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EXHIBIT 2
April 29, 1997
River Associates, LLC / Monterey's Acquisition Corp.
000 Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxxxx, XX 00000
Ladies and Gentlemen:
Casa Ole Restaurants, Inc. ("Purchaser") is pleased to submit the
following proposal, which when accepted by you as set forth below, will
constitute our agreement ("Letter Agreement") with Monterey's Acquisition Corp.
("Company"), and River Associates, LLC and all other equity owners of the
Company (collectively, "Sellers"), the sole shareholders of the Company,
regarding the acquisition (the "Acquisition") by Purchaser of 100% of the
capital stock of the Company.
1. PURCHASE PRICE. The Acquisition will be structured as a purchase by
Purchaser of all the outstanding capital stock of the Company or, at the
option of Purchaser, a merger of the Company with a wholly owned
subsidiary of Purchaser. As part of such structure, Purchaser would
assume all liabilities of the Company and agree to refinance the
existing debt of the Company totaling $7,006,000 as of March 30, 1997
consisting of $2,356,000 of senior debt and $4,650,000 of subordinated
debt. Purchaser will assume the net working capital deficit incurred in
the ordinary course of business to the extent discussed in Item 2 below.
The aggregate consideration (the "Purchase Price") for the outstanding
capital stock of the Company will be $4 million in cash.
2. The Purchase Price will be subject to
(1) an adjustment based on the outstanding debt as of the closing
date and
(2) an adjustment based on the working capital deficit as of the
closing date.
To the extent the debt at closing is greater or less than the sum of
$7,006,000, the Purchase Price will be adjusted upward or downward
accordingly. To the extent the working capital deficit is greater or
less than $750,000 plus (i) management fees payable to River Associates,
LLC immediately prior to closing (approximately $300,000), and plus (ii)
expenditures and accruals related to the opening of the
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Baytown store not included in the above-referenced working capital
deficit (approximately $425,000), the Purchase Price will be adjusted
upward or downward accordingly.
3. DEFINITIVE PURCHASE AGREEMENT. Upon your execution of this Letter
Agreement, we will promptly begin to draft a definitive purchase
agreement (the "Definitive Agreement") consistent with the terms of this
Letter Agreement and which will contain standard representations,
warranties, covenants and indemnifications.
4. TIMING; DUE DILIGENCE; EXCLUSIVITY. Our intent is to complete our
legal, accounting, and business due diligence and arrange financing
commitments as promptly as practicable and in any event within 90 days
from the date you sign and return this Letter Agreement to us.
Consistent with this intent, you agree that, for the period from the
date we receive a copy of this Letter Agreement signed by you through
the 90th day thereafter (the "Termination Date"), the Company and Seller
will not, and will cause their affiliates, directors, officers,
employees, representatives and agents (the "Company Representatives")
not to, directly or indirectly, solicit or initiate or enter into
discussions or transactions with, or encourage, or provide any
information to, any corporation, partnership or other entity or group
(other than to us or our designees) concerning any sale of ownership
interests and/or assets. To the extent satisfactory progress is being
made towards a closing, Sellers will agree to one 30-day extension of
the 90-day deadline. You represent that neither you nor any of your
affiliates are bound by any agreement with respect to any such
transaction other than as contemplated by this Letter Agreement. You
also agree to notify us immediately upon receipt of any inquiries from
any entity or group with respect to any potential transaction involving
the Company and/or its assets.
5. CONDITIONS. Our conditions to closing include (a) the absence of any
material adverse change in the business, assets, condition or prospects
of the Company; (b) our ability to conduct such due diligence as we deem
reasonably appropriate and our ability to approve the results of that
due diligence; (c) our satisfaction with the resolution of any problems
or concerns discovered by us during our due diligence; (d) receipt of
all required consents and approvals; (e) the execution of mutually
satisfactory documentation for the Acquisition, including the Definitive
Agreement; (f) receipt of satisfactory financing commitments and
subsequent definitive documentation of such commitments; and (g) other
conditions customary to transactions of this type.
6. CONDUCT OF BUSINESS. Prior to the execution of the Definitive
Agreement, the Company will conduct its business only in the ordinary
course, consistent with past practice, and will use commercially
reasonable efforts to maintain the value of its business as a going
concern. The Company will not, without our prior written consent, (a)
increase any compensation or benefit arrangement for any employee or
officer other than in the ordinary course, consistent with past
practice, (b) shift any business activities from the Company to any
other entities, whether owned by the Sellers or third parties, (c) sell
any material assets of the Company, (d) effect any changes to its
capital structure, including without limitation entering into any
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commitments to issue shares of the Company, (e) make any distributions
or pay any dividends to the Company's shareholders or (f) undertake or
perform any act that would adversely affect the goodwill of the Company,
the Company's relationship with its employees and customers, or the
Company's prospects. Nothing herein will prevent, however the Company
from paying accrued fees owed to River Associates, LLC.
7. EXPENSES. Each party will bear their own expenses in connection with
the transactions contemplated hereby. For the purposes of the preceding
sentence, if the transactions contemplated hereby are completed, all
expenses of the Company will be borne by the Sellers. The Sellers will
also be solely responsible for any expenses related to professional
service providers and/or brokers retained by either the Company or the
Sellers to assist in the Acquisition or in the sale process. To the
extent that any expenses of the Sellers are actually paid by the Company
after the closing, the Purchase Price will be adjusted accordingly.
8. CONFIDENTIALITY; INFORMATION; ANNOUNCEMENTS. The Confidentiality
Agreement between the parties will remain in full force and effect. You
agree to provide us, and our investors and lenders, including legal and
other representatives, with access to the Company and all information
that any of them reasonably requests. Pending closing of the
transaction, none of the parties will make any public statements about
such transaction without the consent of each other party, except as
required by applicable law, in which case the language of any such
statement shall, to the extent practicable, be mutually agreed to by the
parties which agreement shall not be unreasonably withheld.
9. MISCELLANEOUS. Except with respect to the obligations set forth in
paragraphs 4, 6, 7, 8, 9, and 10 of this Letter Agreement, this Letter
Agreement is not intended to be a binding contract. The parties shall
not be legally obligated by any of the terms hereof, other than
paragraphs 4, 6, 7, 8, 9, and 10 hereof, unless and until the terms of
this Letter Agreement are embodied in definitive documentation in form
and substance satisfactory to the parties, and executed and delivered by
them. This Letter Agreement shall terminate if such definitive
documentation shall not have been executed and delivered on or prior to
the Termination Date, provided that such termination shall not relieve
any party of liability for breach prior to such termination. In
addition, if during the course of further negotiations or in our conduct
of due diligence, we discover information about the Company which
concerns the basis on which we are pursuing this transaction, or we are
unable to agree with the Company and/or the Sellers on terms in the
definitive documentation, either party reserves the right to terminate
any further discussions and negotiations immediately upon notice to the
other party, at which time this Letter Agreement shall terminate among
us. This Letter Agreement constitutes the entire agreement among you,
us and/or any of our respective affiliates, and supersedes all prior or
contemporaneous communications, agreements, and understandings, written
or oral, with respect to the Acquisition, and may be signed in
counterparts, all of which shall constitute the same agreement, shall be
governed by the domestic substantive laws of Texas, and shall
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bind and inure to the benefit of the parties and their respective
successors and assigns.
10. EXECUTION. If the foregoing is in accordance with your understanding,
please sign this Letter Agreement in the space indicated below and
return it to us by facsimile for receipt not later than 5:00 p.m. (Texas
time) on April 30, 1997, whereupon paragraphs 4, 6, 7, 8, 9, and 10 of
this Letter Agreement will become a binding agreement among the parties.
In addition, please send an original executed counterpart of this Letter
Agreement to us by overnight courier. The proposal contained herein
will expire unless we have received this Letter Agreement signed by you
within the time period provided above or sooner, if rejected.
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Very truly yours,
Casa Ole Restaurants, Inc.
By: /s/ Xxxxx X. Xxxx
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Title: Chairman and Chief Executive Officer
The foregoing is hereby agreed to and accepted this 30 day of April, 1997:
River Associates, LLC / Monterey's Acquisition Corp.
By: /s/ Xxxx X. Xxxxxxxxxx
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Name: Xxxx X. Xxxxxxxxxx
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Title: Secretary
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