STOCK REDEMPTION
AGREEMENT
THIS
STOCK REDEMPTION AGREEMENT (the or this “Agreement”), is made this 10th day of
September 2003 by and among MERITAGE HOSPITALITY GROUP INC., a Michigan corporation whose
address is 0000 Xxxx Xxxxxxxx Xxx., X.X., Xxxxx 000, Xxxxx Xxxxxx, Xxxxxxxx 00000
(“Meritage”), and XXXXXX X. XXXXX (“Xxxxx”) and XXXXX X. XXXXX,
husband and wife, whose address is 0000 Xxxxxxxxx Xx., X.X., Xxxxx Xxxxxx, Xxxxxxxx 00000
(collectively “the Xxxxx’x”).
Recitals
A.
WHEREAS, Xxxxx is a director and the President of Meritage; and
B.
WHEREAS, Xxxxx is the beneficial owner of 500,200 Meritage common shares (the
“Xxxxx Shares”), which were purchased on or before February 2001, the
title to which is held as set forth in Exhibit A; and
C.
WHEREAS, Xxxxx desires to sell, and Meritage desires to purchase, the Xxxxx
Shares pursuant to the terms, and subject to the conditions, contained herein.
NOW
THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties agree as follows:
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1. |
Purchase and Sale of Common Shares. The Xxxxx’x agree to sell to Meritage,
and Meritage agrees to purchase from the Xxxxx’x, the Xxxxx Shares (or a
lesser portion of such shares as noted in Paragraph 8 below), on the terms, and
subject to the conditions, contained in this Agreement. |
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2. |
Purchase Price. The purchase price for the Xxxxx Shares shall be $4.90 (Four
Dollars Ninety Cents) for each common share acquired from the Xxxxx’x (the
“Purchase Price”). If all the Xxxxx Shares are acquired, the total
purchase price shall be $2,450,980.00 (Two Million Four Hundred Fifty Thousand
Nine Hundred Eighty Dollars and No Cents). The Purchase Price will be paid in
cash (by check) at Closing (as defined below), less any applicable costs (as set
forth in Paragraph 6), upon receipt by Meritage of the Xxxxx Shares. The payment
made pursuant to this Paragraph shall be payment in full for the Xxxxx Shares
acquired, regardless of the trading price for Meritage common shares on the date
of the Closing. |
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3. |
No Encumbrances. The Xxxxx’x warrant that the Xxxxx Shares, when acquired
by Meritage pursuant to Paragraph 1, shall be free and clear of any liens and
encumbrances. |
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4. |
Closing. Closing shall take place within 5 (five) business days after written
notice from Meritage, and shall take place at Meritage’s offices located at
0000 Xxxx Xxxxxxxx Xxx., X.X., Xxxxx 000, Xxxxx Xxxxxx, Xxxxxxxx 00000. In no
event will the Closing take place later than 5:00 p.m. on January 9, 2004.
Meritage will reasonably extend the Closing if the Xxxxx’x need additional
time to complete the certification of any common shares currently registered in
street name. |
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5. |
Conveyance. At Closing, the Xxxxx’x shall convey, or cause to be conveyed,
the Xxxxx Shares to Meritage, by duly endorsed original stock certificate(s),
along with such other documents as may be reasonably required to fully effect
and consummate the transactions contemplated by this Agreement. |
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6. |
Costs; Taxes. Each party shall be solely responsible for any costs (including
their legal fees) associated with the transaction contemplated herein including,
but not limited to, their respective tax consequences/liability due to the
transaction contemplated herein. |
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7. |
Brokers. The parties represent and warrant that they have not dealt with a
broker, realtor or agent in connection with this transaction. Each party
indemnifies and holds the other party harmless from all losses, costs and
expenses (including reasonable attorneys’ fees) arising out of a breach of
the representations or undertaking set forth in this Paragraph. |
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8. |
Meritage’s Private Placement of Common Stock and Warrants. Meritage’s
Board of Directors authorized a private placement of Meritage’s common
shares and warrants on September 3, 2003, whereby Meritage intends to raise
approximately $6,000,000 from investors to launch a new casual dining concept in
Michigan and to purchase the Xxxxx Shares (the “Private Placement”).
Provided Meritage closes on purchases of units for at least $4,000,000 under the
Private Placement (see Paragraph 9(d) below), Meritage will prorate on a 50/50
basis the net proceeds of the Private Placement between Meritage’s
O’Charley’s venture and purchasing the Xxxxx Shares hereunder, up to
the maximum Purchase Price for the Xxxxx Shares of $2,450,980 (which would be
paid to Xxxxx if Meritage closes on the sale of units totaling at least
$4,901,960). For example, if Meritage raises $3,500,000 under the Private
Placement, this Agreement shall not be effective due to the failure of a
contingency. If Meritage raises $4,500,000 under the Private Placement, Meritage
would purchase $2,250,000 of the Xxxxx Shares (i.e., 459,183 shares). If
Meritage raises $5,500,000, then Meritage would purchase $2,450,980 of the Xxxxx
Shares (i.e., all 500,200 shares). Meritage will pay for any commissions that
are incurred under the Private Placement. |
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9. |
Contingencies to Meritage’s Obligations. Unless waived in writing by
Meritage, Meritage’s obligation to consummate the transactions described in
this Agreement is subject to satisfaction of each of the following conditions. |
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(a) |
The representations and warranties of the Xxxxx’x contained herein shall be
accurate in all material respects as of Closing. |
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(b) |
The Xxxxx’x shall have observed and performed all of the obligations
contained in this Agreement. |
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(c) |
This Agreement and the transactions contemplated hereby shall be approved by due
and proper action of Meritage’s Board of Directors. |
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(d) |
Meritage shall have closed on the sale of units under the Private Placement
totaling at least $4,000,000.00 (Four Million Dollars and No Cents). |
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(e) |
No action, suit or proceeding before any court or other governmental authority
shall be pending or threatened wherein an unfavorable judgment or outcome would
prevent the carrying out of this Agreement or any of the transactions described
herein. |
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If any
of the preceding cannot be obtained by the Termination Date (defined below), then this
Agreement shall terminate pursuant to Paragraph 22. |
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10. |
Contingencies to the Xxxxx’x Obligations. Unless waived in writing by the
Xxxxx’x, the Xxxxx’x obligations to perform under this Agreement are
subject to the representations and warranties of Meritage contained in this
Agreement being true and correct as of Closing. If the preceding cannot be
obtained by the Termination Date, then this Agreement shall terminate pursuant
to Paragraph 22. |
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11. |
Representations and Warranties of Meritage. Meritage represents and warrants to
the Xxxxx’x the truth and accuracy of each of the following: |
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(a) |
Meritage
is validly existing and in good standing under the laws of the State of
Michigan, and has all requisite power and authority to enter into this
Agreement and to perform its obligations hereunder. |
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(b) |
Meritage
shall indemnify and hold the Xxxxx’x, and the Xxxxx’x
beneficiaries, agents, successors and assigns, harmless from and against
any claims, proceedings, demand, judgments, awards, penalties,
liabilities, suits, settlements, damages, losses, fines, costs and
expenses of any nature whatsoever, including reasonable attorneys’ fees,
arising out of or in any way related to a breach of any of the aforesaid
representations. The indemnity obligations provided in this Paragraph
shall survive the execution of this Agreement and the Closing. Nothing
herein shall be construed to require Meritage to indemnify or do any act
or thing that is not permitted under the law. |
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12. |
Representations and Warranties of the Xxxxx’x. The Xxxxx’x represent
and warrant to Meritage the truth and accuracy of each of the following: |
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(a) |
The
Xxxxx’x have all requisite power and authority to enter into this
Agreement and to perform their obligations hereunder. Neither of the
Xxxxx’x have entered into any contract (other than this Agreement)
whereby the Xxxxx Shares may be sold, conveyed, leased, mortgaged,
encumbered, assigned or otherwise disposed of. |
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(b) |
The
Xxxxx’x are the record or beneficial owners of the Xxxxx Shares (as set
forth in Exhibit A), have good, valid and marketable title to the Xxxxx
Shares, and have the unconditional right to sell, assign, convey, transfer
and deliver the Xxxxx Shares to Meritage. Prior to Closing, the Xxxxx’x
shall not, by act or omission, permit any change to occur in the status of
the Xxxxx Shares. |
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(c) |
The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereunder on the part of the Xxxxx’x does
not and will not violate any agreement, order, judgment, decree, award, or
conflict with or result in the breach of any material terms or provisions
of any agreement or other instrument to which either of the Xxxxx’x
are a party, or which requires the consent of a third party in connection
with the consummation of the transactions described herein. |
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(d) |
The
Xxxxx’x shall indemnify and hold Meritage, and its beneficiaries,
employees, directors, officers, shareholders, agents, subsidiaries,
affiliated companies, successors and assigns, harmless from and against
any claims, proceedings, demands, judgments, awards, penalties,
liabilities, suits, settlements, damages, losses, fines, costs and
expenses of any nature whatsoever, including reasonable attorneys’ fees,
arising out of or in any way related to a breach of any of the aforesaid
representations. The indemnity obligations provided in this Paragraph
shall survive the execution of this Agreement and the Closing. Nothing
herein shall be construed to require the Xxxxx’x to indemnify or do
any act or thing that is not permitted under the law. |
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13. |
Default. In the event of a party’s default of the due observance or
performance of its obligations under this Agreement, the other party must give
written notice of the claimed default to the other party. If after such notice,
the other party has failed or is unable to cure the default within 10 business
days, the non-defaulting party may (i) terminate this Agreement, (ii) seek
specific performance, and (iii) pursue other available legal or equitable
remedies. |
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14. |
Continued Employment. If this Agreement closes in whole or in part pursuant to
Paragraph 8, then effective 5:00 p.m. on Friday, January 16, 2004, Xxxxx will
resign his positions as an officer and director of Meritage. Xxxxx will
continue, however, to be employed by Meritage for a period of two years (until
January 16, 2006) in the position of Director of Special Projects. In such
position, Xxxxx will carry out such duties as are assigned by Meritage’s
Chief Executive Officer, to whom Xxxxx will report. These duties are likely to
include, but are not limited to, projects that will assist the CEO in
maintaining the operations of the Wendy’s restaurants owned and operated by
Meritage, and in opening Meritage’s new O’Charley’s restaurants.
The CEO may also require that Xxxxx render oral and written reports regarding
the projects performed by him. Xxxxx’x work shall be performed at
Meritage’s or its subsidiary’s offices, at its restaurant locations,
or at any other location directed by the CEO. Xxxxx shall be paid at the rate of
$100.00 per hour, subject to normal withholding, and will be entitled to those
benefits otherwise available to other employees who maintain the same hours of
work as Xxxxx maintains. Xxxxx will maintain a written account of the hours and
projects on which he performs work which shall be submitted to the CEO on a
monthly basis. Xxxxx shall be permitted to engage in other employment with third
parties during this period provided such employment does not conflict with any
other provisions of this Agreement. Meritage will ensure that the Xxxxx’x
are able to continue coverage under Meritage’s health insurance plan
provided, however, that Xxxxx agrees to pay the administrative costs and
expenses associated with extending such coverage (if any), and the cost that
Meritage normally allots for “two-person” coverage for an eligible
employee living in the Grand Rapids area. For example, an employee with
“two person” coverage living in the Grand Rapids area currently pays
$169.44 per month. It is currently believed that there will be no administrative
costs to extend coverage as described above. |
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Xxxxx’x
continued employment and benefits under this Paragraph 14 shall be conditioned upon Xxxxx
not being terminated “for cause,” which term is defined hereunder as
termination due to fraud; misappropriation; embezzlement; intentional and material damage
to Meritage’s property, business or reputation; willful violation of Meritage
policies; use of illegal drugs; commission of a felony; violation of any written
confidentiality or non-competition agreement with Meritage; trading in Meritage shares
for personal gain based on knowledge of Meritage’s activities or results when such
information is not otherwise available to the public; or an uncured breach of this
Agreement. Unless subsequently and mutually agreed in writing by the parties, after the
two year employment period expires (i.e., after January 16, 2006), Xxxxx agrees to retire
in all respects from Meritage, and any employment relationship shall thereafter cease. |
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Xxxxx shall
be entitled to his normal salary and other benefits, as authorized by Meritage’s
Compensation Committee, prior to his resignation described above. Moreover, Xxxxx shall
be entitled to receive the bonus for fiscal year 2003, if any, that Meritage’s
Compensation Committee authorized when it passed the 2003 Executive Incentive
Compensation Plan. |
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15. |
Obligations of Xxxxx Upon Termination. When Xxxxx terminates his employment with
Meritage or Xxxxx’x employment relationship with Meritage is otherwise
terminated, Xxxxx covenants and agrees to the following provisions: |
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(a) |
Non
Competition. Unless approved by Meritage in writing, neither Xxxxx nor any
of his affiliates shall, for a continuous uninterrupted period commencing
upon the date employment terminates and continuing for twenty-four months
thereafter, either directly or indirectly, through ownership, advisory,
employment or other means, compete against Meritage through involvement
with other businesses engaged in either the quick service or casual dining
restaurant industries, provided (i) the quick service restaurants are
located within Meritage’s current Wendy’s Designated Market
Area, or (ii) the casual dining restaurants are located within the State
of Michigan. |
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(b) |
Confidentiality.
Xxxxx shall not communicate or divulge any confidential information,
knowledge or know-how concerning Meritage’s methods of operation.
Confidential information shall be deemed to include marketing plans,
development strategies, operational procedures, financial plans or other
information which constitutes a key element of Meritage’s methods of
operations and is not otherwise known in the public domain.
Notwithstanding the forgoing, Xxxxx shall be permitted to consult with
other Wendy’s operators (provided Xxxxx does not violate the Non
Competition provisions set forth in Paragraph 15(a) above) on all aspects
of their business, and to use his general knowledge and know-how
concerning Meritage’s systems or methods of operation, provided that
Xxxxx shall not divulge any confidential information concerning Meritage
in such consultations. |
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(c) |
Non
Disparagement. Xxxxx shall not make disparaging or unfavorable remarks about
Meritage or its affiliates to other persons or entities. |
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16. |
Release. Contemporaneously with executing this Agreement, the parties agree to
execute a Release in the form attached hereto as Exhibit B. |
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17. |
Broker Relationship. Xxxxx has, from time to time, acted as Meritage’s (or
its affiliate’s) realtor or broker on real estate acquisitions. When Xxxxx
terminates his employment with Meritage or Xxxxx’x employment relationship
with Meritage is otherwise terminated, (i) any existing or implied
realtor/broker relationship shall immediately cease and terminate, and (ii)
Xxxxx will represent and warrant that he is not Meritage’s (or its
affiliate’s) broker/realtor on any other real estate transaction that
Meritage subsequently enters into, and therefore will not make any claim that he
is entitled to a commission or fee as a broker or realtor in any real estate
acquisition or sale by Meritage or one or its affiliates after the time of
employment termination. This provision does not preclude a subsequently
negotiated realtor/broker relationship into which the parties may mutually agree
to enter after Xxxxx’x termination. Prior to Xxxxx’x termination, the
parties agree that Xxxxx shall remain the broker of record (to the extent that
is otherwise prudent or possible), and the commissions/funds received by Xxxxx
from the closing of any sites purchase or sold by Meritage or its affiliates, if
any, shall be distributed in accordance with the August 22, 2001 Compensation
Committee resolution regarding the handling of Xxxxx’x real estate
commissions. |
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18. |
Successors and Assigns. This Agreement shall be binding upon, and inure to the
benefit of, the respective heirs, personal representatives, executors,
administrators, successors and assigns of the parties hereto. |
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19. |
Choice of Law; Venue. This Agreement shall be governed by, and construed and
enforced in accordance with, the laws of the State of Michigan. Venue shall
reside with state and federal courts located in Kent County, Michigan. |
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20. |
Agreement. This is the entire agreement between the parties hereto, and
supercedes any prior oral or written agreements (if any) between the parties.
Notwithstanding the forgoing sentence, unless otherwise noted herein, this
Agreement is not intended to supercede or undo any prior written agreements
between the parties not specifically relating to the matters contained herein
(e.g., option agreements, employment handbook acknowledgement, 2003 Executive
Incentive Compensation Plan, etc.). No amendment, modification, termination or
cancellation of this Agreement shall be effective unless made in writing and
signed by each of the parties hereto. There are no third party beneficiaries of
this Agreement. |
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21. |
Further Assurances. The parties agree to cooperate and execute, acknowledge,
deliver and provide such other acts, instruments, and assurances, and to take
all such further action before or after the Closing, as shall be necessary or
desirable to fully carry out this Agreement and to fully consummate and effect
the transactions contemplated hereby. |
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22. |
Termination. Unless the parties mutually agree to extend the term of this
Agreement, if the Closing has not occurred by 5:00 p.m. on January 9, 2004, then
this Agreement shall terminate, and the Agreement, along with the offer, terms
and conditions contained herein, shall be null and void (including but not
limited to the requirement that Meritage purchase the Xxxxx Shares, or that
Xxxxx resign his positions as an officer and director of Meritage).
Notwithstanding the forgoing, if the reason for termination is due to a breach
by either party, the other party shall be entitled to pursue any and all legal
and equitable rights and remedies available hereunder. |
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23. |
Notices. All notices hereunder shall be in writing and either delivered
personally or by documentable delivery (such as overnight or express mail
delivery like Federal Express) to the address specified on the first page, or to
such other address as a party may designate from time to time by giving notice
in accordance with this Paragraph. Any such notice shall be deemed given on the
date of such delivery. |
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24. |
Recitals; Headings. The parties acknowledge and affirm that the Recitals are
true and accurate in all respects, and are incorporated into this Agreement. The
headings and captions are inserted for convenient reference only and shall not
limit or construe the paragraphs or sections to which they apply, or otherwise
affect the interpretation hereof. |
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25. |
Severability. If any term, condition or provision of this Agreement is found to
be invalid, unlawful or unenforceable, the parties shall endeavor in good faith
to agree to such amendments that will preserve the intent of the parties
hereunder. If the parties fail to agree on such amendments, then such invalid,
unlawful or unenforceable term, condition or provision shall be severed from the
remaining terms, and the remaining terms of this Agreement will continue to be
valid and enforceable to the fullest extent permitted by law. |
[SIGNATURES FOLLOW ON
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IN
WITNESS WHEREOF, the undersigned executed this Agreement as of the date first written
above.
MERITAGE HOSPITALITY
GROUP INC.
/s/Xxxxxx X. Xxxxxxxx,
Xx.
By: Xxxxxx X. Xxxxxxxx, Xx.
Its: Chief Executive Officer
/s/Xxxxxx X. Xxxxx
/s/Xxxxx X. Xxxxx
Xxxxxx X. Xxxxx
Xxxxx X. Xxxxx
EXHIBIT A
Stock Ownership
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Northern Trust, Trustee of the Xxxxxx X. Xxxxx XXX
Xxxxxx X. Xxxxx, Trustee U/A Dated 8/31/99
X.X. Xxxxxxx, Trustee of the Xxxxxx X. Xxxxx XXX
X.X. Xxxxxxx, Trustee of the Xxxxx X. Xxxxx XXX
Xxxxx X. Xxxxx, Trustee U/A Dated 8/31/99
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297,900 common shares
169,725 common shares
14,800 common shares
10,275 common shares
7,500 common shares
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| TOTAL
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500,200 common shares
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EXHIBIT B
RELEASE
Release.
A.
For consideration received, Xxxxxx X. Xxxxx and Xxxxx X. Xxxxx (together the
“Xxxxx’x”) hereby release, waive and forever discharge Meritage
Hospitality Group Inc. (“Meritage”), its affiliates, employees,
directors, officers, successors, assigns or subsidiaries (including but not
limited to Meritage affiliated companies: WM Limited Partnership – 1998
(d/b/a Wendy’s of Michigan), MHG Food Service Inc., and RES Management,
LLC), of and from any and all causes of actions, claims, damages, debts,
demands, obligations, attorneys’ fees, or any other liabilities or claims
of whatsoever nature, whether in law or in equity, known or unknown, including
but not limited to any claim for damages or other relief for tort, breach of
express or implied contract, personal injury, negligence, age discrimination
under The Age Discrimination In Employment Act of 1967 (as amended), employment
discrimination prohibited by any other federal, state or local laws including
sex, race, national origin, marital status, age, handicap, height, weight, or
religious discrimination, and any other claim which the Xxxxx’x have
claimed, may claim, or could claim, provided, however, that the foregoing
release shall not constitute a release by the Xxxxx’x of (i) any claim to
enforce their respective rights under the Stock Redemption Agreement dated
September 10, 2003, or (ii) any claim that is based on a fact, circumstance or
event occurring after the date of this Release.
B.
For consideration received, Meritage, for itself and for its affiliates,
successors, assigns or subsidiaries (including but not limited to Meritage
affiliated companies: WM Limited Partnership – 1998 (d/b/a Wendy’s of
Michigan), MHG Food Service Inc., and RES Management, LLC), hereby releases,
waives and forever discharges the Xxxxx’x of and from any and all causes of
actions, claims, damages, debts, demands, obligations, attorneys’ fees, or
any other liabilities or claims of whatsoever nature, whether in law or in
equity, known or unknown, including but not limited to any claim for damages or
other relief for tort, breach of express or implied contract, personal injury,
negligence, and any other claim which Meritage or its affiliates have claimed,
may claim, or could claim, provided, however, that the foregoing release shall
not constitute a release by Meritage or its affiliates of (i) any claim to
enforce its rights under the Stock Redemption Agreement dated September 10,
2003, or (ii) any claim that is based on a fact, circumstance or event occurring
after the date of this Release.
Review
Period & Revocation Rights. The Xxxxx’x understand and agree that they have been
given 21 days within which to consider this Release. The Xxxxx’x further understand
and agree that they may revoke this Release for a period of seven (7) calendar days
following the execution of this Release. The entire Release (both Meritage’s and the
Xxxxx’x release) is not effective until this revocation period has expired. The
Xxxxx’x understand that any revocation, to be effective, must be in writing and
either (a) mailed and postmarked within seven (7) days of execution of this Release and
addressed to Meritage Hospitality Group Inc., c/o Secretary, 0000 Xxxx Xxxxxxxx Xxx.,
X.X., Xxxxx 000, Xxxxx Xxxxxx, Xxxxxxxx 00000, or (b) hand delivered within seven (7) days
of execution of this Release to Meritage Hospitality Group Inc., c/o Secretary, 0000 Xxxx
Xxxxxxxx Xxx., X.X., Xxxxx 000, Xxxxx Xxxxxx, Xxxxxxxx 00000. The Xxxxx’x understand
that if revocation is made by mail, mailing by certified mail, return receipt requested,
is advisable to show proof of mailing.
IN
WITNESS WHEREOF, the undersigned executed this Release as of the date stated below.
[SIGNATURES FOLLOW ON
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IN
WITNESS WHEREOF, the undersigned executed this Release of the date noted below.
MERITAGE HOSPITALITY
GROUP INC.
By:
Its:
Dated:
Xxxxxx X. Xxxxx
Dated: _______________________
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Xxxxx X. Xxxxx
Dated: _______________________
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