STOCK PURCHASE AGREEMENT by and between CBRL GROUP, INC. (“Seller”) and LRI Holdings, Inc. (“Buyer”) Dated as of October 30, 2006
by
and between
CBRL
GROUP, INC.
(“Seller”)
and
LRI
Holdings, Inc.
(“Buyer”)
Dated
as of October 30, 2006
TABLE
OF CONTENTS
1. | DEFINITIONS....................................................................................................................................................................................................... |
1
|
2. | PURCHASE AND SALE OF SHARES................................................................................................................................................................. |
8
|
2.1 Basic Transaction..................................................................................................................................................................................... |
8
|
|
2.2 Transfer of Shares.................................................................................................................................................................................... |
8
|
|
2.3 Purchase Price.......................................................................................................................................................................................... | 8 | |
2.4 Adjustments to Purchase Price.................................................................................................................................................................. |
8
|
|
2.5 The Closing.............................................................................................................................................................................................. |
10
|
|
2.6 Deliveries at the Closing............................................................................................................................................................................ |
10
|
|
3. | REPRESENTATIONS AND WARRANTIES OF THE SELLER.......................................................................................................................... |
11
|
3.1 Organization, Standing and Authorization................................................................................................................................................... |
11
|
|
3.2 Non-contravention.................................................................................................................................................................................... |
11
|
|
3.3 Broker Fees............................................................................................................................................................................................. |
11
|
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3.4 Shares...................................................................................................................................................................................................... |
11
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|
3.5 No Other Agreements Relating to Acquisition............................................................................................................................................ |
11
|
|
4. | REPRESENTATIONS AND WARRANTIES OF SELLER CONCERNING | |
THE COMPANY AND THE SUBSIDIARIES.................................................................................................................................................. |
12
|
|
4.1 Organization, Qualification and Corporate Power...................................................................................................................................... |
12
|
|
4.2 Capitalization............................................................................................................................................................................................ |
13
|
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4.3 Non-Contravention................................................................................................................................................................................... |
13
|
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4.4 Governmental Consent.............................................................................................................................................................................. |
13
|
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4.5 Financial Statements................................................................................................................................................................................. |
13
|
|
4.6 Absence of Certain Changes..................................................................................................................................................................... |
14
|
|
4.7 Title to and Condition of Tangible Assets................................................................................................................................................... |
16
|
|
4.8 Real Property........................................................................................................................................................................................... | 16 | |
4.9 Inventories................................................................................................................................................................................................ |
17
|
|
4.10 Insurance.................................................................................................................................................................................................. |
18
|
|
4.11 Material Contracts.................................................................................................................................................................................... | 18 | |
4.12 Permits..................................................................................................................................................................................................... | 20 | |
4.13 Intellectual Property.................................................................................................................................................................................. | 20 | |
4.14 Litigation.................................................................................................................................................................................................. | 21 | |
4.15 Environment, Health and Safety................................................................................................................................................................. | 22 | |
4.16 Legal Compliance..................................................................................................................................................................................... | 24 | |
4.17 Employee Benefit Plans............................................................................................................................................................................. | 24 | |
4.18 Labor and Employment Matters................................................................................................................................................................ | 26 | |
4.19
Taxes.......................................................................................................................................................................................................
|
26 | |
4.20 Accounts Receivable................................................................................................................................................................................ | 28 | |
4.21 Suppliers.................................................................................................................................................................................................. |
28
|
|
4.22 Compensation of Employees..................................................................................................................................................................... | 28 | |
4.23 Accounts Payable..................................................................................................................................................................................... | 28 | |
4.24
Consents..................................................................................................................................................................................................
|
28 | |
4.25 Transactions with Affiliates........................................................................................................................................................................ | 28 |
i
4.26 Franchise Matters....................................................................................................................................................................................... | 29 | |
5. | REPRESENTATIONS AND WARRANTIES OF BUYER...................................................................................................................................... |
30
|
5.1 Organization and Standing of Buyer............................................................................................................................................................. | 30 | |
5.2 Corporate Approval; Binding Effect............................................................................................................................................................. | 30 | |
5.3 Non-Contravention..................................................................................................................................................................................... |
30
|
|
5.4 Independent Evaluation............................................................................................................................................................................... | 30 | |
5.5 Sufficient Funds.......................................................................................................................................................................................... | 31 | |
5.6 Securities Matters....................................................................................................................................................................................... | 31 | |
6. | COVENANTS.......................................................................................................................................................................................................... |
32
|
6.1 Reasonable Access; Cooperation................................................................................................................................................................ | 32 | |
6.2 Properties................................................................................................................................................................................................... |
32
|
|
6.3 Preservation of Organization and Relationships with Customers and | ||
Vendors...................................................................................................................................................................................................... |
33
|
|
6.4 Consents of Third Parties............................................................................................................................................................................ |
33
|
|
6.5 Filings......................................................................................................................................................................................................... | 33 | |
6.6 Books and Records.................................................................................................................................................................................... | 33 | |
6.7 Maintain Assets.......................................................................................................................................................................................... | 33 | |
6.8 Employees.................................................................................................................................................................................................. |
34
|
|
6.9 Insurance Policies....................................................................................................................................................................................... | 34 | |
6.10 Advice of Change....................................................................................................................................................................................... | 34 | |
6.11 No Changes Prior to Closing Date.............................................................................................................................................................. |
34
|
|
6.12 Buyer's Financing....................................................................................................................................................................................... | 35 | |
6.13 Sale-Leaseback......................................................................................................................................................................................... | 36 | |
7. | CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS.......................................................................................................................... | 36 |
7.1 Representations and Warranties True at Closing........................................................................................................................................... | 36 | |
7.2 Compliance with Agreement........................................................................................................................................................................ |
36
|
|
7.3 No Material Adverse Effect......................................................................................................................................................................... | 36 | |
7.4 No Litigation............................................................................................................................................................................................... | 36 | |
7.5 Closing Certificate....................................................................................................................................................................................... | 36 | |
7.6 Certificate Evidencing the Shares................................................................................................................................................................. | 36 | |
7.7 Certified Resolutions................................................................................................................................................................................... | 37 | |
7.8 Incumbency Certificate................................................................................................................................................................................ | 37 | |
7.9 Certificate of Good Standing....................................................................................................................................................................... | 37 | |
7.10 Governmental Approvals............................................................................................................................................................................. | 37 | |
7.11 Resignations of Board Members and Officers.............................................................................................................................................. | 37 | |
7.12 Intercompany Payables and Receivables...................................................................................................................................................... | 37 | |
7.13 Consents.................................................................................................................................................................................................... | 37 | |
7.14 Closing Deliveries........................................................................................................................................................................................ | 37 | |
7.15 Funding....................................................................................................................................................................................................... |
37
|
|
7.16 FIRPTA Affidavit........................................................................................................................................................................................ | 38 | |
7.17 Liens........................................................................................................................................................................................................... | 38 | |
7.18 Sale-Leaseback.......................................................................................................................................................................................... | 38 |
ii
8. | CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS................................................................................................................................ |
38
|
8.1 Representations and Warranties True at Closing........................................................................................................................................... |
38
|
|
8.2 Compliance
with
Agreement.........................................................................................................................................................................
|
38
|
|
8.3 No Litigation ............................................................................................................................................................................................... |
38
|
|
8.4 Closing Certificate........................................................................................................................................................................................ |
38
|
|
8.5 Governmental
Approvals..............................................................................................................................................................................
|
38
|
|
8.6 Certified Resolutions.................................................................................................................................................................................... |
38
|
|
8.7 Incumbency Certificate................................................................................................................................................................................. |
39
|
|
8.8 Certificate of Good Standing........................................................................................................................................................................ |
39
|
|
8.9 Intercompany Payables and Receivables....................................................................................................................................................... |
39
|
|
8.10 Closing Deliveries......................................................................................................................................................................................... |
39
|
|
9. | OTHER COVENANTS AND AGREEMENTS.................................................................................................................................................... |
39
|
9.1 Confidential Information............................................................................................................................................................................... |
39
|
|
9.2 Expenses..................................................................................................................................................................................................... |
39
|
|
9.3 Non-Interference
With Executives; Non-solicitation of Employees; Non-
Compete......................................................................................................................................................................................................
|
39
|
|
9.4 Further Assurances...................................................................................................................................................................................... |
40
|
|
9.5 Satisfaction of Conditions Precedent............................................................................................................................................................. |
40
|
|
9.6 Filings.......................................................................................................................................................................................................... |
40
|
|
9.7 Public Statements or Releases...................................................................................................................................................................... |
40
|
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9.8 Exclusivity................................................................................................................................................................................................... |
40
|
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||
10. |
INDEMNIFICATIONS AND SURVIVIAL OF
REPRESENTATIONS
AND
WARRANTIES..............................................................................................................................................................................................
|
41
|
10.1 Indemnification of Buyer............................................................................................................................................................................. |
41
|
|
10.2 Indemnification of Seller............................................................................................................................................................................. |
42
|
|
10.3 Claim Threshold......................................................................................................................................................................................... |
43
|
|
10.4 Indemnity Cap........................................................................................................................................................................................... |
43
|
|
10.5 Exclusion of Consequential and Punitive Damages...................................................................................................................................... |
43
|
|
10.6 Reimbursement of Certain Indemnified Claims............................................................................................................................................ |
43
|
|
10.7 Claims for Indemnification.......................................................................................................................................................................... |
43
|
|
10.8 Defense of Indemnifying Party.................................................................................................................................................................... |
43
|
|
10.9 Exclusive Remedy...................................................................................................................................................................................... |
44
|
|
10.10 Survival of Representations, Warranties and Agreements............................................................................................................................. |
44
|
|
11. | TAX MATTERS........................................................................................................................................................................................................ |
45
|
11.1 Tax Indemnities.......................................................................................................................................................................................... |
45
|
|
11.2 Refunds and Tax Benefits........................................................................................................................................................................... |
46
|
|
11.3 Contests.................................................................................................................................................................................................... |
47
|
|
11.4 Cooperation and Exchange of Information.................................................................................................................................................. | 48 | |
11.5 Miscellaneous............................................................................................................................................................................................ |
49
|
|
12. | TERMINATION....................................................................................................................................................................................................... |
49
|
12.1 Termination and its Effects......................................................................................................................................................................... |
49
|
iii
13. | GENERAL............................................................................................................................................................................................................... | 51 |
13.1 Notices.................................................................................................................................................................................................... | 51 | |
13.2 Entire Agreement..................................................................................................................................................................................... | 52 | |
13.3 Interpretation........................................................................................................................................................................................... | 52 | |
13.4 Governing Law......................................................................................................................................................................................... | 52 | |
13.5 Table of Contents; Sections and Section Headings.................................................................................................................................... | 53 | |
13.6 Assigns.................................................................................................................................................................................................... | 53 | |
13.7 No Implied Rights.................................................................................................................................................................................... | 53 | |
13.8 Counterparts............................................................................................................................................................................................ | 53 | |
13.9 Amendments............................................................................................................................................................................................ | 53 | |
13.10 Waiver of Compliance.............................................................................................................................................................................. | 53 | |
13.11 Severability.............................................................................................................................................................................................. | 53 | |
13.12 Waiver of Jury Trail................................................................................................................................................................................. | 54 |
iv
THIS
STOCK PURCHASE AGREEMENT
(this
“Agreement”)
is
dated as of the 30th day of October, 2006 by and between LRI Holdings Inc.,
a Delaware corporation (the “Buyer”)
and
CBRL Group, Inc., a Tennessee corporation (“Seller”).
RECITALS
A. |
Seller
owns all of the issued and outstanding shares of common stock of
Xxxxx’x
Roadhouse, Inc., a Tennessee corporation (the “Company”), $0.01 par value
per share (the “Shares”).
|
B. |
Seller
desires to sell, and Buyer desires to purchase, all of the Shares
so that,
upon completion of such purchase, Buyer will own all of the outstanding
capital stock of the Company.
|
AGREEMENT
For
and
in consideration of the mutual promises and agreements set forth herein, and
for
other good and valuable consideration, the receipt and sufficiency of which
are
hereby acknowledged, Buyer and Seller agree as follows:
1. |
DEFINITIONS
|
For
all
purposes of this Agreement, the following terms shall have the respective
meanings set forth in this Section
1
(such
definitions to be equally applicable to both the singular and plural forms
of
the terms herein defined).
1.1 “Accounts
Payable” means
all
accounts and notes payable owed by the Company, calculated in accordance with
GAAP.
1.2 “Accounts
Receivable” means
all
accounts and notes receivable owed to the Company,
calculated in accordance with GAAP.
1.3 “Acquisition
Proposal” has
the
meaning set forth in Section
3.5.
1.4 “Affiliate”
means,
as to any Person, any other Person that directly or indirectly controls, or
is
under common control with, or is controlled by, such Person. As used in this
definition, “control” (including, with its correlative meanings, “controlled by”
and “under common control with”) shall mean possession, directly or indirectly,
of power to direct or cause the direction of management or policies (whether
through ownership of securities or partnership or other ownership interests,
by
contract or otherwise).
1.5 “Agreement”
has
the
meaning set forth in the introductory paragraph.
1.6 “Assets”
has
the
meaning set forth in Section
4.7.
1.7 “Audited
Balance Sheet”
has
the
meaning set forth in Section
4.5.
1.8 “Balance
Sheet”
has
the
meaning set forth in Section
4.5.
1.9 “Balance
Sheet Date”
has
the
meaning set forth in Section
4.5.
1.10 “Basket”
has the
meaning set forth in Section
10.3.
1.11 “Buyer”
has
the
meaning set forth in the introductory paragraph.
1.12 “Buyer Indemnitees”
has
the
meaning set forth in Section
10.1(a).
1.13 “Buyer’s Breach”
has
the
meaning set forth in Section
10.2.
1.14 “Cap”
has the
meaning set forth in Section
10.4.
1.15 “Capital
Expenditures”
means
expenditures capitalized as property and equipment in accordance with GAAP
and
consistent with the practices, principles and methodologies used in preparing
the Audited Balance Sheet.
1.16 “Claim”
means
any written action, suit, arbitration, proceeding, hearing, investigation,
litigation, charge, claim, settlement, environmental action or
demand.
1.17 “Closed
Store Liabilities”
means
accrued liabilities for expected obligations of the Company for future net
rent
expenses and other cash expenses for three (3) restaurants (store numbers 314,
341 and 343) closed by the Company prior to the Closing Date as reflected on
the
Final Statement.
1.18 “Closing”
has
the
meaning set forth in Section
2.5.
1.19 “Closing
Date”
has
the
meaning set forth in Section
2.5.
1.20 “Closing
Indebtedness”
has the
meaning set forth in Section
2.4(a).
1.21 “Closing
Working Capital”
has the
meaning set forth in Section
2.4(a).
1.22 “Code”
means
the Internal Revenue Code of 1986, as amended from time to time, and any
regulations or published rulings promulgated or issued thereunder.
1.23 “Company”
has
the
meaning set forth in the first recital.
1.24 “Consents”
has the
meaning set forth in Section
4.24.
1.25 “Company
Intellectual Property Rights”
has the
meaning set forth in Section
4.13.
1.26 “Contest”
has the
meaning set forth in Section
11.3(b).
1.27 “Contract”
means
any
existing agreement, personal or real property lease, commitment, understanding,
instrument, evidence of Indebtedness, mortgage, indenture, security agreement
or
other contract or agreement.
2
1.28 “Disclosure Schedule”
means
the disclosure schedules accompanying this Agreement that are
arranged to correspond to the particular representations and warranties and
that
contain
certain information required by or exceptions to certain statements contained
in
this Agreement.
1.29 “D&T”
means
Deloitte & Touche LLP.
1.30 “Environmental
Laws”
means
any federal, state or local Law, or any order, decree, judgment or injunction
issued, promulgated, approved or entered thereunder, relating to public health
and safety, or pollution or protection of the environment, including the
release, threatened release, manufacturing, processing, use, treatment, storage,
disposal, transport or handling of Hazardous Materials.
1.31 “ERISA”
has
the
meaning set forth in Section
4.17(a).
1.32 “Excluded
Property”
means
any Owned Real Property that is excluded by a Purchaser from the Sale-Leaseback,
including, without limitation, Store #313, Columbus, GA in the event such parcel
of Owned Real Property is not included in the Sale-Leaseback.
1.33 “Family
Member”
with
respect to any individual means the spouse, parents and descendents (whether
natural or adopted) of such Persons.
1.34 “Final
Indebtedness”
has the
meaning set forth in Section
2.4(d).
1.35 “Final
Statement”
has the
meaning set forth in Section
2.4(c).
1.36 “Final
Working Capital”
has the
meaning set forth in Section
2.4(d).
1.37 “Financial Statements”
has
the
meaning set forth in Section
4.5.
1.38 “Franchise
Agreement”
means
each of the franchise, license or area development agreements (together with
any
related guaranty agreements) that provide for the operation or development
of
the Company’s “Xxxxx’x Roadhouse”® restaurants that are currently in effect and
that are listed, together with the name of the Franchisee, in Section
1.38
of the
Disclosure Schedule. “Franchise
Agreements”
means
all such twenty-seven (27) agreements, collectively.
1.39 “Franchisee”
means
any Person that is a party to a Franchise Agreement with the
Company.
1.40 “Fundamental
Representations”
means
the representations and warranties of the Seller set forth in Sections
3.1,
3.3,
3.4,
4.2,
4.3(a),
4.11(l)
and
4.25.
1.41 “GAAP”
means
accounting principles generally accepted in the United States of
America consistently
applied.
1.42 “Governmental
Authority”
means
any nation or federal, state, local, regional, municipal or foreign government
or governmental regulatory body and any of their respective subdivisions,
agencies, instrumentalities, authorities, courts or tribunals.
3
1.43 “Hazardous
Materials”
means
any “Hazardous Substance,” “Oil” or “Pollutant or Contaminant” as such terms are
defined in 40 C.F.R 300.5.
1.44 “HSR
Act”
means
the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976.
1.45 “Indebtedness”
means,
with respect to the Company (i) the principal, premium (if any) and accrued
interest in respect of indebtedness of the Company for money borrowed, whether
or not evidenced by notes, debentures, bonds or other similar instruments and
for the payment of which the Company is responsible or liable, directly or
indirectly, either severally or jointly with any other Person, (ii) all
obligations of the Company for the deferred purchase price of goods, services
or
property already acquired (but excluding trade payables and
other
accrued current Liabilities arising in the ordinary course of
business),
(iii)
all obligations of the Company under leases required to be capitalized in
accordance with GAAP, (iv)
any
amounts owed by and obligations of the Company and the Subsidiaries to any
officer, director or employee of the Company or the Subsidiaries and their
respective Affiliates that is payable, as a result of, or upon the consummation
of the transactions contemplated by, this Agreement (but excluding the Success
Awards, the Replacement Awards and compensation payable in the ordinary course
of business, all as accrued in accordance with GAAP on the Financial
Statements), (v) all intercompany net payables and (vi)
all
obligations of the type referred to in the foregoing clauses (i) through
(v)
of any
other Person, the payment or performance of which the Company is responsible
or
liable, directly or indirectly, as obligor, guarantor or surety. “Indebtedness”,
however, shall not include the Termination Payment.
1.46 “Insurance
Policies”
has the
meaning set forth in Section
4.10.
1.47 “Intellectual
Property Rights”
any
rights in or to any intellectual property or other proprietary rights,
including: (i) all inventions (whether or not patentable or reduced to
practice), all improvements thereto, and all patents, patent applications and
patent disclosures, together with all reissues, continuations,
continuations-in-part, revisions, divisionals, extensions and reexaminations
thereof, (ii) all trademarks, service marks, designs, trade dress, logos,
slogans, trade names, business names, corporate names, Internet domain names,
together with all translations, adaptations, derivations and combinations
thereof, all applications, registrations and renewals in connection therewith
and all goodwill associated with any of the foregoing, (iii) all works of
authorship, copyrights, all registrations, applications for registration and
renewals in connection therewith, (iv) software (including source code,
executable code, data, databases, web sites, firmware and related
documentation), (v) all trade secrets, know-how, technology, processes,
products, methods, techniques, ideas, research and development, recipes,
designs, layouts, specifications, improvements, business information,
studies,
technical and other data, customer and supplier lists, pricing and cost
information and business and marketing plans and proposals, and (vi) all copies
and tangible embodiments of any of the foregoing (in any form or
medium)
1.48 “Inventories” means
all
product and supply inventories of the Company
and the
Subsidiaries used, useable or otherwise saleable in the ordinary course of
the
business consistent with past practices, calculated in accordance with
GAAP.
1.49 “Joint
Firm” has
the
meaning set forth in Section
2.4(b).
4
1.50 “Knowledge”
and the
correlative “Known”
shall
mean the actual knowledge of the Persons set forth in Section
1.50
of the
Disclosure Schedule, without independent inquiry.
1.51 “Laws”
means
all laws, statutes, codes, rules, regulations, ordinances and other
pronouncements having the effect of law in the United States or any domestic
state, county, city or other political subdivision or of any Governmental
Authority, excluding, Environmental Laws.
1.52 “Leased
Real Property”
has
the
meaning set forth in Section
4.8(b).
1.53 “Liabilities”
means
any Indebtedness, Claim, Loss, commitment, obligation and other liability of
any
kind, character or nature whatsoever, whether known or unknown, secured
or unsecured, accrued, fixed, absolute, contingent or otherwise.
1.54 “Liens”
means
any
lien, statutory lien, pledge, mortgage, security interest, charge, encumbrance,
easement, right of way, covenant, Claim, restriction, right, option, conditional
sale or other title retention agreement, warrant or third party equity right
of
any kind or nature.
1.55 “Losses”
has
the
meaning set forth in Section
10.1(a).
1.56 “Material
Adverse Effect”
shall
mean any effect or change that individually
or in the aggregate, would
reasonably
be expected to have a material
and adverse effect
on the
business,
properties, assets, condition (financial or otherwise), results of
operations
of the
Company and the Subsidiaries, taken as a whole, or to the ability of
Seller
to
consummate timely the transactions contemplated hereby, as applicable; provided
that none of the following shall be deemed to constitute
a
Material Adverse Effect: (a) any adverse change, event, development, or effect
arising from (i)
general business or economic conditions, provided
such
conditions do
not
disproportionately affect
the
Company, (ii) national or international political or social conditions,
including the engagement by the United States in hostilities, whether or not
pursuant to the declaration of a national emergency or war, or the occurrence
of
any military or terrorist attack upon the U.S., or any of its territories,
possessions, or diplomatic or consular offices or upon any military
installation, equipment or personnel of the U.S., provided, that such conditions
do not disproportionately affect the Company, (iii)
economic or industry conditions resulting from an outbreak of mad cow disease,
bird influenza or other such infectious disease, (iv) financial, banking, or
securities markets (including any disruption thereof and any decline in the
price of any security or any market index), (v) changes in GAAP, (vi) changes
in
Laws, orders, or other binding directives issued by any Governmental Authority,
(vii) general changes or developments in the industry in which the Company
operates,
provided
such changes or developments do not disproportionately affect the Company,
(viii)
the taking of any action expressly
contemplated
by this Agreement and the other agreements contemplated hereby, or otherwise
consented to by Buyer;
or
(b) any adverse change in or effect on the business of the Company that is
cured by Seller to the reasonable satisfaction of Buyer after consultation
with
Buyer’s counsel before the earlier of (i) the Closing Date or (ii) the date on
which this Agreement is terminated pursuant to Section
12.1
hereof.
1.57 “Material
Contracts”
has the
meaning set forth in Section
4.11.
1.58 “Minimum
Sale-Leaseback Proceeds”
has
the
meaning set forth in Section
8.10.
5
1.59 "Noncompetition
Agreement" means
an
agreement between Seller and the Company pursuant to which Seller agrees to
certain restrictions upon its business activities, which agreement shall be
substantially in the form attached hereto as Exhibit A.
1.60 “Owned
Real Property”
has
the
meaning set forth in Section
4.8(a).
1.61 “Permits”
has the
meaning set forth in Section
4.12.
1.62 “Permitted
Liens”
means
with respect to the Assets, as applicable: (a) real estate taxes, assessments
and other governmental levies, fees, or charges imposed with respect to such
Assets that are (i) not due and payable as of the Closing Date or (ii) being
contested by appropriate proceedings; (b) mechanics liens and similar liens
for
labor, materials, or supplies provided with respect to such Assets incurred
in
the ordinary course of business for amounts that are (i) not yet
due
and payable
or (ii)
being contested by appropriate proceedings; (c) zoning, building codes, and
other land use laws regulating the use or occupancy of any Owned Real Property
or Leased Real Property or the activities conducted thereon that are imposed
by
any Governmental Authority having jurisdiction over such Owned Real Property
or
Leased Real Property which are not violated in any material respect by the
current use or occupancy of such Owned Real Property or Leased Real Property
(as
the case may be) or the operation of the business thereon; (d) liens for any
financing secured by any Assets that is an obligation of the Company that will
be paid off at Closing; (e) liens for any financing contemplated by the Buyer
that will be used, in whole or in part, to finance the acquisition of the Shares
and that is secured by any Assets or the Shares; and (f) easements, covenants,
declarations, conditions, restrictions, and other similar matters of record
affecting title to any such Assets and other title defects that do not or would
not,
individually or in the aggregate,
materially impair the use,
marketability,
or
occupancy of such Assets in the operation of the business of the Company and
the
Subsidiaries.
1.63 “Plan”
has
the
meaning set forth in Section
4.17.
1.64 “Person”
shall
mean any natural person, corporation, company, limited liability company, joint
venture, association, trust, general partnership, limited partnership,
proprietorship, or other business organization.
1.65 “Post-Closing
Date” has
the
meaning set forth in Section
2.4(e).
1.66 “Purchase
Price” has
the
meaning set forth in Section
2.3.
1.67 “Real
Property Leases”
has
the
meaning set forth in Section
4.8(b).
1.68 “Reference
Amount Range”
means
a
deficit in the Company’s Working Capital of between $13,500,000 and $14,500,000,
inclusive.
1.69 “Replacement
Award”
means
any of the compensatory awards described on Section
1.69
of the
Disclosure Schedule. “Replacement Awards” means all such awards,
collectively.
1.70 “Sale-Leaseback”
means
the sale-leaseback of sixty-four (64) parcels of the Company’s Owned Real
Property
pursuant
to those documents (the “Sale-Leaseback
6
1.71 “Seller”
has
the
meaning set forth in the introductory paragraph.
1.72 “Seller Indemnitees”
has
the
meaning set forth in Section
10.2.
1.73 “Seller’s
Breach”
has
the
meaning set forth in Section
10.1(a).
1.74 “Shares”
has
the
meaning set forth in the Recitals.
1.75 “Subsidiary”
and
“Subsidiaries”
have
the respective meanings set forth in Section
4.1(b).
1.76 “Subsidiary
Assets”
has the
meaning set forth in Section
4.1(b).
1.77 “Success
Award” means
any
of the compensatory awards described on Section
1.77
of the
Disclosure Schedule. “Success
Awards” means
all
such awards, collectively.
1.78 “Taxes”
shall
mean any federal, state, local or foreign income, gross receipts, license,
payroll, employment, excise, severance, stamp, occupation, premium, windfall
profits, environmental (including taxes under Code Section 59A),
customs duties, capital stock, franchise, profits, withholding, social security
(or similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated or other tax of any kind whatsoever, including any interest, penalty
or addition thereto, whether disputed or not “Tax
Return”
shall
mean any return, declaration, report, claim for refund, or information return
or
statement relating to Taxes, including any schedule or attachment thereto,
and
including any amendment thereof.
For the
avoidance of doubt, “Tax” does not include any escheat Liabilities or similar
items under state unclaimed property Laws.
1.79 “Termination
Date” means
December 31, 2006.
1.80 “Termination
Payment”
means
the fee payable by the Company in the event it terminates the Sale-Leaseback
as
described in the Sale-Leaseback Documents.
1.81 “2007
YTD Capex” means
Capital Expenditures of the Company from July 29, 2006 through the day before
the Closing Date. Notwithstanding the foregoing and for the avoidance of doubt,
2007 YTD Capex (i) shall not include cash disbursements for internal labor
costs
that are otherwise included within 2007 YTD Capex in excess of $100,000 per
month and (ii) shall be adjusted by the amount of liabilities outstanding
(including checks outstanding) relating to Capital Expenditures in excess of
$2,900,000.
1.82 “Working
Capital”
means
all “current assets” less
all
“current liabilities” of the Company and its Subsidiaries on a consolidated
basis as determined in accordance with GAAP and with the practices, principles
and methodologies used in preparing the Audited Balance
7
1.83 “Working
Capital Adjustment”
means
the amount by which Final Working Capital is outside the Reference Amount Range
such that in the event that Final Working Capital is (i) a deficit greater
than
$14,500,000, such excess shall be paid by Seller to Buyer, (ii) a deficit less
than the $13,500,000, such difference shall be paid by Buyer to Seller; or
(iii)
a surplus, the amount of such surplus plus
$13,500,000
shall be paid by Buyer to Seller.
2. |
PURCHASE
AND SALE OF SHARES.
|
2.1 Basic
Transaction.
Seller
agrees to sell, transfer, convey, assign and deliver to Buyer on the Closing
Date, and Buyer agrees to purchase and accept from Seller, all of the Shares,
free and clear of any Liens, subject to the terms and conditions set forth
in
this Agreement.
2.2 Transfer
of Shares.
Subject
to the satisfaction or waiver of the conditions set forth in Section
8,
on the
Closing Date, Seller shall transfer the Shares by delivery of one or more stock
certificates representing all of the Shares, duly endorsed in blank or with
executed stock powers or assignments attached, in proper form for
transfer.
2.3 Purchase
Price.
In
consideration for the purchase by Buyer of the Shares, Buyer shall pay to Seller
on the Closing Date, as defined in Section
2.5
hereof,
by wire transfer of immediately available funds, the purchase price of Two
Hundred Seventy Six Million and 00/100 Dollars ($276,000,000), as adjusted
pursuant to Section
2.4
hereof
(the “Purchase
Price”),
in
accordance with wire instructions provided by the Seller.
2.4 Adjustments
to Purchase Price.
(a) |
Determination
of Closing Working Capital, Closing Indebtedness and 2007 YTD
Capex.
As promptly as practicable and in any event within sixty (60) days
after
the Closing Date, the
Buyer
shall and shall cause the Company to prepare (i)
a
statement that sets forth the
Company’s calculation of Working Capital as of the opening of business on
the Closing Date (the
“Closing
Working Capital”),
(ii)
a
statement that sets forth the Company’s calculation of Indebtedness as of
the
opening of business on
the Closing Date (the “Closing
Indebtedness”),
and a statement that sets forth the Company’s calculation of 0000 XXX
Capex and shall deliver to the Seller a statement of the calculation
of
Closing Working Capital, Closing Indebtedness and 2007 YTD Capex
(the
"Closing
Statement"),
in each case, except as otherwise expressly provided herein, in accordance
with GAAP applied consistently with past
|
8
practices and in accordance with the practices, principles and methodologies used in preparing the Audited Balance Sheet. |
(b) |
Right
of Review.
The Seller and its
representatives and accountants
shall have the right to review the
Closing
Statement and all work papers relating thereto.
The Seller
shall have the right to request of the Company additional information
related to the Closing Statement, and the Company shall cooperate
with
such reasonable requests. The Seller and D&T shall complete review of
the Closing Statement within thirty (30) days after the Closing Statement
has been made available. If
the
Seller
is
of the view that any adjustment should be made to Closing Statement
in
order for the Closing Statement to be prepared in accordance with
the
requirements of Section
2.4(a),
the Seller shall
give
Buyer written notice of such adjustments.
If
no such notice is given within thirty (30) days after the Closing
Statement has been made available, Seller shall
be deemed to have accepted the Closing Statement without adjustment.
If
the Buyer
agrees with any of the adjustments proposed by the Seller,
such adjustments shall be made to the Closing Statement. If there
are any
proposed adjustments that are disputed by the Buyer,
then the
Buyer and Seller shall
negotiate in good faith to resolve all disputed adjustments. If,
after a
period of thirty (30) days following the date on which Seller
gives the Buyer
written notice of any proposed adjustments, any such adjustments
still
remain disputed, then the Buyer and the Seller shall jointly select
an
independent
nationally recognized accounting firm (the “Joint
Firm”)
to resolve any remaining disputed adjustments, and the decision of
the
Joint Firm shall be final and binding on the parties hereto. The
parties
hereto shall instruct
the Joint Firm to resolve any such remaining disputed adjustments
as
promptly as possible
and in any event within thirty (30) days; provided that the Joint
Firm’s
determination of the adjustment shall be no higher than the Seller’s
proposal and no lower that the Buyer’s proposal.
|
(c) |
Final
Statement.
After the Closing Statement has been prepared and any related adjustments
thereto have been calculated and agreed to pursuant to Section
2.4(a)
and Section
2.4(b),
all adjustments, if any, so agreed to with respect to the Closing
Statement shall be made. The Closing Statement, as so revised by
all such
adjustments, if any, is referred to hereinafter as the “Final
Statement.”
|
(d) |
Adjustments.
The parties hereto acknowledge that the Purchase Price has been calculated
based on certain assumptions with respect to the financial condition
of
Company that will be disclosed on the Final Statement and certain
assumptions regarding the proceeds to be received by the Company
in the
Sale-Leaseback. Accordingly, the parties hereto
agree:
|
(i) If
Working Capital of Company as reflected on the Final Statement (“Final
Working Capital”)
is
outside the Reference Amount
9
(ii) If
Indebtedness of the Company as reflected on the Final Statement (“Final
Indebtedness”)
is
greater than zero, Seller shall pay to Buyer on the Post-Closing Date an amount
(hereinafter referred to as the “Indebtedness
Payment”)
equal
to the amount by which the Final Indebtedness is a greater than
zero.
(iii) The
Purchase Price also shall be decreased by the amount by which the gross proceeds
of the Sale-Leaseback are in excess of $210,000,000.
(iv) The
Purchase Price shall be decreased by the amount by which 2007 YTD Capex is
less
than the applicable amount set forth in Section 6.2(a) of the Disclosure
Schedule and increased by the amount by which 2007 YTD Capex is greater than
the
applicable amount set forth in Section 6.2(a) of the Disclosure Schedule;
provided, that in either event, the applicable amounts shall be prorated if
the
Closing Date occurs between the dates set forth on Section 6.2(a) of the
Disclosure Schedule.
(e) |
Post-Closing.
Any payment that is required to be made pursuant to Section
2.4(d)
shall be made directly to Buyer or Seller, as the case may be, at
that
party’s address set forth in Section
13.1
within five
(5) days
after the Final Statement has been completed in accordance with this
Section
2.4
(including resolutions of disputed adjustments), or on such other
date or
at such other time or place as Buyer and Seller shall agree to in
writing
(the date of such post-closing hereunder being referred to herein
as the
“Post-Closing
Date”).
All payments required to be made pursuant to Section
2.4(d)
shall be made by wire transfer of immediately available funds. Any
payments required to be made pursuant to Section
2.4(d)
shall be treated as an adjustment to the Purchase Price for all purposes
(including Tax purposes).
|
2.5 The
Closing. Subject
to satisfaction or waiver of the conditions in Section
8,
the
closing of the transactions contemplated by the Agreement (the “Closing”)
shall
take place at the offices of Xxxxx Xxxxxxxx Xxxxxxx Xxxxxxxx & Xxxxxxxxx,
P.C., located at 000 Xxxxxxxx Xxxxxx, Xxxxx 0000, Xxxxxxxxx, Xxxxxxxxx 00000,
commencing at 9:00 a.m. local time on November 27, 2006 or within five days
after expiration of the applicable waiting period (and any extension thereof)
under the HSR Act, whichever date is later, or such other date and/or time
as
Buyer and Seller may mutually agree (the “Closing
Date”).
2.6 Deliveries
at the Closing.
At
the
Closing, (i) Seller will deliver to Buyer the various certificates, instruments
and documents referred to in Section
7
below,
(ii) Buyer will deliver to Seller the various certificates, instruments and
documents referred to in Section
8
below,
(iii) Seller will deliver to Buyer one or more stock certificates representing
all of the
10
3. |
REPRESENTATIONS
AND WARRANTIES OF SELLER. Seller represents
and warrants to Buyer that the statements contained in this Section
3
are true, correct and
complete.
|
3.1 Organization,
Standing and Authorization.
Seller is a corporation duly organized, validly existing and in good
standing under the laws of the State of Tennessee. Seller has all requisite
corporate power and corporate authority to execute and deliver this Agreement
and to perform its obligations hereunder. This Agreement constitutes the valid
and legally binding obligation of Seller, enforceable in accordance with its
terms, except as may be limited by bankruptcy, insolvency, reorganization,
or
other Laws affecting creditors’ rights generally, and by general equitable
principles. Except as described in Section
3.1
of the
Disclosure Schedule, Seller need not give any notice to, make any filing with,
or obtain any authorization, consent or approval of any Government Authority
in
order to consummate the transactions contemplated under this
Agreement.
3.2 Non-contravention.
Except as set forth in Section
3.2
of the
Disclosure Schedule, neither the execution and the delivery of this Agreement,
nor the consummation of the transactions contemplated hereby, will constitute
a
violation of, conflict
with, require
the consent of any third party under, or
constitute or create a default under (a) Seller’s charter documents or by-laws,
each as amended to date; (b) any Material Contract to which Seller is a party
or
by which it or any of its properties is bound or to which it or any of such
properties is subject; or (c) any statute or any judgment, decree, order,
regulation or rule of any court or Governmental Authority, except with respect
to clause (c), where the violation, conflict or default would not reasonably
be
expected to impair, or be material and adverse to the Company or Seller’s
ability to consummate the transactions contemplated hereunder.
3.3 Broker
Fees.
Except as set forth in Section
3.3
of the
Disclosure Schedule, Seller has no obligation to pay any fees or commissions
to
any broker, finder or agent with respect to the transactions contemplated by
this Agreement for which Buyer or the Company could become obligated,
and
Buyer shall not have any liability or otherwise suffer any loss as a result
of
or in connection with any such fees.
3.4 Shares.
Except as disclosed in Section
3.4
of the
Disclosure Schedule, Seller owns of record and beneficially one hundred percent
(100%) of the Shares, free and clear of any Liens. Seller is the sole
shareholder of the Company and, except as disclosed
in Section
3.4
of the
Disclosure Schedule, has the exclusive right, power and authority to vote the
Shares.
3.5 No
Other Agreements Relating to Acquisition.
Other
than this Agreement and the Sale-Leaseback Documents, none of the Seller, the
Company, the Subsidiaries or any of their Affiliates is party to or bound by
any
agreement with respect to any proposal or offer to acquire all or any
significant part of the business and properties of the Company, whether by
merger, purchase of stock, purchase of assets or otherwise (any such agreement,
an “Acquisition
Proposal”),
or
any Contract requiring Seller to abandon, terminate or fail to consummate the
transactions contemplated by this Agreement. Any and all discussions with third
parties with
11
4. |
REPRESENTATIONS
AND WARRANTIES OF SELLER CONCERNING THE COMPANY
AND THE SUBSIDIARIES. Seller
represents and warrants to Buyer that the statements contained in
this
Section
4
are true, correct and
complete.
|
4.1 Organization,
Qualification and Corporate Power.
(a) |
The
Company is duly organized, validly existing and in good standing
under the
laws of the State of Tennessee. The Company is qualified and in good
standing to transact business in each jurisdiction in which such
qualification is required by Law, except where the failure to be
so
qualified would not have a Material Adverse Effect.
The
Company has all requisite corporate power and corporate authority
to carry
on its business as now conducted and to own or lease and to operate
its
Assets as such Assets are now owned, leased or operated. Section
4.1
of
the Disclosure Schedule sets forth each jurisdiction in which the
Company
is qualified to do business as a foreign corporation. True,
correct and
complete copies
of the charter and bylaws of the Company have been provided by Seller
to
Buyer, and such copies include all amendments, modifications and
supplements thereto.
|
(b) |
Each
of Xxxxx’x Roadhouse of Texas, Inc. and Xxxxx’x Roadhouse of Kansas, Inc.
(each, a “Subsidiary”
and, collectively, the “Subsidiaries”)
is a wholly owned subsidiary of the Company, and is duly organized,
validly existing and in good standing under the laws of its respective
state of formation. Each Subsidiary has all requisite corporate power
and
corporate authority to carry on its business as now conducted and
to own
or lease and to operate all properties and assets necessary to operate
the
business of the Subsidiary as currently conducted (the “Subsidiary
Assets”).
Each Subsidiary is duly qualified or licensed to do business, and
is in
good standing in each jurisdiction in which the nature of its activities
makes such qualification or licensing necessary, except to the extent
such
failures to be duly qualified, licensed or in good standing could
not
reasonably be expected to have a Material Adverse Effect.
True,
correct and
complete copies
of the charter and bylaws of each Subsidiary have been provided by
Seller
to Buyer, and such copies include all amendments, modifications and
supplements thereto.
|
(c) |
Except
for the Subsidiaries, the Company does not have any subsidiaries
and does
not own or control, directly or indirectly, any of the capital stock
of
any Person. There are no outstanding contractual obligations of Company
to
acquire any shares of capital stock or other ownership interest of
any
Person and the Company does not have any investment (either debt
or
equity), or commitments to make such an investment, in any
Person.
|
12
4.2 Capitalization.
The
entire
authorized capital stock of the Company consists of: (a) fifteen million
(15,000,000) shares of common stock, par value $0.01, of which one thousand
(1,000) shares are issued and outstanding and are being sold pursuant to this
Agreement; and (b) five million (5,000,000) shares of preferred stock, par
value
$0.01, none of which are issued and outstanding. All of the issued and
outstanding common stock of the Company has been duly authorized,
validly
issued, fully paid, is non-assessable
and was
not issued in violation of any preemptive rights.
All of
the issued and outstanding common stock of the Company is held of record by
Seller and true and correct copies of all stock records and corporate minutes
of
the Company have been furnished to Buyer. Except as set forth on Section
4.2
of the
Disclosure Schedule, there are no outstanding or authorized options, warrants,
rights, Contracts, calls, puts, rights to subscribe or conversion rights to
which the Company is a party or which are binding upon the Company providing
for
the issuance, disposition or acquisition of any of its capital stock. There
are
no outstanding or authorized stock appreciation, phantom stock, or similar
rights with respect to the Company. There are no voting trusts, proxies or
any
other Contracts with respect to the voting of the capital stock of the
Company.
4.3 Non-Contravention.
Except as set forth in Section
4.3
of the
Disclosure Schedule, neither the execution and delivery of this Agreement,
nor
the consummation of the transactions contemplated hereunder, will constitute
a
violation
of, or
conflict
with, require
the consent of any third party under, or
constitute or create a default
under, or result in the creation or imposition of any Lien upon any Assets
of
either the Company or any Subsidiary, pursuant to (a) its charter documents
or by-laws, each as amended to date; (b) any Material Contract to which it
is a party or by which it or any of its properties is bound or to which it
or
any of such properties is subject; or (c) any statute or any judgment,
decree, order, regulation or rule of any court or Governmental Authority,
except, in the case of (c), where the violation, conflict, default, lien,
security interest or other encumbrance would not be material and adverse to
the
Company.
4.4 Governmental
Consent.
No consent, approval or authorization of, or registration, qualification
or filing with, any Governmental Authority is required for the execution and
delivery of this Agreement or for the consummation of the transactions
contemplated hereunder, except for the filing of notices (and related requests
for authorization) under the HSR Act with the Department of Justice and the
Federal Trade Commission and disclosures required under the Securities Exchange
Act of 1934 and the rules and regulations promulgated thereunder, except where
any failure to obtain such consent, approval, authorization, registration,
or
qualification, or make such filing would not, individually or in the aggregate,
be material and adverse to the Company.
4.5 Financial
Statements.
Section
4.5
of the
Disclosure Schedule includes (i) the audited consolidated financial statements
of the Company as of July 28, 2006, containing audited balance sheets as of
July
28, 2006 and July 29, 2005 (the July 28, 2006 balance sheet being herein
referred to as the “Audited
Balance Sheet”),
audited statements of income for each of the three fiscal years ended July
28,
2006, July 29, 2005 and July 30, 2004, related statements of changes in
shareholders’ equity and cash flows for each of the fiscal years and related
notes thereto and (ii) the unaudited balance sheet and unaudited statement
of
income as of and for September 24, 2006 (the items described in clauses (i)
and
(ii) herein referred to as the “Financial
Statements”).
Except as set forth on
Section
4.5
of
the
Disclosure
Schedule
and in
the following sentence, each
of such
Financial Statements is true and correct in all material respects
13
4.6 Absence
of Certain Changes.
Since
the
Balance Sheet Date, the business and operations of the Company and the
Subsidiaries have been conducted only in ordinary course of business and there
has been no Material Adverse Effect. Without limiting the foregoing,
since
the
Balance Sheet Date, there has not been, except as disclosed in Section
4.6
of the
Disclosure Schedule:
(a) |
any
declaration or payment of dividends on any capital stock of Company
or any
distribution with respect to, or in redemption of, any of the
Shares;
|
(b) |
any
sale or transfer of any Assets of Company or any Subsidiary except
in the
ordinary course of business consistent with past
practice;
|
(c) |
any
damage, destruction or loss (whether or not fully
covered
by insurance) except for such damage, destruction or loss valued
in excess
of $250,000, either individually or in the aggregate and which is
not
covered by insurance;
|
(d) |
any
change in the condition (financial or otherwise) of properties, Assets,
Liabilities, business,
results of operations
or
prospects of the Company or any Subsidiary, except for changes in
the
ordinary course of business consistent with past practice, none of
which
has,
individually or in the aggregate, caused or would reasonably be expected
to cause,
a
Material Adverse Effect;
|
(e) |
any
transfer, assignment, license, abandonment, failure to maintain or
other
disposition of any Company Intellectual Property Rights other than
in the
ordinary course of business;
|
14
(f) |
any
action (or failure to take any action) that could reasonably be expected
to result in the loss, lapse, abandonment, invalidity or unenforceability
of any Company Intellectual Property
Rights;
|
(g) |
any
material transaction other than in the ordinary course of business
of
Company or any Subsidiary consistent with past
practice;
|
(h) |
any
lease of personal or real property to or from any Person with respect
to
which Company or any Subsidiary is a
party;
|
(i) |
any
amendment of the charter or bylaws of Company or any
Subsidiary;
|
(j) |
the
granting of any Lien against any of the
Assets
except
Permitted Liens;
|
(k) |
any
payment, loan or advance of any amount to, or sale, transfer or lease
of
any Assets to, or execution
or
modification
of
any agreement with, officers or directors of the Company, any Subsidiary
or Seller;
|
(l) |
any
Known personal injury on the premises of Company or any Subsidiary
or in
connection with its business that is reasonably likely to give rise
to a
claim in excess of the applicable insurance coverage and applicable
deductible or self-insured
retention;
|
(m) |
any
increase in the compensation payable to or to become payable by Company
or
any Subsidiary to any officer, employee or agent of Company or any
Subsidiary, except for normal compensation adjustments to salaries,
wages
or bonus accruals made in the ordinary course of business consistent
with
past practice;
|
(n) |
any
layoff of employees that could implicate the Worker Adjustment and
Retraining Notification Act or any similar foreign, state or local
Law
(collectively referred to herein as the “WARN
Act”);
|
(o) |
any
payment, other than in the ordinary course of business of Company
or any
Subsidiary consistent with past practice, under any insurance, pension
or
other benefit Plan to, for or with any officer, employee or agent
of
Company or any Subsidiary;
|
(p) |
any
change
in the method of accounting,
financial
or tax practices, methods or principles
by
Company, except as required by GAAP or changes in the Code or other
Law;
|
(q) |
any
conversion of cash deposits into letters of credit; or
|
(r) |
any
agreement, whether in writing or otherwise, to take any action described
in this Section
4.6.
|
15
4.7 Title
to and Condition of Tangible Assets.
Except as disclosed in Section
4.7
of the
Disclosure Schedule, the Company or one of the Subsidiaries has good and
marketable title to or a valid leasehold interest in the assets reflected in
the
Financial Statements and,
without duplication, all Owned Real Property and all Leased Real Property and
used regularly in, and necessary for, the conduct of the business as currently
conducted (the
“Assets”),
free
and clear of any Liens, except Permitted Liens. All of the Assets are in
suitable condition to operate the business of the Company and its Subsidiaries
as currently conducted, except for such conditions which would not result in
Losses, individually or in the aggregate, in excess of $1,000,000. Except
as
disclosed in Section
4.7
of the
Disclosure Schedule, the Company or one of its Subsidiaries owns or has a valid
leasehold interest in all of the assets that are used in, or
that the
Company deems necessary
for, the conduct of the business
of the
Company and its Subsidiaries.
4.8 Real
Property.
(a) |
Section
4.8(a)
of
the Disclosure Schedule sets forth a complete list of all real property
owned by the Company or
the Subsidiary (the
“Owned
Real Property”).
With respect to each such parcel of Owned Real Property: (i) the
Company
has good and marketable title
in fee simple absolute, free and clear of all Liens, except for Permitted
Liens and except as stated in Section
4.8
of
the Disclosure Schedule; (ii) there are no leases, subleases, licenses,
concessions, or other agreements granting to any party or parties
the
right of use or occupancy of any portion of the parcel of the Owned
Real
Property; and (iii) there are no outstanding options or rights of
first
refusal to purchase any parcel of Owned Real Property, or any portion
thereof or interest therein.
Except as set forth on Section
4.8(a)
of
the Disclosure Schedule, neither the Company nor any Subsidiary is
a party
to any agreement or option to purchase any real property or interest
therein.
|
(b) |
The
leases listed in Section
4.8(b)
of
the Disclosure Schedule (the “Real
Property Leases”)
constitute all leases, subleases, licenses,
concessions
and other agreements
(written or oral)
under which the Company uses or occupies or has any right to use
or
occupy, now or in the future, any land,
buildings, structures or other interest in real
property (the “Leased
Real Property”),
including the right to all security deposits and other amounts and
instruments deposited by or on behalf of the Company or the Subsidiary
thereunder. Section
4.8(b)
of
the Disclosure Schedule sets forth the address of each Leased Real
Property. Seller
has heretofore delivered to Buyer true and complete copies of all
Real
Property Leases,
and in the case of any oral Real Property Leases, a written summary
of the
material terms of such oral Real Property Lease.
Except as set forth in Section
4.8(b)
of
the Disclosure Schedule, each of the Real Property Leases is valid,
binding and in full force and effect, and no notice of default or
termination under any Real Property Leases has been received
and, to the Knowledge of Seller, no event has occurred or circumstance
exists which, with the delivery of notice, passage of time or both,
would
constitute such a breach or default, or permit the termination,
modification or acceleration of rent under such Real Property
Lease.
The Company
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16
holds
the Leased Real Property free and clear of all Liens, except Permitted
Liens and except as stated in Section
4.8(b)
of
the Disclosure Schedule. Except as set forth in Section
4.8(b)
of the Disclosure Schedule, with respect to each Real Property Lease
(i)
the sale of the Shares pursuant to this Agreement does not require
the
consent of any other party to such Real Property Lease, will not
result in
a breach of or default under such Real Property Lease, or otherwise
cause
such Real Property Lease to cease to be legal, valid, binding, enforceable
and in full force and effect on identical terms following the Closing;
(ii) the Company’s and each Subsidiary’s, as the case may be, possession
and quiet enjoyment of the Leased Real Property under such Real Property
Lease has not been disturbed in any material respect, and to the
Company’s
Knowledge, there are no disputes with respect to such Real Property
Lease;
(iii) no security deposit or portion thereof deposited with respect
such
Real Property Lease has been applied in respect of a breach or default
under such Real Property Lease which has not been redeposited in
full;
(iv) neither the Company nor the Subsidiary owes, or will owe in
the
future, any brokerage commissions or finder’s fees with respect to such
Real Property Lease; (v) the other party to such Real Property Lease
is
not an Affiliate of, and otherwise does not have any economic interest
in,
the Company or the Subsidiary; (vi) the Company or the Subsidiary
has not
subleased, licensed or otherwise granted any Person the right to
use or
occupy such Leased Real Property or any portion thereof; and (vii)
the
Company or Subsidiary has not collaterally assigned or granted any
other
security interest in such Real Property Lease or any interest
therein.
|
(c) |
The
Owned Real Property identified in Section
4.8(a)
of
the Disclosure Schedule and the Leased Real Property identified in
Section
4.8(b)
of
the Disclosure Schedule (collectively, the “Real
Property”)
comprise all of the real property used or intended to be used in,
or
otherwise related to, the business.
|
4.9 Inventories.
The Inventories included on the Balance Sheet or subsequently acquired and
to be
properly included on the Final Statement are merchantable
and have
been maintained,
with
the exception of a reasonable allowance for spoilage and/or obsolescence that
is
reflected on the Balance Sheet, in the ordinary and usual course of business
of
Company and its Subsidiaries and are of a quality and quantity usable and
saleable in the ordinary and usual course of the business of Company and its
Subsidiaries, and the quantities of each type of inventory (whether raw
materials, work-in-process or finished goods) are not excessive, but are
reasonable, adequate and appropriate for the present operation of Company and
its Subsidiaries. The Inventories included on the Balance Sheet are valued
for
the purposes thereof at the lower of cost or market. No food ingredient,
finished article of food, food packaging or food labeling included in the
Inventories of the Company is adulterated or misbranded within the meaning
of
the Federal Food, Drug and Cosmetic Act or prohibited under the Food, Drug
and
Cosmetic Act from being introduced into interstate commerce.
17
4.10 Insurance.
Section 4.10 of the Disclosure Schedule sets forth the following information
with respect to each insurance policy (including policies providing property,
casualty, comprehensive general liability, and workers’ compensation coverage
and bond and surety arrangements, if applicable) to which the Company or any
Subsidiary is a party, a named insured, or otherwise the beneficiary of coverage
(the “Insurance
Policies”):
(a) |
the
name, address, and telephone number of the
agent;
|
(b) |
the
name of the insurer, the name of the policyholder, and the name of
each
covered insured;
|
(c) |
the
policy number and the period of coverage;
and
|
(d) |
the
general scope (including an indication of whether the coverage was
on a
claims made, occurrence, or other basis) and amount of
coverage.
|
The
Company
has not received notice that it is in breach or default, and,
to the
Knowledge of Seller,
no event
has occurred which, with notice or the lapse of time, is reasonably expected
to
constitute such a breach or default or permit termination, modification, or
acceleration, under the Insurance Policies. To
the
Knowledge of Seller,
no party
to the Insurance Policies has repudiated any provision thereof. Section
4.10
of the
Disclosure Schedule contains a list of all Claims as of September 30, 2006
filed
by or on behalf of Company or any Subsidiary under the Insurance Policies for
insured losses which are pending and have not been disposed of as of the date
indicated. To the Knowledge of Seller, there are no pending claims under any
of
the Insurance Policies as to which any insurer is defending under reservation
of
rights or has denied liability and, to Seller’s Knowledge, there exists no claim
under any such Insurance Policy that has not been properly filed by
Seller,
Company, or a Subsidiary.
4.11 Material
Contracts.
Section
4.11
of the
Disclosure Schedule contains an accurate and complete list of the following
Contracts
to which the Company or a Subsidiary is bound (the “Material
Contracts”):
(a) |
each
Contract relating to the employment by the Company or a Subsidiary
of any
Person (including any contract or commitment to any labor union),
or any
bonus, deferred compensation, pension, severance, profit sharing,
stock
option Plan;
|
(b) |
each
Contract under or pursuant to which the Company or a Subsidiary has
borrowed money or guaranteed Indebtedness for borrowed money, which
will
not be terminated on the Closing
Date;
|
(c) |
each
Contract relating to capital expenditures in excess of $500,000,
to
the extent such Contracts will not be fully performed prior to the
Closing
Date;
|
(d) |
each
loan or advance to, or investment in, any other Person or any Contract
relating to the making of any such loan, advance or
investment;
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18
(e) |
each
guarantee or other contingent liability in respect of any Indebtedness
or
obligation of any other Person (other than the endorsement of negotiable
instruments for collection in the ordinary course of
business);
|
(f) |
each
management service, consulting or any other similar type Contract
in
excess of $100,000;
|
(g) |
each
material supply, distribution, dealer, sales representative, manufacturing
or similar type Contract, that is not cancelable without liability
to the
Company or a Subsidiary on a maximum of thirty (30) days
notice;
|
(h) |
each
license agreement or other arrangement relating to Company Intellectual
Property Rights by
which the Company or a Subsidiary is licensed or authorized to use
by
others or by which the Company or a Subsidiary has licensed or authorized
for use by others;
|
(i) |
other
than as set forth in any Franchise Agreement or Real Property Lease,
any
non-compete agreement or any agreement restricting the conduct of
the
business, including any settlement, co-existence or similar
agreement;
|
(j) |
each
Contract relating to the lease of the Assets, including,
but not limited to, each Real Property Lease;
|
(k) |
any
material service or maintenance agreements or any similar type Contract
necessary to conduct the business of the Company and its Subsidiaries
as
currently conducted;
|
(l) |
any
Contract with Seller or any Affiliate of Seller (other than the Company
and the Subsidiaries), or with any director or officer of the Company,
Seller or any Affiliate of Seller or any Family Members of such
individuals, with
the exception of employment arrangements with Family
Members of directors and officers of the Company, Seller or any Affiliate
of Seller that are at the restaurant level and on terms and conditions
no
more favorable than hourly restaurant employees,
which arrangements are excluded from this Section
4.11(l);
|
(m) |
any
Contract for the future sale of any products
of the Company or any Subsidiary, except in the ordinary course of
business;
|
(n) |
each
Franchise
Agreement or other Contract with any
Franchisee;
|
(o) |
any
partnership or joint venture
agreement;
|
(p) |
any
outstanding power of attorney empowering any Person to act on behalf
of
the Company or any Subsidiary;
or
|
19
(q) |
any
labor
settlement, conciliation or similar agreement imposing any obligations
on
the Company that must be satisfied after the execution date of this
Agreement; or
|
(r) |
any
Contract not entered into in the ordinary course of business that
involves
amounts of $250,000
or
more and is not unilaterally cancelable by the
Company.
|
Except
as
disclosed
in
Section
4.11
of the
Disclosure Schedule, each Material Contract is a
legal,
valid and binding obligation of the Company (or a Subsidiary, as the case may
be) and is in
full
force and effect, and there exists no default or event of default or event,
occurrence, condition or act which, with the giving of notice or the lapse
of
time, or both, is reasonably expected to become a default or event of default
thereunder. Except as disclosed in Section
4.11
of
the
Disclosure Schedule, neither the Company nor any Subsidiary is in material
violation of any of the terms or conditions of any Material Contract. Seller
has
delivered to Buyer a correct and complete copy of each written Material Contract
and a written summary setting forth the terms and conditions of each oral
Material Contract.
4.12 Permits.
Except
as
described
in
Section
4.12
of the
Disclosure Schedule, the Company and each Subsidiary has and maintains all
licenses, permits,
approvals, certificates
and
other authorizations (the
“Permits”)
from
all
such Governmental Authorities as are necessary for the conduct of its business
as currently conducted. Except as described in Section
4.12
of the
Disclosure Schedule:
(a) neither the execution and delivery of this Agreement, nor the consummation
of the transactions contemplated hereunder, will constitute a violation of,
or
conflict with, require
notice to or the consent of any Governmental Authority in order to maintain
any
Permit in full force and effect; (b) all
Permits are in full force and effect and no suspension or cancellation of any
of
them is threatened; and (c) none of the Seller, the Company nor any Subsidiary
has received any notification of any asserted present or past failure to comply
with such Permits that was not fully resolved with no continuing adverse effect
upon the Company.
4.13 Intellectual
Property.
The
Intellectual Property Rights described in Section
4.13
of the
Disclosure Schedule sets
forth a complete list of the following owned or used by the Company (and if
not
owned, the applicable subsection of Section
4.13
of the
Disclosure Schedule contains a reference to the agreement pursuant to which
the
Company has the right to use the Intellectual Property Rights): (i)
registrations and applications for registration of trademarks, service marks,
and trade or corporate names, and any other marks (ii) patents or pending patent
applications, (iii) unregistered trademarks, service marks, and trade or
corporate names, and any other marks that the Company deems material to its
business, (iv) registered copyrights or applications for copyrights and (v)all
computer software (other than mass-marketed or “off-the shelf” software with a
replacement cost and/or annual license fee of less than $10,000) (items (i)
through (v) being referred to as the “Company
Intellectual Property Rights”).
The
Company owns and possesses, free and clear of any Liens, except Permitted Liens,
all right, title and interest in and to, or has the right to use pursuant to
a
valid and enforceable license set forth in Section
4.11
of the
Disclosure Schedule, all Company Intellectual Property Rights. The Company
Intellectual Property Rights constitute all Intellectual Property Rights that
the Company uses in or deems necessary for, the conduct of the business. All
of
the
20
4.14 Litigation.
(a) |
There
is no (i) pending, or, to Seller’s Knowledge, threatened litigation
relating to the Shares; (ii) Claim pending or, to Seller’s Knowledge,
threatened against Seller, nor is Seller in receipt of any inquiry,
notice, citation, investigation or complaint from any Governmental
Authority, which would adversely affect Seller’s ability to perform its
obligations under this Agreement nor does Seller have Knowledge of
any
occurrence or condition that might properly constitute a basis for
such
Claim; or (iii) judgment, order, writ, injunction or decree of any
court
or administrative agency to which Seller is subject that would adversely
affect Seller’s ability to perform its obligations
hereunder.
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21
grounds
to know of any occurrence or condition that might properly constitute
a
basis for such Claim or such inquiry, notice, citation, investigation
or
complaint; (ii) none of the Company or its Subsidiaries is subject
to any
judgment, order, writ, injunction or decree of any court or administrative
agency; and (iii) to Seller’s Knowledge, there is no event or series of
related events which has occurred or condition which is in existence
of
any kind or character pertaining to the business or assets of Company
or
its Subsidiaries that might, individually or in the aggregate, result
in
Losses to the company or its Subsidiaries in excess of
$100,000.
|
4.15 Environment,
Health, and Safety.
(a) |
Except
as set forth in Section
4.15(a)
of
the Disclosure Schedule: (i) the Company has not engaged in or permitted
any operations or activities upon, or any use or occupancy of, the
Owned
Real Property or Leased Real Property or any portion thereof or any
property or facility previously owned or leased by the Company for
the
purpose of or the handling, manufacture, treatment, storage, use,
generation, release, discharge, refining, dumping or disposal of
any
Hazardous Materials (whether legal or illegal, accidental or intentional,
excluding de minimis quantities of Hazardous Materials that are commonly
used in connection with the Company’s business and which were used and
disposed of in accordance with Environmental Laws
and were not released to the environment
so
as to give rise to Liability under Environmental Laws) on, under,
in or
about any such property or transported any Hazardous Materials to,
from or
across any such property; (ii) no Hazardous Materials have migrated
from
any Owned Real Property or Leased Real Property upon or beneath other
properties, and no Hazardous Materials have migrated from other properties
upon, about or beneath any Owned Real Property or Leased Real
Property,
in either case, in a manner so as to give rise to Liability under
Environmental Laws, (iii) no Hazardous Materials are present on,
under, in or about any of the Owned Real Property or Leased Real
Property
excluding such quantities of Hazardous Material commonly used in
connection with the Company’s business. and that are present in accordance
with, and do not give rise to Liabilities under, Environmental Laws
and
(iv) the Company has not exposed any Person to any Hazardous
Materials so as to give rise to Liability under Environmental
Laws.
|
(b) |
Except
as set forth in Section
4.15(b)
of
the Disclosure Schedule: (i) the Company, the Owned Real Property
and the
Leased Real Property have at all times complied in all respects (except
for any past non-compliance that was fully remediated or resolved)
and are
in compliance with, in all respects, all Environmental Laws, which
compliance has included obtaining and complying at all times, in
all
respects, with all Permits, required pursuant to Environmental Laws,
except for such non-compliance as would not result in Losses, individually
or in the aggregate, in excess of $250,000, and
no activity on or condition of the Owned Real Property or
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22
Leased
Real Property constitutes a nuisance or a tortious condition with
respect
to any third party; and (ii) the Company is not required to take
any
remedial action related to any such property or make any capital
improvements, individually or in the aggregate, in excess of $250,000
in
order to place such property or the improvements located thereon
in
compliance with such Environmental Laws.
|
(c) |
Notice
of Violations.
(i) The Company has not received notice or other communication
concerning nor
does it have
any Knowledge of (A) any violation or alleged violation of Environmental
Laws relating to the Owned Real Property or Leased Real Property
or
properties previously owned or leased by the Company or (B) any
Liability
or alleged
Liability under Environmental Laws relating to the Owned Real Property
or
Leased Real Property or properties previously-owned or leased by
the
Company, and, to Seller’s Knowledge, there exists no basis for any Claim
related to either (A) or (B) being instituted or filed; (ii) no writ,
injunction, decree, order or judgment related to the foregoing is
outstanding; and (iii) the Company has not been ordered or requested
by any Governmental Authority to take any step to remedy any condition
on
any such property.
|
(d) |
Potentially
Responsible Party.
Neither the Environmental Protection Agency nor any other
Governmental Authority has identified the Company as a “potentially
responsible party” or notified the Company that it may in the future
identify the Company as a “potentially responsible party” pursuant to the
Comprehensive Environmental Response, Compensation and Liability
Act of
1980, as amended (CERCLA) or any other similar Environmental
Law.
|
(e) |
The
Company has no responsibility for or liability with respect to any
of the
following at any Owned Real Property or Leased Real Property: 1)
underground storage tanks; 2) confirmed friable asbestos-containing
materials; 3) materials or equipment containing confirmed polychlorinated
biphenyls; or 4) public landfills.
|
(f) |
Neither
the Company nor, with respect to the Company, Seller has, either
expressly
or by operation of law, assumed or undertaken any liability, including
any
obligation for corrective or remedial action, of any other Person
relating
to Environmental Laws.
|
(g) |
The
Company has furnished Buyer all environmental audits, assessments
and
reports and all other documents bearing on Liabilities
under Environmental Laws, in each case relating to its or its affiliates
or predecessors past or current properties, facilities or operations
which
are in its possession or under its reasonable
control.
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23
(h) |
This
Section
4.15
contains the sole and exclusive representations and warranties of
Seller
with respect to the Company’s compliance with Environmental
Laws.
|
4.16 Legal
Compliance.
To the Knowledge of Seller:
(a) |
Each
of the Company and the Subsidiaries is in compliance in
all respects with
all Laws,
and no unresolved charge, complaint, action, suit, proceeding, hearing,
investigation, Claim, demand, or notice has been filed or commenced
against the Company or a Subsidiary alleging any failure to comply
with
any Laws except as would not result in Losses, individually or in
the
aggregate, in excess of $250,000.
|
(b) |
Each
of the Company and the Subsidiaries has filed in a timely manner
all
reports, documents, and other materials it was required to file under
all
applicable Laws, except where such failure to file in a timely manner
would not be material and adverse to the Company.
|
(c) |
Each
of the Company and the Subsidiaries has possession of all records
and
documents it is required to retain under all applicable Laws, except
where
such failure to possess would not be material and adverse to the
Company.
|
4.17 Employee
Benefit Plans.
(a) |
Section
4.17
of
the Disclosure Schedule is a true, correct, and complete list of
all the
employee benefit plans (within the meaning of Section 3(3) of the
Employee
Retirement Income Security Act of 1974, as amended (“ERISA”)),
and any other plan,
arrangement
or
Contract providing deferred or incentive compensation, or health,
life or
other welfare or fringe benefits to employees, consultants or directors
maintained or contributed to by the Company or
its Subsidiaries or with respect to which the Company or any of its
Subsidiaries has any Liability(each
such employee benefit plan or Contract being herein referred to as
a
“Plan”).
None of the Company,
any of its Subsidiaries or any entity treated as a single employer with
the Company or any of its Subsidiaries pursuant to Section 414 of
the Code
(each, an “ERISA
Affiliate”)
maintains, contributes to or has any Liability with respect to (including
any withdrawal liability as defined in Section 4201 of ERISA)
a
“multi-employer plan” within the meaning of Section 3(37) of ERISA or a
defined benefit plan within the meaning of Section 3(35) of ERISA.
Seller
has heretofore delivered to Buyer true, correct and complete copies
of (i)
each Plan (including all Plan amendments); (ii) the most recent summary
plan description for each Plan; (iii) the three most recent Form
5500-series annual reports (with attachments); (iv) the most recent
IRS
determination or favorable opinion letters (if applicable), and
(v) all
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24
related
trust agreements, insurance contracts and other funding arrangements
that
implement each Plan.
|
(b) |
None
of the Company, its Subsidiaries or any employee, officer or director
of
the Company or its Subsidiaries who is a “disqualified person” within the
meaning of Section 4975 of the Code has engaged in any transaction
in
connection with which the
Company or any Subsidiary
could be subject to either a civil penalty assessed pursuant to Section
502(i) of ERISA, or a tax imposed by Section 4975 of the Code
and, to the Company’s Knowledge, no other disqualified person has engaged
in such a transaction.
|
(c) |
Full
payment has been made of all amounts that the Company is required
under
the terms of each Plan and applicable Law to have paid as contributions
or
premium payments with respect to such Plan for all periods ending
prior to
the date hereof and
all amounts that the Company is not yet required
under the terms of each Plan and
applicable Law to
have paid as contributions or
premium payments with respect to such Plan have been properly accrued
in
accordance with GAAP.
|
(d) |
No
“fiduciary”
within the meaning of Section 3(21)
of ERISA that is either the Company, a Subsidiary or any of their
respective officers or directors or, to the Knowledge of the Company,
any
other fiduciary, has any liability for breach of fiduciary duty with
respect to any acts or omissions related to the investment of the
assets
or administration of any Plan. No action, suit, proceeding, hearing,
audit
or investigation with respect to the administration or the investment
of
the assets of any Plan (other than routine claims for benefits) is
pending, or to Seller’s Knowledge,
threatened.
|
(e) |
Each
Plan has been maintained, funded and administered in accordance with
the
terms of such Plan and the terms of any applicable collective bargaining
agreement and complies in form and in operation in all material respects
with the applicable requirements of ERISA, the Code and other applicable
Law.
|
(f) |
Neither
the Company nor any Subsidiary maintains, contributes to or has any
Liability with respect to any welfare benefit plan providing health
or
life insurance or other welfare-type benefits for current or future
retired or terminated directors, officers or employees (or for any
spouse
or dependents thereof) of the Company or any of its Subsidiaries,
other
than in accordance with Section 4980B of the Code (“COBRA”).
The Company, its Subsidiaries and each ERISA Affiliate have complied
in
all material respects with the requirements of
COBRA.
|
(g) |
Any
Plan intended to meet the requirements of a qualified plan under
Section
401(a) has received a determination from the Internal Revenue
|
25
Service
that such Plan is so qualified and, to Seller’s Knowledge of the Company,
nothing has occurred since the date of such determination that could
adversely affect the qualified status of any such
Plan.
|
(h) |
Except
as described in Section
4.17(h)
of
the Disclosure Schedule, the execution of, and performance of the
transactions contemplated in, this Agreement will not result in any
payment by the Company (whether of severance pay or otherwise),
acceleration, forgiveness of indebtedness, vesting, distribution,
increase
in benefits or obligation to fund benefits with respect to any employee,
officer or director of the Company.
|
4.18 Labor
and Employment
Matters.
Except as disclosed in Section
4.18
of the
Disclosure Schedule, each of the Company and the Subsidiaries is in material
compliance with all federal and state Laws respecting employment and employment
practices, including
terms
and
conditions of employment, collective
bargaining, wages
and
hours, layoffs,
immigration, workplace safety, and the collection and payment of employment
taxes. The Company is
not
engaged in any unfair labor practice, and, except as disclosed in Section
4.18
of the
Disclosure Schedule, there is no charge pending or, to the Knowledge of Seller,
threatened against the Company or any Subsidiary alleging unlawful
discrimination in employment practices before any court or agency. There is
no
(i) charge of or proceeding with regard to any unfair labor practice against
the
Company or any Subsidiary pending before the National Labor Relations Board;
(ii) labor strike, dispute, slow-down or work stoppage pending or threatened
against or involving the Company or any Subsidiary; (iii) representation
question respecting the employees of the Company or any Subsidiary and,
to
the Company’s Knowledge, no union organizing activity is underway or
threatened;
(iv)
grievance or arbitration proceeding arising out of or under any collective
bargaining agreement pending against the Company or any Subsidiary; or (v)
collective bargaining agreement covering any employee of the Company or a
Subsidiary or currently being negotiated by the Company or a
Subsidiary.
4.19 Taxes.
(a) |
Each
of the Company and the Subsidiaries has filed or obtained timely
extensions to file all Tax Returns which are required to be filed
prior to
the date of this Agreement, and such filed returns were prepared
in material compliance with all applicable laws and were true,
complete and correct in all material respects. Each of the Company
and its
Subsidiaries has paid all Taxes and other charges due or claimed
to be due
(whether or not requiring the filing of a return
and whether or not shown as due on any Tax Return)
to the extent that such Taxes are due prior to the date of this Agreement.
The Tax Returns filed reflected all Taxes due and payable by Company
and
its Subsidiaries with respect to the periods covered thereby and
the
Company and its Subsidiaries have no material unrecorded liabilities
for
Taxes with respect to such periods.
The Company and each Subsidiary has complied in all material respects
with
all applicable laws relating to the withholding of Taxes.
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26
(b) |
Each
of the Company and the Subsidiaries is a member of the affiliated
group
(as defined in Section 1504 of the Code) of which Seller is the common
parent. Seller has included or will include Company in its consolidated
federal income Tax Return for the taxable years ended July 29, 2005,
July 28, 2006 and for the taxable year of Seller that includes the
Closing Date, and Seller has included Company in its consolidated,
combined or unitary Tax Returns relating to state Taxes as set forth
in
Section
4.19(b)
of
the Disclosure Schedule. Section
4.19(b)
of
the Disclosure Schedule describes all currently outstanding extension
requests with respect to any Tax Return filed by or on behalf the
Company
and its Subsidiaries.
|
(c) |
None
of the Seller, the
Company or a Subsidiary has received written notice from any Governmental
Authority in a jurisdiction in which Company or a Subsidiary does
not file
a Tax Return stating that it is subject to taxation by,
or required to file any Tax Return in, that jurisdiction. None of
the
Seller, the Company or a Subsidiary maintains an office or agency
in any
state in which the Company or the Subsidiaries do not file Tax Returns,
which office or agency is authorized to approve contracts on behalf
of the
Company. None of the Company
or a Subsidiary is required to file any Tax Return in any jurisdiction
outside the United States and is not the tax matters partner of any
partnership.
|
(d) |
The
amounts accrued as liabilities for Taxes on the books of Company
and
reflected on the Balance Sheet are adequate to satisfy all unpaid
liabilities for Taxes of Company through the Balance Sheet Date.
There is
no agreement, waiver or other document extending, or having the effect
of
extending, the period for assessment or collection of any Taxes of
Company, which extension or waiver is still in effect. Except
as set forth in Section
4.19(d)
of
the Disclosure Schedule, none
of the Seller (with respect to any issue relating to the Company),
the
Company, or the Subsidiary is currently the subject of a pending
Tax audit
or examination nor there is any material action, suit, proceeding,
investigation, audit, claim or assessment pending or, to the Knowledge
of
Seller, threatened, with respect to any liability for Tax, or has
received
from any taxing authority any written notice of proposed adjustment,
deficiency, underpayment of Taxes which has not been satisfied by
payment
or been withdrawn. Seller
has delivered to Buyer correct and complete copies of all examination
reports, statements or deficiencies and similar documents prepared
by any
Tax authority that relate to the income, operations or business of
Company
with respect to any period ending on or after February 15, 1999.
There
were no final adjustments made by the Internal Revenue Service affecting
the Company with respect to any federal Tax Return of Company (or
which
includes Company); therefore, none was required by law to be reported
to
any state Tax authorities.
|
27
(e) |
Company
is not a party to any Tax sharing or allocation agreement with any
entity.
Company (i) has not been a member of affiliated group filing a
consolidated federal Tax Return other than the affiliated group of
which
Seller is the common parent and (ii) has no liability for Taxes of
any
Person other than as a member of Seller’s consolidated group under
Treasury Regulation §1.1502-6
or any similar provision of state law, or as a transferee or successor,
by
contract or otherwise.
|
(f) |
The
pricing of inter-company transactions between the Company, the Seller
or
any Subsidiary satisfies, in all material respects, the arm’s length
standards of Section 482 and the Treasury Regulations
thereunder.
|
(g) |
There
is no Contract covering any Person that, individually or collectively,
could give rise to the payment of any amount that would not be deductible
by the Company by reason of Section 280G of the Code.
|
4.20 Accounts
Receivable.
The amount of all Accounts Receivable recorded in the Financial Statements
of
the Company as being due as of the Closing Date, are to the Knowledge of Seller,
collectible in the ordinary course of business in full in accordance with their
terms, subject only to the reserves for bad debts and accruals and reserves
for
discounts, trade promotions and other allowances set forth on the
face
of the Balance Sheet, as adjusted for the passage of time through the Closing
Date in accordance with GAAP
and
with past
custom and practice.
4.21 Suppliers.
To the Knowledge of Seller, no material supplier of the Company has
notified the Company that it intends to discontinue or reduce significantly
its
business with the Company whether as a result of this Agreement or
otherwise.
4.22 Compensation
of Employees.
Section
4.22
of the
Disclosure Schedule is an accurate and complete list of the names and annual
salaries of all Persons employed by the Company as of October 15, 2006 at an
annual salary of $100,000 or more.
4.23 Accounts
Payable.
Since the Balance Sheet Date, the Company has satisfied, paid and
discharged all of its current Accounts Payable and other current liabilities
in
a timely manner and in accordance with their respective terms of payment, except
(i) for current Accounts Payable which are not yet delinquent, and (ii) Accounts
Payable that are the subject of any bona fide dispute. There is no dispute
in
excess of $100,000
with
respect to any Account Payable that currently is unresolved.
4.24 Consents.
Section
4.24
of the
Disclosure Schedule sets forth a true, correct and complete list of the
identities of any Persons or Governmental Authorities whose consent or approval
is required in connection with consummation of the transactions contemplated
hereunder (the “Consents”).
4.25 Transactions
with Affiliates.
None of the Seller, any Affiliate of the Seller (other than the Company
and its Subsidiaries), any directors or officers of such persons or any Family
Members of such directors and officers owns any property or right, tangible
or
intangible, which is used in the business of the Company or the
Subsidiary.
28
4.26 Franchise
Matters.
(a) |
Section
1.38
of
the Disclosure Schedule accurately identifies all Franchise Agreements
to
which the Company is a party that are currently in effect. The
consummation of the transactions contemplated by this Agreement will
not
require the consent of any
Franchisee.
|
(b) |
With
respect to each Franchise
Agreement:
|
(i)
neither
the Company nor any Franchisee, since January 1, 2002, has delivered a written
demand for early termination of any
Franchise
Agreement;
(ii) the
Company has not granted a waiver or consent with respect to a provision of
any
Franchise Agreement
regarding a
Franchisee’s obligation to make any monetary payments required by a Franchise
Agreement and,
since January 1, 2002, the Company has not
entered into any written forbearance agreements, settlement agreements, general
releases, cancellation agreements, termination agreements
with respect to the obligations of a Franchisee under any Franchise Agreement
or
any purchase agreement for the reacquisition of any
restaurants operated by a Franchisee.
(iii) the
Company has in its possession an original executed copy or an exact photocopy
of
each Franchise Agreement. A true,
complete and accurate copy of each Franchise Agreements has been delivered
to
the Buyer. Since January 1, 2002, no Franchise Agreement
has been transferred or sold by a Franchisee.
(c) |
Section
4.26(c)
of
the Disclosure Schedule sets forth each state or other jurisdiction
in
which Company: (i) since January 1, 2002, has filed, or caused to be
filed, applications for registration of the sale of franchises and/or
applications or notices of exemption from such registration and the
date
of registration or the grant of exemption; and (ii) is currently
registered to sell franchises, together with the effective date and
expiration date of any such registration or
exemption.
|
(d) |
To
Seller’s Knowledge, since January 1, 2002, the Company has made all
disclosures in its franchise offering circulars required by all applicable
federal and state laws and regulations which govern the sale of
franchises, and neither Company nor any of its employees or agents
have
offered for sale, accepted an offer, or sold a franchise except in
compliance in all material respects with all applicable federal and
state
laws and regulations which govern the sale of
franchises.
|
(e) |
Except
as set forth in the Franchise Agreements, no Franchisee has a protected
territory, exclusive territory, covenant not to compete, right of
first
refusal, option or other arrangement with respect to the operation
or
|
29
development
of “Xxxxx’x Roadhouse”® restaurants (collectively, the “Territorial
Rights”) with Company. No Franchisee’s Territorial Rights conflict
with the Territorial Rights of any other Franchisee. The Company
has
complied with each Franchisee’s Territorial
Rights.
|
5. |
REPRESENTATIONS
AND WARRANTIES OF BUYER. Buyer
represents and warrants to Seller that the statements contained in
this
Section
5
are true, correct and
complete.
|
5.1 Organization
and Standing of Buyer.
Buyer is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation. Buyer has
all
requisite power, authority and capacity to execute and deliver this Agreement
and all other agreements, documents and instruments contemplated hereby and
to
carry out all actions required of it pursuant to the terms of this
Agreement.
5.2 Corporate
Approval; Binding Effect.
Buyer has obtained all necessary authorizations and approvals from its board
of
directors and stockholders required for the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby. This
Agreement has been duly executed and delivered by Buyer and constitutes the
legal, valid and binding obligation of Buyer, enforceable against Buyer in
accordance with its terms, except that enforceability thereof may be limited
by
bankruptcy, insolvency, reorganization or other similar laws affecting
creditor’s rights generally and by principles of equity.
5.3 Non-Contravention.
Neither the execution and delivery of this Agreement by Buyer nor the
consummation by Buyer of the transactions contemplated hereby will constitute
a
violation of, or be in conflict with, constitute or create a default under,
or
result in the creation or imposition of any lien, security interest or other
encumbrance upon any property of Buyer pursuant to (a) the charter documents
or
by-laws of Buyer, each as amended to date; (b) any agreement or commitment
to
which Buyer is a party or by which Buyer or any of its properties is bound
or to
which Buyer or any of its properties is subject; or (c) except for compliance
with the HSR Act, any statute or any judgment, decree, order, regulation or
rule
of any court or Governmental Authority, except,
in the
case of (c),
where
the violation, conflict, default, lien, security interest or other encumbrance
would not be material and adverse to the Buyer.
5.4 Independent
Evaluation.
Buyer is an experienced and knowledgeable investor with respect to the business
of the Company and the business of owning and operating assets of the type
owned
and operated by the Company. Buyer has had an opportunity to ask questions
of
and receive answers from the Company regarding the Company and its respective
business, assets, results of operations, and financial condition and has had
access to the assets of the Company, the officers and the books, records, and
files of the Company relating to its assets, operations and financial condition.
In making the decision to enter into this Agreement and to consummate the
transactions contemplated hereunder, Buyer has relied solely on (i) its own
independent due diligence investigation and evaluation of the assets, operations
and financial condition of the Company, including through the examination of
documents and records made available to Buyer by Seller, and (ii) the
representations and warranties made by Seller in this Agreement.
Except
as set forth in clause (ii) of the preceding sentence, Buyer
has been
advised by and has relied solely on its own expertise and legal, tax, and other
professional counsel
30
5.5 Sufficient
Funds.
Buyer has
obtained the debt commitments for financing set forth in the commitment letters
of Wachovia Bank National Association and Canpartners Investments IV, LLC,
addressed to Buyer and each dated October 27, 2006 and October 29, 2006,
respectively (the “Commitment Letters”). Each of the Commitment Letters is in
full force and effect as of the date hereof. Together with the proceeds of
such
debt financing, Buyer will
have
adequate funds available to it as may be necessary to pay the Purchase Price,
at
the Closing.
5.6 Securities
Matters.
(a) |
Buyer
recognizes the highly speculative nature of an investment in the
Shares.
|
(b) |
Buyer
is an “accredited investor” as that term is defined in Rule 506 of
Regulation D promulgated under the Securities Act of
1933.
|
(c) |
Buyer
has sufficient knowledge and experience in financial and business
matters
that Buyer is capable of evaluating the merits and risks of an investment
in the Shares. Buyer and such Affiliates have made other investments
and,
by reason of their respective business and financial experience (and
the
collective experience of their agents and employees), have acquired
the
capacity to protect Buyer’s interests in investments of this nature. In
reaching the conclusion that Buyer wishes to acquire the Shares,
Buyer has
carefully evaluated Buyer’s financial resources and investment position
and the risks associated with this investment in the Shares and believes
that Buyer will be able to bear the economic risks of this investment
in
the Shares and will have no need for liquidity from this investment
in the
Shares.
|
(d) |
Buyer
will acquire the Shares for Buyer’s own account for investment and not
with a view to, or for resale in connection with, any distribution
of the
Shares within the meaning of the Securities Act of 1933.
|
(e) |
Buyer
recognizes that this investment in the Shares involves certain risks,
and
Buyer has taken full cognizance of and understands such
risks.
|
(f) |
All
information that Buyer has provided to Seller or Company concerning
the
financial position of Buyer is
correct and complete in all material
respects.
|
(g) |
In
connection with Buyer’s purchase of the Shares: (a) Buyer has been fully
informed as to the circumstances under which Buyer is required to
take and
hold the Shares pursuant to the requirements of the Securities Act
|
31
of
1933 and any applicable state securities or “Blue Sky” laws; and (b) Buyer
has been informed by Seller that the Shares are not registered under
the
Securities Act of 1933 and may not be transferred, assigned or otherwise
disposed of unless the Shares are subsequently registered under the
Securities Act of 1933 or an exemption from such registration is
available.
|
(h) |
Buyer
understands that the Shares may not be sold, assigned or transferred
unless: (a) such sale, assignment or transfer is exempt from registration
under the Securities Act of 1933 and any applicable state securities
or
“Blue Sky” laws; or (b) a registration statement covering the Shares is
effective under the Securities Act of
1933.
|
(i) |
Seller
and Buyer acknowledge and agree that the representations, warranties,
covenants and agreements of Seller contained in this Agreement shall
not
be affected or diminished in any way by any investigation by Buyer
or by
virtue of any representation or warranty of Buyer contained in this
Section
5.6.
|
6. |
COVENANTS.
Seller covenants and agrees that, from and after the date of this
Agreement and until the Closing, except as otherwise specifically
consented to or approved by Buyer in
writing:
|
6.1 Reasonable
Access;
Cooperation. The
Seller shall cause the Company to afford to Buyer and its authorized
representatives and
financing sources
reasonable
access during normal business hours to the
Owned
Real Property and the Leased Real Property and to the Company’s accountants and
all properties,
books,
records, Contracts and documents of the Company and, subject to the Seller’s
prior consent in each case, a reasonable opportunity to communicate with
the
Company’s suppliers, vendors and key employees at such times and locations as
determined by the Company. The
Seller will cause the Company and each of the officers of the Company and the
Subsidiary to furnish Buyer with such financial and operating data and other
information with respect to the business and properties of the Company and
the
Subsidiary as Buyer may from time to time reasonably request. Subject to
Section
9.1
of this
Agreement, all of such information shall be treated as “Confidential
Information” pursuant to the terms of the Confidentiality Agreement, dated July
6, 2006. The Seller shall cause the Company and each of the Company’s officers
and employees and use reasonable efforts to cause its advisors, auditors and
agents to, provide reasonable cooperation and assistance reasonably requested
by
Buyer in connection with the financing of the transactions contemplated by
this
Agreement, including using their respective reasonable efforts to cause
appropriate officers and employees to be available to meet with prospective
lenders and investors in presentations, to execute and deliver any pledge and
security documents, other definitive financing documents, or other certificates
or documents as may be reasonably requested by Buyer.
6.2 Properties.
(a) |
The
Seller shall cause the Company to maintain its Owned Real Property
and
Leased Real Property in operating condition and repair, and make
all
|
32
necessary
repairs, renewals,
additions and replacements thereto, and shall carry on its businesses
substantially in the same manner as heretofore; provided, however,
that is
understood and agreed that those changes or dispositions set forth
in
Section
6.2(a)
of
the Disclosure Schedule have been disclosed to Buyer and shall not
be a
breach of this Section
6.2.
The Seller shall cause the Company to continue to make its budgeted
capital expenditures as set forth on Section
6.2(a)
of
the Disclosure Schedule.
|
(b) |
The
Company shall, at Buyer’s sole cost and expense, assist Buyer in obtaining
(i) a title insurance policy for each Leased Real Property identified
by
Buyer (the “Material
Leased Real Property”),
(ii) a survey for each Material Leased Real Property and (iii) any
lien
waivers, estoppels, affidavits, memorandum of leases or other documents
reasonably required by the Buyer’s lender or a title
company.
|
6.3 Preservation
of Organization and Relationships with Customers and Vendors.
The Seller shall cause the Company to use its commercially reasonable efforts
to
preserve its business organization intact, to keep available to Buyer the
present employees of the Company and to preserve for Buyer the present
relationships of the Company with its suppliers and customers and others having
business relations with it.
6.4 Consents
of Third Parties.
Seller shall and shall cause the Company to employ their
commercially reasonable efforts to secure before the Closing Date the consent
to
the consummation of the transactions contemplated by this Agreement, of and
by
each party set forth in Section
4.24
of the
Disclosure Schedule.
6.5 Filings.
The Seller shall cause the Company to make all filings and give all
notices required to be made by the Company under Law or under any Material
Contract in connection with the transactions contemplated
hereunder.
6.6 Books
and Records.
The Seller shall cause the Company to continue to maintain its books and records
on a basis consistent in all material respects with past practice, and in any
event in a commercially reasonable manner.
6.7 Maintain
Assets.
The Seller shall cause the Company to maintain its Assets in substantially
the same working order,
condition
and
repair as
at
present, ordinary wear and tear excepted, in all material respects and shall
cause the Company not to sell, lease, encumber or otherwise dispose of, or
agree
to sell, lease, encumber or otherwise dispose of any portion of its Assets,
other than Inventories and other assets in the ordinary course of business
consistent with past practice and the Sale-Leaseback.
6.8 Employees.
The Seller shall cause the Company (i) not increase or agree to increase the
compensation payable or to become payable to any of its directors, officers
or
employees, other than increases in employee compensation in the ordinary course
of business consistent with past practice and those increases that are required
by any existing collective bargaining or other existing
and disclosed agreement,
if any; (ii) not enter into
or
modify any
employment, severance, loan, deferred compensation or other similar agreement
with any
33
6.9 Insurance
Policies.
The Seller shall and shall cause the Company to use commercially reasonable
efforts to keep in full force and effect present Insurance Policies or other
comparable insurance coverage and pay all premiums due in respect thereof.
The
Seller shall provide Buyer all prior insurance policies and policy information
for any period during which the Company’s liability was covered by a policy of
the Seller in the event that a claim is reported that would implicate coverage
under any such policy.
6.10 Advice
of Change.
Seller will promptly advise Buyer in writing of any material adverse change
in
the condition of the Company’s business or any of the Assets.
6.11 No
Changes Prior to Closing Date.
Except as expressly contemplated hereunder, the Seller shall cause the
Company not to:
(a) |
incur
any Indebtedness for borrowed money, assume, guarantee, endorse or
otherwise become responsible for obligations of any other individual,
partnership, firm or corporation, or make any loans or advances to
any
individual, partnership, firm or corporation, except in the ordinary
course of business and consistent with past
practice;
|
(b) |
issue
any shares of its capital stock or any other securities or any securities
convertible into shares of its capital stock or any other
securities;
|
(c) |
pay,
or incur any obligation to pay, any dividend on its capital stock
or make,
or incur any obligation to make, any distribution with respect to
its
capital stock or redeem, repurchase or otherwise acquire any of its
capital stock, except as may be necessary to distribute to Seller
the net
cash proceeds (i.e.,
after deducting Sale-Leaseback transaction costs paid by the Company
from
the gross proceeds) of the Sale-Leaseback and/or to distribute to
Seller
(or an Affiliate of Seller) any Excluded Property; provided, however,
that
to the extent that Buyer has exercised its rights under Section 8.10
to
increase the Purchase Price, the Excluded Properties associated with
the
increase in Purchase Price shall be retained by the Company and not
transferred to Seller;
|
(d) |
make
any change to its charter or
by-laws;
|
(e) |
sell,
transfer or otherwise dispose of the Assets or cancel, release or
assign
any Indebtedness owed to it or any Claims held by it (except in the
ordinary course of business and consistent with past practice) or
mortgage, pledge or otherwise encumber any of its Assets, other than
offsets of
|
34
intercompany
receivables against intercompany payables, and other sales, transfers
and
dispositions made in the ordinary course of
business;
|
(f) |
make
any investment of a capital nature either by purchase of stock or
securities, contributions to capital, property transfer or otherwise,
or
by the purchase of any material
property
or assets of any other individual, partnership, firm or
corporation,
except as set forth in Schedule
6.2(a);
|
(g) |
enter
into,
amend,
or
terminate
(or not renew) or permit to expire any
Material Contract, or make any material change in any of its Material
Contracts, except in the ordinary course of
business;
|
(h) |
make
or grant to any of its employees any bonus, wage or salary, increase,
stock option or any other form of added compensation or gift, the
timing
or amount of which is not in the ordinary course of
business;
|
(i) |
change
any of its accounting methods or procedures except as required by
GAAP or
Law;
|
(j) |
make
a revaluation of any of its assets or liabilities, including any
write-offs, increases or decreases in any reserves or any write-up
of the
value of inventory, property, plant, equipment or any other asset
except
as required by GAAP or Law;
|
(k) |
except
as required by the Code, make a material change in Tax methods, material
Tax elections or amendments or revocation thereof, or settled or
compromised any material Tax dispute with respect to the
Company;
|
(l) |
transfer,
assign, license, abandon, fail to maintain or otherwise dispose of
any
Company Intellectual Property Rights, except in the ordinary course
of
business;
|
(m) |
take
any action (or fail to take any action) that could reasonably be
expected
to result in the loss, lapse, abandonment, invalidity or unenforceability
of any Company Intellectual Property Rights,
except, with respect to Company Intellectual Property Rights that
are not
material to the Company’s business in the ordinary course of business;
|
(n) |
convert
any cash deposits into letters of credit;
|
(o) |
enter
into any commitment (contingent or otherwise) to do any of the
foregoing;
or
|
(p) |
do
any other act which would cause any representation or warranty of
Seller
in this Agreement to be or become untrue in any material
respect.
|
6.12 Buyer’s
Financing.
The Buyer will use reasonable best efforts to satisfy the conditions to
receipt of the financing contemplated by the Commitment Letters.
35
6.13 Sale-Leaseback.
The Seller will and will cause the Company to use reasonable best efforts to
satisfy the conditions to receipt of proceeds under the Sale-Leaseback and,
if
the Closing occurs, will or will cause one of its Affiliates to lease to the
Company any Excluded Property on the same terms and conditions as the
Sale-Leaseback. Notwithstanding the foregoing, Buyer is free to negotiate an
alternative sale/leaseback transaction (such transaction, an "Alternative
Sale/Leaseback"),
so
long as (i) the terms and conditions of such transaction are at least as
favorable or more favorable to Seller and (ii) the Alternative Sale/Leaseback
does not create a delay in the Closing. Upon Buyer’s request and upon payment by
Buyer, if and when required, of the Termination Fee and associated costs
required to be paid under the Sale-Leaseback Documents, Seller shall cause
the
Company to terminate the Sale-Leaseback and execute documents setting forth
the
Alternative Sale/Leaseback (the “Alternative Sale/Leaseback Documents”). In that
event, the Seller will and will cause the Company to use reasonable best efforts
to satisfy the conditions to receipt of proceeds under the Alternative
Sale/Leaseback.
6.14
Replacement
Awards.
If
requested by Buyer, Seller shall, and shall cause the Company to, amend the
Replacement Awards to the mutual satisfaction of Seller, Buyer and the
applicable employee.
7. |
CONDITIONS
PRECEDENT TO BUYER’S OBLIGATIONS. The
obligation of Buyer to consummate the Closing shall be subject to
the
satisfaction at or prior to the Closing of each of the following
conditions (to the extent noncompliance is not waived in writing
by
Buyer):
|
7.1 Representations
and Warranties True at Closing.
The representations and warranties made by Seller in this Agreement shall
be true and correct in all material respects at and as of the Closing Date
with
the same effect as if made at and as of such date,
except
to the extent that such representations are qualified by the term “material”, or
contain terms such as “Material Adverse Effect”, in which case such
representations and warranties shall be true and correct in all
respects.
7.2 Compliance
with Agreement.
Seller shall have performed and complied with, in all material respects, all
of
its agreements, covenants and conditions required by this Agreement to be
performed or complied with by it on or prior to the Closing Date.
7.3 No
Material Adverse Effect.
There shall not have occurred a Material Adverse Effect.
7.4 No
Litigation.
No third party action, suit or proceeding shall be pending or threatened
before any Governmental Authority in which it will be or is sought to restrain
or prohibit or obtain damages or other relief in connection with this Agreement
or the consummation of the transactions contemplated hereunder.
7.5 Closing
Certificate.
Seller shall have delivered to Buyer in writing, at and as of the Closing,
a
certificate in form and substance reasonably satisfactory to Buyer and Buyer’s
counsel certifying that the conditions in each of Sections
7.1,
7.2,
7.3
and
7.4
have
been
satisfied.
7.6 Certificate
Evidencing the Shares.
Seller shall have delivered to Buyer, at and as of the Closing, the
certificate(s) evidencing the Shares, and such instruments or documents
36
7.7 Certified
Resolutions.
Seller shall deliver a certificate of a duly authorized representative of
Seller, dated the Closing Date, setting forth resolutions of the board of
directors of Seller authorizing the execution and delivery of this Agreement
and
the consummation of the transactions contemplated hereunder, and certifying
that
such authorizations were duly adopted and are in full force and effect and
have
not been rescinded or amended as of the Closing Date.
7.8 Incumbency
Certificate.
Seller shall have delivered to Buyer a certificate of a duly authorized
representative of Seller attesting to the incumbency and signature of each
officer of the Seller who executed this Agreement or any other material
documents related to the transactions contemplated hereby.
7.9 Certificate
of Good Standing.
Seller shall have delivered to Buyer a certificate of existence and good
standing of Seller and the Company from the Secretary of State of the State
of
Tennessee and with respect to the Company and each Subsidiary, from the
Secretary of State of such other jurisdictions where the Company is qualified
to
do business, dated as of a date not earlier than twenty (20) days prior to
the
Closing Date.
7.10 Noncompetition
Agreement. Buyer
has
received the Noncompetition Agreement, duly executed by Seller.
7.11 Governmental
Approvals. All
applicable waiting periods (and any extensions thereof) under the HSR Act shall
have expired or otherwise been terminated and Buyer, Seller, and the Company
shall have received all licenses, permits and other governmental approvals
necessary to consummate the transactions contemplated hereunder.
7.12 Resignations
of Board Members and Officers.
Buyer shall have received the resignations, effective as of the Closing Date,
of
each director and officer of the Company and each Subsidiary other than those
specified in writing by Buyer.
7.13 Intercompany
Payables and Receivables.
The Company shall have paid or otherwise discharged all intercompany payables
and receivables.
7.14 Consents.
The Company shall have received and delivered to Buyer the Consents
and all
authorizations of Governmental Authorities described in Section 4.12 of the
Disclosure Schedule shall have been obtained.
7.15 Closing
Deliveries.
Seller shall have delivered to Buyer prior to or at the Closing all of the
items
required to be delivered by Seller pursuant to Section
2.6.
7.16 Funding. Buyer
(or members of the Company Group) shall have received the cash proceeds of
the
debt financing contemplated by the Commitment Letters obtained by Buyer, on
the
terms set forth in such Commitment Letters and otherwise on terms and conditions
reasonably satisfactory to Buyer (it being understood that the terms expressly
set forth in such Commitment Letters are satisfactory to Buyer).
37
7.17 FIRPTA
Affidavit.
Buyer shall have received a non-foreign affidavit of the Seller dated as
of the Closing Date and in form and substance required under the Treasury
Regulations issued pursuant to Section 1445(b) of the Code.
7.18 Liens.
There shall be no Liens on the assets and properties of the Company, except
as
set forth on Section
7.18
of the
Disclosure Schedule and Permitted Liens.
7.19 Sale-Leaseback.
The Sale-Leaseback shall have occurred in accordance with its terms and
D&T shall have confirmed that the Sale-Leaseback will qualify for sale
leaseback accounting and the leases thereunder will be given operating lease
treatment for financial reporting purposes.
8. |
CONDITIONS
PRECEDENT TO SELLER’S OBLIGATIONS. The
obligation of Seller to consummate the Closing shall be subject to
the
satisfaction, at or prior to the Closing, of each of the following
conditions (to the extent noncompliance is not waived in writing
by
Seller):
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8.1 Representations
and Warranties True at Closing.
The representations and warranties made by Buyer in this Agreement shall be
true
and correct at and as of the Closing Date with the same effect as if made at
and
as of such date,
except
to the extent that such representations are qualified by the term “material”, or
contain terms such as “Material Adverse Effect”, in which case such
representations and warranties shall be true and correct in all
respects.
8.2 Compliance
with Agreement.
Buyer shall have performed and complied with all of its agreements, covenants
and conditions required by this Agreement to be performed or complied with
by it
at or prior to the Closing.
8.3 No
Litigation.
No third party action, suit or proceeding shall be pending or threatened before
any Governmental Authority in which it will be or is sought to restrain or
prohibit or obtain damages or other relief in connection with this Agreement
or
the consummation of the transactions contemplated hereunder.
8.4 Closing
Certificate.
Buyer shall have delivered to Seller in writing, at and as of the Closing,
a
certificate duly executed by the President of Buyer, in form and substance
satisfactory to Seller and Seller’s counsel certifying that the conditions in
each of Sections
8.1, 8.2 and 8.3
have
been satisfied.
8.5 Governmental
Approvals.
All applicable waiting periods (and any extensions thereof) under the HSR
Act shall have expired or otherwise been terminated and Buyer, Seller, and
the
Company shall have received all licenses, permits and other governmental
approvals necessary to consummate the transactions contemplated
hereby.
8.6 Certified
Resolutions.
Buyer shall deliver a certificate of a duly authorized representative of Buyer,
dated the Closing Date, setting forth resolutions of the board of directors
of
Buyer authorizing the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby, and certifying that such
authorizations were duly adopted and are in full force and effect and have
not
been rescinded or amended as of the Closing Date.
38
8.7 Incumbency
Certificate.
Buyer shall deliver a certificate of a duly authorized representative of Buyer
attesting to the incumbency and signature of each officer of Buyer who executed
this Agreement or any other material documents related to the transactions
contemplated hereby.
8.8 Certificate
of Good Standing.
Buyer shall deliver a certificate of existence and good standing of Buyer from
the Secretary of State of the State of Delaware dated as of a date not earlier
than twenty (20) days prior to the Closing Date.
8.9 Intercompany
Payables and Receivables.
The Company shall have paid or otherwise discharged all intercompany payables
and receivables.
8.10 Sale-Leaseback.
The
Sale-Leaseback (or Alternative Sale/Leaseback) shall have occurred in accordance
with its terms and gross cash proceeds from the Sale-Leaseback (or Alternative
Sale/Leaseback) in a minimum amount of $200 million, less any transactional
costs and expenses paid by the Company related to the Sale-Leaseback (the
“Minimum Sale-Leaseback Proceeds”) shall have been distributed by the Company to
Seller; provided,
however,
to the
extent that the Minimum Sale-Leaseback Proceeds have not been received and
distributed to Seller, Buyer shall have the option to increase the Purchase
Price by amounts corresponding to the values of one or more Excluded Properties
until such increase in the Purchase Price equals or exceeds the amount by which
the proceeds received from the Sale-Leaseback are less than the Minimum
Sale-Leaseback Proceeds, in which case, this condition shall be deemed
satisfied.
8.11 Closing
Deliveries.
Buyer shall have delivered to Seller prior to or at the Closing all of the
items
required to be delivered by Buyer pursuant to Section
2.6,
including the Purchase Price.
9. |
OTHER
COVENANTS AND AGREEMENTS.
|
9.1 Confidential
Information.
The terms and conditions of that certain Confidentiality Agreement dated
July 6, 2006, by and between the parties hereto are hereby incorporated by
reference as if specifically set forth herein; provided, that the Buyer’s
obligations under the Confidentiality Agreement shall terminate as of the
Closing Date.
9.2 Expenses.
Buyer and Seller shall pay the expenses of their respective attorneys, agents,
brokers and financial advisors in connection with the preparation, execution
and
consummation of this Agreement and of the transactions contemplated hereby.
Without limiting the foregoing, each of Buyer and Seller shall pay the costs
which it or they, respectively, has incurred in retaining any broker or finder
in connection with this transaction. For the avoidance of doubt, Seller shall
pay all transactional costs and expenses relating to the Sale-Leaseback that
are
not paid by the Company prior to Closing.
9.3 Non-Interference
With Executives; Non-solicitation of Employees;
Non-Compete.
Buyer agrees that, for a period of one year following the Closing (the
“Restricted
Period”),
neither Buyer nor any of its officers, agents or employees shall encourage,
solicit or otherwise attempt to persuade any Person in the employment of Seller
or any of its subsidiaries or Affiliates (the “Seller
Entities”)
to end
his/her employment with a Seller Entity or to violate any confidentiality,
non-competition or employment agreement that such Person may have
with
39
9.4 Further
Assurances.
Seller and Buyer shall execute and deliver to the other party such other
instruments as may be reasonably required in connection with the performance
this Agreement, and each shall take all such further actions as may be
reasonably required to carry out the transactions contemplated under this
Agreement.
9.5 Satisfaction
of Conditions Precedent.
Seller and Buyer will each use their commercially reasonable efforts to cause
the satisfaction of the conditions precedent contained in this Agreement;
provided, however, that nothing contained in this Section
9.5
shall
obligate any party hereto to waive any right or condition under this
Agreement.
9.6 Filings.
Promptly following execution hereof, Buyer and Seller shall prepare and file
the
notifications required by the HSR Act. Buyer shall pay any fees associated
with
such filing. Seller shall cooperate with Buyer in preparing and filing such
notification. Seller shall reimburse Buyer for all of any filing fees (but
not
related legal and other costs of preparation) associated with such filing within
thirty (30) days after the Termination Date, if the Closing does not occur
solely as a result of the failure of Seller to satisfy the conditions set forth
in Section
7.
9.7 Public
Statements or Releases.
Each party agrees that it will not make, issue or release any public or industry
announcement, statement or, acknowledgment of the existence of the transactions
provided for herein without the prior agreement of the other parties as to
timing and form, except for such statements or releases which may be required
by
Law.
9.8 Exclusivity.
Seller agrees that, until such time as this Agreement is terminated
pursuant to Section
12,
it
shall not and it shall cause the Company and their respective
40
9.9 Sale-Leaseback.
Seller shall cause the Company not to enter into any agreement with respect
to
the Sale-Leaseback (other than the Sale-Leaseback Documents or Alternative
Sale/Leaseback Documents) or amend or modify any Sale-Leaseback Documents or
Alternative Sale/Leaseback Documents in any manner which creates a direct or
indirect obligation of, or could result in any direct or indirect liability
to,
the Company without the prior written consent of Buyer. Prior to the
consummation of the Sale-Leaseback, Seller shall provide to Buyer, and Buyer
shall have the right to review and approve or disapprove of, any and all
agreements with respect to the Sale-Leaseback and any amendments or
modifications of any Sale-Leaseback Documents or Alternative Sale/Leaseback
Documents which create a direct or indirect obligation of, or could result
in
any direct or indirect liability to, the Company. Notwithstanding the foregoing,
Buyer shall have the right to review and approve the Sale-Leaseback Documents
or
Alternative Sale/Leaseback Documents and such other agreements so as to confirm
operating lease accounting treatment under GAAP for the tenant thereunder (it
being understood and acknowledged that the form of Sale-Leaseback Documents
referred to in the Disclosure Schedule and any Alternative Sale/Leaseback
Documents requested by Buyer are deemed approved by Buyer). Upon consummation
of
the Sale-Leaseback in accordance with this Agreement and the agreements approved
by Buyer, each Owned Real Property noted on the schedule as subject to the
Sale-Leaseback shall become and be deemed a Leased Real Property for all
purposes, whereupon all representations, warranties and covenants herein set
forth shall thereafter apply with respect to such newly-classified Leased Real
Property with the same force and effect as if such Real Property was originally
classified as same.
10. |
INDEMNIFICATION
AND SURVIVAL OF REPRESENTATIONS AND
WARRANTIES.
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10.1 Indemnification
of Buyer.
(a) |
Seller,
subject to the conditions and limitations hereafter set forth, hereby
agrees to defend, indemnify, and hold harmless Buyer and the Company
and
each of their respective officers, directors, stockholders, employees,
representatives, agents, successors and assigns (individually, and
|
41
collectively,
the “Buyer
Indemnitees”)
against and in respect of any and all losses, Liabilities, damages,
actions, suits, proceedings, Claims, demands, orders, assessments,
amounts
paid in settlement if approved as provided below, fines, costs or
deficiencies, including interest, penalties and reasonable attorneys’ fees
and costs, including the cost of seeking to enforce this indemnity
to the
extent such enforcement is successful (collectively, “Losses”),
caused by or resulting or arising from, or otherwise with respect
to, (i)
any inaccuracy in, any breach of, or any failure to perform or comply
with, Seller’s representations, warranties or covenants contained in this
Agreement (including any certificate delivered pursuant hereto) or
in any
other agreement, instrument or other document made pursuant hereto,
or
otherwise contemplated herein or arising in connection herewith,
and, in
the case of Section
4.5
only, without giving effect to the materiality qualifier contained
therein
(individually, and collectively, a “Seller’s
Breach”)
and (ii) those Liabilities set forth on Section
10.1of
the Disclosure Schedule.
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(b)
|
Except
for claims of intentional misrepresentation or fraud, and with the
exception of Buyer’s right to pursue specific performance, which by this
reference is preserved and acknowledged by Seller, claims respecting
a
Seller’s Breach against Seller under the provisions hereof shall be
asserted exclusively as provided in this Section
10,
and in no event shall Seller be liable for the payment of any Claims
by
Buyer Indemnitees or any of them hereunder other than as provided
herein.
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|
10.2 Indemnification
of
Seller.
(a) |
Buyer,
subject to the conditions and limitations hereafter set forth, hereby
agrees to defend, indemnify, and hold harmless Seller and its officers,
directors, stockholders, employees, representatives, agents, successors
and assigns (individually, and collectively,
the “Seller Indemnitees”) against and in respect of any and all
Losses caused by or resulting or arising from, or otherwise with
respect
to, any inaccuracy in, any breach of, or any failure to perform or
comply
with, any of Buyer’s representations, warranties or covenants contained in
this Agreement or in any other agreement, instrument or other document
made pursuant hereto, or otherwise contemplated herein or arising
in
connection herewith, without giving effect to any materiality or
Material
Adverse Effect qualifiers contained therein (individually, and
collectively, a “Buyer’s
Breach”).
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(b)
|
With
the exception of Seller’s right to pursue specific performance, which by
this reference is preserved and acknowledged by Buyer, Claims respecting
a
Buyer’s Breach against Buyer under the provisions hereof shall be asserted
exclusively as provided in this Section 10, and in no event shall
Buyer be
liable for the payment of any Claims by Buyer Indemnitees or any
of them
hereunder other than as provided
herein.
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42
10.3 Claim
Threshold.
Notwithstanding anything to the contrary contained herein, Buyer shall be liable
to Seller Indemnitees and Seller shall be liable to Buyer Indemnitees with
respect to a Claim for indemnification
for
breaches of representations and warranties (other than with respect to
Fundamental Representations)
under
this Agreement (x) only at such time as, and to the extent that, the
aggregate of all amounts otherwise indemnifiable hereunder exceeds $1,000,000
(the “Basket”),
and
then only for the amount by which such aggregate damages exceed $1,000,000
and
(y) only if and to the extent that such $1,000,000 consists of one or more
Claims, each such Claim or series of related Claims of which is in excess of
$100,000 (the “Mini-Basket.”);
provided, however, that the Buyer shall indemnify the Seller Indemnitees and
the
Seller shall indemnify the Buyer Indemnitees for the full amount of any Claim
that exceeds the Mini Basket, subject only to clause (x) of this Section 10.3
and subject further to Section 10.4.
10.4 Indemnity
Cap.
Notwithstanding anything to the contrary contained herein,
with
respect to claims for breaches of representations and warranties (other than
with respect to Fundamental Representations) the
maximum indemnification liability of Seller to Buyer party shall not exceed
an
amount equal to $31.1 million (the “Cap”).
10.5 Exclusion
of Consequential and Punitive Damages.
No party to this Agreement shall have indemnification liability for
consequential or punitive damages.
10.6 Reimbursement
of Certain Indemnified Claims.
Any amount received pursuant to Seller’s or Buyer’s respective
indemnification obligations under this Agreement will be net of (a) the proceeds
of any insurance coverage
actually
recovered by Buyer or the Company
duplicating the amount previously indemnified or for which indemnification
is
sought or (b) the indemnitee’s income taxes were reduced by reason of any
deduction allowed to indemnitee for any payment, settlement or satisfaction,
in
each case, with respect to the events giving rise to the indemnification
payment.
10.7 Claims
for Indemnification.
Whenever any Claim shall arise for indemnification hereunder, the indemnified
party shall promptly notify the indemnifying party in writing of the claim
and,
when known, the facts constituting the basis for such claim, provided however,
that no delay on the part of the indemnified party shall release the
indemnifying party of any liability or obligation hereunder unless (and then
solely to the extent) the indemnifying party thereby is
actually
damaged.
In the event of any such Claim for indemnification hereunder resulting from
or
in connection with any Claim or legal proceedings by a third-party, the notice
to the indemnifying party shall specify, if known, the amount or an estimate
of
the amount of the liability arising therefrom. The indemnified party shall
not
settle or compromise any Claim by a third party for which he or it is entitled
to indemnification hereunder without the prior written consent of the
indemnifying party, which shall not be unreasonably withheld, unless suit shall
have been instituted against it and the indemnifying party shall not have taken
control of such suit after notification thereof.
10.8 Defense
of Indemnifying Party.
In connection with any claim to indemnity hereunder resulting from or arising
out of any claim or legal proceeding by a Person who is not a party to this
Agreement, the indemnifying party, at its sole cost and expense may, upon
written notice to the indemnified party, assume the defense of any such claim
or
legal proceeding if it
43
10.9 Exclusive
Remedy.
Except as provided in Section
11,
the
indemnification rights provided in Section
10
shall be
the sole and exclusive remedy available to the parties hereto for any and all
Losses related to a breach of any of the terms, conditions, covenants,
agreements, representations or warranties contained herein or in any of the
ancillary documents hereto, or any right, claim or action arising from the
transactions contemplated hereunder (and each party hereby waives and releases,
to the fullest extent that it may do so, any other right or remedy that may
arise under any Law)
with the
exception of claims based on fraud or intentional misrepresentation (to which
none of the limitations or requirements set forth in this Article
10
shall
apply);
provided
that the provisions of this Section
10.9
shall
not preclude any party from bringing an action for specific performance,
injunctive relief or any other equitable remedy to require any other party
to
perform its obligations under this Agreement or any ancillary document
hereto.
10.10 Survival
of Representations,
Warranties
and
Agreements.
The
representations and warranties of the parties hereto contained in this Agreement
shall survive the Closing for a period of one (1) year.
Notwithstanding the foregoing, the Fundamental Representations shall survive
the
Closing for the applicable statute of limitations and the representations and
warranties contained in Section
4.15
(Environment, Health and Safety) and Section
4.17
(Employee Benefit Plans) shall survive until the second anniversary of the
Closing Date. All covenants and agreements contained herein and the
indemnification obligations of the parties hereunder shall survive the Closing
and remain in full force and effect in accordance with their respective terms
until satisfied in accordance with their respective terms.
44
11. TAX MATTERS.
11.1 Tax
Indemnities.
(a) | From and after the Closing Date, Seller agrees to indemnify Buyer and Company against all Taxes (i) imposed on Seller or any member of an affiliated group with which Seller files a consolidated or combined income Tax Return with respect to any taxable period that ends on or before the Closing Date, including any Taxes resulting from or attributable to Seller’s sale of the Shares, or (ii) without duplication with respect to the Working Capital Adjustment, imposed on Company with respect to any taxable period (or portion thereof) that ends on or before the Closing Date, or, without duplication, (iii) any Taxes imposed on the Company as a result of the Sale-Leaseback, provided, however, that no indemnity shall be provided under this Agreement for any Taxes resulting from any transaction of Company occurring after the Closing Date. Any indemnity payment made by Seller pursuant to this Section 11.1 shall, in accordance with Section 11.5(a), be treated for tax purposes as an adjustment to the Purchase Price and shall not include or require any gross-up for Taxes on such indemnity payment. |
(b) | From and after the Closing Date, Buyer shall indemnify Seller against all Taxes imposed on or with respect to Company and transactions for or that occur in periods that begin after the Closing Date. Any indemnity payment made by Buyer pursuant to this Section 11.1(b). shall, in accordance with Section 11.5(a), be treated for tax purposes as an adjustment to the Purchase Price and shall not include or require any gross-up for Taxes on such indemnity payment. |
(c) | Any indemnity payment required under this Section 11.1 shall be made within ten (10) business days following notice by the party to be indemnified that payment of the amount for which indemnity is sought is then due to the appropriate Tax authority; provided, however that no indemnity payment shall be required to be made more than two (2) business days before it is due to the appropriate Tax authority. In the case of a Tax that is contested pursuant to Section 11.3, payment of the Tax to the appropriate Tax authority will not be considered to be due until a final non-appealable determination to such effect is made by the appropriate Tax authority or a court. |
(d) | For purposes of this Agreement, in the case of any Tax that is imposed on a periodic basis and is payable for a period that begins before the Closing Date and ends after the Closing Date, the portion of such Tax payable for the period ending on the Closing Date shall be (i) in the case of any Tax other than a Tax based upon or measured by income or wages, the amount of such Tax for the entire period multiplied by a fraction, the numerator of which is the number of days in the period ending on the Closing Date and |
45
the
denominator of which is
the number of days in the entire period and (ii) in the case of any Tax based
upon or measured by
income
or wages, the amount
which would be payable if the taxable year ended on the Closing Date. Any
credit or prepayment
shall
be prorated based
upon the fraction employed in clause (i) of the next preceding sentence.
In the case of any Tax based
upon
or measured by capital
(including net worth or long-term debt) or intangibles, any amount thereof
required to be allocated
under
this Section
11.1(d) shall be computed by reference to the level of such items on the
Closing Date.
11.2 Refunds
and Tax Benefits.
(a) |
Buyer
shall promptly pay or cause Company to pay to Seller any refund or
credit
(including any interest paid or credited with respect thereto) received
by
Buyer or Company of Taxes (i) relating to taxable periods ending
on or
before the Closing Date or (ii) attributable to an amount paid by
Seller
under Section
11.1,
but, in each case, only to the extent that the right to such refund
or
credit was not included as an asset of Company on the
Final Statement. Buyer shall, if Seller so requests and at Seller’s
expense, file for or cause Company to file for and obtain any refund
to
which Seller (or Seller, indirectly through Company) is entitled
under
this Section
11.2.
Buyer shall permit or cause Company to permit Seller to control (at
Seller’s expense) the prosecution of any such refund claim, and shall
cause the relevant entity to authorize by appropriate power of attorney
such Persons as Seller shall designate to represent such entity with
respect to such refund claim.
|
(b) |
If
Seller pays an amount pursuant to Section
11.1,
and the underlying adjustment resulting in the obligation of Seller
results in a Tax benefit to Buyer, any subsidiary or any Affiliate
of
Buyer or Company or any entity with which Company files a consolidated,
combined or unitary Tax Return for a period or portion thereof beginning
after the Closing Date and ending on or before the date of the Tax
payment
giving rise to the indemnity obligation, then, upon Seller’s request and
at Seller’s expense and provided that the period of limitations for
obtaining a refund
of
such Taxes has not expired, Buyer shall file or cause Company to
file a
claim for refund and diligently pursue the same. Buyer shall permit
or
cause Company to permit Seller to control (at Seller’s expense) the
prosecution of any such refund claim, and shall cause the relevant
entity
to authorize by appropriate power of attorney such Persons as Seller
shall
designate to represent such entity with respect to such refund claim.
Buyer shall pay or cause Company to pay to Seller, upon receipt of
any
such refund, the amount of such refund attributable to the Tax benefit,
including allocable interest to the extent actually
received.
|
46
(c) |
The
Company will be entitled to the Tax deduction with respect to the
Replacement Awards and the Success Awards for the periods following
the
Closing Date.
|
11.3 Contests.
(a) |
After
the Closing Date, Buyer shall notify Seller in writing of the commencement
of any Tax audit or administrative or judicial proceeding or of any
demand
or claim on Buyer or Company which, if determined adversely to the
taxpayer or after the lapse of time, would be grounds for indemnification
under Section
11.1,
within fifteen (15) days after such commencement or the receipt of
such
demand or claim. Such notice to Seller shall contain factual information
(to the extent known to Buyer or Company) describing the asserted
Tax
liability in reasonable detail and shall include copies of any notice
or
other document received from any Tax authority in respect of any
such
asserted Tax liability. If Buyer fails to give Seller notice of an
asserted Tax liability as required by this Section
11.3,
then, if Seller is precluded by the failure to give such notice from
contesting the asserted Tax liability in formal proceedings before
either
the administrative or judicial forum, then Seller shall not have
any
obligation to indemnify Buyer or Company for any loss arising out
of such
asserted Tax liability.
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(b) |
Seller
may elect to direct, through counsel of its own choosing and at its
own
expense, any audit, claim for refund and administrative or judicial
proceeding involving any asserted liability with respect to which
indemnity may be sought under Section
11.1
(any such audit, claim for refund or proceeding relating to an asserted
Tax liability is referred to herein as a “Contest”); provided, however,
that Buyer and Company and their duly appointed representatives shall
have
the right to participate in any such Contest, at their own
expense,
to the extent that such Contest relates to matters for periods after
the
Closing Date;
and provided, further, that Seller shall obtain the consent of Buyer
and
Company prior to the resolution or settlement of any such dispute
to the
extent it relates to matters after the Closing Date, which consent
shall
not be unreasonably withheld or delayed. If Seller elects to direct
a
Contest, within thirty (30) days after receipt of the notice of asserted
Tax liability, Seller shall notify Buyer of its intent to do so,
and Buyer
shall cooperate and shall cause Company or its respective successor
or
successors to cooperate, at Seller’s expense, in each phase of such
Contest. If Seller chooses to direct the Contest, Buyer promptly
shall
empower and cause Company or its successor to empower (by power of
attorney and such other documentation as may be necessary and appropriate)
such representatives of Seller as it may designate to represent Buyer
or
Company or their respective successors in the Contest insofar as
the
Contest involves an asserted Tax for which Seller may be required
to
indemnify Buyer or Company under Section
11.1.
If Seller elects not to direct the Contest,
|
47
fails
to notify Buyer of its election as herein provided or contests its
obligation to indemnify under Section
11.1,
Buyer or Company may pay, compromise or contest, at their own expense,
such asserted Tax liability without prejudice to any right of Buyer
or
Company to indemnification if otherwise entitled thereto
hereunder.
|
(c) |
Preparation
of Tax Returns.
Seller shall cause to be prepared and filed any Tax Return relating
to
Company for any taxable period ending on or before the Closing Date.
Any
such Tax Return shall be prepared an a basis consistent with those
prepared for prior Tax years unless a different treatment of any
item is
required by an intervening change in law. Buyer shall prepare or
cause
Company to prepare any Tax Return relating to Company for any taxable
period ending after the Closing
Date.
|
11.4 Cooperation
and Exchange of Information.
Seller and Buyer will provide each other with such cooperation and information
as either of them reasonably may request of the other in filing any Tax Return,
amended return or claim for refund, determining a liability for Taxes or a
right
to a refund of Taxes or participating in or conducting any audit or other
proceeding in respect of Taxes. Such cooperation and information shall include
providing copies of relevant Tax Returns or portions thereof, together with
accompanying schedules and related work papers and documents relating to rulings
or other determinations by Tax authorities. Each party shall make its employees
available on a mutually convenient basis to provide explanations of any
documents or information provided hereunder. Each party will retain all returns,
schedules and work papers and all material records or other documents relating
to Tax matters of Company for the taxable period first ending after the Closing
Date and for all prior taxable periods until the later of (i) the expiration
of
the statute of limitations of the taxable periods to which such returns and
other documents relate, without regard to extensions except to the extent
notified by the other party in writing of such extensions for the respective
Tax
periods, or (ii) eight years following the due date (without extension) for
such
returns. On or prior to 120 days before a federal or state Tax Return is due
as
specified by Seller, Buyer, at its expense, shall provide Seller with all Tax
information for the Company, that Seller shall reasonably request (including
schedule(s) showing the items of income, gain, loss, deduction and credit with
respect to each such taxable year required to be included in applicable Tax
Returns and completed work papers specifically including Schedule M-3 as well
as
complying with e-filing requirements) in such form as Seller shall reasonably
request, including any such information as Seller may request to enable Seller
to file any Tax Return with respect to any year that includes a period ending
on
or before the Closing Date. Seller will prescribe the information required
to be
provided by the Buyer to support Seller’s preparation and filing of combined
returns and payment of Estimated State Taxes together with a schedule of due
dates for providing of such information; (ii) Seller at its expense, shall
provide Buyer with all Tax information that Buyer shall reasonably request
(including schedule(s) showing the items of income, gain, loss, deduction and
credit with respect to each such taxable year required to be included in any
applicable Tax Return and completed work papers) for any period ending on or
before the Closing Date; and (iii) without limiting the generality of the
foregoing, each party shall use reasonable efforts to respond promptly to
specific questions from the other party concerning Tax matters with respect
to
which the represented party could reasonably be expected to have relevant
information, and the information provided by each party shall be consistent
with
any
48
11.5 Miscellaneous.
(a) |
The
parties agree to treat all payments made under this Section
11,
under any other indemnity provision contained in this Agreement,
and for
any misrepresentations or breach of warranties or covenants as adjustments
to the Purchase Price for Tax
purposes.
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(b) |
For
the purposes of this Section
11,
all references to Buyer, Seller and Company include
successors.
|
(c) |
The
covenants and agreements of the parties hereto contained in this
Section
11
shall survive the Closing and shall remain in full force and effect
with
respect to: (a) Seller’s obligations until the expiration of all statutes
of limitations with respect to any Taxes that would be indemnifiable
by
Seller under Section
11.1(a);
and (b) Buyer’s obligations until the expiration of all statutes of
limitations with respect to any Taxes that would be indemnifiable
by Buyer
under Section
11.1(b)
or
Section
11.2
of
this Agreement.
|
12. |
TERMINATION.
|
12.1 Termination
and its Effects.
(a) |
The
parties may terminate this Agreement as provided
below:
|
(i) Buyer
and
Seller may terminate this Agreement by mutual written consent at any time prior
to the Closing;
(ii) Buyer
may
terminate this Agreement by giving written notice to Seller if any conditions
to
Buyer’s obligations to consummate
the
transactions
contemplated in this Agreement shall not have been satisfied, or waived by
Buyer, on or prior to the Termination Date;
provided,
however,
that (A) Seller shall be given the right to cure any such breach or failure
for a period of thirty (30) days after
receiving written
notice of such breach or failure in order to avoid termination, unless Seller
is
incapable of curing such breach or failure
and
(B)
Seller shall have
the right to extend the Termination Date for a period not to exceed sixty (60)
days in the event the Permits and
Consents
have not
been obtained or the Minimum Sale-Leaseback Proceeds have not been received
on
or before the Termination Date;
and
provided further,
however, that Buyer shall not be entitled to terminate this Agreement under
this
Section
12.1(a)(ii)
if
49
Buyer
is then
in material
breach of any of its representations, warranties, covenants or agreements
contained in this Agreement and such
breach
shall have
been the cause of, or shall have resulted in, the failure of any such condition
to be satisfied on such date.
(iii) Seller
may terminate this Agreement by giving written notice to Buyer if any conditions
to Seller’s obligations to consummate
the transactions
contemplated in this Agreement shall not have been satisfied, or waived by
Seller, on or prior to the Termination Date;
provided,
however,
that (A) Buyer shall be given the right to cure any such breach or failure
for a
period of thirty (30) days after receiving
written
notice of
such breach in order to avoid termination, unless Buyer is incapable of curing
such breach or failure and (B) Buyer shall
have
the right to
extend the Termination Date for a period not to exceed sixty (60) days in the
event that the Permits and Consents have not
been
obtained or the
Minimum Sale-Leaseback Proceeds have not been received on or before the
Termination Date; and provided further,
however,
that Seller
shall not be entitled to terminate this Agreement under this Section
12.1(a)(iii)
if
Seller is then in material breach of any
of
its
representations, warranties, covenants or agreements contained in this Agreement
and such breach shall have been the cause of, or
shall
have resulted
in the failure of, any such condition to be satisfied on such date.
(iv) if
any
Governmental Authority of competent jurisdiction issues an order, decree, ruling
or injunction, or takes any other action,
that permanently
enjoins, restrains or otherwise prohibits the transactions contemplated
hereunder and such order, decree, ruling
or injunction has
become final and non-appealable; provided,
however,
that
the right to terminate this Agreement pursuant to this Section
12.1(a)(iv)
shall not
be
available to any party whose breach of any provision of this Agreement results
in or causes such order, decree,
ruling
or injunction
or who
has
not used its reasonable best efforts to prevent the entry of and to remove
such
order or injunction.
(b) |
In
the event of termination of this Agreement by any party hereto as
provided
in this Section
12.1,
this Agreement shall forthwith become void and there shall be no
liability
or obligation on the part of any party hereto, except as otherwise
specifically set forth in Section
12.1(b)
or
otherwise specifically set forth in this Agreement; provided, however,
that in no event shall termination of this Agreement limit or restrict
the
rights and remedies of any party against any other party who has
intentionally breached any of the agreements or provisions of this
Agreement prior to the termination
hereof.
|
50
13. |
GENERAL.
|
13.1 Notices.
All notices, demands and other communications hereunder shall be in writing
and
shall be made by hand delivery, telecopier, e-mail, or overnight air courier
guaranteeing next day delivery addressed as follows:
(a) |
if
to Seller to:
|
CBRL
Group, Inc.
X.X.
Xxx
000
Xxxxxxx,
XX 00000
Attention:
N.B. Xxxxxxx Xxxxx
Phone:
(000) 000-0000
Fax: (000)
000-0000
E-Mail:
xxxxxx@xxxxxxxxx.xxx
with
a
copy (which shall not constitute notice) sent contemporaneously to:
Baker,
Donelson, Bearman, Xxxxxxxx & Xxxxxxxxx, P.C.
000
Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx,
Xxxxxxxxx 00000
Attention:
Xxxx X. Xxxxx
Phone:
(000) 000-0000
Fax: (000)
000-0000
E-Mail:
xxxxxx@xxxxxxxxxxxxx.xxx
(b) |
if
to Buyer, to:
|
x/x Xxxxxxxxx, Xxxxxx, Xxxxxxxx & Co. Inc.
000 Xxxx 00xx Xxxxxx
Xxx
Xxxx,
XX 00000
Attention: Xxxxxx
X.
Xxxxxx
Phone:
(000) 000-0000
Fax: (000)
000-0000
E-Mail:
xxxxxx@xxx.xxx
51
with
a
copy (which shall not constitute notice) sent contemporaneously to:
Xxxxxxxx
& Xxxxx
000
Xxxx 00xx Xxxxxx
Xxx
Xxxx, XX 00000
Attention:
Xxx Xxxxxx
Phone: (000) 000-0000
Fax: (000)
000-0000
E-Mail:
xxxxxxx@xxxxxxxx.xxx
(c) |
to
such other address as the party receiving such notice shall have
properly
designated to the other party hereto in
writing.
|
Each
such
notice shall be deemed given at the time delivered by hand, if personally
delivered; when receipt acknowledged, if telecopied or e-mailed; and the next
business day after timely delivery to the courier, if sent by overnight air
courier guaranteeing next day delivery.
13.2 Entire
Agreement.
This Agreement (including the Disclosure Schedule) contains the entire
understanding of the parties, supersedes all prior agreements and understandings
relating to the subject matter hereof and shall not be amended except by a
written instrument hereafter signed by all of the parties hereto.
13.3 Interpretation.
This Agreement has been prepared, and negotiations in connection herewith have
been carried on, by the joint efforts of the parties hereto and their respective
counsel. This Agreement is to be construed fairly and simply and not strictly
for or against the drafter. The table of contents and headings contained in
this
Agreement are for reference purposes only and do not affect in any way the
meaning or interpretation of this Agreement. Whenever the words “include,”
“includes” or “including” are used in this Agreement, they will be deemed to be
followed by the words “without limitation.” The words “hereof,” “herein,”
“hereto” and “hereunder” and words of similar import when used in this Agreement
will refer to this Agreement as a whole and not to any particular provision
of
this Agreement. The term “or” is not exclusive. The word “extent” in the phrase
“to the extent” shall mean the degree to which a subject or other thing extends,
and such phrase shall not mean simply “if.” All terms defined in this Agreement
will have the defined meanings when used in any certificate or other document
made or delivered pursuant hereto unless otherwise defined therein. The
definitions contained in this Agreement are applicable to the singular as well
as the plural forms of such terms and to the masculine as well as to the
feminine and neuter genders of such term. Any agreement, instrument or statute
defined or referred to herein or in any agreement or instrument that is referred
to herein means such agreement, instrument or statute as from time to time
amended, modified or supplemented, including (in the case of agreements or
instruments) by waiver or consent and (in the case of statutes) by succession
of
comparable successor statutes. References to a Person are also to its permitted
successors and assigns.
13.4 Governing
Law.
The validity and construction of this Agreement shall be governed by the
internal substantive laws of the State of Tennessee.
52
13.5 Table
of Contents; Sections and Section Headings.
The table of contents hereto, and the headings of sections and subsections
are
for reference only and shall not limit or control the meaning
thereof.
13.6 Assigns.
This Agreement shall be binding upon and inure to the benefit of the heirs
and
successors of each of the parties. Neither this Agreement nor the obligations
of
any party hereunder shall be assignable or transferable by such party without
the prior written consent of the other party hereto, and any prohibited
assignment shall be deemed null and void,
provided that (i) Buyer may assign its rights and obligations to a wholly owned
subsidiary, and (ii ) at or after the Closing, Buyer or the Company may assign
this Agreement to any Affiliate of the Company, to any lender or agent therefore
for collateral purposes or to any future acquiror of the Company, the business
or the assets of the Company (or any portion thereof), in each case without
the
prior consent of the Seller.
Notwithstanding the foregoing, Buyer shall not be relieved of any of its
obligations under this Agreement in the event of a failure by an assignee to
perform any such obligation.
13.7 No
Implied Rights or Remedies.
Except as otherwise expressly provided herein, nothing herein expressed or
implied is intended or shall be construed to confer upon or to give any Person
other than Seller and Buyer, any rights or remedies under or by reason of this
Agreement.
13.8 Counterparts.
This Agreement may be executed in multiple counterparts, each of which shall
be
deemed an original, but all of which together shall constitute one and the
same
instrument.
13.9 Amendments.
This Agreement may not be changed orally, but only by an agreement in writing
signed by Seller and Buyer.
13.10 Waiver
of Compliance.
Any failure of Seller, on the one hand, or Buyer, on the other hand, to comply
with any obligation, covenant, agreement or condition herein may be expressly
waived in writing by Seller (in respect of failures by Buyer) or Buyer (in
respect of failures by Seller). No waiver shall be applicable except in the
specific instance in which it is given.
13.11 Severability.
In the event that any provision in this Agreement shall be determined to be
invalid, illegal or unenforceable, in any respect, the remaining provisions
of
this Agreement shall not be in any way impaired, and the illegal, invalid or
unenforceable provision shall be fully severed from this Agreement and there
shall be automatically added in lieu thereof a provision as similar in terms
and
intent to such severed provision as may be legal, valid and
enforceable.
53
13.12 Waiver
of Jury Trial.
AS A SPECIFICALLY BARGAINED INDUCEMENT FOR EACH OF THE PARTIES TO ENTER INTO
THIS AGREEMENT (EACH PARTY HAVING HAD THE OPPORTUNITY TO CONSULT COUNSEL),
EACH
PARTY EXPRESSLY WAIVES THE RIGHT TO TRIAL BY JURY IN ANY LAWSUIT OR PROCEEDING
RELATING TO OR ARISING IN ANY WAY FROM THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREIN.
[SIGNATURES
ON FOLLOWING PAGE]
54
IN
WITNESS WHEREOF, and intending to be legally bound hereby, the parties hereto
have caused this Agreement to be duly executed and delivered as of the date
and
year first above written.
BUYER:
LRI
HOLDINGS,
INC.
By:
/s/
Xxxxxxx
Leonard__________________________
Title: President_________________________________
SELLER:
CBRL
GROUP,
INC.
By:
/s/ N.B.
Xxxxxxx Xxxxx ____________________
Title:
Senior Vice
President and General
Counsel
____
EXHIBIT
A
NONCOMPETITION
AGREEMENT
THIS NONCOMPETITION AGREEMENT (the "Agreement") is entered into as of this
______ day of ___________________, 2006 (the “Effective Date”) by and among
XXXXX’X ROADHOUSE, INC (the “Company”), a Tennessee corporation, LRI Holdings,
Inc., a Delaware corporation (“LRI”) and CBRL GROUP, INC. ("CBRL"), a Tennessee
corporation.
WITNESSETH:
WHEREAS, CBRL prior to the Effective Date, was the owner of the Company”, which
operated and franchised a chain of restaurants under the “Xxxxx’x Roadhouse”®
service xxxx (“Logan’s restaurants”), which specialize in steaks and serve
alcohol in an atmosphere designed to be reminiscent of an American roadhouse
(the “Logan’s System”); and
WHEREAS, on the Effective Date, 2006, CBRL sold all of the outstanding stock
of
the Company to LRI pursuant to that certain Stock Purchase Agreement dated
as of
October 30, 2006 (as amended, supplemented, amended and restated or otherwise
modified from time to time hereafter, the "Stock Purchase Agreement"), between
CBRL and LRI; and
WHEREAS, as an inducement to LRI to purchase all of the stock of the Company
and
as a condition to the effectiveness and closing of the transactions contemplated
by the Stock Purchase Agreement, LRI required CBRL to enter into this
Agreement;
NOW, THEREFORE, in consideration of the mutual covenants herein contained
and in
the Asset Purchase Agreement, the parties, intending to be legally bound,
agree
as follows:
1. Term. The term
of this Agreement shall be three years, beginning on the Effective Date,
2006,
and terminating on _____________, 2009
(the " Term").
2. Agreements by
CBRL.
2.1. Noncompete. CBRL covenants and
agrees that, during the Term, it will not, directly or indirectly, engage
in,
own, manage, operate, control or provide consulting services to any food
service
business that conducts activities similar to those operations conducted under
the Logan’s System as it was operated by the Company on the Effective Date
anywhere in the United States of America. CBRL recognizes and acknowledges
that the geographic area and time limitations set forth in this Agreement
are
properly required for the protection of the business interests of the Company
and LRI due to CBRL status and reputation in the industry and the knowledge
that
has been acquired by CBRL through its ownership of and association with the
Logan’s System. If any part of this covenant not to compete is found to be
unreasonable, then it may be amended by appropriate order of a court of
competent jurisdiction to the extent deemed reasonable.
2.2. Permitted Activities.
Notwithstanding Section 2.1, the parties acknowledge and agree
that CBRL
currently operates and, in the future, may acquire additional restaurants
that
sell steaks, ribs, chicken and seafood products and may continue to do so
so
long as the particular restaurant concept is not or does not become a
“roadhouse” concept similar to that operated under the Logan’s System as it was
operated by the Company on the Effective Date. The Company and LRI further
acknowledge that CBRL shall not be deemed to have violated Section 2.1. if
CBRL
acquires any operation: (a) less than fifty percent (50%) of the revenues
of
which are derived from business(es) that would otherwise violate Section
2.1; or
(b) that either (i) does not serve alcoholic beverages or (ii) during any
consecutive twelve month period averages less than thirty three percent of
its
sales in the form of steaks.
2.3. Remedies. In addition to any
other remedies that the parties may have at law or in equity, CBRL, LRI and
the
Company agree that, in the event of a breach by CBRL of the provisions of
Section 2.1., damages to the Company and LRI would be difficult to
determine. Notwithstanding the foregoing, the parties agree that nothing
in this Agreement shall be construed as prohibiting the Company or LRI from
pursuing any remedies available to them for any breach or threatened breach
by
CBRL of Section 2.1., including, without limitation, the recovery of damages
from CBRL or any person or entity acting in concert with CBRL. In the
event of any breach or threatened breach by CBRL of Section 2.1., CBRL
understands and acknowledges that a violation of these sections would cause
irreparable harm to the Company and LRI and the Company and LRI would be
entitled to seek an injunction by any court of competent jurisdiction enjoining
and restraining CBRL from any act prohibited by this Agreement.
3. Notices. All
notices under this Agreement shall be in writing and delivered personally
or
mailed by certified mail, postage prepaid, addressed to the parties at their
last known addresses.
4. Waiver. No
waiver, delay, omission or forbearance on the part of either party to exercise
any right, option, duty, or power arising from any default or breach by the
other party shall affect or impair the rights of the non-defaulting party
with
respect to any subsequent default of the same or a different kind; nor shall
any
delay or omission of the non-defaulting party to exercise any right arising
from
any such default affect or impair the non-defaulting party's rights as to
such
default or any future default.
5. Severability. If
any term, restriction or covenant of this Agreement is deemed invalid or
unenforceable, all other terms, restrictions, and covenants and the application
thereof to all persons and circumstances subject hereto shall remain unaffected
to the extent permitted by law; and if any application of any term, restriction
or covenant to any person or circumstance is deemed invalid or unenforceable,
the application of such terms, restriction or covenant to other persons and
circumstances shall remain unaffected to the extent permitted by law.
6. Headings.
Captions and section headings are used herein for convenience only,
are not part
of this Agreement, and shall not be used in construing it.
7. Governing Law.
This Agreement shall be construed in accordance with and governed
by the laws of
the State of Tennessee.
8. Counterparts.
This Agreement may be executed in two or more counterparts, each
of which shall
be deemed an original but all of which shall constitute one instrument.
9. Entire
Agreement. This Agreement contains the entire agreement between the
parties hereto with respect to the matters addressed herein and there are
no
representations, inducements, promises, agreements, arrangements, or
undertakings, oral or written, between the parties that have been relied
upon by
either of the parties other than those set forth herein. No agreement of
any kind relating to the matters covered by this Agreement shall be binding
upon
any party unless and until the same is made in writing and executed by CBRL,
LRI
and the Company.
IN WITNESS WHEREOF, the parties, each by its duly authorized representative,
have executed this Agreement as of the date and year first shown above.
CBRL,
INC.
By:
_______________________________________
Title:
______________________________________
XXXXX’X
ROADHOUSE,
INC.
By:
_______________________________________
Title:
______________________________________
LRI
HOLDINGS,
INC.
By:
_______________________________________
Title:
______________________________________