income tax returns filed
by the Company since January 1, 1993.
(c) The Company has withheld proper and accurate amounts from its
employees in full and complete compliance with the tax withholding provisions of
the Code and other applicable federal, state, local and other statutes, laws,
rules and regulations, and has filed proper and accurate federal, state, local
and other returns and reports for all years and periods (and portions thereof)
for which any such returns and reports were due with respect to employee income
taxes, withholding taxes, social security taxes and unemployment taxes. Except
as set forth on Schedule 3.27 of the Company, all payments due from the Company
on account of employee income tax withholding, social security taxes or
unemployment taxes in respect of all periods (and portions thereof) ended on or
prior to the date hereof have been properly paid within the time allowed,
without extension.
(d) None of the assets of the Company are subject to any lien or levy or
other manner of collection by a taxing authority for any tax deficiency or
liability of the Company (other than statutory and similar governmental liens
securing payment of ad valorem property taxes or local taxes on income or
profits not yet due and payable by the Company but reflected on the Effective
Date Balance Sheet), nor will the assets become subject to any such lien or levy
as a result of this Agreement or consummation of the Merger.
3.28 Compliance. The Company has complied with all applicable laws,
regulations, rules and orders of Federal, state and local governments and all
agencies thereof applicable to its business, business practices (including, but
not limited to, the marketing, sales and distribution of its products and
services) and assets and properties owned or leased by it. No claims have been
filed against the Company alleging a violation of any such laws or regulations
and neither the
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Company nor any of the Shareholders has received any notice of, or claim
alleging, any violation of such laws or regulations.
3.29 Books and Records.
(a) Prior to the execution of this Agreement, the Company made available
to PJAM for its examination the books and records of the Company, including,
without limitation, computer data and records relating to the business and
finances of the Company (the "Records"). The records are complete and correct
in all material respects and have been maintained in accordance with sound
business practices and on the basis of an adequate system of internal accounting
controls and fairly reflect, in reasonable detail, the transactions and
dispositions of the assets of the Company.
(b) Prior to the execution of this Agreement, the Company furnished to
PJAM for its examination the minute and stock books of the Company or complete
copies thereof, which documents contained a complete record of any and all
proceedings and actions at all meetings of the shareholders and the board of
directors of the Company required to be set forth in said minutes or for which
minutes were prepared. Except for actions required or necessitated by this
Agreement, no changes or additions to the minutes or stock books of the Company
have been made since the date such books were so furnished, and no proceeding or
action required to be set forth in said books has occurred since the date such
books were last furnished to PJAM.
3.30 Securities Representations.
(a) Each Shareholder hereby acknowledges receipt of (1) PJAM's annual
report to Shareholders (including Form 10-K) for the fiscal year ending December
29, 1996, (2) PJAM's Quarterly report on Form 10-Q for the quarter ended on
March 30, 1997, and (iii) PJAM's Proxy Statement, dated April 21, 1997 with
respect to its Annual Meeting of Stockholders to be held on June 4, 1997
(collectively, the "Securities Documents").
(b) Each Shareholder represents that such Shareholder (1) has received
all the information such Shareholder deems necessary concerning PJAM to evaluate
the transactions described in this Agreement, (2) is acquiring the PJAM Shares
for his or her own account, and (3) has no present intention of dividing his or
her interest in the PJAM Shares with others or otherwise disposing of PJAM
Shares.
(c) Each Shareholder represents that such Shareholder has such knowledge
and experience in financial and business matters that he or she is capable of
evaluating the merits and risks of the proposed investment in PJAM Shares. Such
Shareholder understands that, except as may otherwise be provided in the
Registration Rights Agreement, such Shareholder's ability to dispose of the PJAM
Shares in the public market for such stock or otherwise is limited by the
Securities Act, including Rule 144 promulgated thereunder, and, therefore, such
Shareholder may have to bear the risk of his or her investment in such PJAM
Shares for an indefinite period of time.
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(d) Each Shareholder hereby acknowledges that each certificate
representing PJAM Shares that is issuable to such Shareholder pursuant to this
Agreement shall be stamped or otherwise imprinted with a legend substantially to
the following effect:
The securities represented by this certificate have not been registered
under the Securities Act of 1933, as amended (the "Act"), and are
"restricted securities" as defined in Rule 144 promulgated under the Act.
The securities may not be sold or offered for sale or otherwise
distributed except (i) in conjunction with an effective registration
statement for the shares under the Act, (ii) in compliance with Rule 144,
or (iii) pursuant to an opinion of counsel satisfactory to the Company
that such registration or compliance is not required as to such sale,
offer or distribution.
3.31 Completeness of Statements. The Company and the Shareholders have
disclosed, in writing, all material facts known to them relating to the
representations and warranties made by them in this Section 3. To the knowledge
of the Company and the Shareholders, no representation or warranty of the
Company and the Shareholders in this Agreement contains any untrue statement of
a material fact, any misstatement of a material fact, or omits to state a
material fact necessary to make the statements herein or therein not misleading
in light of the circumstances under which they were made. Any matter disclosed
on any schedules referred to in this Section 3 shall be deemed to be disclosed
on all such schedules; provided, however, that nothing in the schedules shall be
deemed adequate to disclose an exception to any representation or warranty made
herein unless the schedule identifies the exception with reasonable
particularity and describes the relevant facts in reasonable detail; and
provided further, the mere listing (or inclusion of a copy) of a document or
other item shall not be deemed adequate to disclose an exception to a
representation or warranty made herein (unless the representation or warranty
has to do with the existence of the document or other item itself).
4. Representations and Warranties of PJAM. PJAM represents and warrants to
the Company and the Shareholders as follows:
4.1 Incorporation; Corporate Power. PJAM and Acquisition Subsidiary are
duly organized validly existing and in good standing under the laws of the State
of Delaware and the State of Ohio, respectively. PJAM has, and at all times has
had, full power and authority, corporate or otherwise, to own and lease its
properties as such properties are now owned and leased and to conduct its
business as and where the businesses have and are now being conducted.
4.2 Authorization; No Violation.
(a) This Agreement has been duly executed and delivered by PJAM and
Acquisition Subsidiary and constitutes their legal, valid and binding
obligation, enforceable in accordance with the terms of this Agreement. PJAM and
Acquisition Subsidiary each has full power and authority, corporate and
otherwise, to enter into and to deliver this Agreement and perform the
transactions described herein.
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(b) Except as set forth in Schedule 4.2, all consents, approvals,
resolutions, authorizations, actions or orders, including those which must be
obtained from Governmental Body, required of PJAM or Acquisition Subsidiary for
the authorization, execution and delivery of, and for the consummation of the
transactions described in, this Agreement have been obtained.
(c) Except as disclosed in Schedule 4.2, the execution and delivery of
this Agreement, the consummation of the transactions described in this
Agreement, and the fulfillment of and compliance with its terms and provisions
do not (1) conflict with or violate (a) any judicial or administrative order,
award, judgment or decree applicable to PJAM or Acquisition Subsidiary or (B)
any term, condition or provision of PJAM's Certificate of Incorporation or By-
Laws, Acquisition Subsidiary's Certificate of Incorporation or By-Laws, or any
agreement, instrument, mortgage, contract, or restriction to which either is a
party, or by which either is bound or which is applicable to either of their
respective properties, or (2) require the approval, consent or authorization of
any other Person.
4.3 Securities Documents. As of the date of each of the Securities
Documents, such Securities Documents (a) were prepared in all material respects
in accordance with the applicable requirements of the Securities Act of 1933, as
amended, the Securities Exchange Act of 1934, as amended, and the rules and
regulations thereunder, and (b) do not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. Each of the combined balance sheets
included in or incorporated by reference into the Securities Documents
(including the related notes and schedules) fairly presents the consolidated
financial position of PJAM as of the date of each such balance sheet and each of
the combined statements of income, retained earnings and cash flows included in
or incorporated by reference into the Securities Documents (including any
related notes and schedules) fairly presents the results of operations, retained
earnings or cash flows, as the case may be, of PJAM for the period set forth
therein (subject, in the case of unaudited financial statements, to normal year-
end audit adjustments which would not be material in amount or effect), in each
case in accordance with generally accepted accounting principles, as they relate
to public companies, consistently applied during the periods involved, except as
may be noted therein. Since the date of the Securities Documents, PJAM has
incurred no debts, obligations or liabilities (whether fixed, absolute, or
contingent) the effect of which has had or is likely to result in a material
adverse effect on PJAM, its business, assets or financial condition.
4.4 Litigation. Except as disclosed in the Securities Documents, there
are no investigations, actions, lawsuits, claims, arbitrations or proceedings
either judicial, administrative or otherwise pending or, to the knowledge of
PJAM, threatened or contemplated, against or affecting PJAM or any of its assets
or properties or business by or before any court, Governmental Body, which, if
adversely decided, would have a material adverse affect against PJAM, its
business, assets or properties.
-22-
4.5 Issuance of PJAM Shares. Upon their issuance to the Shareholders
pursuant to the provisions of this Agreement, the PJAM Shares shall be duly,
legally and validly issued, and, subject to the provisions of Section 1 of this
Agreement, fully paid and nonassessable, and free of all Encumbrances, except
for (i) restrictions on transfer pursuant to federal and state securities laws,
(ii) restrictions contemplated by the Escrow Agreement (with respect to PJAM
Shares subject to such agreement), and (iii) any Encumbrances caused by the
Shareholder to whom such PJAM Shares are issued.
5. Covenants of the Parties.
5.1 Operation of the Company Pending Closing. From the date hereof
through the Effective Date, the Company and the Shareholders shall, except as
otherwise provided herein and except as otherwise consented to by PJAM:
(a) continue the Company's business and operations substantially in
the same manner as heretofore, not undertake any transactions or enter into any
contracts, commitments or arrangements other than in the ordinary course of
business consistent with its past practices, and use their reasonable efforts to
preserve the Company's present business and organization;
(b) refrain from disposing of or encumbering or agreeing to dispose
of or encumber any of the Company's assets other than (1) inventory sold in the
ordinary course of business consistent with past practices, (2) disposition of
worn out or obsolete assets which have been replaced with assets of equal or
greater value, and (3) encumbrances of assets to secure the debt described in
Section 5.1(o);
(c) maintain the Licenses and not take any action, or refrain from
taking any action, which could cause any of the Licenses to be revoked,
restricted or suspended;
(d) not make any commitment for capital expenditure in excess of
$10,000;
(e) take all commercially reasonable efforts necessary to maintain
its tangible assets for the Surviving Corporation's use and benefit after the
Effective Date (normal wear and tear excepted);
(f) maintain its existing insurance coverage, subject to variations
in amounts required by ordinary operations;
(g) not terminate or amend, or suffer the termination or amendment
of, any Material Contract or License except in the ordinary course of business;
(h) not knowingly take or omit to take any action which would cause
any of the representations and warranties made by it herein to be untrue or
incorrect;
(i) not declare or pay any dividend on, or make any distribution to
the holders of, any of the Company Shares, except for distributions in an
aggregate amount not to exceed $450,000,
-23-
plus earnings of the Company otherwise taxable to the Shareholders in respect to
the period January 1, 1997 to May 26, 1997 or, if the Closing shall not have
occurred on or before June 6, 1997, to the Effective Date;
(j) not change its Articles of Incorporation or By-Laws;
(k) maintain the Company's existence;
(l) not authorize for issue or issue any additional shares of capital
stock or securities or change or otherwise adjust the number of shares of
capital stock outstanding;
(m) not make any investment in any other Person, or enter into any
material lease, license, contract or other instrument;
(n) not increase the rate or change the nature of the compensation
payable to the Company's employees, officers or directors; and
(o) not incur or agree to incur any indebtedness for borrowed money,
except for indebtedness not to exceed the amounts permitted to be distributed
pursuant to Section 5.1(i) above (on terms subject to the prior approval of
PJAM, which approval shall not be unreasonably withheld).
5.2 Tax Treatment. PJAM, Acquisition Subsidiary, the Company and the
Shareholders intend that the Merger shall be treated as a reorganization within
the meaning of section 368(a)(2)(E) of the Code. Each of the parties hereto
shall treat the Merger as a reorganization for all federal, state and local
income or franchise tax purposes and shall take no position on any return of
such income or franchise taxes as inconsistent with the reorganization
treatment.
5.3 Non-Competition Agreement. The Shareholders other than Xxxx
Xxxxxxxxx, Xxxxxxx Xxxxxxxxx and Xxx Xxxxxxx shall execute and deliver at the
Closing a Non-Competition Agreement in the form of Exhibit D attached hereto
(the "Non-Competition Agreement") pursuant to which they agree not to compete
with PJAM and the Surviving Corporation in the pizza business in the Cleveland,
Ohio DMA during the two-year period following the Effective Date.
5.4 Release and Resignation. Each Shareholder shall execute and deliver
at the Closing a letter in the form of Exhibit E attached hereto containing (1)
his or her resignation from all offices as an officer, director and employee
with the Company effective as of the Effective Date, and (2) a general release
of claims releasing the Company from all liabilities and obligations that any of
them may owe such Shareholder for events arising on or before the Effective Date
(other than with respect to obligations expressly provided in this Agreement) as
set forth in Exhibit E.
5.5 Registration Rights Agreement. PJAM and the Shareholders shall
execute and deliver at the Closing, the Registration Rights Agreement in the
form of Exhibit F attached hereto (the "Registration Rights Agreement").
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5.6 Health Care Continuation.
(a) The parties expressly acknowledge and stipulate that:
(1) The Company currently provides group health insurance
coverage to Xxxxx X. Xxxxxxxx and his wife, Xxxxxx X. Xxxxxxxx, and Xxxxx
X. Xxxxxxxx and his wife, Xxxx Xxx Xxxxxxxx (collectively, Brian, Jeanne,
Xxxxx and Xxxx Xxx Xxxxxxxx are referred to in this section as the
"Tennysons") under a Contract of Insurance between the Company and Blue
Cross and Blue Shield Mutual of Ohio ("Blue Cross"), Group Contract No.
389865 (the "Contract").
(2) Xxxxxx X. Xxxxxxxx currently suffers from certain health
problems which has necessitated a kidney transplant and other significant,
recurring and long-term medical care and medications.
(3) The medications and other medical care referred to in
Section 5.6(a)(2) are and will continue to be extremely costly, and may not
be available or within the financial means of Xxxxx X. Xxxxxxxx and Xxxxxx
X. Xxxxxxxx in the absence of the insurance coverage afforded to them under
the terms of the Contract.
(4) The employment of Xxxxx X. Xxxxxxxx and Xxxxx X. Xxxxxxxx
shall terminate on the Effective Date.
(5) The continuation of the Contract and the continuation of the
insurance coverage afforded to the Tennysons under the Contract are of
paramount importance to the Tennysons and to the Company and its other
shareholders, such that they would not have entered into this Agreement in
the absence of the undertakings by PJAM, Acquisition Subsidiary and the
Surviving Corporation set forth in Section 5.6(c).
(b) The Company and the Tennysons, jointly and severally, hereby
represent and warrant to PJAM, Acquisition Subsidiary and the Surviving
Corporation that at all times up to and including the date of termination of his
employment by the Company or its successor (the "Termination Date"), each of
Xxxxx X. Xxxxxxxx and Xxxxx X. Xxxxxxxx shall be deemed a "Covered Employee"
within the meaning of Section 602(2) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), with respect to the Contract; and that Xxxxxx
X. Xxxxxxxx shall be deemed to be a "Qualified Beneficiary" of Xxxxx X.
Xxxxxxxx, and Xxxx Xxx Xxxxxxxx shall be deemed a "Qualified Beneficiary" of
Xxxxx X. Xxxxxxxx, within the meaning of ERISA Section 607(3). PJAM agrees that
it shall not, and it shall cause the Surviving Corporation not to, contest any
of the foregoing with Blue Cross.
(c) By reason of the circumstances described in Section 5.6(a) and
5.6(b), the Company, PJAM and Acquisition Subsidiary do hereby jointly and
severally agree that:
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(1) Each of Xxxxx X. Xxxxxxxx and Xxxxx X. Xxxxxxxx shall be deemed
to have experienced a "Qualifying Event" within the meaning of ERISA
Section 603 as of the Termination Date.
(2) PJAM, Acquisition Subsidiary and the Surviving Corporation
shall provide each of the Tennysons with continuation coverage (at the
Tennysons' expense), within the meaning of ERISA, Section 602, with respect
to the Contract.
(3) PJAM, Acquisition Subsidiary and the Surviving Corporation
shall take such reasonable actions as may be necessary to cause the
Contract to continue in full force and effect, in accordance with its
present provisions (except with respect to the amount of the premium and
except for other modifications which do not adversely effect the coverage
presently provided under the Contract), for a period of nineteen (19)
months after the Termination Date, or such longer period of time as any one
or more of the Tennysons is or are entitled to continuation coverage
pursuant to ERISA Section 602 (as in effect on the date hereof).
(d) Without limiting the generality of the foregoing, for a period of
at least six months following the Effective Date, the Surviving Corporation
shall provide health care insurance coverage for all assistant managers and
Management Employees of the Company on the terms substantially equivalent to
those currently provided, including payment of 50% of premiums (100% in the case
of Xxxxx Xxxx).
(e) The parties agree that the provisions of this Section 5.6 do not
obligate continuation of the Contract following the expiration of the current
Contract plan year in the event that the premium rate for participants in the
plan covered by the Contract is increased to an amount in excess of 200% of the
premium rate in effect as of the date hereof; provided, the Surviving
Corporation shall provide the Tennysons at least 31 days prior written notice of
such non-continuation (or such shorter notice as PJAM actually receives as to
such increase), and provided further, in such event, PJAM, Acquisition
Subsidiary and the Surviving Corporation each agrees to cause the Surviving
Corporation to obtain group policy or policies in lieu of the Contract providing
as much coverage as possible at premium rates not in excess of 200% of the
premium rates as in effect on the date hereof under the Contract.
(f) The parties agree that none of the Company, PJAM or the Surviving
Corporation shall have any liability whatsoever in the event that coverage of
any of the Tennysons under the Contract is canceled or interrupted by Blue Cross
due to the failure of any of the Tennysons to timely pay any premiums or to
comply with any rules or regulations of Blue Cross with respect to continuation
coverage under the Contract.
(g) In the event the Contract is canceled or modified as a result of
the breach of the provisions of Section 5.6(c)(3), then the Surviving
Corporation and the Tennysons shall cooperate with one another so as to provide
the Tennysons with continuation coverage pursuant to whatever health plan the
Surviving Corporation may then have in effect in lieu of the Contract and in
order
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to mitigate the damages incurred by the Tennysons as a result of the breach by
PJAM, Acquisition Subsidiary or the Surviving Corporation under Section
5.6(c)(3).
5.7 Employee Bonuses.
(a) The parties acknowledge and agree that, in connection with the
Closing, special bonus payments will be made by the Company to its employees in
the aggregate amount of up to $20,000.
(b) The Company, PJAM and Acquisition Subsidiary agree that the
Surviving Corporation shall continue to pay all managers and assistant managers
of the Company monthly performance bonus payments in the same amounts as would
have been paid by the Company for the same performance under the Company's
current bonus policies for at least the period ending on the last day of the
first full month following the Effective Date.
5.8 Shareholders Agreement. The Shareholders agree that the Shareholder
Agreement dated April 1992 among them and the Company shall terminate on the
Effective Date and that the transfer of shares occurring by virtue of the Merger
is a sale by unanimous consent pursuant to Section 5 of that agreement.
5.9 Substitute Guaranty. PJAM agrees to execute and deliver guarantees of
indebtedness and leases of the Company or similar instruments or assurance or
security prior to the Effective Date on such terms as may be necessary, in the
reasonable judgment of PJAM, to cause the beneficiaries thereof to release each
of the Shareholders and their personal assets from any guaranty, pledge or
security in respect of obligations described on Schedule 5.9.
5.10 Compliance with Conditions. All parties hereto agree to cooperate
fully with each other in order to meet the conditions set forth in Sections 6
and 7. All parties further agree to use their respective Best Efforts, and to
act in good faith, to consummate the transactions described in this Agreement as
promptly as possible. Without limiting the generality of the foregoing, each
Shareholder agrees to vote all of such Shareholder's Company Shares in favor of
the Merger.
5.11 Further Actions. Each of the parties hereto agrees that it will, at
any time, and from time to time, after the date hereof, upon the reasonable
request of the appropriate party, do, execute, acknowledge and deliver, or will
cause to be done, executed, acknowledged and delivered, all such further acts,
deeds, assignments, transfers, conveyances, powers of attorney and assurances as
may be required to complete the transactions and carry out the obligations
described in this Agreement. From the date hereof to the Effective Date, each
party will promptly notify each other party in writing if it becomes aware that
any of the representations or warranties made by any party (including such
party) in this Agreement become inaccurate or is breached, or may become
inaccurate or be breached, or if such party is unable to perform any agreement,
covenant or condition required of such party under this Agreement.
6. Conditions to the Obligations of PJAM and Acquisition Subsidiary. The
obligations of PJAM and Acquisition Subsidiary to consummate the transactions
described in this
-27-
Agreement are subject to the fulfillment, prior to or at the Closing, of the
conditions precedent that:
6.1 Representations and Warranties Correct. All representations and
warranties of the Company and the Shareholders in this Agreement shall be true
and correct in all material respects on and as of the Effective Date as though
made on such date.
6.2 Compliance with Covenants. The Company and the Shareholders shall
have performed and complied with all the covenants, agreements and conditions
required by this Agreement to be performed or complied with by them prior to or
at the Closing.
6.3 Necessary Consents. The Company shall have received all consents, in
the form and substance reasonably satisfactory to PJAM, to the Merger from the
other parties to the Contracts and Licenses, to the extent such consent is
expressly required under such Contracts and Licenses or otherwise deemed
necessary in the reasonable judgment of PJAM.
6.4 No Material Adverse Change. Between the date hereof and the Effective
Date, there shall have been no material adverse change in the business,
financial condition, operations or assets of the Company.
6.5 Comparable Store Sales. Between the date of the Acquisition Date
Balance Sheet and the Effective Date, the Company's comparable store sales in
the aggregate shall not have decreased by more than 4% over corresponding
periods of the Company during 1996.
6.6 No Litigation. No action or proceeding before any court or any
governmental body shall be pending or threatened pursuant to which an
unfavorable judgment, decree, injunction or order would (a) prevent the carrying
out of this Agreement or any of the transactions contemplated hereby, (b)
declare unlawful the transactions described in this Agreement, (c) cause such
transactions to be rescinded or (d) adversely affect the right of PJAM to
operate or control the business, operations or assets of the Company.
6.7 Maximum Price of PJAM Shares. The average per share closing price of
PJAM Shares quoted on the NASDAQ National Market for the five trading days
immediately prior to the Effective Date (as reported in the NASDAQ Composite
Transactions reporting system as published in The Wall Street Journal) (the
"Valuation Date Closing Price") shall not exceed $20.00 per PJAM Share.
6.8 Pooling of Interests. There shall have occurred no event which shall
preclude the transaction described in this Agreement from being accounted for as
a pooling of interests.
6.9 Xxxx Employment Agreement. The transactions contemplated by the
Amendment to the Employment and Stock Option Agreement, between the Company and
Xxxxxxx X. Xxxx, described in Schedule 3.5 (the "Xxxx Employment Agreement"),
shall have been consummated.
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7. Conditions to Obligations of the Shareholders and the Company. The
obligations of the Shareholders and the Company to consummate this Agreement and
the transactions herein described are subject to the fulfillment prior to or at
the Closing of the conditions precedent that:
7.1 Representatives and Warranties Correct. All representations and
warranties of PJAM and Acquisition Subsidiary in this Agreement shall be true
and correct in all material respects on and as of the Closing Date as though
made on such date.
7.2 Compliance with Covenants. PJAM and Acquisition Subsidiary shall have
performed and complied with all the covenants, agreements and conditions
required by this Agreement to be performed or complied with by them prior to or
at the Closing.
7.3 No Litigation. No action or proceeding before any court or any
governmental body shall be pending or threatened pursuant to which an
unfavorable judgment, decree, injunction or order would (a) prevent the carrying
out of this Agreement or any of the transactions contemplated hereby, (b)
declare unlawful any of the transactions described in this Agreement, or (c)
cause this Agreement to be rescinded or voided.
7.4 Minimum Closing Price. The Valuation Date Closing Price shall be at
least equal to $13.00 per PJAM Share.
7.5 Necessary Consents. The Company shall have received all consents, in
form and substance reasonably satisfactory to the Company, to the Merger from
the other parties to the Contracts and Licenses, to the extent such consent is
expressly required under such Contracts and Licenses, and the Shareholders have
been released as a guarantor of, and their personal assets shall have been
released from any pledge respecting, those obligations described on Schedule
5.9.
7.6 No Material Adverse Change. Between the date hereof and the Effective
Date, there shall have been no material adverse change in the business,
financial condition, operations or assets of PJAM and there shall not have
occurred any economic crisis, outbreak of hostilities or similar event which
causes a suspension or impairment of trading in the securities markets or in the
shares of PJAM.
8. Termination.
8.1 Termination Events.
(a) PJAM may terminate this Agreement by delivery of notice of
termination to the Shareholders and the Company if at anytime prior to the
Closing Date:
(1) Any representation or warranty of Shareholders or the Company in
this Agreement or any other agreement or instrument delivered in connection
therewith becomes materially untrue;
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(2) Shareholders or the Company fail or refuse to perform any obligation
or covenant required of them by this Agreement to be performed by any of them
prior to the Effective Date;
(3) Any of the conditions in Section 6 has not been satisfied as of the
Effective Date or if satisfaction of such a condition is or becomes
impossible (other than through the failure of PJAM to comply with its
obligations under this Agreement) and PJAM has not waived such condition on
or before the Effective Date.
(b) Shareholders (by action of Shareholders holding a majority of Company
Shares) and the Company may terminate this Agreement by delivery of notice of
termination to PJAM if at anytime prior to the Closing Date:
(1) Any representation or warranty of PJAM in this Agreement or any
other agreement or instrument delivered in connection therewith becomes
materially untrue;
(2) PJAM fails or refuses to perform any obligation or covenant required
of it by this Agreement to be performed by it prior to the Effective Date; or
(3) Any of the conditions in Section 7 has not been satisfied as of the
Closing Date or if satisfaction of such a condition is or becomes impossible
(other than through the failure of Shareholders or the Company to comply with
their respective obligations under this Agreement) and Shareholders and the
Company have not waived such condition on or before the Effective Date;
(c) The parties may terminate this Agreement at any time prior to the
Closing Date by mutual consent.
(d) Any party (in the case of the Shareholders, by action of Shareholders
holding a majority of Company Shares) may terminate this Agreement by delivery
of notice of termination to the other parties if the Closing has not occurred
(other than through the failure of any party seeking to terminate this Agreement
to comply fully with its obligations under this Agreement) on or before June 30,
1997, or such later date as the parties may agree.
8.2 Effect of Termination. Each party's right of termination under
Section 8.1 is in addition to any other rights it may have under this Agreement
or otherwise, and the exercise of a right of termination will not be an election
of remedies. If this Agreement is terminated pursuant to Section 8.1, all
further obligations of the parties under this Agreement will terminate, except
that the obligations in Sections 11.1 and 11.9 will survive; provided, however,
that if this Agreement is terminated by a party because of the breach of the
Agreement by the other party or because one or more of the conditions to the
terminating party's obligations under this Agreement is not satisfied as a
result of the other party's failure to comply with its obligations under this
Agreement, the terminating party's right to pursue all legal remedies will
survive such termination unimpaired.
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9. Deliveries and Actions Taken at Closing.
9.1 Deliveries by the Shareholders and the Company. At the Closing, the
Shareholders and the Company shall deliver to PJAM the following (duly executed
and notarized where appropriate):
(a) Copies of resolutions of the Board of Directors and all the
Shareholders of the Company which shall be in full force and effect as of the
Effective Date authorizing the execution and delivery of this Agreement and the
consummation of the Merger, certified by the Secretary of the Company;
(b) The resignations of and release of claims by those officers and
directors of the Company designated by PJAM;
(c) Certificate of Good Standing from the Secretary of State of the
State of Ohio for the Company;
(d) a certificate signed by each Shareholder and an executive officer of
the Company certifying as to the fulfillment of the conditions set forth in
Sections 6.1 through 6.4 (as applicable to it); and
(e) Such other documents as may be reasonably requested by PJAM, that it
deems reasonably necessary, to effect the Closing.
9.2 Deliveries by PJAM and Acquisition Subsidiary. At the Closing, PJAM
shall deliver to the Shareholders the following (duly executed where
appropriate):
(a) Copies of the resolutions of the Board of Directors of PJAM or the
Executive Committee of PJAM's Board of Directors, and the Board of Directors of
Acquisition Subsidiary, which shall be in full force and effect as of the
Effective Date, authorizing the execution of this Agreement and the consummation
of the Merger, certified by the Secretaries of PJAM and Acquisition Subsidiary
as of the Effective Date;
(b) Certificates of Good Standing for PJAM and Acquisition Subsidiary
from the Secretaries of State of Delaware and Ohio, respectively;
(c) A certificate signed by an officer of each of PJAM and Acquisition
Subsidiary certifying as to the fulfillment of the conditions set forth in
Sections 7.1 and 7.2; and
(d) Such other documents as may be reasonably requested by the Company
or the Shareholders, as any of them deem reasonably necessary, to effect the
Closing.
9.3 Deliveries by PJAM and the Shareholders. At the Closing, the
Surviving Corporation, the Shareholders (other than Xxxx Xxxxxxxxx, Xxxxxxx
Xxxxxxxxx and Xxx Xxxxxxx) and PJAM shall
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execute and deliver the Non-Competition Agreements; and PJAM and the
Shareholders shall execute and deliver the Registration Rights Agreement.
10. Survival of Representations and Warranties; Indemnities.
10.1 Survival. The representations and warranties contained in this
Agreement shall survive the execution and delivery of this Agreement and the
consummation of Merger, and shall continue to be binding regardless of any
investigation made at any time by or on behalf of any party, for a period of 18
months from and after the Effective Date, except for (a) the representations and
warranties contained in Sections 2.1 (Title to Shares; Share Restrictions), 2.2
(Authority) and 3.5 (Capitalization; Stock Ownership and Rights), which shall
not expire, and (b) the representations and warranties contained in Section 3.27
(Tax Returns; Tax Elections), which shall survive until the applicable
limitations period has run; provided, if a claim is brought within the
applicable period set forth above, the representations and warranties which are
the subject of such claim shall not expire until a final resolution or non-
appealable determination is made of such claim.
10.2 General Indemnities of the Shareholders. Each of the Shareholders
shall, subject to the limitations set forth in Section 10.6, defend and
indemnify PJAM, and hold PJAM harmless from and against, the following
(collectively, the "General Indemnified Liabilities," individually a "General
Indemnified Liability"):
(a) all liabilities, debts, obligations, losses, damages, deficiencies,
penalties, claims, actions, suits, proceedings, investigations, demands,
assessments, orders and judgments (whether fixed, contingent, accrued, absolute
or otherwise) incurred by PJAM or the Surviving Corporation resulting from,
arising out of, or in connection with (i) any inaccurate representation or
warranty or the breach or non-fulfillment of any representation or warranty of
the Company and the Shareholders, or any of them, contained in this Agreement,
except for those representations and warranties specifically identified in
Section 10.3, (ii) any breach or default in the performance by the Company or
the Shareholders, or any of them, of any covenant or agreement contained herein,
(iii) any tax deficiency or assessment of the Company relating to a period ended
on or prior to the Closing Date (regardless of any disclosures set forth in this
Agreement), except to the extent of any amounts accrued and reflected on the
Effective Date Balance Sheet for ad valorem property taxes or local taxes on
income or profits payable by the Company, or (iv) matter numbers 1, 4 (with
respect to claims by the customer referred to therein) and 29 described on
Schedule 3.24; and
(b) any and all costs and expenses incident to any of the foregoing,
including, but not limited to, reasonable attorneys' and accountants' fees.
10.3 Additional Indemnities of the Shareholders. Each Shareholder shall
defend and indemnify PJAM and the Surviving Corporation, and shall hold PJAM and
the Surviving Corporation harmless, from and against the following (collectively
the "Additional Indemnified Liabilities", individually an "Additional
Indemnified Liability"):
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(a) all liabilities, debts, obligations, losses, damages, deficiencies,
penalties, claims, actions, suits, proceedings, investigations, demands,
assessments, orders and judgments (whether fixed, contingent, accrued, absolute
or otherwise) incurred by PJAM or the Surviving Corporation resulting from,
arising out of, or in connection with any misrepresentation or breach of a
representation or warranty of such Shareholder contained in Section 2 (a
"Section 2 Indemnity") (which shall be the sole and exclusive obligation of the
Shareholder who has misrepresented or breached the representation or warranty
giving rise to the Section 2 Indemnity, and no other Shareholder); and
(b) any and all costs and expenses incident to any of the foregoing,
including, but not limited to, reasonable attorneys' and accountants' fees.
10.4 Indemnity by PJAM. PJAM shall defend and indemnify the Shareholders
and hold the Shareholders harmless from and against the following (collectively
"PJAM Indemnified Liabilities," individually a "PJAM Indemnified Liability"):
(a) all liabilities, debts, obligations, losses, damages, deficiencies,
penalties, claims, actions, suits, proceedings, investigations, demands,
assessments, orders and judgments (whether fixed, contingent, accrued, absolute
or otherwise) incurred by the Shareholders resulting from, arising out of, or in
connection with (i) any inaccurate representation or warranty or the breach of
any representation or warranty of PJAM contained in this Agreement, or (ii) any
breach or default in the performance by PJAM of any agreement, covenant or
undertaking which it is to perform under this Agreement; or (iii) if the
Effective Date Balance Sheet is prepared as of the close of business on May 25,
1997, as provided in Section 1.5(a), any and all tax deficiencies which may be
assessed or levied against the Shareholders with respect to taxable earnings of
the Company during the period May 26, 1997 through the Effective Date; and
(b) any and all costs and expenses incident to any of the foregoing,
including, but not limited to, reasonable attorneys' and accountants' fees.
Provided, PJAM's maximum indemnification liability hereunder shall not exceed
$2,500,000 in the aggregate.
10.5 Exclusive Remedy. From and after the Closing, the indemnification
provided for in this Section 10 shall be the exclusive remedy in any action
seeking damages or any other form of monetary relief brought by any party to
this Agreement (other than the Non-Competition Agreements) against another party
hereto or thereto, including any action brought by any such party for any
damages or other form of monetary relief that is predicated upon or otherwise
relates to, or arises out of, the transactions provided for in this Agreement,
but which is otherwise not a General Indemnified Liability or Additional
Indemnified Liability as such terms are defined herein ("Associated
Liabilities"); provided, that nothing herein shall be construed to limit the
right of a party, in a proper case, to seek injunctive or other equitable relief
for a breach of this Agreement.
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10.6 Limitations on the Shareholders' Indemnification Obligations.
(a) For the General Indemnified Liabilities and Associated Liabilities,
PJAM and the Surviving Corporation shall look solely to the Escrow Account (as
defined in the Escrow Agreement) against the Shareholders as their sole source
for payment and discharge of the General Indemnified Liabilities and Associated
Liabilities of such Shareholders, and shall otherwise have no right to hold such
Shareholders personally liable for such General Indemnified Liabilities or
Associated Liabilities. The parties hereto hereby acknowledge and agree that,
except for the Additional Indemnified Liabilities, all claims for
indemnification under this Agreement or any other claims whatsoever made against
the Shareholders arising out of, resulting from, or connected with their
ownership of shares of capital stock of the Company, this Agreement (except for
the Non-Competition Agreements), or the transactions contemplated hereby,
including, without limitation, the Associated Liabilities, shall be subject to
the amounts held in the Escrow Account. Notwithstanding anything in this
Section 10.6(a) to the contrary, no Shareholder shall be liable for any General
Indemnified Liabilities and Associated Liabilities in an amount which exceeds
such Shareholder's Proportionate Share (as described on Exhibit B) of such
liabilities.
(b) For the Additional Indemnified Liabilities, PJAM and the Surviving
Corporation may look to PJAM Shares deposited in Escrow Account by a particular
Shareholder for payment and discharge of the Additional Indemnified Liabilities
of such Shareholder, but may also look to each breaching Shareholder personally
for payment and discharge of such Additional Indemnified Liabilities.
(c) For purposes of this Section 10.6, the Shareholders may satisfy an
indemnification obligation through payment of cash and PJAM Shares, or any
combination thereof. For purposes of this Section 10.6, any PJAM Shares used to
satisfy an indemnification obligation of the Shareholders shall be valued at
$16.50.
(d) No Shareholder shall be obligated to indemnify PJAM or the Surviving
Corporation for any General Indemnified Liabilities and Associated Liabilities
(but specifically excluding any Additional Indemnified Liabilities) until the
aggregate of all such General Indemnified Liabilities and Associated Liabilities
equals $25,000, after which the Shareholder shall indemnify PJAM and the
Surviving Corporation against all such liabilities in excess of $25,000, but
only to the limited extent of such Shareholder's interest in the Escrow Account,
as provided in Section 10.6(a), above.
(e) Notwithstanding anything to the contrary in this Section 10.6, a
Shareholder's maximum liability with respect to such Shareholder's
indemnification obligations contained in this Section 10.6 shall be the value of
the PJAM Shares received by such Shareholder in the Merger, valued as set forth
in Section 10.6(c) ("Indemnification Cap").
10.7 Claims Procedure. Any party (the "Indemnified Party") may assert a
claim (a "Claim") against the other party (the "Indemnifying Party") with
respect to any matter which it believes is subject to indemnification pursuant
to this Agreement by giving written notice (a "Claim Notice") to the
Indemnifying Party. The Claim Notice shall be given by the Indemnified Party
promptly,
-34-
but in no event later than 10 days before a responsive pleading is required to
be filed in a third party action or otherwise no later than 30 days, after (i)
it has knowledge of a Claim under this Agreement or (ii) the commencement of any
legal proceeding against such Indemnified Party, whichever occurs first. The
Claim Notice shall state the basis for the Claim and the dollar amount thereof
and shall be accompanied by any documents or information relevant thereto. The
party receiving the Claim Notice shall have 45 days (or such shorter period of
time as is reasonable when the Indemnified Party must respond to a pleading
filed by a third party or any other type of "Third Party Claim" (defined in
Section 10.8)) after receipt within which to pay the amount thereof to the
Indemnified Party or to discharge such liability, or otherwise to respond to the
Claim Notice (the "Response Period"). If the party does not pay the amount set
forth in the Claim, discharge such liability or respond to the Claim Notice
within the Response Period, the party bringing the Claim may institute
arbitration or litigation (as required by Section ) or, in the case of PJAM or
the Surviving Corporation, may assert its rights to indemnification pursuant to
the Indemnification Escrow Agreement. If the Indemnifying Party does not pay or
discharge the Indemnified Liability, but otherwise responds to the Claim Notice
within the Response Period, except for a Third Party Claim (defined in Section
10.8), the parties shall in good faith attempt to resolve the Claim short of
arbitration or litigation during the 15 days following the expiration of the
Response Period. If the parties are unable to resolve the dispute within such 15
day period, then and only then may the party bringing the Claim institute
arbitration or litigation or, in the case of PJAM or the Surviving Corporation,
assert its rights to indemnification pursuant to the Indemnification Escrow
Agreement.
10.8 Defense of Third Party Claim. If the Indemnifying Party responds to a
Claim that is made by a third party ("Third Party Claim") within the Response
Period, the Indemnifying Party shall have the right to assume, at such party's
expense, the defense of any Third Party Claim and to control the Third Party
Claim and any settlement thereof if the Indemnifying Party acknowledges in
writing that the Third Party Claim constitutes an enforceable liability for
which such party is obligated to indemnify the Indemnified Party.
Notwithstanding the foregoing, the assumption and control of the defense of any
Third Party Claim involving a General Indemnified Liability shall be dependent
upon the amount of the Claim being less than the sums then remaining in the
Escrow Account applicable thereto, and, the assumption and control of the
defense of any Third Party Claim involving an Additional Indemnified Liability
is dependent upon the amount of such Claim, when aggregated with all prior
Additional Indemnified Liabilities and General Indemnified Liabilities, being
less than the Indemnification Cap applicable to the Indemnifying Party. If the
Indemnifying Party is not entitled to assume and control the defense of the
Third Party Claim, the Indemnifying Party, at its expense, may participate in
the defense of the Third Party Claim if it has an economic stake in the Third
Party Claim. The Indemnified Party, at such party's expense, may assume or
participate in the defense of any Third Party Claim which may have a material
impact on its business or the business relationship between the Indemnified
Party and one or more of its business customers or associates; provided that if
the Indemnified Party assumes the defense in such circumstances, the
Indemnifying Party will not be bound by any determination of the proceeding so
defended or any compromise or settlement effected without its consent (which
shall not be unreasonably withheld). The party that defends any Third Party
Claim, shall use its best efforts to defend same or to effect a satisfactory
settlement thereof, and shall provide the other party all information and copies
of all pleadings and other documents and correspondence relating
-35-
to its defense or attempts to effect a settlement thereof. The Indemnifying
Party shall not, in the defense or settlement of any Third Party Claim, consent
to any injunctive or other equitable relief or consent to or enter into any
order, judgment or settlement with respect thereto, without the prior written
consent of the other party hereto, such consent not to be unreasonably withheld;
provided, however, if such consent to the settlement is withheld by the other
party, then the Indemnifying Party shall thereafter have no further obligation
to defend the Third Party Claim and the Indemnifying Party's obligation for the
Indemnified Liability which results from such Third Party Claim shall be limited
to the amount proposed by the Indemnifying Party in the settlement offer. If an
Indemnifying Party has the right to assume and defend any Third Party Claim
under this Section 10.8, but shall fail to assume the defense of such Third
Party Claim, the Indemnified Party may in its sole discretion defend, settle or
compromise such Third Party Claim, without prejudice to its right to
indemnification by the Indemnifying Party hereunder. The parties hereto agree to
cooperate fully with each other in connection with the defense, negotiation or
settlement of any Third Party Claim in order to minimize the indemnified
liability associated therewith and to preserve the Parties' respective goodwill
and business relationships. The Indemnifying Party shall not, in the defense of
such Third Party Claim, consent to entry of any judgment (except with the prior
written consent of the Indemnified Party) or enter into any settlement (except
with the prior written consent of the Indemnified Party) which does not include
as an unconditional term thereof the giving by all claimants therein of a full
and complete release from all liability in respect of such Third Party Claim to
the Indemnified Party. Notwithstanding anything in Section 10.7or this Section
10.8, or any other provision of this Agreement to the contrary, the fees, costs
and expenses related to any claim for indemnification hereunder, including,
without limitation, reasonable attorneys' and accountants' fees, shall be paid
by PJAM or the Surviving Corporation if it is determined by the parties that
PJAM or the Surviving Corporation, as the case may be, is not entitled to
indemnification or PJAM or the Surviving Corporation shall be unsuccessful in
any action, suit or proceeding pursuant to Section 10on the merits of their
claim for indemnification.
10.9 Arbitration. Any controversy or claim arising out of or relating to
this Agreement (including those relating to any Associated Liabilities) between
any of the parties hereto shall be determined by means of arbitration before the
American Arbitration Association in Louisville, Kentucky. All claims for
arbitration must be submitted to arbitration within 45 days after the expiration
of the Response Period, but in no event sooner than 15 days after the Response
Period if the Indemnifying Party has responded to the Claim within the Response
Period. The rules of the American Arbitration Association, as the same may be
amended from time to time, shall be applicable in the arbitration. Any decision
or award of the arbitrator shall be final and binding upon the parties.
Judgment upon the decision or award rendered by the arbitrator may be entered in
any state or federal court having jurisdiction, or application may be made to
such state or federal court for a judicial acceptance of the decision, award or
any order of enforcement, as the case may be.
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11. Miscellaneous Provisions.
11.1 Expenses. Except as otherwise expressly provided in this
Agreement:
(a) except as provided below, the Shareholders shall bear expenses
incurred by them in connection with the preparation, execution, and performance
of this Agreement;
(b) the Company shall bear those expenses reasonably related to
its normal day-to-day operation, except that PJAM shall pay or reimburse the
Company for one-half of the total accounting fees incurred in connection with
the preparation of the 1996 Financials and the Company shall pay the fees and
charges of counsel for the Shareholders (which, if not paid by the Company prior
to the Effective Date, shall be reflected on the Effective Date Balance Sheet);
and
(c) PJAM shall bear all expenses (including its attorneys' and
accountants' fees) incurred by it in connection with the preparation, execution,
and performance of this Agreement.
11.2 Shareholders' and Company's Knowledge Defined. For the purposes of
this Agreement, the term "to the knowledge of the Company and the Shareholders"
or, "to the Company's and Shareholders' knowledge," and similar phrases shall
mean the knowledge of each of the Shareholders, all officers and directors of
the Company and Xxxxx Xxxx (collectively the "Managers"). In determining
Shareholders' and Managers' knowledge, such persons shall be deemed to have
exercised reasonable care in the performance of their duties for the Company and
in the disclosure of information to PJAM in connection with the negotiation,
execution and delivery of this Agreement and the consummation of the transaction
as described in this Agreement.
11.3 Notice. All notices, requests, demands and other communications
required or permitted to be given or made under this Agreement shall be in
writing and shall be deemed delivered on (a) the date of personal delivery or
facsimile transmission, (b) the first business day after the date of delivery to
a nationally recognized overnight courier service, or (c) the third business day
after the date of deposit in the United States mail, postage prepaid, by
registered or certified mail, return receipt requested in each case, addressed
as follows, or to such other address, person or entity as either party shall
designate by notice to the other in accordance herewith:
If to PJAM: PJ America, Inc.
0000 Xxxxxxx Xxxx
Xxxxxxxxxx, XX 00000
Attn: D. Xxxx Xxxxxxx,
Chief Financial Officer
FAX: (000) 000-0000
With copy to: Xxxxxxx X. Xxxxx, Esq.
Xxxxxxxxxx Xxxx & XxXxxxxx, pllc
0000 Xxxxxxxx Xxxx Xxxxx
Xxxxxxxxxx, Xxxxxxxx 00000-0000
FAX: (000) 000-0000
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If to the Company or Xxxxx X. Xxxxxxxx
the Shareholders: 0000 Xxxxxxxx Xxxx
Xxxxxxxxxxxx, Xxxxxxx 00000
FAX: (000) 000-0000
With copy to: Xxxx X. Xxx, Esq.
Xxxxxx & Xxxxxxxxx
0000 Xxxxxxxxx Xxxx Xxxxxxxx
Xxxxxxxxxxxx, Xxxxxxx 00000
FAX: (000) 000-0000
11.4 Exhibits; Entire Agreement. All Exhibits and Schedules to this
Agreement shall be deemed to be incorporated herein by reference and made a part
hereof as if set out in full at the place where first mentioned. As used herein
the term "Agreement" shall mean this Agreement and Plan of Merger and the
Exhibits and Schedules hereto. This Agreement embodies the entire agreement and
understanding of the parties hereto regarding its subject matter and supersedes
all prior agreements, correspondence, arrangements and understandings relating
to the subject matter hereof. No representation, promise, inducement or
statement of intention has been made by any party which has not been embodied in
this Agreement.
11.5 Amendment; Waiver. This Agreement may be amended, modified,
superseded, or canceled only by a written instrument signed by all of the
parties hereto, and any of the terms, provisions, and conditions hereof may be
waived, only by a written instrument signed by the waiving party. Failure of any
party at any time or times to require performance of any provision hereof shall
not be considered to be a waiver of any succeeding breach of such provision by
any party.
11.6 Binding Effect; Assignment. All the terms, provisions and
conditions of this Agreement shall be binding upon and shall inure to the
benefit of and be enforceable by the parties hereto and their respective heirs,
legal representatives, successors and assigns, provided, however, that this
Agreement shall not be assigned by PJAM or Acquisition Subsidiary without the
prior written consent of the Shareholders.
11.7 Captions. The captions in this Agreement are included for purposes
of convenience only and shall not be considered a part of the Agreement in
construing or interpreting any provision hereof.
11.8 Severability of Provisions. If any provision of this Agreement or
the application thereof to any person or circumstance shall to any extent be
held in any proceeding to be invalid or unenforceable, the remainder of this
Agreement, or the application of such provision to persons or circumstances
other than those to which it was held to be invalid or unenforceable, shall not
be affected thereby, and shall be valid and be enforceable to the fullest extent
permitted by law, but only if and to the extent such enforcement would not
materially and adversely frustrate the parties' essential objectives as
expressed herein.
-38-
11.9 Confidentiality.
(a) The parties and their respective agents and employees shall
hold and keep confidential all information which is proprietary in nature and
non-public or confidential, in whole or in part (the "Information") which any of
them may receive from the other party concerning the other party, including, but
not limited to, (1) any and all marketing techniques and arrangements, mailing
lists, purchasing information, pricing policies, quoting procedures, financial
information, customer and prospect names and requirements, employee, customer,
supplier and distributor data, and (2) any and all concepts and ideas including,
without limitation, techniques and "know-how" (whether patentable or protected
by copyright laws of the United States).
(b) Failure to xxxx any of the Information as non-public,
proprietary or confidential information shall not affect its status as part of
the Information under the terms of this Agreement.
(c) None of the parties nor their respective agents or employees
shall, without the prior consent of the other party, disclose or use any such
Information, in whole or in part, except in connection with the performance of
the transactions described in this Agreement.
(d) Unless otherwise required by law, each of the parties agrees
that neither of them shall disclose any Information acquired as a result of this
Agreement, to any person or entity, other than its respective counsel and other
representatives, and such other third parties, such as bankers and lessors, with
whom it must communicate to consummate the transactions described by this
Agreement.
(e) PJAM's obligation of confidence with respect to any
Information relating to the Company shall cease upon consummation of the
transactions described herein. If the parties do not consummate the transactions
described herein, each party shall promptly upon termination of this Agreement
redeliver to each other all copies, notes, compilations, extracts and other
records or written material relating to the Information.
11.10 Governing Law. This Agreement shall be governed by, and shall be
construed and enforced in accordance with, the laws of the State of Delaware.
11.11 Publicity; No Disclosure. Before the Closing, no party to this
Agreement shall make any press release or make any other public announcement
regarding the existence of this Agreement or the transactions described in this
Agreement, without prior consultation with and consent of the other parties to
this Agreement, except as may be required to comply with applicable securities
laws or exchange regulations.
11.12 Post-Closing Access. Following the Closing, PJAM shall cause the
Surviving Corporation to provide each of the Shareholders reasonable access to
the books and records of the Company related to periods prior to Closing for
purposes of preparing such Shareholder's federal, state and local income tax
returns and for such other purposes as may be reasonably requested by such
Shareholder.
-39-
11.13 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
11.14 Waiver of Conflict. PJAM, PJ Acquisition Subsidiary, and the
Company hereby consent to the representation by Xxxxxx & Xxxxxxxxx of the
Shareholders, the Shareholders' representative, or any of the Tennysons,
individually or collectively in any future matter adverse to any or all of PJAM,
the Company or the surviving corporation. PJAM, PJ Acquisition Subsidiary, the
Company and the Surviving Corporation shall not seek to protect as privileged
and prevent from disclosure to any of such Shareholders any communication
provided to Xxxxxx & Xxxxxxxxx in connection with the negotiation and
consummation of the transactions contemplated in this Agreement and shall not
claim or assert that any attorney client privilege to which any such Shareholder
may be entitled was waived by virtue of any representation of the Company by
Xxxxxx & Xxxxxxxxx or otherwise in connection with the Agreement.
In Witness Whereof, the parties have entered into this Agreement as of the
date first
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written above.
PJ AMERICA, INC. ________________________________________
XXXX XXXXXXXXX
By:_______________________________
Title:____________________________
("PJAM")
PJ ACQUISITION SUBSIDIARY, INC. ________________________________________
XXXXXXX XXXXXXXXX
By:_______________________________
Title:____________________________
("Acquisition Subsidiary")
OHIO PIZZA DELIVERY CO. ________________________________________
XXX XXXXXXX
By:_______________________________
Title:____________________________ ("Shareholders")
("Company")
__________________________________
XXXXX X. XXXXXXXX
__________________________________
XXXXX X. XXXXXXXX
__________________________________
XXXXXX X. XXXXXXXX
__________________________________
XXXX XXX XXXXXXXX
-41-
EXHIBIT A
---------
SHAREHOLDER ESCROWED SHARES
----------- ---------------
Promotion Title: "Help Your Papa Help Our Children"
Promotion Description:
We have chosen the Children's Hospital as our local charity. Several times
throughout the year we implement a Children's Hospital Pizza Week. We dedicate
the back of our ADVO to promote these specials and the needs of the hospital. We
also print a few additional copies to use as boxtoppers and to distribute
throughout the hospital to generate sales.
This has developed into a loyal, mutual relationship between Papa John's
and the Children's Hospital. The sales are easily tracked from the weekly coupon
report. We donate 20% from the sales generated by these coupons.
Sales results/benefits:
This positions Papa John's as a generous and compassionate business in the
community. This allows us to donate over $3,500 to the hospital on behalf of our
customers. The hospital is so grateful for our support that it mentions us
regularly in their monthly publications, allows us to be on the air during the
radio-thon, and allows us four positions for uniformed employees on the phones
during the television telethon broadcast. They also invite us to make a check
presentation on the air live during the televised telethon.
EXHIBIT B
Ownership
Company Shares Proportionate Share
Shareholder Owned of PJAM Shares
=====================================================================
Xxxxx X. Xxxxxxxx
Xxxx Xxx Xxxxxxxx,
JTWROS, dated April 30, 1992 40 40%
Xxxxx X. Xxxxxxxx
Xxxxxx X. Xxxxxxxx,
JTWROS, dated April 1, 1997 40 40%
Xxxx X. Xxxxxxxxx 12.5 12.5%
Xxxxxxx X. Xxxxxxxxx 5 5%
J. Xxxxxx Xxxxxxx 2.5 2.5%
EXHIBIT C
---------
----------------------------------------------------
ESCROW AGREEMENT
----------------------------------------------------
June 5, 1997
TABLE OF CONTENTS
Section Page
1. Definitions.................................................................1
1.1 Escrowed Shares........................................................1
1.2 Valuation Price........................................................2
1.3 Proportionate Share....................................................2
1.4 Shareholders' Representative...........................................2
2. Pledge; Deposits in Escrow..................................................2
2.1 Pledge.................................................................2
2.2 Deposits in Escrow.....................................................2
2.3 Purpose of Escrow......................................................2
3. Disposition of Escrowed Shares..............................................2
3.1 Claims Procedure.......................................................2
3.2 Shareholder Response...................................................3
3.3 Dispute Notice; Disposition Upon Receipt of a Dispute Notice...........3
3.4 Fractional Shares......................................................4
3.5 Designation of Shareholders' Shares to Claims..........................4
3.6 Disposition of Balance.................................................5
3.7 Termination of Escrow Accounts; Termination of Agreement...............5
4. Dividends and Voting Rights With Respect to Escrowed Shares.................5
5. Release or Waiver of Claims.................................................5
6. Change in Corporate Structure...............................................6
7. Liability of Escrow Agent...................................................6
7.1 Duties of the Escrow Agent.............................................6
7.2 Reliance by the Escrow Agent...........................................6
7.3 Consultation with Counsel..............................................6
7.4 PJ Indemnity...........................................................6
7.5 Compensation of Escrow Agent...........................................6
7.6 Notices................................................................7
7.7 Entire Agreement.......................................................7
7.8 Binding Agreement......................................................7
7.9 Nonassignable..........................................................8
7.10 Counterparts..........................................................8
7.11 Governing Law.........................................................8
-i-
ESCROW AGREEMENT
This Escrow Agreement is made and entered into this 5th day of June, 1997, by
and among PJ America, Inc., a Delaware Corporation ("PJ"), Ohio Pizza Delivery
Co., an Ohio corporation ("OPD"), Xxxxx X. Xxxxxxxx, Xxxx Xxx Xxxxxxxx, Xxxxx X.
Xxxxxxxx, Xxxxxx X. Xxxxxxxx (each an Indiana resident), Xxxx Xxxxxxxxx, Xxxxxxx
Xxxxxxxxx and Xxx Xxxxxxx (each a Kentucky resident), who formerly were all the
shareholders of OPD (each a "Shareholder" and collectively, the "Shareholders"),
and [PNC Bank] (the "Escrow Agent").
Recitals:
A. Pursuant to the terms of that certain Agreement and Plan of Merger, dated
May 30, 1997, by and among PJ, PJAM Acquisition Subsidiary, Inc., an Ohio
corporation and wholly-owned subsidiary of PJ ("Acquisition Subsidiary"), OPD
and the Shareholders (the "Merger Agreement"), on __________, 1997, Acquisition
Subsidiary was merged into OPD (the "Merger").
B. Each of the Shareholders has agreed to provide certain limited indemnities
(the "Indemnities") to PJ and OPD (as the surviving corporation in the Merger),
pursuant to the terms of Section 10 of the Merger Agreement.
C. Under the terms of the Merger Agreement, each of the Shareholders agreed to
pledge fifteen percent (15%) of the shares of PJ's common stock, $0.01 par value
per share ("XX Xxxxx"), which such Shareholder received as a result of the
Merger, and to deposit the pledged XX Xxxxx in an escrow account under the terms
of this Agreement to secure the performance of the Indemnities.
D. The Escrow Agent has agreed to hold the shares of XX Xxxxx so pledged, and
to disburse the shares deposited in the escrow account, pursuant to the terms of
this Agreement.
Agreement:
Now, Therefore, the parties hereby agree as follows:
1. Definitions. All capitalized terms, to the extent not otherwise defined
herein, shall have the same meaning herein as in the Merger Agreement.
Notwithstanding the foregoing, the terms set forth below shall have the meanings
set forth below:
1.1 Escrowed Shares. The term "Escrowed Shares" shall mean the shares of
XX Xxxxx deposited by the Shareholders with the Escrow Agent pursuant to this
Agreement.
1.2 Valuation Price. The term "Valuation Price" shall mean $16.50 per
share of XX Xxxxx.
1.3 Proportionate Share. For purposes of this Agreement, "Proportionate
Share" shall mean the proportion which the number of Escrowed Shares deposited
by a Shareholder on the date hereof bears to the total number of Escrowed Shares
deposited by all Shareholders on the date hereof.
1.4 Shareholders' Representative. For purposes hereof, the "Shareholders'
Representative" of the Shareholder shall be Xxxxx Xxxxxxxx, until notice shall
be delivered to the Escrow Agent by either Xxxxx Xxxxxxxx or the Shareholders
other than Xxxxx Xxxxxxxx
2. Pledge; Deposits in Escrow.
2.1 Pledge. As security to PJ for the obligations of the Shareholders to
perform the Indemnities, each of the Shareholders hereby pledges to PJ and OPD,
and gives PJ a security interest in, subject in each case to the Shareholder's
Proportionate Share of the Indemnities, the shares of XX Xxxxx set forth on
Exhibit A attached hereto opposite the name of the Shareholder, together with
all rights of the Shareholder with respect to such Escrowed Shares pursuant to
this Agreement.
2.2 Deposits in Escrow. On the date hereof, each of the Shareholders have
deposited with the Escrow Agent certificates evidencing the Escrowed Shares
registered in such Shareholder's name (as described on Exhibit A) on PJ's stock
transfer records, together with stock powers with respect to such Escrowed
Shares duly endorsed in blank, to be held by the Escrow Agent subject to the
terms and conditions of this Agreement. The Escrow Agent hereby acknowledges
receipt of such certificates and stock powers.
2.3 Purpose of Escrow. The parties agree that the Escrowed Shares have
been deposited hereunder solely for the purpose of providing a fund of property
to secure the full and complete performance of the Indemnities by the
Shareholders in accordance with the terms of the Merger Agreement.
The Escrow Agent hereby agrees that it will hold the Escrowed Shares in a
separate account ( the "Escrow Account") for the purposes set forth in this
Agreement. Escrow Agent further agrees that it will have no authority to, and
will not, sell, assign or otherwise transfer, dispose of, or encumber the
Escrowed Shares, or any part thereof, except as provided in this Agreement.
3. Disposition of Escrowed Shares.
3.1 Claims Procedure. PJ may, at any time or from time to time, assert a
claim ("Claim") against the Escrow Account established hereunder, with respect
to any matter which it believes is subject to the Indemnities secured thereby,
by giving notice ("Claims Notice") thereof to the Shareholders' Representative
with a copy to the Escrow Agent; provided, that if the Claim relates to a
Section Indemnity of a particular Shareholder, the Claim Notice Shall be given
solely to the Escrow Agent and the Shareholder from whom the Section Indemnity
is being sought (the "Section Indemnitor"). The Claim Notice shall be given by
PJ, but in no event later than 10 days before a responsive pleading is required
to be filed in a third party action or otherwise no
-2-
later than 30 days, after (a) it has any knowledge of any Claim under the
Indemnities or (b) the commencement of any legal proceedings against PJ or OPD,
whichever occurs first. The Claim Notice shall state the basis for the Claim,
whether the Claim relates to a General Indemnified Liability, an Associated
Liability, or an Additional Indemnified Liability, and the dollar amount
thereof, and shall be accompanied by any documents or information relevant
thereto. In addition, the Claim Notice shall state the number of Escrowed Shares
which are equal in value, valued at the Valuation Price, to the amount of the
Claim.
3.2 Shareholder Response. If the Shareholders' Representative (or a
Section Indemnitor) received a Claim Notice, the Shareholders' Representative
(or the Section Indemnitor) may respond to such Claim Notice, with a copy to the
Escrow Agent, within 45 days (or such shorter period of time as is reasonable
when PJ or OPD must respond to a pleading filed by a third party or to a Third
Party Claim) after receipt of a Claim Notice (hereinafter referred to as the
"Response Period") within which to instruct the Escrow Agent to pay the amount
of the Claim or to otherwise dispute the Claim. If the Shareholder's
Representative (or the Section Indemnitor) elects to pay the Claim, then he or
she shall (a) instruct the Escrow Agent to pay the Claim and shall further
instruct the Escrow Agent to transfer and deliver to PJ the Escrowed Shares
specified in the Claim Notice (not to exceed the number of shares as shall then
remain in escrow), or (b) deliver to Escrow Agent cash in the amount of the
Claim, in which event Escrow Agent shall deliver such cash to PJ and release to
the Shareholders (or Section 2 Indemnitor) Escrowed Shares in the amount of the
Claim valued at the Valuation Price. If the Shareholders' Representative (or
Section Indemnitor) does not so respond to the Claim Notice to dispute the Claim
Notice within the Response Period, then the Escrow Agent, within five business
days after the end of the Response Period, shall deliver to XX Xxxx that number
of Escrowed Shares, valued at the Valuation Price, as shall equal the amount of
the Claim.
3.3 Dispute Notice; Disposition Upon Receipt of a Dispute Notice.
(a) At any time within the Response Period, the Shareholders'
Representative (or the Section Indemnitor) may notify PJ, with a copy to the
Escrow Agent, that the Claim referred to in the Claim Notice is disputed by the
Shareholders' Representative (or the Section Indemnitor), or that pursuant to
the terms of the Merger Agreement that the Shareholders' Representative (or the
Section Indemnitor) is defending the basis for the Claim (any such notice is
hereinafter referred to as a "Dispute Notice").
(b) Upon the receipt of a Dispute Notice, the Escrow Agent (i) shall
distribute to PJ Escrowed Shares valued at the Valuation Price or shall equal
that portion, if any, of the Claim which is not disputed by the Shareholders'
Representative (or Section Indemnitor), and (ii) shall designate as subject to
the Claim those Escrowed Shares, based upon the Valuation Price, equal to that
portion of the Claim which is disputed by the Shareholder (the securities so set
aside being sometimes hereinafter referred to as the "Designated Escrowed
Assets"). The Escrow Agent shall not dispose of any portion of the Designated
Escrowed Assets as shall be subject to a Claim pursuant to any provision of this
Section 3.3(b) until the occurrence of one of the following events:
-3-
(1) Escrow Agent shall have been directed to distribute such
Designated Escrowed Assets in accordance with the joint instructions of PJ
and the Shareholders' Representative (or the Section 2 Indemnitor); or
(2) The Escrow Agent shall have been requested to distribute
such Designated Escrowed Assets subject to Claim to PJ in accordance with
the instructions of the Shareholders' Representative (or Section 2
Indemnitor); or
(3) The Escrow Agent shall have received a certified copy of a
final decision of an arbitrator or a court of competent jurisdiction with
respect to the Claim or Claims set forth in the Claim Notice with respect
to which a Dispute Notice has been received, in which case the Escrow Agent
shall dispose of such Designated Escrowed Assets subject to Claim (or such
additional Escrowed Shares as shall be included in such decision) in
accordance with such final decision. For this purpose, a final decision
shall mean the final decision from an arbitrator or from any court of
competent jurisdiction from which no appeal may be taken, whether because
of lapsed time or otherwise.
3.4 Fractional Shares. Should any fractional share result in computing
the Escrowed Shares subject to the Claim, the number of Escrowed Shares subject
to Claim shall be rounded upward or downward to the nearest whole number.
3.5 Designation of Shareholders' Shares to Claims. With respect to any
transfer or designation of Escrowed Shares to PJ in respect of a Claim pursuant
to Section 3, the Escrow Agent shall determine the amount of Escrowed Shares (or
net proceeds therefrom) of each Shareholder to be included in such transfer or
designation as follows:
(a) For Indemnities which are General Indemnified Liabilities or
Associated Liabilities, Escrowed Shares (or net proceeds therefrom, as
applicable) of each Shareholder so transferred or designated shall equal such
Shareholder's Proportionate Share thereof; and
(b) For Indemnities which are Section 2 Indemnities, the Escrowed
Shares (or net proceeds therefrom, as applicable) of each Section 2 Indemnitor
so transferred or designated shall be solely those of such Section 2 Indemnitor,
and not those of any other Shareholders, it being expressly agreed that the
Section 2 Indemnitor's Proportionate Share thereof shall be 100%.
Nothing in this Agreement shall impose any liability or obligation on a
Shareholder for any Claim to the extent of that portion of the Claim which is in
excess of the sums held in the Escrow Account established to secure such Claim.
3.6 Disposition of Balance. On ________________, 1998, Escrow Agent shall
deliver to each Shareholder or to such Shareholder's personal representative,
all of the Escrowed Shares remaining in the Escrow Account deposited by such
Shareholder; provided, however, that if a Claim has been given on or before such
date, and the Claim has not been resolved prior to that date, then the Escrowed
Shares having a value (at the Valuation Price) equal to the amount of the
-4-
Claim shall continue to be held by the Escrow Agent and shall not be delivered
by the Escrow Agent until the Claim has been finally settled pursuant to the
Agreement.
3.7 Termination of Escrow Accounts; Termination of Agreement. Upon the
delivery by the Escrow Agent of all of the Escrowed Shares (and any proceeds
therefrom) to either the Shareholders or PJ, the Escrow Account and the escrow
created hereby with respect to the obligations secured thereby, shall terminate.
Upon the final termination of the Escrow Account pursuant to this Section 3.7,
this Agreement shall terminate.
4. Dividends and Voting Rights With Respect to Escrowed Shares. So long as
any Escrowed Shares are held by the Escrow Agent hereunder:
(a) Each of the Shareholders shall be entitled to exercise any and
all voting and consequential rights and powers accruing to an owner of the
Escrowed Shares or any part thereof for any purposes not inconsistent with the
terms of this Agreement; provided, however, that each of the Shareholders shall
give the Escrow Agent at least five (5) days prior written notice of the manner
in which such Shareholder intends to exercise any such right or power.
(b) The Shareholders shall be entitled to receive and retain any and
all non-liquidating cash dividends paid in respect of the Escrowed Shares. All
distributions payable in XX xxxxx shall be retained by the Escrow Agent and
shall only be released at the time the Escrowed Shares to which such
distributions relate are released from escrow, and shall be distributed to the
party receiving such Escrowed Shares.
(c) The Escrow Agent shall execute and deliver to the Shareholders,
or cause to be executed and delivered to the Shareholders, all such proxies,
powers of attorneys, and other instruments for the purpose of enabling the
Shareholders to exercise the voting and consequential rights and powers which
the Shareholders are entitled to exercise pursuant to Section 4.0(a), and to
receive the non-liquidating dividends and other distributions to which the
Shareholder is entitled pursuant to Section 4.(b) hereof.
5. Release or Waiver of Claims. The acceptance by PJ of any Escrowed Shares
or (or proceeds therefrom, as applicable) from the Escrow Agent in accordance
with the terms of this Agreement shall constitute a full release of PJ's rights
with respect to such Claims if and to the extent such Claims relate to a General
Indemnified Liability or an Associated Liability and, with respect to any
Additional Indemnified Liabilities, shall constitute a release of PJ or OPD's
rights with respect to such Claim only to the extent of the sum of the Valuation
Price of any Escrowed Shares so received by PJ plus the cash proceeds so
received by PJ. Nothing herein contained, nor any act or failure to act by PJ
or OPD (as the Surviving Corporation), shall operate or be construed as a waiver
of any rights of PJ or OPD under the Merger Agreement or any other agreement
executed in connection therewith, nor shall anything herein contained prohibit
PJ or OPD (as the Surviving Corporation) from pursuing any specific equitable
remedies which it may have reserved to itself under the Merger Agreement.
-5-
6. Change in Corporate Structure. If there shall occur during the term of
this Agreement any reorganization, stock dividend, stock split or other change
in corporate structure or capitalization affecting the XX Xxxxx, an appropriate
adjustment shall be made to the number of Escrowed Shares to be deposited and
released and in the computation of the Valuation Price.
7. Liability of Escrow Agent.
7.1 Duties of the Escrow Agent. The Escrow Agent is not a party to, and
shall not be bound by, any contract between PJ or the Shareholders. The Escrow
Agent shall act as a depository only and shall not be required to take notice of
any default, pledge or warranty under any contract between PJ and the
Shareholders. The duties and obligations of the Escrow Agent hereunder shall be
determined solely by the express provisions of this Agreement. The Escrow Agent
shall be liable only for its own negligence and misconduct and not the
negligence or misconduct of any other person.
7.2 Reliance by the Escrow Agent. The Escrow Agent is not responsible in
any manner whatever for the sufficiency, correctness, genuineness or validity of
any instrument, nor for the identity, authority or right of any person executing
it. The Escrow Agent may act in reliance upon any writing, instrument or
signature which it, in good faith, believes to be genuine, may assume the
validity and accuracy of any statement or assertion contained in such writing or
instrument, and may assume that any person purporting to give any writing,
notice or instrument in connection with the provisions hereof has been duly
authorized to do so.
7.3 Consultation with Counsel. The Escrow Agent may consult legal counsel
in the event of a dispute as to its duties hereunder, and shall incur no
liability, and shall be fully protected, in acting in accordance with the
opinion of counsel.
7.4 PJ Indemnity. PJ hereby agrees to indemnify the Escrow Agent for, and
hold the Escrow Agent harmless from, all costs, damages, attorneys' fees,
liabilities and expenses which the Escrow Agent incurs by virtue of acting as
escrow agent hereunder, except such liability and expense as may result from its
gross negligence, bad faith or willful misconduct or neglect.
7.5 Compensation of Escrow Agent. PJ shall bear the Escrow Agent's fee
for the performance of services by the Escrow Agent hereunder and shall be
responsible for reimbursing the Escrow Agent for the reasonable costs and
expenses incurred by it in connection with the performance of such services. In
no event shall the Shareholders be required to pay any fees to the Escrow Agent.
7.6 Notices. All notices and other communications required or permitted
hereunder shall be sufficiently given if in writing and personally delivered
against a written receipt, if delivered to a reputable express messenger service
(such as Federal Express, UPS or DHL Courier) for overnight delivery, when sent
by confirmed telephone facsimile (fax) or sent by registered, express or
certified U.S. mail, with postage prepaid, addressed as follows:
-6-
If to PJ: PJ America, Inc.
0000 Xxxxxxx Xxxx
Xxxxxxxxxx, Xxxxxxx 00000
Attn: Xxxxxxx X. Xxxxxxxx, President
With Copy to: Xxxxxxxxxx Xxxx & XxXxxxxx PLLC
0000 Xxxxxxxx Xxxx Xxxxx
Xxxxxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxxx X. Xxxxx, Esq.
If to the Shareholders: Xxxxx Xxxxxxxx
0000 Xxxxxxxx Xxxx
Xxxxxxxxxxxx, Xxxxxxx 00000
FAX: (000) 000-0000
With Copy to: Xxxxxx & Xxxxxxxxx
0000 Xxxxxxxxx Xxxx Xxxxxxxx
Xxxxxxxxxxxx, Xxxxxxx 00000
Attn: Xxxx X. Xxx, Esq.
If to the Escrow Agent: ___________________
___________________
___________________
or to such other address or addresses as any of the parties to this Agreement
shall furnish to the others in writing. Notices shall be deemed given when
personally delivered, when delivered to an express messenger service, when
transmitted by confirmed fax or when deposited in the U.S. mail in accordance
with the foregoing provisions. However, the time period in which a response to
any such notice, demand or request must be given shall commence to run from the
date of personal delivery, the date of delivery by a reputable messenger
service, the date of confirmation of a fax, or the date on the return receipt,
as applicable.
7.7 Entire Agreement. This Agreement contains the entire agreement of the
parties hereto with respect to the subject matter hereof. No variations hereof
shall be binding upon any party unless set forth in a writing executed by all of
the parties hereto.
7.8 Binding Agreement. This Agreement shall be binding upon, and inure to
the benefit of, the parties hereto and their respective executors,
administrators, heirs, successors and assigns.
7.9 Nonassignable. Except for the pledge by the Shareholder of the
Escrowed Shares and Shareholder's rights under this Agreement provided for in
Section 2 hereof, the Shareholder may not sell, assign, transfer, pledge or
otherwise dispose of the Escrowed Shares or such Shareholder's rights under this
Agreement.
-7-
7.10 Counterparts. This Agreement may be executed in several
counterparts, all of which shall be deemed to be one and the same instrument.
7.11 Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Delaware.
In Witness Whereof, the parties have entered into this Agreement as of the
date first written above.
PJ America, Inc.
By:
-------------------------------
Title:
----------------------------
("PJ")
-----------------------------------
Xxxxx X. Xxxxxxxx
-----------------------------------
Xxxxx X. Xxxxxxxx
-----------------------------------
Xxxxxx X. Xxxxxxxx
-----------------------------------
Xxxx Xxx Xxxxxxxx
-----------------------------------
Xxxx Xxxxxxxxx
-----------------------------------
Xxxxxxx Xxxxxxxxx
-8-
-----------------------------------
Xxx Xxxxxxx
-----------------------------------
By:
-------------------------------
Title:
----------------------------
("Escrow Agent")
-9-
EXHIBIT D
---------
NONCOMPETITION AGREEMENT
This Noncompetition Agreement ("Agreement") is entered into on June 5,
1997, by and between [Name of Shareholder] ("Shareholder"), PJ America, Inc., a
Delaware corporation ("PJAM"), and Ohio Pizza Delivery Co., an Ohio corporation
("OPD").
Recitals:
A. Shareholder is a former shareholder in OPD.
B. Pursuant to the terms of that certain Agreement and Plan of Merger,
dated May 30, 1997 (the "Merger Agreement"), among PJAM, OPD, PJAM Acquisition
Subsidiary, Inc. ("Newco"), Shareholder and the other shareholders of OPD, on
the date hereof, Newco is being merged with and into OPD (the "Merger").
C. In the Merger, each share of common stock of OPD outstanding prior to
the Merger is being converted into shares of Common Stock of PJAM, as more
particularly described in the Merger Agreement.
D. In connection with the Merger, as provided in the Merger Agreement,
Shareholder agreed to enter into this Agreement to provide that Shareholder
will not engage in activities that are detrimental to or competitive with PJAM
or OPD following the Merger.
Agreement:
Now, Therefore, the parties hereby agree as follows:
1. Covenant Not-To-Compete. Shareholder hereby covenants and agrees
that for a period of two years from the date hereof, Shareholder will not,
within the "Territory" (as defined in Section 6.4), without the prior written
consent of PJAM:
(a) directly or indirectly enter into the employ of, render any service
to, or act in concert with, or on behalf of, any "Person" (as defined in Section
6.3) that owns, operates, manages, franchises or licenses any "Competitive
Business" (as defined in Section 6.2); or
(b) directly or indirectly engage in any such Competitive Business on
Shareholder's own account; or
(c) become interested in any such Competitive Business, directly or
indirectly, as an individual, partner, joint venturer, shareholder, director,
officer, principal, agent, employee, consultant, investor, representative,
creditor, licensor or transferor of any trademark, trade name, process, product
or marketing or other intangible, or in any other relationship or capacity;
provided, that the purchase of securities in Papa John's International, Inc. or
a publicly traded
security of any other corporation engaged in such business or service shall not
in itself be deemed violative of this Agreement so long as Shareholder does not
own, directly or indirectly, more than 2% of the securities of such other
corporation.
2. Confidentiality Covenant. Shareholder will not, at any time
hereafter, divulge, furnish or make accessible to any Person any know-how,
methods, systems or other confidential information or trade secrets with respect
to the business, assets, operations or financial affairs of OPD.
3. Nonsolicitation of Employees Covenant. Shareholder shall not, for a
period of two years from the date hereof, individually or on behalf of any other
Person, entice or induce, directly or indirectly, any employee of OPD or an
"Affiliate" (as defined in Section 6.1) of OPD to leave the employment of OPD or
an Affiliate of OPD to work with Shareholder or with any Person with whom
Shareholder is or becomes affiliated.
4. Reasonableness of Scope and Duration. Shareholder agrees that the
covenants and agreements contained herein are, taken as a whole, fair and
reasonable in their geographic scope and duration, and Shareholder will not
raise any issue of the reasonableness of the scope or duration of any such
covenants in any proceeding to enforce any such covenants.
5. Cumulative Remedies; Enforceability. Shareholder acknowledges that
PJAM and Newco have consummated the Merger Agreement in reliance, among other
things, upon the fulfillment by Shareholder of all of the covenants and
agreements of this Agreement. Shareholder understands and agrees that OPD and
PJAM may not be adequately compensated by damages for a breach by Shareholder of
any of the covenants and agreements contained herein, and that OPD and PJAM
shall, in addition to all other remedies, be entitled to injunctive relief and
specific performance. Shareholder hereby affirmatively waives the requirement
that PJAM or OPD post any bond, demonstrate the likelihood of irreparable damage
to PJAM or OPD or demonstrate that any actual damages will be suffered by PJAM
or OPD or any other entity seeking enforcement hereof as a result of
Shareholder's breach of any provision of this Agreement. The covenants and
agreements contained in this Agreement shall be construed as separate covenants
and agreements, and if any court shall finally determine that the restraints
provided for in any such covenants and agreements are too broad as to the area,
activity or time covered, said area, activity or time covered shall be reduced
to whatever extent the court deems reasonable, and such covenants and agreements
shall be enforced as to such reduced area, activity or time. Nothing herein
contained will be construed as prohibiting PJAM or OPD from pursuing any other
remedies available to it for such breach or threatened breach, including,
without limitation, the recovery of money damages, and it shall also be entitled
to the payment of any and all reasonable fees, disbursements, and other charges
of the attorneys and collection agents, court costs, and all other costs of
enforcement.
6. Definitions. The following terms, when used herein, shall have the
meanings set forth below:
-2-
6.1 Affiliate. Any Person controlled by, controlling or under common
control with such Person. For the purposes of this definition of Affiliate,
"control" of a Person means the power, direct or indirect, to direct or cause
the direction of the management and policies of such Person, whether by
ownership of securities, contract, law or otherwise; and the terms "controlling"
and "controlled" shall have meanings correlative to the foregoing.
6.2 Competitive Business. Any business that manufactures or sells
pizza, whether on a delivery, carry-out, dine-in, retail or wholesale basis.
6.3 Person. Any individual, corporation (including, without
limitation, any non-profit corporation), general or limited partnership, limited
liability partnership or company, joint venture, estate, trust, association,
unincorporated organization or other entity.
6.4 Territory. The Cleveland, Ohio DMA.
7. Miscellaneous.
7.1 Binding Effect. All of the terms, provisions and conditions of
this Agreement shall inure to the benefit of and be enforceable by PJAM, OPD and
their Affiliates and their respective successors and assigns.
7.2 Entire Agreement. This Agreement embodies the entire agreement and
understanding of the parties with respect to the subject matter herein
contained, and supersedes all prior agreements, correspondence, arrangements and
understandings relating to the subject matter hereof. No representation,
promise, inducement or statement of intention has been made by any party which
has not been embodied in this Agreement, and no party shall be bound by or be
liable for any alleged representation, promise, inducement or statement of
intention not so set forth. This Agreement may be amended, modified,
superseded, or canceled only by a written instrument signed by all of the
parties, and any of the terms, provisions, and conditions hereof may be waived,
only by a written instrument signed by the waiving party. Failure of any party
at any time or times to require performance of any provision hereof shall not be
considered to be a waiver of any succeeding breach of such provision by any
party.
7.3 Governing Law. This Agreement is executed and delivered in, and
shall be governed by, the laws of the State of Delaware without giving effect to
any conflict of law, rule or principle that might require the application of the
laws of another jurisdiction.
7.4 Headings. The headings in this Agreement are included for purposes
of convenience only and shall not be considered a part of this Agreement in
construing or interpreting any provision hereof.
7.5 Invalidity of Provisions; Severability. If any provision of this
Agreement or the application thereof to any Person or circumstance shall to any
extent be held in any proceeding to be invalid, illegal or unenforceable, the
remainder of this Agreement, or the application of such provision to Persons or
circumstances other than those to which it was held to be invalid, illegal
-3-
or unenforceable, shall not be affected thereby, and shall be valid, legal and
be enforceable to the fullest extent permitted by law, but only if and to the
extent such enforcement would not materially and adversely frustrate the
parties' essential objectives as expressed herein. The parties shall endeavor
in good faith negotiations to replace the invalid, illegal or unenforceable
provisions with valid provisions, the economic effect of which comes as close as
possible to that of the invalid, illegal or unenforceable provisions.
7.6 Notices.
(a) Giving of Notices. All notices, requests, consents, approvals,
waivers, demands and other communications hereunder (collectively,
"Notices") shall be deemed to have been given if in writing and (1)
personally delivered against a written receipt, or (2) sent by confirmed
telephonic facsimile, or (3) delivered to a reputable express messenger service
(such as Federal Express, DHL Courier and United Parcel Service) for overnight
delivery, addressed as follows (or to such other address as a party shall have
given Notice to the other):
If to Shareholder: _______________________________
_______________________________
_______________________________
Fax No: _______________________
With a copy to: Xxxx X. Xxx, Esq.
Xxxxxx & Xxxxxxxxx
0000 Xxxxxxxxx Xxxx Xxxxxxxx
Xxxxxxxxxxxx, Xxxxxxx 00000
Fax No: 317/000-0000
If to Newco: PJ America, Inc.
0000 Xxxxxxx Xxxx
Xxxxxxxxxx, Xxxxxxx 00000
Attention: D. Xxxx Xxxxxxx,
Chief Financial Officer
Fax No: 205/000-0000
With a copy to: Xxxxxxx X. Xxxxx, Esq.
Xxxxxxxxxx Xxxx & XxXxxxxx pllc
0000 Xxxxxxxx Xxxx Xxxxx
Xxxxxxxxxx, Xxxxxxxx 00000-0000
Fax No: 502/000-0000
(b) Time Notices Deemed Given. All Notices shall be effective upon
being properly personally delivered, or upon confirmation of a telephonic
facsimile, or upon the delivery to a reputable express messenger service. The
period in which a response to any such Notice must be given shall commence to
run from the date on the receipt of a personally delivered Notice, or the
-4-
date of confirmation of a telephonic facsimile or two days following the proper
delivery of the Notice to a reputable express messenger service, as the case may
be.
7.7 Time Periods. All time periods in this Agreement shall be computed
by excluding from such computation any time during which Shareholder is in
violation of any provision of this Agreement and any time during which there is
pending in any court of competent jurisdiction any action (including, without
limitation, any appeal from any final judgment) brought by any Person, whether
or not a party to this Agreement, in which action PJAM or OPD seeks to enforce
the agreements and covenants in this Agreement or in which any Person contests
the validity of such agreements and covenants or their enforceability or seeks
to avoid their performance or enforcement.
In Witness Whereof, the parties have entered into this Agreement as of the
date first written above.
------------------------
[Name of Shareholder]
("Shareholder")
PJ America, Inc.
By:_______________________
Title:____________________
("PJAM")
Ohio Pizza Delivery Co.
By:_______________________
Title:____________________
("OPD")
-5-
EXHIBIT E
---------
June 5, 1997
Board of Directors
Ohio Pizza Delivery Co.
Dear Directors:
Effective as of the date hereof, I hereby resign from all offices as an
officer, director and employee of Ohio Pizza Delivery Co. (the "Company").
Furthermore, for myself, my heirs, personal representatives, successors and
assigns, in consideration of the exchange of shares of common stock of the
Company for shares of common stock of PJ America, Inc. ("PJAM"), pursuant to the
terms of that certain Agreement and Plan of Merger, dated May 30, 1997 (the
"Agreement"), among PJAM, the Company, the undersigned and others, I hereby
release and forever discharge the Company and its officers, directors,
employees, affiliates, and their respective successors and assigns
(collectively, the "Released Parties"), from all claims, demands, damages,
liabilities, actions, causes of action, rights, agreements, promises, losses,
costs, expenses and controversies of every kind and description, matured or
unmatured, liquidated or unliquidated, contingent or otherwise, which I now
have, may now have, have had or may hereafter have against any of the Released
Parties; provided, nothing herein shall be construed to release PJ Acquisition
Subsidiary, Inc., the Surviving Corporation, or PJAM from any obligation under
the Agreement, any obligation expressly identified in the Agreement or
obligations to pay accrued compensation and benefits or to reimburse normal
business expenses incurred through the date hereof, or rights under COBRA.
Respectfully submitted,
[Name of Shareholder]