XXXXXXXX'X INTERNATIONAL, INC.
RIO BRAVO INTERNATIONAL, INC.
INNOVATIVE RESTAURANT CONCEPTS, INC.
IRC KANSAS, INC.
APPLEBEE'S OF MICHIGAN, INC.
RIO BRAVO SERVICES, INC.
CHEVYS HOLDINGS, INC.
CHEVYS, INC.
AND
RIO BRAVO ACQUISITIONS, INC.
ASSET PURCHASE AGREEMENT
February 10, 1999
TABLE OF CONTENTS
Page
ARTICLE I PURCHASE AND SALE OF ASSETS............................................................................1
Section 1.1 Assets..........................................................................................1
Section 1.2 Excluded Assets.................................................................................3
ARTICLE II PURCHASE PRICE OF ASSETS..............................................................................4
Section 2.1 Purchase Price..................................................................................4
Section 2.2 Adjustment of Purchase Price....................................................................4
Section 2.3 Obligations Satisfied by Sellers................................................................4
Section 2.4 Certain Liabilities and Obligations.............................................................4
Section 2.5 Taxes and Fees..................................................................................5
Section 2.6 Allocation of Purchase Price....................................................................5
ARTICLE III CLOSING..............................................................................................5
Section 3.1 Date, Time and Place of Closing.................................................................5
Section 3.2 Deliveries by Sellers at Closing................................................................5
Section 3.3 Deliveries by Buyer at Closing..................................................................7
Section 3.4 Transfer of Operations..........................................................................8
ARTICLE IV FRANCHISE SYSTEM......................................................................................9
Section 4.1 Rio Bravo Franchise System......................................................................9
Section 4.2 Franchise Fund.................................................................................10
Section 4.3 Reserved.......................................................................................10
Section 4.4 Development Agreements.........................................................................10
Section 4.5 Continued Operating of Rio Bravo Restaurants...................................................10
Section 4.6 National Advertising Accounts..................................................................10
Section 4.7 Franchisee Deposits............................................................................11
ARTICLE V REPRESENTATIONS AND WARRANTIES OF SELLERS AND PARENT.................................................11
Section 5.1 Corporate Existence............................................................................11
Section 5.2 Corporate Power and Authority..................................................................11
Section 5.3 Execution and Delivery Permitted; Consents.....................................................11
Section 5.4 The Assets.....................................................................................12
Section 5.5 Binding Effect.................................................................................13
Section 5.6 Condition of Assets............................................................................13
Section 5.7 Absence of Other Assets........................................................................13
Section 5.8 Ownership of Assets............................................................................13
Section 5.9 Real Property..................................................................................14
Section 5.10 Litigation or Condemnation; Compliance with Laws...............................................15
Section 5.11 Taxes..........................................................................................15
Section 5.12 Contracts......................................................................................16
Section 5.13 Employment Matters.............................................................................16
Section 5.14 Licensure......................................................................................17
Section 5.15 Environmental Matters..........................................................................17
Section 5.16 System Operation...............................................................................19
Section 5.17 Historical Financial Information...............................................................19
Section 5.18 Year 2000 Issues...............................................................................19
Section 5.19 Intellectual Property..........................................................................19
Section 5.20 Absence of Certain Changes.....................................................................20
Section 5.21 Insurance......................................................................................20
Section 5.22 Adulterated Food...............................................................................20
ARTICLE VI COVENANTS OF SELLERS.................................................................................20
Section 6.1 Employee Benefit Plans.........................................................................20
Section 6.2 Sellers Performance............................................................................20
Section 6.3 Transfer of Licenses and Permits...............................................................21
Section 6.4 Agreements Respecting Employees of Seller......................................................21
Section 6.5 Conduct of Business............................................................................22
Section 6.6 Broker's Fees..................................................................................23
Section 6.7 Access to Information and Real Property........................................................23
Section 6.8 No Sale Negotiations...........................................................................24
Section 6.9 Survey and Title Report........................................................................24
Section 6.10 Cooperation....................................................................................25
Section 6.11 Proration and Purchase Price Adjustment Data...................................................25
Section 6.12 Remodeling Costs...............................................................................25
Section 6.13 Transition Services............................................................................25
Section 6.14 Confidentiality................................................................................26
Section 6.15 Further Assurances.............................................................................26
Section 6.16 Use of Rio Bravo Trade Name....................................................................26
Section 6.17 Termination of the Development Agreements, Reserve Territories and Franchise Agreements.......27
Section 6.18 Covenant Not to Compete........................................................................27
Section 6.19 Releases of Franchisees........................................................................27
Section 6.20 Environmental Remediation......................................................................27
ARTICLE VII REPRESENTATIONS AND WARRANTIES OF BUYER, CHI AND CHEVYS.............................................28
Section 7.1 Corporate Existence............................................................................28
Section 7.2 Corporate Power and Authority..................................................................28
Section 7.3 Execution and Delivery Permitted; Consents.....................................................28
Section 7.4 Binding Effect.................................................................................29
Section 7.5 Financing......................................................................................29
ARTICLE VIII COVENANTS OF BUYER, CHI AND CHEVYS.................................................................29
Section 8.1 Buyer Performance..............................................................................29
Section 8.2 Confidentiality................................................................................29
Section 8.3 Seller Employees...............................................................................30
Section 8.4 Cooperation....................................................................................31
Section 8.5 Broker's Fees..................................................................................31
Section 8.6 No Securities Trading..........................................................................31
Section 8.7 Access to Books and Records....................................................................31
Section 8.8 Landlord Releases..............................................................................31
Section 8.9 Maintenance of System..........................................................................32
ARTICLE IX PRORATIONS AND PURCHASE PRICE ADJUSTMENT;............................................................32
Section 9.1 Purchase Price Adjustments.....................................................................32
Section 9.2 Gift Certificates..............................................................................33
Section 9.3 Buyer's Conditions to Closing..................................................................33
Section 9.4 Seller's Conditions to Closing.................................................................34
ARTICLE X INDEMNIFICATION AGAINST LOSS..........................................................................35
Section 10.1 Indemnification by Parent and Sellers..........................................................35
Section 10.2 Indemnification by CHI, Chevys and Buyer.......................................................36
Section 10.3 Limitation on Indemnification and Liability....................................................37
Section 10.4 Time to Assert Claims..........................................................................37
Section 10.5 Resolution of Claims...........................................................................38
Section 10.6 Third Party Claim Indemnification Procedure....................................................38
Section 10.7 Exclusive Remedies.............................................................................38
ARTICLE XI MISCELLANEOUS........................................................................................38
Section 11.1 Notices........................................................................................38
Section 11.2 Applicable Law and Jurisdiction................................................................39
Section 11.3 Binding on Successors; Assignment..............................................................40
Section 11.4 Payment of Costs...............................................................................40
Section 11.5 Closing Not to Prejudice Claim for Damages......................................................40
Section 11.6 Survival of Representations, Warranties, Covenants and Undertakings............................40
Section 11.7 Additional Documents...........................................................................40
Section 11.8 Time is of the Essence.........................................................................40
Section 11.9 Interpretation.................................................................................41
Section 11.10 Entire Agreement...............................................................................41
Section 11.11 Counterparts....................................................................................41
Section 11.12 Termination.....................................................................................41
Section 11.13 Public Announcements...........................................................................42
Section 11.14 No Third-Party Beneficiaries...................................................................42
Section 11.15 Liquor Licenses................................................................................42
LIST OF EXHIBITS AND SCHEDULES................................................................................44
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "Agreement") is made and entered
into this 10th day of February, 1999, by and among XXXXXXXX'X INTERNATIONAL,
INC., a Delaware corporation (the "Parent"), RIO BRAVO INTERNATIONAL, INC., a
Kansas corporation and wholly owned subsidiary of the Parent ("RBI"), INNOVATIVE
RESTAURANT CONCEPTS, INC., a Georgia corporation and wholly owned subsidiary of
RBI ("IRC"), IRC KANSAS, INC., a Kansas corporation and wholly owned subsidiary
of IRC ("IRCK"), APPLEBEE'S OF MICHIGAN, INC., a Michigan corporation and wholly
owned subsidiary of the Parent ("AMI"), RIO BRAVO SERVICES, INC., a Kansas
corporation and wholly owned subsidiary of IRC ("RBS") (collectively RBI, IRC,
IRCK, AMI and RBS) are referred to as "Sellers"), and CHEVYS HOLDINGS, INC., a
Delaware corporation ("CHI"), CHEVYS, INC., a California corporation and wholly
owned subsidiary of CHI ("Chevys") and RIO BRAVO ACQUISITIONS, INC., a Delaware
corporation and wholly owned subsidiary of Chevys ("Buyer").
WHEREAS, Sellers collectively own various items of personal property
and interests in real property and contractual agreements (i) used in the
operation or development of the Rio Bravo Cantina restaurants listed on Schedule
1.1 (the "Restaurants") and (ii) used in the operation of the Rio Bravo Cantina
franchise System (as defined and described in Section 4.1) and the Rio Bravo
Cantina restaurant concept (the "Concept," as defined in Section 4.1);
WHEREAS, Sellers wish to sell, assign and transfer to Buyer and Buyer
wishes to purchase and acquire substantially all of the assets and properties
held in connection with, necessary for, or material to the business and
operations of the Restaurants, the System and the Concept (together, the
"Business"), and Buyer has agreed to assume the Assumed Liabilities (as defined
in Section 2.4), all for the purchase price and upon the terms and conditions
hereinafter set forth;
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements, covenants, representations, warranties and promises set forth
herein, and in order to prescribe the terms and conditions of such purchase and
sale, the parties hereto agree as follows:
ARTICLE I
PURCHASE AND SALE OF ASSETS
Section 1.1 Assets Subject to the terms and conditions set forth in
this Agreement, Sellers hereby agree that at the Closing (as defined in Section
3.1, below) they shall sell, transfer, convey, and assign to Buyer free and
clear of all mortgages, liens, security interests, pledges and encumbrances,
except for Permitted Encumbrances (as defined in Section 5.9(d) below) and
subject to Sellers' ability to assign or transfer certain assets, and Buyer
hereby agrees at the Closing to purchase and accept from Sellers all of Sellers'
right, title and interest in and to all personal property, whether tangible or
intangible, and interests in real estate, whether owned in fee or held under
lease or license and all other property, assets and rights of every nature, kind
and description, tangible or intangible, whether real, personal or mixed,
whether accrued, contingent or otherwise (other than the Excluded Assets, as
defined in Section 1.2) primarily relating to or used or held for use in
connection with the Business as the same may exist on the Closing Date
(collectively the "Assets") including, without limitation, all of those items in
the following categories that conform to the definition of Assets:
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(a) The System and the Concept, including without limitation, the Seller's
rights under the Franchise Agreements (as defined in Section 4.1(b)),
the Development Agreements (as defined in Section 4.1(c)), and the
Intellectual Property (as defined in Section 1.1(j)) relating to the
System and the Concept;
(b) The Real Property Leases (as defined in Section 5.4(c), below),
including all of Sellers' interest under the Real Property Leases in
the buildings, fixtures, signs, parking facilities, trash facilities,
fences, other leasehold improvements, appurtenances and hereditaments,
easements, rights of way, licenses, permits and qualifications from
governmental entities and other third parties relating to the Sellers'
interests under the Real Property Leases;
(c) All Owned Real Property (as defined in Section 5.4(a), below),
including the buildings, fixtures, signs, parking facilities, trash
facilities, fences, other improvements, appurtenances, hereditaments,
easements, rights of way, licenses, permits and qualifications from
governmental entities and other third parties (to the extent
transferable by Sellers) relating to Owned Real Property;
(d) The Minor Contracts and Material Contracts (both as defined in Section
5.4(e) below);
(e) All equipment and leasehold improvements installed in the Restaurants
or the IRC corporate office space located in an office building in
Atlanta (the "Rio Corporate Office") or primarily used in connection
with the Business, wherever located, including but not limited to the
furniture, machinery, equipment, alarm systems, tables, chairs, cash
registers, computer equipment, ovens, refrigerators, display cases,
shelves, utensils, tools, pans, lights, uniforms, signs, menus,
glasses, plates, dishes, silverware, pitchers, books, cabinets, racks,
towels, ornaments and decorative items, bars, and bar equipment (the
"Equipment");
(f) All of Seller's other rights and property interests of any nature which
relate to or are primarily used or held for use in connection with the
Business, including, but not limited to rights to use existing
Restaurant telephone numbers and rights arising under Equipment
warranties;
(g) All data transmission equipment and related software and software
licenses, computer software and related manuals which relate to or are
primarily used or held for use in connection with the Business,
including those items set forth on Schedule 1.1(g) hereto;
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(h) All rights under all warranties, guarantees, indemnities and similar
rights, express or implied, or other claims for damages or loss related
to any of the Assets or the Business;
(i) All xxxxx cash in amounts normally used to open the Restaurants (not
including prior receipts held for deposit), in an aggregate amount of
$131,000;
(j) All (i) patents and patent applications, patent disclosures awaiting
filing, reissues, divisions, continuations - in - part and extensions,
patent disclosures awaiting filing determination, inventions,
improvements, (ii) trademarks, trade names, service marks, trade dress
logos, business and product names, slogans and registrations and
applications for registration thereof; (iii) copyrights (including
software), (iv) inventions, processes, designs, formulae, trade
secrets, know-how, confidential business and technical information,
product specifications, recipes, ingredients lists, manner and method
of operation, menus, signage, decor, and (v) intellectual property
rights similar to any of the foregoing and all rights thereunder
primarily relating to or used or held for use in connection with the
Business, including all tangible embodiments thereof ("Intellectual
Property");
(k) All inventories of smallwares, cleaning supplies, paper goods and food
and beverages held for use in connection with the Business and opened
from their individual packaging and/or already in the production
process at the Restaurant as of the Closing Date (collectively, the
"Inventory in Process");
(l) All licenses, permits, approvals and qualifications relating to the
Business from any governmental authority ("Permits"); and
(m) All operating manuals, recipes and other related materials at the
Restaurant level, all books and records located at the Restaurants or
at the Rio Corporate Office, advertising and promotional materials and
personnel records of hourly employees located at the Restaurants.
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Section 1.2 Excluded Assets. Excluded from sale under this Agreement
are the assets of Sellers and their subsidiaries listed on Schedule 1.2 to this
Agreement and all assets of the Parent and Parent's sister corporations
(collectively, the "Excluded Assets"). Such Excluded Assets shall include, but
not be limited to, (i) the four specialty restaurants operated by IRC (or its
subsidiary, Summit Restaurants, Inc.) and all related assets (the "Specialty
Restaurants"), (ii) a limited right for the Sellers, or the purchaser of the
Specialty Restaurants, as the case may be, to use the Rio Bravo trademark and
menu items until December 31, 1999 pursuant to the assignment to Buyer of the
license referenced in Section 3.2(m), (iii) all portable computers and any
computer software in the Restaurants or at the Rio Corporate Office that is used
for or connected to the Parent's restaurant systems or corporate systems,
including but not limited to the Parent's proprietary point of sale and
proprietary back office software, and (iv) any Assets of any kind related to any
Restaurants excluded from sale hereunder pursuant to the provisions of Sections
3.4, 6.9, 6.20 or 11.15, provided that Sellers rights to use the Rio Bravo
trademark, tradename and tradedress shall be subject to the terms of a license
substantially similar to the Rio Bravo License (as defined in Section 3.2(m)).
ARTICLE II
PURCHASE PRICE OF ASSETS
Section 2.1 Purchase Price. The purchase price paid for the Assets
shall be Fifty Three Million Dollars ($53,000,000) (the "Purchase Price"),
payable by (i) payment in cash, by wire transfer of federal funds at Closing, of
Forty-Seven Million Dollars ($47,000,000) adjusted as set forth in Section 2.2
below (the "Cash Purchase Price"), and (ii) delivery at Closing of a promissory
note in the principal amount of Six Million Dollars ($6,000,000), in a form
mutually agreed upon by Buyer and Sellers (the "Note"), with the terms set forth
in the term sheet attached as Exhibit 2.1 hereto.
Section 2.2 Adjustment of Purchase Price. At the Closing, Buyer and
Sellers shall prepare and deliver to the other an itemized statement of purchase
price adjustments (the "Adjustment Statement") as set forth in Section 9.1 of
this Agreement. The amount on the Adjustment Statement shall constitute an
adjustment to the Cash Purchase Price paid at Closing. Such amount shall be
adjusted, as necessary, within sixty (60) days of Closing, as set forth in
Section 9.1.
Section 2.3 Obligations Satisfied by Sellers. With respect to the
Business, Sellers shall pay and be solely responsible for all trade payables,
accounts payable, utility payments, tax withholding, payroll taxes, wages and
other operating and other expenses and all accrued liabilities which, in each
such case, are incurred or related to a time or events occurring or arising on
or before the Effective Time.
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Section 2.4 Certain Liabilities and Obligations.
(a) Liabilities Not Assumed. Except for the liabilities and
obligations specifically assumed pursuant to and referred to in Section
2.4(b), Buyer shall not take subject to and shall not be liable for,
any liabilities or obligations of any kind or nature, whether absolute,
contingent, accrued, known or unknown, of Parent, Sellers or of or
relating to the Business (the "Excluded Liabilities"). Without limiting
the generality of the foregoing, Buyer shall not be responsible for any
obligations relating to or arising out of events or operations of the
Business occurring prior to the Closing Date.
(b) Assumed Liabilities. On the Closing Date, Buyer shall
assume all of Sellers' obligations with respect to the Real Property
Leases, the Minor Contracts, the Material Contracts, the Franchise
Agreements and Development Agreements and the amounts specified in
Section 6.4(c) (collectively, the "Assumed Liabilities"). Without
limiting the generality of the foregoing, Buyer shall not be
responsible for any obligation relating to or arising out of events or
operation of the Business occurring prior to the Closing Date.
Section 2.5 Taxes and Fees. In connection with the purchase, sale or
transfer of the Assets to, and the assumption of the Assumed Liabilities by,
Buyer pursuant to this Agreement:
(a) Buyer shall pay all sales taxes;
(b) Sellers shall pay all real estate transfer taxes; and
(c) Buyer and Seller shall each pay one-half of all filing fees and
documentary fees or taxes related to the recording of all deeds and
lease assignments.
Section 2.6 Allocation of Purchase Price. Buyer and Sellers agree that
the Purchase Price shall be allocated to the Assets in a manner agreed to by
them within 60 days after the date of the final Adjustment Statement. If the
parties are unable to agree on the allocation of Assets, an Independent
Accounting Firm shall allocate the Assets in accordance with the provisions of
Section 1060 of the Internal Revenue Code. "Independent Accounting Firm" shall
mean the first of the following accounting firms (using a partner thereof with
experience in the restaurant industry) in the following order of priority who
agrees to resolve the dispute submitted: PricewaterhouseCoopers, Xxxxxx Xxxxxxxx
LLP and Ernst & Young LLP. The fees and expenses of the Independent Accounting
Firm shall be borne equally by Buyer and Sellers. Such allocation shall be
binding on Buyer and Sellers for all purposes including the reporting of gain or
loss and determination of basis for income tax purposes, and each of the parties
hereto agrees that it or they will file a statement setting forth such
allocation with its or their federal income tax returns and will also file such
further information or take such further actions as may be necessary to comply
with the Treasury Regulations that have been promulgated pursuant to Section
1060 of the Internal Revenue Code of 1986, as amended (the "Code").
5
ARTICLE III
CLOSING
Section 3.1 Date, Time and Place of Closing. The consummation of the
transactions contemplated hereby (the "Closing") shall be held as soon as
practicable on the first Monday following the day on which all conditions to
closing described in Sections 9.3 and 9.4 have been satisfied or waived (the
"Closing Date"), beginning at 9:00 a.m. central time in the offices of Sellers'
counsel or at such other place, time or date as the parties hereto shall
mutually agree. The parties anticipate that the Closing shall occur on March 29,
1999.
Section 3.2 Deliveries by Sellers at Closing. At the Closing, and
thereafter as may be reasonably requested by Buyer, Sellers shall convey,
transfer, assign, and deliver all of their right, title and interest in and
possession of the Assets and Business to Buyer, and shall also deliver to Buyer,
or as designated by Buyer, the following:
(a) Bills of sale in substantially the form attached hereto as Exhibit
3.2(a), fully executed by Sellers;
(b) Assignment and Assumption of Real Property Leases in substantially the
form attached hereto as Exhibit 3.2(b), fully executed by Sellers in
recordable form;
(c) Assignment and Assumption of Material Contracts in substantially the
form attached hereto as Exhibit 3.2(c), fully executed by Sellers;
(d) Assignment and Assumption of Minor Contracts in substantially the form
attached hereto as Exhibit 3.2(d), fully executed by Sellers;
(e) Special Warranty Deeds with respect to each Owned Real Property in form
reasonably satisfactory to Buyer and Buyer's counsel, (or Deeds in such
form as may be required by the Title Company issuing any Title
Policies) fully executed by Sellers, in recordable form;
(f) Assignment and Assumption of Franchise Agreements in substantially the
form attached hereto as Exhibit 3.2(f), fully executed by Sellers;
(g) Assignment and Assumption of Development Agreements in substantially
the form attached hereto as Exhibit 3.2(g), fully executed by Sellers;
(h) Estoppel certificates in form reasonably satisfactory to Buyer, Buyer's
counsel, Sellers and Sellers' counsel, fully executed by each lessor of
each Real Property Lease, in recordable form;
(i) Assignment of Trademarks in substantially the form attached as Exhibit
3.2(i), fully executed by Sellers;
(j) Consents to Material Contracts, Real Property Leases, and other
agreements, as listed on Schedule 5.3, in forms reasonably satisfactory
to Buyer, Buyer's counsel, Sellers and Seller's counsel, fully executed
by the lessor, parties to Material Contracts, or other third parties,
as the case may be;
(k) Commitments to issue an ALTA policy of title insurance, issued at
Buyer's sole cost and expense, regarding each Owned Real Property,
insuring fee title to such property (the "Title Commitments") in
accordance with Section 6.9;
6
(l) An affidavit in form reasonably satisfactory to Buyer's counsel that
Sellers are not "foreign persons" within the meaning of the Internal
Revenue Code, fully executed by Sellers;
(m) Assignment of the license (the "Rio Bravo License") for limited use of
the Rio Bravo tradename in substantially the form of Exhibit 3.2(m)
(the "License Assignment"), fully executed by Sellers, or, in the
alternative, if Sellers have not consummated the sale of the Specialty
Restaurants, the Rio Bravo License, fully executed by Sellers;
(n) Opinion of Xxxxxx X. Xxxxxxxxx, counsel for Sellers in form reasonably
satisfactory to Buyer's counsel;
(o) As may be reasonably requested by Buyer, copies of all personnel
records of the Restaurant Employees (as defined in Section 6.1) and the
Corporate Employees (as defined in Section 6.4) who accept employment
with Buyer;
(p) As may be reasonably requested by Buyer, in electronic form, the
historical monthly Restaurant profit and loss statements for the
preceding two (2) years, in substantially the same form as provided
pursuant to Section 5.17;
(q) Originals of all Material Contracts, Franchise Agreements and
Development Agreements and copies of all other books and records
relating to the Business (which will be delivered as soon as
practicable after Closing);
(r) Certified copies of duly adopted resolutions of Sellers' and Parent's
Boards of Directors and stockholders, as required by law or company
charter or bylaw provisions, authorizing, approving, and consenting to
the execution and delivery of this Agreement, to the consummation of
the transactions contemplated herein, and to the performance of the
agreements set forth herein;
(s) Certificate of good standing for each Seller dated within thirty (30)
days of the Closing Date from their respective state of incorporation;
(t) A duly executed Cross-Receipt;
(u) The Reserve Agreement, as defined in Section 4.2, fully executed by
Sellers and Parent;
(v) The certificate referenced in Section 9.3(a), fully executed by Sellers
and Parent;
(w) Wire transfer instructions regarding delivery of the Cash Purchase
Price; and
(x) Such other documents, certificates or instruments reasonably necessary
to consummate the transactions contemplated by this Agreement.
Section 3.3 Deliveries by Buyer at Closing. Buyer shall deliver to
Sellers at Closing:
(a) The Cash Purchase Price by wire transfer;
(b) The Note, in accordance with the provisions of the term sheet attached
as Exhibit 2.1 and otherwise in the form mutually agreed upon by Buyer
and Sellers;
7
(c) Assignment and Assumption of Real Property Leases in substantially the
form attached hereto as Exhibit 3.2(b), fully executed by Buyer;
(d) Assignment and Assumption of Material Contracts in substantially the
form attached hereto as Exhibit 3.2(c), fully executed by Buyer;
(e) Assignment and Assumption of Minor Contracts in substantially the form
attached hereto as Exhibit 3.2(d), fully executed by Buyer;
(f) Assignment and Assumption of Franchise Agreements in substantially the
form attached hereto as Exhibit 3.2(f), fully executed by Buyer;
(g) Assignment and Assumption of Development Agreements in substantially
the form attached hereto as Exhibit 3.2(g), fully executed by Buyer;
(h) Assignment of Trademarks in substantially the form attached as Exhibit
3.2(i);
(i) License Assignment, fully executed by Buyer, or, in the alternative, if
Sellers have not consummated the sale of the Specialty Restaurants, the
Rio Bravo License, fully executed by Buyer;
(j) Opinion of Buyer's counsel in form reasonably satisfactory to Sellers'
counsel;
(k) The Reserve Agreement, as defined in Section 4.2, fully executed by
Buyer, Chevys and CHI, together with evidence of the establishment of
the line of credit, as set forth therein;
(l) A duly executed Cross-Receipt;
(m) Certified copies of duly adopted resolutions of CHI's, Chevys' and
Buyer's Boards of Directors authorizing, approving, and consenting to
the execution and delivery of this Agreement, to the consummation of
the transactions contemplated herein, and to the performance of the
agreements set forth herein;
(n) Certificate of good standing for Chevys and Buyer dated within thirty
(30) days of the Closing Date from their state of incorporation;
(o) The certificate referenced in Section 9.4(a), fully executed by Buyer,
Chevys and CHI; and
(p) Such other documents, certificates or instruments reasonably necessary
to consummate the transactions contemplated by this Agreement.
8
Section 3.4 Transfer of Operations. Buyer shall be entitled to
immediate possession of, and to exercise all rights arising under, the Assets
and the Business from and after the time that the Restaurants open for business
on the Closing Date, and operation of the Restaurants and the Business shall
transfer at such time (the "Effective Time"). Except as provided hereby, all
profits, losses, liabilities, claims, or injuries arising before the Effective
Time shall be solely to the benefit or the risk of Sellers. All such occurrences
after the Effective Time and relating to periods or events after the Effective
Time shall be solely to the benefit or the risk of Buyer. The risk of loss or
damage by eminent domain, fire, storm, flood, theft, or other casualty or cause
shall be in all respects upon Sellers prior to the Effective Time and upon the
Buyer thereafter. In the event of any material destruction, loss or damage to
any improvements situated or constructed on any of the Real Property, or to the
Equipment or property covered by the Equipment Leases, as a result of casualty
or eminent domain prior to Closing, Sellers', at their option, shall either (a)
repair or restore by the Closing Date or (b) pay over or assign to Buyer, as the
case may be, all condemnation and/or insurance proceeds received by Sellers or
to which Sellers are entitled; and if any of the losses or damages are not
covered by proceeds of condemnation or insurance, or if insurance (including any
amount subject to deductibles or self insurance) or insurance proceeds are not
available, Buyer shall receive payment from Sellers or such reduction in the
Purchase Price (pro rata from the Cash Purchase Price and the principal amount
of the Note) as shall be reasonably necessary to repair or restore such loss or
damage. Notwithstanding the foregoing, if the damage to a Restaurant is such
that the Restaurant cannot be opened for business as of the Closing Date, and it
is not reasonably expected that such Restaurant can be opened within two (2)
weeks thereafter (the "Damaged Restaurants"), the parties agree that the Closing
will occur with respect to all Restaurants other than the Damaged Restaurants,
and the Purchase Price shall be reduced (pro rata from the Cash Purchase Price
and the principal amount of the Note) by the aggregate amount allocated to the
Damaged Restaurants as set forth on the Allocation Schedule attached as Schedule
3.4 hereto. The Closing shall be effected as to the Damaged Restaurants at such
time as the Damaged Restaurants are open for business, within six (6) months
after Closing, after which time any obligation of Buyer to purchase Damaged
Restaurants shall cease, although Buyer will have the option to purchase. If, as
of the Closing Date, there are more than four (4) Damaged Restaurants, Buyer, at
its option, may terminate this Agreement.
ARTICLE IV
FRANCHISE SYSTEM
Section 4.1 Rio Bravo Franchise System.
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(a) Sellers purchased, developed and have operated the trademarks,
tradenames, trade dress, menus, signage, decor, operating processes and
procedures, food preparation and ingredients lists and all other unique
Intellectual Property, know-how and manner and method of operation
related to the Rio Bravo restaurant concept (the "Concept") and have
created and operated a franchise system for the Concept (the "System"),
consisting of development agreements, franchise agreements and the
other agreements and business relationships. A continued relationship
with the franchisees of the Concept is important to the business
interests of Sellers and, therefore, the parties have agreed to use
their reasonable efforts to cooperate with each other toward the
orderly transition of the System from Sellers to Buyer.
(b) Schedule 4.1(b) hereto is a true and complete list of each franchisee
of the System (the "Franchisees"), showing the date of each franchise
agreement and any amendments thereto, if any, (the "Franchise
Agreements") and the street address of the restaurant (the "Franchise
Restaurant") to which each such agreement relates.
(c) Schedule 4.1(c) hereto is a true and complete list of each Franchisee
development agreement, amendments, letter agreements or other
instruments, if any, showing the territory to which such agreement
relates and the remaining Franchise Restaurant development schedule
under such agreement (the "Development Agreements").
(d) Schedule 4.1(d) hereto is a true and complete list of each registered
trademark related to the System and the Concept (the "Trademarks").
Section 4.2 Franchise Fund. Pursuant to the terms of the Reserve
Agreement attached as Exhibit 4.2 hereto (the "Reserve Agreement"), Buyer shall
provide the amount of Six Million Dollars ($6,000,000), or such reduced amount
as permitted under the terms of the Reserve Agreement (the "Franchise Fund"), to
satisfy its obligations thereunder.
Section 4.3 Reserved .
Section 4.4 Development Agreements. Buyer will assume the obligations
under the Development Agreements designated on Schedule 4.4 without change and
shall waive any existing defaults (but only as to such existing default and not
as to any future performance by the Franchisee) by the Franchisee, subject to
the negotiation between Buyer and the Franchisee of a new development schedule
within a reasonable time period after Closing; provided, however, where the
territories set forth in such Development Agreement conflict with a territory of
an existing franchisee of Buyer or a Buyer territory, Buyer shall not be
required to breach any existing agreement with a Chevys franchisee and Buyer and
Sellers shall use good faith efforts in negotiating with the Franchisees and the
franchisees of Buyer to resolve the conflict. The remaining Development
Agreements as designated on Schedule 4.4 shall be terminated by Sellers prior to
the Closing Date by delivery of a termination notice reasonably satisfactory to
Buyer. The Development Agreements terminated shall include all Development
Agreements for territories in which the Franchisee has no operating Franchise
Restaurants or Franchise Restaurants under construction.
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Section 4.5 Continued Operation of Rio Bravo Restaurants. Buyer will
continue to operate all of the Restaurants in either the Atlanta or Kansas City
territory as Rio Bravo Restaurants until the earlier of three years after the
Closing or the date on which no Franchisee operates a Franchise Restaurant as a
Rio Bravo Franchise Restaurant.
Section 4.6 National Advertising Accounts. Sellers shall assume and be
responsible for any individual advertising account of a Franchisee which has
been overspent by either the Franchisee or the Sellers. To the extent a
Franchisee has paid money into its advertising account which has not been spent,
Sellers, within ninety (90) days after the Closing Date, will return such
amounts to the Franchisee, after offsetting such amount by (i) any outstanding
past due receivables owed from the Franchisee, excluding any royalties for
periods for which royalties have been waived, and (ii) any prepaid advertising
amounts to be allocated among the Franchisees.
Section 4.7 Franchisee Deposits. Sellers shall retain all deposits paid
by Franchisees under the terms of the Development Agreements and will offset
such deposits against any outstanding past due receivables owed from the
Franchisees, excluding any royalties for periods for which royalties have been
waived. To the extent, after the Closing Date, a Franchisee indicates it is
entitled under its Development Agreement to offset a deposit against some amount
owed to the Buyer, Buyer shall discuss with Sellers such Franchisee claim, and
if the Franchisee is entitled to such offset, in the reasonable opinion of
Buyer, Sellers shall reimburse Franchisee for such amount.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF SELLERS AND PARENT
As an inducement to Buyer to enter this Agreement and to consummate the
transactions contemplated hereby, Sellers and Parent represent and warrant to
Buyer as follows. When used in this Agreement, the term "knowledge" or any
variation thereof with respect to the Sellers shall mean the actual knowledge of
the senior executive officers of the Parent and the Sellers listed on Schedule V
hereto.
Section 5.1 Corporate Existence. The Parent and each Seller is duly
organized, validly existing, and in good standing under the laws of its
respective state of incorporation and is qualified to do business and is in good
standing in each jurisdiction in which the failure to qualify or be in good
standing could materially adversely affect the Assets or the Business. The
jurisdictions in which Sellers are qualified are set forth on Schedule 5.1
hereto.
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Section 5.2 Corporate Power and Authority. The Parent and each Seller
has the corporate power and authority to own its properties and assets,
specifically including but not limited to the Assets, and to carry on its
business as now conducted. Each Seller has the requisite corporate power and
authority to convey, assign, and transfer the Assets and the Business as set
forth in this Agreement.
Section 5.3 Execution and Delivery Permitted; Consents. The execution,
delivery and performance of this Agreement will not violate or result in a
breach of any term of any Seller's Articles of Incorporation or Bylaws, result
in a breach of or constitute a default under any term in any agreement or other
instrument to which any Seller or Parent is a party or by which any of the
Assets are bound, such default having not been previously waived by the other
party to any such agreement, or violate any law or any order, rule or regulation
applicable to any Seller or Parent, of any court or of any regulatory body,
administrative agency or other governmental instrumentality having jurisdiction
over any Seller or Parent or its properties; and will not result in the creation
or imposition of any lien, charge, or encumbrance of any nature whatsoever upon
any of the Assets. The Board of Directors and shareholders of each Seller and
Parent has taken all action required by law and by its Articles of Incorporation
and Bylaws to authorize the execution and delivery of this Agreement, and the
transfer of the Assets and the Business to Buyer in accordance with this
Agreement. Except as set forth on Schedule 5.3 (which shall include, but not be
limited to, consents required from the Parent's lenders), and except for
consents required under Minor Contracts (which will not be obtained), the
execution, delivery and performance of this Agreement and the other agreements
executed in connection herewith, and the consummation of the transactions
contemplated hereby and thereby do not require any filing with, notice to or
consent, waiver or approval of any third party (other than those obtained prior
to the date hereof), including but not limited to, any governmental body or
entity other than any filing required under the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), and the expiration of any
applicable waiting period thereunder. Schedule 5.3 identifies separately each
notice, consent, waiver or approval by reference to each Real Property Lease
(including consents of any landlords thereof), and to each Material Contract to
which it is applicable. No consent of any Franchisee is required for assignment
of the Franchise Agreements or Development Agreements.
Section 5.4 The Assets.
(a) Attached hereto as Schedule 5.4(a) is a complete and
accurate list of each parcel of real property owned by a Seller on
which a Restaurant is located (the "Owned Real Property");
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(b) Attached hereto as Schedule 5.4(b) is a complete and
accurate list of each parcel of real estate leased by Seller or in
which it has a leasehold or other interest (i) on which a Restaurant is
located or which is being held for development and (ii) the Rio
Corporate Office (collectively, the "Leased Real Property"),
(collectively, the Owned Real Property and the Leased Real Property are
referred to as the "Real Property");
(c) Attached hereto as Schedule 5.4(c) is a complete and
accurate list of all agreements or documents, and Sellers have made
available to Buyer a copy of such agreements or documents, under which
Seller claims or holds such leasehold or other interest or right to the
use of the Leased Real Property (the "Real Property Leases");
(d) Attached hereto as Schedule 5.4(d) is a complete and
accurate list of all material leases of equipment, fixtures and/or
personal property used in the operation of the Restaurants or the
Business (the "Equipment Leases"), identified by parcel of Owned Real
Property or Leased Real Property where the leased equipment is located
and Sellers have made available to Buyer a copy of such Equipment
Leases;
(e) When delivered as set forth below, Schedule 5.4(e) shall
be a complete and accurate list of all other contracts, agreements,
commitments or other understandings or arrangements to which any Seller
is a party that relate to the Business or by which any of the Assets
are bound or affected (other than (i) the Equipment Leases, (ii) the
Development Agreements and Franchise Agreements, (iii) the "Minor
Contracts" which are such contracts, agreements or commitments
terminable on thirty (30) days' notice or having annual payment
obligations of less than $15,000 per contract and which, in the
aggregate, are reflected in the financial statements, as applicable,
referenced on Schedule 5.17, to the extent an amount was owed in the
particular period presented and which, to Sellers' knowledge, are not
expected to increase in a material amount and (iv) those contracts
which relate to goods or services also supplied to the Parent's other
restaurant concepts or which were obtained as a result of a
relationship with the Parent which may not be assigned to Buyer on the
same terms (the "Non Assumed Contracts")). Schedule 5.4(e) (1) shall
list those Non Assumed Contracts with annual payment obligations in
excess of $15,000. The contracts listed on Schedules 5.4(d) and 5.4(e)
are the "Material Contracts," true and complete copies of which (or a
representative form thereof with respect to linen contracts) Sellers
have made available to Buyer; and
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(f) All Assets related to the System and the Concept which are
being transferred to Buyer hereunder are set forth on Schedules 4.1(b),
4.1(c), 4.1(d) and 4.1(e).
Section 5.5 Binding Effect. This Agreement and each other agreement
required to be executed and delivered by Parent or any Seller in connection
herewith, when executed and delivered, will be the legal, valid and binding
obligation of such Seller and Parent, enforceable against it in accordance with
its terms, except as enforceability may be limited by (i) applicable bankruptcy,
reorganization, insolvency, moratorium and similar laws affecting the
enforcement of creditors' rights generally, and (ii) general equitable
principles (regardless of whether enforceability is considered in a proceeding
in equity or at law).
Section 5.6 Condition of Assets.
(a) Each Restaurant contains all Equipment necessary to
operate the Restaurant in accordance with Sellers' historical
practices. The Equipment is in reasonable operating condition,
commensurate with its age, with reasonable wear and tear excepted, and
the Equipment complies in all material respects with all federal, state
and local laws, rules and regulations, and all occupational safety and
health act regulations.
(b) The buildings, fixtures, parking facilities, trash
facilities, fences and other improvements, appurtenances and
hereditaments at or on each Restaurant and the Rio Corporate Office are
in good condition, commensurate with their age, with reasonable wear
and tear excepted, and in compliance in all material respects with all
federal, state and local laws, ordinances, rules and regulations
(including, without limitation, handicap access requirements) and
leases and lease provisions.
(c) There are no limitations on access to the Real Property or
any easement or similar restriction which would materially affect the
operation of the Real Property as a Restaurant.
Section 5.7 Absence of Other Assets. Except as specifically provided in
this Agreement, there is no asset, property, or right of any nature owned, held
or used by Sellers, Parent or any direct or indirect subsidiary or affiliate
which is not being transferred to Buyer hereunder that has been primarily used
or held for use in connection with the operation of the Business, other than the
Excluded Assets and Permits that are not transferable by Sellers. All Equipment,
Inventory in Process or Unused Inventory (as defined in Section 9.1(f)) in use
in the operation of any Restaurant are situated entirely upon the premises of
such Restaurant.
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Section 5.8 Ownership of Assets. Parent and Sellers collectively have
good title to the Assets (other than the Owned Real Property (which is addressed
in Section 5.9 below)), which title is, or will be at Closing, free and clear of
all deeds of trust, mortgages, liens, security interests, charges, and
encumbrances of any nature whatsoever; Parent and Sellers have the full,
absolute and unrestricted right to assign, transfer and convey to Buyer the
Assets, subject only to those consents set forth on Schedule 5.3 (except for
such consents as may be required under the Minor Contracts that are not being
obtained); no person or entity other than the Sellers has any interest in the
Assets or the Business other than the lessors under the Real Property Leases and
Equipment Leases, the other parties to the Minor Contracts, the Material
Contracts, the Franchise Agreements and the Development Agreements.
Section 5.9 Real Property.
(a) Sellers collectively have good and marketable title to all of the Owned
Real Property free and clear of all restrictions, pledges, liens,
mortgages, hypothecation, collateral assignments, encumbrances or
easements, other than Permitted Encumbrances as defined below, and the
full, absolute and unrestricted right to assign, transfer and convey to
Buyer said Owned Real Property, subject only to such consents as
Sellers shall deliver to Buyer at Closing as set forth on Schedule 5.3.
Sellers have the exclusive right to possess, use and occupy the Owned
Real Property as a Restaurant, subject to any rights to use or occupy
the Owned Real Property as a result of a Permitted Encumbrance. Sellers
have received no written notice of any public assessments, regulatory
and code violations, defect claims, required repairs or alterations or
pending government actions (condemnation, eminent domain, etc.)
regarding the Owned Real Property. To Sellers' knowledge, the Owned
Real Property is adequately served by all public utilities required for
the use and operation of the Owned Real Property.
(b) Each Real Property Lease is in full force and effect; and each
constitutes the legal, valid, binding and enforceable obligation of
Sellers, and, to Sellers' knowledge, the lessor thereof. Sellers are
current in all material obligations under each Real Property Lease.
There are currently no events of default by any Seller, and, to the
best of Sellers' knowledge, no state of facts exists which with notice
or the passage of time, or both, would constitute an event of default
by any Seller or any other party under any Real Property Lease. To
Sellers' knowledge, there are no disputes in effect as to any Real
Property Lease. Subject to the consents listed on Schedule 5.3, the
consummation of the transactions contemplated by this Agreement will
not (and will not give any person a right to) terminate or modify any
rights of, or accelerate or increase any obligation of Sellers under
any Real Property Lease. Neither (a) the request for or granting of
consent nor (b) the transfer of any Real Property Lease will cause an
increase in the amount of rent or other sums payable under the terms of
any Real Property Lease. Sellers have not assigned, transferred,
conveyed, mortgaged or otherwise encumbered any interest in any Leased
Real Property. To Sellers' knowledge, the Leased Real Property is
adequately served by all public utilities required for the use and
operation of the Leased Real Property. Sellers have the right to use
the Leased Real Property as a Restaurant, or, with respect to the Rio
Corporate Office, as an office.
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(c) Except as set forth on Schedule 5.9(c) hereto, no proceedings are
pending, or to Sellers' knowledge, threatened which could or would
cause any material change, redesignation, redefinition or other
modification of the zoning or use classification of, or any building or
environmental code requirements applicable to, any of the Real Property
(or any portion thereof). No moratorium or proceeding is pending, or to
Sellers' knowledge, threatened, which would or could affect the
availability, at regular rates and connection fees, of sewer, water,
electric, gas, telephone or other services or utilities that would have
a material adverse impact on the operation of any of the Real Property.
(d) As used herein, the term "Permitted Encumbrances" means: (i) the
standard printed exclusions and standard or printed exceptions in the
form of owner's or leasehold policy of title insurance (as the case may
require) generally in use in the jurisdiction in which the Owned Real
Property or Leased Real Property, as applicable, is located; (ii) such
matters as disclosed by any survey of the subject Owned Real Property
obtained by Buyer in accordance with Section 6.9 which is not a Buyer's
Objection (as defined in Section 6.9(c)); (iii) any lien or real
property ad valorem taxes and other taxes and assessments, not due and
payable on or before the Closing Date; (iv) zoning ordinances affecting
the subject Owned Real Property or Leased Real Property, as applicable,
which is not a Buyer's Objection (as defined in Section 6.9(c)); and
(v) all easements, covenants, restrictions, reservations, rights of way
and other similar matters of record as shown on any title report for
each parcel of Owned Real Property delivered to Buyer in accordance
with Section 6.9 which is not a Buyer's Objection (as defined in
Section 6.9(c)) that has not been waived as set forth in Section
6.9(d).
Section 5.10 Litigation or Condemnation; Compliance with Laws. Except
as set forth on Schedule 5.10 to this Agreement, there are no suits, actions,
condemnation actions, investigations, complaints, or other proceedings of any
nature whatsoever in law or in equity, which are pending or, to Sellers'
knowledge, threatened against any Seller, which materially adversely affect any
of the Assets, any Assumed Liabilities or the Business, by or before any
federal, state, municipal, or other governmental court, department, commission,
board, bureau, agency, or other instrumentality (whether domestic or foreign).
Sellers are not in default with respect to any order, writ, injunction,
garnishment, levy, or decree of any federal, state, municipal, or other
governmental court, department, commission, board, bureau, agency, or
instrumentality which would materially adversely affect the Assets, any Assumed
Liabilities or the Business, and the transfer of the Assets or the Business do
not constitute a default thereunder which would materially adversely affect the
Assets or the Business. To Sellers' knowledge, the operations of the Restaurants
and the condition of the Assets or the Business do not violate in any material
respect any federal, state, or municipal law, regulation or rule (including any
applicable zoning or similar use regulation or law). No improvements which might
form the basis of a mechanic's or materialmen's lien have or will have been made
to the Real Property prior to the Closing Date which have not been paid in full.
To Sellers' knowledge, each Seller has complied in all material respects with
all U.S. federal, state, local, municipal and foreign laws (other than
Environmental Law, as to which the Sellers make the representations and
warranties set forth in Section 5.15), ordinances, rules and regulations
applicable to the Assets or the Business, including, without limitation, all
employment, franchise, building, zoning and land use laws and the Foreign
Corrupt Practices Act, and no Seller has received any written notice alleging
any conflict, violation, breach or default with such laws.
16
Section 5.11 Taxes. All ad valorem and other property taxes relating to
the Assets and the Business have been fully paid to the extent due, and all
prior tax years and there are no delinquent property tax liens or assessments.
Each Seller has also filed (or will file) all federal, state, local and other
tax returns and reports of whatever kind pertaining to the Assets and required
to be filed by any Seller for all periods up to and including the Closing Date.
Each Seller has paid (or will pay) all taxes of whatever kind, including any
interest, penalties, governmental charges, duties, fees, and fines imposed by
the United States, foreign countries, states, counties, municipalities, and
subdivisions, and by all other governmental entities or taxing authorities,
which are due and payable (or which relate to any period prior to the Closing
Date) or for which assessments relating to any period prior to the Closing Date
have been received, the nonpayment of which would result in a material lien on
any of the Assets. Except as set forth on Schedule 5.11 hereto, no audits are
currently pending with respect to any federal or state tax returns of any
Seller, and Sellers have received no written notice of any claims by any such
governmental entity or taxing authority with respect to the payment of taxes or
filing of tax returns or reports.
Section 5.12 Contracts. The Minor Contracts and the Material Contracts
have been entered into in the ordinary course of Sellers' business and, to
Sellers' knowledge, contain commercially reasonable terms. Subject to the
consents delivered to Buyer at Closing, Sellers have the right to assign,
transfer and convey to Buyer the Material Contracts. There have been no events
of material default by any Seller, or, to Sellers' knowledge, any third party,
and, to the knowledge of Sellers, no state of facts exists which with notice or
the passage of time, or both, would constitute an event of material default by
any Seller or a third party under any Material Contract; provided, however,
Buyer acknowledges that there exist disputes between Sellers and the Franchisees
over compliance by the parties, including the payment of fees, under the
Franchise Agreements and Development Agreements. Except as set forth on Schedule
5.12 hereto, to Sellers' knowledge, there are no material defaults under the
Franchise Agreements or Development Agreements. Subject to the consents listed
on Schedule 5.3, the consummation of the transactions contemplated by this
Agreement will not (and will not give any person a right to) terminate or modify
any rights of, or accelerate or increase any obligation of Sellers under any
Material Contract. Each Material Contract, Franchise Agreement and Development
Agreement (except as set forth on Schedule 5.12) is in full force and effect;
and each constitutes the legal, valid, binding and enforceable obligation of
Sellers and, to Sellers' knowledge, the other parties thereto. Except as set
forth on Schedule 5.4(e), there are no material oral contracts to which any
Seller is a party that relate to the Business or the Assets and as to which
Buyer would be obligated after the Closing.
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Section 5.13 Employment Matters.
(a) No Restaurant Employees are on strike, claiming unfair labor practices
or other collective bargaining disputes. Sellers have received no
written notice that such employees are threatening to strike, claiming
unfair labor practices or other collective bargaining disputes. Sellers
have no knowledge that any labor union has recently attempted, or is
presently attempting, to organize the Restaurant Employees into a
collective bargaining unit, and no group of Restaurant Employees is
presently organized into a collective bargaining unit. To Sellers'
knowledge, there have been no strikes, grievances, claims of unfair
labor practices or other collective bargaining disputes in connection
with the Business.
(b) To Sellers' knowledge, Sellers have operated all Restaurants in
material compliance with all local, state and federal laws and
regulations related to employment matters including, but not limited
to, payment of wages and benefits and employee discrimination.
(c) Buyer is not obligated to assume any liability, obligation or other
responsibility under any benefit plan of Parent or any Seller.
(d) The $100,000 amount referenced in Section 6.4(c) is a reasonable
approximation of the accrued but unused vacation pay due any hourly
employee as of the Closing Date.
Section 5.14 Licensure. Sellers possesses all Permits necessary for the
operation of each Restaurant for which the failure to obtain would have a
material adverse effect on the operation of such Restaurant. Sellers have all
such Permits current and in full force and effect and are in material compliance
with all requirements and limitations set forth in such Permits. All such
Permits are now, and at Closing will be, in full force and effect.
Section 5.15 Environmental Matters.
(a) Hazardous Materials (as defined below) have not been at
any time during Sellers' ownership or operation of the Owned Real
Property or Sellers' possession or operation of the Leased Real
Property, and to Sellers' knowledge, except as may be disclosed in
those environmental reports made available by Sellers to Buyer and
listed on Schedule 5.15(a) (collectively, the "Environmental Reports"),
have not been during any other time, generated, stored, discharged,
disposed of, spilled, dumped, poured, emptied, or released and are not
currently present at, on, in, beside, above, or under the Real
Property, except for those Hazardous Materials which may lawfully be
used in the ordinary course of operating the Business (and then only in
material compliance with applicable Environmental Law (as defined
below)). Except as may be disclosed in the Environmental Reports,
underground storage tanks are not and have not been at any time during
Sellers' ownership of the Owned Real Property or Sellers' possession of
the Leased Real Property, and to Sellers' knowledge have not been
during any other time, located on the Real Property. Sellers have at
all times operated the Real Property and the Business in material
compliance with all Environmental Law.
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(b) For the purpose of this Agreement, the term "Hazardous
Materials" shall include, but not be limited to:
any substance defined as "hazardous substances,"
"hazardous air pollutant," "pollutants,"
"contaminants," "hazardous materials," "hazardous
wastes," "toxic chemicals," "petroleum or petroleum
products," "toxics," "hazardous chemicals,"
"extremely hazardous substances," "pesticides" or
related materials, including but not limited to radon
and asbestos, as now, in the past, or hereafter
defined in any applicable federal, state or local
law, regulation, ordinance, policy or directive,
including, but not limited to, the Comprehensive
Environmental Response, Compensation and Liability
Act of 1980, as amended by the Superfund Amendments
and Reauthorization Act of 1986, 42 U.S.C. ss. 9601
et. seq.; the Emergency Planning and Community
Right-to-Know Act, 42 U.S.C. ss. 1101 et. seq.; the
Resource Conservation and Recovery Act, 42 U.S.C. ss.
6901 et. seq.; the Hazardous Materials Transportation
Act of 1974, 49 U.S.C. ss. 1801 et. seq.; the Federal
Water Pollution Control Act, 33 U.S.C. ss. 1251 et.
seq.; the Clean Air Act, 42 U.S.C. ss. 7401 et. seq.;
the Federal Insecticide, Fungicide and Rodenticide
Act, 7 U.S.C. ss. 136 et. seq.; the Safe Drinking
Water Act, 42 U.S.C. ss. 3001 et. seq.; the Toxic
Substances Control Act, 15 U.S.C. ss. 2601 et. seq.;
the Oil Pollution Act of 1990, 33 U.S.C. ss. 2701 et.
seq.; and any laws regulating the use of biological
agents or substances including medical or infectious
wastes and the similar or analogous State laws,
regulations and local ordinances, which may be
applicable, as any such acts may be amended.
(c) For the purpose of the Agreement, the term "Environmental
Law" shall include, all applicable federal, state and local statutes,
laws, regulations, ordinances, policies and directives relating to
pollution, protection of the environment, Hazardous Materials, or
public or worker health and safety, including without limitation, all
statutes listed in the definition of Hazardous Materials.
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(e) Sellers (i) have not been notified in writing that they or any of them
is potentially liable, (ii) have not received any written requests for
information or other correspondence concerning any site or facility and
(iii) to Sellers' knowledge are not "potentially responsible parties,"
under any Environmental Law with respect to operations at or the
condition of any of the Real Property.
(f) Sellers have obtained all permits and made all filings which are
required by Environmental Law for the ownership of the Owned Real
Property and leasing of Leased Real Property and the operation of its
businesses, as presently conducted, of which the failure to obtain or
file would have a material adverse effect on the Assets or the Business
and there are no violations and no pending or, to the knowledge of the
Sellers, threatened investigations or proceedings with respect to such
permits which could reasonably be expected to have a material adverse
affect upon the Assets.
(g) Sellers agree and consent to the performance of environmental testing
on the Real Property at Buyer's expense; provided, however, that
neither the performance of nor failure to perform such tests by Buyer
will negate or affect Sellers' representations or warranties contained
herein.
Section 5.16 System Operation. The System has been established and
operated in material compliance with all applicable state and federal laws
related to the offer and sale of franchises. Sellers are in material compliance
with the Franchise Agreements and the Development Agreements; provided, however,
Buyer acknowledges that there exist disputes between Rio Bravo and the
Franchisees over compliance by the parties, including the payment of fees, under
the Franchise Agreements and Development Agreements. Sellers know of no material
infringements to the Intellectual Property and to their knowledge the System
does not infringe on the valid and enforceable intellectual property of third
parties.
Section 5.17 Historical Financial Information. The historical financial
information for the Restaurants or RBI provided to Buyer as set forth on
Schedule 5.17 was prepared in accordance with Sellers' historical practices and
the books and records from which such financial information was prepared are
true, correct and complete in all material respects. The unaudited statements of
operations for each Restaurant and combined for all Restaurants for the fiscal
years ended December 27, 1998, December 28, 1997, and December 29, 1996 were
prepared in accordance with generally accepted accounting principles, except for
the absence of explanatory notes, and fairly present in all material respects
the operating results of the Restaurants for the periods presented. The
unaudited consolidated balance sheet of RBI as of December 27, 1998, which
includes all assets of the Business and the assets and liabilities of the
Specialty Restaurants, was prepared in accordance with Sellers' historical
practices and the books and records of Sellers from which such financial
information was prepared are true, correct and complete in all material
respects, and the Assets and the Assumed Liabilities, as shown therein, are
reflected in accordance with generally accepted accounting principles, except
for the absence of explanatory notes.
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Section 5.18 Year 2000 Issues. Sellers disclaim all warranties, express
or implied, and make no representations, that any date-sensitive assets sold
hereunder, whether hardware or software, will accurately recognize and process
dates through and beyond January 1, 2000. Buyer accepts the date-sensitive
assets "as-is" with respect to their ability to accurately recognize and process
dates through and beyond January 1, 2000.
Section 5.19 Intellectual Property.
(a) Schedule 4.1(d) sets forth a list of all patents, patent applications,
trademarks, service marks, logos, tradenames, copyrights and
registrations and applications for registration thereof used in
connection with the Business.
(b) Except and to the extent described in Schedule 4.1(d), Sellers have
exclusive ownership of the Intellectual Property and Sellers' rights in
the Intellectual Property are freely transferable. The Intellectual
Property constitutes all of the patents, trademarks, service marks,
trade names, copyrights and similar rights that are (a) related to the
Business, or (b) primarily used in, or are necessary for the operation
of the Business as presently conducted by Sellers. To the extent
required to maintain the valid existence, enforceability or subsistence
of the Intellectual Property, all Intellectual Property has been duly
registered with, filed in or issued by the appropriate governmental
authority, and has been renewed and maintained in accordance with all
applicable provisions of law and administrative regulations. With
respect to the Business as presently conducted, there is no claim or
demand (including, but not limited to, and claim of infringement,
interference or misappropriation) by Sellers or any third party, nor to
the Sellers' knowledge any basis therefor, pertaining to the
Intellectual Property.
(c) There are no licenses or other agreements under which the Sellers have
been granted rights in any Intellectual Property. The Rio Bravo License
(when executed) is the only agreement under which Sellers have granted
rights to others in any Intellectual Property.
Section 5.20 Absence of Certain Changes. Since December 27, 1998,
Sellers have carried on the Business and conducted their operations and affairs
only in the ordinary and normal course consistent with past practice and there
has not been any material damage, destruction or loss (whether or not covered by
insurance) affecting the Assets or action taken by Sellers which, if taken
between the date hereof and Closing, would be prohibited by Section 6.5(b)
hereof (excluding Section 6.5(b)(vii)).
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Section 5.21 Insurance. The insurance coverage provided by the
insurance policies obtained by Parent or Sellers with respect to the Assets is
adequate and customary for the Business. Sellers are not in default in any
material respect with regard to any of the provisions contained in any such
insurance policy, where such default would have a material adverse effect upon
the Assets or the Business. Such insurance policies are in full force and effect
on the date hereof, and will be continued in full force and effect to and
including the Closing Date.
Section 5.22 Adulterated Food. To Sellers' knowledge, no Seller has
served any food or food stuff at a Rio Bravo Cantina which is adulterated or
spoiled. Except as set forth on Schedule 5.10, there is no pending material
claim that any Seller served any food item which has, or is claimed to have
caused any illness or injury to the consumer thereof.
ARTICLE VI
COVENANTS OF SELLERS
Sellers covenant and agree as follows:
Section 6.1 Employee Benefit Plans. Buyer is not obligated to assume
any liability, obligation or other responsibility under any benefit plan of any
Seller or any affiliate of any Seller. The active participation in any Seller
benefit plan of all Sellers' employees in or assigned to the Restaurants (the
"Restaurant Employees") shall cease as of the Closing Date for all periods of
time on or after the Closing Date. Sellers shall remain responsible and liable
for all payments required under the terms of any "employee welfare benefit plan"
as defined in Section 3(1) of ERISA for claims incurred and expenses and
payments accrued prior to the Closing Date.
Section 6.2 Sellers Performance. Sellers shall, through the Effective
Time, continue to faithfully and diligently perform each and every continuing
obligation of Sellers, if any, under each of the Real Property Leases, Minor
Contracts, Material Contracts, Franchise Agreements and Development Agreements
in accordance with Sellers' historical practices. Sellers agree to remit, as
required by law, any transfer tax Sellers have agreed to pay pursuant to Section
2.5(b). If requested in writing by Buyer and allowed under the terms of a
Material Contract, Sellers shall take such actions necessary to terminate any
Material Contract, pursuant to its terms, as of the Closing Date or as soon
thereafter as possible.
Section 6.3 Transfer of Licenses and Permits. Within ten (10) days
following the date hereof, Sellers shall deliver to Buyer a true and complete
list of the Permits currently held by any Seller in connection with the
operation of the Business. Sellers shall use their reasonable efforts and
cooperate in assisting Buyer with the assumption, transfer or reissuance of any
and all Permits required for the operation of the Business.
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Section 6.4 Agreements Respecting Employees of Sellers and Buyer
(a) The parties recognize that the orderly transfer of the
personnel employed by the Business is significant to the business
interests of both Buyer and Sellers. As a result, the parties will use
their reasonable efforts to avoid significant disruption to the
Business.
(b) Immediately prior to the Closing, Sellers shall terminate
all Restaurant Employees, and all multi-unit supervisors or employees
at the corporate headquarters of Rio Bravo (the "Corporate Employees")
who have accepted employment with Buyer pursuant to Section 8.3(b) and
who are listed on Schedule 6.4(b) (to be delivered by Buyer at
Closing).
(c) At the Closing, (1) Sellers and Buyer shall prorate any
accrued bonus, (2) Sellers shall pay to Buyer $100,000 for all accrued
but unused vacation pay due any employee paid on an hourly basis as of
the Closing Date, as set forth in Section 9.1, and Buyer will
thereafter assume the financial and legal obligations of the same.
Buyer agrees to pay bonuses to Restaurant Employees for the month (or
quarter, as the case may be) in which the Closing occurs under the
Sellers' existing bonus plan. At Closing, Sellers shall pay to Buyer an
amount equal to all earned vacation for any salaried employee hired by
Buyer as of the Closing Date, as set forth in Section 9.1, and Buyer
will thereafter assume the financial and legal obligation of the same.
Except as provided in this Section 6.4, Buyer will not assume any
profit sharing or retirement plan, welfare benefit plan, or salary or
bonus plan of any Seller or any other employment-related liabilities.
(d) For a period of one (1) year after the Closing Date,
Sellers shall not solicit the employment of any Restaurant Employee or
(except for the possible employment of Xxxx Xxxx, Director of Franchise
Operations, who may be solicited for employment after the date ninety
(90) days from the Closing Date) solicit for employment or hire any
Corporate Employee who accepts employment with Buyer at Closing and who
remains employed with Buyer for a period of at least six (6) months
thereafter.
(e) Sellers shall use reasonable efforts, without cost to
Sellers, in assisting Buyer in obtaining health insurance coverage for
the Restaurant Employees and Corporate Employees similar to that
currently offered by Sellers.
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Section 6.5 Conduct of Business.
(a) From the execution of this Agreement until Closing,
Sellers shall:
(i) Operate and continue to maintain
the Business only in the ordinary
course, using reasonable commercial
efforts in keeping with Sellers'
historical practices to preserve
and maintain the services of its
employees, its relationships with
suppliers, Franchisees and
customers;
(ii) Continue to insure the Assets under
existing policies of insurance at
current levels until the Effective
Time; (iii) Maintain all books and
records in the ordinary course,
consistent with past practice; (iv)
Sellers shall promptly inform Buyer
in writing of (1) any material
development affecting the Assets,
the Assumed Liabilities, or the
financial condition, operations,
results of operations or prospects
of the Business, (2) any material
development affecting the ability
of Sellers to consummate the
transactions contemplated by this
Agreement and (3) deliver to Buyer
weekly sales reports of the
Restaurants and monthly financial
statements relating to the
Business, substantially the same as
delivered pursuant to Section 5.17.
No disclosure by Sellers pursuant
to this Section 6.5, however, shall
affect or limit the scope of any
warranty, representation or
covenant of Sellers contained in
this Agreement, or in any agreement
executed in connection herewith, or
limit Sellers' liability for
damages incurred for any breach of
any such warranty, representation
or covenant.
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(b) Further, Sellers shall not, without the express prior
written approval of Buyer:
(i) Change in any material manner the ownership
of the Assets;
(ii) Increase the overall Restaurant workforce or
increase the rate of compensation to
Restaurant Employees beyond the usual and
customary annual merit increases or bonuses
under established compensation plans except
for (1) bonuses or severance for Corporate
Employees who do not become employees of
Buyer, and (2) changes related to Sellers'
benefit plans which will take effect on
March 1, 1999, a description of which has
been made available to Buyer;
(iii) Mortgage, pledge or subject to lien any of
the Assets;
(iv) Sell or otherwise dispose of any Asset
except for Excluded Assets and except in the
ordinary course of business;
(v) Violate any applicable law relating to the
operation of the Business or Assets in any
material respect;
(vi) Knowingly engage in any practice, take any
action or omit to take any action or enter
into any transaction that would render any
of the warranties and representations of
Sellers or Parent contained in Article V
untrue in any material respect;
(vii) Enter into or commit to enter into any
contract, agreement or commitment that would
be required to be set forth on Schedule
5.4(e) hereto; and
(viii) Other than any expiration consistent with
its terms, cancel or terminate or consent to
or accept any cancellation or termination of
any Material Contract, any Real Property
Lease or any Franchise Agreement or
Development Agreement (except as
specifically permitted hereunder), amend or
otherwise modify any of its material terms
or provisions or give any consent, waiver or
approval, waive any breach of any of its
material terms or provisions or take any
other action in connection with any Material
Contract, any Real Property Lease or any
Franchise Agreement or Development Agreement
(except as specifically permitted hereunder)
that would materially impair the interests
or rights of Sellers to be transferred to
Buyer hereunder.
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Section 6.6 Broker's Fees. Sellers shall indemnify and hold Buyer
harmless in respect to any claim for brokerage or finder's fees or commissions
with respect to the transactions contemplated herein by anyone claiming to have
acted on behalf of any Seller. Sellers shall pay all fees due Xxxxx Xxxxxxx in
connection with the transactions contemplated hereby.
Section 6.7 Access to Information and Real Property. Sellers shall
afford Buyer, its counsel, financial advisors, auditors, lenders, lenders'
counsel and other authorized representatives reasonable access for any purpose
consistent with this Agreement (including performing inspections, conducting
survey work, conducting tests of equipment and the like) from the date hereof
until the Closing and for a period of one (1) year after the Closing, or three
(3) years if reasonably necessary for Buyer to comply with or make any
governmental inquiry or filing, during normal business hours, to the offices,
properties, books, and records of Sellers and Parent with respect to the Assets
and the Business, including access to the Restaurants, subject to Buyer's
obligations regarding the confidentiality of such information as set forth in
Section 8.2 hereof; provided, however, that such access shall be arranged in
advance by Buyer with Sellers and will be scheduled in a manner and with a
frequency calculated to cause the minimum disruption of the business of Sellers.
Section 6.8 No Sale Negotiations. Sellers and their representatives and
agents shall not solicit, negotiate or consummate any proposals with respect to
(i) any direct or indirect sale, disposition or redemption of any securities of
any of Sellers, (ii) the direct or indirect sale or disposition of all or
substantially all of the Assets or of the Business, or (iii) any merger,
reorganization, consolidation or recapitalization or other similar transactions
involving the Business; provided, however that Sellers and their representatives
and agents may take any of the foregoing actions if the Board of Directors of
the Parent determines in good faith, after consultation with legal counsel, that
the failure to do so could reasonably be expected to constitute a breach of the
Board's fiduciary duties.
Section 6.9 Survey and Title Report.
(a) Buyer, at Buyer's sole cost and expense, will obtain, as
soon as practicable using all reasonable efforts, a current ALTA
on-the-ground/as built survey (collectively, the "Surveys" and each, a
"Survey") of each free-standing Owned Real Property, prepared by
licensed surveyors who are reasonably acceptable to Buyer and Buyer's
selected title company (the "Title Company"), for the modification to
the extent permitted by insurance regulations, of the survey exception
to the Title Policies.
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(b) Buyer, at Buyer's sole cost and expense, will obtain, as
soon as practicable using all reasonable efforts, a current preliminary
title report or title policy commitment issued by the Title Company for
each parcel of Owned Real Property (collectively, the "Title Reports"
and each, a "Title Report"), describing such parcel, listing Buyer and
Buyer's designated lender as the prospective named insured and showing
as the proposed policy amount an amount to be determined by Buyer.
Buyer shall furnish to Sellers, at Buyer's sole cost and expense, a
legible and true copy of the Surveys, the Title Reports and all
documents and other instruments referenced in the Title Report.
(c) As soon as is reasonably possible after the date of
receipt of the Survey, the Title Report and copies of all documents
pertaining to such Survey and Title Report as Buyer and/or Title
Company may reasonably require for each Owned Real Property, Buyer and
Buyer's attorney shall review the same and notify Sellers in writing of
only, in Buyer's reasonable judgment, material objections to the
condition of the title or matters shown on the Survey or in the Title
Report ("Buyer's Objections"). As soon as is reasonably possible
following receipt of Buyer's notice, Sellers shall rectify Buyer's
Objections at Sellers' sole cost. The parties agree that, if necessary,
the time of Closing shall be extended accordingly. Sellers shall use
reasonable efforts, without cost to Sellers, to assist Buyer, at
Buyer's expense, in remedying any other objections Buyer may have, but
in no event shall any inability to remedy such objections delay the
Closing or cause a termination of this Agreement.
(d) If Sellers do not or cannot rectify Buyer's Objections
within thirty (30) days after receipt of all Buyer's Objections, Buyer,
at Buyer's option, may: (i) waive such Buyer's Objections without
remedy; (ii) if there are three (3) or fewer Restaurants with uncured
Buyer's Objections within such time period, conduct the Closing with
respect to all other Restaurants and reduce the Purchase Price (pro
rata from the Cash Purchase Price and the principal amount of the Note)
by the aggregate amount allocated to such Restaurants as set forth on
the Allocation Schedule; or (iii) if there are four (4) or more
Restaurants with uncured Buyer's Objections within such time period,
terminate this Agreement.
Section 6.10 Cooperation. Sellers will use reasonable efforts to cause
the conditions set forth in Section 9.4 to be satisfied and to facilitate and
cause the consummation of the transactions contemplated hereby; and obtain from
all persons, and take all other actions with respect to, all consent or
approvals required on the part of such party with respect to the consummation of
those transactions (except for the consent of other parties to Minor Contracts,
which consents shall not be required to be obtained hereunder even if required
by the terms of such Minor Agreements). Sellers and Parent will use reasonable
efforts to obtain the consent required from Parent's lenders, as set forth on
Schedule 5.3.
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Section 6.11 Proration and Purchase Price Adjustment Data. At least
five (5) days prior to the Closing Date, Sellers shall deliver to Buyer all
information and documents necessary for the preparation of the Adjustment
Statement required under Section 2.2, above, regarding the prorations and
Purchase Price adjustments set forth in Section 9.1 below.
Section 6.12 Remodeling Costs. Sellers shall complete, at their own
expense, the remodeling currently underway at the Daytona Restaurant location.
Unless otherwise requested in writing by Buyer, Sellers shall immediately
terminate any other remodeling efforts. At Buyer's sole expense, Buyer may
request Sellers to complete or undertake any other remodeling at any Restaurant
and shall reimburse Sellers for all expenses incurred at Buyer's request.
Section 6.13 Transition Services.
(a) If and to the extent requested in writing by Buyer, Sellers agree to
provide to Buyer (i) for a period of three (3) months after the
Closing, restaurant accounting and payroll services and (ii) for a
period of nine (9) months after the Closing, POS system support and
other computer related services related to the Restaurants, both as
reasonably requested by Buyer and as mutually agreed upon between
Sellers and Buyer (the "Services"). Buyer shall give Sellers thirty
(30) days written notice prior to the Closing, of the Services
requested. The parties will agree on a detailed letter of understanding
with respect to the Services prior to any Service being rendered. In
accordance with the above, the Services shall be provided promptly as
requested and shall be provided in the same manner and with the same or
similar personnel as Sellers previously utilized.
(b) Buyer will pay for the Services on a monthly basis, after receipt of an
invoice from Sellers, at Sellers' direct personnel cost and other
direct costs incurred in connection with providing the requested
Service. Sellers' invoice shall detail the personnel used, the amount
of time spent and its calculation of the cost thereof. Direct personnel
cost shall include only base salary and benefits normally paid to
Sellers employees in such capacities.
(c) Sellers are not required to maintain the employment of any specific
personnel in connection with providing the Services. (d) Sellers will
provide one (1) POS software release to Buyer to address Year 2000
compliance matters. Sellers will provide to Buyer all POS software
maintenance releases for a period of twelve (12) months after the
Closing Date. Sellers shall provide reasonable software changes in the
event the POS software does not function as designed, within a
reasonable timeframe mutually agreed upon by Buyer and Sellers. Sellers
are not obligated to provide any additional POS software releases or
any feature enhancements, or provide any other further support of the
POS system except as set forth herein. Sellers are giving no warranty
of any kind to Buyer as to the POS system. Buyer agrees to remove the
POS software from the Restaurants within twelve (12) months after the
Closing Date. Sellers shall provide a single, two (2) day training
session on support of the POS System, at the Parent's corporate
headquarters, for up to five (5) employees of Buyer. Buyer shall
promptly reimburse Sellers for all reasonable out-of-pocket expenses
incurred to conduct this training session.
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Section 6.14 Confidentiality. Sellers and Parent shall hold in
confidence (unless compelled to disclose by judicial or administrative process
or, in the opinion of their counsel, by other requirements of law) all
confidential information (as defined below) of Buyer and Chevys and will not
disclose the same to any third party except and then only to the extent in
connection with and reasonably necessary (and will be used solely) to carry out
this Agreement and the transactions contemplated hereby. "Confidential
Information" shall mean all proprietary and confidential information regarding
Buyer or Chevys or its business and obtained by Sellers and Parent in connection
with the transactions contemplated by this Agreement, except information (a)
ascertainable or obtained from public information, (b) received from a third
party not employed by, affiliated with, or known to Sellers or Parent to be
under an obligation of confidentiality to the disclosing party, or (c) obtained
by or in the possession of Sellers or Parent prior to the disclosure thereof in
connection with this Agreement or the transactions contemplated hereby. If this
Agreement is terminated under Section 11.12, Sellers and Parent will promptly
return to Buyer upon request, all Confidential Information furnished by Buyer,
including all copies and summaries thereof.
Section 6.15 Further Assurances. Sellers and Parent hereby agree that
they will at any time and from time to time following the Closing Date, upon
request of Buyer, execute, acknowledge and deliver, or will cause to be
executed, acknowledged and delivered, all such further acknowledgements, deeds,
assignments, transfers, conveyances and similar instruments of assignment as may
be reasonable and necessary for the assigning, conveying and transferring (or
confirmation thereof) from Sellers to Buyer or to Buyer's successors and assigns
any and all of the Assets to be conveyed to Buyer as provided herein.
Section 6.16 Use of Rio Bravo Trade Name. Sellers shall not use in any
manner whatsoever any of the Intellectual Property of the Business after the
Closing, except for (i) in connection with the operation of any Restaurants
which are excluded from sale hereunder pursuant to the provisions of Sections
3.4, 6.9, 6.20 or 11.15 and subject to a license agreement with Buyer
substantially similar to the Rio Bravo License; and (ii) the Rio Bravo tradename
and menu items, which shall be used solely by Sellers or the purchaser of the
Specialty Restaurants, as the case may be, pursuant to the terms and conditions
of the Rio Bravo License.
Section 6.17 Termination of Development Agreements, Reserve Territories
and Franchise Agreements. Sellers shall deliver on or before the Closing a
written notice of termination to each Franchisee whose Development Agreement is
being terminated as set forth on Schedule 4.4 and Franchise Agreement and
reserve territory is being terminated as set forth on Schedule 6.17. Sellers
shall also terminate as of the Closing Date any Franchise Agreements between
Sellers and any affiliate of Sellers or the Parent. Buyer is not assuming any
liability relating to or arising out of (i) the operation of the System prior to
the Closing Date, (ii) the transfer and assignment of the System and the Concept
by Sellers to Buyer or (iii) the termination prior to the Closing Date of any
Development Agreement, reserve territory or Franchise Agreement.
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Section 6.18 Covenant Not to Compete. For a period of three (3) years
from and after the Closing Date, Sellers and Parent will not engage directly or
indirectly in any business that constitutes a full service Mexican restaurant
with a bar in North America; provided, however, that no owner of less than 5% of
the outstanding stock of any publicly traded corporation shall be deemed to
engage solely by reason thereof in any of its businesses. Notwithstanding the
foregoing, (i) in the event Sellers do not consummate the sale of the Specialty
Restaurants, operation of the Specialty Restaurants by Sellers in accordance
with past practices shall not be deemed a violation of this Section 6.18; and
(ii) operation of any Restaurants which are excluded from sale hereunder
pursuant to the provisions of Sections 3.4, 6.9, 6.20 or 11.15 shall not be
deemed a violation of this Section 6.18.
Section 6.19 Releases of Franchisees. Sellers will use reasonable
efforts to obtain releases (in forms reasonably satisfactory to Sellers and
Buyer) from all Franchisees of Sellers releasing Sellers and Parent from all
liabilities related to the operation of the System prior to the Closing Date and
releasing Buyer from all liabilities related to the transfer of the System and
the Concept and such Franchisee's Franchise Agreement and Development Agreement
to Buyer.
Section 6.20 Environmental Remediation. Sellers shall provide Buyer
access to each Owned Real Property for the purpose of obtaining current Phase I
environmental reports. To the extent the Phase I for an Owned Real Property
indicates an environmental remediation requirement that could reasonably be
expected to have a material adverse impact on such parcel of Owned Real Property
or impose a liability under applicable law which is material as regards such
parcel of Owned Real Property (regardless of the cost involved to remediate),
such environmental remediation shall be conducted as follows:
(a) If the cost to remediate is $5,000 or less, per Restaurant affected,
such remediation shall be the sole responsibility and cost of Buyer.
(b) If the cost to remediate is more than $5,000 but less than $100,000,
per Restaurant affected, Sellers shall be required to pay the cost of
such remediation. Buyers and Sellers shall reasonably mutually agree on
the actual cost of such remediation and Sellers shall promptly begin
such remediation. The Closing Date may be delayed for up to four (4)
months to complete the remediation. If the remediation is not completed
within the four (4) month period, the Closing shall occur, Sellers
shall remit to Buyer any remaining amounts of the agreed upon cost not
already paid to third parties and Buyer shall be responsible for
completing the remediation post-Closing.
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(c) If the cost to remediate, as reasonably mutually agreed upon by Buyer
and Sellers, is greater than $100,000, per Restaurant affected,
Sellers, at their option, may choose not to remediate. Buyer, at its
option, may (i) require Sellers to pay to Buyer $100,000, per
Restaurant affected, and (ii) conduct the necessary remediation and be
responsible for all costs above $100,000. The Closing Date may be
delayed for up to four (4) months to complete the remediation. If the
remediation is not completed within the four (4) month period, the
Closing shall occur and Buyer shall be responsible for completing the
remediation post-Closing. If Buyer does not elect this option, Buyer
may (i) close on all Restaurants and bear responsibility for any
remediation; (ii) if three (3) or fewer Restaurants are affected,
conduct the Closing with respect to all other Restaurants and reduce
the Purchase Price (pro rata from the Cash Purchase Price and the
principal amount of the Note) by the aggregate amount allocated to such
affected Restaurants as set forth on the Allocation Schedule; or (iii)
if four (4) or more Restaurants are affected, terminate this Agreement.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES OF BUYER, CHI AND CHEVYS
As an inducement to Sellers to enter into this Agreement and to
consummate the transactions contemplated hereby, Buyer, CHI and Chevys represent
and warrant to Sellers as follows:
Section 7.1 Corporate Existence. Each of Chevys, CHI and Buyer is a
corporation validly existing and in good standing under the laws of the State of
California, Delaware and Delaware, respectively.
Section 7.2 Corporate Power and Authority. Each of CHI, Chevys and
Buyer has all requisite corporate power and authority to own its properties and
assets, and to carry on the business in which it is now engaged. Each of CHI,
Chevys and Buyer has the corporate power and authority to perform the respective
covenants of Buyer set forth in this Agreement.
Section 7.3 Execution and Delivery Permitted; Consents. Except for the
consents set forth on Schedule 7.3, the execution, delivery and performance of
this Agreement will not violate or result in a breach of any term of CHI's,
Chevy's or Buyer's Certificate of Incorporation or Bylaws or result in a breach
of or constitute a default under any term in any agreement or other instrument
to which CHI, Chevys or Buyer is a party, such default having not been
previously waived by the other party to such agreements, or violate any law or
any order, rule or regulation applicable to CHI, Chevys or Buyer, of any court
or of any regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over CHI, Chevys or Buyer or their
properties, or, except for financing specifically entered into to purchase the
Assets, result in the creation or imposition of any mortgage, lien, charge, or
encumbrance of any nature whatsoever upon any of the Assets purchased by Buyer
hereunder. CHI's, Chevys' or Buyer's Board of Directors, or an authorized
committee thereof, has taken all action required by law, and their Certificates
of Incorporation, Bylaws, and otherwise to authorize the purchase of the Assets
in accordance with this Agreement. Except as set forth on Schedule 7.3, which
shall include CHI's and Chevys' lenders, the execution, delivery and performance
of this Agreement and the other agreements executed in connection herewith, and
the consummation by Buyer of the transactions contemplated hereby and thereby do
not require any filing with, notice to or consent, waiver or approval of any
third party, including but not limited to, any governmental body or entity other
than any filing required under the HSR Act, and the expiration of any applicable
waiting period thereunder.
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Section 7.4 Binding Effect. This Agreement and each other agreement
required to be executed and delivered by CHI, Chevys or Buyer in connection
herewith, when executed and delivered, will be the legal, valid and binding
obligation of CHI, Chevys and Buyer, enforceable against each of them in
accordance with its terms, except as enforceability may be limited by (i)
applicable bankruptcy, reorganization, insolvency, moratorium and similar laws
affecting the enforcement of creditors' rights generally, and (ii) general
equitable principles (regardless of whether enforceability is considered in a
proceeding in equity or at law).
Section 7.5 Financing . As of the date hereof and at the Closing Date,
Buyer has and shall have sufficient existing resources or firm commitments from
financial institutions to fund the Purchase Price and Franchise Fund as set
forth herein.
ARTICLE VIII
COVENANTS OF BUYER, CHI AND CHEVYS
Section 8.1 Buyer Performance. Subject to the terms and conditions of
this Agreement, Buyer hereby covenants and agrees to accept conveyance of the
Assets and assignment of the Real Property Leases, and to assume and perform the
obligations of Sellers under the Minor Contracts, the Material Contracts, the
Franchise Agreements and the Development Agreements after the Closing Date and
otherwise perform and fulfill all other obligations with respect to the Assets
pertaining to the period after the Closing Date. Buyer agrees to remit to
Sellers or the applicable governmental entity, as required by law, any sales tax
Buyer has agreed to pay pursuant to Section 2.5(a).
Section 8.2 Confidentiality. Buyer and Chevys shall hold in confidence
(unless compelled to disclose by judicial or administrative process or, in the
opinion of its counsel, by other requirements of law) all confidential
information (as defined below) of Sellers and will not disclose the same to any
third party except and then only to the extent in connection with and reasonably
necessary (and will be used solely) to obtain financing or to carry out this
Agreement and the transactions contemplated hereby, including any due diligence
review by or on behalf of Buyer. "Confidential Information" shall mean all
proprietary and confidential information regarding Sellers or the Assets and
obtained by Buyer in connection with the transactions contemplated by this
Agreement, except information (a) ascertainable or obtained from public
information, (b) received from a third party not employed by, affiliated with,
or known to Buyer to be under an obligation of confidentiality to the disclosing
party, or (c) obtained by or in the possession of Buyer prior to the disclosure
thereof in connection with this Agreement or the transactions contemplated. If
this Agreement is terminated under Section 11.12, Buyer will promptly return to
Sellers upon request, all Confidential Information furnished by Sellers,
including all copies and summaries thereof. This Section 8.2 supercedes and
replaces the Confidentiality Letter between Sellers and X.X. Childs Associates,
L.P. dated December 3, 1998.
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Section 8.3 Seller Employees.
(a) The parties recognize that the orderly transfer of the personnel
employed by the Business is significant to the business interests of
both Buyer and Sellers. As a result, the parties will use their
reasonable efforts to avoid significant disruption to the Business.
(b) Buyer shall offer employment to all Restaurant Employees upon terms and
conditions substantially equivalent to those provided by any Seller or
affiliate of any Seller, a description of which has been made available
to Buyer; provided, however, that with respect to all such employees
who are not actively employed due to any illness or injury on the
Closing Date, Buyer's offer of employment shall be effective commencing
with the first day that such employee is ready and able to return to
active employment within thirty days of the Closing Date. Buyer agrees
to pay bonuses to Restaurant Employees for the month (or quarter, as
the case may be) in which the Closing occurs under the Sellers'
existing bonus plan.
(c) Buyer shall interview any Corporate Employee for which a substantially
equivalent or similar position shall exist subsequent to the
transactions contemplated by this Agreement.
(d) Buyer shall maintain employee records transferred to Buyer hereunder
for a period of not less than one (1) year or three (3) years if
necessary for Sellers to comply with any governmental inquiries or
governmental filings and during such periods will afford Sellers
reasonable access to such records during Buyer's normal business hours.
Buyer shall maintain the confidentiality of such records and limit
access thereto in a manner consistent with Buyer's treatment of its
employee records.
(e) Buyer agrees with respect to Restaurant Employees or Corporate
Employees hired by Buyer within ninety (90) days of the Closing Date:
(1) to give such Employees credit under Buyer's benefits plans,
programs, and arrangements, including credit for accrued vacation (to
the extent Buyer is paid for such accrued vacation pursuant to Section
9.1), for such Employees' period of service with Sellers, provided that
such credit shall only be taken into account under any tax-qualified
plan maintained by Buyer for purposes of determining such Employees'
eligibility for participation and eligibility to satisfy any hours of
service requirement in order to receive an allocation of an employer
contribution; (2) to the extent allowed by the applicable plan, to
provide coverage to such Employees who are eligible under Buyer's
health, medical, life insurance and other welfare plans (A) without the
need to undergo a physical examination or otherwise provide evidence of
insurability; (B) any pre-existing condition or similar limitations or
exclusions will be applied by taking into account the period of
coverage under Seller's plan; (C) by applying and giving credit for
amounts paid for the plan year in which the Closing Date occurs as
deductibles, out of pocket expenses and similar amounts paid by
individuals and their beneficiaries.
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(f) For a period of one year after the Closing Date, Buyer shall not
solicit the employment of or employ any restaurant or corporate
employee of the Parent, any Specialty Restaurant or any franchisee of
the Parent.
(g) Buyer, as reasonably requested by Sellers and to the extent lawful,
shall withhold from the paycheck of any Restaurant Employee the amounts
currently being withheld by or paid to Sellers as repayment of a loan
to such Restaurant Employee, and shall promptly remit such amounts to
Sellers.
Section 8.4 Cooperation. Buyer shall use its reasonable efforts to
cause the conditions set forth in Section 9.3 to be satisfied and to facilitate
and cause the consummation of the transactions contemplated hereby; and obtain
from all persons, and take all other actions with respect to, all consents or
approvals required on the part of such party with respect to the consummation of
those transactions. Buyer acknowledges that it is responsible for obtaining
appropriate and customary insurance coverage with respect to the Assets from and
after the Closing Date.
Section 8.5 Broker's Fees. Buyer shall indemnify and hold Sellers
harmless in respect to any claim for brokerage or finder's fees or commissions
with respect to the transactions contemplated herein by anyone claiming to have
acted on behalf of Buyer.
Section 8.6 No Securities Trading . Buyer acknowledges that the Parent
is a publicly-held company and dissemination of information concerning this
transaction or trading in the Parent's stock by any party to this transaction or
any party receiving information from any party to this transaction prior to
public release could result in violation of the Securities and Exchange
Commission xxxxxxx xxxxxxx regulations. Buyer agrees not to disseminate any
information concerning this transaction, except pursuant to Section 11.13, and
agrees not to trade in the stock of the Parent until January 1, 2000.
Section 8.7 Access to Books and Records. For a period of one (1) year
from the Closing Date, or three (3) years if necessary for Sellers or the Parent
to comply with or make any governmental inquiry or filing, Buyer shall provide
Sellers and its counsel and other advisors, reasonable access to the books and
records transferred to Buyer hereunder, during normal business hours as
requested in advance by Sellers. Such access shall be arranged in advance by
Sellers with Buyer and will be scheduled in a manner and with a frequency
calculated to cause the minimum disruption of the business of Buyer.
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Section 8.8 Landlord Releases. CHI, Chevys and Buyer shall use
reasonable efforts in assisting Sellers in obtaining from each lessor under each
Real Property Lease a release from all liability with respect to the Real
Property Lease for Parent and Sellers. Reasonable efforts shall include, but not
be limited to, (a) providing the lessor with financial information concerning
CHI, Chevys and Buyer and (b) providing the guarantee of CHI and Chevys for the
obligations under the Real Property Leases pursuant to the provisions of Section
9.3(j). CHI and Chevys shall use reasonable efforts to obtain the consent of any
lender required to allow CHI and Chevys to provide such guarantees.
Section 8.9 Maintenance of System. Buyer shall use reasonable efforts
after the Closing Date, for such time as any Franchisee is operating a Rio Bravo
restaurant, to support and maintain the Rio Bravo Concept and System in good
faith in a reasonable manner, including complying with the terms of any
Franchise Agreements or Development Agreements.
ARTICLE IX
PURCHASE PRICE ADJUSTMENT;
CONDITIONS TO CLOSING
Section 9.1 Purchase Price Adjustments. The items listed below shall be
paid by the party indicated and if not paid prior to the Closing shall
constitute an adjustment to the Purchase Price at Closing.
(a) Sellers shall pay all ad valorem, real and personal property taxes,
general and special public and private assessments, and any other
property taxes on the Assets and the Business for the tax year in which
the Closing occurs, prorated for the current year up to the Closing
Date; however, if the amount of such tax for tax year is not
determinable, it shall be prorated on the basis of the tax for the
immediately preceding tax year;
(b) Buyer shall pay all rentals or other amounts paid with respect to the
Real Property Leases which apply to periods past the Closing Date,
including reimbursement to Sellers of the applicable portion of prepaid
rentals, percentage rents, and common area maintenance charges;
(c) Buyer shall pay any amounts paid by Sellers with respect to the Minor
Contracts and Material Contracts for services extending beyond the
Closing Date which were paid under the terms of such Minor and Material
Contracts in the ordinary course;
(d) Buyer shall pay any prepaid expenses including deposits, associated
with the operation of a Restaurant which were paid by Sellers in the
ordinary course of business, including telephone expenses, billboard
advertising expenses, cooperative fees, national advertising expenses,
and utility charges, but only to the extent of appropriate
documentation of the transfer of the benefit of such item to Buyer;
(e) Buyer shall pay the amounts referred to in Section 6.12 as requested by
Buyer;
(f) Buyer shall pay 50% of the cost of all food and beverage inventory at
the Restaurants not considered Inventory in Process which, in Buyer's
reasonable opinion, is useable and saleable in the ordinary course (the
"Unused Inventory");
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(g) Sellers shall pay (1) their share of accrued bonus pay for the period
prior to the Closing Date, (2) $100,000 for all accrued vacation pay
for hourly employees, and (3) all earned vacation pay for those
salaried employees hired by Buyer as of the Closing Date, all of which
Buyer is assuming pursuant to Section 6.4(c); and
(h) To the extent due and unpaid, Sellers shall pay any amounts under any
of the Material Contracts, Minor Contracts, Real Property Leases,
Franchise Agreements, Development Agreements, Equipment Leases, Permits
and other liabilities of or associated with the Business through the
Effective Time (and not expressly assumed by Buyer under this
Agreement).
Within sixty (60) days after Closing, Sellers and Buyer shall mutually agree on
a final Adjustment Statement, revised to reflect any necessary changes from the
Adjustment Statement agreed to at Closing, to properly reflect the items set
forth above. Sellers or Buyer, as the case may be, shall promptly remit any
amounts still owed as reflected on the final Adjustment Statement.
Section 9.2 Gift Certificates. On a monthly basis after the Closing
Date, Buyer shall account to Sellers the amount of Rio Bravo gift certificates
issued by Sellers prior to the Closing Date which Buyer has honored. Sellers
shall promptly reimburse Buyer for such amount. Buyer agrees to honor such gift
certificates, and any Franchisee gift certificates which were issued prior to
the Closing Date, after the Closing Date and to change the form of gift
certificates issued at the Restaurants beginning on the Closing Date. Buyer is
responsible for billing the Franchisees directly for any gift certificates
issued by the Franchisees.
Section 9.3 Buyer's Conditions to Closing. The obligations of Buyer
hereunder are subject to satisfaction of each of the following conditions at or
before Closing, the occurrence of which may, at the option of Buyer, be waived:
(a) All representations and warranties of Sellers in this
Agreement shall be, to the extent qualified by materiality, true, and
to the extent not qualified by materiality, true in all material
respects on and as of the Closing as if made as of the Closing, and
Sellers shall have delivered to Buyer a certificate to such effect
dated as of the Closing Date; provided, however, that Sellers may, not
later than five days prior to the Closing, deliver to Buyer updated
Schedules which may only reflect matters that arise after the date
hereof (and that Sellers could not reasonably have known or anticipated
as of the date hereof) and, provided that such Schedules are acceptable
to Buyer, acting in good faith, such Schedules shall supersede and
replace the Schedules delivered by Sellers at the signing of this
Agreement;
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(b) There shall not have occurred since December 27, 1998, any
event or condition that has or would reasonably be expected to have a
material adverse effect on the Assets or the Business taken as a whole,
provided that restaurant sales for the Restaurants for the period from
the date hereof through the Closing Date, as compared to the same
period in 1998, of less than negative 15% shall not be deemed a
material adverse change hereunder;
(c) Sellers shall have performed and complied or shall have caused the
performance and compliance (i) in all material respects with all
covenants and agreements that are unqualified as to materiality and are
required by this Agreement on their part to be performed or complied
with prior to or on the Closing Date, and (ii) with all covenants and
agreements that are qualified as to materiality and are required by
this Agreement on Sellers' part to be performed or complied with prior
to or on the Closing Date;
(d) Sellers shall deliver all of the items required to be delivered by them
pursuant to Section 3.2 of this Agreement;
(e) The form and substance of the documents delivered by Sellers pursuant
to this Agreement shall be reasonably acceptable to Buyer and Buyer's
counsel;
(f) Buyer shall have obtained a Phase I environmental report for each Owned
Real Property;
(g) Buyer shall have obtained, either from Sellers or directly from the
issuing authority, all material Permits, licenses, including liquor
licenses, and approvals of all governmental and quasi-governmental
authorities necessary for the operation of the Business as intended by
Buyer; provided, however, that if Buyer is unable to obtain from local
municipal or county authorities a liquor license necessary for such
operation of any of the Restaurants, the effect on the Closing
hereunder shall be as set forth in Section 11.15;
(h) There shall be no claims, actions or suits pending or threatened
regarding the Assets or the Business that would restrict or prohibit or
materially adversely effect Buyer from or in consummating the
transactions contemplated herein;
(i) The waiting period under the HSR Act shall have expired or a
notification of early termination of the waiting period shall have been
received by Buyer; and
37
(j) Receipt of those consents set forth on Schedule 7.3, including a
consent from their lender for Chevys and CHI to act as guarantor on any
Real Property Lease; provided, however, if, after reasonable efforts by
Chevys and CHI, such lender will not provide its consent with respect
to the guaranty, Buyer, Chevys and CHI shall waive this condition if
Sellers and Parent agree in writing that Chevys and CHI is not required
to guaranty any such Real Property Lease.
Section 9.4 Sellers' Conditions to Closing. The obligations of Sellers
hereunder are subject to satisfaction of each of the following conditions at or
before Closing, the occurrence of which may, at the option of Sellers, be
waived:
(a) All representations and warranties of Buyer in this Agreement shall be,
to the extent qualified by materiality, true, and to the extent not
qualified by materiality, true in all material respects on and as of
the Closing, and Buyer shall have delivered to Sellers a certificate to
such effect dated as of the Closing Date;
(b) Buyer shall have performed and complied or shall have caused the
performance and compliance (i) in all material respects with all
covenants and agreements that are unqualified as to materiality and are
required by this Agreement on its part to be performed or complied with
prior to or on the Closing Date, and (ii) with all covenants and
agreements that are qualified as to materiality and are required by
this Agreement on Buyer's part to be performed or complied with prior
to or on the Closing Date;
(c) Buyer shall deliver all of the documents required to be delivered by it
under Section 3.3 of this Agreement;
(d) All consents set forth on Schedule 5.3 shall have been obtained,
including but not limited to any consents needed from lessors under the
Real Property Leases and Material Contracts and the consent of the
Parent's lenders;
(e) The form and substance of the documents delivered by Buyer pursuant to
this Agreement shall be reasonably acceptable to Sellers and Sellers'
counsel;
(f) The waiting period under the HSR Act shall have expired or a
notification of early termination of the waiting period shall have been
received by Seller; and
(g) There shall be no claims, actions or suits pending or threatened that
would prohibit or materially or adversely effect Sellers from or in
consummating the transactions contemplated herein.
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ARTICLE X
INDEMNIFICATION AGAINST LOSS
Section 10.1 Indemnification by Parent and Sellers. Parent and Sellers
jointly and severally agree to defend, indemnify, and hold harmless Buyer and
its officers, directors, agents, employees, and affiliates and each of the
heirs, executors, successors and assigns of any of the foregoing (collectively
"Buyer Indemnified Parties"), against and in respect of any and all loss,
liability, lien, damage, cost and expense including, without limitation,
liabilities for all reasonable attorneys', accountants', experts and
investigative fees and expenses, including those incurred to enforce the terms
hereof; (each, a "Claim") incurred or resulting from:
(a) Any misrepresentation or breach of warranty or representation made by
Sellers or Parent in this Agreement or in any certificate, agreement or
Schedule delivered hereunder;
(b) Any nonfulfillment or breach of any covenant or agreement by Sellers or
Parent under this Agreement or any agreement, certificate or schedule
delivered hereunder or any liability related to noncompliance with any
bulk sales laws;
(c) Any tax liability of any Seller (including, without limitation,
liabilities for taxes, interest, penalties, governmental charges,
duties, fees, and fines imposed by the United States, foreign
countries, states, counties, municipalities, and subdivisions, and by
all other governmental entities or taxing authorities), except to the
extent that such tax is expressly assumed by Buyer hereunder;
(d) Any liability of any Seller (not expressly assumed by Buyer hereunder)
to a third party related to operation of the Business through the
Effective Time;
(e) Any Excluded Liabilities;
(f) Any liability of any Seller (not expressly assumed by Buyer hereunder),
including but not limited to obligations arising with regard to
Sellers' responsibilities under the Real Property Leases, Minor
Contracts, Material Contracts, Franchise Agreements and Development
Agreements through the Effective Time;
(g) Any liability associated with or arising out of the transfer and
assignment of the System and the Concept by Sellers to Buyer as
contemplated in this Agreement or arising out of the termination of any
Development Agreement, reserve territory or Franchise Agreement by
reason of Franchisee defaults existing prior to the Closing Date; and
(h) Any transfer tax which Sellers have agreed to pay pursuant to Section
2.5(b).
39
Section 10.2 Indemnification by CHI, Chevys and Buyer. CHI, Chevys and
Buyer jointly and severally agree to defend, indemnify, and hold harmless
Sellers and their officers, directors, agents, employees and affiliates and each
of the heirs, executors, successors and assigns of any of the foregoing
(collectively, the "Seller Indemnified Parties") against and in respect of any
and all Claims incurred or resulting from:
(a) Any misrepresentation or breach of warranty or representation made by
Buyer, CHI or Chevys in this Agreement or in any certificate, agreement
or Schedule delivered hereunder;
(b) Any nonfulfillment or breach of any covenant or agreement by Buyer, CHI
or Chevys under this Agreement or any agreement, certificate or
schedule delivered hereunder;
(c) Any tax liability of Buyer (including, without limitation, liabilities
for taxes, interest, penalties, governmental charges, duties, fees, and
fines imposed by the United States, foreign countries, states,
counties, municipalities, and subdivisions, and by all other
governmental entities or taxing authorities);
(d) Any liability of Buyer (not expressly assumed by Sellers hereunder) to
a third party related to operation of the Business after the Effective
Time;
(e) Any Assumed Liability;
(f) Any liability of Buyer (not expressly assumed by Sellers hereunder),
including but not limited to obligations arising with regard to
Seller's responsibilities under the Real Property Leases, Minor
Contracts, Material Contracts, Franchise Agreements and Development
Agreements after the Effective Time;
(g) Any liability under the Real Property Leases arising after the
Effective Time; and (h) Any sales tax which Buyer has agreed to pay
pursuant to Section 2.5(a).
Section 10.3 Limitation on Indemnification and Liability.
(a) No Buyer Indemnified Party shall be entitled to make any Claim against
any Seller or Parent pursuant to Section 10.1 unless and until all such
Claims aggregate $600,000 (the "Threshold Amount") and each individual
Claim must be in excess of $5,000 (an "Allowed Claim"). Once such
Allowed Claims exceed the Threshold Amount, the Buyer Indemnified
Parties may make all Allowed Claims against the Seller or Parent from
the first dollar of the first Allowed Claim. The maximum amount for
which Sellers or Parent shall be responsible under any circumstances
under this Article X shall be 50% of the Purchase Price.
40
(b) No Seller Indemnified Party shall be entitled to make any Allowed Claim
against Buyer or Chevys pursuant to Section 10.2 unless and until all
such Allowed Claims aggregate to the Threshold Amount. Once such
Allowed Claims exceed the Threshold Amount, the Seller Indemnified
Parties may make all Allowed Claims against the Buyer or Chevys from
the first dollar of the first Allowed Claim. The maximum amount for
which the Buyer or Chevys shall be responsible under any circumstances
under this Article X shall be 50% of the Purchase Price.
(c) Notwithstanding anything to the contrary contained herein, the
limitations on indemnification contained in this Section 10.3 shall not
apply to any Claim (i) under Section 10.1(a) relating to a breach of
Sections 5.1 (Corporate Existence), 5.2 (Corporate Power and
Authority); (ii) under Section 10.1(c), (d) or (e) based upon Sellers
failure to pay any liability which is related to the Business and is
not an Assumed Liability; (iii) under Section 10.1(f) or 10.1(h); (iv)
under Section 10.2(a) relating to a breach of Sections 7.1 (Corporate
Existence), 7.2 (Corporate Power and Authority); (v) under Section
10.2(c), (d) or (e) based upon Buyers failure to pay any liability
related to the Business and is not an Excluded Liability; or (vi) under
Section 10.2(f), Section 10.2(g) or Section 10.2(h).
Section 10.4 Time to Assert Claims. Any Claims made pursuant to Section
10.1 or Section 10.2, or otherwise hereunder, must be asserted by providing
written notice to party against which the Claim is made within one year of the
Closing Date, except for (i) Claims under Section 10.1(c) or Section 10.2(c)
which must be made within three years of the Closing Date, (ii) Claims under
Sections 10.1(e), 10.1(f), 10.1(h), 10.2(e), 10.2(f) or 10.2(h), which may be
made at any time, or (iii) Claims under Section 10.2(g) which may be made at any
time during the term, including any extensions thereof, of the related Real
Property Lease. Any matters as to which a Claim has been asserted on or before
the applicable deadline shall continue to be covered by Section 10.1 or Section
10.2, as the case may be, until finally terminated or resolved.
Section 10.5 Resolution of Claims. In the event any party seeks
indemnification from the other for any Claim, the parties agree to meet with
each other, in the absence of attorneys and other non-employee advisors, to
discuss the basis for the Claim and to attempt in good faith to reach a
negotiated settlement of the Claim. During this process, either party may
request that an independent third party be used to mediate the dispute. If the
Claim has not been resolved to either party's satisfaction within sixty (60)
days from when the claimant first notified the other party of the existence of
the Claim, either party may seek judicial action to enforce or declare its
rights.
41
Section 10.6 Third Party Claim Indemnification Procedure. An
indemnified person shall promptly notify the indemnifying party of the existence
of any Claim resulting from a claim made by a third party and shall give the
indemnifying party the opportunity to defend the same at its own expense and
with counsel of its own selection, provided that such indemnified person shall
at all times also have the right to participate fully in the defense of the
Claim at his, her or its own expense. If the indemnifying party shall, within
fifteen (15) days after such notice, fail to acknowledge its indemnification
obligation hereunder in writing or thereafter fail to defend such Claim
adequately and reasonably, and such indemnified person is entitled to such
defense, such indemnified person shall have the right, but not the obligation,
to undertake the defense of, and to compromise or settle (exercising reasonable
business judgment) such Claim on behalf, for the account, and the sole risk and
expense, of the indemnifying party. The omission of any indemnifying party to
give notice of the existence of any third party claim as provided herein shall
not relieve the indemnifying party of its indemnification obligations under this
Article X except to the extent that such omission results in a failure of actual
notice to the indemnifying party and such indemnifying party is materially
damaged as a result of such failure to give notice. Except with the prior
written consent of the Indemnified Party, no indemnifying party, in the defense
of any Claim, shall consent to entry of any judgment or enter into any
settlement that provides for injunctive or other nonmonetary relief affecting
the Indemnified Party or does not include as an unconditional term thereof the
giving by each claimant or plaintiff to such Indemnified Party of a release from
all liability with respect to such Claim or litigation.
Section 10.7 Exclusive Remedies. The rights and remedies of the parties
under this Article X shall be the sole and exclusive rights and remedies
following and subject to the Closing that either party may seek for any
misrepresentation, breach of warranty or failure to fulfill any covenant or
agreement under this Agreement, except that either party may seek specific
performance or injunctive relief and except that the parties shall be entitled
to all remedies at law or in equity for any other party's failure to perform any
of its post-Closing covenants.
ARTICLE XI
MISCELLANEOUS
Section 11.1 Notices. Except as otherwise expressly provided, all
notices, consents, requests, demands and other communications hereunder shall be
in writing and shall be deemed to have been duly given (i) upon personal
delivery, (ii) upon facsimile transmission with confirmation of receipt, (iii)
one day after delivery to a commercial overnight delivery service with confirmed
receipt, or (iv) three days after delivery to the U.S. mail of notice sent by
certified U.S. mail, return receipt requested, with first class postage prepaid,
and in all cases, addressed as follows:
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(a) If to Buyer: Xxxxxx Xxxxxxx
Chevys, Inc.
000 Xxxxxx Xx., Xxx. 000
Xxx Xxxxxxxxx, XX 00000
FAX: (000) 000-0000
With a copy to: Xxxxxxxxxxx Xxxxx
Xxxxxxxx & Worcester LLP
Xxx Xxxx Xxxxxx Xxxxxx
Xxxxxx, XX 00000
FAX: (000) 000-0000
and: Xxxxx X. Xxxxxxx
X.X. Childs Associates, L.P.
Xxx Xxxxxxx Xx., 00xx Xxxxx
Xxxxxx, XX 00000
FAX: (000) 000-0000
(b) If to Sellers: Xxxxxx X. Xxxxxxxxx
Xxxxxxxx'x International, Inc.
0000 X. 000xx Xx.
Xxxxxxxx Xxxx, XX 00000
FAX: (000) 000-0000
With a copy to: Xxxxx X. Xxx
Xxxxxxxxx Xxxxxxx Xxxxx Xxxxxx LLP
0000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxx Xxxx, XX 00000
FAX: (000) 000-0000
or to such other address as Buyer or Sellers shall have last designated by
notice to the other party.
Section 11.2 Applicable Law and Jurisdiction. This Agreement shall be
governed by, and construed and enforced in accordance with, the internal laws of
the State of Kansas. CHI, Chevys, Buyer, Parent and Sellers consent to and
hereby submit to the jurisdiction of the federal courts of the State of Georgia
in connection with any action, suit or proceeding arising out of or relating to
this Agreement, and each of the parties hereto irrevocably waives, to the
fullest extent permitted by law, any objection which it may now or hereafter
have to the laying of the venue of any such proceeding brought in such a court
and any claim that any such proceeding brought in such a court has been brought
in an inconvenient forum.
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Section 11.3 Binding on Successors; Assignment. All of the terms,
provisions and conditions of this Agreement shall be binding upon and shall
inure to the benefit of the parties hereto, their respective successors, assigns
and legal representatives. Buyer may not assign this Agreement or any of its
rights or obligations hereunder without Sellers' prior written consent;
provided, however, that Buyer may, without the consent of Sellers, (i) assign
any or all of its rights and interests hereunder to one or more of its
affiliates, (ii) designate one or more of its affiliates to perform its any or
all of its obligations hereunder (in any and all cases, the Buyer shall
nonetheless remain liable and responsible for the performance of such
obligations), or (iii) assign its rights under this Agreement to lenders to the
Buyer in connection with the Buyer's financing of all or a portion of the
Purchase Price hereunder. Sellers may not assign this Agreement or any of their
rights or obligations hereunder without Buyer's prior written consent.
Section 11.4 Payment of Costs .
(a) Sellers Costs. Except as otherwise set forth herein,
Sellers shall pay their own costs incurred in negotiating this
Agreement and in consummating the transactions contemplated hereby,
including any costs associated with obtaining any consent, waiver or
approval shown on Schedule 5.3, and fees or commissions payable to any
party representing Sellers in connection with arranging or negotiating
this Agreement and the transactions contemplated hereby, including
without limitation all investment banker or financial advisor fees.
(b) Buyer Costs. Except as otherwise set forth herein, Buyer
shall pay its own costs incurred in negotiating this Agreement and in
consummating the transactions contemplated hereby, including any fees
or commissions payable to any party representing Buyer in connection
with arranging or negotiating this Agreement and the transactions
contemplated hereby, including without limitation all investment banker
or financial advisor fees.
Section 11.5 Closing Not to Prejudice Claim for Damages. Closing of the
transactions contemplated by this Agreement shall not prejudice any claim for
damages which either party may have hereunder, in law or in equity, due to a
material default in observance in the due and timely performance of any of the
covenants and agreements herein contained or for the breach of any warranty or
representation hereunder, unless such observance, performance, warranty, or
representation is specifically waived in writing by the party making such claim.
Section 11.6 Survival of Representations, Warranties, Covenants and
Undertakings. Except as may be otherwise specified in Section 10.4, all of the
representations, warranties, covenants and undertakings herein shall survive the
execution of this Agreement and the Closing Date for a period of one year.
Section 11.7 Additional Documents. After Closing, each party agrees to
furnish such additional documents as are necessary to complete the transactions
contemplated hereby.
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Section 11.8 Time is of the Essence. Time is of the essence in the
performance of the obligations of the parties ----------------------- hereunder.
Section 11.9 Interpretation. The title of the sections of this
Agreement are for convenience of reference only, and are not to be considered in
construing this Agreement. Whenever required by the context of this Agreement,
the singular shall include the plural and the masculine shall include the
feminine and vice versa.
Section 11.10 Entire Agreement. This Agreement and the Exhibits and
Schedules attached hereto and incorporated herein by this reference contain the
entire Agreement of the parties hereto with respect to the transactions
contemplated hereby and supersede any and all prior agreements, arrangements,
and understandings between the parties. No inducements contrary to the terms of
this Agreement exist. No waiver of any term, provision, or condition of this
Agreement, whether by conduct or otherwise, in any one or more instances shall
be deemed to be construed as a further or continuing waiver of any such term,
provision or condition or any other term, provision or condition of this
Agreement. In connection with the execution and delivery of this Agreement,
neither party has relied on any promise, inducement, representation or warranty
of the other party not set forth in this Agreement, its Schedules and Exhibits.
This Agreement may not be modified orally and may only be amended in a writing
executed by all parties hereto.
Section 11.11 Counterparts. This Agreement may be executed in one or
more counterparts which in the aggregate shall comprise one Agreement.
Section 11.12 Termination.
(a) This Agreement may be terminated prior to the Closing
as follows:
(i) At any time by the mutual consent of Sellers
and Buyer;
(ii) By Buyer in accordance with the provisions
of Sections 3.4, 6.9, 6.20 and 11.15;
45
(iii) By either Sellers or Buyer, at their sole
election, at any time after June 30, 1999,
if the Closing shall not have occurred on or
prior to such date;
(iv) By Buyer if any condition set forth in
Section 9.3 hereof shall not have been met
as of the Closing, or on such earlier date
as Buyer has notified Sellers of their
failure to reasonably comply with their
covenants hereunder such that a condition to
Closing can not be met, and Sellers have
failed to institute such compliance for a
period of fifteen (15) days after receipt of
such notice from Buyer; or
(v) By Sellers if any condition set forth in
Section 9.4 hereof shall not have been met
as of the Closing, or on such earlier date
as Sellers have notified Buyer of its
failure to reasonably comply with its
covenants hereunder such that a condition to
Closing can not be met, and Buyer has failed
to institute such compliance for a period of
fifteen (15) days after receipt of such
notice from Sellers.
(b) In the event of the termination of this Agreement
pursuant to subparagraph (iv) or (v) above because
Sellers or Buyer, as the case may be, shall have
willingly or in bad faith failed to satisfy a
condition to the Closing, the other party shall be
entitled to pursue, exercise, and enforce any and all
remedies, rights, powers, and privileges available to
it at law or in equity.
Section 11.13 Public Announcements. Buyer and Sellers will coordinate
with each other all press releases relating to the transactions contemplated by
this Agreement and, except to the extent required by law, refrain from issuing
any press release relating to this Agreement or the transactions contemplated
hereby without providing the other party reasonable opportunity to review,
comment thereon and approve such press release. Buyers agree that Sellers
initial press release relating to this Agreement shall be released prior to any
press release of Buyer. Chevys, Buyer, Sellers and Parent agree that they will
not directly comment in a disparaging manner on the manner in which Sellers or
the Parent managed or operated the System or the Restaurants or Buyer or Chevys
in the future manages or operates the System or the Restaurants; provided,
however, that this sentence shall not limit the ability of Chevys, Buyer,
Sellers or Parent to make factual statements.
46
Section 11.14 No Third-Party Beneficiaries. This Agreement shall not
confer any rights or remedies upon any person other than the parties hereto and
their respective successors and permitted assigns.
Section 11.15 Liquor Licenses. If, as of the Closing Date, Sellers and
Buyer reasonably mutually agree that Buyer will not be able to obtain a liquor
license with respect to a Restaurant, such Restaurant shall be excluded from the
Closing, retained by Sellers, and the Purchase Price shall be reduced by the
amount allocated to such Restaurant on the Allocation Schedule. If four or more
Restaurants are included in the foregoing, Buyer, at its option, may terminate
this Agreement. If Buyer reasonably believes it will be able to obtain a liquor
license for a Restaurant within six (6) months after the Closing Date, the
Closing shall occur with respect to such Restaurant and the parties will enter
into a mutually acceptable liquor license management agreement such that Buyer
can legally serve alcoholic beverages at such Restaurant from and after the
Closing Date pursuant to such management agreement. Such agreement shall be for
an initial period of six (6) months, with automatic ninety (90) day extensions
so long as Buyer is diligently attempting to obtain a liquor license. If, after
such six (6) month period (as extended pursuant to the preceding sentence),
Buyer has reasonably determined it will not obtain a liquor license for a
Restaurant for reasons not caused by Buyer, Buyer may terminate the management
agreement and require Sellers to repurchase such Restaurant for the amount
allocated to such Restaurant on the Allocation Schedule.
47
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day, month, and year first above written.
CHEVYS, INC. RIO BRAVO ACQUISITIONS, INC.
By: By:
Name: Name:
Title: Title:
CHEVYS HOLDINGS, INC.
By:
Name:
Title:
XXXXXXXX'X INTERNATIONAL, INC. INNOVATIVE RESTAURANT CONCEPTS, INC.
By: By:
Name: Name:
Title: Title:
RIO BRAVO INTERNATIONAL, INC. IRC KANSAS, INC.
By: By:
Name: Name:
Title: Title:
RIO BRAVO SERVICES, INC. APPLEBEE'S OF MICHIGAN, INC.
By: By:
Name: Name:
Title: Title:
48
LIST OF EXHIBITS AND SCHEDULES
Exhibits
2.1 Promissory Note Term Sheet
3.2(a) Bills of Sale
3.2(b) Assignment and Assumption of Real Property Leases
3.2(c) Assignment and Assumption of Material Contracts
3.2(d) Assignment and Assumption of Minor Contracts
3.2(f) Assignment and Assumption of Franchise Agreements
3.2(g) Assignment and Assumption of Development Agreements
3.2(i) Assignment of Trademarks
3.2(n) License Assignment for Rio Bravo Tradename
4.2 Reserve Agreement
Schedules
1.1 Restaurants
1.1(g) Computer Software
1.2 Excluded Assets
3.4 Allocation Schedule
4.1(b) Franchisees and Franchise Agreements
4.1(c) Development Agreements
4.1(d) Trademarks
4.4 Development Agreements assumed; Development
Agreements terminated
V Senior Executive Officers of Parent and Sellers
5.1 Sellers Jurisdictions
5.3 Consents
5.4(a) Owned Real Property
5.4(b) Leased Real Property
5.4(c) Real Property Leases
5.4(d) Equipment Leases
5.4(e) Other Material Contracts
5.4(e)(1) Non Assumed Contracts
5.9(c) Zoning Proceedings
5.10 Pending Claims and Litigation
5.11 Pending Tax Audits or Claims
5.12 Franchise Agreement and Development Agreement
Defaults
5.15(a) Environmental Reports
5.17 Historical Financial Information
6.4(b) Corporate Employees hired by Buyer(delivered at Closing)
6.17 Franchise Agreements and Reserve Territories Terminated
7.3 Buyer Consents
