EX-2.1
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r8k21.htm
EXHIBIT 2.1
Exhibit 2.1
ACQUISITION AGREEMENT
This ACQUISITION AGREEMENT (this
"Agreement") is entered into this 16th day of December, 2002, to be
effective as of December 16, 2002 (the "Effective Date"), by and among FIESTA,
L.L.C., an Oklahoma limited liability company ("Buyer"), FIESTA RESTAURANTS,
INC., an Oklahoma corporation ("Seller"), and EATERIES, INC., an Oklahoma
corporation ("Eateries").
W I T N E S S E T H:
WHEREAS, Seller owns and operates, among others,
those certain seven (7) restaurants under the trade name "Xxxxxx'x Mexican
Restaurants" (collectively, the "Xxxxxx'x Restaurants");
WHEREAS, Buyer desires to acquire from Seller, and
Seller desires to sell to Buyer, the Operating Assets, as more particularly defined
herein, located at, pertaining to, or used in connection with the ownership and operation
of those certain seven (7) Xxxxxx'x Restaurants and one (1) concession located in Arizona
as more particularly identified on attached Schedule 1 (the
"Restaurants"), subject to the terms and conditions set forth herein;
WHEREAS, Seller is a wholly owned subsidiary of
Eateries;
WHEREAS, Eateries has entered into certain franchise
and license agreements (collectively, the "Franchise Agreements") with certain
third parties, as more particularly identified on Schedule 3.24.1 (the
"Franchisees"), for the development and operation of restaurants operating under
the Xxxxxx'x trade name, as more particularly identified on Schedule 3.24.1 (the
"Franchise Restaurants");
WHEREAS, Buyer desired to acquire from Eateries, and
Eateries desires to sell to Buyer, all of Eateries' right, title and interest in and to
the Franchise Agreements and the Operating Assets, if any, owned, leased or licensed by
Eateries and located at, pertaining to, or used in connection with the ownership and
operation of the Restaurants, subject to the terms and conditions set forth herein;
WHEREAS, contemporaneously with and as a condition
precedent to the consummation of the transaction contemplated by this Agreement, Eateries
and Buyer shall enter into the Management Agreement, as more particularly defined herein,
whereby Eateries shall provide management and operational services to Buyer and/or Buyer's
designated Affiliate(s), as defined herein, on the terms and conditions as set forth
herein; and
WHEREAS, the parties hereto desire to set forth
certain representations, warranties and covenants made by each to the other as an
inducement to the consummation of the transactions, contemplated by this Agreement, all as
more fully set forth below.
NOW, THEREFORE, in consideration of the foregoing,
the mutual covenants and agreements contained in this Agreement and other good and
valuable consideration not recited in this Agreement, the receipt and sufficiency of which
are hereby acknowledged, the parties agree as follows:
1. DEFINITIONS
For purposes of this Agreement, the following terms
have the meanings specified or referred to in this Section 1:
"Affiliate" shall mean any
person, estate or entity (including, without limitation, an individual, a corporation, a
partnership, a trust, unincorporated association or limited liability company), which has
a relationship with a Person whereby such Person directly or indirectly controls or is
controlled by or is under control with the other, or holds or beneficially owns five
percent (5%) or more of the equity interest in the other.
"Applicable Contracts" shall mean
(i) the contracts and agreements of Seller and Eateries related to the operation of the
Restaurants as set forth in Schedule 3.14 attached hereto, including, without
limitation, any capital leases of any fixtures, furniture and/or equipment and any
licenses to serve alcoholic beverages, to the extent assignable; (ii) contracts and
agreements relating to goods or services for the operation of the Restaurants which by
their terms are cancelable on thirty (30) days notice or less and provide for payments
over the life of the contract of less than $1,000 per month in the aggregate for each
Restaurant ("Immaterial Contracts)"; and (iii) all undelivered purchase orders
for Inventory purchased in the ordinary course of business.
"Assets" shall mean the Operating
Assets, the Applicable Contracts, the Leases, and the Franchise Agreements.
"Assignment Agreement" shall mean
the assignment and assumption of Applicable Contracts in the form of Assignment and
Assumption Agreement attached hereto as Exhibit 1.
"Assignment of Franchise Agreement"
shall mean the assignment and assumption of the Franchise Agreements in the form of
Assignment of Franchise Agreement attached hereto as Exhibit 2.
"Assignment of Lease Agreement"
shall mean the assignment and assumption of each of the Leases in the form of Assignment
of Lease Agreement attached hereto as Exhibit 3.
"Assumed Contracts" shall mean the
Applicable Contracts to be assigned and assumed as set forth on the attached Schedule
2.1.3, pursuant to the Assignment Agreement.
"Balance Sheet" shall mean the
unaudited balance sheet of Seller as of September 30, 2002 attached as Exhibit 4.
"Balance Sheet Date" shall mean
September 30, 2002.
"Xxxx of Sale" shall mean the Xxxx
of Sale in the form attached hereto as Exhibit 5.
"Buyer" shall mean Fiesta, L.L.C.,
an Oklahoma limited liability company.
"Buyer's Closing Documents" is
defined in Section 4.2.1.
"Buyer's Financing" shall mean that
financing from GE Capital to Buyer and/or its designated Affiliates for the purchase of
the Restaurants and other assets as contemplated by this Agreement.
"Closing" is defined in Section
2.3.
"Closing Date" shall mean the date
and time as of which the Closing actually takes place.
"Collateral Documents" shall mean
the Security Agreement and UCC Financing Statements securing the Note in the form attached
hereto as Exhibit 6.
"Damages" is defined in Section
10.2.
"Eateries" shall mean Eateries,
Inc., an Oklahoma corporation.
"Effective Date" is December 16,
2002.
"Employment Agreement" shall mean
that certain Employment Agreement to be entered into by and between Buyer and Xxxxxxx
Xxxxxxxx in substantially the form and substance attached hereto as Exhibit 7.
"ERISA" shall mean the Employee
Retirement Income Security Act of 1974 or any successor law, and regulations and rules
issued pursuant to that Act or any successor law.
"Facilities" shall mean all real
property, leaseholds or other interests and all buildings, structures, improvements, all
trade and other fixtures, plumbing, HVAC, electrical systems, parking areas, signage,
trade dress, furniture and equipment, located thereon, therein or attached thereto, upon,
by and within which Seller and/or Eateries owns, leases or operates the Restaurants.
"Franchise Agreements" shall mean
those certain franchise, license and related agreements, including, without limitation,
any guaranty of the franchisee obligations, by and between Seller and/or Eateries and the
Franchisees, as more particularly set forth on attached Schedule 3.22.1, and any
form franchise documents prepared by or on behalf of Seller or Eateries for use with the
Xxxxxx'x Restaurants, including, without limitation, any uniform franchise offering
circular or franchise or license agreements.
"Franchise Restaurants" shall mean
those certain restaurants operated, or to be developed and operated, pursuant to the
Franchise Agreements, as more particularly set forth in Schedule 3.22.1.
"Franchisees" shall mean the
parties, other than Seller and/or Eateries, under the Franchise Agreements, as more
particularly set forth in Schedule 3.22.1.
"Xxxxxx'x Restaurants" shall mean
those certain Arizona-style Mexican restaurants owned and operated by Seller under the
trade name "Xxxxxx'x" which include but are not limited to the Restaurants.
"Governmental Body" shall mean any:
(a) nation, state, county, city, town, village, district or other
jurisdiction of any nature;
(b) federal, state, local, municipal, or other government;
(c) governmental or quasi-governmental authority of any nature,
including, without limitation, any governmental agency, branch, department, official, or
entity and any court or other tribunal;
(d) body exercising, or entitled to exercise, any administrative,
executive, legislative, police, regulatory, or taxing authority or power of any nature.
"Inspection Period" is defined in Section
5.1.1.
"Intellectual Property Assets" all
trade and service marks, trade dress, and copyrights, located, in at or on, relating to or
used in connection with the Restaurants, as set forth on attached Schedule 3.16.
"Inventory" shall mean all unused
uniforms, food, alcoholic and non-alcoholic beverages, paper products and unopened
cleaning supplies located, in at or on, relating to or used in connection with the
Restaurants.
"Leases" shall mean those certain
lease agreements for the Restaurants set forth in Schedule 2.1.2.
"Legal Requirement" shall mean any
federal, state, local, municipal, or other Order, constitution, law, rule, permit,
concession, grant, franchise, license, ordinance, principle of common law, regulation,
statute, or treaty.
"License Agreement" shall mean the
License Agreement in the Form attached hereto as Exhibit 10.
"Management Agreement" shall mean
that certain Management Agreement between Buyer and Eateries in substantially the form and
substance attached hereto as Exhibit 9.
"Operating Assets" shall mean the
personal property (including, without limitation, Seller's right, title and interest in
and to any fixtures), operating assets, equipment, and goodwill relating to the
Restaurants, including without limitation, the Intellectual Property Assets; the
Inventory; leased equipment; signs and signage; databases, point-of-sale, electronic
ordering and management information systems hardware, software, manuals and instructions;
furniture, furnishings, and decorations; supplies; utility, security and all other
deposits, but excluding cash accounts; cash on hand, receivables (including credit card
receivables and vendor rebates and refunds arising out of the ownership or operation of
the Restaurants prior to the Closing Date) and all other tangible and intangible assets
located in, at or on, relating to or used in connection with the operation of the
Restaurants, including, without limitation, those assets set forth in Schedule 2.1.1.
"Order" shall mean any award,
decision, injunction, judgment, order, ruling, subpoena, or verdict entered, issued, made,
or rendered by any court, administrative agency, or other Governmental Body or by any
arbitrator with valid jurisdiction to enter such Order.
"Owner/Operators" shall mean those
certain management and supervisory personnel of the Restaurants who have entered into the
Owner/Operator Agreements with Seller and/or Eateries, as more particularly set forth in Schedule 3.11.7.
"Owner/Operator Agreements" shall
mean those certain agreements by and between Seller and/or Eateries and the
Owner/Operators, as more particularly set forth in Schedule 3.11.7.
"Person" shall mean any individual,
corporation, general or limited partnership, limited liability company, joint venture,
estate, trust, association, organization, labor union, or other entity or Governmental
Body.
"Promissory Note" shall mean the
Promissory Note in the form attached as Exhibit 10.
"Purchase Price" is defined in Section
2.2.
"Purchase Price Allocation" is
defined in Section 2.2.
"Purchase Price Credit" is
defined in Section 2.2.4.
"Real Estate Information" is
defined in Section 3.5.
"Repair Notice" is defined in Section
5.1.3.
"Restaurants" shall mean the
Xxxxxx'x Restaurants identified on Schedule 1.
"Seller's Closing Documents" is
defined in Section 3.2.1.
"Seller's or Eateries' Knowledge or the
Knowledge of Seller or Eateries" shall mean the actual knowledge of the Seller or
Eateries, as applicable, and, as of the Closing, of the executive officers and directors
of Seller and Eateries, of Xxxxxxx Xxxxxxxx and of Xxxx Xxxxxxxxx.
2. PURCHASE AND TRANSFER; CLOSING
2.1. Purchase. Subject to the terms and
conditions of this Agreement, at Closing Seller and Eateries will sell and transfer the
Assets to Buyer and Buyer will purchase the Assets from Seller and Eateries as follows:
2.1.1. Transfer of Operating Assets. At Closing but
effective the Closing Date, the Seller and Eateries, as their interests may appear, will
sell, transfer, assign and convey to Buyer or its designated Affiliate, pursuant to the
Xxxx of Sale, the Operating Assets, as including, without limitation those assets set
forth on Schedule 2.1.1, free and clear of all debts, claims, liabilities, liens,
security interests and encumbrances, except for liabilities specifically assumed by Buyer
under the Assumed Contracts. Seller and Eateries agree to execute, upon request by Buyer,
any additional documentation necessary or advisable to transfer or establish ownership by
Buyer of the Intellectual Property Assets, including, without limitation, any assignment
of trade or service marks with the United States Patent and Trademark Office or similar
Governmental Body.
2.1.2. Assignment and Assumption of Leases. At Closing but
effective the Closing Date, Seller shall transfer, assign and convey to Buyer or its
designated Affiliate, and Buyer shall assume, pursuant to the Assignment of Lease
Agreement, all of Seller's right, title and interest under the Leases and to the leasehold
estate of each of the Restaurants, pursuant to the Leases as set forth in Schedule
2.1.2., free and clear of all mortgages, liens, encumbrances, encroachments,
easements, leases, tenancies, security interests, covenants, conditions and restrictions,
except any matters affecting the leasehold title which would not materially adversely
affect or otherwise materially interfere with the use of any of the Facilities as a
restaurant. At Closing but effective the Closing Date, subject to the provisions of Section
7.14, Seller shall use commercially reasonable efforts to obtain the written consent
of each landlord under each of the Leases to the assignment by Seller to Buyer of each of
the Leases.
2.1.3. Assignment and Assumption of Assumed Contracts. At
Closing but effective the Closing Date, Seller, and Eateries to the extent of its
interests, shall transfer, assign and convey to Buyer or its designated Affiliate, and
Buyer shall assume, pursuant to the Assignment Agreement, all of Seller's, and Eateries'
to the extent of its interests, right, title and interest in and to the Assumed Contracts,
as set forth in Schedule 2.1.3, free and clear of all liens, security interests and
encumbrances.
2.1.4. Assignment and Assumption of Franchise Agreements. At
Closing but effective the Closing Date, Eateries shall transfer, assign and convey to
Buyer, and Buyer shall assume, pursuant to the Assignment of Franchise Agreements
(including any license agreements), all of Eateries' right, title and interest in and to
the Franchise Agreements pertaining to the Franchise Restaurants, as set forth in Schedule
3.22.1, free and clear of all liens, security interests, and encumbrances.
2.1.5. Seller's Affidavit. At Closing but effective the Closing
Date, Seller shall furnish Buyer with one or more affidavits certifying that (i) no
outstanding materialmen's or mechanics' lien rights exist regarding any of the
Restaurants, (2) none of the Restaurants are subject to any lease, oral or written, not
disclosed to Buyer herein, and (3) Seller has paid all utility charges due as of the
Closing Date, if any, regarding each of the Restaurants.
2.1.6. Employees. Except as otherwise set forth in Schedule
2.1.6, at Closing but effective the Closing Date, Seller and/or Eateries shall
terminate the employment of all employees of the Seller and/or Eateries employed at or in connection with the Restaurants. Buyer shall
have the option, but not the obligation, to offer employment on such terms as Buyer deems
appropriate, to any or all of the employees of any of the Restaurants, excluding those
employees set forth in Schedule 2.1.6. Buyer agrees to continue the existing
employee vacation policies and to assume the liability for such accrued vacation to the
extent of the credit received pursuant to Section 2.4.6 and give the employees
credit for vacation time accumulated prior to the Closing Date, subject to the pro-rations
set forth in Section 2.4.6. Upon termination of such employees by Seller, Buyer
shall offer health insurance coverage to all employees who were covered under Seller's
health insurance program based on their employment status at the Restaurants and such
coverage will waive all waiting periods and pre-existing condition limitations to the
extent an employee was covered under an existing policy; provided, that during any interim
time period before such health insurance coverage of Buyer takes effect, all employees
shall have the option to continue Seller's health insurance coverage under the terms and
conditions as specified by federal law, including, without limitation, COBRA. During such
interim time period, Buyer shall reimburse its employees for the cost of the COBRA
coverage insurance in excess of the employee share of the cost of Seller's health
insurance coverage prior to the termination of employee by Seller.
2.1.7. Owner/Operator Agreements. The parties acknowledge and
agree that Seller and/or Eateries have entered into the Owner/Operator Agreements with the
Owner/Operators. At Closing but effective the Closing Date, Seller shall assign to
Buyer or its designated Affiliate, and Buyer or its designated Affiliate shall assume, all
of Seller's and/or Eateries' rights and obligations under the Owner/Operator Agreements.
The parties further agree that (i) notwithstanding anything to the contrary contained
herein, neither Buyer nor any of its designated Affiliates shall have any obligation or
liability to any Owner/Operator under any Owner/Operator Agreement, or otherwise for any
obligation or liability accruing prior to the Closing Date except to the extent of the
credit received pursuant to the Owner/Operator Agreement in accordance with Section
2.4.6; (ii) the transactions contemplated by this Section 2.1.7 are expressly
conditioned upon the Closing of the transactions contemplated by this Agreement; and (iii)
the transactions contemplated by this Section 2.1.7 shall not affect the payment or
the calculation of the Purchase Price, as contemplated in Section 2.2, except for
the pro-rations as set forth in Section 2.4.6.
2.1.8. Seller Name Change. On or before the Effective Date,
Seller shall deliver to Buyer an executed Consent to Similar Name consenting to the use by
Buyer of the name Fiesta, L.L.C. and to corporate names using the word "Fiesta"
for Buyer's designated Affiliates, if so required by the Secretary of State of Oklahoma.
At Closing but effective the Closing Date, Seller shall deliver to Buyer an executed
Certificate of Amendment or other appropriate documentation changing the name of Seller.
2.1.9. Mesa Restaurant Insurance Claim. Seller and/or Eateries
shall assign to Buyer all of their respective right, title and interest in and to any
insurance or similar claims and/or proceeds related to the Restaurant located at 0000 Xxxx
Xxxxxxxxxx, Xxxx, Arizona.
2.1.10. Excluded Assets. Notwithstanding anything to the
contrary contained herein, Buyer acknowledges and agrees that the Assets shall not include
(i) any of the assets and liabilities relating to, associated with or used in the
operation of any Xxxxxx'x Restaurant other than the Restaurants (ii) any of Seller's or
Eateries' right, title and interest in and to the judgment obtained by Eateries against
J.R. Simplot Company in that certain case styled Eateries, Inc. and Fiesta Restaurants,
Inc. v. J. R. Simplot Company, case number CIV-99-1330-C filed in the District Court
of Oklahoma County, Oklahoma; nor (iii) to any cash, cash equivalents, receivables,
refunds or rebates related to or arising out of the operation of the Restaurants prior to
the Closing Date, whenever paid or received other than cash on hand at the Restaurants, in
accordance with Section 2.2.1.
2.1.11. Liabilities Not Expressly Assumed. Except as expressly
set forth in Schedule 2.1.11 the Assignment Agreement, the Assignment of Franchise
Agreement, the Assignment of Lease Agreement, any assignment of the Owner/Operator
Agreements and in Section 10.3, neither Buyer nor any designated Affiliate shall
assume or become responsible at any time for any liability, obligation, debt or commitment
of Seller or Eateries, whether or not absolute, accrued, asserted, or relating to or
arising from the assets covered by this Agreement, including (without limitation) any
liabilities, obligations, debts or commitments of Seller or Eateries (a) incident to,
arising out of, or incurred with respect to this Agreement and the transactions
contemplated by this Agreement, or (b) which otherwise arise because of events, acts or
transactions occurring from the operation of the Restaurants prior to the Closing Date.
The parties agree and acknowledge that all of Seller's and Eateries' liabilities,
obligations, debts and commitments not specifically assumed by Buyer under this Agreement
shall remain the sole responsibility of Seller or Eateries, as their respective interests
may appear, bearing such responsibility therefor prior to the Closing Date. The assumption
of any liabilities, obligations, debts or commitments by Buyer shall not expand the rights
or remedies of third parties against Seller or Eateries as compared to the rights or
remedies that those parties would have had against Seller or Eateries in the absence of
this Agreement.
2.2. Purchase Price. The aggregate purchase
price for the Assets will be Three Million and No/100 Dollars ($3,000,000.00) subject to
adjustment as follows (the "Purchase Price") to be allocated as set forth on Schedule
2.2 (the "Purchase Price Allocation"):
2.2.1. Inventory and Cash on Hand. At the close of business not
more than three (3) days before the Closing Date as mutually agreed by Buyer and Seller,
representatives of Seller and Buyer shall conduct (i) an inventory of the Inventory, and
(ii) an audit of cash on hand at each of the Restaurants. At the Closing, Buyer shall pay
Seller in cash for the agreed amount of all unopened and unused Inventory, based on the
amount reflected in invoices received by Seller for such Inventory, and for all cash on
hand. Such payment is not included in the Purchase Price.
2.2.2. Allocation of Profits and Losses. The parties agree that
irrespective of the actual Closing Date, the Buyer is to receive the profits and incur any
losses arising from the operation of the Restaurants as of the Effective Date. All
liabilities, obligations, commitments or risk of loss of Seller and/or Eateries as to the
Assets to be assumed by Buyer pursuant to this Agreement will be transferred effective the
Closing Date with the exception of the items set forth in Section 2.4 which will be
prorated as of the Effective Date.
2.2.3. Payment. Subject to the Purchase Price Credit set forth
in Section 2.2.4 and as may be adjusted as provided in Section 2.4, the
Purchase Price will be paid to Seller by Buyer at Closing by the Promissory Note executed
by Buyer in favor of Seller or, at Seller's option, in favor of Eateries, in the principal
amount of $3,000,000.00, allocated to each Restaurant as set forth in Schedule 2.2.3,
with a fixed interest rate of six percent (6%) and a maturity date of the earlier of (i)
one hundred eighty (180) days from and after the Closing Date or (ii) the funding of
Buyer's Financing. The Note shall be secured by a first priority lien in the Operating
Assets, as set forth in the Collateral Documents, in favor of Seller. Buyer shall use its
commercially reasonable best efforts to cause the funding of Buyer's Financing as soon as
possible.
2.2.4. Purchase Price Credit. . Subsequent to Closing, Buyer
will conduct a review and audit of the Company's books and records to determine the
existence of any unpaid taxes, liabilities, indebtedness operating costs and/or payables,
whether known or unknown and whether absolute, accrued, contingent or otherwise and
prorated through the Closing Date where necessary, which arose or accrued prior to the
Closing Date including without limitation those arising under the Applicable Contracts. In
addition to Buyer's rights set forth in Section 10, Buyer will have the right to
offset from the Purchase Price and the Promissory Note (the "Purchase Price
Credit") (i) any amounts, pursuant to Section 2.4, for any outstanding taxes,
liabilities, indebtedness, operating costs and/or payables arising or accruing prior to or
as of the Closing Date including, without limitation, those arising under Applicable
Contracts, and (ii) an amount determined in accordance with Section 5.1 for repair
costs. Buyer shall provide Seller with prior notice of any proposed offset to the Purchase
Price Credit. Any dispute relating to any offset, which cannot be resolved by the parties
within thirty (30) days of such notice, shall be resolved by arbitration in accordance
with the terms and conditions of Section 11. Notwithstanding anything to the
contrary contained herein, the Purchase Price Credit shall in no manner limit Seller's
liability to Buyer, nor Buyer's remedies, under this Agreement.
2.2.5. Transfer and Sales Taxes. Buyer and Seller agree that any
and all sales, use, transfer, or other similar taxes or recording costs imposed or as a
result of the consummation of the transactions contemplated by this Agreement shall be
paid by Seller. Seller shall remit to the appropriate Governmental Body all sales, use,
transfer or other similar taxes resulting from the transfer of the Assets pursuant to the
provisions of this Agreement.
2.3. Closing. The closing of the transactions
contemplated by this Agreement will take place at the offices of Buyer's counsel at
10:00 a.m. (Central Standard Time) on or before December 23, 2002.
2.4. Prorated Amounts. Seller and Buyer shall
allocate, prorate and pay the following closing costs and other amounts relating to the
transactions contemplated by this Agreement as follows:
2.4.1. Taxes. Seller and Buyer shall prorate and timely pay all
real and personal property, ad valorem taxes and assessments due as of the Effective Date.
If the 2002 ad valorem tax bills are unavailable, Seller and Buyer shall estimate the 2002
ad valorem taxes by multiplying the amount due in 2001 by one hundred five percent (105%).
Seller and Buyer agree to reimburse the other party for any over or under payment of the
estimated 2002 ad valorem taxes within thirty (30) days of receiving notice of the actual
ad valorem taxes due and owing for 2002.
2.4.2. Rents, Expenses and Other Items. Seller shall timely pay
or cause to be timely paid all taxes, liabilities, indebtedness, operating costs,
payables, rents, utilities, expenses and other items relating to each of the Restaurants,
including without limitation, the rent, percentage rent, if any, and common area
maintenance or similar charges and assessments, due under the Leases through the Effective
Date.
2.4.3. Assumed Contracts. Seller and Buyer shall prorate through
the Effective Date all fees, credits, and expenses relating to the Assumed Contracts, the
Leases, the Franchise Agreements and all other costs and expenses related to the operation
of the Restaurants not otherwise paid by Seller through the Effective Date.
2.4.4. Repairs. Seller and Buyer shall pay or cause to be paid
any costs, expenses or adjustments determined prior to the Effective Date relating to the
inspection, condition or repair of the Restaurants pursuant to Sections 5.1.2 and 5.1.3.
2.4.5. Receivables, Rebates and Refunds. Seller and/or Eateries
and Buyer shall prorate, as of the Effective Date, any rebates, refunds or other
incentives received from vendors, suppliers or other parties related to the operation of
the Restaurants or purchase of Inventory or other items, irrespective of whether such
amounts have been received prior to or after Closing. Buyer shall promptly, within two (2)
business days of receipt, pay over to Seller any receivables, rebates or refunds related
to or arising out of the ownership or operation of the Restaurants prior to the Effective
Date.
2.4.6. Incentive Compensation; Accrued Vacation. Buyer shall
receive a credit from Seller and/or Eateries for any amounts paid or to be paid to Seller
and/or Eateries by the Owner/Operators pursuant to the terms and conditions of the
Owner/Operator Agreements. Seller and/or Eateries and Buyer shall prorate, as of the
Effective Date, (i) any incentive compensation due to any Restaurant employee, including,
without limitation, any amounts due to an Owner/Operator pursuant to an Owner/Operator
Agreement or otherwise, irrespective of whether such amounts are due and payable to such
employee prior to or after Closing and (ii) the amount of compensation equivalent to any
vacation time accrued prior to the Effective Date for any employee to be employed by
Buyer.
2.4.7. Post-Closing Reconciliation. Any pro-rations unable to be
conclusively determined at Closing because of the unavailability of precise information
required in order for the pro-rations to be determined, including, without limitation, the
pro-rations for percentage rent, as provided in Section 2.4.2, or under the
Owner/Operator Agreements, as provided in Section 2.4.6, shall be estimated by the
parties at Closing, with adjustments to be made promptly between the parties as soon as
the necessary information becomes available. The provisions of this Section 2.4.7
shall survive Closing for a period of twelve (12) months.
2.5. Management Agreement. As a condition
precedent to Closing, Buyer, and/or its designated Affiliates, and Eateries shall enter
into the Management Agreement, whereby Eateries shall provide to Buyer, and/or its
designated Affiliates, accounting, management, computer information systems, human
resources, licensing and similar services for the compensation as set forth in the
Management Agreement. As a condition precedent to Closing, in accordance with the
provisions of Section 7.14, the parties shall also enter into a separate management
agreement, for such compensation as provided in the Management Agreement, for the
purchase, sale and service of alcoholic beverages for each of the Restaurants until Buyer,
and/or its designated Affiliate, shall have obtained such liquor license in its own name,
if such existing licenses are not otherwise lawfully assignable to or obtainable by Buyer
and/or its designated Affiliate.
2.6. Employment Agreement. As a condition
precedent to Closing, Buyer and Xxxxxxx Xxxxxxxx shall have entered into the Employment
Agreement.
2.7. Seller Financing. The parties agree and
acknowledge that it is anticipated that the parties will not be able to obtain the
consents of all of the landlords under the Leases or the transfer of existing or the
obtaining of new liquor licenses, as contemplated by this Agreement, at Closing, and that
obtaining such items is a condition precedent to Buyer obtaining third party financing for
the purchase of the Assets. Seller and/or Eateries agree to accept payment of a portion of
the Purchase Price, in accordance with Section 2.2.3, by the Promissory Note,
subject to the satisfaction of the conditions subsequent as set forth in Section 7.14.
Within thirty (30) days of the receipt by Buyer of the landlord consent and liquor license
for each Restaurant, Buyer shall pay to Seller and/or Eateries, in accordance with the
terms and conditions of the Promissory Note, that portion of the outstanding principal
balance of the Promissory Note applicable to the Restaurant as to which landlord consent
has been obtained, as set forth in Schedule 2.7.
2.8. License for Remaining Xxxxxx'x Restaurants.
Buyer shall grant a royalty free irrevocable license for the use of the Xxxxxx'x trade
dress, trade name and related service marks (i) at Closing, at the four (4) Xxxxxx'x
Restaurants located as set forth in Schedule 2.8 which Seller retains, such license
shall be transferable to the succeeding owner(s) of such Xxxxxx'x Restaurants at no
additional cost, and (ii) at the time any Restaurant the purchase of which is rescinded by
Buyer pursuant to Section 7.14, such license shall be transferable to the
succeeding owner of such rescinded Restaurant at no additional cost.
2.9. Liquor Licenses. Seller and Eateries
shall use their best efforts, without incurring any out-of-pocket costs not otherwise
reimbursed by Buyer, to assist Buyer and/or its designated Affiliates in obtaining
licenses for the purchase, sale and service of alcoholic beverages for each of the
Restaurants. This obligation shall survive Closing.
2.10. Franchise Agreement with Best Restaurants,
Inc. At Closing but effective the Closing Date, Seller and/or Eateries shall provide
an estoppel certificate, in form and substance reasonable acceptable to the parties,
regarding the Franchise Agreement with Best Restaurants I, L.L.C. and/or Xxxxxxx Xxxxxxxx.
2.11. Possession. At the Closing, Seller will
transfer to Buyer exclusive possession of the Assets free, clear and discharged of
possession or use and the right of possession or use by any and all Persons, except third
party landlords under the Leases.
3. REPRESENTATIONS AND
WARRANTIES OF SELLER
Seller and Eateries jointly and severally represent and warrant to
Buyer as follows:
3.1. Organization and Good Standing and Title to
the Assets.
3.1.1. Seller. Seller is a corporation duly formed, validly
existing and in good standing under the laws of the state of Oklahoma, and is duly
qualified to do business and in good standing under the laws of each state or jurisdiction
in which either the ownership or use of the properties owned or used by it, or the nature
of the activities conducted by it, require such qualification, with full power and
authority to conduct its business as it is now being conducted, to own or use the property
and assets that it purports to own or use, and to perform all its obligations under this
Agreement and Seller's Closing Documents.
3.1.2. Eateries. Eateries is a corporation duly formed, validly
existing and in good standing under the laws of the state of Oklahoma, with full power and
authority to conduct its business as it is now being conducted, to own or use the property
and assets that it purports to own or use, and to perform all its obligations under this
Agreement and Seller's Closing Documents.
3.1.3. Title to Seller's Assets. Seller owns all the properties
and assets (whether real, personal, or mixed and whether tangible or intangible) that it
purports to own, including all of the properties and assets reflected in the Balance Sheet
and all of the properties and assets purchased or otherwise acquired by the Company since
the date of the Balance Sheet (except for personal property and inventory acquired and
sold since the date of the Balance Sheet in the ordinary course of business and consistent
with past practice). To Seller's best knowledge, all properties and assets reflected in
the Balance Sheet are free and clear of all liens, encumbrances, security interests and
claims of any Person, except as otherwise specifically disclosed herein. Seller, in
accordance with its respective interests therein, has good title to all of the Operating
Assets, including, without limitation, the Intellectual Property Assets, to the extent of
its interest therein and to Seller's best knowledge, free and clear of all liens, claims,
security interests and encumbrances, except as specifically disclosed herein to Seller's
best knowledge; Seller has good and marketable title to the leasehold estate of the
Restaurants, free and clear of all mortgages, liens, encumbrances, leases, tenancies,
security interests, covenants, conditions, and restrictions, except matters affecting the
leasehold interest which would not materially adversely affect or otherwise materially
interfere with the operation by Buyer of the Restaurant under such Lease and except for
rights to profits held by the Owner/Operators under the Owner/Operator Agreements as
specifically disclosed herein, no Person has any right to purchase or otherwise acquire
any interest in the Seller, including but not limited to, any option, right of first
refusal or preemptive right that has not been otherwise waived or released prior to
Closing and no Person has a right to acquire any of the Assets; and Eateries owns one
hundred percent (100%) of the ownership interests in Seller.
3.1.4. Title to Eateries' Assets. Eateries owns no interest in
any of the Assets except certain Assumed Contracts as set forth therein. Eateries owns one
hundred percent (100%) of the capital stock of Seller.
3.2. Authority; Binding Agreement; No Conflict.
3.2.1. Authority; Binding Agreement. This Agreement constitutes
the legal, valid, and binding obligation of Seller and Eateries, enforceable against
Seller and Eateries in accordance with its terms. Upon the execution and delivery by
Seller and Eateries of this Agreement and the documents and agreements delivered by Seller
and Eateries in accordance with this Agreement (collectively, the "Seller's Closing
Documents"), will constitute the legal, valid, and binding obligations of Seller and
Eateries, enforceable against Seller and Eateries in accordance with their respective
terms. Seller and Eateries have the absolute and unrestricted right, power, authority, and
capacity to execute and deliver this Agreement and the Seller's Closing Documents and to
perform their respective obligations under this Agreement and the Seller's Closing
Documents.
3.2.2. No Conflict. Neither the execution and delivery of this
Agreement nor the consummation or performance of any of the transactions contemplated
under this Agreement will, directly or indirectly (with or without notice or lapse of
time):
(i) conflict with, or result in a violation of (A) any provision of the
Organizational Documents of the Seller or Eateries, or (B) any resolution adopted by
Seller, Eateries or the stockholders of Seller or Eateries;
(ii) conflict with, or result in a violation of, or give any
Governmental Body or other Person the right to challenge any of the transactions
contemplated under this Agreement or to exercise any remedy or obtain any relief under,
any Legal Requirement or any Order to which Eateries or Seller or any of the assets owned
or used by Eateries or Seller, may be subject, including without limitation, transfer or
bulk sales laws, but not including the laws pertaining to the transfer of liquor licenses;
(iii) conflict with, or result in a violation of any of the terms or
requirements of, or give any Governmental Body the right to revoke, withdraw, suspend,
cancel, terminate, or modify, any governmental authorization that is held by Eateries or
Seller or that otherwise relates to the business of, or any of the assets owned or used
by, Eateries or Seller, but not including the laws pertaining to the transfer of liquor
licenses;
(iv) conflict with, or result in a violation or breach of any provision
of, or give any Person the right to declare a default or exercise any remedy under, or to
accelerate the maturity or performance of, or to cancel, terminate, or modify, any Assumed
Contract;
(v) result in the imposition or creation of any encumbrance upon or
with respect to any of the assets owned or used by Eateries or Seller; or
(vi) cause Eateries or Seller to be required to give any notice to or
obtain any consent from any Person in connection with the execution and delivery of this
Agreement or the consummation or performance of any of the transactions contemplated under
this Agreement, with the exception of third party landlords of certain of the Restaurants,
if any.
3.3. Financial Statements. Seller has
delivered to Buyer unaudited balance sheets of Seller as of December 31 for the years 2000
and 2001, and the related unaudited statements of income for each of the Restaurants for
the fiscal years then ended. Such financial statements including, without limitation, the
Balance Sheet, accurately and fairly present in all material respects the financial
condition and the results of operations as of the respective dates and for the periods
referred to in such financial statements in compliance with all Legal Requirements,
including, without limitation, all federal income tax statutes, rules and regulations.
3.4. Agreements, Books and Records. The books
of account, minute books, and other records of Seller and of the Restaurants, all of which
have been or will be made available to Buyer, are complete and correct and have been
maintained in accordance with sound business practices. The minute books of Seller contain
accurate and complete records of all meetings held and actions taken by the members and
committees of Seller. Seller, and/or Eateries, shall maintain the existing books and
records being maintained for each of the Restaurants for a period of at least three (3)
years after the Closing Date and shall provide access to those books and records during
such time period to one or more representatives of Buyer during regular business hours and
upon reasonable advance notice, to the extent reasonably necessary to Buyer.
3.5. Leases. Seller has good and marketable
title to the leasehold estate of each of the Restaurants, free and clear of all mortgages,
liens, encumbrances, encroachments, easements, leases, tenancies, security interests,
covenants, conditions and restrictions, except matters affecting the leasehold title to
any of the Restaurants which would not materially adversely affect or otherwise materially
interfere with the use of any of the Facilities as a restaurant; and Seller has exclusive
possession of the Assets free, clear and discharged of possession or use and the right of
possession or use by any and all Persons, except for the interests of the respective
landlord under each of the Leases and except for rights to profits held by the
Owner/Operators under the Owner/Operator Agreements. Seller has provided to Buyer, or will
provide upon execution of this Agreement, accurate and complete copies of the Leases and,
to the extent in Seller's or Eateries' possession or control, all surveys, title
commitments, environmental reports, nondisturbance agreements and such other documents and
information reasonably requested by Buyer covering or relating to the leaseholds or real
estate where the Restaurants are located (collectively, the "Real Estate
Information").
3.6. Sufficiency of Assets. As of the day
following the Closing Date, the Operating Assets shall be in good operating condition and
repair, ordinary wear and tear excepted, and shall be sufficient for the continued
operation of the Restaurants after the Closing Date in substantially the same manner as
conducted by the Seller prior to the Closing Date. Seller, to the extent possible, shall
and hereby assign effective as of Closing Date all warranty rights of Seller, if any, with
respect to the assets transferred pursuant to this Agreement.
3.7. Inventory. As of the day following the
Closing Date, the Inventory located at each Restaurant shall be sufficient for the
continued operation of the Restaurants after the Closing Date in substantially the same
manner as conducted by the Seller prior to the Closing Date. All Inventory being acquired
by Buyer in accordance with Section 2.2.1 shall consist of a quality usable and
salable in the ordinary course of business, consistent with the past practices of Seller.
3.8. No Undisclosed Liabilities. To Seller's
or Eateries' Knowledge, and except as set forth in the Balance Sheet or otherwise in this
Agreement, neither Seller, nor Eateries as related to the Restaurants or the Franchise
Agreements, has any liabilities or obligations of any nature, whether known or unknown and
whether absolute, accrued, contingent, or otherwise which would materially adversely or
otherwise materially interfere with the use by Buyer of the Operating Assets as a
restaurant or Buyer's rights under the Franchise Agreements
3.9. Taxes.
3.9.1. Tax Returns. Seller and Eateries on behalf of Seller and
as related to the Restaurants, have timely filed (taking into account all extensions of
time) with all appropriate governmental agencies all federal, state, commonwealth, local,
foreign and other tax or information returns and tax reports (including, but not limited
to, all income tax, unemployment compensation, Social Security, payroll, sales and use,
profits, excise, privilege, occupation, property, ad valorem, franchise, license, school
and any other tax under the laws of the United States or of any state, foreign
jurisdiction, any commonwealth, municipal entity or of any political subdivision with
valid taxing authority) due for all periods ended on or before the date hereof. All such
returns and reports as are based on income have been prepared on the same basis as those
of previous years. All federal, state, county, commonwealth, foreign, local and other
governmental taxes of Seller and of Eateries as related to Seller and/or the Restaurants
and all interest, penalties, assessments, deficiencies, charges, fees or other government
impositions or charges accrued, due, or claimed to be due, to any such taxing authority
with respect to the foregoing, have been fully paid. There is no liability for taxes in
excess of the amounts so paid.
3.9.2. Pending Tax Matters. Except as set forth in Schedule
3.9.2 neither Seller, nor Eateries as it relates to the Restaurants, the Franchise
Agreements or Seller, is a party to any pending federal, state, commonwealth, municipal or
foreign action, or proceeding for the collection of taxes or any other governmental
charges, and to the Knowledge of Seller, the assertion of any such claim is not
threatened. Neither Seller, nor Eateries as it relates to the Restaurants or Seller, has
received notice from any Governmental Body, including, without limitation, the Secretary
of the Treasury, of the commencement of any administrative proceeding, or of a final
administrative adjustment resulting from any such proceeding.
3.9.3. Payment of Taxes. Seller, and Eateries as it relates to
the Restaurants, the Franchise Agreements or Seller, have to the best of their Knowledge,
paid or shall pay all taxes of every kind and description relating to each of the
Restaurants through any date or period of time prior to the Closing Date, payable by
Seller or Eateries to the United States, the state in which a Restaurant is located, or
any other taxing authority, and which could give rise to a lien against the assets to be
transferred to Buyer pursuant to this Agreement. Nothing contained herein shall be
construed to require Seller or Eateries to pay any regular or special taxes before they
become due.
3.9.4. Reports. To Seller's or Eateries' Knowledge, there have
been no reports prepared by any agent of the Internal Revenue Service with respect to any
tax matter involving Seller, the Assets, or Eateries as it relates to the Restaurants, the
Franchise Agreements or Seller. Seller agrees to provide to Buyer such other tax
information as Buyer may reasonably request relating to the Restaurants and the Franchise
Agreements and to assist the other in the preparation of its personal property and other
tax returns, reports, assessments, and statements of the business of each of the
Restaurants.
3.10. No Material Adverse Change. Since the
date of the Balance Sheet, there has not been any material adverse change in the business,
operations, properties, prospects, assets, or condition of the Restaurants and no event
has occurred or circumstance exists that would be reasonably anticipated to result in such
a material adverse change, other than distributing of cash and cash equivalents to Seller
in accordance with this Agreement.
3.11. Employment Matters.
3.11.1. Compliance. Except as set forth in Schedule 3.11.1,
neither Seller, nor Eateries as it relates to the Restaurants, has had at any time during
the last two (2) years, nor is there, to the Knowledge of Seller, nor Eateries as it
relates to the operation of the Restaurants, now threatened, any labor dispute,
arbitration proceeding, complaint, charge, case, controversy, walkout, work stoppage, or
any other similar occurrence relating to union activity that adversely affects, or may
adversely affect, the assets, the properties, the business, the operations, or the
condition, financial or otherwise, of Seller or operations of the Restaurants. Seller, and
Eateries as it relates to the operation of the Restaurants, are in material compliance
with all applicable Legal Requirements relating to wages and the payment thereof, hours of
work, collective bargaining agreements, workers' compensation laws and the withholding and
payment of Social Security and similar taxes, including without limitation ERISA and the
Americans with Disabilities Act. Seller and Eateries as it relates to the operation of the
Restaurants, have withheld all amounts required by Legal Requirements or agreement to be
withheld from the wages or salaries of its employees. Seller and Eateries as it relates to
the operation of the Restaurants, are not liable for any arrears of wages or other taxes
or penalties for failure to comply with any of the foregoing. Except as set forth on Schedule
3.11.1, there are no controversies, claims, charges or complaints, pending, or to the
Knowledge of Seller, or Eateries as it relates to the operation of the Restaurants,
threatened, by any employee or former employee of Seller, or Eateries as it relates to the
Restaurants, including, without limitation, any controversy, claim, or complaint regarding
unfair labor practices, wages, workers' compensation, employment-related torts, wrongful
termination, sexual harassment, employment discrimination, or any other similar claims.
3.11.2. Benefit Plans. Schedule 3.11.2 includes a
complete and accurate list of all employee welfare benefit and employee pension benefit
plans as defined in Sections 3(1) and 3(2) of ERISA and all other employee
benefit agreements or arrangements, including but not limited to deferred compensation
plans, incentive plans, vacation plans, bonus plans or arrangements, stock option plans,
stock purchase plans, Seller or Eateries purchase plans, severance pay plans, cafeteria
plans, employment contracts and other similar plans, agreements and arrangements that are
currently in effect or were maintained within three (3) years of the Closing Date, or have
been approved before this date but are not yet effective, for the benefit of partners,
members, managers, officers, directors, shareholders, Affiliates, employees, or former
employees (or beneficiaries of any of them) of Seller or Eateries as it relates to the
Restaurants.
3.11.3. No Carryover Liability. The consummation of this
Agreement, and the employment by Buyer of former employees of Seller or Eateries,
including, without limitation, Xxxxxxx Xxxxxxxx, will not result in any carryover
liability to the Buyer relating to benefit plans maintained by or on behalf of Seller or
Eateries as set forth in Schedule 3.11.5, nor does Seller, or Eateries as it
relates to the operation of the Restaurants, have any liability for taxes, penalties,
interest or any other claims resulting from any employee pension benefit plan, employee
welfare benefit plan, or other employee benefit agreement, or arrangement set forth in Schedule
3.11.2. As to employee pension benefit plans of the Seller and/or Eateries as it
relates to the operation of the Restaurants: neither Seller nor Eateries has become liable
to the PBGC under Section 4062, 4063 or 4064 of ERISA; nor has made a complete or partial
withdrawal from a multi-employer plan (as defined in Section 3(37) of ERISA) so as to
incur withdrawal liability as defined in Section 4201 of ERISA, and all group health plans
maintained by Seller, or Eateries as it relates to the operation of the Restaurants, have
been operated in compliance with Section 4980B(f) of the IRC.
3.11.4. No Sponsorship. The parties agree that, unless otherwise
assumed in writing, Buyer does not and will not assume the sponsorship of, or the
responsibility for contributions to, or any liability in connection with, any employee
pension benefit plan, any employee welfare benefit plan, or other employee benefit
agreement or arrangement maintained by Seller or by Eateries for any employees, former
employees, retirees, their beneficiaries or any other person.
3.11.5. Employees and Compensation. Except as set forth in Schedule
3.11.5, there are no Persons employed in operations at the Restaurants, whether
employees of Eateries, Seller or otherwise. Schedule 3.11.5 also sets forth the
salaries and compensation of each employee of Seller, or Eateries as it relates to the
operation of the Restaurants, for the six (6) months preceding the date of this Agreement.
3.11.6. Employment Claims. Seller agrees that Seller, and not
Buyer, shall be solely responsible for all liability, costs, and expenses (including
reasonable attorneys' and investigative fees and costs) for all existing employment
claims, including, without limitation, those claims set forth in Schedule 3.11.1,
arising from or relating to any employee or former employee of Seller, or of Eateries
employed in operations at the Restaurants, during their employment by the Seller prior to
and through the Closing Date, including, without limitation, those claims relating to
arbitrations, unfair labor practice charges, employment discrimination charges, wrongful
termination, workers' compensation, unemployment benefits, any employment-related tort or
any other claim or charge of or by any such employee, or any of the foregoing arising as a
result of conditions, actions, fact or events or series of actions, facts or events which
occurred prior to the Closing Date. Seller and Buyer agree to cooperate and consult
together in the conduct of the defense of any such employment claims relating to or any
employee or former employee of any Restaurant.
3.11.7. Owner/Operator Agreements. Schedule 3.11.7
contains a list of all agreements between management and supervisory personnel of the
Restaurants and Seller and/or Eateries. Except as set forth in Schedule 3.11.7, no
Person has any claim, right or any agreement to purchase, acquire or receive any ownership
interest in Seller or the Assets or receive any income from the Restaurants or Seller.
3.12. Litigation. Except as set forth in Schedule
3.12, there are no: (i) Orders or settlements within the preceding three (3) years
relating to any action, suit, claim, investigation or legal, administrative, arbitration
or other proceeding, nor (ii) any actions, suits, claims, investigations, legal,
administrative, arbitration or other proceedings, or governmental investigations or
examinations, any violation of any Legal Requirement, or any change in any zoning or
building ordinance, affecting Seller, the Assets, the Restaurants, or Eateries as it
relates to the Franchise Agreements and the operation of the Restaurants, pending, or to
the Knowledge of Seller or Eateries, threatened against, relating or with respect to
Seller, the Assets, the Restaurants, or Eateries as it relates to the Franchise Agreements
and the operation of the Restaurants, or their respective businesses, properties, assets
or operations, at law or in equity.
3.13. Absence of Certain Changes and Events.
Except as set forth in Schedule 3.13, since the date of the Balance Sheet,
Seller, and Eateries as it relates to the operation of the Restaurants, has conducted its
business only in the ordinary course of business and there has not been any:
a) change in Seller's ownership or grant of any
options to purchase any ownership interest;
b) payment or increase by Seller, or Eateries as it
relates to the Restaurants, of any bonuses, salaries, or other compensation to any
officer, director, shareholder or (except in the ordinary course of business) employee or
entry into any employment, severance, or similar contract with any member, or employee
other than oral employment contracts terminable at will deemed entered into with
employees, other than management personnel, hired since the Balance Sheet Date;
c) adoption of, or increase in the benefits under,
any profit sharing, bonus, deferred compensation, savings, insurance, pension, retirement,
or other employee benefit plan for or with any employees of the Seller as it relates to
the Restaurants;
d) damage to or destruction or loss of any asset or
property of the Restaurants or used in the operation of the Restaurants, whether or not
covered by insurance, materially and adversely affecting the properties, assets, business,
financial condition, or prospects of the Restaurants;
e) entry into, termination of, or receipt of notice
of termination of any contract other than in the ordinary course of business, provided
such contract is terminable upon not less than thirty (30) day notice to the contracting
party thereunder; or
f) sale, other than sales of inventory in the
ordinary course of business, lease, Restaurant closing or other disposition of any asset
or property of a Restaurant or mortgage, pledge, or imposition of any lien or other
encumbrance on any asset or property of any Restaurant.
3.14. Contracts; No Defaults. Schedule
3.14 contains a complete and accurate list, and Seller has, or will have upon
execution of this Agreement, delivered to Buyer true and complete copies of, each written
Applicable Contract other than Immaterial Contracts. Except as otherwise set forth in Schedule
3.14, the Seller is in full compliance with all terms and requirements of each
Applicable Contract and each Applicable Contract is in full force and effect and no event
has occurred or circumstance exists that (with or without notice or lapse of time) may
contravene, conflict with, or result in a violation or breach of, or give the Seller or
other Person the right to declare a default or exercise any remedy under, or to accelerate
the maturity or performance of, or to cancel, terminate, or modify, any Applicable
Contract nor has the Seller received any notice of any of the foregoing. Except as set
forth in Section 5.6, the Seller has not entered into any written or verbal
agreement to relocate any manager or supervisor of the Restaurants.
3.15. Common Area Maintenance Charges and
Assessments. Schedule 3.15 contains a complete and accurate list of all changes
and assessments paid by Seller, or by Eateries as it relates to the Restaurants, within
the last twelve (12) months for common area maintenance or similar charges or assessments
pursuant to a Lease or otherwise.
3.16. Intellectual Property Assets. Seller
and Eateries acquired the rights to the Intellectual Property Assets, as set forth on Schedule
3.16 from Famous Restaurants, Inc. and its affiliates ("Famous") in
connection with the transaction contemplated by that certain Asset Purchase Agreement
dated as of November 14, 1997. Neither Seller nor Eateries has transferred or assigned any
of its respective rights in and to the Intellectual Property Assets. Except for Garcimex'
claim of ownership, and its claim of a right to use the Xxxxxx'x service marks, in New
Jersey, and the claim of Xxxxxxx X. Xxxxxx of a right to use the Xxxxxx'x Service marks in
Anchorage, Alaska to Seller's or Eateries' Knowledge there are no adverse claims as to the
Intellectual Property Assets and, and to Seller's or Eateries' Knowledge, the use of the
Intellectual Property Assets in connection with Seller's ownership and operation of the
Xxxxxx'x Restaurants does not infringe the trademark or other intellectual property assets
of any other Person and the assignment of the Intellectual Property Assets to Buyer does
not violate the rights of any other Person.
3.17. Existing Improvements. Seller or
Eateries has received and paid for all permanent certificates of occupancy; all licenses,
permits, authorizations, and approvals required by any Governmental Body having
jurisdiction and all requisite certificates of the local board of fire underwriters (or
other body exercising similar functions) for the building and improvements on each of the
Restaurants, all of which shall remain in full force and effect until the Closing Date. To
Seller's and Eateries' Knowledge, none of the improvements located on the real property of
any of the Restaurants encroach on any other Person's property and all of the improvements
located on the real property of any of the Restaurants comply with all applicable setback
lines and other building restrictions.
3.18. Use of the Restaurants. To Seller's and
Eateries' Knowledge, each of the Restaurants is zoned lawfully and properly for use by
Buyer for the intended operation of x Xxxxxx'x Mexican restaurant or are subject to
exceptions or variances from all zoning laws, and, except as disclosed in Schedule 3.18,
neither Seller nor Eateries have any Knowledge of: (i) any proposed public improvements or
condemnations which may result in special assessments or in any material reduction in the
usefulness of any of the Restaurants to Buyer, (ii) any plans or requirements for the
material alteration or correction of any existing conditions of any of the Restaurants, or
(iii) any other facts that might materially adversely affect the condition, suitability or
usefulness of any of the Restaurants to Buyer for the operation of x Xxxxxx'x Mexican
restaurant.
3.19. Compliance with Laws. Seller, and
Eateries as it relates to the Franchise Agreements and the Restaurants, have complied in
all material respects with all applicable laws, ordinances, regulations, statutes, rules
and restrictions affecting and pertaining to each of the Restaurants or the Franchise
Agreements. The performance of this Agreement will not result in any breach of, constitute
a default under, or result in the imposition of any lien or encumbrance on any of the
Restaurants under any agreement or other instrument binding on any of the Restaurants, any
interest in the Franchise Agreements, or Seller which is not released or paid at Closing
except for Leases as to which the consent of the landlord to its assignment to Buyer will
not have been obtained.
3.20. Special Assessments. To Seller's and
Eateries' Knowledge, there are no delinquent special assessments which would affect any of
the Restaurants, whether or not constituting a lien on the Assets of such Restaurant.
3.21. Parties in Possession. With the
exception of third party landlords pursuant to the Leases, no third parties are in
possession of any portion of any of the Facilities as lessees, tenants at sufferance,
trespassers, or otherwise.
3.22. Franchise Agreements.
3.22.1. Franchisees. A list of the Franchise Restaurants,
Franchisees and Franchise Agreements is set forth on attached Schedule 3.22.1, and
except as set forth in Schedule 3.22.1, there are no pending or granted, and to
Seller's or Eateries' Knowledge, no claims of any Person to any, rights to develop
Xxxxxx'x Mexican restaurants in any other domestic or international markets.
3.22.2. Franchise Agreements. Except as set forth in Schedule
3.22.2, (i) each Franchise Agreement is in full force and effect; (ii) there are no
pending, or to Seller's or Eateries' Knowledge, any threatened, action, suit, claim,
controversy, dispute, investigation, legal, administrative, arbitration or other
proceeding, affecting arising from or related to the Franchise Restaurants, Franchisees or
Franchise Agreements; and (iii) no event has occurred or circumstance exists that (with or
without notice or lapse of time) may contravene, conflict with, or result in a violation
or breach of, or give any Person, including, without limitation, Seller, Eateries, or any
Franchisee, the right to declare a default or exercise any remedy under, or to accelerate
the maturity or performance of, or to cancel, terminate, or modify, any Franchise
Agreement, nor have Seller or Eateries received any notice of any of the foregoing.
3.22.3. Franchisor Costs. To Seller's and Eateries' Knowledge
and with the exception of the Flagstaff, Arizona store, for the last three (3) fiscal
years, the annual costs incurred by Seller and/or Eateries in performing any obligations
as franchisor and/or licensor under the Franchise Agreements, excluding legal fees and
costs related to preparation of a uniform franchise offering circular and for franchise
agreement for the Xxxxxx'x Restaurants, have been less than $5,000.00.
3.23. Broker's or Finder's Fee. Neither
Seller nor Eateries has entered into any agreement with any broker or finder that would
require the payment by any party to this Agreement of a broker's or finder's fee.
4. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller and Eateries as follows:
4.1. Organization and Good Standing. Buyer is
a limited liability company duly organized, validly existing, and in good standing under
the laws of the state of Oklahoma.
4.2. Authority; No Conflict.
4.2.1. Authority. This Agreement constitutes the legal,
valid, and binding obligation of Buyer enforceable against Buyer in accordance with its
terms. Upon the execution and delivery by Buyer of this Agreement, and any other documents
or agreements delivered by Buyer in accordance with this Agreement (collectively, the
"Buyer's Closing Documents"), the Buyer's Closing Documents, will constitute the
legal, valid, and binding obligations of Buyer, enforceable against Buyer in accordance
with their respective terms. Buyer has the absolute and unrestricted right, power, and
authority to execute and deliver this Agreement and the Buyer's Closing Documents and to
perform its obligations under this Agreement and the Buyer's Closing Documents.
4.2.2. Conflict. Neither the execution and delivery of this
Agreement nor the consummation or performance of any of the transactions contemplated
under this Agreement will, directly or indirectly (with or without notice or lapse of
time):
(i) conflict with, or result in a violation of (A) any provision of the
articles of organization or operating agreement of the Buyer, or (B) any resolution
adopted by Buyer or the managers or members of Buyer;
(ii) conflict with, or result in a violation of, or give any
Governmental Body or other Person the right to challenge any of the transactions
contemplated under this Agreement or to exercise any remedy or obtain any relief under,
any Legal Requirement or any Order to which Buyer or any of the assets owned or used by
Buyer, may be subject, including without limitation, transfer or bulk sales laws;
(iii) conflict with, or result in a violation of any of the terms or
requirements of, or give any Governmental Body the right to revoke, withdraw, suspend,
cancel, terminate, or modify, any governmental authorization that is held by Buyer or that
otherwise relates to the business of, or any of the assets owned or used by, Buyer;
(iv) result in the imposition or creation of any encumbrance upon or
with respect to any of the assets owned or used by Buyer; or
(v) cause Buyer to be required to give any notice to or obtain any
consent from any Person in connection with the execution and delivery of this Agreement or
the consummation or performance of any of the transactions contemplated under this
Agreement.
4.3. Binding Agreement. This Agreement
constitutes the legal, valid and binding obligation of Buyer, enforceable in accordance
with its terms. The performance by the Buyer of its respective obligations under this
Agreement does not require the consent or approval of any Person, agency or court not
already obtained, and will not conflict with, result in a breach of any terms of, or
constitute a default under any agreement or order, statute, rule or regulation binding on
it.
4.4. Litigation. Buyer knows of no pending or
threatened legal proceedings which seek or would seek to prohibit or enjoin the
consummation of the transactions contemplated by this Agreement.
4.5. Broker's or Finder's Fee. The Buyer has
not entered into any agreement with any broker or finder that would require the payment by
any party to this Agreement of a broker's or finder's fee.
5. COVENANTS OF SELLER
5.1. Inspection Period/Meeting with Employees.
5.1.1. Inspection Period. From the Effective Date through the
Closing Date (the "Inspection Period"), Buyer shall have the right, at its
expense, to inspect the Facilities and equipment of each of the Restaurants for the
operation of a restaurant by Buyer. During the Inspection Period the Buyer and its
representatives shall have the right, in addition to the provisions of Section 5.2,
below, to obtain commitments for title insurance and to enter upon the Facilities at each
of the Restaurants to conduct investigations, including, without limitation, surveys;
engineering, planning and feasibility studies; environmental inspections and assessments;
an inspection of the Facilities at each of the Restaurants; a study of the availability of
utilities, drainage, access and sewer facilities at each of the Restaurants; and any other
investigations the Buyer may desire to determine the suitability of each of the
Restaurants for the operation of a restaurant by the Buyer. The Buyer shall conduct its
investigations in a manner and at the times of day reasonably agreed to with the Seller.
5.1.2. Material Deficiencies. If material deficiencies are
discovered during the Inspection Period that exceed $25,000.00 in the aggregate to repair
and Buyer has given Seller written notice of such deficiency, Seller will have the option
of fixing such deficiency for a period of 30 days following the Inspection Period. If
Seller does not fix such material objection during the cure period, Buyer, Seller and
Eateries shall have the absolute right, in their sole discretion, to terminate this
Agreement by giving written notice of such termination or decision not to close to the
other party. For purposes of Section 5.1 "material deficiency" shall mean
a deficiency that interferes with the customary efficiency, operations or safety of a
Restaurant and not related to normal wear and tear associated with Facilities or the age
of the respective Restaurants and Facilities, but assuming a normal level of maintenance.
5.1.3. Meetings with Employees. Beginning on the Effective Date,
Buyer may begin meeting with the employees of the Restaurants at times and under
circumstances reasonably agreed to with Seller.
5.2. Access and Investigation. Between the
Effective Date and the Closing Date, Seller and Eateries will, and will cause their
representatives to, (i) afford Buyer and its representatives full and free access to
Seller's and the Restaurants' personnel (subject to the provisions of Section 5.1.4),
assets, properties, contracts, books and records, and other documents and data; (ii)
furnish Buyer and its representatives with copies of all contracts, books and records, and
other existing documents and data as Buyer may reasonably request; (iii) furnish Buyer and
its representatives with such additional financial, operating, and other data and
information relating to the Restaurants and the Facilities in Seller's possession or
control as Buyer may reasonably request; and (iv) furnish Buyer and its representatives
with the Franchise Agreements with copies of all promotional and development materials,
contracts, books and records, and other existing documents and data in Seller's and/or
Eateries' possession or control, or as Buyer may reasonably request, relating to the
Franchise Agreements, Franchisees and Franchise Restaurants. Buyer shall indemnify and
hold Seller and Eateries harmless from any claims or actual damages arising from Buyer's
or its representative's access to the Assets, including, without limitation, the
Facilities, during the Inspection Period.
5.3. Operation of the Businesses of the
Restaurants. Between the Effective Date and the Closing Date, Seller and Eateries
will:
a) conduct the business of Seller and the Restaurants, and Eateries as
it relates to the Franchise Agreements or the Restaurants, only in the ordinary course of
business;
b) use commercially reasonable efforts to preserve intact the current
business organization of Seller and the Restaurants, keep available the services of the
current managers, supervisory personnel, employees, and agents of Seller and the
Restaurants, and maintain the relations and good will with franchisees, suppliers,
customers, landlords, creditors, employees, agents, and others having business
relationships with Eateries, Seller and the Restaurants;
c) confer with Buyer concerning operational matters of a material
nature;
d) not enter into, amend, terminate or otherwise modify any material
contracts or obligations, including, without limitation, the Applicable Contracts, the
Leases or the Franchise Agreements; and
e) otherwise report periodically to Buyer concerning the status of the
business, operations, and finances of the Restaurants and the Franchise Restaurants.
5.4. Notification. Between the Effective Date
and the Closing Date, Seller will promptly notify Buyer in writing if Seller or Eateries
becomes aware of any fact or condition that causes or constitutes a breach of any of
Seller's or Eateries' representations and warranties as of the Effective Date, or if
Seller or Eateries becomes aware of the occurrence after the Effective Date of any fact or
condition that would (except as expressly contemplated by this Agreement) cause or
constitute a breach of any such representation or warranty had such representation or
warranty been made as of the time of occurrence or discovery of such fact or condition.
During the same period, Seller or Eateries will promptly notify Buyer of the occurrence of
any breach of any covenant of any Seller or Eateries in this Section 5 or of the
occurrence of any event that may make the satisfaction of the conditions in Section 7
impossible or unlikely. Seller will also notify Buyer of any changes in the management or
supervisory personnel at any Restaurant.
5.5. No Negotiation. Until such time, if any,
as this Agreement is terminated pursuant to Section 9, Seller and Eateries will
not, and will cause their representatives not to, directly or indirectly solicit,
initiate, or encourage any inquiries or proposals from, discuss or negotiate with, provide
any non-public information to, or consider the merits of any unsolicited inquiries or
proposals from, any Person (other than Buyer) relating to any transaction involving the
sale of the business or assets (other than Inventory in the ordinary course of business)
of Seller, including, without limitation, the Restaurants, the Facilities, or any
ownership interest in Seller, or any merger, consolidation, business combination, or
similar transaction involving the Seller or the franchise rights of Seller, including,
without limitation, the Franchise Agreements.
5.6. Employees. Seller hereby covenants and
agrees that neither Seller, nor any Affiliate, will solicit for employment or employ, for
a period commencing on the date hereof and ending six (6) months from the date of Closing,
any of the persons who are currently employees of Seller unless Buyer elects not to hire
such employee.
5.7. Best Efforts. Between the date of this
Agreement and the Closing Date, Seller will use its best efforts to cause the conditions
in Section 7 to be satisfied.
6. COVENANT OF BUYER
Between the date of this Agreement and the Closing Date, Buyer will use
its best efforts to cause the conditions in Sections 7.8, 7.10, 7.11, 7.12 and 8 to
be satisfied.
7. CONDITIONS PRECEDENT TO
BUYER'S OBLIGATION TO CLOSE
Buyer's obligation to purchase the Assets and to consummate the
transactions contemplated under this Agreement and to take the other actions required to
be taken by Buyer at the Closing is subject to the satisfaction, at or prior to the
Closing, of each of the following conditions (any of which may be waived by Buyer, in
whole or in part):
7.1. Accuracy of Representations. All of
Seller's and Eateries' representations and warranties in this Agreement, considered
collectively, and each of these representations and warranties, considered individually,
must have been accurate in all material respects as of the date of this Agreement, and
must be accurate in all material respects as of the Closing Date as if made on the Closing
Date.
7.2. Seller's and Eateries' Performance. All
of the covenants, agreements and obligations that Seller or Eateries is required to
perform or to comply with pursuant to this Agreement at or prior to the Closing,
considered collectively, and each of these covenants and obligations, considered
individually, must have been duly performed and complied with in all material respects.
7.3. Consents. Subject to the terms and
conditions of Section 7.14, each of the consents required in this Agreement, must
have been obtained and must be in full force and effect.
7.4. Closing Obligations. Each of the
following must have been delivered to Buyer:
a) executed Seller's Closing Documents;
b) a certificate executed by Seller and Eateries representing and
warranting to Buyer that each of Seller's and Eateries' representations and warranties in
this Agreement and Schedules attached hereto was accurate in all material respects as of
the date of this Agreement and is accurate in all material respects as of the Closing Date
as if made on the Closing Date; and
c) such other documents as Buyer may reasonably request for the purpose
of (i) evidencing the accuracy of any of Seller's or Eateries' representations and
warranties, (ii) evidencing the performance by Seller or Eateries of, or the compliance by
Seller or Eateries with, any covenant or obligation required to be performed or complied
with, (iii) evidencing the satisfaction of any condition referred to in this Section 7,
or (iv) otherwise facilitating the consummation or performance of any of the transactions
contemplated under this Agreement.
7.5. No Proceedings. Since the Effective
Date, there must not have been commenced or threatened against Buyer, or against any
Affiliate of Buyer, any proceeding (i) involving any challenge to, or seeking damages or
other relief in connection with, any of the transactions contemplated under this
Agreement, or (ii) that may have the effect of preventing, delaying, making illegal, or
otherwise interfering with any of the transactions contemplated under this Agreement.
7.6. No Claim Regarding Stock or Sale Proceeds.
There must not have been made or threatened by any Person, any claim asserting that such
Person is the holder or the beneficial owner of, or has the right to acquire or to obtain
beneficial ownership of, any ownership interest in Seller or the Assets, or is entitled to
all or any portion of the Purchase Price.
7.7. No Prohibition. Neither the consummation
nor the performance of any of the transactions contemplated under this Agreement will,
directly or indirectly (with or without notice or lapse of time), materially conflict
with, or result in a material violation of, or cause Buyer or any Affiliate of Buyer to
suffer any material adverse consequence under, (i) any applicable Legal Requirement or
Order, or (ii) any Legal Requirement or Order that has been published, introduced, or
otherwise proposed by or before any Governmental Body.
7.8. Leases/Real Estate. Buyer will have
received, in its sole reasonable determination, adequate and necessary Real Estate
Information. Buyer will have inspected the Facilities and reviewed the Real Estate
Information and Leases and will have determined, in its sole discretion that the Leases
and Facilities are acceptable, and, subject to the provisions of Section 7.14,
obtained any necessary approvals or consents from third party landlords.
7.9. Management. The Buyer (i) will have
entered into the Management Agreement with Seller, (ii) will have entered into the
Employment Agreement with Xxxxxxx Xxxxxxxx; and (iii) will be satisfied, in its sole
reasonable determination, that the Restaurants will continue to have experienced
supervisory management upon current compensation terms.
7.10. Liquor Licenses. Subject to the
provisions of Section 7.14, Buyer will have received, in its sole determination,
any and all licenses, permits and approvals necessary for the purchase, storage, sale and
service of alcoholic beverages at the Restaurants.
7.11. Owner/Operator Agreements. Buyer shall
have assumed the Owner/Operator Agreements.
7.12. Buyer Financing. Buyer shall have
obtained the Buyer Financing, on terms and conditions acceptable to Buyer in its sole
discretion, subject only to funding of the Buyer Financing as to a particular Restaurant
as set forth in Section 7.14.
7.13. UCC Searches. Buyer will have conducted
and received UCC lien searches on Seller, the Assets, and Eateries as it relates to the
Restaurants and Seller, and the result of such searches must be in form and substance
reasonably acceptable to Buyer.
7.14. Conditions Subsequent. The parties
agree and acknowledge that it is anticipated that the parties will not be able to obtain
(i) the consents of each of the third party landlords under the Leases or (ii) the
transfer of or new liquor licenses as of the Closing Date. Buyer will consummate the
Closing as to such affected Restaurant, provided, if Buyer has not received the consent of
the landlord under the Lease and either a transferred or a new liquor license for each
Restaurant on or before one hundred eighty (180) days after the Closing Date, Buyer and
Seller will in good faith attempt to devise a solution by which Buyer still receives the
contemplated economic benefits of such affected Restaurant, including solutions such as a
(i) management agreement; (ii) sublease arrangement or (ii) net profits interest. In the
event Buyer and Seller are unable in good faith to agree to a solution, Buyer shall have
the right to rescind the purchase of the Assets as to such Restaurant for which the
consent and/or the liquor license has not been received. Set forth in Schedule 7.14
hereto is an agreed allocation by the parties of the Purchase Price to each Restaurant. In
the event Buyer rescinds the purchase of a Restaurant, then Seller shall return to Buyer
one hundred percent (100%) of the Purchase Price allocated to such Restaurant and the net
loss (if any) of the Restaurant since the Closing Date and Buyer shall return to Seller
the net profit (if any) of the Restaurant since the Closing Date.
8. CONDITIONS PRECEDENT TO
SELLER'S AND EATERIES' OBLIGATIONS TO CLOSE
Seller's and Eateries' respective obligations to sell the Assets,
consummate the transactions contemplated under this Agreement and to take the other
actions required to be taken by Seller and Eateries at the Closing is subject to the
satisfaction, at or prior to the Closing, of each of the following conditions (any of
which may be waived by Seller and/or Eateries, in whole or in part):
8.1. Accuracy of Representations. All of
Buyer's representations and warranties in this Agreement, considered collectively, and
each of these representations and warranties, considered individually, must have been
accurate in all material respects as of the date of this Agreement and must be accurate in
all material respects as of the Closing Date as if made on the Closing Date.
8.2. Buyer's Performance. All of the
covenants and obligations that Buyer is required to perform or to comply with pursuant to
this Agreement at or prior to the Closing, considered collectively, and each of these
covenants and obligations, considered individually, must have been performed and complied
with in all material respects.
8.3. Documents. Buyer must have executed or
caused to be executed and delivered to Seller the Buyer's Closing Documents and such other
documents as Seller or Eateries may reasonably request for the purpose of (i) evidencing
the accuracy of any representation or warranty of Buyer, (ii) evidencing the performance
by Buyer of, or the compliance by Buyer with, any covenant or obligation required to be
performed or complied with by Buyer, (iii) evidencing the satisfaction of any condition
referred to in this Section 8, or (iv) otherwise facilitating the consummation of
any of the transactions contemplated under this Agreement. Buyer shall also deliver a
certificate executed by Buyer representing and warranting to Seller and Eateries that each
of Buyer's representations and warranties in this Agreement hereto was accurate in all
material respects as of the date of this Agreement and is accurate in all material
respects as of the Closing Date as if made on the Closing Date;
8.4. No Injunction. There must not be in
effect any Legal Requirement or any injunction or other Order that prohibits the sale of
the Assets to Buyer, that has been adopted or issued, or has otherwise become effective,
since the date of this Agreement.
8.5. No Proceedings. Since the date of this
Agreement, there must not have been commenced or threatened against Seller Eateries, or
against any Affiliate of Seller or Eateries, any proceeding (i) involving any challenge
to, or seeking damages or other relief in connection with, any of the transactions
contemplated under this Agreement, or (ii) that may have the effect of preventing,
delaying, making illegal, or otherwise interfering with any of the transactions
contemplated under this Agreement.
8.6. No Claim Regarding Assets or Sale Proceeds.
There must not have been made or threatened by any Person, any claim asserting that such
Person is the holder or the beneficial owner of, or has the right to acquire or to obtain
beneficial ownership of, any ownership interest in Seller or the Assets, or is entitled to
all or any portion of the Purchase Price.
8.7. No Prohibition. Neither the consummation
nor the performance of any of the transactions contemplated under this Agreement will,
directly or indirectly (with or without notice or lapse of time), materially conflict
with, or result in a material violation of, or cause Seller or Eateries, or any Affiliate
of Seller or Eateries, to suffer any material adverse consequence under, (i) any
applicable Legal Requirement or Order, or (ii) any Legal Requirement or Order that has
been published, introduced, or otherwise proposed by or before any Governmental Body.
9. TERMINATION
9.1 Termination Events. This Agreement may,
by notice given prior to or at the Closing, be terminated:
a) by either Buyer or Seller if a material breach of any provision of
this Agreement has been committed by the other party and such breach has not been waived;
b) (i) by Buyer if any of the conditions in Section 7 has not
been satisfied as of the Closing Date or if satisfaction of such a condition is or becomes
impossible (other than through the failure of Buyer to comply with its obligations under
this Agreement) and Buyer has not waived such condition on or before the Closing Date; or
(ii) by Seller, if any of the conditions in Section 8 has not been satisfied as of
the Closing Date or if satisfaction of such a condition is or becomes impossible (other
than through the failure of Seller to comply with their obligations under this Agreement)
and Seller has not waived such condition on or before the Closing Date;
c) by mutual consent of Buyer and Seller; or
d) subject to the terms and conditions of Section 7.14, by
either Buyer or Seller if the Closing has not occurred (other than through the failure of
any party seeking to terminate this Agreement to comply fully with its obligations under
this Agreement) on or before December 31, 2002.
9.2 Effect of Termination. Each party's right
of termination under Section 9.1 is in addition to any other rights it may have
under this Agreement or otherwise, and the exercise of a right of termination will not be
an election of remedies. If this Agreement is terminated pursuant to Section 9.1,
all further obligations of the parties under this Agreement will terminate, except that
the obligations in Sections 11 and 12 will survive; provided, however, that if this
Agreement is terminated by a party because of the breach of the Agreement by the other
party or because one or more of the conditions to the terminating party's obligations
under this Agreement is not satisfied as a result of the other party's failure to comply
with its obligations under this Agreement, the terminating party's right to pursue all
legal remedies will survive such termination unimpaired.
10. SURVIVAL; INDEMNIFICATION.
10.1. Survival of Representations and Warranties.
(a) The parties hereto agree to shorten the applicable period of
limitation of claims for breach of representations and warranties under this Agreement
that might otherwise prevail under applicable law and for that purpose each and every
representation and warranty set forth in this Agreement shall survive the Closing until
one (1) year after the Closing Date, except the representations and warranties contained
in Section 3.6 which shall survive the Closing Date for one hundred eighty (180)
days.
(b) From and after one (1) year from the Closing Date, neither Seller,
Eateries nor Buyer shall be under any liability whatsoever with respect to any such
representation or warranty or any obligation or liability based upon such representation
or warranty, except for breaches as to which a party shall have given notice (specifying,
with reasonable particularity, the facts establishing such breach and the specific nature
and amount of damages for which indemnification is sought) to the breaching party or
parties prior to the date such applicable period of survival terminates.
(c) The provisions of this Section 10.1 shall have no effect
upon any covenants or agreements of the parties hereto, that, by their terms, are to have
effect or be performed after the Closing Date.
10.2. Seller's and Eateries' Indemnities.
Seller and Eateries, from and after the Closing Date, shall indemnify and hold Buyer and
its members, managers, agents, employees, representatives, successors, and assigns
harmless from and against any and all damage, loss, cost, obligation, claims, demands,
assessments, judgments or liabilities, including taxes, and all expenses, including
interest, penalties, and attorneys' and accountants' fees and disbursements (collectively,
"Damages") incurred in litigation or otherwise, and any investigation relating
thereto, by any of the above-named persons, directly or indirectly, resulting from:
(i) Seller's or Eateries' misrepresentation, breach of warranty, or
failure to perform any covenant or agreement made or undertaken by Seller or Eateries in
this Agreement or in any other agreement, certificate, Schedule, Exhibit, or writing
delivered to Buyer pursuant to this Agreement or in connection with the transactions
contemplated under this Agreement;
(ii) notwithstanding any disclosures or representations by Seller or
Eateries, all disputes, litigation, settlements, administrative or other proceedings, and
all related or subsequent litigation, appeals or administrative action and all debts,
obligations, and liabilities arising out of or in connection with any facts existing prior
to the Closing Date, including, without limitation, operation of the Restaurants or the
Franchise Agreements, and all disputes, litigation, settlements, administrative or other
proceedings related thereto;
(iii) any liability, claim, cause of action, or debt associated with
the ownership or operation of the Restaurants or the Franchise Agreements prior to the
Closing;
(iv) any liability claim, cause or action, or debt associated with the
Leases until such time, if any, that the Lease is assigned to Buyer and the consent or
approval of the landlord is obtained in accordance with Section 7.8;;
(v) any liability claim, cause or action, or debt associated with the
excluded assets referenced in Section 2.1.10; and
(vi) all Damages arising from or in connection with any action, suit,
proceeding, or claim incident to any of the foregoing.
10.3. Buyer's Indemnity. Buyer, from and
after the Closing Date, except as otherwise provided herein, shall indemnify and hold
Seller and Eateries, and its respective officers, directors, shareholders, agents,
employees, representatives, successors, and assigns harmless from and against any Damages
incurred in litigation or otherwise, and an investigation relating thereto by any of the
above named individuals resulting from:
(i) Buyer's misrepresentation, breach of warranty, or failure to
perform any covenant or agreement made or undertaken by Buyer in this Agreement or in any
other agreement or certificate delivered by Buyer to Seller or Eateries pursuant to this
Agreement or in connection with the transactions contemplated under this Agreement;
(ii) all disputes, litigation, settlements, administrative or other
proceedings, and all related or subsequent litigation, appeals or administrative action,
and all debts, obligations, and liabilities arising out of or in connection with the
Assumed Contracts, the Leases (but only from and after the date such Lease is assigned to
Buyer and the consent or approval of the landlord is obtained in accordance with Section
7.8) or the Franchise Agreement or the ownership or operation of the Restaurants
following the Closing Date, in each case, however, other than the Damages for which Seller
is obligated to indemnify Buyer under Section 10.1 above;
(iii) any liability, claim, cause of action, or debt associated with
the ownership or operation of the Restaurants or the Franchise Agreements after the
Closing Date;
(iv) any liability, claim, cause of action, or debt expressly assumed
by Buyer under this Agreement; and
(v) and any and all Damages arising from or in connection with any
action, suit, proceeding, or claim incident to any of the foregoing.
10.4. Procedure. All claims for
indemnification by a party under this Section 10 (the party claiming
indemnification and the party against whom such claims are asserted being hereinafter
called the "Indemnified Party" and the "Indemnifying Party",
respectively) shall be asserted and resolved as follows:
(i) In the event that any claim or demand for which
an Indemnifying Party would be liable to an Indemnified Party hereunder is asserted
against or sought to be collected from such Indemnified Party by a third party, such
Indemnified Party shall with reasonable promptness give notice (the "Claim
Notice") to the Indemnifying Party of such claim or demand, specifying the nature of
and basis for such claim or demand and the amount or the estimated amount thereof to the
extent then feasible (which estimate shall not be conclusive of the final amount of such
claim or demand). The Indemnifying Party shall not be obligated to indemnify the
Indemnified Party under this Agreement with respect to any such claim or demand if the
Indemnified Party fails to notify the Indemnifying Party thereof in accordance with the
provisions of this Agreement, and, as a result of such failure, the Indemnifying Party's
ability to defend against the claim or demand is materially prejudiced. The Indemnifying
Party shall have twenty (20) days from the personal delivery or mailing, in accordance
with Section 12.5, of the Claim Notice (the "Notice Period ") to notify
the Indemnified Party whether or not it disputes the liability of the Indemnifying Party
to the Indemnified Party hereunder with respect to such claim or demand and whether or not
it desires, at the cost and expense of the Indemnifying Party, to defend the Indemnified
Party against such claim or demand; provided, however, that any Indemnified Party is
hereby authorized, but is not obligated, prior to and during the Notice Period to file any
motion, answer, or other pleading that it shall deem necessary or appropriate to protect
its interests or those of the Indemnifying Party. If the Indemnifying Party notifies the
Indemnified Party within the Notice Period that it desires to defend the Indemnified Party
against such claim or demand, the Indemnifying Party shall, subject to the last sentence
of this section, have the right to control the defense against the claim by all
appropriate proceedings and any settlement negotiations, provided that the Indemnifying
Party chooses counsel reasonably satisfactory to the Indemnified Party. If the Indemnified
Party desires to participate in any such defense or settlement, it may do so at its sole
cost and expense.
(ii) If requested by the Indemnifying Party, the
Indemnified Party agrees, at the Indemnifying Party's expense, to cooperate with the
Indemnifying Party and its counsel in contesting any claim or demand that the Indemnifying
Party elects to contest, or, if appropriate and related to the claim in question, in
making any counterclaim against the person asserting the third party claim or demand, or
any cross-complaint against any person other than an Affiliate of Buyer if Buyer is the
Indemnified Party.
(iii) If any Indemnified Party should have a claim
against the Indemnifying Party hereunder that does not involve a claim or demand being
asserted against or sought to be collected from it by a third party, the Indemnified Party
shall send a Claim Notice with respect to such claim to the Indemnifying Party. If the
Indemnifying Party disputes such claim, such dispute shall be resolved by arbitration in
accordance with Section 11.
10.5 Limitation on Seller's and Eateries'
Liability.
(a) Notwithstanding anything to the contrary contained in this
Agreement, Seller and Eateries shall have liability to Buyer for the breach of a
representation, warranty, covenant or other provision of this Agreement, including the
agreement to indemnify, but excluding the representation, warranty, or covenant contained
in Section 3.6, only with respect to individual losses or claims which exceed
$5,000.00 (a "Material Loss") and then only to the extent the sum total of such
Material Losses exceeds $50,000.00; provided further that Seller's and Eateries' aggregate
liability to Buyer under this Agreement shall in no event exceed the Purchase Price;
(b) IN NO EVENT SHALL THE SELLER OR EATERIES HAVE ANY LIABILITY TO
BUYER (OTHER THAN TO THIRD PARTIES WITH RESPECT TO CLAIMS FOR WHICH SELLER OR EATERIES IS
AN INDEMNIFYING PARTY) FOR EXEMPLARY, PUNITIVE, SPECIAL, INDIRECT, CONSEQUENTIAL
(INCLUDING LOST PROFITS), REMOTE OR SPECULATIVE DAMAGES IN CONNECTION WITH OR IN ANY WAY
RELATED TO THE TRANSACTION CONTEMPLATED BY THIS AGREEMENT, WHETHER ARISING IN CONTRACT,
TORT OR OTHERWISE.
10.6 Losses. The amount of any loss for which
reimbursement or indemnification is provided under this Section 10 shall be net of
any amounts recovered or recoverable by a party or an Indemnified Party under insurance
policies with respect to such loss. Any indemnification or other payment by Seller or
Eateries to Buyer under Section 10 shall be deemed a reduction to the Purchase
Price in the amount of such payment.
10.7 Remedies Exclusive. The provisions of
this Section 10 set forth the exclusive remedies for breach of this Agreement or
related to the transaction contemplated by this Agreement except for termination rights as
set forth in Section 9 and shall preclude assertion by any party hereto of any
other rights or the seeking of any other remedies against any other party hereto.
11. RESOLUTION OF DISPUTES
The following provisions shall apply to any controversy between Seller
and Eateries and Buyer (including any director, officer, shareholder, partner, manager,
member employee, agent or Affiliate of Seller, Eateries or Buyer) and relating to or
arising out of this Agreement or any transaction contemplated by this Agreement (including
any claim that any part of this Agreement is invalid, illegal or otherwise void or
voidable):
11.1. Arbitration. The parties shall resolve
the controversy by final and binding arbitration in accordance with the Rules for
Commercial Arbitration (the "Rules") of the American Arbitration Association in
effect at the time of the execution of this Agreement and pursuant to the following
additional provisions:
11.1.1. Applicable Law. The Oklahoma Arbitration Act shall apply
to the arbitration and all procedural matters relating to the arbitration.
11.1.2. Selection of Arbitrators. The parties shall select one
arbitrator within ten (10) days after the filing of a demand and submission in accordance
with the Rules. If the parties fail to agree on an arbitrator within such ten (10) day
period, or fail to agree to an extension of that period, the arbitration shall take place
before an arbitrator selected in accordance the Rules.
11.1.3. Location of Arbitration. The arbitration shall take
place in Oklahoma City, Oklahoma, and the arbitrator shall issue any award at the place of
arbitration. The arbitrator may conduct hearings and meetings at any other place agreeable
to the parties or, upon the motion of a party, determined by the arbitrator as necessary
to obtain significant testimony or evidence.
11.1.4. Discovery. The arbitrator shall have the power to
authorize all forms of discovery (including depositions, interrogatories and document
production) upon the showing of (i) a specific need for the discovery, (ii) that the
discovery likely will lead to material evidence needed to resolve the controversy, and
(iii) that the scope, timing and cost of the discovery is not excessive.
11.1.5. Authority of Arbitrator. The arbitrator shall not have
the power (i) to alter, modify, amend, add to, or subtract from any term or provision of
this Agreement or (ii) to grant interim injunctive relief prior to the award.
11.1.6. Enforcement of Award. The prevailing party shall have
the right to enter the award of the arbitrator in any court having jurisdiction over one
or more of the parties or their assets. The parties specifically waive any right they may
have to apply to any court for relief from the provisions of this Agreement or from any
decision of the arbitrator made prior to the award.
11.2. Attorneys' Fees and Costs. The
prevailing party to the arbitration shall have the right to an award of its reasonable
attorneys' fees and costs incurred after the filing of the demand and submission. If Buyer
prevails, the award shall include a reasonable amount for that portion of Buyer's
administrative overhead allocable to the time devoted by Buyer's in-house legal staff.
12. GENERAL PROVISIONS
12.1. Survival of Representations, Warranties and
Covenants. Seller, Eateries and Buyer agree that all representations, warranties and
covenants made in this Agreement are material and have been relied upon by the parties,
notwithstanding any investigation by any party. Seller, Eateries and Buyer agree that the
representation, warranties, and covenants, which by their terms, require performance after
the Closing Date will survive the Closing Date; provided, the limitation on
indemnification set forth in Section 10.1 will apply to claims for breach of the
representations and warranties under this Agreement.
12.2. Expenses. Except as otherwise expressly
provided in this Agreement, each party to this Agreement will bear its respective expenses
incurred in connection with the preparation, execution, and performance of this Agreement
and the transactions contemplated under this Agreement, including all fees and expenses of
agents, representatives, counsel, and accountants. In the event of termination of this
Agreement, the obligation of each party to pay its own expenses will be subject to any
rights of such party arising from a breach by another party.
12.3. Public Announcements. Unless consented
to in writing by the parties in advance or required by Legal Requirements, Seller, Buyer
and Eateries shall keep this Agreement strictly confidential and shall not make any
disclosure of this Agreement to any person other than their respective agents, partners,
advisors, consultants and representatives as required to consummate the contemplated
transactions. Eateries shall, in its discretion, issue a press release regarding the entry
into this Agreement, and shall consult with Buyer regarding the terms of such release.
Seller and Buyer shall consult with each other concerning the means by which the
Restaurants' employees, customers, suppliers, and others having dealings with the
Restaurants shall learn of this Agreement and the transactions contemplated by this
Agreement, and Buyer shall have the right to be present for any such communication.
12.4. Confidentiality. Between the date of
this Agreement and the Closing Date (and if Closing does not occur, for a period of one
(1) year after the Effective Date) and in accordance with that certain letter of
understanding between the parties, dated October 9, 2002, Buyer and Seller will maintain
in confidence, and will cause the officers, directors, shareholders, members, managers,
employees, agents, partners, members, advisors and representatives of Buyer, Seller and
Eateries to maintain in confidence, and not use to the detriment of another party any
written, oral, or other information obtained from another party in connection with this
Agreement or the transactions contemplated under this Agreement, unless (a) such
information is already known to such party or to others not bound by a duty of
confidentiality or such information becomes publicly available through no fault of such
party, (b) the use of such information is necessary or appropriate in making any filing or
obtaining any consent or approval required for the consummation of the transactions
contemplated under this Agreement, or (c) the furnishing or use of such information is
required by or necessary or appropriate in connection with legal proceedings.
12.5. Notices. All notices, consents,
waivers, and other communications under this Agreement must be in writing and will be
deemed to have been duly given when (a) delivered by hand (with written confirmation of
receipt), (b) sent by telecopier (with written confirmation of receipt), provided that a
copy is mailed by registered mail, return receipt requested, or (c) when received by the
addressee, if sent by a nationally recognized overnight delivery service (with written
confirmation of receipt), in each case to the appropriate addresses and facsimile numbers
set forth below (or to such other addresses and facsimile numbers as a party may designate
by notice to the other parties):
Seller:
Fiesta Restaurants, Inc.
0000 X. Xxxxx Xx Xxxxxx
Xxxxxx, Xxxxxxxx 00000
Fax: (000) 000-0000
Attention: Xxxxxxx X. Xxxx, Xx.
Eateries:
Eateries, Inc.
0000 X. Xxxxx Xx Xxxxxx
Xxxxxx, Xxxxxxxx 00000
Fax: (000) 000-0000
Attention: Xxxxxxx X. Xxxx, Xx.
With a copy to: Hall, Estill, Hardwick, Gable, Golden
& Xxxxxx, P.C.
000 X. Xxxxxx Xxxxxx, Xxxxx 000
Xxxxx, Xxxxxxxx 00000
Fax: (000) 000-0000
Attention: Del X. Xxxxxxxxx
Buyer:
Fiesta, L.L.C.
One Xxxxxx Place
0000 Xxxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxxx Xxxx, Xxxxxxxx 00000
Fax: (000) 000-0000
Attention: Xxxxxxx X. Xxxxx
H. Xxxxxxx Xxxxxxxx
00000 Xxxxx Xxxxx Xxxxx
Xxxxxxxx Xxxx, Xxxxxxxx 00000
With a copy to: Xxxxxxxx XxXxxx XxXxxxxxx XxXxx
& Xxxxxx, P.C.
Twelfth Floor, One Leadership Square
000 X. Xxxxxxxx Xxxxxx
Xxxxxxxx Xxxx, Xxxxxxxx 00000
Fax: (000) 000-0000
Attention: D. Xxxxx XxXxxx, Esq.
12.6. Further Assurances. The parties agree
to furnish upon request to each other such further information, to execute and deliver to
each other such other documents, and to do such other acts and things, all as the other
party may reasonably request for the purpose of carrying out the intent of this Agreement
and the documents referred to in this Agreement.
12.7. Waiver. The rights and remedies of the
parties to this Agreement are cumulative and not alternative. Neither the failure nor any
delay by any party in exercising any right, power, or privilege under this Agreement or
the documents referred to in this Agreement will operate as a waiver of such right, power,
or privilege, and no single or partial exercise of any such right, power, or privilege
will preclude any other or further exercise of such right, power, or privilege or the
exercise of any other right, power, or privilege. To the maximum extent permitted by
applicable law, no claim or right arising out of this Agreement or the documents referred
to in this Agreement can be discharged by one party, in whole or in part, by a waiver or
renunciation of the claim or right unless in writing signed by the other party; no waiver
that may be given by a party will be applicable except in the specific instance for which
it is given; and no notice to or demand on one party will be deemed to be a waiver of any
obligation of such party or of the right of the party giving such notice or demand to take
further action without notice or demand as provided in this Agreement or the documents
referred to in this Agreement.
12.8. Entire Agreement and Modification. This
Agreement supersedes all prior agreements between the parties with respect to its subject
matter and constitutes (along with the documents referred to in this Agreement) a complete
and exclusive statement of the terms of the agreement between the parties with respect to
its subject matter. This Agreement may not be amended except by a written agreement
executed by the party to be charged with the amendment.
12.9. Assignments, Successors, and No Third-Party
Rights. Neither party may assign any of its rights under this Agreement without the
prior consent of the other parties except that Buyer may assign any of its rights under
this Agreement to any Affiliate of Buyer provided that Buyer will remain liable under this
Agreement. Subject to the preceding sentence, this Agreement will apply to, be binding in
all respects upon, and inure to the benefit of the successors and permitted assigns of the
parties. Nothing expressed or referred to in this Agreement will be construed to give any
Person other than the parties to this Agreement any legal or equitable right, remedy, or
claim under or with respect to this Agreement or any provision of this Agreement. This
Agreement and all of its provisions and conditions are for the sole and exclusive benefit
of the parties to this Agreement and their successors and assigns.
12.10. Severability. If any provision of this
Agreement is held invalid or unenforceable by any court of competent jurisdiction, the
other provisions of this Agreement will remain in full force and effect. Any provision of
this Agreement held invalid or unenforceable only in part or degree will remain in full
force and effect to the extent not held invalid or unenforceable.
12.11. Section Headings, Construction. The
headings of Sections in this Agreement are provided for convenience only and will not
affect its construction or interpretation. All references to "Section" or
"Sections" refer to the corresponding Section or Sections of this Agreement. All
words used in this Agreement will be construed to be of such gender or number as the
circumstances require. Unless otherwise expressly provided, the word "including"
does not limit the preceding words or terms.
12.12. Time of Essence. With regard to all
dates and time periods set forth or referred to in this Agreement, time is of the essence.
12.13. Governing Law. This Agreement will be
governed by the laws of the state of Oklahoma without regard to conflicts of laws
principles thereof.
12.14. Counterparts. This Agreement may be
executed in one or more counterparts, each of which will be deemed to be an original copy
of this Agreement and all of which, when taken together, will be deemed to constitute one
and the same agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the parties have executed and delivered
this Agreement as of the date first written above.
BUYER:
FIESTA, L.L.C., an Oklahoma limited liability company
By:_______________________________________
H. Xxxxxxx Xxxxxxxx, Manager
EATERIES:
EATERIES, INC., an Oklahoma corporation
By:
Xxxxxxx X. Xxxx, Xx., Chief Executive Officer and Chairman of the Board
SELLER:
FIESTA RESTAURANTS, INC., an Oklahoma corporation
By:
Xxxxxxx X. Xxxx, Xx., Chief Executive Officer and Chairman of the Board
LIST OF EXHIBITS AND SCHEDULES
Exhibit 1 Assignment
and Assumption Agreement
Exhibit 2 Assignment
of Franchise Agreements
Exhibit 3 Assignment
of Lease Agreement
Exhibit 4 Balance
Sheet
Exhibit 5 Xxxx of
Sale
Exhibit 6 Collateral
Documents
Exhibit 7 Employment
Agreement
Exhibit 8 Management
Agreement
Exhibit 9 Promissory
Note
Exhibit 10 License
Agreement
Schedule 1 Restaurants
Schedule 2.1.1 Operating Assets
Schedule 2.1.2 Leases
Schedule 2.1.3 Assumed Contracts
Schedule 2.1.6 Excluded Employees
Schedule 2.2 Purchase Price Allocation
Schedule 2.2.3 Promissory Note Allocation
Schedule 2.8 Xxxxxx'x Restaurants
Retained by Seller
Schedule 3.9.2 Tax Matters
Schedule 3.11.1 Employment Matters
Schedule 3.11.2 Employee Plans
Schedule 3.11.5 Employees and Salaries
Schedule 3.11.7 Owner/Operators and Owner/Operator Agreements
Schedule 3.12 Litigation
Schedule 3.13 Absence of Certain Changes and Events
Schedule 3.14 Applicable Contracts; Defaults
Schedule 3.15 Common Area Maintenance Charges and
Assessments
Schedule 3.16 Intellectual Property Assets
Schedule 3.18 Condemnation Matters
Schedule 3.22.1 Franchise Agreements, Franchisees and Franchise Restaurants
Schedule 3.22.2 Franchise Agreements Defaults
Schedule 7.14 Allocation of Purchase Price by Restaurant