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Exhibit 2-B
ASSET PURCHASE AGREEMENT
by and among
Xxxxxx'x Restaurants of Pennsylvania, Inc.
("Purchaser"),
Xxxxxx'x Foods, Inc.
("MFI")
and
Taco Xxxx Corp.
and
Taco Xxxx of California, Inc.
(together "Seller")
May 7, 1999
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ASSET PURCHASE AGREEMENT
------------------------
This ASSET PURCHASE AGREEMENT (this "Agreement"), made and entered
into as of this 7th day of May, 1999 by and among Xxxxxx'x Restaurants of
Pennsylvania, Inc., a Pennsylvania corporation ("Purchaser"), Xxxxxx'x Foods,
Inc., an Ohio corporation ("MFI"), Taco Xxxx Corp., a California corporation
("TB"), and Taco Xxxx of California, Inc., a California corporation ("TBCAL")
(TB and TBCAL shall be referred to jointly and severally as "Seller");
WITNESSETH:
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WHEREAS, Seller presently owns and operates 12 Taco Xxxx
restaurants in and around Pittsburgh, Pennsylvania as identified on Schedule I
hereto (the "Restaurants"); and
WHEREAS, Seller desires to sell and transfer to Purchaser and
Purchaser desires to purchase and acquire from Seller the Restaurants on the
terms and subject to the conditions set forth in this Agreement;
NOW, THEREFORE, the parties hereto agree as follows:
I. PURCHASE AND SALE OF ASSETS
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1.1. PURCHASE AND SALE OF ASSETS. Subject to and upon the terms and
conditions hereof, Seller shall sell and assign to Purchaser, and Purchaser
shall purchase and acquire from Seller at the Closing (as defined in Section 7.1
hereof) the
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assets referred to or described in this Section 1.1 and/or the Schedules
contemplated hereby (the "Assets")
1.1.1. OWNED REAL PROPERTY. All of Seller's rights and incidents of
interest in and to the real property owned, as of the Closing Date (as defined
in Section 7.1 hereof), by Seller constituting part of the Restaurants (the
"Owned Real Property"). The Owned Real Property is identified on Schedule 1.1.1
hereto.
1.1.2. LEASED REAL PROPERTY. All of Seller's rights and incidents of
interest, as of the Closing Date, in and to the leases of real property
constituting part of the Restaurants (the "Leased Real Property"). The Leased
Real Property is identified on Schedule 1.1.2 hereto. Seller shall provide
Purchaser with copies of the leases for such Leased Real Property.
1.1.3. TANGIBLE PERSONAL PROPERTY. All rights and incidents of
interest of Seller in and to all restaurant equipment, fixtures, furniture,
signs, menus, dishes, glassware, utensils and other smallwares, computers,
telephones, register systems and other office or telecommunications equipment in
which Seller has any interest as of the date of this Agreement and which are
located at the Restaurants, as well as spare equipment and parts of which Seller
is aware that are readily available, stored in the area of the Restaurants, and
designated for use at the Restaurants, all of the foregoing subject to use, wear
and tear, disposition, replacement or similar actions in the normal course
between the date hereof and the Closing (the "Tangible Personal Property").
Purchaser, at its option, may elect to use the POS software that Seller may
offer its franchisees from time to time, for the then current fee charged by
Seller to its franchisees.
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1.1.4. INVENTORIES. All rights and incidents of interest of Seller in
and to the food ingredients, packaging materials, paper products, miscellaneous
consumable inventories and stores and supplies located at the Restaurants, as of
the Closing Date (the "Inventories").
1.1.5. MISCELLANEOUS ASSETS. Other supplies (in addition to those
listed as part of the Inventories described in Section 1.1.4 hereof) and sundry
items, including telephone numbers, keys, lock combinations and similar items
relating to the operation of the Restaurants, security systems located at the
Restaurants and any purchasing cooperative stock interests of Seller pertaining
specifically to the Restaurants.
1.1.6. CASH. All cash in drawers and change funds of Seller in each
Restaurant as of the commencement of business on the Closing Date, not to exceed
$1,000 per Restaurant (the "Cash").
1.2. EXCLUDED ASSETS. Notwithstanding anything contained in this
Agreement to the contrary, the following rights, properties and assets (the
"Excluded Assets") shall not be included in the Assets:
1.2.1. CASH AND CASH EQUIVALENTS. All cash or cash equivalents of
Seller, including bank accounts and deposits, in existence on the Closing Date,
other than the Cash.
1.2.2. EXCLUDED REAL PROPERTY. The owned and leased real property of
Seller other than the Owned Real Property and the Leased Real Property (the
"Excluded Real Property").
1.2.3. EXCLUDED IMPROVEMENTS. All buildings, fixtures and similar
improvements located on the Excluded Real Property.
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1.2.4. EXCLUDED TANGIBLE PERSONAL PROPERTY. All office equipment,
furniture, fixtures, business machines and other tangible personal property of
Seller other than the Tangible Personal Property.
1.2.5. RECEIVABLES. All accounts and notes receivable of Seller.
II. PURCHASE PRICE
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2.1. PURCHASE PRICE. (a) In consideration of the transfer of the Assets
and the other undertakings of Seller hereunder, Purchaser shall pay to Seller
the sum of Three Million Two Hundred Forty Thousand Dollars ($3,240,000) (the
"Purchase Price"), plus the Cash and the value of the Inventories as of the
Closing Date determined in accordance with Section 2.1(b) hereof. The Purchase
Price shall be payable in cash to Seller by cashier's check or bank wire
transfer to an account or accounts designated in writing by Seller as follows:
$15,000 upon the execution of this Agreement, and the remaining $3,225,000 on
the Closing Date. The $15,000 shall be refundable to Purchaser only in the event
this Agreement terminates pursuant to Section 10.1 hereof due to Seller's
failure to fulfill any of its obligations hereunder that constitutes a condition
precedent to the performance of Purchaser's obligations hereunder.
(b) On the business day immediately preceding the Closing Date, as of
the close of business of the Restaurants, Seller shall take a physical count and
review of the Cash and Inventories, and Purchaser shall have the right to have
its representatives observe such physical count and review. No later than 15
business days thereafter, Seller shall prepare and deliver to Purchaser a
statement of all of the
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Cash and Inventories as of the Closing Date (the "Closing Inventory Statement").
Within ten business days after receipt by Purchaser of the Closing Inventory
Statement. Purchaser shall remit to Seller, by cashier's check or bank wire
transfer to an account designated in writing by Seller, the amount stated in the
Closing Inventory Statement. All items of Inventory shall be valued at Seller's
actual cost. Any amounts not paid by Purchaser within ten business days as
provided herein shall bear interest at the lesser of (i) the rate of 1.5% per
month or (ii) the highest rate permissible under applicable law.
(c) On the Closing Date, Purchaser shall remit to Seller in immediately
available funds the amount of any prepaid deposits or other items that will
benefit Purchaser's operation of the Restaurants and which are identified in
Schedule 2.1(c) hereto as of the date hereof, or added to such schedule on or
before the Closing Date.
III. ASSUMPTION OF LIABILITIES
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3.1. ASSUMED LIABILITIES. It is expressly understood and agreed that
Purchaser shall assume, and shall be responsible for, those liabilities and
obligations as are described in this Section 3.1. Purchaser shall assume on the
Closing Date, and thereafter in due course shall pay and fully satisfy, the
liabilities and obligations relating to the Restaurants and set forth below in
subparagraphs (i) and (ii) of this Section 3.1 (such liabilities and obligations
being referred to herein as the "Assumed Liabilities"):
(i) All liabilities and obligations arising or accruing, or pertaining
to the period, on or after the Closing Date (A) relating to the Restaurants or
the Assets, or their ownership or operation, and (B) under all contracts, leases
and other agreements pertaining to the Restaurants in the normal course (i) as
identified on Schedule 3.1, (ii)
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copies of which have been provided to Purchaser, or (iii) (and where monetary
obligations are included) for amounts consistent with market pricing (the
"Assumed Contracts"); and
(ii) Without limiting anything in subparagraph (i) above,
all liabilities and obligations arising or accruing, or pertaining to the
period, on or after the Closing Date for death, personal injury (including
workers' compensation), property damage or other injury, damage or loss to, by
or of any person or entity, any property or any right, relating to the
Restaurants or the Assets, or their operation, including, without limitation,
any tort, breach of contract or violation of any statute, regulation or other
law or requirement of any governmental agency.
Seller will use reasonable efforts to identify the
Assumed Contracts, provide copies thereof to Purchaser, and list the Assumed
Contracts it has knowledge of on Schedule 3.1.
IV. REPRESENTATIONS, WARRANTIES AND CERTAIN COVENANTS
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4.1. REPRESENTATIONS, WARRANTIES AND CERTAIN COVENANTS OF SELLER.
Seller represents and warrants to and covenants with Purchaser as follows:
4.1.1. ORGANIZATION. Each of TB and TBCAL is a corporation duly
organized, validly existing and in good standing under the laws of California.
4.1.2. AUTHORIZATION AND EFFECT OF AGREEMENT. Seller has all requisite
corporate power and authority to enter into and to perform its obligations under
this Agreement. This Agreement constitutes a valid and binding obligation of
Seller.
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4.1.3. NO RESTRICTIONS AGAINST SALE OF THE ASSETS. The execution and
delivery of this Agreement by Seller, and the performance by it of the
transactions contemplated hereby will not violate, conflict with, or result in a
breach of the Certificate of Incorporation or By-Laws of Seller, or any Law
applicable to it.
4.1.4. INVENTORIES. As of the Closing Date, Inventories shall not be
excessive in light of the present operation of the Restaurants. The Inventories
consist of items usable in the normal course of the operation of the
Restaurants.
4.1.5. COMPLIANCE WITH LAWS. The Restaurants have been, are and will
be, from the date hereof through the Closing Date, conducted in substantial
compliance with applicable laws ("Laws"), and in a fashion reasonably consistent
with Seller's business practices prior to Seller's execution of this Agreement.
4.1.6. TITLE TO AND CONDITION OF TANGIBLE PERSONAL PROPERTY. Except as
provided in Schedule 4.1.6 hereto, Seller has marketable title to all of the
Tangible Personal Property free and clear of all liens, except for liens for
taxes not due and payable, or that otherwise arise by operation of law. All
items of the Tangible Personal Property are being sold in "as is" condition.
There is no significant asset necessary for operating the Restaurants as Taco
Xxxx outlets that is not included in the Assets.
4.1.7. OWNED REAL PROPERTY AND LEASED REAL PROPERTY. With respect to
the Owned Real Property and the Leased Real Property (the "Real Property"),
except as provided in Schedule 4.1.7 hereto:
(i) To Seller's knowledge, there are no pending
actions against or affecting the Real Property;
(ii) The Real Property (including all improvements, parking
areas,
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utilities and HVAC systems) is being sold in "as is" condition; provided,
however, that all major equipment systems included herein shall be in working
condition on the Closing Date;
(iii) The Real Property currently has unrestricted
vehicular and pedestrian ingress and egress access to publicly dedicated and
publicly maintained roads or streets, the failure of which would not result in
more than an insignificant adverse impact on the operation of the Restaurants;
(iv) Seller has not released or discharged nor, to Seller's
knowledge (for purposes of this Agreement, to Seller's knowledge shall be deemed
to be knowledge at the Irvine headquarters level, without any special
investigation, of factors that would have more than an insignificant adverse
impact on the operation of the Restaurants), has any third party released or
discharged, any hazardous substance on the Real Property. Seller agrees to
provide Purchaser with copies of any environmental surveys, audits or other
reports relating to the Restaurants of which it is aware in its possession;
(v) The Real Property leases are in effect, and all amounts
due and owing by Seller pursuant to the leases prior to the Closing will be paid
by Seller; and
(vi) Seller has marketable title in fee simple to the Owned
Real Property, and marketable title to a leasehold estate in the Leased Real
Property.
4.1.8. NO DEFAULT OR LITIGATION. To its knowledge, Seller is not, and
on the Closing Date shall not be, in default under any of the material terms or
provisions of any Assumed Contract. Except as provided in Schedule 4.1.8 hereto,
to Seller's knowledge no action has occurred, or on the Closing Date shall have
occurred, relating to the conduct of the Restaurants that would have a material
adverse impact upon the post
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Closing operation of the Restaurants. Except as provided in Schedule 4.1.8
hereto, to Seller's knowledge there is no action pending against Seller relating
to the conduct of the Restaurants that could have a material adverse effect upon
the operation of the Restaurants.
4.1.9. GENERAL. Seller shall not be deemed to have made any
representation or warranty to Purchaser other than as expressly made by Seller
in Sections 4.1.1 through 4.1.8 hereof. Without limiting the generality of the
foregoing, Seller makes no representations with respect to any projections,
estimates, budgets, future revenues or future results of operations of the
Restaurants.
4.2. REPRESENTATIONS, WARRANTIES AND CERTAIN COVENANTS OF PURCHASER.
Purchaser represents and warrants to and covenants with Seller as follows:
4.2.1. ORGANIZATION AND POWER. Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of Pennsylvania;
and MFI is a corporation duly organized, validly existing and in good standing
under the laws of Ohio. Purchaser has all requisite corporate power and
authority to own its properties and to conduct its business as presently
conducted.
4.2.2. AUTHORIZATION AND EFFECT OF AGREEMENT. Purchaser has all
requisite power and authority to enter into and to perform its obligations under
this Agreement. This Agreement constitutes a valid and binding obligation of
Purchaser.
4.2.3. NO RESTRICTIONS AGAINST PURCHASE OF THE ASSETS; NO DEFAULT. The
execution and delivery of this Agreement by Purchaser, and the performance by it
of the transactions contemplated hereby will not violate, conflict with or
result in a breach of the Certificate of Incorporation or By-Laws of Purchaser,
or any Law applicable to it.
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Purchaser is not in default under any of the terms or provisions of any debt
instrument, supply agreement or other agreement or instrument relating in any
way to its existing business or assets.
4.2.4. GENERAL. Except as may otherwise be expressly included elsewhere
in this Agreement, Purchaser shall not be deemed to have made any representation
or warranty to Seller other than as expressly made by Purchaser in Sections
4.2.1 through 4.2.3 hereof.
V. CERTAIN COVENANTS OF PURCHASER AND SELLER
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Purchaser and Seller covenant and agree as follows:
5.1. PRESS RELEASES. Purchaser and Seller shall not issue or cause
publication of any press release or other public communication with respect to
this Agreement or the transactions contemplated hereby without the consent of
the other. Without the express prior written consent of the other, Purchaser and
Seller shall not, and Purchaser and Seller shall cause their affiliates not to,
disclose to any other person or entity any information with respect to the terms
and conditions of this Agreement; provided however that each of Purchaser and
Seller may make such disclosures to (i) its independent accountants, legal
counsel and employees, and (ii) as required by law, including without limitation
by the Securities and Exchange Commission ("SEC") and any other national stock
exchange, provided such party gives written notice to the other and discusses
the matter with the other prior to any such disclosure.
5.2. INVESTIGATION BY PURCHASER. Seller shall afford to the
authorized
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representatives of Purchaser access to the Restaurants so that Purchaser may
interview the Restaurant employees and assess the condition of the Assets.
Purchaser shall schedule the interviews and inspections with Seller's Transition
Manager ("TM") for the region(s) in which the Restaurants are located, and
Purchaser's representative shall be accompanied by Seller's TM or his designee.
Purchaser shall conduct the interviews and inspections so as to minimize any
disruption to the operation of the Restaurants.
5.3. CONFIDENTIAL NATURE OF INFORMATION. Whether or not the Closing
shall occur, each of the parties hereto shall treat in confidence all documents,
materials and other information which it shall have obtained regarding the other
relating to this Agreement or the transactions contemplated hereby.
5.4. MAKE NO MATERIAL CHANGE IN THE RESTAURANTS. Seller shall operate
the Restaurants until the Closing Date in the ordinary course, which shall
include maintaining, repairing and/or replacing equipment at the Restaurants in
the normal course.
5.5. SATISFACTION OF CONDITIONS. Each of the parties hereto agrees to
use its best efforts with due diligence and in good faith to satisfy promptly
all conditions to the obligations of the parties hereto in order to expedite the
consummation of the transactions contemplated hereby. In connection herewith,
both parties agree to work together to agree to reasonable terms and conditions
with the landlords of each parcel of Leased Real Property in order to obtain,
where necessary, landlord consents to the assignment of the leaseholds from
Seller to Purchaser, including as an example but not limited to Seller
reasonably agreeing to remain contingently obligated to the landlord on
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a particular assigned leasehold and Purchaser reasonably agreeing to indemnify
Seller against any Seller's loss associated with Seller's remaining so
obligated.
5.6. PURCHASE PRICE ALLOCATION. For federal, state, local and other tax
purposes, including without limitation income tax, ad valorem, transfer and
recording tax and similar purposes, Purchaser and Seller agree that the Purchase
Price will be allocated (the "Allocation") among the Assets as set forth on
Schedule 5.6. None of the parties hereto will take any position that is
substantively inconsistent with the Allocation in preparing any income or other
tax return or report and will each use reasonable efforts to maintain the
positions reflected in such returns or reports in determining any tax
liabilities. The parties acknowledge that the Allocation shall be based on, and
reflect, the relative fair market value of the Assets and Assumed Liabilities as
of the date hereof.
5.7. TITLE AND SURVEY MATTERS. Purchaser shall have the right, at its
option and sole cost and expense, to cause a current Commitment for Title
Insurance for the Restaurants to be issued for the benefit of Purchaser, to
cause a title search to be performed for the Restaurants and to cause surveys
and/or environmental Vista reports to be prepared or performed. In the event any
of the foregoing require access to the Restaurants, Purchaser shall follow the
procedures set forth in Section 5.2 hereof. Title and/or environmental reports,
searches, investigations, work or the like other than as specifically described
in this Section 5.7 shall not be performed or caused to be performed by
Purchaser in connection with the Restaurants without Seller's prior written
consent, which shall not be unreasonably withheld. Seller agrees to provide
Purchaser
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with copies of any surveys, title reports, title insurance policies or
environmental assessments relating to the Restaurants of which it is aware in
its possession.
In the event the results of any environmental audit of any
of the Owned Real Property performed with Seller's prior consent as provided
above indicates that remedial action to alleviate currently existing
contamination problems at any such site is required by applicable federal or
state law, Seller may, at its option, (i) conduct, at its expense, the remedial
action as required at such site, (ii) work with Purchaser to reach a resolution
that is mutually acceptable to both Seller and Purchaser, or (iii) remove such
Restaurant from this Agreement, in which event the Purchase Price shall be
reduced as provided in Schedule 5.7 hereto.
5.8. CASUALTY AND CONDEMNATION. In the event that any Restaurant is
materially damaged by casualty or a material portion of any Restaurant is taken
or subject to pending or threatened condemnation prior to Closing, Purchaser
shall purchase the Restaurant and Seller shall transfer at Closing all insurance
or condemnation proceeds received (together with an assignment of the right to
receive any proceeds not yet paid) to Purchaser.
5.9. EQUITY PORTION OF PURCHASE PRICE. Commencing as of the Closing
Date, Purchaser shall maintain an equity position in the Restaurants equal to,
at a minimum, the aggregate of (i) 15% of the Purchase Price, Cash, value of the
Inventories and all transaction costs (with transaction costs, to the extent
they do not exceed 5% of the Purchase Price, Cash and value of the Inventories),
and (ii) all transaction costs incurred by Purchaser in connection with the
transactions contemplated hereby in excess of 5% of the Purchase Price, Cash and
value of the Inventories. Equity may
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include stock/partnership capital and market value of existing assets, net of
debt. Equity investments of stock/partnership capital and/or a contribution of
assets will be valued on an "all-in" basis. The equity of the combined entity
(acquired Assets and existing operations) must be at least 15%. Equity shall be
calculated in accordance with the formula set forth in Schedule 5.9. In order to
cause Purchaser to satisfy its equity obligations under this Agreement, MFI
hereby unconditionally guarantees to Seller and its affiliates, successors and
assigns, the full and complete timely performance of Purchaser's obligations
under this Agreement, the Real Property leases and the Taco Xxxx Franchise
Agreements for the Restaurants. MFI hereby waives presentment, demand, protest
and notice in connection with this guaranty obligation. Purchaser's failure to
maintain such equity position in the Restaurants as provided in this Section 5.9
at any time during the first two years following the Closing shall constitute a
breach by Purchaser of the Taco Xxxx Franchise Agreements for all of the
Restaurants; provided, however, that Purchaser shall have 60 days following
notice from Seller to cure any failure by Purchaser, by a less than a material
amount, to maintain such equity position. The parties acknowledge that the
remedy provided in the foregoing sentence shall not limit any other remedy
available to Seller relating to a breach by Purchaser of Section 5.9, either
during or after such two year period. Purchaser further agrees that it will not,
during the first two years following Closing, without the prior written consent
of Seller, which shall not be unreasonably withheld, refinance or restructure
any portion of Purchaser's debt or equity assumed or contributed in connection
with the transactions contemplated hereby. The parties agree that it shall not
be unreasonable for Seller to withhold its consent if such refinancing or
restructuring would result in a reduction of
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equity below the minimum level required by this Section 5.9. Purchaser agrees,
at Seller's request, to provide Seller at Closing with an officer's certificate
in form satisfactory to Seller that the equity contributed by Purchaser as
required by this Section 5.9 is not encumbered in any way.
5.10. FINANCING. In the event Purchaser is planning to finance a
portion of the Purchase Price, Purchaser shall file within 10 business days of
the execution of this Agreement a completed application for such financing with
a reputable financing company and provide Seller with a copy of such completed
application. Purchaser shall regularly inform Seller of the status of its
endeavors to obtain financing. In the event Purchaser does not, despite its best
efforts, obtain a commitment for such financing within 60 days of the execution
of this Agreement, then within 75 days of the execution of this Agreement either
party may terminate this Agreement. Purchaser agrees that it will provide Seller
with a copy of the lender commitment letter promptly following its receipt of
such letter, or at least 10 days before Closing, whichever is earlier. Purchaser
also agrees, at Seller's reasonable request, to provide Seller with copies of
any other documentation relating to such financing.
5.11. FINANCIAL STATEMENTS AND RELATED DOCUMENTS. At the time of
execution of this Agreement, Purchaser shall deliver to Seller a copy of MFI's
certified audited current financial statements, as well as Purchaser's current
financial statements certified by the president and chief financial officer of
Purchaser. MFI's financial statements shall be in the form, with the content and
for the period required by the SEC. All financial statements of Purchaser shall
be in the form, with the content, and for the period reasonably required by
Seller.
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If these financial statements do not show that Purchaser has available
cash or other liquid assets equaling at least 15% (as calculated in accordance
with Schedule 5.9) of the Purchase Price, Cash and value of the Inventories (and
transaction costs as provided in Section 5.9 hereof), Purchaser shall also
deliver proof that Purchaser has available 15% of the Purchase Price, Cash and
value of the Inventories (and transaction costs as provided in Section 5.9
hereof) that will not be secured by the Assets or by stock in the Purchaser.
For the two year period following the Closing, Purchaser shall provide
Seller with MFI's then current quarterly financial statements in the form
prescribed by the SEC, and Purchasers then current certified quarterly financial
statements in the form reasonably satisfactory to Seller.
Purchaser has provided Seller with copies of Purchaser's business plan
for the Restaurants, and shall provide Seller with Purchaser's ownership
structure, certified as true and correct by Purchaser or a duly authorized
officer of Purchaser.
5.12. EMPLOYEES. Except as provided in Schedule 5.12 hereto, Purchaser
shall extend offers of employment to all of Seller's employees up to and
including the level of Restaurant General Manager working in the Restaurants,
such employment to commence effective the Closing Date. Seller shall offer
Purchaser the opportunity to interview Seller's restaurant support managers for
the Restaurants. Except as otherwise expressly provided by applicable law, on
and after the Closing Date Purchaser shall be responsible for all matters of
employment occurring on or after the Closing Date concerning such employees who
accept Purchasers offer of employment, including without limitation workers'
compensation claims, unemployment benefit
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claims, wage and hour claims, employment discrimination claims, child labor
claims and OSHA claims, and Purchaser shall indemnify Seller for any and all
such matters and claims, and Seller shall be responsible for such matters of
employment and claims occurring up to the Closing Date and shall indemnify
Purchaser therefor. The employment by Seller of the Restaurant employees who
accept Purchaser's offer of employment shall cease effective the close of
business on the day preceding the Closing Date. The timing of such offers of
employment, and any related meetings between Purchaser and the Restaurant
employees, shall be as agreed between Purchaser and Seller. Seller makes no
representations regarding the qualifications or abilities of the Restaurant
employees. For a period of two years following the Closing Date, Seller and its
affiliates shall not knowingly, without the consent of Purchaser, recruit with
an intent to employ any Restaurant employee employed by Seller on the day
preceding the Closing Date who accepts Purchasers offer of employment, so long
as such Restaurant employee remains an employee of Purchaser.
5.13. FRANCHISOR'S POLICIES AND PROCEDURES. Commencing as of the
Closing Date, Purchaser and MFI shall comply fully with Seller's policies and
procedures applicable to Taco Xxxx franchisees generally and/or public companies
in particular, as such policies and procedures may be changed from time to time,
including without limitation Sellers requirements regarding corporate ownership
and structure (e.g. single purpose entity) and its standards for conversions,
relocations, upgrading and current image. Purchaser and MFI acknowledge that
compliance with this Section 5.13 may include, for example, executing one or
more agreements with Seller demonstrating Purchaser's and/or MFI's commitment
and willingness to comply with certain of Seller's
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policies and procedures. In applying the policies and procedures to Purchaser
and its affiliates, TB shall in good faith take into account that MFI is a
public company and that some policies and procedures applicable to privately
held companies could be inconsistent with the operation of public companies. For
example, among other possibilities, MFI, but not any of its individual
management, directors or shareholders, will be required to guarantee the
obligations of Purchaser under the Taco Xxxx Franchise Agreements.
VI. CONDITIONS PRECEDENT TO THE CLOSING
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6.1. CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER. The obligations
of Purchaser under this Agreement shall be subject to the satisfaction, on or
prior to the Closing Date, of all of the following conditions, any one or more
of which may be waived at the option of Purchaser:
6.1.1. NO MISREPRESENTATION OR BREACH OF COVENANTS, REPRESENTATIONS AND
WARRANTIES. There shall have been no material breach by Seller in the
performance of Seller's covenants herein, the representations and warranties of
Seller contained or referred to in this Agreement shall be true and correct on
the Closing Date and there shall have been delivered to Purchaser a certificate
to that effect, dated the Closing Date, and signed by a duly authorized officer
of Seller.
6.1.2. CONVEYANCING DOCUMENTS. With respect to the Assets there shall
have been delivered to Purchaser by Seller bills of sale, assignments, general
warranty deeds, landlord consents, lease assignments, current form Taco Xxxx
Franchise Agreements in conformity with Section 6.2.4 of this Agreement, and KFC
Corporation
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("KFCC") and TB authorizations, as appropriate, for Taco Xxxx/KFC 2n1 facilities
(conversions or ground-ups) and single brand facilities for the locations
specified in the Development Agreement (as defined herein) for the effective
dates stated therein. All of the transfer documents delivered pursuant to this
Section shall be reasonably satisfactory to Purchaser's attorneys and
Purchaser's lender as of the Closing Date.
6.1.3. CONSENTS AND APPROVALS. The consents, waivers and approvals
necessary for the effective transfer, assignment and conveyance of the Assets
shall have been given or obtained.
6.1.4. APPROVAL BY MFI. This Agreement and the transactions
contemplated hereby shall have been approved by the Board of Directors of MFI.
6.1.5. NO LEGAL OBSTRUCTION. Any and all required waiting periods or
approvals under the Xxxx-Xxxxx-Xxxxxx Act or with or from other federal agencies
shall have expired or been terminated or received without the institution of a
proceeding challenging the transactions contemplated hereby. Any required filing
fees in connection with the approvals contemplated by this Section shall be
shared equally by Purchaser and Seller.
6.1.6. RELATED CLOSING. Simultaneously with the Closing hereunder, the
sale of 42 KFC restaurants in the Pittsburgh, Pennsylvania, St. Louis, Missouri,
Ohio and West Virginia areas to Purchaser or its affiliates contemplated under
the Asset Purchase Agreement dated April 30, 1999 among Purchaser and certain of
its affiliates, MFI, KFC National Management Company and Kentucky Fried Chicken
of California, Inc. shall also close.
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6.2. CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER. The obligations of
Seller under this Agreement shall be subject to the satisfaction, on or prior to
the Closing Date, of all of the following conditions, any one or more of which
may be waived at the option of Seller.
6.2.1. NO MISREPRESENTATION OR BREACH OF COVENANTS, REPRESENTATIONS AND
WARRANTIES. There shall have been no material breach by Purchaser in the
performance of its covenants herein, the representations and warranties of
Purchaser contained or referred to in this Agreement shall be true and correct
on the Closing Date and there shall have been delivered to Seller a certificate
to that effect, dated the Closing Date, and signed by a duly authorized officer
of Purchaser.
6.2.2. CONSIDERATION. Purchaser shall have delivered to Seller the
Purchase Price in accordance with the terms of Section 2.1 (a) hereof.
6.2.3. RESOLUTIONS: OTHER DOCUMENTS. There shall have been delivered to
Seller by Purchaser copies, certified by the Secretary of Purchaser, of
resolutions duly adopted by the Board of Directors and shareholders of Purchaser
authorizing, ratifying and approving the terms, execution and delivery by
Purchaser of this Agreement and the performance thereof by Purchaser. Purchaser
shall have also delivered to Seller a good standing certificate dated within 15
days of the Closing Date, as well as the documents referred to in Sections 5.10
and 5.11 hereof and any other documents that Seller may reasonably request.
6.2.4. FRANCHISE DOCUMENTS. Purchaser and TB shall have executed and
delivered to each other a current form 20-year Taco Xxxx Franchise Agreement for
each
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of the Restaurants, with the exception of the Restaurant located at 0000
Xxxxxxxxxx Xxxx, Xxx Xxxxxx, XX, together with such other documents as may then
be customarily required by TB in connection with the issuance of franchises, and
the KFCC and TB authorizations, as appropriate, for the Taco Xxxx/KFC 2n1 and
other facilities for the locations specified in the Development Agreement. For
the Restaurant at 0000 Xxxxxxxxxx Xxxx, Purchaser shall have been granted at
Closing a current form 5-year Taco Xxxx Franchise Agreement, and Purchaser
hereby agrees to convert or relocate such Restaurant to a then current ground-up
image Taco Xxxx/KFC 2n1 facility at a location approved by KFCC and TB within 5
years of the Closing, following which Purchaser shall receive a new 20-year Taco
Xxxx franchise.
6.2.5. APPROVAL BY TRICON. This Agreement and the transactions
contemplated hereby shall have been approved by the senior management of Tricon
Global Restaurants, Inc. ("Tricon").
6.2.6. NO LEGAL OBSTRUCTION. Any and all required waiting periods or
approvals under the Xxxx-Xxxxx-Xxxxxx Act or with or from other federal agencies
shall have expired or been terminated or received without the institution of a
proceeding challenging the transactions contemplated hereby. Any required filing
fees in connection with the approvals contemplated by this Section shall be
shared equally by Purchaser and Seller.
6.2.7. RELATED CLOSING. Simultaneously with the Closing hereunder, the
sale of 42 KFC restaurants in the Pittsburgh, Pennsylvania, St. Louis, Missouri,
Ohio and West Virginia areas to Purchaser or its affiliates contemplated under
the Asset Purchase Agreement dated April 30, 1999 among Purchaser and certain of
its affiliates, MFI, KFC
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National Management Company and Kentucky Fried Chicken of California, Inc. ("KFC
APA") shall also close.
6.2.8. SALES AND DISTRIBUTION AGREEMENT. Purchaser and AmeriServe Food
Distribution, Inc. ("AmeriServe") shall have executed a Sales and Distribution
Agreement in the form used with other Taco Xxxx franchisees and substantially as
set forth as Exhibit A hereto, pursuant to which AmeriServe shall be appointed
Purchaser's exclusive distributor for certain products for the Restaurants until
January 11, 2005, or, in the alternative, Purchaser shall have received from
AmeriServe a Waiver and Release in the form used with other Taco Xxxx
franchisees and substantially as set forth as Exhibit B hereto, executed by
AmeriServe.
6.2.9. POWER PLAY AGREEMENT. Purchaser shall have executed and
delivered to TB a Power Play Agreement for the Restaurants in the form used with
other Taco Xxxx franchisees and substantially as set forth as Exhibit C hereto.
6.2.10. FINANCIAL OBLIGATIONS. Each of Purchaser and MFI and their
affiliates shall be current in any and all financial obligations they may have
to Seller or any of its affiliates, including without limitation with respect to
any royalty payments due and any amounts due under any guaranty.
6.2.11. DEVELOPMENT AGREEMENT. Purchaser shall have executed and
delivered to TB a Development Agreement ("Development Agreement") in the form
substantially as set forth as Exhibit D hereto. Purchaser's development
obligations under the Development Agreement will be consistent with those set
forth in Section 10.12 of the KFC APA.
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6.2.12. EAST SIDE MARIO'S LITIGATION. As of the Closing, MFI, Purchaser
and their affiliates shall execute and deliver to Seller a general release, and
related documents in the form reasonably satisfactory to Purchaser, Seller and
their respective counsel. The release and related documents shall provide, in
substantial part, that MFI, Purchaser and their affiliates release with
prejudice any and all claims whatsoever that any of them have, may have or may
have had, or which were, could have been, or may be asserted by them in the
litigation entitled XXXXXX'X CREATIVE RESTAURANT CONCEPTS, INC. AND XXXXXX'X
FOODS, INC. v. EAST SIDE MARIO'S RESTAURANTS, INC., XXXXX CALLENDERS PIE SHOPS,
INC. AND XXXX XXXXXXXX, filed in the United States District Court, Northern
District of Ohio, Eastern Division, Case No. 1:98CV1559, or XXXXXX'X CREATIVE
RESTAURANT CONCEPTS, INC. AND XXXXXX'X FOODS, INC. v. EAST SIDE MARIO'S
RESTAURANTS INC., XXXXX XXXXXXXXX'X PIE SHOPS, INC. AND XXXX XXXXXXXX, filed in
the United States District Court, Northern District of Ohio, Eastern Division,
Case No. 1:98CV920 (the "Litigation") against Tricon or any of its affiliates,
or for which Tricon or any of its affiliates may have an obligation to indemnify
any or all of East Side Mario's Restaurants, Inc., Xxxxx Xxxxxxxxx'x Pie Shops,
Inc., or any of their respective current or former affiliates, employees,
officers or directors, or PepsiCo, Inc., or any of its current or former
affiliates, employees, officers or directors (together "Indemnified Parties") in
connection therewith (provided, however, that this shall not preclude MFI,
Purchaser and their affiliates from asserting claims against any such
Indemnified Party, for which claims Tricon and its affiliates have no obligation
to indemnify such Indemnified Party), and that MFI, Purchaser and their
affiliates jointly and severally agree to indemnify Tricon and its affiliates
for, from and against any other claims which
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were, are or may be asserted against Tricon or any of its affiliates in the
Litigation or any related litigation involving the same parties, or for which
Tricon or any of its affiliates are found to be liable in the Litigation or any
related litigation involving the same parties. Except as provided herein, Tricon
and its affiliates shall release MFI and its affiliates from any claims Tricon
or its affiliates may have against MFI or its affiliates relating to the East
Side Mario's restaurant concept.
In connection with such release, Seller shall cause Pizza Hut, Inc. to
pay MFI $60,000.
VII. CLOSING
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7.1. THE CLOSING. Subject to the fulfillment of the conditions
precedent specified in Article V1 hereof, the consummation of the transactions
of purchase and sale contemplated hereby (the "Closing") shall take place at
10:00 a.m. on June 15, 1999 or on such other date as mutually agreed by Seller
and Purchaser (the "Closing Date"). The Closing shall take place at a location
as mutually agreed by Purchaser and Seller.
VIII. INDEMNIFICATION
---------------
8.1. INDEMNIFICATION. (a) Purchaser and Seller (i) represent that they
have not incurred any brokerage or finder's fees or agent's commissions or other
similar charges to any person or entity which would result in liability, cost or
obligation to the other or any affiliate of the other and (ii) agree to
indemnify and save harmless the other from and against any loss, cost, damage or
expense (including court costs and reasonable attorneys fees and expenses)
resulting from any breach of such representation.
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(b) From and after the Closing, Seller shall indemnify and
save harmless Purchaser and its affiliates from and against any and all loss,
cost, damage or expense of or to Purchaser or its affiliates (including court
costs and reasonable attorneys' fees and expenses) resulting from or arising out
of:
(i) Any breach of any representation, warranty,
covenant or obligation of Seller contained in this Agreement; or
(ii) Any liability or obligation in respect of the
operation of the Restaurants by Seller prior to the Closing Date (including but
not limited to employment or termination claims by Seller's Restaurant employees
arising from events occurring at the Restaurants prior to the Closing Date).
(c) From and after the Closing, Purchaser shall indemnify
and save harmless Seller and its affiliates from and against any and all loss,
cost, damage or expense of or to Seller or its affiliates (including court costs
and reasonable attorneys' fees and expenses) resulting from or arising out of:
(i) Any breach of any representation, warranty,
covenant or obligation of Purchaser contained in this Agreement; or
(ii) The Assumed Liabilities.
IX. PRORATIONS AND EXPENSES
-----------------------
9.1. EXCLUSIVITY. Utility charges, rental charges, Real Property taxes,
and personal property taxes, including without limitation, accruals or
prepayments thereof (collectively called the "Proration Accounts"), shall be
apportioned between Seller and Purchaser as of the Closing. To the extent the
Proration Accounts cannot be fully
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apportioned, or other amounts payable by Purchaser or Seller hereunder, as the
case may be, cannot be fully determined as of the Closing, either party may from
time to time after the Closing Date prepare and submit to the other one or more
post-closing statements, and Purchaser or Seller, as the case may be, shall pay
the amounts due to the other within 30 days of receipt of any such post-closing
statement.
9.2. OTHER TAXES AND EXPENSES. (a) All federal, state and municipal
income, federal and state withholding, Federal Insurance Contributions Act,
federal employment and state unemployment taxes and other charges levied or
imposed upon Seller will be borne and paid by Seller and all such taxes and
charges so levied or imposed upon Purchaser will be borne and paid by Purchaser.
(b) Except as otherwise provided by the Proration Accounts
or this Agreement, each party will bear and pay its own expenses and taxes
incurred in connection with the transactions referred to in this Agreement.
Notwithstanding the foregoing, Purchaser shall bear and pay in their entirety
all registration, sales, transfer, excise, real estate, escrow, recordation and
any similar taxes and fees, as well as all closing fees, whether charged by the
lender, the title company or otherwise, payable by reason of the sale and
conveyance of any of the Assets; provided, however, that Seller shall pay 1/2 of
the 2% Pennsylvania real estate transfer tax only; and provided further,
however, that, to the extent Seller is required under applicable state law to
remit any sales taxes in connection with the transactions contemplated by this
Agreement, Purchaser shall pay such taxes to Seller at Closing so they can be
duly and timely paid in accordance with such state law.
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X. MISCELLANEOUS
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10.1. TERMINATION. Notwithstanding anything contained in this
Agreement to the contrary, this Agreement may be terminated at any time prior to
the Closing:
(a) by the mutual written consent of Purchaser and Seller;
(b) by Seller or Purchaser if the Closing shall not have
occurred on or before September 30,
1999, unless extended by written agreement of the parties; or
(c) by either Purchaser or Seller if the other shall fail
to fulfill any of its obligations hereunder that constitutes a condition
precedent to the performance of the first party's obligations in accordance
with the terms hereof.
In the event of termination of this Agreement under Section
10.1, each party hereto shall pay all of its own fees and expenses. There shall
be no further liability hereunder on the part of any party hereto if this
Agreement shall be so terminated, except by reason of a breach of this
Agreement or any representation, warranty or covenant contained herein.
Notwithstanding the foregoing sentence, the $15,000 of the Purchase Price paid
by Purchaser upon the execution of this Agreement shall only be refundable as
provided in Section 2.1 (a) hereof. The termination of this Agreement as
provided in this Section shall have no impact on the defenses, rights and
remedies, if any, available to any party (currently or hereafter) in the
Litigation, or with respect to any claims which any party may make against
Tricon or its affiliates in the Litigation, or any claims that Tricon or its
affiliates may make against any such party or others in the Litigation or
otherwise.
10.2. SPECIFIC PERFORMANCE. Seller and Purchaser acknowledge and agree
that monetary damages are not adequate to enforce the terms of this Agreement or
to
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address a breach or an alleged breach of this Agreement. Each of the parties
hereto will be entitled to obtain specific performance or other equitable relief
against the other in connection with any breach of any provision hereof (in
addition to any other remedies, including monetary damages, otherwise available
hereunder or at law).
10.3. NOTICES. All notices and other communications required or
permitted hereunder shall be in writing and, unless otherwise provided in this
Agreement, shall be deemed to have been duly given when delivered in person or
when dispatched by telegram or electronic facsimile transfer, or sent by
overnight mail to the addressees at the addresses specified below:
(a) If to Seller:
Taco Xxxx Corp.
Taco Xxxx of California, Inc.
00000 Xxx Xxxxxx
Xxxxxx, Xxxxxxxxxx 00000
Attn: General Counsel
(b) If to Purchaser:
Xxxxxx'x Foods, Inc.
Xxxxxx'x Restaurants of Pennsylvania, Inc.
00000 Xxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxxxx, Xxxx 00000
Attn: Xx. Xxxxx X. Xxxxxxx
President, Chief Operating Officer
or to such other address or addresses as any such party may from time to time
designate as to itself by like notice.
10.4. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of Seller, Purchaser, and their respective successors and
assigns; provided however that Purchaser may not assign its rights or delegate
its obligations
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hereunder in whole or in part without the prior written consent of Seller;
provided further that, as between Seller and Purchaser, no such assignment shall
relieve Purchaser of its primary liability to Seller for any of Purchaser's
obligations hereunder.
10.5. MODIFICATION AND WAIVER. No modification or waiver of any of the
provisions of this Agreement shall be effective unless such modification or
waiver shall be in writing and signed by the party or parties to be bound.
10.6. ENTIRE AGREEMENT. This Agreement (together with any Schedules
and Exhibits hereto, the Asset Purchase Agreement referred to in Section 6.2.7
and the settlement and release documents contemplated in Section 6.2.12)
supersedes any other agreement, whether written or oral, that may have been made
or entered into by Purchaser or Seller relating to the matters contemplated
hereby. This Agreement (together with any Schedules and Exhibits hereto)
constitutes the entire agreement by and between the parties and there are no
agreements or commitments except as expressly set forth herein. Notwithstanding
the above, this Section shall not apply to those agreements listed in Schedule
10.6 hereto.
10.7. LIMITATIONS ON RIGHTS OF THE PARTIES. Nothing expressed or
implied in this Agreement is intended or shall be construed to confer upon or
give any person, firm or corporation other than the parties hereto any rights or
remedies under or by reason of this Agreement or any transaction contemplated
hereby.
10.8 APPLICABLE LAW. This Agreement shall be governed by and construed
in accordance with the substantive laws of the Commonwealth of Kentucky without
giving effect to the principles of conflict of laws thereof. If any party seeks
to enforce its rights under this Agreement by legal proceedings or otherwise,
the nonprevailing party shall
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pay the prevailing party's costs and expenses, including, without limitation,
reasonable attorneys' fees.
10.9. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same agreement.
10.10. TITLES AND HEADINGS. Titles and headings to sections herein are
inserted for convenience of reference only, and are not intended to be a part of
or to affect the meaning or interpretation of this Agreement.
10.11. SEVERABILITY. If any provision or provisions of this Agreement,
or any of the documents or instruments delivered pursuant hereto, or any portion
of any provision hereof or thereof, shall be deemed invalid or unenforceable
pursuant to a final determination of any court of competent jurisdiction or as a
result of future legislative action, such determination or action shall be
construed so as not to affect the validity or enforceability hereof or thereof
and shall not affect the validity or effect of any other portion hereof or
thereof.
10.12. FRANCHISE AGREEMENTS. Purchaser acknowledges that, except as
may otherwise be provided in Schedule 10.12 hereto, and subject to the
provisions of Section 6.2 hereof, TB shall issue to Purchaser a Taco Xxxx
Franchise Agreement for each of the Restaurants. Purchaser agrees to comply
fully with the terms of such Franchise Agreements and any supplements or
attachments thereto, including without limitation any "Exhibit A's" containing
upgrading, relocation, rebuild and/or remodeling obligations for the
Restaurants. Purchaser further acknowledges that, due to concern for the
employees at the Restaurants, among other reasons, at the time of execution of
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this Agreement, the Exhibit A's may only contain generally described upgrading,
relocation, rebuild and/or remodeling obligations, and that the specific
components of such obligations (which shall include current image signage for
all of the Restaurants) will be determined by Seller at a later date, consistent
with what is required of similarly situated franchisees. Purchaser agrees to
comply with these specific obligations within the time periods specified by
Seller. Purchaser further agrees to comply fully with the terms of each Real
Property lease for the Leased Real Property, including without limitation the
obligations under each Real Property lease to pay rent when due, so long as
Seller or any of its affiliates remain obligated (contingently or otherwise)
under such Real Property lease. Purchaser agrees that, notwithstanding anything
to the contrary set forth in the Taco Xxxx Franchise Agreements for the
Restaurants, a breach by Purchaser of any Real Property lease under which Seller
or any of its affiliates remain liable shall constitute a breach by Purchaser of
the Taco Xxxx Franchise Agreement for that Restaurant, and a breach by Purchaser
of a Taco Xxxx Franchise Agreement for one of the Restaurants shall constitute a
breach by Purchaser under the Taco Xxxx Franchise Agreements for all of the
Restaurants; provided, however, that this cross-default provision shall no
longer apply to a default under a Real Property lease where Seller and its
affiliates are no longer liable. The $45,000 initial franchise fee payable by
Purchaser to TB for the Taco Xxxx franchise for each of the Restaurants is
included in the Purchase Price specified in Section 2.1 of this Agreement, and
no separate additional initial franchise fee shall be charged by Seller to
Purchaser for the Taco Xxxx Franchise Agreements for any of the Restaurants.
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10.13. ASSET SALE ONLY. Purchaser and Seller mutually agree that this
transaction constitutes an asset sale only.
IN WITNESS WHEREOF, the parties hereto have executed, or have caused
their duly authorized representatives to execute, this Agreement the day and
year first above written.
SELLER: PURCHASER:
Taco Xxxx Corp. Xxxxxx'x Foods, Inc.
By: /s/ Xxxxxx Xxxxxxx By: /s/ Xxxxxxx X. Xxxxx-Xxxxx
------------------------------ ---------------------------
Vice President Chairman & CEO
FEIN 00-0000000
-----------------
Taco Xxxx of California, Inc. Xxxxxx'x Restaurants of
Pennsylvania, Inc.
By: /s/ Xxxxxx Xxxxxxx By: /s/ Xxxxx X. Xxxxxxx
------------------------------ ---------------------------
Vice President President & COO
FEIN 00-0000000
-----------------
Reviewed by X.X. Xxxxxxx
Date: 5-14-99
