AGREEMENT
THIS AGREEMENT, with respect to the acquisition by Jreck Subs Group,
Inc. ("Jreck" or "Buyer"), a Colorado corporation, of (1) all the outstanding
shares of stock of Little King, Inc., a Delaware corporation ("Little King")
from Xx. Xxxxxx X. Xxxxxxxx ("Xxxxxxxx") and its other shareholders and (2) all
of the equipment owned by Xxxxxx X. Xxxxxxxx, presently used in the SRW stores
(Wertheim and the other shareholders of Little King collectively "Sellers").
The terms of said acquisition shall be as follows:
1. Acquisition of Stock. Buyer will acquire 100% of the issued and
outstanding capital stock of Little King from Sellers, and Sellers will sell the
same to Buyer, all in accordance with the terms set forth in this Agreement,
Buyer's acquisition of the stock shall transfer to Buyer all of the issued and
outstanding capital stock of Little King (the "Little King Stock"), as of the
Closing. At the time of closing, SRW shall transfer seven (7) Little King
restaurants, including all related personal property and all related intangible
assets, and including equipment, the name, contracts, accounts and notes
receivables, goodwill, trademarks, leases, licenses, franchise agreements and
subfranchise agreements related to the seven stores. The Little King Stock shall
be transferred subject to all liabilities and liens on the books of each as of
Closing.
2. Closing. Unless otherwise mutually agreed by Buyer and Sellers, the
purchase and sale of the Little King Stock shall occur no later than August 2,
1997, at the principal corporate offices of Little King (the "Closing"). At
Closing, the parties shall execute such further documents as are reasonably
necessary to complete the transactions contemplated herein.
3. Purchase Price of Little King Stock. The total purchase price for
the Little King Stock shall be 500,000 common shares of Jreck (the "Little King
Purchase Price") and an additional 700,000 common shares of Jreck within twelve
(12) months of the date of closing.
4. SRW. SRW shall manage the stores transferred to Little King, shall
pay the salary of Xxxxxx Xxxxxxxx and pay the debts of SRW as consideration for
the Management Agreement. Once the debts of SRW are paid, all store proceeds
shall belong to Little King.
5. Purchase Price of Equipment. The total purchase price for all of the
equipment presently being used in the SRW and Little King stores owned by Xxxxxx
X. Xxxxxxxx shall be $250,000.
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6. Payment Terms:
6.1. The Little King Stock Purchase Price shall be paid as follows:
(a) 500,000 shares of Jreck common stock shall be issued and
delivered to the shareholders of Little King at Closing;
(b) 700,000 shares of Jreck common stock within twelve (12)
months of the closing.
6.2. The Equipment Purchase Price shall be paid to Xxxxxx X.
Xxxxxxxx as follows:
(a) $150,000 shall be paid in cash to Wertheim at closing;
(b) $100,000 within sixty (60) days of closing.
7. Representations and Warranties. The Sellers and Buyer make the
following:
7.1 The lawful organization, good standing and corporate power and
authority of Little King and Jreck.
7.2 That the execution and delivery of the Agreements constitute
the valid and binding agreements of the parties hereto and
that such agreements do not violate or contravene the terms of
any agreement to which Little King, Jreck or Wertheim are a
party.
7.3 That Wertheim owns in excess of 95% of the outstanding and
issued Little King Stock and of all rights in and to such
Little King stock; the Little King Stock is represented by
share certificates, and Wertheim may transfer the Little King
Stock owned by him to Buyer pursuant to the Little King
Agreement without consent of approval of any person,
corporation, partnership, governmental authority or other
entity; his Little King Stock is fully paid and non-assessable
and, except as provided in a schedule to the Agreement,
Wertheim has not sold, transferred or assigned any of his
rights in or to any of his Little King Stock; his Little King
Stock is free and clear of any liens, claims, encumbrances and
restrictions of any kind; and there are no outstanding options
for his Little King stock held by any person or entity.
7.4 That Wertheim owns in excess of 95% of the outstanding and
issued SRW Stock and all rights in and to such SRW Stock; the
SRW Stock is represented by share certificates, and Wertheim
may transfer the SRW Stock owned by him to Buyer pursuant to
the SRW Formal Agreement without consent of approval of any
person, corporation, partnership, governmental authority or
other entity; his SRW Stock is fully paid and non-assessable
and, except as provided in a schedule to the Agreement,
Wertheim has not sold, transferred or assigned any of his
rights in or to any of his SRW stock; his SRW Stock is free
and clear of any liens, claims, encumbrances and restrictions
of any kind; and there are no outstanding options for his SRW
stock held by any person or entity.
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7.5 That all licenses, trademark registrations, franchise
registration and leases required in connection with the
ownership and operation of the businesses currently conducted
by Buyer and Little King are valid, maintained and in full
force and effect.
7.6 That all of Buyer's and Little King's financial statements and
other documents relating to their financial condition or
business operations which have been made available to the
other party(ties) are accurate in all material respects, not
misleading and do not omit any material information.
7.7 That to the knowledge of the relevant party, Buyer's, Sellers'
and Little King's ownership and operation of their respective
businesses are in compliance with all applicable federal,
state and local statutes, ordinances and regulations.
7.8 That all of Sellers' contracts, leases and other agreements or
instruments related to this transaction are binding upon
Sellers.
7.9 That the debts owed by Little King will be paid by Jreck. The
bank loans will be paid in regular monthly payments. The
$470,000 Wertheim loan will be resolved between the parties
without a regular payment schedule.
7.10. Jreck agree that if Little King's revenues for the calendar
year 1998 are equal to or greater than $900,000, Wertheim
shall receive an additional 50,000 shares of Jreck common
stock (the "Additional Shares"), which shares shall be issued
and delivered to Wertheim on or prior to March 31, 1999. In
the event Little King's franchise income is equal to or
greater than $400,000, notwithstanding the total revenues not
being raised to $900,000, Wertheim shall receive the 50,000
shares of Jreck common stock as if he met the revenue level
mentioned above. Within six (6) months of Closing, Jreck will
invest, or cause to be invested, $450,000 into Little King for
the development of the Little King concept. Jreck has also
indicated that it plans to complete secondary offering of its
common stock on or prior to March 31, 1998. Within ten (10)
days of completion of such secondary offering, Jreck will
invest, or cause to be invested, an amount equal to 4% of the
proceeds received by Jreck in such secondary offering into
Little King for development of the Little King concept;
provide Wertheim an option to buy Little King from Jreck after
the second anniversary of Closing if the stock price Jreck
Subs Group, Inc. is not at least at $1.50. The option price
shall be equal to the shares of Jreck common stock then owned
or controlled by Wertheim, plus the funds invested by Jreck
Subs Group, Inc., plus a fair market determination between
parties. If no agreement is made on fair determination, the
amount shall be determined by binding arbitration.
All representations, warranties shall survive the Closing for
periods to be negotiated.
7.11 After Closing, Jreck will establish an employee equity plan
for the employees of Little King, as well as the other
divisions of Jreck Subs Group, Inc. The employees of Little
King shall be entitled to participate in such plan to the same
extent as all key employees of various divisions of Jreck Subs
Group, Inc.
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8. Covenants:
8.1. At Closing, Jreck shall cause Little King to execute
"Employment Agreements" with each of Xxx X. Xxxxxxxx and
Xxxxxx Xxxxxxxx (each as "Employee" or the "Employees") to
serve as President and Vice President of Little King as they
determine in their sole discretion. Each Employment Agreement
shall contain a reasonable noncompetition, nonsolicitation and
confidentiality covenants. Each Employee shall be terminable
only for "cause." With respect to Xxxxxx Xxxxxxxx, "Cause"
shall include the operation of Little King at a net loss for
three (3) consecutive years. The term of the Employment shall
be seven (7) years for Xxx Xxxxxxxx and ten (10) years for
Xxxxxx Xxxxxxxx. The beginning annual salary shall be $54,000
for Xxx Xxxxxxxx and $45,000 for Xxxxxx Xxxxxxxx. Salary
increases shall be based upon a percentage of increase
profits, not to exceed 20% in any one year. Xxx Xxxxxxxx and
Xxxxxx Xxxxxxxx may terminate their respective Employment
Agreements within 90 days' and 180 days', respectively,
written notice subject in each case to the noncompetition,
nonsolicitation and confidentiality provisions. Jreck shall
consent to and acknowledge each Employment Agreement. At
Closing, Jreck shall grant each of Xxx Xxxxxxxx and Xxxxxx
Xxxxxxxx'x nonqualified stock options to acquire shares of
Jreck common stock at the same price as other insiders,
expiring five (5) years after Closing. The date of exercise
and purchase price shall be determined by the Board of
Directors of Jreck Subs Group, Inc.
8.2. Jreck shall cause Tri-Emp Enterprises, Inc., a New York
corporation (the "Majority Owner"), to enter into an agreement
wherein it agrees, for a period of three (3) years following
the Closing, not to sell more than 1% per quarter of Jreck
Subs Group, Inc. common stock or 10% of the volume traded in
any week.
8.3. If Tri-Emp Enterprises, Inc. receives an offer to purchase its
controlling interest during the first three (3) years, it will
obtain an acceptable stock sale for Xxxxxx X. Xxxxxxxx. If
Xxxxxx X. Xxxxxxxx receives an offer for a substantial or all
of his stock position, he shall grant Tri-Emp Enterprises,
Inc. or its designee a first option to make such purchase. The
option shall be on the same terms and conditions as a third
party bona fide purchaser.
8.4. The intention of this paragraph is to protect Xxx Xxxxxxxx
from having a restricted stock with no market to recoup his
equity because the market has been destroyed or damaged.
8.5. Registration Rights.
8.5.1. Piggyback Registration and Inclusion of Registrable
Securities. Subject to the terms of this Agreement, in the
event Jreck decides to Register (defined below) any of its
stock (either for its own account or the account of a security
holder or holders exercising their respective demand
registration rights) on a form that would be suitable for a
registration involving solely Registrable Securities (defined
below). Jreck at its sole cost and expense will: (i) promptly
give Sellers written notice thereof (which notice shall
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include a list of the states in which Jreck intends to attempt
to qualify such securities under the applicable Blue Sky or
other state securities laws) and (ii) make a best efforts
attempt to include in such Registration (and any related
qualification under Blue Sky laws or other compliance), and in
any underwriting involved therein, all the Registrable
Securities specified in a written request delivered to Jreck
by Sellers within thirty (30) days after delivery of such
written notice of Jreck.
If the Registration of which Jreck shall give notice is
for a Registered public offering involving an underwriting,
Jreck shall so advise the Sellers' as a part of the written
notice given pursuant to this section 8.5. In such event, the
right of Sellers to Registration shall be conditioned upon
such underwriting and the underwriters agreement to include
Sellers shares in the underwriting. If Sellers desire to
distribute their securities through such underwriting, they
shall (together with Jreck and the other holders distributing
their securities through such underwriting) enter into an
underwriting agreement with the underwriter's representative
for such offering. The Sellers shall have no right to
participate in the selection of the underwriters for an
offering pursuant to this Section 8.5 and Sellers shall have
no liability for any costs and fees related thereto.
8.5.2. Blue Sky in Piggyback Registration. In the event of any
Registration of Registrable Securities pursuant to this
Section 8.5, Jreck will exercise its best efforts to Register
and qualify the securities covered by the Registration
Statement under such other securities or Blue Sky laws of such
jurisdictions as shall be reasonably appropriate for the
distribution of such securities; provided, however, that Jreck
shall not be required to qualify to do business or to file a
general consent to service of process in any such states or
jurisdictions.
8.5.3. Definitions. For purposes of this Agreement, the
following definitions shall apply:
"Register", "Registered", and "Registration" refer to a
registration affected by preparing and filing a registration
statement in compliance with the Securities Act ("Registration
Statement"), and the declaration or ordering of the
effectiveness of such Registration Statement.
"Registrable Securities" shall mean all Jreck shares not
previously sold to the public and issued or issuable upon
conversation or exercise of any of Jreck's Convertible
Securities purchased by or issued to the investors, including
shares issued or issuable pursuant to stock splits, stock
dividends and options, including the options hereunder.
"Securities Act" shall mean the Securities Act of 1933, as
amended, or any similar federal statute, and the rules and
regulations of the Commission thereunder.
8.6 Until such time as all Jreck common stock issued to Sellers is
freely traceable and no longer subject to Rule 144 under the
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Act, Jreck shall timely make all public filings required under
Rule 144(c) in order to permit the use of Rule 144 by Sellers.
8.7. Within sixty (60) days after Closing, Jreck shall cause
Majority Owner or some other investor to purchase at market
shares of Jreck common stock from Wertheim in a private
transaction having a market value of $75,000.
9. Bankruptcy. In the event an involuntary or voluntary petition for
bankruptcy is filed with respect to Jreck under the Federal Bankruptcy Laws
within three years following the Closing, and is not thereafter dismissed within
ninety (90) days, Wertheim is hereby granted the first option to repurchase the
Little King Stock from Jreck for the total cash sum of $25,000. Such first right
to purchase shall be exercisable for a period of thirty (30) days following
notice to Wertheim of the bankruptcy and will require payment of the $25,000
within said thirty (30) day period.
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The parties have placed their hands and seals this 23rd day of July,
1997.
JRECK SUBS GROUP, INC.
By: /s/
--------------------------------
Xxxxxxxxxxx X. Xxxxxx
President
LITTLE KING, INC.
By: /s/
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Xxxxxx X. Xxxxxxxx
/s/
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Xxxxxx X. Xxxxxxxx, Individually
