EXECUTION COPY
EXHIBIT 2.1
____________________________________
STOCK PURCHASE AGREEMENT
BETWEEN
AMERICAN RESTAURANT GROUP, INC.,
AS THE SELLER,
AND
NBACo, Inc.
AS THE PURCHASER
DATED AS OF MAY 9, 2000
____________________________________
Table of Contents
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Page
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ARTICLE I PURCHASE AND SALE OF SHARES; REORGANIZATION OF CERTAIN ASSETS
1.1 Sale of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
1.2 Delivery of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
1.3 Reorganization of Certain Assets . . . . . . . . . . . . . . . . . . . . . . .2
1.4 Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
1.5 Payment of the Purchase Price. . . . . . . . . . . . . . . . . . . . . . . . .4
ARTICLE II THE CLOSING
2.1 The Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
ARTICLE III REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Seller . . . . . . . . . . . . . . . . .4
3.2 Representations and Warranties of the Purchaser. . . . . . . . . . . . . . . 12
ARTICLE IV ACTIONS AT OR PRIOR TO THE CLOSING
4.1 Conduct of Business Pending the Closing Date . . . . . . . . . . . . . . . . 14
4.2 Access to the Companies. . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.3 Consents and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.4 No Solicitation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.5 Notification of Material Events by Purchaser . . . . . . . . . . . . . . . . 16
4.6 Treatment of Guarantees. . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.7 Elimination of Intercompany Debt . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE V ACTIONS SUBSEQUENT TO THE CLOSING
5.1 Books and Records; Availability to the Seller. . . . . . . . . . . . . . . . 16
5.2 Cooperation in Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.4 Indemnification of Directors and Officers. . . . . . . . . . . . . . . . . . 17
5.5 Further Action.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.6 WARN.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
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ARTICLE VI CONDITIONS PRECEDENT
6.1 Obligations of the Purchaser . . . . . . . . . . . . . . . . . . . . . . . . 18
6.2 Obligations of the Seller. . . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE VII TAX MATTERS
7.1 Seller's Indemnity for Taxes . . . . . . . . . . . . . . . . . . . . . . . . 20
7.2 Purchaser's, Companies' and their Affiliate's Liability for Taxable
Periods Commencing After Closing Date. . . . . . . . . . . . . . . . . . . . 20
7.3 Apportionment of Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
7.4 Preparation of Tax Returns . . . . . . . . . . . . . . . . . . . . . . . . . 21
7.5 Transfer and Conveyance Taxes. . . . . . . . . . . . . . . . . . . . . . . . 22
7.6 Contests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
7.7 Termination of Seller's Indemnity Obligations for Taxes. . . . . . . . . . . 23
7.8 Tax Refunds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
7.9 1445 Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE VIII SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION, ETC.
8.1 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
8.2 Agreement to Indemnify by the Seller . . . . . . . . . . . . . . . . . . . . 24
8.3 Agreement to Indemnify by the Purchaser. . . . . . . . . . . . . . . . . . . 24
8.4 Indemnity Threshold. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
8.5 Claims for Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . 25
8.6 Procedures Regarding Third-Party Claims. . . . . . . . . . . . . . . . . . . 25
8.7 Treatment of Indemnification Payments. . . . . . . . . . . . . . . . . . . . 26
ARTICLE IX GENERAL PROVISIONS
9.1 Certain Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
9.2 Termination or Abandonment of Agreement. . . . . . . . . . . . . . . . . . . 29
9.3 Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
9.4 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
9.5 Execution in Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . 30
9.6 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
9.7 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
9.8 Titles and Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
9.9 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
9.10 Entire Agreement; No Oral Waiver. . . . . . . . . . . . . . . . . . . . . . 31
9.11 Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
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9.12 No Third-Party Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
9.13 Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
9.14 Seller Disclosure Letter. . . . . . . . . . . . . . . . . . . . . . . . . . 32
9.15 Brokers and Finders . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
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Schedule 1.3(a) Excluded Leases
Schedule 1.3(b) Headquarters Assets Retained by Seller
Schedule 1.4(a) Purchase Price Adjustments
Schedule 1.4(e)(i) Additions to Current Assets
Schedule 1.4(e)(ii) Deductions from Current Liabilities
Schedule 1.4(e)(iii) Additions to Current Liabilities
Schedule 3.2(k) Liabilities Associated with the Excluded Leases
Schedule 3.2(l) Headquarters Assets
Schedule 4.6 Treatment of Guarantees
Schedule 4.7 Intercompany Debt
Schedule 6.1(c) Non-Released Liens
Schedule 6.1(d) Required Consents
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STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT, dated as of May 9, 2000, between
AMERICAN RESTAURANT GROUP, INC., a Delaware corporation (the "SELLER"), and
NBACo, Inc., a Delaware corporation (the "PURCHASER").
W I T N E S S E T H :
WHEREAS, the Seller is the sole owner of (A) 100 shares of
common stock of Local Favorite, Inc., a California corporation ("NATIONAL
SPORTS GRILL"), (B) 1,000 shares of common stock of Spoons Restaurants, Inc.,
a Texas corporation ("SPOONS"), (C) 1,000 shares of common stock of Spectrum
Foods, Inc., a California corporation ("SPECTRUM"), and (D) 1,000 shares of
common stock of Xxxxxx'x, Inc., a California corporation ("GRANDY'S", and
together with National Sports Grill, Spoons and Spectrum, the "COMPANIES")
(collectively, the "SHARES");
WHEREAS, the Shares represent all of the outstanding shares of
capital stock of the Companies;
WHEREAS, the Seller currently leases offices located at 000
Xxxxxxx Xxxxxx Xxxxx, Xxxxxxx Xxxxx, Xxxxxxxxxx 00000 (the "HEADQUARTERS");
WHEREAS, the Seller and each of the respective Companies are
parties to Grant of Rights agreements, dated January 2, 1997 (the "GRANTS OF
RIGHTS");
WHEREAS, the Seller and NSG Asia, LTD. are parties to a Master
Franchise Agreement, dated as of September 9, 1999, relating to the licensing of
certain foreign rights to develop National Sports Grill (the "NSG FOREIGN
LICENSE"); and
WHEREAS, the Purchaser wishes to purchase from the Seller and the
Seller wishes to sell to the Purchaser the Shares, the leasehold interest in the
Headquarters and the interests in the Grants of Rights and the NSG Foreign
License upon the terms and subject to the conditions herein;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereto agree as follows:
ARTICLE I
PURCHASE AND SALE OF SHARES; REORGANIZATION OF CERTAIN ASSETS
1.1 SALE OF SHARES. On the terms and subject to the conditions
contained herein, the Seller agrees to sell to the Purchaser, and the Purchaser
agrees to purchase from the Seller, at the Closing described in Section 2.1
hereof, all of the Shares.
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1.2 DELIVERY OF SHARES. At the Closing, the Seller shall deliver
to the Purchaser validly issued certificates representing all of the Shares,
duly endorsed in blank or accompanied by stock powers duly executed in blank,
with all necessary stock transfer stamps affixed.
1.3 REORGANIZATION OF CERTAIN ASSETS. Immediately prior to the
Closing, the Seller shall, or shall cause its Affiliates, as appropriate, to
sell, convey, assign, transfer and deliver to one of the Companies (reasonably
satisfactory to the Purchaser) all right, title and interest in and relating to
the following assets and any claims by the Seller related thereto: (i) the Lease
(as defined below) (and any related subleases) for the Headquarters, (ii) all
furniture, fixtures, equipment and other tangible personal property owned or
leased by the Seller or one of its Affiliates, which are now, or may hereafter
prior to the Closing Date be, placed in or attached to the Headquarters, (iii)
the NSG Foreign License and (iv) the Grants of Rights (collectively, the
"INCLUDED ASSETS"). Immediately prior to the Closing, the Seller shall, or
shall cause the Companies, as appropriate, to sell, convey, assign, transfer and
deliver to the Seller or its Affiliates (other than the Companies) any and all
Leases set forth on Schedule 1.3(a) (collectively, the "EXCLUDED LEASES") and
all liabilities related thereto. Notwithstanding any other provision hereof,
(i) the Seller shall retain any assets used solely by the Seller in connection
with the operations of its Black Angus restaurant concept, and shall have the
right to remove any of such assets after the Closing Date, upon reasonable
notice to the Purchaser, to the extent any of such assets are located at the
Headquarters, (ii) the Purchaser shall, by reason of this Agreement, acquire the
right to any assets that are owned solely by the Companies, and (iii) any assets
that are used both in the operations of the Black Angus restaurant concept and
in the business of the Companies shall be acquired by the Purchaser, unless
otherwise indicated on Schedule 1.3(b).
1.4 PURCHASE PRICE. (a) The total consideration (the "PURCHASE
PRICE") payable by the Purchaser to the Seller for the purchase and sale of the
Shares shall be equal, as set forth on Schedule 1.4(a) (but subject to
adjustment after the date hereof), to $25.0 million, MINUS, without duplication,
(i) the amount of any indebtedness represented by Capital Lease Obligations,
including the short-term portion thereof, as of the Closing Date; (ii) the
amount of any proceeds received by the Seller from (A) the sale, franchising or
licensing, net of any Taxes the Seller was or is required to pay as a result of
such sale, franchising or licensing (including, without limitation, pursuant to
the NSG Foreign License) or (B) pursuant to the reorganization contemplated in
Section 1.3, of any assets of the Companies after March 29, 1999; and (iii) the
Companies pro rata portion of any rebates, marketing allowances, discounts or
other amounts received by the Seller under any of the contracts listed on
Schedule 1.4(a) (the "PRORATED CONTRACTS"). The Purchase Price shall be payable
as set forth in Section 1.5 and is subject to adjustment as provided below in
this Section 1.4 and Section 5.3.
(b) Within 60 days after the Closing Date, the Purchaser shall
furnish to the Seller an unaudited combined balance sheet of the Companies as of
the close of business on the Closing Date and a report (the "PRELIMINARY
ADJUSTMENT REPORT"), prepared on the basis of such balance sheet, stating in
reasonable detail the Purchaser's computation of the Working Capital Amount (as
defined below) as of the Closing Date. THE SELLER SHALL HAVE THE RIGHT TO
REQUEST IN WRITING, WITHIN 10 BUSINESS DAYS OF RECEIPT OF THE PRELIMINARY
ADJUSTMENT REPORT, COPIES OF
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BACKUP DOCUMENTATION AND OTHER INFORMATION REASONABLY RELATED TO THE PREPARATION
OF THE PRELIMINARY ADJUSTMENT REPORT AS THE SELLER SHALL DEEM APPROPRIATE.
Unless the Seller provides written notice to the Purchaser of an objection to
any aspect of the Preliminary Adjustment Report on or before the close of
business on the first Business Day that is at least 30 calendar days after the
later of (i) the Seller's receipt of the Preliminary Adjustment Report and (ii)
the Seller's receipt of all backup documentation and other information required
to be delivered pursuant to the preceding sentence, the Preliminary Adjustment
Report shall then become binding upon the Purchaser and the Seller, and shall be
the "FINAL ADJUSTMENT REPORT", and such Business Day shall be the "FINAL
ADJUSTMENT REPORT DATE". If the Seller, by written notice to the Purchaser
before the close of business on such Business Day, objects to any aspect of the
Preliminary Adjustment Report, then those aspects as to which the objection was
made shall not become binding, and the Purchaser and the Seller shall discuss
such objection in good faith. If the Purchaser and the Seller reach written
agreement amending the Preliminary Adjustment Report, the Preliminary Adjustment
Report, as amended by such written agreement, shall become binding upon the
Purchaser and the Seller and shall be the Final Adjustment Report, and the date
of such written agreement shall be the Final Adjustment Report Date. If the
Purchaser and the Seller do not reach such written agreement within 21 calendar
days after the Seller gives such notice of objection, those aspects as to which
such objection was made shall promptly be submitted for arbitration to a
nationally recognized accounting firm, other than the auditors of the Purchaser
or any of its Affiliates, selected by Purchaser and approved by the Seller, such
approval not to be unreasonably withheld (the "ACCOUNTING FIRM"). The Accounting
Firm shall arbitrate the dispute and submit a written statement of its
adjudication, which statement, when delivered to the Purchaser and to the
Seller, shall become binding upon the Purchaser and the Seller, and shall,
together with those aspects of the Preliminary Adjustment Report as to which no
objection was made, be the Final Adjustment Report. In such case, the second
Business Day after the date on which such statement is delivered to the
Purchaser and to the Seller shall be the Final Adjustment Report Date. In acting
hereunder, the Accounting Firm shall be entitled to the privileges and
immunities of arbitrators, and each party agrees to enter into an engagement
agreement reasonably acceptable to both parties with the Accounting Firm in
connection with the foregoing and shall request, and seek in any such engagement
agreement to require, that the Accounting Firm issue a written statement of its
adjudication as promptly as practicable and in any event within 45 days of the
date of final submission of documentation by the Purchaser and the Seller in
connection therewith. The fees of the Accounting Firm shall be shared equally by
the Purchaser and the Seller.
(c) On the Final Adjustment Report Date, if the Final Adjustment
Report states that the Working Capital Amount is less than negative $1.0 million
(the "WORKING CAPITAL TARGET"), the Seller shall pay to the Purchaser, in
immediately available U.S. dollar-denominated funds by wire transfer, no later
than two Business Days after the Final Adjustment Report Date an amount in cash
equal to the sum of (i) the excess of the Working Capital Target over the
Working Capital Amount specified in the Final Adjustment Report (such excess,
the "WORKING CAPITAL DEFICIENCY AMOUNT") and (ii) interest computed at the Prime
Rate for the period from the Closing Date to the date of such payment on the
Working Capital Deficiency Amount. The Purchase Price shall be deemed reduced
by any Working Capital Deficiency Amount.
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(d) On the Final Adjustment Report Date, if the Final Adjustment
Report states that the Working Capital Amount is greater than the Working
Capital Target, the Purchaser shall pay to the Seller, in immediately available
U.S. dollar-denominated funds by wire transfer, no later than two Business Days
after the Final Adjustment Report Date an amount in cash equal to the sum of (i)
the excess of the Working Capital Amount specified in the Final Adjustment
Report over the Working Capital Target (such excess, the "WORKING CAPITAL
SURPLUS AMOUNT") and (ii) interest computed at the Prime Rate for the period
from the Closing Date to the date of such payment on the Working Capital Surplus
Amount.
(e) The term "WORKING CAPITAL AMOUNT" shall mean the amount
resulting from subtracting Current Liabilities from Current Assets as of the
Closing Date after giving effect to the reorganization contemplated in Section
1.3 and the transactions contemplated in Section 4.7. The term "CURRENT ASSETS"
shall mean the combined total current assets of the Companies as of the Closing
Date after adding the account categories of the Seller listed on Schedule
1.4(e)(i); PROVIDED, that Current Assets shall not include Tax assets or
accruals for Tax assets; and the term "CURRENT LIABILITIES" shall mean the
combined total current liabilities of the Companies as of the Closing Date after
deducting the account categories listed on Schedule 1.4(e)(ii) and adding the
account categories of the Seller listed on Schedule 1.4(e)(iii); PROVIDED, that
Current Liabilities shall not include any Taxes or accruals for Taxes to be paid
by the Seller pursuant to Section 7.1 or Section 7.4.
1.5 PAYMENT OF THE PURCHASE PRICE. Payment of the Purchase Price
shall be made at the Closing by delivery to the Seller of the Purchase Price by
wire transfer of immediately available U.S. dollar-denominated funds to an
account or accounts designated by the Seller to the Purchaser no less than two
Business Days prior to the Closing Date.
ARTICLE II
THE CLOSING
2.1 THE CLOSING. The closing of the purchase and sale of the
Shares provided for in this Agreement (the "CLOSING") shall take place at the
offices of Xxxxxxx Xxxxxxx & Xxxxxxxx, 00 Xxxxxxxxx Xxxx Xxxxx, Xxxxxxxxx Xxxx,
Xxxxxxxxxx at 10:00 a.m. (Los Angeles Time), on June 9, 2000, or at such other
time and place as the parties hereto shall agree upon in writing, subject to the
satisfaction or waiver of the conditions to the obligations of the parties set
forth in Article VI hereof. The time and date of the Closing are herein
referred to as the "CLOSING DATE." The parties hereto agree to use their best
efforts to cause the Closing to occur as soon as practicable consistent with the
provisions of this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 REPRESENTATIONS AND WARRANTIES OF THE SELLER. EXCEPT AS SET
FORTH IN THE LETTER, DATED AS OF THE DATE HEREOF AND DELIVERED TO THE PURCHASER
BY THE SELLER CONCURRENTLY WITH
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THE EXECUTION AND DELIVERY OF THIS AGREEMENT (THE "SELLER DISCLOSURE LETTER"),
WHICH IDENTIFIES EXCEPTIONS BY SPECIFIC SECTION REFERENCES, THE Seller
represents and warrants to the Purchaser as follows:
(a) CORPORATE ORGANIZATION. Each of the Companies is a
corporation validly existing and in good standing under the laws of its
respective state of incorporation, has the corporate power to own its properties
and carry on its business as the same is now being conducted and is duly
qualified to do business as a foreign corporation in each jurisdiction in which
the nature of its business or properties makes such qualification necessary,
except for any jurisdictions in which the failure to be so qualified would not
reasonably be expected to have an adverse effect that is material to the
business, operation, financial condition or results of operations of the
Companies, taken as a whole, or a material adverse effect on the Seller's
ability to consummate the transactions contemplated by this Agreement or
otherwise perform its obligations hereunder (a "SELLER MATERIAL ADVERSE
EFFECT").
(b) AUTHORITY. The Seller has all requisite corporate power and
authority to execute and deliver this Agreement and to perform its obligations
hereunder. The execution and delivery of this Agreement by the Seller and the
performance of the transactions herein contemplated to be performed by the
Seller have been duly authorized by the Board of Directors of the Seller and no
further corporate action on the part of the Seller is necessary to authorize
this Agreement and the performance of such transactions. This Agreement has
been duly executed and delivered by the Seller and, assuming due authorization,
execution and delivery by the Purchaser, constitutes a valid and binding
agreement of the Seller, enforceable against the Seller in accordance with its
terms, except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and similar laws relating to or affecting creditors
generally, by general equitable principles (regardless of whether such
enforceability is considered in a proceeding at law or in equity) and an implied
covenant of good faith and fair dealing.
(c) NO CONFLICT. Neither the execution and delivery of this
Agreement nor the performance by the Seller of the transactions contemplated
hereby will (i) conflict with, violate or breach any provision of the
certificate of incorporation or by-laws of the Seller or any of the
Companies,(ii) except as listed on Section 3.1(c)(ii) of the Seller Disclosure
Letter, with or without the giving of notice or the lapse of time or both,
conflict with, violate or constitute a default under, or result in the
acceleration of or entitle any party to accelerate (whether after the giving of
notice or lapse of time or both) any obligation of the Seller or any of the
Companies under any mortgage, indenture, deed of trust, lease, contract,
agreement, license or other instrument or any provision of any law, order,
judgment, decree or ruling of any governmental authority to which the Seller or
any of the Companies is a party or by which any of their respective property is
bound or (iii) result in the creation or imposition of any lien, mortgage,
pledge, charge, security interest or encumbrance ("LIEN") upon any of the assets
or properties of the Seller or the Companies or the loss of any license or other
contractual right with respect thereto, except, in the case of clause (ii) or
(iii) above, for any such events which, individually or in the aggregate, would
not reasonably be expected to have a Seller Material Adverse Effect.
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(d) CAPITAL STRUCTURE; TITLE TO SHARES. (i) The authorized
capital stock of National Sports Grill consists of 1,000 shares of common stock,
of which 100 shares are outstanding. The authorized capital stock of Spoons
consists of 100,000 shares of common stock, of which 1,000 shares are
outstanding. The authorized capital stock of Spectrum is 3,000,000 shares of
common stock, of which 1,000 shares are outstanding. The authorized capital
stock of Grandy's is 10,000 shares of common stock, 1,000 shares of which are
outstanding. None of the Companies has any Subsidiaries. All of the Shares
have been validly issued, are fully paid and nonassessable and are owned
beneficially and of record by the Seller. There are no outstanding options,
warrants or calls relating to the sale or issuance of any shares of the capital
stock of any of the Companies, whether issued or unissued, or any securities
convertible into or evidencing the right to purchase any shares of capital stock
of any of the Companies.
(ii) Except as set forth on Section 3.1(d)(ii) of the Disclosure
Schedule, the Seller has good and valid title to the Shares free and clear of
all Liens, options, warrants or calls and, upon delivery of the Shares and
payment therefor pursuant to this Agreement, good and valid title to the Shares
will pass to the Purchaser free and clear of all Liens, options, warrants or
calls, other than those arising by or through the Purchaser.
(e) FINANCIAL STATEMENTS. To the Seller's knowledge, there is no
liability or obligation of any kind, whether accrued, absolute, fixed or
contingent, of any of the Companies that is not reflected or reserved against in
the statement of assets and liabilities (including the notes thereto) of the
year ended December 27, 1999, other than (i) liabilities or obligations not
required to be reflected or reserved against in the financial statements of the
Companies in accordance with generally accepted accounting principles,
(ii) liabilities or obligations incurred in the ordinary course of business
since December 27, 1999, (iii) liabilities or obligations that would not
reasonably be expected to have a Seller Material Adverse Effect or (iv) as set
forth in Section 3.1(e) (iv) of the Seller Disclosure Letter.
(f) REAL ESTATE. (i) Section 3.1(f)(i) of the Seller Disclosure
Letter contains a list of all real estate which is either owned by one or more
of the Companies (the "OWNED PROPERTIES") or is subject to a real property lease
(a "LEASE") to which one or more of the Companies is a party (the "LEASED
PROPERTIES" and, together with Owned Properties, the "COMPANY PROPERTIES") as of
the date of this Agreement. For purposes of this Agreement, the Seller's lease
relating to the Headquarters shall be deemed a Lease and the Headquarters shall
be deemed a Leased Property.
(ii) The Companies own in fee simple all the Owned Properties,
free and clear of all Liens except for (A) Liens listed on Section 3.1(f)(ii)
of the Seller Disclosure Letter, (B) Liens which individually or in the
aggregate, would not reasonably be expected to have a Seller Material Adverse
Effect and (C) (1) liens for taxes, assessments and governmental charges or
levies not yet due and payable, (2) Liens imposed by law, (3) pledges or
deposits to secure obligations under workers' compensation laws or similar
legislation or to secure public or statutory obligations or (4) survey
exceptions, easement agreements and other customary encumbrances on title to
real property. Except as set forth on Section 3.1(f)(ii) of the Seller
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Disclosure Letter, to the knowledge of the Seller, there are no condemnation
proceedings or eminent domain proceedings of any kind pending or threatened
against the Owned Properties.
(iii) Each Lease is a valid and subsisting agreement and is in
full force and effect in accordance with the terms thereof. Each of the
Companies or its sublessee, as applicable, enjoys peaceful and quiet possession
of its respective Leased Properties and, to the knowledge of the Seller, there
has not been any material default (beyond any applicable notice, grace or cure
period) under any Lease by any Company as lessee or, to the Seller's knowledge,
the lessor thereunder, in each case except for defaults which are continuing and
which, individually or in the aggregate, would not reasonably be expected to
have a Seller Material Adverse Effect. To the knowledge of the Seller, the
rental set forth in each Lease is the actual rental being paid, and, to the
knowledge of the Seller, there are no separate agreements or understandings with
respect to the same.
(iv) To the knowledge of the Seller, the current use of the
Company Properties by the respective Companies does not violate the certificate
of occupancy thereof or any local zoning or similar land use or government
regulations in any way that would, individually or in the aggregate, reasonably
be expected to have a Seller Material Adverse Effect. To the knowledge of the
Seller, the present use and conditions thereof do not violate any applicable
deed restrictions or other applicable covenants, restrictions, agreements,
existing site plan approvals, zoning or subdivision regulations or urban
redevelopment plans (as modified by any duly issued variances) in any way that
would, individually or in the aggregate, reasonably be expected to have a Seller
Material Adverse Effect. Except as set forth on Section 3.1(f)(iv) of the
Seller Disclosure Letter, Seller has not received any written notice of any
condemnation proceedings or eminent domain proceedings of any kind pending or
threatened against the Leased Properties as of the date hereof. Except as set
forth in Section 3.1(f)(iv) of the Seller Disclosure Letter, none of the Company
Properties are leased or subleased to any third party, and no third party has
any option, right of possession or interest of any kind in or to the Company
Properties (except for the lessor of any Leased Property as set forth in the
applicable Lease, or third parties having interests in the fee of such Leased
Property). To the knowledge of the Seller, all water, sewer, gas, steam,
electric, telephone, cable television, access and drainage facilities and all
other utilities required by law and by the normal operation of the Company
Properties are installed to the boundaries of the Company Properties, are
connected to the Company Properties where appropriate with valid permits, and
are adequate to service the Company Properties for the operation of the business
presently conducted thereat and to permit compliance in all material respects
with all applicable law.
(g) TANGIBLE PERSONAL PROPERTY. Except as set forth on Section
3.1(g) of the Seller Disclosure Letter, each of the Companies has good title to
all tangible personal property owned by it except for (i) defects in title or
Liens which would not reasonably be expected to have a Seller Material Adverse
Effect, (ii) Liens for taxes not yet delinquent or being contested in good faith
by appropriate proceedings for which adequate reserves are reflected on the
financial statements of the Companies in accordance with generally accepted
accounting principles, (iii) statutory Liens of carriers, warehousemen,
mechanics, materialmen and other similar Persons
7
incurred in the ordinary course of business for amounts the payment of which is
not due, (iv) Liens of landlords securing tenant lease obligations, whether
arising by statute or contract, (v) Liens incurred or deposits made in the
ordinary course of business in connection with workers' compensation,
unemployment insurance and other types of social security, (vi) Liens for
liabilities disclosed or reflected in the financial statements of the Companies
made available to the Purchaser, (vii) Liens incidental to the conduct of
business of any of the Companies as permitted to be conducted pursuant to this
Agreement or to the ownership of property of a character which customarily exist
on properties of companies engaged in activities similar to those engaged in by
the Companies and which were not incurred in connection with the borrowing of
money or the obtaining of advances or credit, and which do not, individually or
in the aggregate, interfere with the ordinary conduct of the business of the
Companies or detract from the value or use of the properties subject to any such
Liens and (viii) Liens incurred in connection with the purchase of tangible
personal property. All leases pursuant to which any of the Companies leases as
lessor or lessee any tangible personal property are valid and binding in
accordance with their respective terms, and to the knowledge of the Seller,
except as set forth in Section 3.1(g) of the Seller Disclosure Letter, there is
not under any of such leases any existing default or event which with notice or
lapse of time or both would constitute a default, in each case, on the part of
any of the Companies or, to the Seller's knowledge, on the part of any other
party to such leases.
(h) INSURANCE. SECTION 3.1(H) OF THE SELLER DISCLOSURE LETTER
SETS FORTH ALL POLICIES OF INSURANCE FOR GENERAL LIABILITY, PROPERTY, DIRECTORS'
AND OFFICERS' LIABILITY, WORKERS' COMPENSATION, FIDELITY AND OTHER CUSTOMARY
MATTERS CURRENTLY HELD BY OR ON BEHALF OF THE COMPANIES FOR THE STATED POLICY
PERIODS (THE "INSURANCE POLICIES"). THE INSURANCE POLICIES ARE IN FULL FORCE
AND EFFECT AND TO THE KNOWLEDGE OF THE SELLER, THE COMPANIES ARE NOT IN MATERIAL
DEFAULT WITH RESPECT TO ANY PROVISION CONTAINED IN ANY INSURANCE POLICY NOR HAS
ANY COMPANY FAILED TO GIVE ANY NOTICE OF ANY CLAIM UNDER ANY INSURANCE POLICY IN
A TIMELY FASHION NOR HAS COVERAGE FOR CURRENT CLAIMS BEEN DENIED OR WITHHELD.
(i) INTELLECTUAL PROPERTY. Section 3.1(i) of the Seller
Disclosure Letter sets forth all registrations and pending applications for all
material trademarks, trade names, service marks, service names, copyrights or
patents, owned or used by any of the Companies in the conduct of its business as
now conducted ("INTELLECTUAL PROPERTY"). Except as identified in Section 3.1(i)
of the Seller Disclosure Letter, the Companies own or have an unexpired license
to use all of the Intellectual Property. Section 3.1(i) of the Seller
Disclosure Letter also contains a list of all material licenses or agreements
pursuant to which any of the Companies licenses any Person to use any of the
Intellectual Property. Except those set forth on Section 3.1(i) of the Seller
Disclosure Letter, the Seller knows of no current infringement of any
Intellectual Property by any other Person.
(j) COMPLIANCE WITH CONTRACTS, AGREEMENTS, ETC. Each of the
Companies is in compliance with all material terms and provisions of all
contracts, indentures, leases (other than Leases of real property), policies,
instruments and licenses to which it is a party or by which it or any of its
assets or business may be bound or affected, which, in any case, are material to
the
8
Companies, taken as a whole, their business or operations ("MATERIAL
CONTRACTS"), and all such Material Contracts are valid and binding upon the
Company party thereto in accordance with their terms and in full force and
effect. To the knowledge of the Seller no material breach or default by one of
the Companies or event which, with notice or lapse of time or both, could
constitute a material breach or default by one of the Companies, exists with
respect to a Material Contract, and no non-Company party to a Material Contract
has given written notice or asserted in writing to any of the Companies that it
is in default thereunder and, to the knowledge of the Seller, no non-Company
party thereto is in material breach or default a under Material Contract, except
as set forth in Section 3.1(j) of the Seller Disclosure Letter.
(k) LITIGATION. To the knowledge of the Seller, except as
disclosed in Section 3.1(k) of the Seller Disclosure Letter, there are no
lawsuits, actions, arbitrations or legal or administrative or regulatory
proceedings pending or, to the knowledge of the Seller, threatened against any
of the Companies or relating to any of their respective assets that would
reasonably be expected to have a Seller Material Adverse Effect. Neither the
Seller nor any of the Companies is a party to, or subject to or bound by, any
order, judgment, injunction, stipulation, award or decree (whether rendered by a
court or administrative agency or by arbitration) having continuing effect, in
any such case, which would, individually or in the aggregate, reasonably be
expected to have a Seller Material Adverse Effect. Notwithstanding the
foregoing, the Seller makes no representation or warranty with respect to any
Environmental Permits, Environmental Laws, Materials of Environmental Concern or
any law, statute, rule, regulation, ordinance, decree or order relating thereto,
the Seller's only representations and warranties with respect to which are set
forth in Section 3.1(r).
(l) GOVERNMENTAL REGULATIONS. Each of the Companies is in
compliance in all material respects with all laws, statutes, rules, regulations,
ordinances, decrees and orders of all applicable federal, state and local
authorities applicable to its business, and each of the Companies has and holds
all governmental permits and authorizations necessary to entitle it to own and
operate its properties and to conduct its business operations, except such
failures to comply or to have and hold which would not reasonably be expected to
have a Seller Material Adverse Effect; PROVIDED, HOWEVER, that the Seller makes
no representation or warranty in this Section 3.1(l) with respect to any
Environmental Permits, Environmental Laws, Materials of Environmental Concern or
any law, statute, rule, regulation, ordinance, decree or order relating thereto,
the Seller's only representations and warranties with respect to which are set
forth in Section 3.1(r).
(m) PENSION AND BENEFIT PLANS. (i) Schedule 3.1(m) of the Seller
Disclosure Letter lists each "employee benefit plan" (within the meaning of
section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")) and any other material employee plan or agreement contributed to or
maintained by any of the Companies or under which employees of the Companies are
entitled to benefits (the "COMPANY PLANS").
(ii) To the Seller's knowledge, each Company Plan has been
administered and is in compliance with the terms of such Company Plan and all
applicable laws, rules and
9
regulations except where the failure to comply could not reasonably be expected
to have a Seller Material Adverse Effect.
(iii) To the Seller's knowledge, no "reportable event" (as such
term is used in section 4043 of ERISA), "prohibited transaction" (as such term
is used in section 406 of ERISA or section 4975 of the Internal Revenue Code of
1986, as amended (the "CODE")) or "accumulated funding deficiency" (as such term
is used in section 412 or 4971 of the Code) has heretofore occurred with respect
to any Company Plan that would reasonably be expected to have a Seller Material
Adverse Effect.
(iv) No litigation or administrative or other proceeding
involving any Company Plans has occurred or to the Seller's knowledge is
threatened that would reasonably be expected to have a Seller Material Adverse
Effect.
(v) To the Seller's knowledge, except as set forth on Schedule
3.1(m) of the Seller Disclosure Letter, none of the Companies has contributed to
any "multiemployer plan" (within the meaning of section 3(37) of ERISA), and
neither the Companies nor any member of their Controlled Group (defined as any
organization which is a member of a controlled gourp of organizations within the
meaning of Code sections 414(b), (c), (m) or (o)) has incurred any withdrawal
liability that remains unsatisfied in an amount that would reasonably be
expected to have a Seller Material Adverse Effect.
(vi) The termination of, or withdrawal from, any Company Plan or
multiemployer plan to which any of the Companies contributes, on or prior to the
date hereof, has not and, to the Seller's knowledge, will not subject any of the
Companies to any liability under Title IV of ERISA that would reasonably be
expected to have a Seller Material Adverse Effect.
(n) CONSENTS. Except as set forth on Section 3.1(n) of the Seller
Disclosure Letter, the execution, delivery and performance of this Agreement by
the Seller and the consummation by the Seller of the transactions contemplated
by this Agreement will not require the consent, approval or authorization of any
governmental or regulatory authority and no declaration, filing or registration
with any governmental or regulatory authority is required in connection with
such transactions, except for consents, approvals, authorizations, declarations,
filings or registrations (i) that have not been obtained or made and would not
reasonably be expected to have a Seller Material Adverse Effect or (ii) that
would be required solely as a result of the identity or the legal or regulatory
status of the Purchaser or any of its Affiliates.
(o) TRANSACTIONS WITH AFFILIATES. Except as set forth in Section
3.1(o) of the Seller Disclosure Letter, none of the Companies has any
outstanding contracts, agreements or other arrangements or understandings with
the Seller or any other Affiliate of the Seller THAT ARE INDIVIDUALLY OR IN THE
AGGREGATE MATERIAL TO THE BUSINESS, OPERATIONS OR FINANCIAL CONDITION OF THE
COMPANIES.
10
(p) LABOR CONTROVERSIES. To the knowledge of the Seller, each of
the Companies has paid in full to all employees all wages, salaries and
commissions due to such employees, except as would not reasonably be expected to
have a Seller Material Adverse Effect. None of the Companies is a party to, or
otherwise bound by, any consent decree with, or citation by, any government
agency relating to employees or employment practices.
(q) TAX MATTERS. For purposes of this Agreement, "TAXES" shall
mean all taxes of United States federal, state, local and foreign income,
profits, franchise, gross receipts, payroll, sales, employment, transfer, use,
property, excise, value added, estimated, stamp, alternative or add-on minimum,
withholding and any other taxes, duties or assessments, together with all
interest, penalties and additions imposed with respect to such amounts, whether
or not disputed, and "TAX RETURN" shall mean any return, declaration, report,
claim for refund or information return or statement filed or required to be
filed with any Tax authority in connection with the determination, assessment,
collection or imposition of any Taxes, including any schedule or attachment
thereto, and including any amendment thereof. For purposes of this Section
3.1(q), any reference to the Companies shall include any successor or
predecessor, including any corporation which merged or was liquidated with and
into any of the Companies.
(i) The Companies have each timely filed with the
appropriate Tax authorities all Tax Returns required to be filed through
the date hereof and will timely file any such Tax Returns required to be
filed on or prior to the Closing Date (except those under valid
extension). All Tax Returns are correct and complete in all respects.
All Taxes of the Companies (whether or not shown to be due on the Tax
Returns) have been paid. WITH RESPECT TO TAXES NOT YET DUE AND OWING,
THE COMPANIES HAVE MADE ADEQUATE ACCRUALS (OTHER THAN ACCRUALS FOR
DEFERRED TAXES FOR ANY PERIODS OR PORTIONS THEREOF ENDING PRIOR TO THE
CLOSING DATE REFLECTING DIFFERENCES BETWEEN BOOK AND TAX BASES IN ASSETS
AND LIABILITIES) for such Taxes in their financial statements.
(ii) There are no liens or other encumbrances with
respect to Taxes upon any of the assets or properties of the Companies,
other than with respect to Taxes not yet due and payable or which are
being contested in good faith.
(iii) There are no outstanding agreements, waivers or
arrangements extending the statutory period of limitation applicable to
any claim for, or the period for the collection or assessment of, Taxes
due from or with respect to any of the Companies for any taxable period,
and no power of attorney granted by or with respect to any of the
Companies relating to Taxes is currently in force. To the knowledge of
the Seller, no closing agreement pursuant to section 7121 of the Code (or
any predecessor provision), or any similar provision of any state, local
or foreign law, has been entered into by or with respect to any of the
Companies.
(iv) No audit or other proceeding by any court,
governmental or regulatory authority, or similar person is pending with
respect to any Taxes due from or
11
with respect to any of the Companies or any Tax Return filed by or with
respect to any of the Companies.
(v) As of the Closing, none of the Companies shall be a
party to, be bound by or have any obligation under, any Tax sharing
agreement or similar contract or arrangement.
(vi) The Companies (i) are not, and have not been, a
member of an affiliated group filing a consolidated federal income Tax
Return, other than a group the common parent of which is the Seller for
the last five (5) years, and (ii) no Tax authority has asserted that any
of the Companies has any liability for the Taxes of any person under
Treasury Regulation section 1.1502-6 (or any similar provision of state,
local or foreign tax law), or as a transferee or successor, by contract
or otherwise.
(r) ENVIRONMENTAL MATTERS. Other than exceptions to any of the
following that would not reasonably expected to have a Seller Material Adverse
Effect, or except as disclosed in Section 3.1(r) of the Seller Disclosure
Letter: to the knowledge of the Seller, each of the Companies complies with all
applicable Environmental Laws, and possesses and complies with all applicable
Environmental Permits required under such laws to operate as it presently
operates; to the knowledge of the Seller, there are no Materials of
Environmental Concern at any property owned or operated by any of the Companies
that are in a condition or concentration that gives rise to liability of the any
of the Companies under any Environmental Law; and none of the Companies has
received any written notification alleging that it is liable for, or request for
information pursuant to section 104(e) of the Comprehensive Environmental
Response, Compensation and Liability Act or similar state statute concerning,
disposal of Materials of Environmental Concern at any location.
"ENVIRONMENTAL LAWS": all foreign, Federal, state, or local
statutes, regulations, ordinances, codes, or decrees protecting the
quality of the ambient air, soil, surface water or groundwater, in effect
as of the date of this Agreement.
"ENVIRONMENTAL PERMITS": all permits, licenses, registrations,
and other authorizations required under applicable Environmental Laws.
"MATERIALS OF ENVIRONMENTAL CONCERN": any hazardous, acutely
hazardous, or toxic substance or waste defined and regulated as such
under Environmental Laws, including without limitation the federal
Comprehensive Environmental Response, Compensation and Liability Act and
the federal Resource Conservation and Recovery Act.
3.2 REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The
Purchaser represents and warrants to the Seller as follows:
12
(a) CORPORATE ORGANIZATION. The Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the state of
Delaware.
(b) AUTHORITY. The Purchaser has all requisite corporate power
and authority to execute and deliver this Agreement and to perform its
obligations hereunder. The execution and delivery of this Agreement by the
Purchaser and the performance of the transactions herein contemplated to be
performed by the Purchaser have been duly authorized by the Board of Directors
of the Purchaser and no further corporate action on the part of the Purchaser,
or action on the part of its shareholders, is necessary to authorize this
Agreement and the performance of such transactions. This Agreement has been
duly executed and delivered by the Purchaser and, assuming due authorization,
execution and delivery by the Seller, constitutes a valid and binding agreement
of the Purchaser, enforceable against the Purchaser in accordance with its
terms, except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and similar laws relating to or affecting creditors
generally, by general equitable principles (regardless of whether such
enforceability is considered in a proceeding at law or in equity) and an implied
covenant of good faith and fair dealing.
(c) NO CONFLICT. Neither the execution and delivery of this
Agreement nor the performance by the Purchaser of the transactions contemplated
hereby will (i) conflict with, violate or breach any provision of the
Certificate of Incorporation or By-laws of the Purchaser, (ii) with or without
the giving of notice or the lapse of time or both, conflict with, violate or
constitute a default under, or result in the acceleration of or entitle any
party to accelerate (whether after the giving of notice or lapse of time or
both) any obligation under any mortgage, indenture, deed of trust, lease,
contract, agreement, license or other instrument or any provision of any law,
order, judgment, decree, restriction or ruling of any governmental authority to
which the Purchaser is a party or by which any of its property is bound or (iii)
result in the creation or imposition of any Lien upon any of the assets or
properties of the Purchaser or the loss of any license or other contractual
right with respect thereto, except, in the case of clause (ii) or (iii) above,
for any such events which, individually or in the aggregate, could not
reasonably be expected to have a material adverse effect on the ability of the
Purchaser to consummate the transactions contemplated hereby or otherwise
perform its obligations hereunder (a "PURCHASER MATERIAL ADVERSE EFFECT").
(d) LITIGATION. There are no lawsuits, actions, arbitrations or
legal or administrative or regulatory proceedings, or written charges,
complaints or investigations pending or, to the knowledge of the Purchaser,
threatened against the Purchaser, and the Purchaser is not a party to, or
subject to or bound by, any order, judgment, injunction, stipulation, award or
decree (whether rendered by a court or administrative agency or by arbitration)
having continuing effect, in any such case, which could, individually or in the
aggregate, have a Purchaser Material Adverse Effect.
(e) CONSENTS. The execution, delivery and performance of this
Agreement by the Purchaser and the consummation by the Purchaser of the
transactions contemplated by this Agreement will not require the consent,
approval or authorization of any governmental or
13
regulatory authority or any other Person under any license to which the
Purchaser is a party or to which any of its properties are subject, and no
declaration, filing (including, without limitation, any filing under 15 U.S.C.
Section 18a and the rules promulgated thereunder) or registration with any
governmental or regulatory authority is required in connection with such
transactions, except for any consents, approvals, authorizations, declarations,
filings or registrations that have not been obtained or made and could not
reasonably be expected to have a Purchaser Material Adverse Effect.
(f) BROKER'S OR FINDER'S FEES. Neither the Purchaser nor any of
its Affiliates has authorized any person to act as a broker, finder or in any
similar capacity in connection with the transactions contemplated by this
Agreement.
(g) ADEQUATE FUNDS. At the Closing Date the Purchaser will have
all funds required to deliver the consideration called for by Section 1.4 and to
take such other actions as may be required to enable the Purchaser to consummate
the transactions contemplated hereby.
(h) COMMITMENTS. As of the date of this Agreement, Purchaser has
one or more written commitments from one or more banks or other financial
institutions to lend the Purchaser an amount that, when added to the written
equity contribution commitments held by the Purchaser, is sufficient to permit
the Purchaser to deliver the consideration required under Section 1.4.
(i) INVESTMENT. The Purchaser is purchasing the Shares for its
own account for investment purposes only and not with a view to, or for sale in
connection with, any distribution of the Shares. Purchaser shall not transfer
or otherwise dispose of the Shares, or any interest therein, in such a manner as
to cause the Seller to be in violation of any registration requirements of the
Securities Act of 1933, as amended, or applicable state securities laws.
(j) NO KNOWLEDGE OF INACCURACY. The Purchaser knows of no reason
that any representation or warranty made by the Seller herein is inaccurate in
any respect.
(K) EXCLUDED LEASES. THE EXCLUDED LEASES AND THE PREMISES LEASED
THEREUNDER ARE FREE FROM ALL LIABILITIES, LIENS, CLAIMS, DAMAGES, LOSSES,
OBLIGATIONS, JUDGMENTS, SUITS, ACTIONS OR CAUSES OF ACTION, COSTS AND EXPENSES
(INCLUDING, WITHOUT LIMITATION, ENVIRONMENTAL LIABILITIES AND ALL RENT OR
UTILITY PAYMENTS AND ANY OTHER OBLIGATIONS RELATING TO PERIODS PRIOR TO THE DATE
HEREOF THAT ARE DUE AND OWING PURSUANT TO THE EXCLUDED LEASES OR WITH RESPECT TO
THE PREMISES LEASED THEREUNDER, BUT EXCLUDING RENT, MAINTENANCE AND UTILITY
PAYMENTS RELATING TO PERIODS AFTER THE DATE HEREOF), EXCEPT AS DISCLOSED ON
SCHEDULE 3.2(k). THERE ARE NO LAWSUITS, ACTIONS, ARBITRATIONS OR LEGAL OR
ADMINISTRATIVE PROCEEDINGS PENDING OR THREATENED WITH RESPECT TO THE EXCLUDED
LEASES OR THE PREMISES LEASED THEREUNDER, EXCEPT AS DISCLOSED ON SCHEDULE
3.2(k).
(L) LIST OF HEADQUARTERS ASSETS. SCHEDULE 3.2(l) SETS FORTH ALL
MATERIAL ASSETS OF THE SELLER AND ITS AFFILIATES THAT ARE MAINTAINED AS OF THE
DATE HEREOF AT THE HEADQUARTERS FOR USE IN THE BUSINESS AND OPERATIONS OF THE
SELLER AND ITS AFFILIATES.
14
ARTICLE IV
ACTIONS AT OR PRIOR TO THE CLOSING
THE PARTIES COVENANT TO TAKE THE FOLLOWING ACTIONS BETWEEN THE
DATE HEREOF AND THE CLOSING DATE:
4.1 CONDUCT OF BUSINESS PENDING THE CLOSING DATE. THE SELLER
AGREES THAT, AFTER THE DATE HEREOF AND PRIOR TO THE CLOSING OR EARLIER
TERMINATION OF THIS AGREEMENT, UNLESS SPECIFICALLY PROVIDED FOR HEREIN OR UNLESS
THE PURCHASER SHALL HAVE CONSENTED IN WRITING (WHICH CONSENT WILL NOT BE
UNREASONABLY WITHHELD OR DELAYED):
(a) THE BUSINESS OF THE COMPANIES WILL BE CONDUCTED ONLY IN THE
ORDINARY COURSE CONSISTENT WITH PAST PRACTICE;
(b) THE BUSINESS OF THE SELLER AND THE COMPANIES WILL BE CONDUCTED
IN COMPLIANCE WITH APPLICABLE LAWS, REGULATIONS AND CONTRACTUAL
OBLIGATIONS, THE FAILURE TO COMPLY WITH WHICH WOULD REASONABLY BE
EXPECTED TO HAVE A SELLER MATERIAL ADVERSE EFFECT;
(c) NO CHANGE WILL BE MADE IN THE CERTIFICATE OF INCORPORATION OR
THE BY-LAWS OF ANY OF THE COMPANIES;
(d) NO CHANGE WILL BE MADE IN THE AUTHORIZED, ISSUED OR
OUTSTANDING CAPITAL STOCK OF ANY OF THE COMPANIES, NO ADDITIONAL SHARES
OF SUCH CAPITAL STOCK WILL BE ISSUED AND NO SUBSCRIPTIONS, OPTIONS,
RIGHTS, WARRANTS, COMMITMENTS OR AGREEMENTS RELATING TO THE AUTHORIZED,
ISSUED OR OUTSTANDING CAPITAL STOCK OF ANY OF THE COMPANIES WILL BE
ISSUED, GRANTED, CREATED OR ENTERED INTO;
(e) NONE OF THE COMPANIES WILL MERGE, AMALGAMATE OR CONSOLIDATE
WITH ANY OTHER PERSON, ACQUIRE ALL OR SUBSTANTIALLY ALL OF THE BUSINESS
OR ASSETS OF ANY OTHER PERSON, OR ACQUIRE OWNERSHIP OR CONTROL OF ANY
CAPITAL STOCK, BONDS, OR OTHER SECURITIES OF, OR ANY PROPERTY INTEREST
IN, ANY OTHER PERSON OR ACQUIRE CONTROL OF THE MANAGEMENT OR POLICIES
THEREOF, OR ENTER INTO ANY NEGOTIATIONS WITH RESPECT TO ANY OF THE
ACTIONS DESCRIBED IN THIS SUBSECTION (E), EXCEPT FOR THE PURCHASE AND
SALE OF SECURITIES IN CONNECTION WITH THE ORDINARY CASH MANAGEMENT OR
INVESTMENT OF FUNDS OF THE SELLER AND THE COMPANIES, CONSISTENT IN EACH
CASE WITH PAST PRACTICES AND ORDINARY AND PRUDENT MANAGEMENT OF SUCH
FUNDS;
(f) NEITHER THE SELLER NOR ANY OF THE COMPANIES WILL ENTER INTO OR
ASSUME ANY CONTRACT, AGREEMENT OR COMMITMENT WHICH, BY REASON OF ITS
SIZE, TERM OR OTHER FACTOR WOULD REASONABLY BE EXPECTED TO HAVE A SELLER
MATERIAL ADVERSE EFFECT;
(g) EACH OF THE COMPANIES WILL, CONSISTENT WITH PAST PRACTICE,
MAINTAIN ALL ASSETS OWNED, LEASED OR REGULARLY USED BY IT IN GOOD
OPERATING CONDITION AND REPAIR, ORDINARY
15
WEAR AND TEAR EXCEPTED, AND WILL MAINTAIN EXISTING INSURANCE COVERAGE ON
SUCH ASSETS AS WELL AS OTHER EXISTING INSURANCE COVERAGE;
(h) EACH OF THE COMPANIES WILL MAINTAIN ITS BOOKS, ACCOUNTS AND
RECORDS IN THE USUAL AND ORDINARY MANNER, ON A BASIS CONSISTENT WITH PAST
PRACTICE;
(i) THE SELLER AGREES THAT BETWEEN THE DATE HEREOF AND THE CLOSING
DATE, IT WILL NOT EFFECT A "PLANT CLOSING" OR "MASS LAYOFF" AS THOSE
TERMS ARE DEFINED IN THE WORKER ADJUSTMENT AND RETRAINING NOTIFICATION
ACT OF 1988, AS AMENDED, ("WARN"), AFFECTING IN WHOLE OR IN PART ANY SITE
OF EMPLOYMENT, FACILITY, OPERATING UNIT OR EMPLOYEE OF ANY COMPANY,
WITHOUT NOTIFYING THE PURCHASER IN ADVANCE AND WITHOUT COMPLYING WITH THE
NOTICE REQUIREMENTS AND ALL OTHER PROVISIONS OF WARN OR ANY STATE LAW;
AND
(j) THE SELLER AND THE COMPANIES WILL NOT AUTHORIZE ANY OF, OR
COMMIT OR AGREE TO TAKE ANY OF, THE FOREGOING ACTIONS.
4.2 ACCESS TO THE COMPANIES. THE SELLER SHALL CAUSE EACH OF THE
COMPANIES TO AFFORD TO THE PURCHASER AND ITS AGENTS, ATTORNEYS, ADVISORS,
FINANCING SOURCES AND OTHER REPRESENTATIVES REASONABLE ACCESS DURING NORMAL
BUSINESS HOURS TO THE OFFICES, PLANTS, PROPERTIES, CONTRACTS AND FINANCIAL
RECORDS OF THE COMPANIES, IN ORDER THAT THE PURCHASER AND SUCH REPRESENTATIVES
MAY HAVE FULL OPPORTUNITY TO MAKE SUCH INVESTIGATIONS AS THEY DESIRE OF THE
AFFAIRS OF THE COMPANIES, AND SHALL FURNISH TO THE PURCHASER AND SUCH OTHER
PERSONS SUCH ADDITIONAL DATA AND INFORMATION AS MAY FROM TIME TO TIME REASONABLY
BE REQUESTED BY THEM, IN EACH CASE, CONSISTENT WITH THE CONFIDENTIALITY
PROVISIONS OF SECTION 9.3 BELOW.
4.3 CONSENTS AND APPROVALS. SUBJECT TO THE TERMS AND CONDITIONS
HEREIN PROVIDED, ALL OF THE PARTIES HERETO SHALL USE COMMERCIALLY REASONABLE
EFFORTS PROMPTLY TO TAKE, OR TO CAUSE TO BE TAKEN, ALL ACTIONS AND TO DO, OR TO
CAUSE TO BE DONE, ALL THINGS NECESSARY, PROPER OR ADVISABLE TO CONSUMMATE AND
MAKE EFFECTIVE THE SALE OF THE SHARES AND THE OTHER TRANSACTIONS CONTEMPLATED BY
THIS AGREEMENT, INCLUDING USING COMMERCIALLY REASONABLE EFFORTS TO SATISFY THE
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE PARTIES HERETO AND TO PROCEED
WITH THE CLOSING AS EXPEDITIOUSLY AS PRACTICABLE. THE SELLER SHALL USE ITS
COMMERCIALLY REASONABLE EFFORTS TO COOPERATE IN OBTAINING ANY CONSENTS OR
APPROVALS REQUIRED HEREUNDER WITH THE PURCHASER (WHO SHALL BE PRIMARILY
RESPONSIBLE FOR OBTAINING SUCH CONSENTS OR APPROVALS); PROVIDED, THAT EXCEPT AS
OTHERWISE PROVIDED HEREIN, THE SELLER SHALL NOT BE OBLIGATED TO INCUR ANY
EXPENSE OR TO INCUR, GUARANTEE, ASSUME OR REPAY ANY OBLIGATION OF ANY OTHER
PERSON OR OTHERWISE SATISFY OR BECOME LIABLE FOR ANY LIABILITY OR OBLIGATION OF
THE PURCHASER OR ANY OF THE COMPANIES.
4.4 NO SOLICITATION. PRIOR TO THE CLOSING OR THE TERMINATION OF
THE AGREEMENT PURSUANT TO SECTION 9.2 BELOW, THE SELLER SHALL NOT, AND SHALL NOT
AUTHORIZE OR PERMIT ANY OF ITS OFFICERS, DIRECTORS, AGENTS, REPRESENTATIVES,
ADVISORS OR SUBSIDIARIES TO SOLICIT OR TAKE ANY ACTION TO FACILITATE THE
SUBMISSION OF INQUIRES, PROPOSALS OR OFFERS FROM ANY PERSON RELATING TO ANY
ACQUISITION, BUSINESS COMBINATION, RECAPITALIZATION, FINANCING, LIQUIDATION OR
DISSOLUTION OF THE COMPANIES OR ANY OTHER TRANSACTION THAT COULD REASONABLY BE
EXPECTED TO IMPEDE, INTERFERE WITH OR MATERIALLY DELAY THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT.
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4.5 NOTIFICATION OF MATERIAL EVENTS BY PURCHASER. THE PURCHASER
SHALL PROMPTLY NOTIFY THE SELLER OF ANY CIRCUMSTANCES, EVENT OR ACTION,
ATTRIBUTABLE TO THE PURCHASER, THE SELLER OR OTHERWISE, THE EXISTENCE,
OCCURRENCE OR TAKING OF WHICH WOULD RESULT IN ANY OF THE REPRESENTATIONS OR
WARRANTIES (AS QUALIFIED BY THE SELLER DISCLOSURE LETTER) OF THE SELLER
CONTAINED IN THIS AGREEMENT BEING OR BECOMING INACCURATE IN ANY RESPECT WHETHER
IMMEDIATELY AFTER THE OCCURRENCE OF SUCH CIRCUMSTANCE, EVENT OR ACTION OR AT THE
CLOSING.
4.6 TREATMENT OF GUARANTEES. THE PURCHASER SHALL USE COMMERCIALLY
REASONABLE EFFORTS TO HAVE THE SELLER RELEASED FROM ITS OBLIGATIONS UNDER THE
GUARANTEES SET FORTH ON SCHEDULE 4.6; PROVIDED, THAT THE PURCHASER'S FAILURE TO
OBTAIN SUCH RELEASE AFTER MAKING SUCH EFFORTS SHALL NOT GIVE RISE TO ANY RIGHT
BY THE SELLER TO TERMINATE ITS OBLIGATIONS UNDER THIS AGREEMENT.
4.7 ELIMINATION OF INTERCOMPANY DEBT. ON THE CLOSING DATE,
CONTEMPORANEOUSLY WITH THE CLOSING, ALL INTERCOMPANY AMOUNTS OWING TO THE
COMPANIES OR ANY OF ITS AFFILIATES BY THE SELLER, AND ALL AMOUNTS OWED TO THE
SELLER OR ANY OF ITS AFFILIATES BY THE COMPANIES UNDER THE ACCOUNTS LISTED ON
SCHEDULE 4.7 SHALL BE CANCELED OR ELIMINATED.
ARTICLE V
ACTIONS SUBSEQUENT TO THE CLOSING
THE PARTIES COVENANT TO TAKE THE FOLLOWING ACTIONS SUBSEQUENT TO
THE CLOSING:
5.1 BOOKS AND RECORDS; AVAILABILITY TO THE SELLER. (a)
IMMEDIATELY AFTER THE CLOSING, THE SELLER SHALL DELIVER TO THE COMPANIES ALL
BOOKS, PAPERS, FILES, TAX RETURNS AND RECORDS (INCLUDING THE CORPORATE MINUTE
BOOKS AND CORPORATE SEALS, PERSONNEL RECORDS, FINANCIAL STATEMENTS AND RELATED
WORK PAPERS) THAT RELATE TO THE COMPANIES AND THAT ARE IN THE POSSESSION OF THE
SELLER OR ANY AFFILIATE OR AGENT THEREOF AND NOT IN THE POSSESSION OF THE
COMPANIES.
(b) AFTER THE CLOSING, THE PURCHASER SHALL, AND SHALL CAUSE THE
COMPANIES TO, (i) USE THEIR REASONABLE BEST EFFORTS TO PROPERLY RETAIN AND
MAINTAIN SUCH RECORDS UNTIL SUCH TIME AS THE SELLER REASONABLY AGREES THAT SUCH
RETENTION AND MAINTENANCE IS NO LONGER NECESSARY AND (ii) ALLOW THE SELLER AND
ITS RESPECTIVE AGENTS AND OTHER REPRESENTATIVES (AND AGENTS OR OTHER
REPRESENTATIVES OF ANY OF THEIR RESPECTIVE AFFILIATES), AT TIMES AND DATES
MUTUALLY ACCEPTABLE TO THE PARTIES, TO INSPECT, REVIEW AND MAKE COPIES OF SUCH
RECORDS AS THE SELLER MAY DEEM REASONABLY NECESSARY FROM TIME TO TIME, SUCH
ACTIVITIES TO BE CONDUCTED DURING NORMAL BUSINESS HOURS. DURING SUCH PERIOD,
THE SELLER, ITS COUNSEL AND ACCOUNTANTS SHALL HAVE THE RIGHT TO EXAMINE AND MAKE
COPIES AT THE SELLER'S EXPENSE OF THE COMPANIES' BOOKS, RECORDS AND OTHER DATA
IN EXISTENCE ON THE CLOSING DATE.
5.2 COOPERATION IN LITIGATION. EACH PARTY SHALL PROVIDE THE OTHER
WITH SUCH COOPERATION AS MAY REASONABLY BE REQUESTED, AT THE EXPENSE OF THE
REQUESTING PARTY (UNLESS THE REQUESTING PARTY IS TO BE INDEMNIFIED HEREUNDER
WITH RESPECT THERETO IN WHICH CASE SUCH COOPERATION SHALL BE GIVEN AT THE
EXPENSE OF THE INDEMNIFYING PARTY), IN CONNECTION WITH THE
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DEFENSE OF ANY LITIGATION WHETHER EXISTING AT THE CLOSING DATE OR ARISING
THEREAFTER OUT OF, OR RELATING TO, THE BUSINESS OR AFFAIRS OF THE COMPANIES
(OTHER THAN LITIGATION BETWEEN THE PARTIES), INCLUDING WITHOUT LIMITATION (TO
THE EXTENT PERMITTED BY LAW WITHOUT VIOLATING ANY REQUIREMENT OF CONFIDENTIALITY
OR SECRECY) BY MAKING AVAILABLE ALL BOOKS AND RECORDS RELATING THERETO AND ALL
EMPLOYEES HAVING KNOWLEDGE OF THE MATTERS IN CONTROVERSY.
5.3 POST-CLOSING PAYMENTS. The Seller shall pay to the Purchaser
$1.3 million, in immediately available U.S. dollar-denominated funds by wire
transfer, no later than 15 days after the Closing Date, and the Purchase Price
shall be deemed reduced by $1.3 million upon the making of such payment.
5.4 INDEMNIFICATION OF DIRECTORS AND OFFICERS. UNTIL THE FIFTH
ANNIVERSARY OF THE CLOSING DATE, PURCHASER SHALL NOT, AND SHALL NOT PERMIT ANY
OF ITS SUBSIDIARIES TO, TAKE ANY ACTION TO AMEND ANY PROVISION OF THE
CERTIFICATE OF INCORPORATION OR BY-LAWS OF THE COMPANIES THAT PROVIDES FOR
INDEMNIFICATION OF OFFICERS, DIRECTORS OR EMPLOYEES (INCLUDING AN AMENDMENT
EFFECTED THROUGH A MERGER, CONSOLIDATION, SALE OF ALL OR SUBSTANTIALLY ALL OF
THE ASSETS, LIQUIDATION OR DISSOLUTION OF ANY SUCH CORPORATION), IF THE EFFECT
OF ANY SUCH AMENDMENT WOULD BE TO ADVERSELY AFFECT THE RIGHTS PROVIDED THEREBY
TO ANY PERSON WHO SHALL HAVE SERVED AS A DIRECTOR, OFFICER OR EMPLOYEE OF ANY OF
THE COMPANIES PRIOR TO THE CLOSING DATE.
5.5 FURTHER ACTION. IN CASE AT ANY TIME AFTER THE CLOSING ANY
FURTHER ACTION IS NECESSARY TO CARRY OUT THE PURPOSE OF THIS AGREEMENT, EACH OF
THE SELLER AND THE PURCHASER WILL TAKE SUCH FURTHER ACTION (INCLUDING THE
EXECUTION AND DELIVERY OF SUCH FURTHER INSTRUMENTS AND DOCUMENTS) AS THE OTHER
PARTY REASONABLY MAY REQUEST, INCLUDING, BUT NOT LIMITED TO THE TRANSFER OF ANY
REGISTRATIONS OR APPLICATIONS FOR INTELLECTUAL PROPERTY TO THE PURCHASER OR THE
COMPANIES, ALL AT THE SOLE COST AND EXPENSE OF THE REQUESTING PARTY (UNLESS THE
REQUESTING PARTY IS ENTITLED TO INDEMNIFICATION THEREFOR UNDER ARTICLE VIII);
PROVIDED, HOWEVER, THAT THE SELLER SHALL PAY ANY COSTS AND EXPENSES RELATED TO
THE TRANSFER OF ANY REGISTRATIONS OR APPLICATIONS FOR INTELLECTUAL PROPERTY TO
THE PURCHASER OR THE COMPANIES.
5.6 WARN. The Purchaser agrees that between the Closing Date and
a period ninety (90) calendar days thereafter it will not, with respect to any
single site of employment, facility, operating unit or employee, effect a "plant
closing" or "mass layoff" as those terms are defined in WARN without complying
with the notice requirements and all other provisions of WARN or any state law,
provided, that the Seller agrees that it shall, upon the Purchaser's reasonable
request, cooperate with the Purchaser and issue, at the Purchaser's expense, any
and all notices required by WARN on behalf of the Purchaser, which the Purchaser
shall have approved, with respect to such "plant closings" or "mass layoffs"
which may be anticipated by the Purchaser to occur within the ninety (90) day
period following the Closing Date referred to above.
ARTICLE VI
CONDITIONS PRECEDENT
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6.1 OBLIGATIONS OF THE PURCHASER. THE OBLIGATIONS OF THE
PURCHASER TO PURCHASE THE SHARES AND TO CONSUMMATE THE OTHER TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT SHALL BE SUBJECT TO THE SATISFACTION (OR WAIVER
BY THE PURCHASER) OF THE FOLLOWING CONDITIONS:
(a) REPRESENTATIONS AND WARRANTIES AND PERFORMANCE. THE
REPRESENTATIONS AND WARRANTIES OF THE SELLER CONTAINED HEREIN SHALL HAVE BEEN
TRUE AND CORRECT IN ALL MATERIAL RESPECTS WHEN MADE (EXCEPT THAT THOSE
REPRESENTATIONS AND WARRANTIES THAT ARE QUALIFIED BY SELLER MATERIAL ADVERSE
EFFECT SHALL BE TRUE AND CORRECT) AND, EXCEPT AS CONTEMPLATED BY THIS AGREEMENT,
SHALL BE TRUE AND CORRECT IN ALL MATERIAL RESPECTS (EXCEPT THAT THOSE
REPRESENTATIONS AND WARRANTIES THAT ARE QUALIFIED BY SELLER MATERIAL ADVERSE
EFFECT SHALL BE TRUE AND CORRECT) AT AND AS OF THE CLOSING DATE WITH THE SAME
EFFECT AS THOUGH MADE AT AND AS OF THE CLOSING DATE. THE SELLER SHALL HAVE
PERFORMED IN ALL MATERIAL RESPECTS ALL OBLIGATIONS AND SHALL HAVE COMPLIED IN
ALL MATERIAL RESPECTS WITH ALL COVENANTS AND OTHER AGREEMENTS REQUIRED BY THIS
AGREEMENT TO BE PERFORMED OR COMPLIED WITH BY THE SELLER AT OR PRIOR TO THE
CLOSING DATE, INCLUDING, WITHOUT LIMITATION, THE REORGANIZATION OF THE INCLUDED
ASSETS AND EXCLUDED LEASES CONTEMPLATED BY SECTION 1.3.
(b) OFFICER'S CERTIFICATES. THE PURCHASER SHALL HAVE RECEIVED AN
EXECUTED CERTIFICATE, DATED AS OF THE CLOSING DATE, OF THE GENERAL COUNSEL OF
THE SELLER TO THE EFFECT THAT THE CONDITIONS SPECIFIED IN SECTION 6.1(a) HAVE
BEEN SATISFIED WITH RESPECT TO THE SELLER AND EACH COMPANY.
(c) LIEN RELEASES. THE PURCHASER SHALL HAVE RECEIVED RELEASES
(INCLUDING UCC-3 TERMINATING STATEMENTS) OF ALL LIENS ON THE SHARES AND ANY OF
THE ASSETS OF COMPANIES, EXCEPT FOR LIENS SET FORTH ON SECTION 6.1(c) OF THE
SELLER DISCLOSURE LETTER, LIENS IMPOSED BY GOVERNMENTAL AUTHORITIES FOR TAXES,
ASSESSMENTS OR CHARGES NOT YET DUE OR WHICH ARE BEING CONTESTED IN GOOD FAITH
AND BY APPROPRIATE PROCEEDINGS, CARRIERS', MECHANICS', WAREHOUSEMEN'S,
ARTISANS', SERVICE, SUPPLIERS', DEPOSITARIES', OR OTHER LIKE LIENS ARISING IN
THE ORDINARY COURSE OF BUSINESS, PLEDGES OR DEPOSITS IN RESPECT OF WORKERS'
COMPENSATION, UNEMPLOYMENT INSURANCE AND OTHER SOCIAL SECURITY LEGISLATION,
LIENS OF LANDLORDS SECURING TENANT LEASE OBLIGATIONS, WHETHER ARISING BY STATUTE
OR CONTRACT, DEPOSITS TO SECURE THE PERFORMANCE OF BIDS, TRADE CONTRACTS,
LEASES, STATUTORY OBLIGATIONS, SURETY AND APPEAL BONDS, PERFORMANCE BONDS AND
OTHER OBLIGATIONS OF LIKE NATURE INCURRED IN THE ORDINARY COURSE OF BUSINESS,
EASEMENTS, RIGHTS-OF-WAY, RESTRICTIONS AND OTHER SIMILAR ENCUMBRANCES INCURRED
IN THE ORDINARY COURSE OF BUSINESS AND ENCUMBRANCES CONSISTING OF ZONING
RESTRICTIONS, EASEMENTS, LICENSES, RESTRICTION ON THE USE OF PROPERTY OR MINOR
IMPERFECTIONS, PERMITTED HEREUNDER AND ANY LIENS PLACED ON THE COMPANY
PROPERTIES AND RELATED IMPROVEMENTS IN CONNECTION WITH THE FINANCING OF THOSE
RESPECTIVE PROPERTIES.
(d) CONSENTS. ALL NECESSARY CONSENTS, APPROVALS OR AUTHORIZATIONS
TO THE PURCHASE OF THE SHARES AND CONSUMMATION OF THE OTHER TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT BY ANY GOVERNMENTAL OR REGULATORY AUTHORITY OR
ANY OTHER PERSON SET FORTH IN SCHEDULE 6.1(d) SHALL HAVE BEEN OBTAINED AND BE IN
FULL FORCE AND EFFECT.
(e) INJUNCTIONS. No action or proceeding seeking an injunction or
temporary restraining order shall be pending that seeks to restrain, prohibit or
invalidate the purchase or sale
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of the Shares or the consummation of the other transactions contemplated by this
Agreement and no such injunction or restraining order shall have been issued and
remain in force; PROVIDED, HOWEVER, THAT PRIOR TO INVOKING THIS SECTION 6.1(e),
THE SELLER SHALL HAVE USED ITS BEST EFFORTS TO HAVE ANY SUCH ACTION OR
PROCEEDING DISMISSED OR SUCH ORDER OR DECREE VACATED; AND, PROVIDED, FURTHER,
THAT THE PROVISIONS OF THIS SECTION 6.1(e) SHALL NOT APPLY IF THE SELLER OR ANY
AFFILIATE OF THE SELLER (OTHER THAN THE COMPANIES) HAS DIRECTLY OR INDIRECTLY
SOLICITED OR ENCOURAGED ANY SUCH ACTION OR PROCEEDING.
(f) FINANCING. The funds referred to in the commitment letters
described in Section 3.2(h) above shall be available to the Purchaser to be
applied to the Purchase Price; PROVIDED, that the Purchaser uses its reasonable
best efforts to meet all terms and conditions of obtaining such funds.
(g) CREDIT AGREEMENT. THE REVOLVING CREDIT AGREEMENT, DATED AS OF
FEBRUARY 25, 1998, AMONG THE SELLER, ARG ENTERPRISES, INC., ARG PROPERTY
MANAGEMENT CORPORATION, GRANDY'S, SPOON'S, SPECTRUM, NATIONAL SPORTS GRILL, THE
BANKS LISTED THEREIN, AND BANKBOSTON, N.A., AS AGENT, SHALL BE AMENDED, AS
NECESSARY, TO RELEASE THE COMPANIES FROM THEIR OBLIGATIONS THEREUNDER AND TO
PERMIT THE TRANSACTIONS CONTEMPLATED IN THIS AGREEMENT.
6.2 OBLIGATIONS OF THE SELLER. THE OBLIGATIONS OF THE SELLER TO
SELL THE SHARES AND REORGANIZE THE INCLUDED ASSETS AND THE EXCLUDED LEASES AS
CONTEMPLATED BY SECTION 1.3 AND TO CONSUMMATE THE OTHER TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT SHALL BE SUBJECT TO THE SATISFACTION (OR WAIVER
BY THE SELLER) OF THE FOLLOWING CONDITIONS:
(a) REPRESENTATIONS AND WARRANTIES AND PERFORMANCE. THE
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER CONTAINED HEREIN SHALL HAVE BEEN
TRUE AND CORRECT IN ALL RESPECTS MATERIAL TO THE VALIDITY OR ENFORCEABILITY OF
THIS AGREEMENT (EXCEPT THAT THOSE REPRESENTATIONS AND WARRANTIES THAT ARE
QUALIFIED BY PURCHASER MATERIAL ADVERSE EFFECT SHALL BE TRUE AND CORRECT) WHEN
MADE AND, EXCEPT AS AFFECTED BY THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT,
SHALL BE TRUE AND CORRECT IN ALL MATERIAL RESPECTS (EXCEPT THAT THOSE
REPRESENTATIONS AND WARRANTIES THAT ARE QUALIFIED BY PURCHASER MATERIAL ADVERSE
EFFECT SHALL BE TRUE AND CORRECT) AT AND AS OF THE CLOSING DATE WITH THE SAME
EFFECT AS THOUGH MADE AT AND AS OF THE CLOSING DATE. THE PURCHASER SHALL HAVE
PERFORMED IN ALL MATERIAL RESPECTS ALL OBLIGATIONS AND SHALL HAVE COMPLIED IN
ALL MATERIAL RESPECTS WITH ALL COVENANTS AND OTHER AGREEMENTS REQUIRED BY THIS
AGREEMENT TO BE PERFORMED OR COMPLIED WITH BY IT PRIOR TO THE CLOSING DATE.
(b) OFFICER'S CERTIFICATES. THE SELLER SHALL HAVE RECEIVED AN
EXECUTED CERTIFICATE, DATED AS OF THE CLOSING DATE, OF THE CHIEF EXECUTIVE
OFFICER AND THE CHIEF FINANCIAL OFFICER OF THE PURCHASER TO THE EFFECT THAT THE
CONDITIONS SPECIFIED IN SECTION 6.2(a) HAVE BEEN SATISFIED.
(c) CONSENTS. ALL REQUIRED CONSENTS, APPROVALS OR AUTHORIZATIONS
TO THE PURCHASE OF THE SHARES AND CONSUMMATION OF THE OTHER TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT BY ANY GOVERNMENTAL OR REGULATORY AUTHORITY OR
ANY OTHER PERSON SHALL HAVE BEEN OBTAINED AND BE IN FULL FORCE AND EFFECT.
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(d) INJUNCTIONS. NO ACTION OR PROCEEDING SEEKING AN INJUNCTION OR
TEMPORARY RESTRAINING ORDER SHALL BE PENDING THAT SEEKS TO RESTRAIN, PROHIBIT OR
INVALIDATE THE PURCHASE OR SALE OF THE SHARES OR THE CONSUMMATION OF THE OTHER
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT AND NO SUCH INJUNCTION OR
RESTRAINING ORDER SHALL HAVE BEEN ISSUED AND REMAIN IN FORCE.
(e) SERVICES AGREEMENT. THE SELLER SHALL HAVE RECEIVED AN EXECUTED
COPY OF A SERVICES AGREEMENT IN A FORM REASONABLY SATISFACTORY TO IT, PURSUANT
TO WHICH THE PURCHASER AND THE SELLER SHALL CONTINUE TO PROVIDE THE SERVICES SET
FORTH THEREIN ON AN INTERIM BASIS.
(f) CONSULTING AGREEMENT. THE SELLER SHALL HAVE RECEIVED AN
EXECUTED COPY OF A CONSULTING AGREEMENT WITH XXXXX XXXXXXX IN A FORM REASONABLY
SATISFACTORY TO IT, WHICH AGREEMENT SHALL HAVE A TERM OF AT LEAST ONE (1) YEAR.
ARTICLE VII
TAX MATTERS
7.1 SELLER'S INDEMNITY FOR TAXES. THE SELLER SHALL INDEMNIFY AND
HOLD HARMLESS THE PURCHASER, THE COMPANIES AND THEIR AFFILIATES, AGAINST ANY
LOSS, DAMAGE, LIABILITY OR EXPENSE, INCLUDING, BUT NOT LIMITED TO, REASONABLE
FEES FOR ATTORNEYS AND OTHER OUTSIDE CONSULTANTS, INCURRED IN CONTESTING OR
OTHERWISE IN CONNECTION WITH ANY TAXES OF OR PAYABLE BY THE SELLER, THE
COMPANIES OR THEIR AFFILIATES WITH RESPECT TO TAXABLE YEARS OR PERIODS ENDING ON
OR BEFORE THE CLOSING DATE SOLELY WITH RESPECT TO INCOME OF THE SELLER OR ANY
AFFILIATE OF THE SELLER OTHER THAN THE COMPANIES PURSUANT TO TREASURY
REGULATIONS SECTION 1.1502-6 OR ANY ANALOGOUS PROVISIONS OF STATE OR LOCAL
INCOME OR FRANCHISE TAX LAW; AND WITH RESPECT TO PAYMENTS REQUIRED TO BE MADE
AFTER THE CLOSING DATE UNDER ANY TAX INDEMNITY, TAX SHARING, TAX ALLOCATION, OR
SIMILAR AGREEMENTS (WHETHER OR NOT IN WRITING) IN EFFECT ON OR PRIOR TO THE
CLOSING DATE; AND TAXES IMPOSED ON THE PURCHASER, THE COMPANIES OR ANY OF THEIR
AFFILIATES FROM THE REORGANIZATION CONTEMPLATED IN SECTION 1.3 OF THIS
AGREEMENT.
7.2 PURCHASER'S, COMPANIES' AND THEIR AFFILIATE'S LIABILITY FOR
TAXABLE PERIODS COMMENCING AFTER CLOSING DATE. THE PURCHASER SHALL INDEMNIFY
AND HOLD HARMLESS THE SELLER AND ANY OF ITS AFFILIATES AGAINST ANY LOSS, DAMAGE,
LIABILITY OR EXPENSE, INCLUDING BUT NOT LIMITED TO, REASONABLE FEES FOR
ATTORNEYS AND OTHER OUTSIDE CONSULTANTS INCURRED IN CONTESTING OR OTHERWISE IN
CONNECTION WITH TAXES OF, OR PAYABLE BY, THE PURCHASER, THE COMPANIES OR THEIR
AFFILIATES FOR ANY TAXABLE YEAR OR TAXABLE PERIOD COMMENCING AFTER THE CLOSING.
7.3 APPORTIONMENT OF TAXES. IN ORDER TO APPORTION APPROPRIATELY
ANY TAXES RELATING TO ANY TAXABLE YEAR OR PERIOD THAT INCLUDES THE PORTION OF
SUCH TAXABLE YEAR OR PERIOD ENDING ON THE CLOSING DATE OF A TAXABLE YEAR THAT
BEGINS BEFORE THE CLOSING DATE AND ENDS AFTER THE CLOSING DATE (AN "INTERIM
PERIOD"), THE PARTIES HERETO SHALL, TO THE EXTENT PERMITTED UNDER APPLICABLE
LAW, ELECT WITH THE RELEVANT TAX AUTHORITY TO TREAT FOR ALL PURPOSES, THE
CLOSING DATE AS THE LAST DAY OF THE TAXABLE YEAR OR PERIOD OF THE COMPANIES, AND
SUCH INTERIM PERIOD SHALL BE TREATED AS A SHORT TAXABLE YEAR FOR PURPOSES OF
THIS ARTICLE VII. IN ANY CASE WHERE APPLICABLE LAW DOES NOT PERMIT ANY COMPANY
TO TREAT THE CLOSING DATE AS THE LAST DAY OF THE TAXABLE YEAR OR
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PERIOD OF SUCH COMPANY WITH RESPECT TO TAXES THAT ARE PAYABLE WITH RESPECT TO AN
INTERIM PERIOD, THE PORTION OF ANY SUCH TAX THAT IS ALLOCABLE TO THE PORTION OF
THE INTERIM PERIOD ENDING ON THE CLOSING DATE SHALL BE:
(x) IN THE CASE OF TAXES THAT ARE EITHER (1) BASED UPON OR
RELATED TO INCOME OR RECEIPTS, OR (2) IMPOSED IN CONNECTION WITH ANY SALE
OR OTHER TRANSFER OR ASSIGNMENT OF PROPERTY (REAL OR PERSONAL, TANGIBLE
OR INTANGIBLE) (OTHER THAN CONVEYANCES PURSUANT TO THIS AGREEMENT, WHICH
ARE COVERED UNDER SECTION 7.5), DEEMED EQUAL TO THE AMOUNT WHICH WOULD BE
PAYABLE IF THE TAXABLE YEAR OR PERIOD ENDED ON THE CLOSING DATE (EXCEPT
THAT, SOLELY FOR PURPOSES OF DETERMINING THE MARGINAL TAX RATE APPLICABLE
TO INCOME OR RECEIPTS DURING SUCH PERIOD IN A JURISDICTION IN WHICH SUCH
TAX RATE DEPENDS UPON THE LEVEL OF INCOME OR RECEIPTS, ANNUALIZED INCOME
OR RECEIPTS MAY BE TAKEN INTO ACCOUNT, IF APPROPRIATE, FOR AN EQUITABLE
SHARING OF SUCH TAXES); AND
(y) IN THE CASE OF TAXES NOT DESCRIBED IN SUBPARAGRAPH (x)
ABOVE THAT ARE IMPOSED ON A PERIODIC BASIS AND MEASURED BY THE LEVEL OF
ANY ITEM, DEEMED TO BE THE AMOUNT OF SUCH TAXES FOR THE ENTIRE PERIOD
(OR, IN THE CASE OF SUCH TAXES DETERMINED ON AN ARREARS BASIS, THE AMOUNT
OF SUCH TAXES FOR THE IMMEDIATELY PRECEDING PERIOD) MULTIPLIED BY A
FRACTION THE NUMERATOR OF WHICH IS THE NUMBER OF CALENDAR DAYS IN THE
INTERIM PERIOD ENDING ON THE CLOSING DATE AND THE DENOMINATOR OF WHICH IS
THE NUMBER OF CALENDAR DAYS IN THE ENTIRE RELEVANT PERIOD.
7.4 PREPARATION OF TAX RETURNS. THE SELLER SHALL PREPARE AND FILE
OR OTHERWISE FURNISH TO THE APPROPRIATE PARTY (OR CAUSE TO BE PREPARED AND FILED
OR SO FURNISHED) IN A TIMELY MANNER (i) THE UNITED STATES FEDERAL INCOME TAX
RETURN OF THE COMPANIES AND (ii) ALL STATE OR LOCAL INCOME OR FRANCHISE TAX
RETURNS FILED BY ANY OF THE COMPANIES AS PART OF A COMBINED OR CONSOLIDATED
RETURN INCLUDING THE SELLER OR ANY AFFILIATE OF THE SELLER OTHER THAN THE
COMPANIES THAT INCLUDES ANY TAXABLE YEAR OR PERIOD THAT ENDS ON OR PRIOR TO THE
CLOSING (SUCH PERIODS AND INTERIM PERIODS A "PRECLOSING PERIOD") PERIOD. IN
ADDITION, THE SELLER SHALL PREPARE AND FILE, OR CAUSE TO BE PREPARED AND FILED,
ANY AND ALL OTHER TAX RETURNS REQUIRED TO BE FILED BY THE COMPANIES (AFTER
GIVING EFFECT TO ANY VALID EXTENSIONS OF THE DUE DATE FOR FILING ANY SUCH TAX
RETURNS) ON OR PRIOR TO THE CLOSING DATE. ALL SUCH TAX RETURNS SHALL BE
PREPARED IN A MANNER CONSISTENT WITH THE PRIOR TAX RETURNS OF THE COMPANIES,
UNLESS OTHERWISE REQUIRED UNDER APPLICABLE LAW. THE SELLERS SHALL TIMELY PAY
(OR CAUSE TO BE TIMELY PAID) ALL TAXES SHOWN AS DUE AND OWING ON ALL SUCH TAX
RETURNS. THE PURCHASER SHALL PREPARE AND FILE, OR CAUSE TO BE PREPARED AND
FILED, ANY AND ALL OTHER TAX RETURNS REQUIRED TO BE FILED BY THE COMPANIES;
PROVIDED THAT THE PURCHASER SHALL FURNISH THE SELLER WITH COPIES OF SUCH TAX
RETURNS THAT RELATE TO A PRECLOSING PERIOD AT LEAST 45 DAYS PRIOR TO THEIR DUE
DATE AND, IF SUCH TAX RETURN SHALL INCLUDE AN INTERIM PERIOD, A CALCULATION IN
REASONABLE DETAIL OF THE TAX PAYABLE FOR THE INTERIM PERIOD, AND THE PURCHASER
SHALL NOT FILE ANY TAX RETURNS RELATING TO ANY PRECLOSING PERIODS WITHOUT THE
SELLER'S APPROVAL, WHICH APPROVAL SHALL NOT BE UNREASONABLY WITHHELD. THE
PURCHASER SHALL PAY (OR CAUSE TO BE PAID) ALL TAXES SHOWN AS DUE AND OWING ON
ALL SUCH TAX RETURNS, AND THE SELLER SHALL PAY THE PURCHASER ANY TAXES OTHER
THAN REAL OR PERSONAL PROPERTY TAXES (AS SHOWN ON SUCH TAX RETURNS) RELATING TO
PRECLOSING PERIODS AT LEAST 10 DAYS PRIOR TO THE DUE DATE FOR FILING SUCH TAX
RETURNS. THE SELLER, THE COMPANIES AND THE PURCHASER SHALL REASONABLY
COOPERATE, AND SHALL CAUSE THEIR
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RESPECTIVE AFFILIATES, OFFICERS, EMPLOYEES, AGENTS, AUDITORS AND OTHER
REPRESENTATIVES REASONABLY TO COOPERATE, IN PREPARING AND FILING ALL TAX
RETURNS, INCLUDING MAINTAINING AND MAKING AVAILABLE TO EACH OTHER ALL RECORDS
NECESSARY IN CONNECTION WITH TAXES AND IN RESOLVING ALL DISPUTES AND AUDITS WITH
RESPECT TO ALL TAXABLE PERIODS RELATING TO TAXES. THE PURCHASER AND THE SELLER
RECOGNIZE THAT THE SELLER AND THE SELLERS'S AGENTS AND OTHER REPRESENTATIVES
WILL NEED ACCESS, FROM TIME TO TIME, AFTER THE CLOSING DATE, TO CERTAIN
ACCOUNTING AND TAX RECORDS AND INFORMATION HELD BY THE COMPANIES TO THE EXTENT
SUCH RECORDS AND INFORMATION PERTAIN TO EVENTS OCCURRING PRIOR TO THE CLOSING
DATE; THEREFORE, EACH OF THE PURCHASER AND THE COMPANIES AGREES (i) TO USE ALL
REASONABLE EFFORTS TO PROPERLY RETAIN AND MAINTAIN SUCH RECORDS UNTIL SUCH TIME
AS THE SELLER AGREES THAT SUCH RETENTION AND MAINTENANCE IS NO LONGER NECESSARY
(BUT IN NO EVENT LONGER THAN SIX YEARS AFTER THE CLOSING DATE; PROVIDED,
HOWEVER, THAT THE SIX-YEAR PERIOD SHALL BE EXTENDED IF AT THE END OF SUCH PERIOD
THE SELLER IS ENGAGED IN A CONTROVERSY WITH A TAX AUTHORITY WITH RESPECT TO
MATERIALS RELEVANT TO SUCH CONTROVERSY UNTIL SUCH CONTROVERSY IS FINALLY
RESOLVED (TAKING INTO ACCOUNT ALL RIGHTS OF APPEAL)) AND (ii) TO ALLOW THE
SELLER AND THE SELLER'S AGENTS AND OTHER REPRESENTATIVES, AT TIMES AND DATES
MUTUALLY ACCEPTABLE TO THE PARTIES, TO INSPECT, REVIEW AND MAKE COPIES OF SUCH
RECORDS AS THE SELLER, ITS AGENTS AND OTHER REPRESENTATIVES MAY DEEM NECESSARY
OR APPROPRIATE FROM TIME TO TIME, SUCH ACTIVITIES TO BE CONDUCTED DURING NORMAL
BUSINESS HOURS AND AT THE SELLER'S EXPENSE.
7.5 TRANSFER AND CONVEYANCE TAXES. THE SELLER SHALL BE LIABLE FOR
AND SHALL PAY ALL APPLICABLE SALES, TRANSFER, RECORDING, DEED, STAMP AND OTHER
SIMILAR TAXES, INCLUDING, WITHOUT LIMITATION, ANY REAL PROPERTY TRANSFER OR
GAINS TAXES (IF ANY), RESULTING FROM THE CONSUMMATION OF THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT.
7.6 CONTESTS. THE PURCHASER SHALL PROMPTLY NOTIFY THE SELLER IN
WRITING OF ANY WRITTEN NOTICE OF A PROPOSED ASSESSMENT OR CLAIM IN AN AUDIT OR
ADMINISTRATIVE OR JUDICIAL PROCEEDING INVOLVING THE COMPANIES WHICH, IF
DETERMINED ADVERSELY TO THE TAXPAYER, WOULD BE GROUNDS FOR INDEMNIFICATION UNDER
THIS ARTICLE VII; PROVIDED, HOWEVER, THAT A FAILURE TO GIVE SUCH NOTICE WILL NOT
AFFECT THE PURCHASER'S RIGHT TO INDEMNIFICATION HEREUNDER, EXCEPT TO THE EXTENT,
IF ANY, THAT, BUT FOR SUCH FAILURE, UNLESS SUCH FAILURE RESULTS IN AN ADVERSE
EFFECT ON THE SELLER, THE SELLER COULD HAVE AVOIDED THE TAX LIABILITY IN
QUESTION. THE SELLER SHALL NOT SETTLE OR OTHERWISE COMPROMISE ANY ISSUE OR
MATTER WITHOUT THE PURCHASER'S PRIOR WRITTEN CONSENT (WHICH SHALL NOT BE
UNREASONABLY WITHHELD) IF SUCH ISSUE OR MATTER WILL HAVE A MATERIAL ADVERSE
EFFECT ON THE TAX LIABILITY OF THE PURCHASER OR THE COMPANIES FOR A POST-CLOSING
TAXABLE YEAR OR PERIOD. IF THE SELLER DOES NOT ASSUME THE DEFENSE OF ANY SUCH
AUDIT OR PROCEEDING, THE PURCHASER MAY, WITHOUT ANY EFFECT TO ITS OR THE
COMPANIES' RIGHT TO INDEMNIFICATION UNDER SECTION 7.1, DEFEND THE SAME IN SUCH
MANNER AS IT MAY DEEM APPROPRIATE, INCLUDING, BUT NOT LIMITED TO, SETTLING SUCH
AUDIT OR PROCEEDING. EXCEPT AS PROVIDED OTHERWISE IN THIS SECTION 7.6, THE
PURCHASER SHALL CONTROL AT ITS OWN EXPENSE ANY AND ALL AUDIT, ADMINISTRATIVE AND
JUDICIAL PROCEEDINGS RELATED TO THE COMPANIES OR THE COMPANIES' TAXES.
7.7 TERMINATION OF SELLER'S INDEMNITY OBLIGATIONS FOR TAXES.
NOTWITHSTANDING ANY PROVISION HEREIN TO THE CONTRARY, THE OBLIGATIONS OF THE
SELLER TO INDEMNIFY AND HOLD HARMLESS THE PURCHASER, THE COMPANIES AND THEIR
AFFILIATES PURSUANT TO THIS ARTICLE VII SHALL TERMINATE AT THE CLOSE OF BUSINESS
ON THE 30TH DAY FOLLOWING THE EXPIRATION OF THE APPLICABLE STATUTE OF
23
LIMITATIONS WITH RESPECT TO THE TAX LIABILITIES IN QUESTION (GIVING EFFECT TO
ANY WAIVER, MITIGATION OR EXTENSION THEREOF).
7.8 TAX REFUNDS. ANY REFUNDS OR CREDITS OF TAXES OF, OR WITH
RESPECT TO, THE COMPANIES THAT ARE ATTRIBUTABLE OR ALLOCABLE TO A PRECLOSING
PERIOD SHALL BE FOR THE ACCOUNT OF THE SELLER UNLESS, OR EXCEPT TO THE EXTENT
THAT, THE AMOUNT OF SUCH TAX REFUND OR CREDIT (i) IS ACCRUED OR OTHERWISE
REFLECTED AS AN ASSET ON THE FINANCIAL BOOKS AND RECORDS OF THE COMPANIES AS OF
THE CLOSING DATE OR (ii) RELATES TO A NET OPERATING LOSS OR OTHER CARRYBACK FROM
A TAX PERIOD OR PORTION THEREOF BEGINNING AFTER THE CLOSING DATE; PROVIDED THAT
IF BOTH THE SELLER AND THE PURCHASER MAY CARRY BACK NET OPERATING LOSSES OR
OTHER TAX ITEMS FROM THE SAME TAXABLE PERIODS, ANY REFUND SHALL BE DEEMED
ATTRIBUTABLE TO THE CARRY BACK OF THE SELLER'S OR PURCHASER'S NET OPERATING
LOSSES AND OTHER ITEMS IN ACCORDANCE WITH APPLICABLE LAW AND, TO THE EXTENT
APPLICABLE LAW PERMITS THE CARRY BACK OF NET OPERATING LOSSES OR OTHER TAX ITEMS
TO THE SAME PERIOD, IN THE PROPORTIONS THAT SUCH NET OPERATING LOSSES AND OTHER
TAX ITEMS OF THE SELLER AND PURCHASER WHICH MAY BE CARRIED BACK BEAR TO EACH
OTHER (AND, FOR PURPOSES OF DETERMINING THESE PROPORTIONS, TREATING TAX ITEMS
OTHER THAN NET OPERATING LOSSES AS BEING EQUIVALENT TO AN AMOUNT OF NET
OPERATING LOSSES THAT, IF CARRIED BACK, WOULD PRODUCE THE SAME REFUND AS THE
CARRYBACK OF THE TAX ITEMS). ANY REFUNDS OR CREDITS OF TAXES OF, OR WITH
RESPECT TO THE COMPANIES THAT ARE ACCRUED OR OTHERWISE REFLECTED ON THE
FINANCIAL BOOKS AND RECORDS OF THE COMPANIES AS OF THE CLOSING DATE, OR THAT ARE
ATTRIBUTABLE OR ALLOCABLE TO ANY PERIOD (OR PORTION THEREOF) BEGINNING AFTER THE
CLOSING DATE (TREATING SUCH DATE AS THE BEGINNING OF A SHORT TAXABLE YEAR FOR
THIS PURPOSE) SHALL BE FOR THE ACCOUNT OF THE PURCHASER. THE PURCHASER SHALL,
IF THE SELLER SO REQUESTS AND AT THE SELLER'S EXPENSE, CAUSE ANY COMPANY TO FILE
FOR AND OBTAIN ANY REFUNDS OR CREDITS TO WHICH THE SELLER IS ENTITLED HEREUNDER,
INCLUDING, WITHOUT LIMITATION, THROUGH THE PROSECUTION OF ANY ADMINISTRATIVE OR
JUDICIAL PROCEEDING WHICH THE SELLER, IN ITS SOLE AND ABSOLUTE DISCRETION,
CHOOSES TO DIRECT SUCH ENTITY TO PURSUE; PROVIDED, THAT SUCH ACTIONS WOULD NOT
HAVE AN ADVERSE EFFECT ON THE PURCHASER, THE COMPANIES OR THEIR AFFILIATES. THE
PURCHASER SHALL PERMIT THE SELLER TO CONTROL (AT THE SELLER'S EXPENSE) THE
PROSECUTION OF ANY SUCH REFUND OR CREDIT CLAIM, AND WHEN DEEMED APPROPRIATE BY
THE SELLER, SHALL CAUSE THE RELEVANT ENTITY TO AUTHORIZE BY APPROPRIATE POWER OF
ATTORNEY SUCH PERSON AS THE SELLER SHALL DESIGNATE TO REPRESENT SUCH ENTITY WITH
RESPECT TO SUCH REFUND CLAIM. THE SELLER SHALL INDEMNIFY THE PURCHASER AND/OR
ANY AFFILIATE OF THE PURCHASER FOR ANY COSTS, EXPENSES OR OTHER LOSSES INCURRED
BY THE PURCHASER OR ANY AFFILIATE OF THE PURCHASER IN CONNECTION WITH THE
PROSECUTION OF ANY SUCH TAX REFUND OR CREDIT CLAIM. THE PURCHASER SHALL PAY
OVER TO THE SELLER THE AMOUNT OF ANY SUCH TAX REFUND OR CREDIT, MINUS THE AMOUNT
OF ANY TAXES PAYABLE IN RESPECT OF SUCH AMOUNT BY THE PURCHASER OR ANY AFFILIATE
OF THE PURCHASER, PROMPTLY AFTER THE TAX REFUND IS RECEIVED OR ANY SUCH CREDIT
OF TAXES IS GRANTED; PROVIDED, HOWEVER, THAT IF ANY SUCH REFUND OR CREDIT OF
TAXES IS SUBSEQUENTLY DISALLOWED OR REDETERMINED, THE SELLER SHALL REPAY
PROMPTLY TO THE PURCHASER THE AMOUNT OF SUCH DISALLOWED, OR THE AMOUNT OF THE
REDUCTION IN SUCH REDETERMINED, TAX REFUND OR CREDIT INCLUDING INTEREST AND
PENALTIES.
7.9 1445 CERTIFICATE. THE SELLER SHALL DELIVER TO THE PURCHASER
AT THE CLOSING A CERTIFICATE COMPLYING WITH THE CODE AND TREASURY REGULATIONS,
IN FORM AND SUBSTANCE SATISFACTORY TO THE PURCHASER, DULY EXECUTED AND
ACKNOWLEDGED, CERTIFYING THAT THE TRANSACTIONS CONTEMPLATED HEREBY ARE EXEMPT
FROM WITHHOLDING UNDER SECTION 1445 OF THE CODE.
24
ARTICLE VIII
SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION, ETC.
8.1 SURVIVAL. NONE OF THE REPRESENTATIONS AND WARRANTIES MADE BY
THE SELLER AND THE PURCHASER IN THIS AGREEMENT, THE DISCLOSURE IN THE SCHEDULES
HERETO, IN THE SELLER DISCLOSURE LETTER OR IN ANY CERTIFICATE DELIVERED
HEREUNDER, SHALL SURVIVE AFTER THE CLOSING DATE, EXCEPT THAT THE REPRESENTATIONS
AND WARRANTIES MADE IN SECTIONS 3.1(a), (b), (d) AND SECTIONS 3.2(a), (b) AND
THE REPRESENTATIONS AND WARRANTIES RELATING TO 15 U.S.C. SECTION 18a CONTAINED
IN SECTION 3.2(e) SHALL SURVIVE INDEFINITELY, AND THE REPRESENTATIONS AND
WARRANTIES MADE IN SECTIONS 3.2 (i) AND (k) SHALL SURVIVE FOR TWO YEARS. THE
LAST DATE OF EACH SUCH PERIOD IS HEREINAFTER REFERRED TO AS THE "SURVIVAL DATE."
8.2 AGREEMENT TO INDEMNIFY BY THE SELLER. Subject to the terms
and conditions of this Article VIII, the Seller hereby agrees to indemnify,
defend, and hold harmless the Purchaser and its Affiliates, directors, officers,
and employees (individually, a "PURCHASER INDEMNITEE") (except with respect to
Taxes, which is governed by Article VII) from and against, for and in respect
of, any and all damages, losses, obligations, liabilities, claims, actions or
causes of action, encumbrances, costs, and expenses (including, without
limitation, reasonable attorneys' fees), suffered, sustained, incurred, or
required to be paid by any Purchaser Indemnitee (collectively, "PURCHASER'S
DAMAGES") arising out of, based upon, in connection with, or as a result of (a)
the untruth, inaccuracy, breach, or nonfulfillment of any representation or
warranty that shall survive the Closing Date pursuant to Section 8.1 or any
covenant or agreement of the Seller contained in or made pursuant to this
Agreement, the Disclosure Schedules and the Seller Disclosure Letter in and or
certificate delivered hereunder, (b) the Excluded Leases; PROVIDED, HOWEVER,
THAT THE SELLER'S AGGREGATE LIABILITY PURSUANT TO THIS CLAUSE (b) RELATING TO
MATTERS ADDRESSED IN SECTION 3.2(k) SHALL NOT EXCEED $500,000 OR (c) the conduct
of the Seller's business at any time following the Closing Date.
8.3 AGREEMENT TO INDEMNIFY BY THE PURCHASER. Subject to the terms
and conditions of this Article VIII, the Purchaser hereby agrees to indemnify,
defend, and hold harmless the Seller and its Affiliates (individually, a "SELLER
INDEMNITEE") (except with respect to Taxes, which is governed by Article VII)
harmless from and against, for and in respect of, any and all damages, losses,
obligations, liabilities, claims, actions or causes of action, encumbrances,
costs, and expenses (including, without limitation, reasonable attorneys' fees)
suffered, sustained, incurred, or required to be paid by any Seller Indemnitee
(collectively, "SELLER'S DAMAGES") arising out of, based upon, in connection
with, or as a result of (a) the untruth, inaccuracy, breach, or nonfulfillment
of any representation or warranty that shall survive the Closing Date pursuant
to Section 8.1 OR ANY COVENANT OR AGREEMENT OF THE PURCHASER CONTAINED IN OR
MADE PURSUANT TO THIS AGREEMENT, INCLUDING IN ANY CERTIFICATE DELIVERED
HEREUNDER, (b) THE CONDUCT OF THE BUSINESS OF THE COMPANIES ANY TIME FOLLOWING
THE CLOSING DATE (INCLUDING, WITHOUT LIMITATION, LIABILITIES, IF ANY, FOR
SEVERANCE OR FOR PROVIDING CONTINUATION COVERAGE UNDER THE CONSOLIDATED OMNIBUS
BUDGET RECONCILIATION ACT OF 1985, AS AMENDED, AS A RESULT OF OR IN
25
CONNECTION WITH ANY TERMINATION OF EMPLOYMENT OCCURRING FOLLOWING THE CLOSING OF
ANY EMPLOYEE OF THE COMPANIES WHOSE EMPLOYMENT CONTINUES WITH ANY OF THE
COMPANIES FOLLOWING THE CLOSING; ANY SUCH TERMINATION FOLLOWING THE CLOSING ON
THE CLOSING DATE SHALL BE DEEMED TO HAVE OCCURRED FOLLOWING THE CLOSING DATE FOR
THE PURPOSES OF THE INDEMNIFICATION PROVISIONS OF THIS CLAUSE (b)), (c) THE
SELLER'S BEING FORCED TO DISGORGE, REIMBURSE OR RETURN AMOUNTS RECEIVED UNDER
ANY PRORATED CONTRACT TO THE OTHER PARTY THERETO AS A RESULT OF ANY COMPANY NOT
CONTINUING TO PURCHASE OR USE THE PRODUCT OR SERVICE SUPPLIED UNDER ANY PRORATED
CONTRACT CONSISTENT WITH PRACTICE PRIOR TO THE CLOSING DATE; (d) ANY AMOUNTS
RELATING TO ANY PERIOD AFTER THE CLOSING DATE PAID BY THE SELLER PURSUANT TO ANY
OF THE GUARANTEES SET FORTH IN SCHEDULE 4.6 OR PURSUANT TO ANY INDEMNIFICATION
OBLIGATION OWED BY THE SELLER TO SAGA CORPORATION RELATING TO ANY LEASE OTHER
THAN AN EXCLUDED LEASE; AND (e) ANY AMOUNTS PAID BY THE SELLER RELATING TO THE
HEADQUARTERS LEASE FOR PERIODS RELATING TO PERIODS AFTER THE CLOSING DATE;
PROVIDED, HOWEVER, THAT THE PURCHASER SHALL NOT BE OBLIGATED TO INDEMNIFY THE
SELLER FOR A BREACH OF SECTION 3.2(k) UNLESS AND UNTIL THE AGGREGATE OF ALL
SELLER'S DAMAGES (INCLUDING INDEMNIFICATION PAYMENTS TO PURCHASER INDEMNITEE
PURSUANT TO SECTION 8.2(b)) CAUSED BY, ARISING OUT OF, RELATED TO OR INCURRED AS
A RESULT OF OR IN CONNECTION WITH ALL BREACHES BY PURCHASER OF SECTION 3.2(k)
EXCEEDS $500,000.
8.4 INDEMNITY THRESHOLD. No amounts of indemnity shall be payable
in the case of a claim by a Purchaser Indemnitee under SECTION 8.2 if upon
payment thereof the Purchaser Indemnitee shall have received payments from the
Seller in respect of claims made under such Section equal to the Purchase Price.
8.5 CLAIMS FOR INDEMNIFICATION. No claim for indemnification with
respect to any representation or warranty shall be made under this Agreement
after the applicable Survival Date. With respect to any potential loss
anticipated, the Purchaser Indemnitee or the Seller Indemnitee, as the case may
be, will keep the Seller or the Purchaser, as the case may be, promptly advised
of any actual loss sustained.
8.6 PROCEDURES REGARDING THIRD-PARTY CLAIMS. The procedures to be
followed by the Purchaser and the Seller with respect to any third party claim,
demand, suit, cause of action, or proceeding (judicial or otherwise)
(collectively, a "CLAIM") which could give rise to an indemnification obligation
hereunder shall be as follows:
(a) Promptly after receipt by any Purchaser Indemnitee or Seller
Indemnitee, as the case may be, of notice of the commencement of any Claim by a
third party (a "THIRD-PARTY CLAIM NOTICE") which the person receiving such
notice has reason to believe may result in a claim by it for indemnity pursuant
to this Agreement, such person (the "INDEMNIFIED PARTY") shall give written
notice of such Claim to the party against whom indemnification hereunder is
sought (the "INDEMNIFYING PARTY"), setting forth in reasonable detail the nature
of such Claim, including copies of any documents and correspondence from such
third party to the Indemnified Party. The Indemnifying Party shall be entitled,
at its own expense, to participate in the defense of such Claim, or, if (i) the
Claim seeks (and continues to seek) solely monetary damages and (ii) the
Indemnifying Party confirms, in writing, its obligation hereunder to indemnify
and hold harmless the Indemnified Party with respect to such damages in their
entirety pursuant to Section 8.2 or 8.3 hereof, as the case may be, then such
Indemnifying Party shall be entitled to assume and
26
control such defense with counsel chosen by it and approved by the Indemnified
Party (which approval shall not be unreasonably withheld or delayed). Following
such assumption, the Indemnified Party shall be entitled to participate in the
defense at its own expense. The Indemnifying Party may make a monetary
settlement to any Claim; PROVIDED, HOWEVER, that such monetary settlement shall
be paid in full by the Indemnifying Party, and PROVIDED, FURTHER, that the prior
written consent of the Indemnified Party (which consent shall not be
unreasonably withheld or delayed) shall be required if such settlement does not
release the Indemnified Party from all liability with respect to such Claim.
(b) With respect to a Claim as to which the Indemnifying Party (i)
does not have the right to assume the defense or (ii) shall not have exercised
its right to assume the defense, the Indemnified Party shall assume and control
the defense of and contest such Claim with counsel chosen by it in its sole
discretion. The Indemnifying Party shall be entitled to participate in the
defense of such Claim at its own expense. The Indemnifying Party shall be
obligated to pay all reasonable attorneys' fees and expenses of the Indemnified
Party; PROVIDED, HOWEVER, THAT THE INDEMNIFYING PARTY SHALL NOT, IN CONNECTION
WITH ANY ONE SUCH CLAIM OR SEPARATE BUT SUBSTANTIALLY SIMILAR OR RELATED CLAIMS
IN THE SAME JURISDICTION, ARISING OUT OF THE SAME GENERAL ALLEGATIONS OR
CIRCUMSTANCES, BE LIABLE FOR THE FEES AND EXPENSES OF MORE THAN ONE SEPARATE
FIRM OF ATTORNEYS (TOGETHER WITH NO MORE THAN ONE LOCAL COUNSEL) AT ANY TIME FOR
SUCH INDEMNIFIED PARTY. IF THE INDEMNIFIED PARTY HAS ASSUMED CONTROL OF A CLAIM
PURSUANT TO THIS SECTION 8.6(b) AND PROPOSES TO SETTLE SUCH CLAIM PRIOR TO A
FINAL JUDGMENT THEREON OR TO FOREGO ANY APPEAL WITH RESPECT THERETO, THEN, OTHER
THAN WITH RESPECT TO NON-MONETARY SETTLEMENTS, THE INDEMNIFIED PARTY SHALL GIVE
THE INDEMNIFYING PARTY PROMPT WRITTEN NOTICE THEREOF AND THE INDEMNIFYING PARTY
SHALL HAVE THE RIGHT TO PARTICIPATE IN THE SETTLEMENT OR ASSUME OR REASSUME THE
DEFENSE OF SUCH CLAIM; SO LONG AS THE INDEMNIFYING PARTY CONFIRMS IN WRITING ITS
OBLIGATION HEREUNDER TO INDEMNIFY AND HOLD HARMLESS THE INDEMNIFIED PARTY WITH
RESPECT TO ANY PURCHASER'S DAMAGES OR SELLER'S DAMAGES, AS THE CASE MAY BE,
ARISING OUT OF SUCH CLAIM.
(c) BOTH THE INDEMNIFYING PARTY AND THE INDEMNIFIED PARTY SHALL
COOPERATE FULLY WITH ONE ANOTHER IN CONNECTION WITH THE DEFENSE, COMPROMISE, OR
SETTLEMENT OF ANY CLAIM, INCLUDING, WITHOUT LIMITATION, BY MAKING AVAILABLE TO
THE OTHER ALL PERTINENT INFORMATION AND WITNESSES WITHIN ITS CONTROL AND
EXECUTING AND DELIVERING ANY DOCUMENTS NECESSARY FOR ONE PARTY TO ACT AS A
REPRESENTATIVE FOR SUCH OTHER PARTY.
8.7 TREATMENT OF INDEMNIFICATION PAYMENTS. ANY PAYMENT MADE
PURSUANT TO INDEMNIFICATION OBLIGATIONS ARISING UNDER THIS ARTICLE VIII SHALL BE
TREATED AS AN ADJUSTMENT TO THE PURCHASE PRICE. THE AMOUNT OF ANY PURCHASER'S
DAMAGES OR SELLER'S DAMAGES FOR WHICH INDEMNIFICATION IS PROVIDED UNDER THIS
AGREEMENT SHALL BE REDUCED TO TAKE INTO ACCOUNT ANY TAX BENEFIT OR INCREASED TO
TAKE ACCOUNT OF ANY TAX LIABILITY REALIZED BY THE INDEMNIFIED PARTY ARISING FROM
THE INCURRENCE OR PAYMENT OF ANY SUCH PURCHASER'S DAMAGES OR SELLER'S DAMAGES.
ARTICLE IX
GENERAL PROVISIONS
27
9.1 CERTAIN DEFINITIONS. (a) AS USED IN THIS AGREEMENT, THE
FOLLOWING TERMS HAVE THE FOLLOWING MEANINGS:
"AFFILIATE" WHEN USED WITH RESPECT TO ANY PERSON, MEANS ANY OTHER
PERSON CONTROLLING, CONTROLLED BY OR UNDER COMMON CONTROL WITH SUCH
PERSON.
"BUSINESS DAY" MEANS ANY DAY THAT IS NOT A SATURDAY, SUNDAY OR
OTHER DAY ON WHICH BANKS ARE REQUIRED OR AUTHORIZED BY LAW TO BE CLOSED
IN NEWPORT BEACH, CALIFORNIA OR LOS ANGELES, CALIFORNIA.
"CAPITAL LEASE OBLIGATIONS" MEANS AN OBLIGATION THAT IS REQUIRED
TO BE CLASSIFIED AND ACCOUNTED FOR AS A CAPITALIZED LEASE FOR FINANCIAL
REPORTING PURPOSES IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES IN THE UNITED STATES, AND THE AMOUNT OF INDEBTEDNESS
REPRESENTED BY SUCH OBLIGATION WILL BE THE CAPITALIZED AMOUNT OF SUCH
OBLIGATION AT THE CLOSING DATE AS DETERMINED IN ACCORDANCE WITH SUCH
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES.
"KNOWLEDGE" OR "KNOW" MEANS (i) WHEN USED IN CONNECTION THE
SELLER, THE KNOWLEDGE OF XXXXXXX XXXXXX, AFTER REASONABLE INVESTIGATION
AND (ii) WHEN USED IN CONNECTION WITH THE PURCHASER, THE KNOWLEDGE OF
XXXXX XXXXXXX AND XXX XX XXXXX, AFTER REASONABLE INVESTIGATION.
"PERSON" MEANS AN INDIVIDUAL, PARTNERSHIP, CORPORATION, BUSINESS
TRUST, LIMITED LIABILITY COMPANY, JOINT STOCK COMPANY, TRUST,
UNINCORPORATED ASSOCIATION, JOINT VENTURE, GOVERNMENTAL AUTHORITY OR
OTHER ENTITY OF WHATEVER NATURE.
"PRIME RATE" SHALL MEAN THE PRIME RATE PUBLICLY ANNOUNCED FROM
TIME TO TIME BY THE CHASE MANHATTAN BANK IN NEW YORK, NEW YORK.
"SUBSIDIARY" SHALL MEAN AS TO ANY PERSON, A CORPORATION,
PARTNERSHIP OR OTHER ENTITY OF WHICH SHARES OF STOCK OR OTHER OWNERSHIP
INTERESTS HAVING ORDINARY VOTING POWER (OTHER THAN STOCK OR SUCH OTHER
OWNERSHIP INTERESTS HAVING SUCH POWER ONLY BY REASON OF THE HAPPENING OF
A CONTINGENCY) TO ELECT A MAJORITY OF THE BOARD OF DIRECTORS OR OTHER
MANAGERS OF SUCH CORPORATION, PARTNERSHIP OR OTHER ENTITY ARE AT THE TIME
OWNED, OR THE MANAGEMENT OF WHICH IS OTHERWISE CONTROLLED, DIRECTLY OR
INDIRECTLY THROUGH ONE OR MORE INTERMEDIARIES, OR BOTH, BY SUCH PERSON.
THE FOLLOWING TERMS SHALL HAVE THE MEANING ASCRIBED TO THEM ON THE
PAGES INDICATED BELOW:
Defined Term: Page
------------ ----
"ACCOUNTING FIRM" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
"CLAIM" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
"CLOSING" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
"CLOSING DATE". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
28
"CODE". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
"COMPANIES" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
"COMPANY PLANS" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
"COMPANY PROPERTIES". . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
"CURRENT ASSETS". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
"CURRENT LIABILITIES" . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
"ENVIRONMENTAL LAWS". . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
"ENVIRONMENTAL PERMITS" . . . . . . . . . . . . . . . . . . . . . . . . . . 12
"ERISA" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
"EXCLUDED LEASES" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
"FINAL ADJUSTMENT REPORT" . . . . . . . . . . . . . . . . . . . . . . . . . .3
"FINAL ADJUSTMENT REPORT DATE". . . . . . . . . . . . . . . . . . . . . . . .3
"GRANDY'S". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
"GRANTS OF RIGHTS". . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
"HEADQUARTERS". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
"INCLUDED ASSETS" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
"INDEMNIFIED PARTY" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
"INDEMNIFYING PARTY". . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
"INSURANCE POLICIES". . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
"INTELLECTUAL PROPERTY" . . . . . . . . . . . . . . . . . . . . . . . . . . .8
"LEASE" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
"LEASED PROPERTIES" . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
"LIEN". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
"MATERIALS CONTRACTS" . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
"MATERIALS OF ENVIRONMENTAL CONCERN". . . . . . . . . . . . . . . . . . . . 12
"NATIONAL SPORTS GRILL" . . . . . . . . . . . . . . . . . . . . . . . . . . .1
"NSG FOREIGN LICENSE" . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
"OWNED PROPERTIES". . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
"PRECLOSING PERIOD" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
"PRELIMINARY ADJUSTMENT REPORT" . . . . . . . . . . . . . . . . . . . . . . .2
"PRORATED CONTRACTS". . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
"PURCHASE PRICE". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
"PURCHASER" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
"PURCHASER INDEMNITEE". . . . . . . . . . . . . . . . . . . . . . . . . . . 24
"PURCHASER MATERIAL ADVERSE EFFECT" . . . . . . . . . . . . . . . . . . . . 13
"PURCHASER'S DAMAGES" . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
"SELLER". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
"SELLER DISCLOSURE LETTER". . . . . . . . . . . . . . . . . . . . . . . . . .4
"SELLER'S DAMAGES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
"SELLER INDEMNITEE" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
"SELLER MATERIAL ADVERSE EFFECT" . . . . . . . . . . . . . . . . . . . . . .5
"SHARES". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
"SPECTRUM". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
"SPOONS". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
29
"SURVIVAL DATE" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
"TAX RETURN". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
"TERMINATION PERIOD". . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
"TAXES" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
"THIRD-PARTY CLAIM NOTICE". . . . . . . . . . . . . . . . . . . . . . . . . 25
"WARN'" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
"WORKING CAPITAL AMOUNT". . . . . . . . . . . . . . . . . . . . . . . . . . .4
"WORKING CAPITAL DEFICIENCY AMOUNT" . . . . . . . . . . . . . . . . . . . . .3
"WORKING CAPITAL SURPLUS AMOUNT". . . . . . . . . . . . . . . . . . . . . . .3
"WORKING CAPITAL TARGET". . . . . . . . . . . . . . . . . . . . . . . . . . .3
9.2 TERMINATION OR ABANDONMENT OF AGREEMENT. THIS AGREEMENT MAY
BE TERMINATED OR ABANDONED AT ANY TIME PRIOR TO THE CONSUMMATION HEREOF:
(a) BY MUTUAL CONSENT OF THE PARTIES IN WRITING; OR
(b) BY THE SELLER, BY WRITTEN NOTICE TO THE PURCHASER, IF THERE
HAS BEEN A MATERIAL BREACH OF ANY REPRESENTATION, WARRANTY OR COVENANT
MADE IN THIS AGREEMENT BY THE PURCHASER; OR
(c) BY THE PURCHASER, BY WRITTEN NOTICE TO THE SELLER, IF THERE
HAS BEEN A MATERIAL BREACH OF ANY REPRESENTATION, WARRANTY OR COVENANT
MADE IN THIS AGREEMENT BY THE SELLER; OR
(d) BY EITHER PARTY BY WRITTEN NOTICE TO THE OTHER IF THE CLOSING
HAS NOT OCCURRED BY JUNE 30, 2000, SO LONG AS THE PARTY SEEKING TO
TERMINATE THIS AGREEMENT IS NOT IN BREACH OF ITS OBLIGATIONS HEREUNDER;
OR
(e) PURSUANT TO SECTION 9.14 HEREOF.
IN THE EVENT OF ANY TERMINATION OF THE AGREEMENT AS PROVIDED IN
THIS SECTION 9.2, THIS AGREEMENT SHALL FORTHWITH BECOME WHOLLY VOID AND OF NO
FURTHER FORCE AND EFFECT AND THERE SHALL BE NO LIABILITY ON THE PART OF THE
PURCHASER OR THE SELLER OR THE COMPANIES WITH RESPECT TO ANY OBLIGATIONS SET
FORTH IN THIS AGREEMENT, EXCEPT THAT THE OBLIGATIONS OF THE PURCHASER AND THE
SELLER UNDER THIS SECTION 9.2 AND SECTIONS 9.3, 9.4, 9.7, 9.10 AND 9.12 OF THIS
AGREEMENT SHALL REMAIN IN FULL FORCE AND EFFECT. NOTWITHSTANDING ANY OTHER
PROVISION OF THIS AGREEMENT TO THE CONTRARY, UPON TERMINATION OF THIS AGREEMENT
PURSUANT TO CLAUSE (b), (c) OR (d) OF THIS SECTION 9.2, THE PARTIES HERETO SHALL
REMAIN LIABLE TO EACH OTHER FOR ANY BREACH OF SECTION 4.3 EXISTING AT THE TIME
OF SUCH TERMINATION, AND THE NON-BREACHING PARTY MAY SEEK SUCH REMEDIES,
INCLUDING PAYMENT OF ANY DAMAGES AND ATTORNEYS' FEES, AGAINST THE BREACHING
PARTY WITH RESPECT TO ANY SUCH BREACH PROVIDED FOR IN THIS AGREEMENT OR AS MAY
OTHERWISE BE AVAILABLE AT LAW OR IN EQUITY.
9.3 CONFIDENTIALITY. (a) PRIOR TO THE CLOSING (AND, IF THIS
AGREEMENT IS TERMINATED PRIOR TO THE CLOSING, AT ALL TIMES AFTER SUCH
TERMINATION), NEITHER THE PURCHASER NOR ANY OF ITS AGENTS OR AFFILIATES SHALL
DISCLOSE OR USE ANY CONFIDENTIAL INFORMATION OF OR WITH RESPECT TO THE
30
COMPANIES OR THE CONDUCT OF THE BUSINESS OF THE COMPANIES EXCEPT IN CONNECTION
WITH BUSINESS OF THE COMPANIES AND THE SELLER. EXCEPT WITH RESPECT TO PUBLIC
ANNOUNCEMENTS AND DISCLOSURES RELATED TO THE TRANSACTIONS CONTEMPLATED HEREBY
THAT HAVE BEEN MUTUALLY AGREED TO BY THE PARTIES, THE PURCHASER AND THE SELLER
SHALL AT ALL TIMES KEEP CONFIDENTIAL THE TERMS OF THIS AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED HEREBY. NEITHER THE PURCHASER NOR ANY OF ITS AGENTS OR
AFFILIATES SHALL AT ANY TIME DISCLOSE OR USE ANY CONFIDENTIAL INFORMATION OF OR
WITH RESPECT TO THE SELLER OR ITS AFFILIATES (OTHER THAN THE COMPANIES AFTER THE
CLOSING) OR THE CONDUCT OF THE BUSINESS OF THE SELLER OR ITS AFFILIATES (OTHER
THAN THE COMPANIES AFTER THE CLOSING).
(b) NOTWITHSTANDING SECTION 9.3(a), THE PURCHASER AND THE SELLER
SHALL BE PERMITTED TO DISCLOSE (i) INFORMATION LEGALLY REQUIRED TO BE DISCLOSED
PURSUANT TO APPLICABLE LAWS OR REGULATIONS (INCLUDING APPLICABLE SECURITIES
LAWS), OR COURT OR ADMINISTRATIVE ORDERS; PROVIDED THAT THE DISCLOSING PARTY
SHALL NOTIFY THE OTHER PARTY SUFFICIENTLY PRIOR TO ANY SUCH DISCLOSURE TO ENABLE
SUCH OTHER PARTY TO OBJECT TO SUCH DISCLOSURE AND THE DISCLOSING PARTY SHALL USE
REASONABLE EFFORTS TO OBTAIN A PROTECTIVE OR OTHER APPROPRIATE ORDER PRIOR TO
ANY SUCH DISCLOSURE IN SUCH AN ACTION, (ii) INFORMATION TO A PARTY'S ATTORNEYS,
ACCOUNTANTS, ADVISORS AND OTHER REPRESENTATIVES WHO HAVE A NEED TO KNOW FOR THE
PURPOSE OF EFFECTING THE TRANSACTIONS CONTEMPLATED HEREBY AND WHO AGREE TO BE,
OR ARE, BOUND BY CONFIDENTIALITY PROVISIONS AT LEAST AS RESTRICTIVE AS THOSE
CONTAINED HEREIN OR (iii) INFORMATION TO EMPLOYEES OF THE PARTIES WHO HAVE NEED
TO KNOW FOR THE PURPOSE OF EFFECTING THE TRANSACTIONS CONTEMPLATED HEREBY AND
WHO AGREE TO BE, OR ARE, BOUND BY CONFIDENTIALITY PROVISIONS AT LEAST AS
RESTRICTIVE AS THOSE CONTAINED HEREIN.
9.4 EXPENSES. EXCEPT AS EXPRESSLY SET FORTH HEREIN, ALL FEES,
COMMISSIONS AND OTHER EXPENSES INCURRED BY ANY PARTY HERETO IN CONNECTION WITH
THE NEGOTIATION OF THIS AGREEMENT AND IN PREPARING TO CONSUMMATE THE SALE OF THE
SHARES AND THE OTHER TRANSACTIONS CONTEMPLATED HEREBY, INCLUDING ANY FEES AND
EXPENSES OF THEIR RESPECTIVE COUNSEL AND FINANCIAL ADVISORS, SHALL BE BORNE BY
THE PARTY INCURRING SUCH FEE OR EXPENSE.
9.5 EXECUTION IN COUNTERPARTS. THIS AGREEMENT MAY BE EXECUTED IN
ONE OR MORE COUNTERPARTS, ALL OF WHICH SHALL BE CONSIDERED ONE AND THE SAME
AGREEMENT, AND SHALL BECOME A BINDING AGREEMENT WHEN ONE OR MORE COUNTERPARTS
HAVE BEEN SIGNED BY EACH PARTY AND DELIVERED TO THE OTHER PARTIES.
9.6 NOTICES. ALL NOTICES, REQUEST, DEMANDS OR OTHER
COMMUNICATIONS PROVIDED HEREIN SHALL BE MADE IN WRITING AND SHALL BE DEEMED TO
HAVE BEEN DULY GIVEN IF DELIVERED AS FOLLOWS:
IF TO THE SELLER:
AMERICAN RESTAURANT GROUP, INC.
0000 XX XXXXXX XXXX
XXXXX 000
XXX XXXXX, XXXXXXXXXX 00000
ATTENTION: XXXXXXX X. XXXXXX, GENERAL COUNSEL
WITH A COPY TO:
31
MILBANK TWEED HADLEY & XXXXXX LLP
000 XXXXX XXXXXXXX, 00XX XXXXX
XXX XXXXXXX, XXXXXXXXXX 00000
ATTENTION: XXXXXXX X. XXXXXXXX
IF TO THE PURCHASER:
NBACO, INC.
000 XXXXXXX XXXXXX XXXXX
XXXXXXX XXXXX, XXXXXXXXXX 00000
ATTENTION: XXXXX X. XXXXXXX
WITH A COPY TO:
XXXXXXX XXXXXXX & XXXXXXXX
000 XXXXXXXXX XXXXXX
XXX XXXX, XXX XXXX 00000
ATTENTION: XXXXXX X. XXXXXXX, III
OR TO SUCH OTHER STREET ADDRESS AS EITHER PARTY SHALL HAVE SPECIFIED BY NOTICE
IN WRITING TO THE OTHER PARTY. ALL SUCH NOTICES, REQUESTS, DEMANDS AND
COMMUNICATIONS SHALL BE DEEMED TO HAVE BEEN RECEIVED ON (i) THE DATE OF DELIVERY
IF SENT BY MESSENGER, (ii) ON THE BUSINESS DAY ON WHICH DELIVERED IF SENT BY
OVERNIGHT COURIER, (iii) ON THE DATE RECEIVED, IF SENT BY FAX AND (iv) ON THE
FIFTH BUSINESS DAY AFTER THE MAILING THEREOF IF SENT BY MAIL.
9.7 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA AS APPLIED TO
CONTRACTS ENTERED INTO AND TO BE PERFORMED IN CALIFORNIA.
9.8 TITLES AND HEADINGS. TITLES AND HEADINGS TO ARTICLES AND
SECTIONS HEREIN ARE INSERTED FOR CONVENIENCE OF REFERENCE ONLY AND ARE NOT
INTENDED TO BE A PART OF OR TO AFFECT THE MEANING OR INTERPRETATION OF THIS
AGREEMENT.
9.9 SUCCESSORS AND ASSIGNS. THIS AGREEMENT SHALL NOT BE
ASSIGNABLE BY THE SELLER WITHOUT THE PRIOR WRITTEN CONSENT OF THE PURCHASER OR
BY THE PURCHASER WITHOUT THE PRIOR WRITTEN CONSENT OF THE SELLER; PROVIDED,
HOWEVER, THAT THE PURCHASER MAY ASSIGN ALL OR ANY PART OF ITS INTEREST IN THIS
AGREEMENT TO ANY OF ITS AFFILIATES IF SUCH AFFILIATE UNDERTAKES TO PERFORM THE
PURCHASER'S OBLIGATIONS HEREUNDER, PROVIDED THAT NO SUCH ASSIGNMENT SHALL
RELIEVE THE PURCHASER OF ITS OBLIGATIONS HEREUNDER AND THE PURCHASER SHALL
UNCONDITIONALLY GUARANTEE THE PERFORMANCE BY SUCH ASSIGNEE OF THE OBLIGATIONS OF
THE PURCHASER HEREUNDER PURSUANT TO INSTRUMENT REASONABLY SATISFACTORY TO THE
SELLER. THIS AGREEMENT SHALL BE BINDING UPON AND SHALL INURE TO THE BENEFIT OF
THE PARTIES HERETO AND THEIR RESPECTIVE SUCCESSORS IN INTEREST AND ASSIGNS.
9.10 ENTIRE AGREEMENT; NO ORAL WAIVER. THIS AGREEMENT, THE
SCHEDULES, THE SELLER DISCLOSURE LETTER AND THE CERTIFICATES AND OTHER DOCUMENTS
CONTEMPLATED HEREBY CONSTITUTE
32
THE ENTIRE AGREEMENT AMONG THE PARTIES PERTAINING TO THE SUBJECT MATTER HEREOF
AND SUPERSEDE ALL PRIOR AND CONTEMPORANEOUS AGREEMENTS, UNDERSTANDINGS AND
REPRESENTATIONS, WHETHER ORAL OR WRITTEN, OF THE PARTIES IN CONNECTION
THEREWITH. NO COVENANT OR CONDITION OR REPRESENTATION NOT EXPRESSED IN THIS
AGREEMENT SHALL AFFECT OR BE EFFECTIVE TO INTERPRET, CHANGE OR RESTRICT THIS
AGREEMENT. NO PRIOR DRAFTS OF THIS AGREEMENT AND NO WORDS OR PHRASES FROM ANY
SUCH PRIOR DRAFTS SHALL BE ADMISSIBLE INTO EVIDENCE IN ANY ACTION, SUIT OR OTHER
PROCEEDING INVOLVING THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
THIS AGREEMENT MAY NOT BE CHANGED OR TERMINATED ORALLY, NOR SHALL ANY CHANGE,
TERMINATION OR ATTEMPTED WAIVER OF ANY OF THE PROVISIONS OF THIS AGREEMENT BE
BINDING ON ANY PARTY UNLESS IN WRITING SIGNED BY THE PARTIES HERETO. NO
MODIFICATION, WAIVER, TERMINATION, RESCISSION, DISCHARGE OR CANCELLATION OF THIS
AGREEMENT AND NO WAIVER OF ANY PROVISION OF OR DEFAULT UNDER THIS AGREEMENT
SHALL AFFECT THE RIGHT OF ANY PARTY THEREAFTER TO ENFORCE ANY OTHER PROVISION OR
TO EXERCISE ANY RIGHT OR REMEDY IN THE EVENT OF ANY OTHER DEFAULT, WHETHER OR
NOT SIMILAR.
9.11 SEVERABILITY. IF ANY PROVISION OF THIS AGREEMENT SHALL BE
DECLARED BY ANY COURT OF COMPETENT JURISDICTION TO BE ILLEGAL, VOID OR
UNENFORCEABLE, ALL OTHER PROVISIONS OF THIS AGREEMENT SHALL NOT BE AFFECTED AND
SHALL REMAIN IN FULL FORCE AND EFFECT.
9.12 NO THIRD-PARTY RIGHTS. EXCEPT FOR THE INDEMNIFICATIONS
PROVISION SET FORTH IN SECTION 5.4, NOTHING IN THIS AGREEMENT, EXPRESSED OR
IMPLIED, SHALL OR IS INTENDED TO CONFER UPON ANY PERSON OTHER THAN THE PARTIES
HERETO OR THEIR RESPECTIVE SUCCESSORS OR ASSIGNS, ANY RIGHTS OR REMEDIES OF ANY
NATURE OR KIND WHATSOEVER UNDER OR BY REASON OF THIS AGREEMENT, INCLUDING
WITHOUT LIMITATION ANY RIGHTS OF EMPLOYMENT.
9.13 REMEDIES. IN THE EVENT OF ANY FAILURE OR REFUSAL BY ANY
PARTY TO COMPLY WITH ANY COVENANT OR AGREEMENT CONTAINED IN THIS AGREEMENT THE
OTHER PARTY SHALL HAVE THE RIGHT TO PURSUE THE REMEDY OF SPECIFIC PERFORMANCE.
9.14 SELLER DISCLOSURE LETTER. REFERENCES IN THIS AGREEMENT TO
THE SELLER DISCLOSURE LETTER SHALL MEAN SUCH SELLER DISCLOSURE LETTER AS IT MAY
BE AMENDED, SUPPLEMENTED OR MODIFIED BY THE SELLER AT ANY TIME PRIOR TO THE
CLOSING WITHOUT ANY LIABILITY TO THE SELLER OTHER THAN THAT THE PURCHASER SHALL
HAVE THE RIGHT FOR TEN (10) BUSINESS DAYS (THE "TERMINATION PERIOD") AFTER ANY
SUCH AMENDMENT, SUPPLEMENT OR MODIFICATION OF THE SELLER DISCLOSURE LETTER TO
TERMINATE THIS AGREEMENT IF SUCH AMENDMENT, SUPPLEMENT OR MODIFICATION OF THE
SELLER DISCLOSURE LETTER REVEALS A MATTER WHICH (TOGETHER WITH ALL OTHER
AMENDMENTS, SUPPLEMENTS OR MODIFICATIONS) WOULD HAVE A SELLER MATERIAL ADVERSE
EFFECT; PROVIDED, HOWEVER, THAT AFTER THE EXPIRATION OF THE TERMINATION PERIOD,
THE SELLER MAY FURTHER AMEND, SUPPLEMENT AND MODIFY THE SELLER DISCLOSURE LETTER
AS SET FORTH IN THIS SECTION 9.14. IN THE EVENT THAT THE PURCHASER ELECTS TO
TERMINATE THIS AGREEMENT DURING THE TERMINATION PERIOD, THE PURCHASER'S SOLE
REMEDY SHALL BE TO TERMINATE THIS AGREEMENT WITHOUT ANY LIABILITY TO THE SELLER
OR ANY OF ITS DIRECTORS, OFFICERS OR AGENTS FOR AND IN RESPECT OF ANY AND ALL
DAMAGES, LOSSES, OBLIGATIONS, LIABILITIES, CLAIMS, ACTIONS OR CAUSES OF ACTION,
ENCUMBRANCES, COSTS AND EXPENSES (INCLUDING, WITHOUT LIMITATION, ATTORNEYS',
ACCOUNTING AND OTHER PROFESSIONAL FEES) SUFFERED, SUSTAINED, INCURRED OR
REQUIRED TO BE PAID BY THE PURCHASER. FOR PURPOSES OF THIS AGREEMENT,
INFORMATION DISCLOSED IN ANY PARTICULAR SECTION OF THE SELLER DISCLOSURE LETTER
SHALL BE DEEMED TO BE DISCLOSED IN ANY OTHER RELEVANT SECTION OF THE SELLER
DISCLOSURE LETTER.
33
THE DUPLICATION OR CROSS-REFERENCING OF ANY DISCLOSURES MADE IN THE SELLER
DISCLOSURE LETTER SHALL NOT, IN ANY INSTANCE OR IN THE AGGREGATE, EFFECT A
WAIVER OF THE FOREGOING SENTENCE.
9.15 BROKERS AND FINDERS. EACH PARTY SHALL BEAR ALL COSTS AND
EXPENSES, AND SHALL INDEMNIFY THE OTHER PARTY FOR ALL COSTS AND EXPENSES,
RELATING TO THE RETENTION BY SUCH PARTY OF ANY FINDER OR BROKER IN CONNECTION
WITH THE PURCHASE OR SALE OF THE SHARES AND THE INCLUDED ASSETS, INCLUDING ANY
FEES OR COMMISSIONS PAYABLE OR ALLEGED TO BE PAYABLE TO SUCH BROKER OR FINDER IN
CONNECTION WITH THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.
[SIGNATURES APPEAR ON NEXT PAGE.]
34
IN WITNESS WHEREOF, THE PARTIES HAVE EXECUTED, DELIVERED AND
ENTERED INTO THIS AGREEMENT AS OF THE DAY AND YEAR FIRST ABOVE WRITTEN.
AMERICAN RESTAURANT GROUP, INC.
BY: /s/ Xxxxxx X. Xxxxx
-------------------------------------------
NAME: XXXXXX X. XXXXX
TITLE: DIRECTOR
NBACO, INC.
BY: /s/ Xxxxx X. Xxxxxxx
-------------------------------------------
NAME: XXXXX X. XXXXXXX
TITLE: CHAIRMAN AND CHIEF EXECUTIVE OFFICER
35
DISCLOSURE SCHEDULE
SECTION 1.4(e)(i)
ACCOUNT # ACCOUNT DESCRIPTION
11220 A/R Employees
13400 Prepaid Expense General
Section 1.4(e)(ii)
Account # Account Description
20000 Accounts Payable
21050 Accrued Advertising Payable
21700 Accrued Sales Tax
21750 Accrued Sales Tax -- Suspense
21760 Accrued Use Tax
21999 Closed Unit Reserve
22000 through 22720 Total Accrued Insurance
24000 through 24099 Accrued Payroll
24300 through 24399 Accrued Vacation
24400 through 24499 Accrued Bonus
25000 Current Portion of Capitalized Lease Obligations
Section 1.4(e)(iii)
Account # Account Description
21950 Deferred Income
24806 SDI -- Spectrum Foods, Inc.
24807 SDI -- Xxxxxx'x, Inc.
24808 SDI -- Spoons Restaurants, Inc.
24809 SDI -- Corporate
24811 SDI -- Local Favorite, Inc.
36
DISCLOSURE SCHEDULE
SECTION 4.7
ACCOUNT #
28001 DUE TO/FROM BLACK ANGUS
28002 DUE TO/FROM GRANDY'S
28003 DUE TO/FROM SPOONS
28004 DUE TO/FROM SPECTRUM
28005 DUE TO/FROM VELVET TURTLE
28006 DUE TO/FROM NATIONAL SPORTS GRILL
28080 DUE TO/FROM GRANDY'S ADVERTISING FUND
28090 DUE TO/FROM ARG CORPORATE
28095 DUE TO/FROM ARG HOLDINGS
37
