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EXHIBIT 10.1
AMENDED AND RESTATED
LLC MEMBERSHIP INTEREST PURCHASE AGREEMENT
Dated as of
August 21, 2000
by and between
SIZZLER INTERNATIONAL, INC.,
(the "Purchaser")
FFPE HOLDING COMPANY, INC.
JBS INVESTMENTS, LTD., A NEVADA LIMITED PARTNERSHIP
OMS INVESTMENTS, LTD., A NEVADA LIMITED PARTNERSHIP
TDM ENTERPRISES, LTD., A NEVADA LIMITED PARTNERSHIP
(collectively referred to as the "Sellers")
XXXXX XXXXXXXXX AND XXXXXX XXXXXXXX XXXXXXXXX
(INDIVIDUALLY AND AS CO-TRUSTEES OF
XXXXXXXXX FAMILY TRUST UDT DATED 7/19/95),
XXXX XXXXXXXXX, XXXXXXXXXX XXXXXXXXX, AND
XXXXXX XXXXXXXXX-XXXXX (INDIVIDUALLY
AND AS TRUSTEE OF THE XXXXXX XXXXXXXXX-XXXXX
FAMILY TRUST UDT DATED 10/16/97)
(the "Principals" and the "Shareholders")
S&C COMPANY, INC.
(the "Old Company")
FFPE, LLC
(the "New Company")
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TABLE OF CONTENTS
PAGE
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ARTICLE I SALE OF LLC MEMBERSHIP INTEREST........................................2
ARTICLE II REPRESENTATIONS OF THE SELLING PARTIES................................11
ARTICLE III REPRESENTATIONS OF THE PURCHASER......................................22
ARTICLE IV ADDITIONAL AGREEMENTS OF THE SELLING PARTIES..........................23
ARTICLE V ADDITIONAL AGREEMENTS OF THE PURCHASER................................29
ARTICLE VI CONDITIONS............................................................31
ARTICLE VII SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION..........................32
ARTICLE VIII TERMINATION...........................................................37
ARTICLE IX DEFINITIONS...........................................................38
ARTICLE X MISCELLANEOUS.........................................................48
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AMENDED AND RESTATED
LLC MEMBERSHIP INTEREST PURCHASE AGREEMENT
This Amended and Restated LLC Membership Interest Purchase Agreement
("Agreement") is effective as of August 21, 2000 by and among SIZZLER
INTERNATIONAL, INC., a Delaware corporation (the "Purchaser"), FFPE HOLDING
COMPANY, INC., a Delaware corporation ("FFPE Holding"), JBS Investments, Ltd., a
Nevada limited partnership ("JBS Investments"), OMS Investments, Ltd., a Nevada
limited partnership ("OMS Investments") and TDM Enterprises, Ltd., a Nevada
limited partnership ("TDM Enterprises") (JBS Investments, OMS Investments and
TDM Enterprises collectively the "Partnerships," and together with FFPE Holding
collectively the "Sellers"), XXXXX XXXXXXXXX ("Oscar"), and XXXXXX XXXXXXXX
XXXXXXXXX ("Xxx"), individually and as CO-TRUSTEES OF XXXXXXXXX FAMILY TRUST UDT
DATED 7/19/95 (the "Oscar and Xxxxxx Trust"), XXXX XXXXXXXXX ("Xxxx"),
XXXXXXXXXX XXXXXXXXX ("Xxxxxxxxxx"), XXXXXX XXXXXXXXX-XXXXX ("Xxxxxx"),
individually and as Trustee of the Xxxxxx Xxxxxxxxx-Xxxxx Family Trust UDT Dated
10/16/97 (the "Xxxxxx Trust"), S&C COMPANY, INC., a California corporation (the
"Old Company"), and FFPE, LLC, a Delaware limited liability company (the "New
Company"). In accordance with the terms and provisions herein, this Agreement
amends that certain LLC Membership Interest Purchase Agreement dated May 23,
2000 by and among Purchaser, FFPE Holding, Oscar, Pat, Oscar and Xxxxxx Trust,
John, Bernadette, Xxxxxx, Xxxxxx Trust, Old Company, and New Company ("Original
Agreement"). If any conflict exists between the terms of this Agreement and the
Original Agreement, the terms of this Agreement shall control. Unless the
context otherwise requires, capitalized terms used in this Agreement shall have
the meanings given to them in Article 9 of this Agreement.
RECITALS:
A. The Purchaser, together with its subsidiaries, owns and operates,
and franchises to others, restaurants that do business under the Sizzler(R)
service xxxx in the United States and abroad, and owns and operates Kentucky
Fried Chicken(R) or KFC(R) restaurants in Queensland, Australia.
B. FFPE Holding is a newly formed Delaware corporation. The
Shareholders are the owners of all of the outstanding shares of capital stock of
FFPE Holding. The Principals are the officers and/or directors of FFPE Holding,
the Old Company and the New Company. Each of the Partnerships is a newly formed
Nevada limited partnership.
C. The New Company is a newly formed Delaware limited liability
company. The Selling Parties have represented to the Purchaser that (a) the New
Company has, or before the Closing Date will have, a single class of Membership
Interest and (b) the Sellers are, or before the Closing Date will be, the owners
of all of the outstanding Units of the New Company.
D. The New Company is, or on or before the Closing Date shall be, the
successor of, and the surviving entity in a merger with, the Old Company.
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E. The Old Company, a California corporation, has been engaged in the
operation of the Restaurants and, on or before the Closing, is expected to
become the predecessor to, and to merge into, the New Company.
F. On the terms and conditions set forth herein, (a) the Sellers desire
to sell, and the Purchaser desires to purchase, 82 units of the New Company,
which units (the "Purchased Units") shall represent 82% of all of the
outstanding Units of the New Company, and (b) the Selling Parties and the
Purchaser desire to carry out the Transactions.
AGREEMENT:
In consideration of the foregoing recitals and the mutual representations,
warranties, and covenants contained in this Agreement, the parties to this
Agreement agree as follows:
ARTICLE I
SALE OF LLC MEMBERSHIP INTEREST
Section 1.1 Sale of LLC Membership Interest. For the Purchase Price, and
subject to the terms and conditions herein stated, on the Closing Date the
Sellers shall sell, assign, transfer and deliver to the Purchaser, and the
Purchaser shall purchase and acquire from the Sellers, all of the Purchased
Units.
Section 1.2 Closing. The sale referred to in Section 1.1 (the "Sale")
shall take place at the offices of Sheppard, Mullin, Xxxxxxx & Xxxxxxx LLP, 000
X. Xxxxxxxx, Xxxxxxxxxx Xxxxx, Xxx Xxxxx, Xxxxxxxxxx 00000 at 10:00 A.M., PST,
on the Closing Date. The parties hereby agree that the effective time of the
Closing for Federal income tax purposes shall be at 12:01 A.M., PST, on the
Closing Date.
Section 1.3 Selling Parties' Deliveries. At the Closing, the Selling
Parties shall deliver or cause to be delivered, in form, substance and manner
reasonably satisfactory to the Purchaser, the following items:
(a) to the Purchaser's order, the Unit Certificates evidencing the
Purchased Units (which may bear any appropriate legend), duly endorsed by the
Sellers in blank as of the Closing Date or accompanied by a written assignment
of the Units executed by the Sellers and dated as of the Closing Date;
(b) a copy of the certificate of formation of the New Company,
including any certificate of merger required in connection with the
Reorganization, certified by the Secretary of State of the State of Delaware as
of a date not earlier than ten (10) days before the Closing Date;
(c) the original Limited Liability Company Agreement of the New
Company, executed by FFPE Holding (as amended to contemplate the addition of JBS
Investments, OMS Investments and TDM Enterprises as additional members of the
New Company);
(d) the Amended and Restated Limited Liability Agreement of the
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New Company, in the form attached to this Agreement as Exhibit 25.
(e) an Entity Good Standing Certificate with respect to the New
Company, dated as of a date no earlier than ten (10) days before the Closing
Date;
(f) a Tax Certificate with respect to the New Company, dated as of
a date no earlier than ten (10) days before the Closing Date;
(g) a certificate from the Secretary of State or other appropriate
official in each state in which the New Company is required to qualify to do
business, to the effect that the New Company is qualified to do business in such
state, as of a date not earlier than ten (10) days before the Closing Date;
(h) a copy of the certificate of incorporation of FFPE Holding,
certified by the Secretary of State of the State of Delaware as of a date not
earlier than ten (10) days before the Closing Date;
(i) a copy of the bylaws of FFPE Holding, certified by the
Secretary of FFPE Holding as of the Closing Date;
(j) an Entity Good Standing Certificate with respect to FFPE
Holding, dated as of a date no earlier than ten (10) days before the Closing
Date;
(k) a Tax Certificate with respect to FFPE Holding, dated as of a
date no earlier than ten (10) days before the Closing Date;
(l) a copy of the Board Resolutions of FFPE Holding, certified by
the Secretary of FFPE Holding as of the Closing Date;
(m) a copy of the articles of incorporation of the Old Company,
including any certificate of merger required in connection with the
Reorganization, certified by the Secretary of State of the State of California
as of a date not earlier than ten (10) days before the Closing Date;
(n) the bylaws of the Old Company, certified by the Secretary of
the Company as of the Closing Date;
(o) a copy of the Board Resolutions of the Old Company, certified
by the Secretary of the Old Company as of the Closing Date;
(p) copies or originals of all other agreements, instruments,
certificates, and documents executed, delivered, or filed by or among the
Selling Parties in connection with the Reorganization;
(q) the Call Option Agreement, executed by FFPE Holding and dated
as of the Closing Date;
(r) the Put Option Agreements, executed by FFPE Holding and dated
as of the Closing Date;
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(s) the Releases, fully executed by all parties thereto and dated
as of the Closing Date;
(t) the Consulting Agreements, executed by Oscar and Xxx,
respectively, and dated as of the Closing Date;
(u) the Employment Agreements, executed by the employees
thereunder and dated as of the Closing Date;
(v) the Warrants, in such denominations as FFPE Holding may
request, executed by FFPE Holding and dated as of the Closing Date;
(w) the Warrant Registration Rights Agreement, executed by the
holders of the Registrable Securities, as defined therein and dated as of the
Closing Date;
(x) the Pledge Agreement, executed by FFPE Holding and dated as of
the Closing Date;
(y) to the Purchaser's order, the Unit Certificate evidencing the
Retained Units (which may bear any appropriate legend), duly endorsed by FFPE
Holding in blank as of the Closing Date or accompanied by a written assignment
of the Units in blank executed by FFPE Holding and undated;
(z) Landlord Estoppel Certificates with respect to each of the
Company Real Property Leases, executed by or on behalf of the landlords or
lessors thereunder;
(aa) Written evidence of the cancellation or termination of all
outstanding Company Options, and the release of all Liabilities of the Company
and its Affiliates in connection therewith, by the holders of such Company
Options, subject only to delivery by the Company of the payment for such Company
Options;
(bb) Written evidence of the redemption or repurchase of all
outstanding shares of common stock of the Old Company issued pursuant to
exercise of Company Options, and the release by the holders thereof of all
Liabilities of the Company and its Affiliates in connection with the grant or
exercise of such Company Options, or the issuance of shares pursuant to such
exercise, and such redemption or repurchase;
(cc) a written agreement as to allocation of Purchase Price
pursuant to Section 1.10, executed by the Selling Parties;
(dd) such consent, waiver and estoppel certificate and release of
liens and other instruments with respect to Southwest Community Bank as the
Purchaser shall reasonably require;
(ee) any documents, instruments or actions in connection with the
drawdown or funding of a Revolving Loan under the Loan Documents reasonably
required by the Purchaser;
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(ff) the opinion of counsel to the Selling Parties, executed by
such counsel and dated as of the Closing Date; and
(gg) the Selling Parties' Closing Certificate, executed by the
Selling Parties and dated as of the Closing Date;
(hh) a written assumption of liability under the January 4 Note,
executed and delivered by the Shareholders;
(ii) a copy of the certificates of limited partnership for JBS
Investments, TDM Enterprises and OMS Investments, certified by the Secretary of
State of the State of Nevada as of a date not earlier than ten (10) days before
the Closing Date;
(jj) a copy of the articles of limited partnership for each of JBS
Investments, TDM Enterprises and OMS Investments;
(kk) an Entity Good Standing Certificate with respect to JBS
Investments, TDM Enterprises and OMS Investments, dated as of a date no earlier
than ten (10) days before the Closing Date;
(ll) Tax Certificates for each of JBS Investments, TDM Enterprises
and OMS Investments, dates as of a date no earlier than ten (10) days before the
Closing Date;
(mm) a certificate from the Secretary of State or other appropriate
official in each state in which JBS Investments, TDM Enterprises or OMS
Investments are required to qualify to do business, to the effect that such
limited partnerships are qualified to do business in such state, as of a date
not earlier than ten (10) days before the Closing Date;
(nn) An Indemnity Agreement in form and substance satisfactory to
Purchaser regarding that certain Real Property Lease relating to the Deer Valley
Restaurant;
(oo) A letter regarding the Phoenix Loan, executed by the lender
thereof, in form and substance satisfactory to the Purchaser;
(pp) A xxxx of sale, executed by SRA Ventures, LLC of the
assignment by SRA Ventures, LLC as assignor, of any right, title or interest it
may have in and to any personal property located at or used in connection with
the operation of the Restaurants, in form and substance satisfactory to the
Purchaser;
(qq) an option agreement executed by SRA Ventures, as optionor, for
the benefit of the Purchaser, as optionee, in the form attached hereto as an
exhibit.
Section 1.4 Purchaser's Deliveries. At the Closing, the Purchaser shall
deliver or cause to be delivered, in form, substance and manner reasonably
satisfactory to the Selling Parties, the following items:
(a) deposit of $15,200,000 of the Purchase Price into the Pay Off
Escrow;
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(b) deposit of $800,000 of the Purchase Price into the Adjustment
Escrow;
(c) the Warrants, executed by the Purchaser in favor of FFPE
Holding, in such denominations as FFPE Holding shall request and dated as of the
Closing Date;
(d) the Warrant Registration Rights Agreement, executed by the
Purchaser and dated as of the Closing Date;
(e) a copy of the Certificate of Incorporation of the Purchaser,
certified by the Secretary of State of the State of Delaware as of a date not
earlier than ten (10) days before the Closing Date;
(f) the bylaws of the Purchaser, certified by the Secretary of the
Purchaser as of the Closing Date;
(g) a copy of the Board Resolutions of the Purchaser, certified by
the Secretary of the Purchaser as of the Closing Date;
(h) an Entity Good Standing Certificate and a Tax Certificate with
respect to the Purchaser, dated as of a date not earlier than ten (10) days
before the Closing Date;
(i) the Call Option Agreement, executed by the Purchaser and dated
as of the Closing Date;
(j) the Put Option Agreements, executed by the Purchaser and dated
as of the Closing Date;
(k) the Pledge Agreement, executed by the Purchaser and dated as
of the Closing Date;
(l) the Consulting Agreements, executed by the New Company and
dated as of the Closing Date;
(m) the Employment Agreements, executed by the New Company and
dated as of the Closing Date;
(n) a written agreement as to allocation of Purchase Price
pursuant to Section 1.10, executed by the Purchaser;
(o) the drawdown or funding of the Revolving Loan (as defined
under the Loan Documents);
(p) a bond in the amount of $3.1 million from a surety or other
institution reasonably acceptable to FFPE Holding, securing the Purchaser's
obligations under Section 1.5(a)(i) of this Agreement. Purchaser shall have the
right to substitute a different bond or letter of credit (both of which must be
from a surety or bank reasonably acceptable to FFPE Holding and on terms and
conditions no less advantageous to FFPE Holding than the immediately preceding
bond or letter of credit) or in lieu of a different bond or letter of credit,
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place $3,100,000 in cash into an escrow account. In the event that Purchaser has
not paid the Additional Consideration by the Additional Consideration Payment
Date, then FFPE Holding shall have the right to pursue its remedies in
accordance with the terms of the bond, the letter of credit or the cash escrow,
as the case may be;
(q) the opinion of counsel to the Purchaser, executed by such
counsel and dated as of the Closing Date; and
(r) the Purchaser's Closing Certificate.
Section 1.5 Additional Consideration. On the terms and subject to the
conditions of this Section 1.5, within 20 business days after the determination
of the Additional Consideration (the "Additional Consideration Payment Date"),
the Purchaser shall pay or cause to be paid to FFPE Holding additional
consideration (the "Additional Consideration"), determined as follows:
(a) The amount of the Additional Consideration payable by the
Purchaser to FFPE Holding on the Additional Consideration Payment Date consists
of two components and shall be determined as follows:
(i) If, and only if, any of Net Sales, Restaurant EBITDA,
Total EBITDA or Number of Business Units for the Earn-Out Period exceeds the
Minimum Criteria as set forth in the Additional Consideration Table, then the
Purchaser shall pay to FFPE Holding the amount of Additional Consideration set
forth in the Additional Consideration Table, which amounts in the aggregate,
shall not exceed $3,100,000.
(ii) If, and only if, each of Net Sales, Restaurant EBITDA,
and Total EBITDA for the Earn-Out Period exceeds the Full Target, as set forth
in the Additional Consideration Table, and if the number of Business Units is at
least 18, then an additional amount shall be paid as follows: the Purchaser
shall pay to FFPE Holding (A) one-half (1/2) of the first $2,000,000 in Excess
Restaurant EBITDA, and (B) one-third (1/3) of any Excess Restaurant EBITDA that
is greater than such initial $2,000,000 Excess Restaurant EBITDA; provided,
however, that the Purchaser shall not be obligated to pay in excess of
$5,000,000 under clause (B) of Section 1.5(a)(ii) of this Agreement.
(b) Not later than May 1, 2003, the Purchaser shall compute the
amount of Net Sales, Restaurant EBITDA, Total EBITDA and Number of Business
Units for the Earn-Out Period, and the Purchaser shall provide to FFPE Holding
for its review and approval, the Purchaser's computations and working papers
reflecting how such computations were made. If the Sellers have any objections
to the computation of Net Sales, Restaurant EBITDA, Total EBITDA and Number of
Business Units for the Earn-out Period, they will deliver detailed statements
describing their objections to the Purchaser within 30 days after receiving the
Purchaser's computations and working papers reflecting how such computations
were made. The parties will use their reasonable efforts to resolve any such
objections. If, however, the parties do not obtain final resolution of this
matter within 30 days after the Purchaser has received the statements of
objections, the parties shall submit the dispute for resolution in the manner
and shall bear the costs thereof as described in Section 1.9(d). The
Accountant's determination of the amount of Net Sales, Restaurant EBITDA, Total
EBITDA and Number of Business Units for the Earn-Out Period shall be rendered by
the Accountant in a writing setting
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forth in reasonable specificity the reasons for each conclusion reached in its
decision. The Accountant's determination shall be binding upon all parties. The
Purchaser and FFPE Holding shall use their best efforts to aid the Accountant in
reaching a decision within 30 days from the date the dispute is tendered to the
Accountant. In computing the EBITDA for purposes of this Section, the Purchaser
shall make any adjustment required by the Intercompany Accounting procedures as
described on the EBITDA Adjustment Guidelines, attached as Exhibit 26.
Section 1.6 Sales and Transfer Taxes. The Purchaser shall bear the cost of
any and all Transfer Taxes applicable to the Sale.
Section 1.7 Pay Off Escrow.
(a) Before the Closing, the parties shall open an escrow (the "Pay
Off Escrow") for the purpose of ensuring the prior payment and satisfaction in
full of certain interests in and claims against the Company. The Pay Off Escrow
shall be opened at Chicago Title Company in Los Angeles, California or such
other institutional escrow holder mutually acceptable to the parties (the "Pay
Off Escrow Holder").
(b) The parties shall open the Pay Off Escrow by executing and
delivering, together with the Pay Off Escrow Holder, a written escrow agreement
(the "Pay Off Escrow Agreement"). The terms and conditions of the Pay Off Escrow
Agreement shall be consistent with this Agreement unless the parties otherwise
agree.
(c) On or before the Closing, FFPE Holding shall prepare a
schedule of holders of any Company Options or any shares of the Old Company's
common stock outstanding immediately before the merger contemplated as part of
the Reorganization (the "Scheduled Holders"). All of the Scheduled Holders shall
have agreed to the cancellation or termination of their Company Options or the
redemption or repurchase of their shares, as of immediately before such merger.
The schedule shall indicate the name, address, Social Security Number, amount of
securities, and termination or redemption price of such securities.
(d) At the Closing, the Purchaser shall deposit into the Pay Off
Escrow the cash portion of the Purchase Price described in Section 1.4(a) (the
"Pay Off Escrow Amount") and Purchaser and FFPE Holding shall deliver joint
written instructions to the Pay Off Escrow Holder (the "Payoff Escrow Payment
Instructions"). The Payoff Escrow Payment Instructions shall instruct the Pay
Off Escrow Holder to immediately disburse the Pay Off Escrow Amount, as follows:
(i) first, to the Pay Off Escrow Holder for its fees and
costs;
(ii) second, to the holder of the Xxxxxx Note in the amount
necessary to pay in full all indebtedness thereunder;
(iii) third, to the Scheduled Holders in their respective
amounts shown on the schedule;
(iv) fourth, to Xxxxxx Xxxxx in the amount necessary to pay
in full all indebtedness of the Company owed to him (other than the January 4
Note);
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(v) fifth, to Xxxxxxx, Xxxxxxx & Xxxxxxx in an amount to pay
in full all indebtedness of the Company owed to them;
(vi) sixth, to Sheppard, Mullin, Xxxxxxx & Hampton LLP in an
amount as indicated on the escrow instructions delivered to the Pay Off Escrow
Holder; and
(vii) seventh, to Sellers in accordance with their pro rata
ownership interests in the New Company.
(e) Upon delivery to the Pay Off Escrow Holder of the Payoff
Escrow Payment Instructions, the Pay Off Escrow Holder shall immediately
disburse the amount specified in such Payment Instructions.
(f) The Pay Off Escrow Amount may be invested by the Pay Off
Escrow Holder in certificates of deposit, U.S. governmental obligations, or
interest-bearing accounts as reasonably requested by FFPE Holding. All interest
accruing on the Pay Off Amount shall be for the benefit of FFPE Holding.
(g) The Pay Off Escrow Holder shall close the Pay Off Escrow as
soon as possible following execution of the Payoff Escrow Payment Instructions.
The Pay Off Escrow Holder shall provide a statement to each of FFPE Holding and
the Purchaser of all deposits, interest, costs and disbursements related to the
Pay Off Escrow Account. All Pay Off Escrow fees and costs shall be payable by
FFPE Holding.
Section 1.8 Adjustment Escrow.
(a) Before the Closing, the parties shall open an escrow (the
"Adjustment Escrow") for the purpose of ensuring the availability of cash to
satisfy any required adjustment to the Purchase Price under Section 1.9 hereof
(an "Adjustment"). The Adjustment Escrow shall be opened at Chicago Title
Company in Los Angeles, California or such other institutional escrow holder
mutually acceptable to the parties (the "Adjustment Escrow Holder"). The parties
shall open the Adjustment Escrow by executing and delivering, together with the
Adjustment Escrow Holder, written escrow agreement(s) and instructions (the
"Adjustment Escrow Agreement"). The terms and conditions of the Adjustment
Escrow Agreement shall be consistent with this Agreement unless the parties
otherwise agree.
(b) All amounts deposited by the Purchaser into the Adjustment
Escrow at the Closing, and any interest thereon (the "Holdback Amount"), shall
be retained in the Adjustment Escrow until termination of the Adjustment Escrow
or the earlier disbursement of all or any portion of the Holdback Amount in
satisfaction of any required Adjustment. The Holdback Amount may be invested by
the Adjustment Escrow Holder in certificates of deposit, U.S. governmental
obligations, or interest-bearing accounts as reasonably requested by FFPE
Holding. Subject to disbursement to the Purchaser in satisfaction of any
required Adjustment, all interest accruing on the Holdback Amount shall be for
the benefit of FFPE Holding.
(c) Promptly following the determination of the amount of any
Adjustment pursuant to Section 1.9, the Purchaser and FFPE Holding shall execute
and deliver joint written instructions to the Adjustment Escrow Holder regarding
the disbursement of the Holdback Amount in accordance with such Section (the
"Adjustment Payment Instructions").
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Upon delivery of the Adjustment Payment Instructions to the Adjustment Escrow
Holder, the Adjustment Escrow Holder shall promptly disburse the amounts to the
Persons specified in such Adjustment Payment Instructions.
(d) The Adjustment Escrow shall remain open until the earlier of
(a) the date on which all of the Holdback Amount has been disbursed pursuant to
the Adjustment Payment Instructions, (b) the last day of the sixth calendar
month following the Closing Date, unless the Adjustment Escrow Holder has
theretofore received written notice from Purchaser to the effect that there is a
claim of Adjustment to which the Purchaser believes it is entitled under Section
1.9, which is unpaid, and which is the subject of pending litigation,
arbitration or other dispute resolution proceeding not anticipated to be
completed on or before such six-month expiration, or (c) the date of termination
set forth in any joint written instructions from the Purchaser and FFPE Holding
or any judgment or order of the court delivered to the Adjustment Escrow Holder,
in either case to the effect that the Adjustment Escrow has been or shall be
terminated (any such date, a "Termination Date").
(e) As soon as practicable following a Termination Date, the
Adjustment Escrow Holder shall do the following:
(i) close the Adjustment Escrow;
(ii) disburse to the Purchaser, out of the Holdback Amount,
any amounts as to which the Adjustment Escrow Holder had theretofore received
Payment Instructions to pay to the Purchaser but that remain undisbursed as of
the Termination Date;
(iii) unless otherwise instructed by FFPE Holding, distribute
all of the Holdback Amount remaining after any disbursement required by Section
1.8(e)(ii) hereof to FFPE Holding; and
(iv) deliver to Purchaser and FFPE Holding an accounting of
the receipt, investment, and all disbursements of the Holdback Amount and all
Adjustment Escrow fees and costs.
(f) All Adjustment Escrow fees and costs shall be payable by
Purchaser.
Section 1.9 Purchase Price Adjustment.
(a) The Purchase Price shall be subject to reduction after the
Closing Date (i) in the amount, if any, by which Closing Indebtedness exceeds
$4,236,000 (the "Closing Indebtedness Overage") and (ii) in the amount, if any,
by which Closing Current Liabilities less Closing Current Assets exceeds
$745,000 (the "Working Capital Deficiency"), determined as set forth in this
Section.
(b) The Purchase Price shall be subject to increase after the
Closing Date by an amount equal to (i) the amount, if any, by which Closing
Indebtedness is less than $4,236,000 (the "Closing Indebtedness Deficiency") and
(ii) the amount, if any, by which Closing Current Assets less Closing Current
Liabilities (the "Working Capital Excess") exceeds $600,000.
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(c) Promptly following the Closing, FFPE Holding shall prepare,
and cause the New Company's certified public accountants to audit, consolidated
financial statements of the New Company as of the Closing Date prepared in
accordance with GAAP and with such adjustments and reserves as may be required
by Section 4.10 (the "Closing Financial Statements"). On the basis of the
Closing Financial Statements, the New Company's accountants shall compute
Closing Indebtedness, Closing Current Assets, Closing Current Liabilities and
Closing Current Indebtedness. In making their computations, the accountants
shall not consider Current Assets to include cash in the amount of any unpaid
non-working capital items. The New Company shall deliver the Closing Financial
Statements and the computations to the Purchaser within 60 days after the
Closing Date. If within thirty days following delivery of the Closing Financial
Statements and the computations, the Purchaser has not given FFPE Holding notice
of its objection thereto (such notice to contain a statement of the basis of the
Purchaser's objection), then the Closing Indebtedness, Closing Current Assets,
Closing Current Liabilities and Closing Current Indebtedness included in the
computation shall be used to determine the Closing Indebtedness Overage, Closing
Indebtedness Deficiency, the Working Capital Deficiency, and Working Capital
Excess, if any.
(d) If the Purchaser gives such notice of objection, and the
parties fail to resolve such objection within thirty (30) days, then the issues
in dispute will be submitted to a "Big Five" accounting firm (the "Accountants")
for resolution. If issues are submitted to the Accountants for resolution, (i)
each party will furnish to the Accountants such work papers and other documents
and information relating to the disputed issues as the Accountants may request
and are reasonably available to that party, and will be afforded the opportunity
to present to the Accountants any material relating to the determination and to
discuss the determination with the Accountants; (ii) the determination by the
Accountants, as set forth in a notice delivered to both parties by the
Accountants, will be binding and conclusive on the parties; and (iii) the
Purchaser and FFPE Holding will each bear 50% of the fees of the Accountants for
such determination.
(e) If as finally determined either the Closing Indebtedness
Overage is greater than zero or the Working Capital Deficiency is greater than
zero, then on the tenth business day following the final determination of such
amounts, FFPE Holding shall pay to the Purchaser an amount equal to the Closing
Indebtedness Overage and the Working Capital Deficiency, as the case may be. All
payments will be made together with interest at 8% compounded daily beginning on
the Closing Date and ending on the date of payment. Payment must be made in
immediately available funds. At FFPE Holding's option, payment may be made by
either check, wire transfer, or disbursement from the Adjustment Escrow pursuant
to Adjustment Payment Instructions to the Adjustment Escrow Holder.
(f) If as finally determined either the Closing Indebtedness
Deficiency is greater than zero or the Working Capital Excess is greater than
zero, then on the tenth business day following the final determination of such
amounts, the Purchaser shall pay to FFPE Holding an amount equal to the Closing
Indebtedness Deficiency and the Working Capital Excess, as the case may be. All
payments will be made together with interest at 8% compounded daily beginning on
the Closing Date and ending on the date of payment. Payment must be made in
immediately available funds. At the Purchaser's option, payment may be made by
either check or wire transfer.
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Section 1.10 Allocation of Purchase Price. For federal and state income
tax purposes, Sellers and Purchaser agree that (i) the transactions described in
Section 1.1 (Sale of LLC Membership Interest) are properly treated and shall be
reported by Sellers and Purchaser as a sale by Sellers and purchase by Purchaser
in the aggregate of an 82% interest as a member in the capital and profits of
the New Company, (ii) the New Company is and shall be treated by Sellers and
Purchaser as a partnership governed by subchapter K of the Code, and (iii) the
consideration received or to be received for such 82% membership interest in
such sale and purchase for all purposes of the Code consists of the Purchase
Price and 82% of the liabilities of the New Company as of the time of such sale
and purchase (in connection with which and for all such purposes, including
without limitation the determination of the Purchaser's basis in such 82%
membership interest and the gain or loss of Sellers with respect to the sale
thereof, the parties shall treat the Additional Consideration in accordance with
the "open transaction" method of reporting) (such consideration, as it may be
adjusted from time to time in accordance with such method of reporting, is
referred to herein as the "Tax Purchase Price"). Sellers acknowledge that
Purchaser intends to cause the New Company to make an election under Section 754
of the Code in connection with such sale and purchase, and Sellers agree to
execute such documents as may reasonably be required for them to execute in
order for the New Company to make such election. For purposes of Sections 743,
755, 1060 and any other applicable provisions of the Code or regulations
thereunder, the Tax Purchase Price shall be allocated among the assets of the
Company with respect to Purchaser consistent with the allocations set forth in a
schedule to be prepared by the parties on or before the Closing. In connection
with such allocation, the parties acknowledge and agree that no portion of the
Tax Purchase Price shall be allocated to the covenants of the Principals in
Section 4.9 hereof (Non-Competition), it being understood that the Principals
have entered into such covenants solely in consideration of the execution of
this Agreement by the other parties hereto and not in consideration of any
portion of the Tax Purchase Price. The determination of the initial Book Value
of assets of the New Company, within the meaning of Section 1.8 of the Amended
and Restated Limited Liability Operating Agreement attached as Exhibit 25, as of
the constructive formation of the New Company a tax partnership pursuant to
Treasury Regulations Section 301.7701-2(f)(2) upon the transfer of interests in
the New Company from FFPE Holding to the Partnerships, shall be made in a manner
consistent with the foregoing allocation of the Tax Purchase Price and shall be
adjusted from time to time to reflect Additional Consideration paid.
ARTICLE II
REPRESENTATIONS OF THE SELLING PARTIES
Except as otherwise set forth in the Selling Parties' Disclosure Schedule,
each of the Selling Parties represent and warrant as follows:
Section 2.1 Existence and Good Standing.
(a) FFPE Holding is a corporation duly incorporated, validly
existing and in good standing under the laws of Delaware and has all requisite
corporate power and authority to own, lease and operate its properties and to
carry on its business as now being conducted. FFPE Holding is duly qualified or
licensed and in good standing to do business in each jurisdiction in which the
character or location of the property owned, leased or operated by it or the
nature of the business conducted by it makes such qualification necessary.
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(b) The New Company is a limited liability company duly organized,
validly existing and in good standing under the laws of Delaware and has all
requisite power and authority to own, lease and operate its properties and to
carry on its business as now being conducted. The New Company is duly qualified
or licensed and in good standing to do business in each jurisdiction in which
the character or location of the property owned, lease or operated by it or the
nature of the business conducted by it makes such qualification necessary. The
New Company has not elected to be treated as an association for federal tax
purposes pursuant to United States Treasury Regulations Section 301.7701-3(c).
(c) The Old Company is a corporation duly incorporated, validly
existing and in good standing under the laws of California and has all requisite
corporate power and authority to own, lease and operate its properties and to
carry on its business as now being conducted. The Old Company is duly qualified
or licensed and in good standing to do business in each jurisdiction in which
the character or location of the property owned, lease or operated by it or the
nature of the business conducted by it makes such qualification necessary.
(d) JBS Investments is a duly formed limited partnership and is
existing in good standing under the laws of Nevada and has all requisite power
and authority to own, lease and operate its properties and to carry on its
business as now being conducted.
(e) OMS Investments is a duly formed limited partnership and is
existing in good standing under the laws of Nevada and has all requisite power
and authority to own, lease and operate its properties and to carry on its
business as now being conducted.
(f) TDM Enterprises is a duly formed limited partnership and is
existing in good standing under the laws of Nevada and has all requisite power
and authority to own, lease and operate its properties and to carry on its
business as now being conducted.
Section 2.2 Capital Stock.
(a) The New Company will, as of the Closing, have an authorized
capitalization consisting of one hundred (100) Units of Membership Interest, of
which 100 Units as of the Closing will be issued and outstanding. No other Units
of Membership Interest are authorized or issued. All issued and outstanding
Units are duly authorized, validly issued, fully paid and non-assessable. There
are no outstanding subscriptions, options, warrants, rights, puts, calls,
pre-emptive rights, commitments, conversion rights, rights of exchange, plans or
other agreements of any kind relating to any of the outstanding, authorized but
unissued or unauthorized shares of or units of equity interest in, or any other
security of the New Company, and there is no authorized or issued security of
any kind convertible into or exchangeable, for any such capital stock or other
security, other than as contemplated by this Agreement.
(b) The Old Company has an authorized capitalization consisting of
one class of capital stock, designated as common stock, of which 1,320,000
shares are issued and outstanding. No other shares of capital stock are
authorized or issued. All issued and outstanding subscriptions, options,
warrants, rights, puts, calls, preemptive rights, commitments, conversion
rights, rights of exchange, plans or other agreements of any kind relating to
any of the outstanding, authorized but unissued or unauthorized shares of or
units of equity interest in, or
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any other security of the Old Company, and there is no authorized or issued
security of any kind convertible into or exchangeable, for any such capital
stock or other security, other than as contemplated by this Agreement.
Section 2.3 Subsidiaries. The only Company Subsidiary is Oscar's of
Arizona, LLC (the "Arizona LLC"). The Company is the sole member of the Arizona
LLC. The Company owns its membership interest in the Arizona LLC free and clear
of any Encumbrance. The Company's membership interest in the Arizona LLC has
been duly authorized, validly issued, fully paid and is non-assessable and was
issued free of preemptive rights and in compliance with applicable laws. No
equity securities of the Arizona LLC are or may become required to be issued or
purchased by reason of any options, warrants, rights to subscribe to, puts,
calls or commitments of any character whatsoever relating to, or securities or
rights convertible into or exchangeable for, membership interests of the Arizona
LLC, and there are no contracts, commitments, understandings or arrangements by
which the Arizona LLC is bound to issue additional membership interests, or
options, warrants or rights to purchase or acquire any additional membership
interests or securities convertible into or exchangeable for such membership
interests.
Section 2.4 Ownership of Stock. The Sellers, on or before the Closing,
will be the lawful owners of all of the Units. On or before the Closing, the
Units will be free and clear of any Encumbrances, other than restrictions
imposed by applicable securities laws. The delivery to the Purchaser of the
Units at Closing pursuant to the provisions of this Agreement will transfer to
the Purchaser valid title thereto, free and clear of any and all Encumbrances.
Section 2.5 Authorization and Validity of Agreement. Each of the Selling
Parties has the full capacity to execute and deliver this Agreement, to perform
such Selling Party's respective obligations hereunder and to consummate the
Transactions and the Reorganization. This Agreement has been duly executed and
delivered by each of the Selling Parties and, assuming the due execution of this
Agreement by the Purchaser, is a valid and binding obligation of each of the
Selling Parties, enforceable against each such Selling Party in accordance with
its terms, except to the extent that its enforceability may be subject to the
Enforceability Exceptions.
Section 2.6 Governmental Approvals. No Consent of any Governmental
Authority on the part of any of the Selling Parties or Company Subsidiaries is
required in connection with the execution or delivery by any of the Selling
Parties of this Agreement or the consummation by the Selling Parties of the
Transactions, other than pursuant to the HSR Act, approvals by state alcoholic
beverage control authorities, and any required state or federal securities law
filings in connection with any solicitation of the holders of Company Options or
with the Warrants.
Section 2.7 Consents and Approvals; No Violations. The execution and
delivery of this Agreement, the consummation of the Transactions and compliance
by the Selling Parties with the provisions hereof will not (a) conflict with or
result in any breach of any provision of the charter documents of the Sellers,
the Company or any of the Company Subsidiaries, (b) require any Consent under or
result in a violation or breach of or constitute (with or without due notice or
lapse of time or both) a default (or give rise to any right of termination,
cancellation, payment or acceleration) under any of the terms, conditions or
provisions of any agreement or other instrument involving in excess of $10,000
to which FFPE Holding, the Company or any Company Subsidiaries are parties or by
which their respective assets are bound, (c) result in the
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creation or imposition of any Encumbrance upon any of the outstanding shares of
the capital stock or units of membership interest or assets of the Sellers, the
Company or any Company Subsidiary, or (d) subject to obtaining the Consents from
Governmental Authorities referred to in Section 4.4(a) hereof, contravene any
provision of any Law to which the Sellers, the Company or any Company Subsidiary
or its or any of their respective assets or properties are subject.
Section 2.8 Company Financial Statements. The Selling Parties have made
available to the Purchaser true and complete copies of the Company Financial
Statements. The Company Financial Statements other than the Interim Statement
have been prepared in accordance with GAAP (except as may be indicated therein
or in the notes thereto) and present or will present fairly, in all material
respects, the financial position of the Company and the Company Subsidiaries as
at the dates thereof and the results of their operations and cash flows for the
periods then ended, subject, in the case of any unaudited interim financial
statements included within the Company Financial Statements, to normal year-end
audit adjustments. All accounts receivable of the Company, whether reflected in
the Company Financial Statements or otherwise, represent sales actually made in
the ordinary course of business, and are current and collectible net of any
reserves shown in the Company Financial Statements filed prior to the date
hereof.
Section 2.9 Absence of Certain Changes or Events; No Undisclosed
Liabilities. Since December 31, 1999, there has not been: (a) any event that has
had or would reasonably be expected to have a Company Material Adverse Effect,
(b) any declaration, payment or setting aside for payment of any dividend or
other distribution or any redemption or other acquisition of any shares of
capital stock or securities of the Company by the Company or any Company
Subsidiary (other than to shareholders to allow them to pay their taxes on 1999
income) (c) any material damage or loss to any material asset or property,
whether or not covered by insurance, or (d) any change by the Company in
accounting principles or practices. Since December 31, 1999, there has not been
any action taken by any Selling Party, or any Company Subsidiary that, if taken
during the period from the date of this Agreement through the Closing Date,
would constitute a breach of Section 4.1. Except for those liabilities that are
fully reflected or reserved against on the balance sheet of the Company included
in the Company Financial Statements and for liabilities incurred in the ordinary
course of business consistent with past practice, since December 31, 1999,
neither the Company nor any of the Company Subsidiaries has incurred any
liability or any nature whatsoever (whether absolute, accrued, contingent or
otherwise and whether due or to become due).
Section 2.10 Litigation. There is no action, suit or proceeding at law or
in equity by any Person or any arbitration or any administrative or other
proceeding by or before any Governmental Authority pending or, to the Selling
Parties' Knowledge, threatened against the Company or any of the Company
Subsidiaries.
Section 2.11 Contracts.
(a) There are no Company Contracts that are not listed in the
Selling Parties' Disclosure Schedule. All Company Contracts are valid and
binding and are in full force and effect and enforceable by the Company or
Company Subsidiary, as applicable, in accordance with their respective terms,
subject to the Enforceability Exceptions. Neither the Company nor any of the
Company Subsidiaries is in violation or breach of or default under any Company
Contract.
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(b) All payments owed by the Company or any Company Subsidiary on
any Company Contract have been paid. The Company has not received written notice
that it is in default under any Company Contract. There exists no event,
occurrence, condition or act which, with the giving of notice, the lapse of time
or the happening of any further event or condition, would give rise to a right
in favor of any Person party to a Company Contract to accelerate the obligations
of the Company or Company Subsidiary under the Company Contract or otherwise
become a default by the Company or Company Subsidiary under such Company
Contract.
(c) Neither the Company nor any Company Subsidiary is a party to,
or has any of its assets or properties subject to, any agreement, arrangement or
understanding (written or oral) with any other Person (including a Company
Subsidiary or an Affiliate of the Company or of any Company Subsidiary), which
(i) provides capital, surplus, balance sheet or any other form of economic or
financial support to such other person other than the Arizona LLC, (ii)
guarantees the obligations of, or performance of any acts, by such other Person,
or (iii) imposes legal liability on the Company or any Company Subsidiary for
any payments (contingent or otherwise) under any third-party note, guarantee,
debt, bond, mortgage, indenture, contract, lease, license, agreement or
instrument, in each case (i), (ii) and (iii) in an amount in excess of $10,000.
Section 2.12 Employee Benefit Plans. For purposes of this Section 2.12,
the term "Company" shall include all members of the "Controlled Group of
Employers," which includes all entities that would be aggregated with the
Company pursuant to Code Section 414.
(a) The Selling Parties' Disclosure Schedule contains a true and
complete list of all Company Employee Benefit Plans.
(i) Each Company Employee Benefit Plan (and each related
trust, insurance contract, or fund) (other than any Multiemployer Plan) complies
in form and in operation in all material respects with the applicable
requirements of ERISA, the Code, and other applicable laws and has been operated
in all material respects in accordance with the terms of each such plan's
document.
(ii) All required reports and descriptions (including, as
applicable, Form 5500 Annual Reports, summary annual reports, PBGC-1's, and
summary plan descriptions) have been filed or distributed appropriately with
respect to each such Company Employee Benefit Plan (other than any Multiemployer
Plan). The requirements of Part 6 of Subtitle B of Title I of ERISA and of Code
Sec. 4980B have been met in all material respects with respect to each such
Company Employee Benefit Plan which is a "group health plan" (as such term is
defined in Section 607(1) of ERISA and Section 5000(b)(1) of the Code).
(iii) All contributions (including all employer contributions
and employee salary reduction contributions) which are due under any Company
Employee Benefit Plan which is an Employee Pension Benefit Plan have been paid
to each Company Employee Benefit Plan in a timely manner and all contributions
for any period ending on or before the Closing Date which are not yet due have
been paid to each Company Employee Pension Benefit Plan or accrued in accordance
with GAAP. All premiums or other payments required to be paid under each Company
Employee Benefit Plan which is an Employee Welfare Benefit Plan for all
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periods ending on or before the Closing Date have been paid in a timely manner
with respect to each such plan.
(iv) Each Company Employee Benefit Plan which is an Employee
Pension Benefit Plan intended to meet the requirements of a "qualified plan"
under Code Sec. 401(a) (other than Multiemployer Plan) has received a favorable
determination letter from the Internal Revenue Service with respect to the
tax-qualified status of the plan and, to the Selling Parties' Knowledge, no
event has occurred and no condition exists which would reasonably be expected to
result in the revocation of any such determination.
(v) The market value of the assets under each Company
Employee Benefit Plan which is an Employee Pension Benefit Plan (other than any
Multiemployer Plan) subject to Title IV of ERISA equals or exceeds the present
value of all vested and nonvested accumulated benefit liabilities thereunder as
of the close of its most recent plan year determined in accordance with the
methods, factors, and assumptions used by such plan's actuary.
(vi) The Selling Parties have delivered to the Purchaser
correct and complete copies of (as applicable) the plan documents and summary
plan descriptions, the most recent determination letter received from the
Internal Revenue Service, the most recent Form 5500 Annual Report, and all
related trust agreements, insurance contracts, and other funding agreements
which implement each Company Employee Benefit Plan (other than any Multiemployer
Plan).
(b) No Company Benefit Plan which is subject to Title IV of ERISA
(other than any Multiemployer Plan) has been completely or partially terminated
(other than in a standard termination under ERISA Section 4041(b)) or has been
the subject of a reportable event, within the meaning of ERISA Section 4043(c),
which would reasonably be expected to result in a liability of the Company. No
proceeding by the PBGC to terminate any such Company Benefit Plan (other than
any Multiemployer Plan) has been instituted or, to the Selling Parties'
Knowledge, threatened.
(c) There have been no Prohibited Transactions with respect to any
Company Benefit Plan, which would reasonably be expected to result in a
liability of the Company. To the Selling Parties' Knowledge, no fiduciary has
any liability for breach of fiduciary duty under, or any other failure to act or
comply with, the applicable requirements of Part 4 of subtitle B of Title I of
ERISA, in connection with the administration or investment of the assets of any
such Company Benefit Plan, other than any Multiemployer Plan, which would
reasonably be expected to result in a liability of the Company. No action, suit,
proceeding, hearing, or investigation with respect to the administration or the
investment of the assets of any such Company Benefit Plan (other than
Multiemployer Plan) (other than routine claims for benefits) is pending or, to
the Selling Parties' Knowledge, is any of the foregoing threatened. Neither the
Selling Parties nor, to the Selling Parties' Knowledge, the directors and
officers (and employees with responsibility for employee benefits matters) of
the Company has any knowledge of any event which has occurred or condition which
exists that would reasonably be expected to result in any such action, suit,
proceeding, hearing, or investigation.
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(d) The Company has not incurred and, to the Selling Parties'
Knowledge, no event has occurred and no condition exists that would reasonably
be expected to result in the incurrence by the Company of, any liability to the
PBGC (other than PBGC premium payments) or otherwise under Title IV of ERISA
(including any Withdrawal Liability, as that term is defined below) or under the
Code with respect to any such Company Benefit Plan which is an Employee Pension
Benefit Plan intended to be qualified under Section 401(a) of the Code.
(e) The Company has not incurred any unsatisfied withdrawal
liability under Part 1 of Subtitle E of Title IV of ERISA ("Withdrawal
Liability") to any Multiemployer Plan, and, to the Selling Parties' Knowledge,
if, as of the close of the most recent fiscal year of any Multiemployer Plan to
which any of them contributes, the Company or any such member were to engage in
a complete withdrawal (as defined in Section 4203 of ERISA) from any such
Multiemployer Plan, neither the Company nor any such member would incur
Withdrawal Liability.
(f) The Company does not maintain or ever has maintained or
contributed, or ever has been required to contribute to any Employee Welfare
Benefit Plan providing medical, health, or life insurance or other welfare-type
benefits for current or future retired or terminated employees, their spouses,
or their dependents (other than in accordance with Code Sec. 4980B or any
applicable state law).
(g) None of the persons performing services for the Company have
been improperly classified as being independent contractors, leased employees,
or as being exempt from the payment of wages for overtime.
(h) None of the assets of any Benefit Plan that is a "pension
plan" within the meaning of Section 3(2) of ERISA are invested in a group
annuity contract or other insurance contract that is subject to any surrender
charge, interest rate adjustment, or other similar expense upon its premature
termination.
(i) No Benefit Plan is of a (i) "multiple employer welfare
arrangement," as that term is defined in ERISA Section 3(40) or (ii) a "welfare
benefit fund," as that term is defined in Code Section 419(e).
Section 2.13 Employment Agreements. The Selling Parties have identified in
the Selling Parties' Disclosure Schedule, and have made available to the
Purchaser, true and complete copies of (1) all severance, employment consulting
and other agreements with directors, executive officers, key employees or
consultants of the Company; (2) all severance programs and policies of each of
the Company and each Company Subsidiary with or relating to Employees or
directors; and (3) all plans, programs, agreements and other arrangements of
each of the Company and each Company Subsidiary with or relating to Employees
which contain change in control provisions. Except for the amount of the
payments due under such agreements, programs, policies, plan or other
arrangements referred to in the preceding sentence, neither the execution and
delivery of this Agreement nor the consummation of the Transactions will (either
alone or in conjunction with any other event, such as termination of employment)
(A) result in any payment (including, without limitation, severance,
unemployment compensation, golden parachute or otherwise) becoming due to any
director or any employee of the Company
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or any Company Subsidiary or Affiliate under any Employee Benefit Plan or
otherwise, (B) increase any benefits otherwise payable under any Employee
Benefit Plan or (C) result in any acceleration of the time of payment or vesting
of any benefits.
Section 2.14 Taxes.
(a) The Company has filed or caused to be filed all returns and
reports for Taxes ("Tax Returns") required to be filed by, or with respect to,
the Company on or prior to the date hereof and has timely paid all Taxes shown
to be due on such Tax Returns. All such Tax Returns were correct and complete in
all respects.
(b) All Taxes and Liabilities for Taxes of the Company or of the
Selling Parties relating to the Company due and payable by the Company or for
which the Company or its assets may be responsible and which are due and payable
have been paid. All Taxes attributable to all taxable periods ending on or
before the Closing Date (other than taxes attributable to the transfer of the
Purchased Units in accordance with Section 1.1 hereof), to the extent not
required to be previously paid, have been fully and adequately reserved for on
the books and records of the Company and the Company will not accrue a Tax
liability after the date hereof up to the time immediately before Closing other
than a Tax liability accrued in the ordinary course of business.
(i) There is no audit, assessment or claim now pending or,
to the Selling Parties' Knowledge, threatened by any taxing authority regarding
any Taxes relating to the Company for the Pre-Closing Period or for which the
Company or its assets may be responsible. No claim has ever been made in writing
by an authority in a jurisdiction where the Company does not file Tax Returns
that it is or may be subject to taxation by that jurisdiction for the
Pre-Closing Period.
(ii) The Company has not been included in any "consolidated,"
"unitary" or "combined" Tax Return provided for under the law of the United
States, any foreign jurisdiction or any state or locality with respect to Taxes
for any taxable period for which the statute of limitations has not expired.
(iii) There are no agreements for the extension or waiver of
the time for assessment of any Taxes relating to the Company for any Pre-Closing
Period, and the Company has not been requested to enter into any such agreement
or waiver.
(iv) The Company has withheld and paid all Taxes required to
have been withheld and paid in connection with amounts paid or owing to any
employee, independent contractor, creditor, stockholder or other third party.
(v) There are no tax sharing or allocation agreements in
effect as between the Company and any other party (including, without
limitation, any of FFPE Holding and any predecessor or Affiliate of any of the
Selling Parties other than the Company) under which the Purchaser or the Company
could be liable for any Taxes after the Closing Date.
(c) Effective for the tax year beginning January 1, 1993, Old
Company duly and timely filed an election, executed by all persons whose
signatures were required on such election, to be treated as an "S" corporation
on IRS Form 2553 in accordance with the
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instructions on that form, and from and after such date, Old Company has been
duly qualified as an "S" corporation as defined in the Code, and Old Company has
been entitled to be so treated as an "S" corporation during such period.
(d) There are no liens for Taxes (other than for current Taxes not
yet due and payable) upon the assets of the Company.
Section 2.15 Intellectual Property
(a) The Company or the Company Subsidiaries own, or are licensed
or otherwise possess legally enforceable rights to use all Company Intellectual
Property.
(b) There are no conflicts with or infringements of any Company
Intellectual Property by any third party and the conduct of the Business does
not conflict with or infringe any proprietary rights of any third party.
(c) The Selling Parties' Disclosure Schedule contains a complete
list of all material trademarks, registrations, and applications pertaining to
the Company Intellectual Property. All such Company Intellectual Property so
listed is owned by the Company and/or the Company Subsidiaries, free and clear
of any Encumbrances.
(d) There are no licenses, sublicenses or other agreements under
which any of the Selling Parties or any of the Company Subsidiaries have granted
rights to any Person to use the Company Intellectual Property. Neither any of
the Selling Parties nor any Company Subsidiary will, as a result of the
execution and delivery by the Selling Parties or the performance by the Selling
Parties of their respective obligations under this Agreement, be in breach of
any license, sublicense or other agreement relating to the Company Intellectual
Property.
(e) The Company and each of the Company Subsidiaries own or have
the right to use all computer and point-of-sale hardware and software currently
used in and material to the Business, on a per user basis.
(f) All Company Intellectual Property was developed by employees
of the Company within the scope of their employment or independent contractors
as "works-made-for-hire" as that term is defined under Section 101 of the United
States copyright laws, pursuant to written agreements.
Section 2.16 Insurance. The Selling Parties' Disclosure Schedule sets
forth a true and complete list of all insurance policies (in effect currently or
at any time during the previous four years) carried by, or covering the Company
and the Company Subsidiaries, with respect to the Business and their respective
assets and properties, other than as is indicated on the Selling Parties'
Disclosure Schedule, together with, in respect of each such policy, the amount
of coverage and the deductible. Other than as is indicated on the Selling
Parties' Disclosure Schedule, each insurance policy listed in the Selling
Parties' Disclosure Schedule is in full force and effect and all premiums due
thereon have been paid in full for those policies in effect currently or in
effect at any time during the previous four years).
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Section 2.17 Title to Properties. The Selling Parties' Disclosure Schedule
sets forth a true and complete list of all Company Real Property (other than
Company Real Property Leases). The Company Real Property set forth in the
Selling Parties' Disclosure Schedule comprises all of the real property
currently used in the operation of the Business.
Section 2.18 Leases. The Selling Parties' Disclosure Schedule sets forth a
true and complete list of all Company Real Property Leases. Each Company Real
Property Lease is a valid leasehold interest and is in full force and effect.
All rents, additional rents and other amounts owed by Company or any Company
Subsidiary under any Company Real Property Lease have been paid. Each of the
Company and the Company Subsidiaries enjoys peaceful and undisturbed possession
under all Company Real Property Leases. The Company is not currently in default
under any Company Real Property Lease. The Company Real Property Leases are free
and clear of all Encumbrances, except for Permitted Encumbrances. The
consummation of the Transactions will not create any Encumbrance (other than
Permitted Encumbrances) on any of the Company Real Property. There exists no
event, occurrence, condition or act which, with the giving of notice, the lapse
of time or the happening of any further event or condition, would become a
default by the Company under any Company Real Property Lease.
Section 2.19 Environmental, Health and Safety Matters.
(a) No Hazardous Substances have been generated, treated, stored,
release or disposed of, or otherwise placed, deposited in or located any Company
Real Property, by the Company or, to FFPE Holding's knowledge, any other Person,
except in compliance with all applicable Laws.
(b) To Selling Parties' Knowledge, no activity has been undertaken
on any Company Real Property that would cause or contribute to (i) any Company
Real Property becoming a treatment, storage or disposal facility in violation of
RCRA or any similar state law or local ordinance, (ii) a release or threatened
release of any Hazardous Wastes from the Company Real Property in violation of
CERCLA or any similar state law or local ordinance, or (iii) the discharge of
pollutants or effluents into any water source or system, the dredging or filling
of any waters or the discharge into the air of any emissions, for which the
Company does not have all required Permits under the Federal Water Act or the
Clean Air Act or any similar state law or local ordinance.
(c) To Selling Parties' Knowledge, there are no substances or
conditions in or on the Company Real Property that may support a claim or cause
of action under any Environmental, Health and Safety Laws.
(d) To Selling Parties' Knowledge, there are no above ground or
underground tanks that have been located under, in or about the Company Real
Property which have been subsequently removed or filled.
(e) Neither the Sellers nor the Company or any Company
Subsidiaries has received any written notice, report or other information
regarding any actual or alleged violation of Environmental, Health and Safety
Laws, or any liabilities or potential liabilities (whether accrued, absolute,
contingent, unliquidated or otherwise), including any investigatory,
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remedial or corrective obligations, relating to the Company and the Company
Subsidiaries or their properties arising under Environmental, Health and Safety
Laws.
Section 2.20 Compliance with Laws. The Business has been operated in
compliance with all Laws applicable thereto, other than any failure of
compliance which would involve an amount less than $10,000.
Section 2.21 Permits. The Company and each of the Company Subsidiaries
have all Company Permits. All Company Permits are in full force and effect.
Neither the Company nor any Company Subsidiary is in violation of any Company
Permit. No proceedings are pending or, to the Selling Parties' Knowledge,
threatened to revoke or limit any Company Permit or to limit the manner in which
the Company conducts the Business.
Section 2.22 Operations. Each Restaurant is supplied with utilities
(including, without limitation, water, sewage, disposal, electricity, gas and
telephone) and other services necessary for the operation of such facility as
currently operated, and, to the Selling Parties' Knowledge, there is no
condition which would reasonably be expected to result in the termination or
material modification of the present access from the Restaurant to or materially
increase the cost of such utility services.
Section 2.23 Labor Matters. Neither the Company nor any Company Subsidiary
is a party to any labor agreement with respect to their respective employees
with any labor organization, union or group. As to the employees, no labor
organization or group of employees has made a pending demand which has been
served upon the Company or any Company Subsidiary for recognition or
certification, and there are no representation or certification proceedings or
petitions seeking a representation proceeding pending which has been served upon
the Company or any Company Subsidiary nor are any such proceedings or petitions
threatened to be brought or filed, with the National Labor Relations Board or
any other labor relations tribunal or authority. There are no strikes, work
stoppages, slowdowns, lockouts, arbitrations or grievances, or other labor
disputes pending or, to the Selling Parties' Knowledge, threatened against the
Selling Parties or its Affiliates involving the Employees, nor are there any
organizing activities pending.
Section 2.24 Transactions with Affiliates. The Selling Parties' Disclosure
Schedule identifies all contracts, commitments and agreements (other than
ordinary and customary executive benefits) in effect as of the date hereof by
and between (A) the Company or any Company Subsidiary on the one hand and any of
the Selling Parties or other Affiliate of the Company on the other hand.
Section 2.25 Broker's or Finder's Fees. Except for the fees of Xxxxxxxx,
Xxxxxxx & Xxxxxxx (for which FFPE Holding shall be solely responsible), no
agent, broker, person or firm acting on behalf of any of the Selling Parties or
the Company is, or will be, entitled to any commission or broker's or finder's
fees from any of the parties hereto, or from any Affiliate of any of the parties
hereto, in connection with any of the Transactions.
Section 2.26 Selling Parties' Disclosure Statement. The parties have
acknowledged that the Selling Parties have delivered a preliminary Selling
Parties' Disclosure Schedule, in the form attached to this Agreement as Exhibit
19. Within three (3) business days of the date hereof,
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the Selling Parties shall deliver a final Selling Parties' Disclosure Statement
(the "Final Schedule") to the Purchaser. The Final Schedule shall amend and
restate the Selling Parties' Disclosure Statement in the form attached to this
Agreement. Within three (3) business days of such delivery, Purchaser shall
identify in writing all documents, contracts, agreements, instruments or other
information described or referred to in the Final Schedule, which are remaining
to be delivered to the Purchaser. Within three (3) business days of such
delivery, FFPE Holding shall deliver copies of all such items so identified. For
a period of three (3) days following its receipt of the last item so delivered
by FFPE Holding, the Purchaser shall have the right to disapprove the Final
Schedule and any and all items described or referred to therein. Such right
shall be exercised by Purchaser's delivery to FFPE Holding of written notice of
disapproval expressly referencing this Section. The Purchaser shall have the
right to exercise such right of disapproval in its sole discretion.
The parties acknowledge that, in accordance with this Section 2.26, the
Purchaser has exercised its right to disapprove the Final Schedule and certain
matters contained therein and that such disapproval constitutes non-fulfillment
of the condition precedent to the Purchaser's obligation to effect the
Transactions specified in Section 6.3(g) of the Agreement (the "Due Diligence
Condition"). The Purchaser agrees to waive the Due Diligence Condition upon and
subject to the execution, delivery and performance of this Agreement.
The parties hereto approve the schedule attached hereto and agree that it
shall be the final Selling Parties' Disclosure Schedule referred to in this
Agreement.
ARTICLE III
REPRESENTATIONS OF THE PURCHASER
The Purchaser represents and warrants as follows:
Section 3.1 Existence and Good Standing of the Purchaser; Authorization.
(a) The Purchaser is a corporation duly incorporated, validly
existing and in good standing under the laws of Delaware.
(b) The Purchaser has full corporate power and authority to
execute and deliver this Agreement, to perform its obligations hereunder and to
consummate the Transactions. The execution, delivery and performance of this
Agreement by the Purchaser, and the consummation by it of the Transactions, have
been duly authorized and approved by the board of directors of the Purchaser and
no other corporate or similar action on the part of the Purchaser or its
shareholders is necessary to authorize the execution, delivery and performance
of this Agreement by the Purchaser and the consummation of the Transactions.
This Agreement has been duly executed and delivered by the Purchaser and,
assuming the due execution of this Agreement by the Selling Parties, is a valid
and binding obligation of the Purchaser enforceable against the Purchaser in
accordance with its terms, except to the extent that its enforceability may be
subject to the Enforceability Exceptions.
Section 3.2 Consents and Approvals; No Violations. The execution and
delivery of this Agreement, the consummation of the Transactions and compliance
by the Purchaser with the
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provisions hereof will not (a) conflict with or result in any breach of any
provision of the articles of incorporation or bylaws of the Purchaser, (b)
require any Consent under or result in a violation or breach of or constitute
(with or without due notice or lapse of time or both) a default (or give rise to
any right of termination, cancellation, payment or acceleration) under any of
the terms, conditions or provisions of any agreement or other instrument to
which the Purchaser is a party or by which its assets are bound, (c) result in
the creation or imposition of any Encumbrance upon any of the outstanding shares
of the capital stock or assets of the Purchaser, or (d) subject to obtaining the
Consents from Governmental Authorities referred to in Section 4.4(a) hereof,
contravene any provision of any Law to which the Purchaser or its assets or
properties are subject.
Section 3.3 Purchase for Investment. The Purchaser will acquire the Units
solely for its own account for investment and not with a view toward any resale
or distribution thereof.
Section 3.4 Broker's or Finder's Fees. Except for the fees of X.X. Xxxxxxx
LLC (for which the Purchaser shall be solely responsible), no agent, broker,
person or firm acting on behalf of the Purchaser is, or will be, entitled to any
commission or broker's or finder's fees from any of the parties hereto, or from
any Affiliate of any of the parties hereto, in connection with any of the
Transactions.
Section 3.5 No Material Adverse Change. Except as described in the
Purchaser's disclosures filed with the U.S. Securities and Exchange Commission,
there has not been any material adverse change in the business, operations,
properties, prospects, assets, or condition of the Purchaser and, to the
Purchaser's Knowledge, no event has occurred or circumstance exists that may
result in such material adverse change.
ARTICLE IV
ADDITIONAL AGREEMENTS OF THE SELLING PARTIES
Section 4.1 Conduct of Business of the Company and the Company
Subsidiaries.
(a) Unless Purchaser shall otherwise agree in writing and except
as expressly contemplated by this Agreement, during the period from the date of
this Agreement to the Closing Date, the Sellers shall cause the Company to, and
the Company shall (and cause each of the Company Subsidiaries to) (1) conduct
the Business in the ordinary course and consistent with past practice, (2) use
the commercially reasonable efforts of the Company and of the Company
Subsidiaries to preserve intact their business organization, keep available the
services of its and their officers and employees, maintain satisfactory
relationships with all Persons with whom it and they do business, and preserve
the possession, control and condition of all of its and their assets, and (3)
refrain from taking any of the following actions:
(i) amend or propose to amend the articles of incorporation
or bylaws of the Company or any Company Subsidiary;
(ii) authorize for issuance, issue, grant, sell, pledge,
dispose of or propose to issue, grant, sell, pledge or dispose of any shares of,
or any options, warrants, commitments, subscriptions or rights of any kind to
acquire or sell any shares of, the capital
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stock or other securities of the Company or any of the Company Subsidiaries
including, but not limited to, any securities convertible into or exchangeable
for shares of stock of any class of the Company or any of its subsidiaries;
(iii) split, combine or reclassify any shares of the Company's
capital stock or declare, pay or set aside any dividend or other distribution
(whether in cash, stock or property or any combination thereof) in respect of
its capital stock, other than dividends or distributions to the Company or any
Company Subsidiary, or directly or indirectly redeem, purchase or otherwise
acquire or offer to acquire any shares of its capital stock or other securities;
(iv) (A) create, incur, assume, forgive, or make any changes
to the terms of or the collateral securing any receivables or employee or
officer loans or advances, (B) create, incur, assume, or make any change to the
terms of or the collateral securing any indebtedness of the Company, except for
planned expansion as contemplated in the Business Plan or to refinance existing
obligations on terms that are no less favorable to the Company or its
subsidiaries than the existing terms; (C) assume, guarantee, endorse or
otherwise become liable or responsible (whether directly, indirectly,
contingently or otherwise) for the obligations of any Person , except to finance
planned expansion as contemplated in the Business Plan; (D) make or incur any
expenditure in an amount over $100,000, except for planned expansion as
contemplated in the Business Plan; (E) make any loans, advances or capital
contributions to, or investments in, any other Person (other than to a Company
Subsidiary and customary travel, relocation or business advances to employees);
(F) acquire the stock or assets of, or merge or consolidate with, any other
Person; (G) voluntarily incur any material liability or obligation (absolute,
accrued, contingent or otherwise) other than in the ordinary course of business
consistent with past practice , except obligations in connection with the
finance of planned expansion as contemplated in the Business Plan; or (H) sell,
transfer, mortgage, pledge, or otherwise dispose of, or encumber, or agree to
sell, transfer, mortgage, pledge or otherwise dispose of or encumber, any assets
or properties, real, personal or mixed material to the Company and the Company
Subsidiaries taken as a whole other than to secure debt permitted under
subclause (A) of this clause (iv) or other than in the ordinary course of
business consistent with past practice;
(v) increase in any manner the wages, salaries, bonus,
compensation or other benefits of any of its officers or employees or enter
into, establish, amend or terminate any employment, consulting, retention,
change in control, collective bargaining, bonus or other incentive compensation,
profit sharing, health or other welfare, stock option or other equity, pension,
retirement, vacation, severance, termination, deferred compensation or other
compensation or benefit plan, policy, agreement, trust, fund or arrangement
with, for or in respect of, any shareholder, officer, director, other employee,
agent, consultant or Affiliate other than as required pursuant to the terms of
agreements in effect on the date of this Agreement, or enter into or engage in
any agreement, arrangement or transaction with any of its directors, officers,
employees or affiliates except current compensation and benefits in the ordinary
course of business, consistent with past practice, or in accordance with the
Business Plan;
(vi) (A) commence or settle any litigation or other
proceedings with any Governmental Authority or other person, or (B) make or
rescind any election relating to Taxes, settle any claim, action, suit,
litigation, proceeding, arbitration, investigation, audit or
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controversy relating to Taxes, file any amended Tax Return or claim for refund,
change any method of accounting or make any other material change in its
accounting or Tax policies or procedures.
(vii) adopt or amend any resolution or agreement concerning
indemnification of its directories, officers, employees or agents;
(viii) commit or omit to do any act which act or omission
would cause a breach of any covenant contained in this Agreement or would cause
any representation or warranty contained in this Agreement to become untrue, as
if each such representation and warranty were continuously made from and after
the date hereof;
(ix) fail to maintain its books, accounts and records in the
usual manner on a basis consistent with that heretofore employed;
(x) materially increase or decrease the average restaurant,
corporate or warehouse facility inventory or house bank accounts in any
Restaurant;
(xi) enter into any new line of business;
(xii) enter into any lease, contract or agreement pursuant to
which the Company is obligated to pay or incur obligations of more than $10,000
per year, other than (i) the purchase of inventory in the ordinary course of
business consistent with past practice or (ii) in connection with planned
expansion as contemplated in the Business Plan;
(xiii) make any changes to its current investment strategy,
policy or practices;
(xiv) make, engage or incur costs for the design or
construction of any new Restaurant, the remodeling or renovation of existing
Restaurants or Restaurants except as provided in the Business Plan;
(xv) allow any employee or other person to remove any
Company asset, display, proprietary asset, retail item or other property from
the corporate office, warehouses, restaurants of the Company or any other
Company facilities;
(xvi) issue any gift certificates, coupons or complimentary
rights for dining or retail other than in such amounts as are in the ordinary
course of business consistent with past practice; or
(xvii) authorize any of, or agree to commit to do any of, the
foregoing actions.
(b) The Selling Parties shall, and shall cause the Company
Subsidiaries to, use its or their commercially reasonable efforts to comply in
all material respects with all Laws applicable to it or any of its properties,
assets or business and maintain in full force and effect all the Company Permits
necessary for, or otherwise material to, such business.
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Section 4.2 Notification of Certain Matters. The Selling Parties shall
give prompt notice to Purchaser if any of the following occur after the date of
this Agreement: (i) receipt of any notice or other communication in writing from
any third party alleging that the Consent of such third party is or may be
required in connection with the Transactions, provided that such Consent would
have been required to have been disclosed in this Agreement; (ii) receipt of any
material notice or other communication from any Governmental Authority in
connection with the Transactions; (iii) the occurrence of an event which would
be reasonably likely to have a Company Material Adverse Effect; or (iv) the
commencement or threat of any litigation involving or affecting the Company or
any Company Subsidiary, or any of their respective properties or assets, or, to
the Selling Parties' Knowledge, any employee, agent, director or officer, in his
or her capacity as such, of the Company or any Company Subsidiary which, if
pending on the date hereof, would have been required to have been disclosed in
this Agreement or which relates to the consummation of the Sale.
Section 4.3 Access and Information. The Purchaser may, prior to the
Closing Date, through its representatives, review the properties, books and
records of the Company to familiarize itself with such properties and the
business of the Company. The Selling Parties shall cause the Company to permit
the Purchaser and its representatives to have reasonable access to the
Restaurants and the Company's other properties and facilities and to the books
and records of the Company during normal working hours and upon reasonable
notice to conduct such review. As part of its review, the Purchaser shall have
the right to conduct physical inspections of the Restaurants and any Company
facilities (and the structures located thereon) owned or leased by the Company.
Section 4.4 Reasonable Best Efforts.
(a) Subject to the terms and conditions herein provided, the
Selling Parties shall use commercially reasonable efforts take, or cause to be
taken, all actions and do, or cause to be done, all things necessary, proper or
advisable to consummate and make effective as promptly as practicable the
Transactions, including, but not limited to, (i) obtaining all Consents from
Governmental Authorities and other third parties required for the consummation
of the Transactions (provided that the Selling Parties shall not cause the
Company to make any payment or amend the terms of any agreement in connection
with obtaining any such Consent without the prior written approval of Purchaser)
and (ii) timely making all necessary filings under the HSR Act. Upon the terms
and subject to the conditions hereof, the Selling Parties shall use commercially
reasonable best efforts to take, or cause to be taken, all actions and to do, or
cause to be done, all things necessary to satisfy the other conditions to
Closing set forth herein.
(b) The Selling Parties shall inform Purchaser regularly, and to
respond to requests of Purchaser, as to the status of whether or not each
Consent required from third parties (other than Governmental Authorities) in
connection with this Agreement and the Transactions have been obtained.
Section 4.5 Public Announcements. So long as this Agreement is in effect,
the Selling Parties shall not, and shall cause the Company and the Company
Subsidiaries not to, (a) issue or cause the publication of any press release or
any other announcement or communication with respect to the Transactions without
the written consent of Purchaser, or (b) discuss with the press or the media
this Agreement, or the Transactions (and will refer any and all questions and
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inquiries to Purchaser), except in any case under (a) or (b) where such release
or announcement is required by applicable Law, in which case the Company, prior
to making such announcement, will consult with Purchaser regarding the same.
Selling Parties will have a reasonable opportunity to review and comment upon
any press release to be issued by Purchaser in connection with this Agreement,
consistent with Purchaser's legal obligations to make public disclosure.
Section 4.6 No Solicitation.
(a) The Selling Parties shall not, nor shall they permit the
Company or the Company Subsidiaries or any of their respective officers,
directors or employees or any investment banker, financial advisor, attorney,
accountant or other representative retained by them, it or any of the Company
Subsidiaries, directly or indirectly, to (i) solicit, initiate or encourage
(including by way of furnishing information), or take any other action knowingly
designed or reasonably likely to facilitate, any inquiries or the making of any
proposal which constitutes, or may reasonably be expected to lead to, any
Company Sale Proposal or (ii) participate in any discussion or negotiations
regarding any Company Sale Proposal.
(b) In addition to the obligations of the Company set forth in
paragraphs (a), the Selling Parties shall promptly advise Purchaser orally and
in writing of any request for information or of any Company Sale Proposal, the
material terms and conditions of such request or the Company Sale Proposal and
the identity of the person making such request or Company Sale Proposal and
shall keep Purchaser fully informed on a prompt basis with respect to any
developments with respect to the foregoing.
Section 4.7 Personal Guarantees. The Selling Parties may, in their sole
discretion, seek to obtain from third parties the termination of, and release
from Liability under, any personal guarantees by the Principals of any Liability
of the Company. The failure of the Selling Parties to obtain any such
termination or release shall not be a Selling Parties condition precedent to
effecting the Sale and the other Transactions.
Section 4.8 Service Xxxx Registration. Following the date hereof, the
Selling Parties will promptly use their best efforts to cause the Company to
change the trademark and service xxxx under which the Restaurants are operated
from "Oscar's" to another xxxx eligible for registration in the United States
Patent and Trademark Office. The new xxxx shall be approved in writing by the
Purchaser. The Selling Parties shall, or shall cause the Company to use their
best efforts, comply with all of the Company's obligations under the letter
agreement dated May 5, 2000 between the Old Company and Hilton.
Section 4.9 Non-Competition.
(a) The parties acknowledge that the Principals have intimate
knowledge of the Business, which, if exploited by him or her in contravention of
this Agreement, would seriously, adversely and irreparably affect the ability of
the Purchaser and its Affiliates to continue the Business acquired pursuant
hereto.
(b) To induce the Purchaser to enter into this Agreement, the
Principals have agreed to the provisions of this Section 4.9.
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(c) Each of the Principals covenant and agree that for the period
ending five (5) years from the Closing Date or two years after the date of the
termination of his employment with Purchaser or an Affiliate thereof, whichever
is the last to occur, such Principal will not, without the prior written consent
of Purchaser, directly or indirectly, in Southern California or the greater
Phoenix metropolitan area (the "Territory"), compete with the Business.
(d) For purposes of this Section 4.9, the term "compete" shall
mean (a) hiring, soliciting, taking away or attempting to hire, solicit or take
away any employee engaged in, or who has in the preceding four months has been
engaged in, the Business either on behalf of himself or herself or any other
person or entity; or (b) entering into or attempting to enter into any business
directly competing with the Business within the Territory, either alone or with
any individual, partnership, corporation or association.
(e) For purposes of this Agreement, the words "directly or
indirectly" as they modify the word "compete" shall mean (a) acting as an agent,
representative, consultant, officer, director, independent contractor or
employee of any entity or enterprise, which is competing (as defined in Section
4.9(c), above) with the Business; or (b) participating in any such competing
entity or enterprise, or any Business affiliate of such entity or enterprise, as
an owner, partner, limited partner, joint venturer, creditor, or shareholder
(except as a shareholder holding less than a five percent interest in a
corporation whose shares are actively traded on a regional or a national
securities exchange or in the over-the-counter market).
(f) The Principals recognize that the territorial and time
limitations set forth in Section 1, above, are reasonable, not burdensome and
are properly required by Law for the adequate protection of Purchaser, and in
the event that such territorial or time limitations are deemed to be
unreasonable by a court of competent jurisdiction, then Principals and Purchaser
agree and submit to the reduction of either said territorial or time limitation,
or both, to such an area or period as said court shall deem reasonable.
(g) Each of the Principals acknowledges that his or her expertise
in the Business is of a special, unique, unusual, extraordinary and intellectual
character, which gives said expertise a peculiar value, and that a breach by him
or her of any of the provisions of this Agreement cannot be reasonably or
adequately compensated in damages in an action at law and that such breach will
cause Purchaser irreparable injury and damage. Each of the Principals further
acknowledges that he or she possesses unique skills, knowledge and ability and
that competition in violation of this Agreement would be extremely detrimental
to Purchaser. By reason thereof, each of the Principals agrees that Purchaser
shall be entitled, in addition to any other remedies it may have under this
Agreement or otherwise, to temporary, preliminary and/or permanent injunctive
and other equitable relief to prevent or curtail any breach of this Agreement,
without proof of actual damages that have been or may be caused to Purchaser by
such breach or threatened breach; provided, however, that no specification in
this Agreement of a specific legal or equitable remedy shall be construed as a
waiver or prohibition against the pursuing of other legal or equitable remedies
in the event of a breach.
(h) Notwithstanding any provision of this Section 4.9 to the
contrary, Xxxx shall not be prohibited from acting as a consultant for or making
a passive minority equity investment in, any privately held company engaged in
the operation of "fine dining" restaurants exclusively.
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(i) The provisions of this Section 4.9 shall not apply to any
activities by Xxxxxx after the expiration of the twelve (12) month period
following the termination of her Employment Agreement, to the extent such
activities do not relate to any restaurant business involving all of the
following:
(1) A menu that is substantially similar to the menu of the
New Company's business; or
(2) A "quick service" or counter service or partial counter
service restaurant having an average check amount per person that is
substantially similar to the average check in the New Company's business.
Section 4.10 Adjustments to Company Financial Statements. On or before the
Closing Date, the Company shall establish such reserves and shall make such
other adjustments to the Company Financial Statements as are necessary to bring
them into conformity with GAAP as customarily applied to the Purchaser's
financial statements.
Section 4.11 Company Options. The Principals and the Shareholders agree to
use commercially reasonable efforts to ensure that, as of the effective date of
the merger contemplated as part of the Reorganization, Sellers shall be the only
holders of Units and that there shall be no outstanding options to purchase any
Units. Accordingly, following the date of this Agreement, the Selling Parties
shall use their best efforts to obtain the items described in Section 1.3(bb)
and (cc), and shall do so in compliance with applicable law.
ARTICLE V
ADDITIONAL AGREEMENTS OF THE PURCHASER
Section 5.1 Access and Information. Between the date of this Agreement and
the Closing Date, Purchaser will give, and shall direct its accountants and
legal counsel to give, the Selling Parties and their authorized representatives
(including, without limitation, its financial advisors, accountants and legal
counsel), at all reasonable times, access as reasonably requested to all offices
and other facilities and to all contracts, agreements, commitments, books and
records of or pertaining to Purchaser and its subsidiaries, and to the parties
thereto, will permit the foregoing to make such reasonable inspections as they
may require and will cause its officers promptly to furnish the Selling Parties
with (a) such financial and operating data and other information with respect to
the business and properties of Purchaser and its Subsidiaries as the Selling
Parties may from time to time reasonably request and (b) a copy of each material
report, schedule and other document filed or received by Purchaser or any of its
Subsidiaries pursuant to the requirements of applicable securities laws or the
NYSE.
Section 5.2 Notification of Certain Matters. Purchaser shall give prompt
notice to the Selling Parties if any of the following occur after the date of
this Agreement: (i) receipt of any notice or other communication in writing from
any third party alleging that the Consent of such third party is or may be
required in connection with the Transactions, provided that such Consent would
have been required to have been disclosed in this Agreement; (ii) receipt of any
notice or other communication from any Governmental Authority (including, but
not limited to, the NYSE or any securities exchange) in connection with the
Transactions; (iii) the commencement or
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threat of any litigation involving or affecting Purchaser or any of its
Subsidiaries, or any of their respective properties or assets, or, to its
knowledge, any employee, agent, director or officer, in his or her capacity as
such, of Purchaser or any of its Subsidiaries which, if pending on the date
hereof, would have been required to have been disclosed in this Agreement or
which relates to the consummation of the Sale.
Section 5.3 Reasonable Best Efforts. Subject to the terms and conditions
herein provided, Purchaser shall use its commercially reasonable efforts to
take, or cause to be taken, all actions and to do, or cause to be done, all
things necessary, proper or advisable to consummate and make effective as
promptly as practicable the Transactions, including, but not limited to, (i)
obtaining all Consents from Governmental Authorities and other third parties
required for the consummation of the Transactions and (ii) timely making all
necessary filings under the HSR Act. Upon the terms and subject to the
conditions hereof, Purchaser agrees to use commercially reasonable efforts to
take, or cause to be taken, all actions and to do, or cause to be done, all
things necessary to satisfy the other conditions to Closing set forth herein.
Section 5.4 Filing Fees. Purchaser shall be responsible and bear the cost
of all filing and application fees and expenses of the Selling Parties (other
than the costs of the Company's officers and employees and any attorneys' fees
and costs) in connection with any required applications, statements, filings or
submissions to the SEC or pursuant to the HSR Act or to obtain any Consents from
any Governmental Authorities required for the consummation of the Transactions.
Section 5.5 Personal Guarantees. The Purchaser shall use its commercially
reasonable efforts to cooperate with any efforts of the Selling Parties to
obtain a termination of, or release from Liability under, any Qualified Personal
Guarantees by the Principals. The Purchaser's efforts need not include more than
the following: (a) providing such third parties with financial and other
information regarding the Purchaser; (b) offering, or causing a Subsidiary to
offer, to assume the guarantee sought to be terminated; or (c) providing, or
causing a Subsidiary to provide, a replacement guarantee. Effective immediately
following the Closing Date, Purchaser shall indemnify and hold harmless the
Principals from and against Liability under any Qualified Personal Guarantee as
to which a release or termination has not been obtained on or before the Closing
Date. Notwithstanding anything to the contrary set forth herein, Purchaser
agrees that it shall indemnify and hold harmless FFPE Holding from and against
any Liability pursuant to that certain Guarantee of Lease dated as of August __,
2000, executed by FFPE Holding and the Purchaser in connection with that certain
Lease Agreement dated June 18, 1993, among Xx. Xxxx X. Xxxxxx and Xxx. Xxxx
Xxxxxx, as landlords, and the Old Company, as tenant, for the property located
at 0000 Xxxxxxxxx Xxxxxxxxx, Xxxxxxxxx, Xxxxxxxxxx. The obligations of Purchaser
to indemnify the Principals under this paragraph shall be limited to those
Qualified Personal Guarantees identified in the Selling Parties' Disclosure
Schedule attached hereto.
Section 5.6 Certain Tax Matters.
(a) For all purposes of this Agreement, Taxes other than income
Taxes shall be allocated to periods before or after Closing based on the actual
revenue, receipts, income, expense, loss, and operations of Company during such
periods and in the case of ad valorem Taxes based on the lapse of time before
and after Closing during the relevant Tax period, except that (i) any Taxes
imposed on the New Company pursuant to California Revenue
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& Taxation Code Section 17942 shall be allocated entirely to the period after
Closing, and (ii) no increase in the rate of any such Tax as a result of the
transactions contemplated by this Agreement (for example, a reassessment of
value for ad valorem Tax purposes) shall be considered to be allocable to any
period before Closing.
(b) FFPE Holding shall be entitled to all refunds of Taxes
relating to any period or partial period before Closing, and Purchaser shall pay
to FFPE Holding the amount of such refund promptly upon receipt thereof by
Purchaser or any Affiliate of Purchaser unless such refund has been treated as
an asset of the Company.
(c) Purchaser shall use commercially reasonable best efforts to
cause the New Company to assume the Old Company's obligations to pay federal and
state employment taxes, file federal and state employment tax returns and
provide Forms W-2 to employees of the Old Company hired by the New Company, so
as to avoid over-withholding as to such employees and to avoid requirements to
provide Forms W-2 on an expedited basis, as contemplated by Internal Revenue
Service Revenue Procedure 96-60, 1996-2 C.B. 399 and/or Internal Revenue Service
Revenue Ruling 62-60, 1962-1 C.B. 1986 and corresponding provisions of state
law.
(d) Shareholders shall be responsible for preparing and filing the
short period tax return for FFPE Holding and Old Company for the calendar year
2000 from January 1, 2000 to the Closing Date. Purchaser shall be supplied with
a copy of such tax return.
(e) No action shall be taken by any party to this Agreement to
cause the New Company to be treated as anything but a partnership for tax
purposes.
(f) The Principals shall be responsible for preparing and filing
all required tax returns in connection with JBS Investments, OMS Investments and
TDM Enterprises that are to be filed by such entities.
ARTICLE VI
CONDITIONS
Section 6.1 Conditions to Each Party's Obligations. The respective
obligations of the Selling Parties and the Purchaser to effect the Sale of the
Shares and the other Transactions shall be subject to the fulfillment or waiver
at or prior to the Closing of the following conditions:
(a) No Injunction. No order, statute, rule, regulation executive
order, stay, decree, judgment or injunction shall have been enacted, entered,
promulgated, or enforced by any Governmental Authority since the date of this
Agreement which prohibits or prevents the consummation of the Transactions which
has not been vacated, dismissed or withdrawn prior to the Closing Date.
(b) HSR. Any waiting period applicable to the Sale under the HSR
shall have expired or early termination thereof shall have been granted.
Section 6.2 Conditions to Selling Parties' Obligations. The obligations of
the Selling Parties to effect the Transactions shall be subject to the
fulfillment or waiver at or prior to the
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Closing of the following additional conditions, any one or more of which may be
waived by a Selling Party:
(a) Purchaser Representations and Warranties. The representations
and warranties of the Purchaser contained in this Agreement shall be true and
correct in all material respects (except that where any statement in a
representation or warranty expressly includes a "material adverse effect",
"material" or other materiality qualifier, such representation or warranty shall
be true and correct in all respects) as of the date hereof and as of the Closing
Date with the same effect as though such representations and warranties had been
made on and as of such date, except those representation and warranty that speak
as of an earlier date, which shall be true and correct as of such earlier date
(it being understood that, for purposes of determining the accuracy of such
representations and warranties, any update of or modification to the Purchaser
Disclosure Schedule made or purported to have been made after the date of this
Agreement shall be disregarded).
(b) Performance of Agreements. Each and all of the covenants of
the Purchaser to be performed at or prior to the Closing pursuant to the terms
hereof shall have been duly performed in all material respects.
(c) Deliveries. The Purchaser shall have tendered delivery of all
items described in Section 1.4 of this Agreement which are required to be
delivered at or prior to the Closing in accordance with such section.
(d) No Insolvency. There shall not have occurred any Event of
Insolvency with respect to the Purchaser.
(e) Continued Listing. The SII Common Stock shall not have ceased
to be listed on a national securities exchange.
Section 6.3 Conditions to Purchaser's Obligations. The obligation of the
Purchaser to effect the Transactions contemplated hereby shall be subject to the
fulfillment or waiver at or prior to the Closing of the following conditions:
(a) Selling Parties' Representations and Warranties. The
representations and warranties of the Selling Parties contained in this
Agreement shall be true and correct in all material respects (except that where
any statement in a representation or warranty expressly includes a "material
adverse effect", "material" or other materiality qualifier, such representation
or warranty shall be true and correct in all respects) as of the date hereof and
as of the Closing Date with the same effect as though such representations and
warranties had been made on and as of such date, except those representations
and warranties that speak as of an earlier date, which shall be true and correct
as of such earlier date (it being understood that, for purposes of determining
the accuracy of such representations and warranties, any update of or
modification to the Selling Parties' Disclosure Schedule made or purported to
have been made after the date of this Agreement shall be disregarded).
(b) Performance of Agreements. Each and all of the covenants of
the Selling Parties to be performed at or prior to the Closing pursuant to the
terms hereof shall have been duly performed in all material respects.
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(c) Deliveries. The Selling Parties shall have tendered delivery
of all items described in Section 1.3 of this Agreement which are required to be
delivered at or prior to the Closing in accordance with such section.
(d) Governmental and Other Approvals. All Consents necessary by
Governmental Authorities to permit the consummation of the Transactions shall
have been received and shall be in full force and effect.
(e) Company Real Property Leases. None of the Company Real
Property Leases shall have been terminated. No landlord or lessor under any
Company Real Property Lease shall have failed to have consented in writing to
the Reorganization or the Transactions, or shall have exercised or asserted, in
connection with the Reorganization or the Transactions, any right to declare a
default, terminate, purchase tenant's interest in or the premises leased under,
or increase by more than 10% any rent or other charges under any Company Real
Property Lease.
(f) There shall not have been any Material Adverse Effect with
respect to the Company.
(g) The Purchaser shall not have exercised its right of
disapproval in accordance with Section 2.26 of this Agreement.
ARTICLE VII
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION
Section 7.1 Survival of Representations. The representations and
warranties of the Selling Parties contained in Article II and the
representations and warranties of the Purchaser contained in Article III (or in
any Selling Party's Closing Certificate or any Purchaser's Closing Certificate)
are made only as of the date of this Agreement and as of the Closing Date. Such
representations and warranties shall survive the Closing Date, notwithstanding
any investigation made or information obtained by the other party, but shall
expire on the last day of the eighteenth (18th) calendar month following the
month in which the Closing Date occurs, except for the representations and
warranties set forth at Sections 2.4, 2.12, 2.14 and 2.19, which shall expire
upon the expiration of the applicable statute of limitations (or, in the case of
Section 2.19, four years).
Section 7.2 Indemnification by Selling Parties. Subject to the limitations
of Section 7.5, each of the Selling Parties shall indemnify, defend and hold the
Purchaser and its officers, directors, Affiliates and agents, and any successors
thereto, harmless from Damages incurred or paid by any such Persons as a result
of (i) the failure of any representation or warranty made by the Selling Parties
in this Agreement, the Selling Parties' Closing Certificate, or the Selling
Parties' Disclosure Statement to be true and correct as of the Closing Date,
(ii) the breach by the Selling Parties of any of its covenants in this
Agreement, (iii) any Liability of any of the Selling Parties to any holder of
Company Options, whether arising under contract or federal or state securities
or other applicable law, or (iv) any Liability of the Company arising under the
January 4 Note.
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Section 7.3 Indemnification by Purchaser. Subject to the limitations of
Section 7.5, the Purchaser shall indemnify, defend and hold each of the Selling
Parties and any of their respective officers, directors, Affiliates and agents,
and any successors thereto, harmless from Damages incurred or paid by any such
Persons as a result of (i) the failure of any representation or warranty made by
the Purchaser in this Agreement, the Purchaser's Closing Certificate, or the
Purchaser's Disclosure Statement to be true and correct as of the Closing Date
or (ii) the breach by the Purchaser of any of its covenants in this Agreement.
Section 7.4 Insurance Recoveries
(a) The Purchaser with respect to any claim of indemnity under
Section 7.2, and the Selling Parties with respect to any claim of indemnity
under Section 7.3, shall use their respective reasonable best efforts to effect
any available recovery from an insurer with respect to any insurance policy
under which Damages may be recovered.
(b) The obligations of the Purchaser and the Selling Parties
described in Section 7.4(a):
(i) need not be performed before a claim of indemnity is
made under this Article 7;
(ii) are not conditions precedent to any party's
indemnification obligations under this Article 7;
(iii) shall not be deemed to have been suspended, excused or
waived by the payment of any amount with respect to a claim of indemnity under
this Article 7;
(iv) shall not be interpreted to obligate an Indemnified
Party to initiate, pursue or join in any litigation against any insurer or any
other Person in order to effect any such recovery; provided, however, in the
event that any Indemnified Party declines to pursue any such action or
litigation against any insurer, the Indemnified Party shall, upon the
Indemnifying Party's written request, shall promptly assign to the Indemnifying
Party the Indemnified Party's rights and claims, if any, against such insurer
with respect to any such recovery; provided further, in the event that the
Indemnifying Party thereafter initiates or pursues any litigation or other
proceeding against the insurer with respect to any such assigned rights or
claims, the Indemnifying Parties shall indemnify, defend and hold the
Indemnified Party harmless from and against any Liability as the Indemnified
Party may suffer or incur in connection with such litigation or proceeding.
(c) The amount of any indemnity to which an Indemnified Party may
be entitled under Section 7.2 or 7.3 hereof shall be reduced by the net (after
deducting all attorney fees, expenses and other costs of recovery) amount such
Indemnified Party recovers from any insurer in respect of such Damages.
(d) If an Indemnified Party recovers any amount (after deducting
all attorney fees, expenses and other costs of recovery) from any insurer or
other party in respect of any Damages after the Indemnifying Party has paid all
or a portion of such Damages, then in the case of a claim of indemnity under
Section 7.2 the Selling Parties and in the case of a claim of indemnity under
Section 7.3 the Purchaser shall reimburse the Indemnifying Party in an amount
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equal to the lesser of (x) the net recovery amount received by the Indemnified
and (y) the amount of Damages paid by the Indemnifying Party.
Section 7.5 Limitations. The obligations to indemnify set forth in Section
7.1 and 7.2 shall be subject to the following limitations:
(a) No Indemnified Party shall be entitled to indemnity pursuant
to Section 7.2 if the Damages for which indemnity is sought arose out of or from
(i) the failure of any representation or warranty made by the Purchaser in this
Agreement, the Purchaser's Closing Certificate, or the Purchaser's Disclosure
Statement to be true and correct in all material respects as of the Closing Date
or (ii) the breach by the Purchaser of any of its covenants in this Agreement.
(b) No Indemnified Party shall be entitled to indemnity pursuant
to Section 7.3 if the Damages for which indemnity is sought arose out of or from
(i) the failure of any representation or warranty made by the Selling Parties in
this Agreement, the Selling Parties' Closing Certificate, or the Selling
Parties' Disclosure Statement to be true and correct in all material respects as
of the Closing Date or (ii) the breach by any of the Selling Parties of any of
their covenants in this Agreement.
(c) No Indemnified Party shall be entitled to indemnity pursuant
to Section 7.2 for any single claim of Damages not exceeding $2,500, and unless,
until, and only to the extent that the aggregate Damages for which all claims of
indemnity under such section have been made (including one or more claims of
Damages not exceeding $2,500) exceed $150,000. After the $150,000 has been
exceeded, the $2,500 threshold per item still applies, other than with respect
to a series of substantially similar related claims, including a class action.
(d) No Indemnified Party shall be entitled to indemnity pursuant
to Section 7.3 for any single claim of Damages not exceeding $2,500, and unless,
until, and only to the extent that the aggregate Damages for which all claims of
indemnity under such section have been made (including one or more claims of
Damages not exceeding $2,500) exceed $150,000. After the $150,000 has been
exceeded, the $2,500 threshold per item still applies, other than with respect
to a series of substantially similar related claims, including a class action.
(e) All claims of indemnity under Section 7.2 with respect to the
failure of any representation or warranty made by the Selling Parties in this
Agreement, the Selling Parties' Closing Certificate, or the Selling Parties'
Disclosure Statement to be true and correct in all material respects as of the
Closing Date, and all claims of indemnity under Section 7.3 with respect to the
failure of any representation or warranty made by the Purchaser in this
Agreement, the Purchaser's Closing Certificate, or the Purchaser's Disclosure
Statement to be true and correct in all material respects of the Closing Date,
must be asserted on or prior to the date of expiration of such representations
and warranties set forth in Section 7.1, by the transmittal of written notice to
the other party prior to such date of expiration, and all proceedings with
respect to such claims must be brought within six months after such date of
expiration.
(f) No Indemnified Party shall be entitled to indemnity pursuant
to Section 7.2(i) for Damages in an aggregate amount exceeding $3,512,000.
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(g) No Indemnified Party shall be entitled to indemnity pursuant
to Section 7.3(i) for Damages in an aggregate amount exceeding $3,512,000.
(h) No Indemnified Party shall be entitled to indemnity from the
Old Company or the New Company pursuant to Section 7.2 for Damages arising after
the Closing Date.
Section 7.6 Sole Recourse. Following the Closing Date, an Indemnified
Party's sole recourse and remedy for monetary damages against an Indemnified
Party in respect of any breach of any representation, warranty or covenant in
this Agreement or any exhibit or schedule attached hereto or any certificate
delivered in connection herewith shall be under the provisions of and to the
extent provided in this Article 7.
Section 7.7 Indemnification Procedure.
(a) Promptly after incurring Damages, the assertion by a third
party of a claim that could give rise to Damages against an Indemnified Party,
or the discovery of facts or circumstances following the Closing which could
give rise to a claim under this Article 7, the Indemnified Party shall promptly
deliver a Certificate to the Indemnifying Party.
(b) In case the Indemnifying Party shall object to the
indemnification of an Indemnified Party in respect of any claim or claims
specified in any Certificate, the Indemnifying Party shall, within thirty (30)
days after receipt by the Indemnifying Party of such Certificate, deliver to the
Indemnified Party a written notice to such effect and the Indemnifying Party and
the Indemnified Party shall, within the 30-day period beginning on the date of
receipt by the Indemnified Party of such written objection, attempt in good
faith to agree upon the rights of the respective parties with respect to each of
such claims to which the Indemnifying Party shall have so objected. If the
Indemnified Party and the Indemnifying Party shall succeed in reaching agreement
on their respective rights with respect to any of such claims, the Indemnified
Party and the Indemnifying Party shall promptly prepare and sign a memorandum
setting forth such agreement. Should the Indemnified Party and the Indemnifying
Party be unable to agree as to any particular item or items or amount or
amounts, then the Indemnified Party and the Indemnifying Party shall submit such
dispute to binding, final and non-appealable arbitration in Los Angeles,
California in accordance with the Commercial Arbitration Rules of the American
Arbitration Association. In the event of arbitration, each party shall select
one arbitrator and the two arbitrators so selected shall select a third
arbitrator. Such arbitrators shall either be chosen from retired judges of the
California court system or be other qualified individuals mutually acceptable to
both the Purchaser and the Selling Parties. Notwithstanding anything to the
contrary in this Section 7.7(b), the parties to any arbitration conducted
pursuant to this Section 7.7(b) shall have the right to conduct limited
discovery consistent with the nature and complexity of the dispute which is the
subject of such arbitration.
(c) Promptly after the assertion by any third party of any claim
against any Indemnified Party that, in the judgment of such Indemnified Party,
may result in the incurring by such Indemnified Party of Damages for which such
Indemnified Party would be entitled to indemnification pursuant to this
Agreement, such Indemnified Party shall deliver to the Indemnifying Party a
written notice describing in reasonable detail such claim and such Indemnifying
Party may, at its option, assume the defense of the Indemnified Party against
such
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claim (including the employment of counsel, who shall be reasonably satisfactory
to such Indemnified Party), and the payment of expenses. Any Indemnified Party
shall have the right to employ separate counsel in any such action or claim and
to participate in the defense thereof, but the fees and expenses of such counsel
shall not be at the expense of the Indemnifying Party unless (x) the
Indemnifying Party shall have failed, within a reasonable time after having been
notified by the Indemnified Party of the existence of such claim as provided in
the preceding sentence, to assume the defense of such claim, (y) the employment
of such counsel has been specifically authorized in writing by the Indemnifying
Party or (z) the named parties to any such action (including any impleaded
parties) include both such Indemnified Party and the Indemnifying Party and such
Indemnified Party shall have been advised in writing by such counsel that there
may be one or more legal defenses available to the Indemnified Party which are
not available to the Indemnifying Party, or available to the Indemnifying Party,
but the assertion of which would be adverse to the interests of the Indemnified
Party. No Indemnifying Party shall be liable to indemnify any Indemnified Party
for any settlement of any such action or claim effected without the written
consent of the Indemnifying Party, but if settled with the written consent of
the Indemnifying Party, or if there be a final judgment for the plaintiff in any
such action, the Indemnifying Party shall indemnify and hold harmless each
Indemnified Party from and against any loss or liability by reason of such
settlement or judgment.
(d) Claims for Damages specified in any Certificate to which an
Indemnifying Party shall not object in writing within thirty (30) of receipt of
such Certificate, claims for Damages covered by a memorandum of agreement of the
nature described in Section 7.7(b), claims for Damages the validity and amount
of which have been the subject of judicial determination as described in Section
7.7(b) and claims for Damages the validity and amount of which shall have been
the subject of a final, non-appealable judicial determination, or shall have
been settled with the consent of the Indemnifying Party, as described in Section
7.7(c) are hereinafter referred to, collectively, as "Agreed Claims". Within ten
business days of the determination of the amount of any Agreed Claims, the
Indemnifying Party shall pay to the Indemnified Party an amount equal to the
Agreed Claim by wire transfer in immediately available funds to the bank account
or accounts designated in writing by the Indemnified Party not less than one
business day prior to such payment.
Section 7.8 Right of Offset. If the Purchaser incurs any Damages for which
it is entitled to indemnification from any of the Selling Parties pursuant to
the procedure set forth in Section 7.7 above, and there is not a sufficient
number of Units held by the Purchaser pursuant to the Pledge Agreement to
reimburse the Purchaser for such Damages, Purchaser may, subject to Sections 7.4
and 7.5, apply all or any part of any payment that is payable to any of the
Selling Parties under this Agreement, the Call Option Agreement, or the Put
Option Agreements in order to pay, or to provide for the payment of, any of such
Damages. The exercise of such right of offset by the Purchaser hereunder shall
be evidenced by means of a notice to such effect given by the Purchaser to FFPE
Holding. FFPE Holding shall have fifteen (15) days to respond to the notice
before Purchaser may make an offset. Upon the exercise by the Purchaser of its
right of offset hereunder, (a) the amount to which the Purchaser is entitled to
offset shall be and is deemed to be, applied in reduction of, and shall
constitute a payment of, any amount due under any provision of this Agreement,
or the Call Option Agreement, or the Put Option Agreements, as applicable, to
the extent specified in the notice of offset. No rights of offset may be
exercised by Purchaser without complying with Section 7.7 hereof.
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ARTICLE VIII
TERMINATION
Section 8.1 Events of Termination This Agreement may be terminated at any
time prior to the Closing Date as follows:
(a) by mutual written consent of the Purchaser and all of the
Selling Parties;
(b) by either Purchaser or any of the Selling Parties if the Sale
shall not have been consummated on or prior to September 15, 2000, provided,
however, that the right to terminate this Agreement pursuant to this Section
8.1(b) shall not be available to any party whose failure to perform any of its
obligations under this Agreement results in the failure of the Sale to be
consummated by such time;
(c) by Purchaser if any of the Selling Parties shall have breached
in any material respect any of such party's representations, warranties,
covenants or other agreements contained in this Agreement, which breach or
failure to perform is incapable of being cured or has not been cured within 20
business days after the giving of written notice to the Company; and
(d) by any of the Selling Parties if Purchaser shall have breached
in any material respect any of its representations, warranties, covenants or
other agreements contained in this Agreement, which breach or failure to perform
is incapable of being cured or has not been cured within 20 business days after
the giving of written notice to Purchaser.
Section 8.2 Effect of Termination. In the event that this Agreement shall
be terminated pursuant to Section 8.1, this Agreement shall become void and of
no effect with no liability on the part of any party hereto (or of any of its
directors, officers, employees, agents, legal or financial advisors or other
representatives); provided, however, that no such termination shall relieve any
party hereto from any liability for any breach of this Agreement prior to
termination. If this Agreement is terminated as provided herein, each party
shall use its reasonable best efforts to redeliver all documents, work papers
and other material (including any copies thereof of any other party relating to
the Transactions, whether obtained before or after the execution hereof, to the
party furnishing the same.
ARTICLE IX
DEFINITIONS
In this Agreement, the following expressions shall have the following
meanings unless the context otherwise requires:
"Additional Consideration Table" shall mean the schedule attached hereto
as Exhibit 23.
"Adjustment Escrow" shall have the meaning given to such term in Section
1.8 hereof.
"Adjustment Escrow Agreement" shall have the meaning given to such term in
Section
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1.8 hereof.
"Adjustment Payment Instructions" shall have the meaning given to such
term in Section 1.7 hereof.
"Adjustment Escrow Holder" shall have the meaning given to such term in
Section 1.8 hereof.
"Affiliate" shall mean any Person directly or indirectly controlling,
controlled by or under direct or indirect common control with another Person. A
Person shall be deemed to control another Person if such Person possesses,
directly or indirectly, the power to direct or cause the direction of the
management and policies of such other Person, whether through the ownership of
voting securities, by contract or otherwise.
"Agreed Claims" shall have the meaning set forth in Section 7.3(d) hereof.
"Board Resolutions" of a corporation party to this Agreement shall mean
the resolutions of the corporation's board of directors approving the Agreement
and the Transactions and authorizing the officers of the corporation, on behalf
of the corporation, to enter into the Agreement and carry out the Transactions.
"Business" shall mean the operation of the Restaurants and all other
businesses of the Company and the Company Subsidiaries as currently conducted.
"Business Plan" shall mean the Company's Business Plan attached as Exhibit
21.
"Call Option Agreement" means the Call Option Agreement in the form
attached to this Agreement as Exhibit 15, under which FFPE Holding grants to the
Purchaser an option to purchase the Retained Units.
"CERCLA" shall mean the Comprehensive Environmental Response Compensation
and Liability Act of 1980, 42 USC Section 9601 et. seq.
"Certificate" shall mean the certificate referenced in Section 7.7 of this
Agreement which shall:
(i) state that the Indemnified Party has paid or properly accrued
Damages or reasonably anticipates that it will incur liability for Damages
for which such Indemnified Party is entitled to indemnification pursuant
to this Agreement; and
(ii) specify in reasonable detail each individual item of Damage
included in the amount so stated, the date such item was paid or properly
accrued, the basis for any anticipated liability and the nature of the
misrepresentation, breach of warranty, breach of covenant or claim to
which each such item is related and the computation of the amount to which
such Indemnified Party claims to be entitled under Section 7.2 or 7.3 of
this Agreement.
"Clean Air Act" shall mean the Clean Air Act, 42 U.S.C. Sections 7401 et
seq.
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"Closing" shall mean the consummation of the Sale and "Close" shall have a
correlative meaning.
"Closing Current Assets" shall mean current assets of the Company
(consisting of any accounts receivable, inventory, prepaid expenses and cash and
cash equivalents) on a consolidated basis as of the Closing Date as shown on the
Closing Financial Statements.
"Closing Current Indebtedness" shall mean the current portion of Closing
Indebtedness on a consolidated basis as of the Closing Date as shown on the
Closing Financial Statements.
"Closing Current Liabilities" shall mean the current liabilities of the
Company (consisting of any accounts and notes payable, accrued expenses,
provisions for taxes and current maturity on long-term debt) on a consolidated
basis as of the Closing Date as shown on the Closing Financial Statements, but
shall not include Closing Current Indebtedness.
"Closing Date" shall mean the 10:00 a.m., PST, on August 30, 2000, or, if
the conditions to the Closing have not been satisfied or performed by such date,
then the date and time as soon as practicable thereafter following satisfaction
or performance of all such conditions.
"Closing Indebtedness" shall mean (i) any liability, of the Company or any
of the Company Subsidiaries (A) for borrowed money (whether or not the recourse
of the lender is to the whole of the assets of the Company or any of the Company
Subsidiaries or only to a portion thereof), (B) evidenced by a note, debenture
or similar instrument (including a purchase money obligation) or (C) for the
payment of money relating to a capitalized lease obligation; (ii) any liability
of others of the kind described in the preceding clause (i) which the Company or
any of the Company Subsidiaries has guaranteed or which is otherwise the legal
liability of any such Person; (iii) any obligation secured by an Encumbrance to
which any of the property or assets of the Company or any of the Company
Subsidiaries are subject, whether or not the obligations secured thereby shall
have been assumed by or shall otherwise be such Person's legal liability; and
(iv) any and all deferrals, renewals, extensions, refinancings and refundings
of, or amendments, modifications or supplements to, any liability of the kind
described in any of the preceding clauses (i), (ii) or (iii), in each case on a
consolidated basis as of the Closing Date as determined from the Closing
Financial Statements, other than the Bridge Note (as defined in the Loan
Documents); provided, however, that for purposes of Section 1.9(a) hereof,
"Closing Indebtedness" shall not include the first $100,000 of indebtedness
evidenced by that certain Note date March 18, 1997, in the original principal
amount of $400,000, executed by Oscar's of Arizona, L.L.C. in favor of Bank of
America Community Development Bank.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Company" shall mean the Old Company before and the New Company on and
after the merger pursuant to the Reorganization.
"Company Contract" shall mean (i) any Company Real Property Lease and (ii)
any franchise, management, royalty, license, lease or joint venture agreement or
any note, bond, mortgage, indenture, contract, lease, license, agreement or
instrument involving obligations of more than $10,000 to which the Company or a
Company Subsidiary is a party or subject or by which the Company or a Company
Subsidiary is bound.
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"Company Employee Benefit Plan" shall mean all Employee Benefit Plans that
the Company or by a member of the Controlled Group of Employers maintains for
current or former employees of the Company or by a member of the Controlled
Group of Employers with respect to their employment by the Company or by a
member of the Controlled Group of Employers.
"Company Financial Statements" shall mean the audited consolidated
financial statements as of December 31, 1999 and unaudited interim financial
statements as of March 31, 2000 of the Company ("Interim Statement").
"Company Intellectual Property" shall mean all (1) trademarks and service
marks (registered or unregistered), trade dress, trade names and other names and
slogans embodying business goodwill or indications of origin, all applications
or registrations in any jurisdiction pertaining to the foregoing and all
goodwill associated therewith; (2) patentable inventions, technology, computer
programs and software (including password unprotected interpretive code or
source code, object code, development documentation, programming tools,
drawings, specifications and data) and all applications and patents in any
jurisdiction pertaining to the foregoing, including re-issues, continuations,
divisions, continuations in part, renewals or extensions; (3) recipes and trade
secrets, including confidential and other non-public information; (4) copyrights
in writings, designs, software programs, mask works or other works, applications
or registrations in any jurisdiction for the foregoing and all moral rights
related thereto (including but not limited to operating manuals); (5) databases
and all database rights; and (6) Internet Web sites, domain names and
applications and registrations pertaining thereto that, in each case, are used
in the Business.
"Company Material Adverse Effect" shall mean any material adverse effect
on the Business, assets, prospects, condition (financial or otherwise),
Liabilities or the results of operations of the Company or any of the Company
Subsidiaries, other than any such effect resulting from, arising out of, or
relating to (i) general business or economic conditions, (ii) conditions
generally affecting the industry in which the Company competes, or (iii) the
taking of any action required by this Agreement.
"Company Options" shall mean any options, warrants or other rights to
purchase or acquire any capital stock of the Old Company.
"Company Permits" shall mean any permits (including signage permits),
certificates, licenses (including alcoholic beverage licenses), approvals and
other authorizations required in connection with the operation of the Business.
"Company Real Property" shall mean any and all real property owned in fee
or leased by the Company or any of the Company Subsidiaries as of the date
hereof, including all improvements.
"Company Real Property Leases" shall mean any lease of real property to
which the Company or a Company Subsidiary is a party.
"Company Sale Proposal" means any inquiry, proposal or offer from any
person relating to (1) any direct or indirect acquisition or purchase of assets
of the Company and the Company Subsidiaries other than in the ordinary course of
business, (2) any issuance, sale, or other
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disposition of (including by way of merger, consolidation, business combination,
share exchange, joint venture, or any similar transaction) any securities (or
options, rights or warrants to purchase, or securities convertible into or
exchangeable for, such securities) of the Company or any Company Subsidiary, (3)
any tender offer, exchange offer or other transaction in which, if consummated,
any person shall acquire beneficial ownership (as such term is defined in Rule
13d-3 under the Securities Exchange Act), or the right to acquire beneficial
ownership, or any "group" (as such term is defined under the Securities Exchange
Act) shall have been formed which beneficially owns or has the right to acquire
beneficial ownership, of, any of the outstanding voting capital stock of the
Company, or, (4) any merger, consolidation, share exchange, business
combination, recapitalization, liquidation, dissolution or similar transaction
involving the Company or any Company Subsidiary, other than the Transactions.
"Company Subsidiary" shall mean any Subsidiary of the Company.
"Consent" of or by a specified Person shall mean any consent, approval,
waiver or authorization by or notice to or declaration or filing with a
specified Person.
"Consulting Agreements" shall mean the Consulting Agreements in the forms
attached to this Agreement as Exhibits 7 and 8, between the New Company and
Xxxxx Xxxxxxxxx and Xxx Xxxxxxxxx, respectively.
"Contingent Obligation" shall mean any Liability of a Person under a
guaranty or other contract pursuant to which a Person has agreed to be
responsible for the obligations of another Person which is not a party to this
Agreement.
"Controlled Group of Employers" shall have the meaning set forth in
Section 2.12 hereof.
"Damages" shall mean any and all damages, losses, Liabilities, costs and
expenses, including reasonable attorneys' and other professional fees and cost,
including both claims of third parties and economic losses, other than charges
for in-house counsel and in-house administrative charges and other than lost
profits or punitive damages.
"Earn-Out Period" shall mean the period beginning on the first day of the
calendar month in which the Closing Date occurs and ending on the last day of
the thirtieth (30th) calendar month thereafter.
"Employee Benefit Plan" shall mean any (a) nonqualified deferred
compensation or retirement plan or arrangement which is an Employee Pension
Benefit Plan, (b) defined contribution retirement plan or arrangement which is
an Employee Pension Benefit Plan intended to be qualified under Code Section
401(a), (c) defined benefit retirement plan or arrangement which is an Employee
Pension Benefit Plan (including any Multiemployer Plan) intended to be qualified
under Code Section 401(a) or (d) Employee Welfare Benefit Plan or material
fringe benefit plan or program.
"Employee Pension Benefit Plan" shall have the meaning set forth in ERISA
Section 3(2).
"Employee Welfare Benefit Plan" shall have the meaning set forth in ERISA
Section 3(1).
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"Employment Agreements" means the Employment Agreements in the forms
attached to this Agreement as Exhibits 9 through 12, between the Company, as
employer, and a FFPE Holding or other Person.
"Encumbrances" shall mean any liens, mortgages, deeds of trust, pledges,
security interests, charges, encumbrances, restrictions, adverse rights or
claims of every kind and character.
"Enforceability Exceptions" shall mean the extent to which the
enforceability of a contractual obligation may be limited by applicable
bankruptcy, insolvency, reorganization and similar laws affecting the
enforcement of creditors' rights generally and to general equitable principles.
"Entity Good Standing Certificate" shall mean, with respect to a legal
entity, a certificate by the Secretary of State of the jurisdiction in which
such legal entity has been organized to the effect that the legal entity is in
good standing as a legal entity in such jurisdiction.
"Environmental, Health and Safety Laws" shall mean all RCRA, CERCLA, the
Clean Air Act, the Federal Water Act, the Hazardous Materials Transportation
Act, 49 USC Section 1801, et. seq., and all other federal, state and local
statutes, regulations, and ordinances concerning public health and safety,
worker health and safety, and pollution or protection of the environment,
including, without limitation, all those concerning the handling,
transportation, treatment, release, storage, disposal, distribution, labeling,
testing, processing or discharge of Hazardous Substances.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"Event of Insolvency" shall take place with respect to a Person if:
(a) such Person shall (i) make a general assignment for the
benefit of creditors; (ii) generally not be paying its debts as such debts
become due; (iii) admit in writing its inability to pay its debts as they become
due; (iv) file a voluntary petition in bankruptcy; (v) file any petition or
answer seeking for itself any reorganization, arrangement, composition,
readjustment of debt, liquidation or dissolution or similar relief under any
present or future statute, law or regulation of any jurisdiction; (vi) petition
or apply to any tribunal for any receiver, custodian or any trustee for any
substantial part of its property; (vii) be the subject of any such proceeding
filed against it that remains undismissed for a period of 90 days; (viii) file
any answer admitting or not contesting the material allegations of any such
petition filed against it or any order, judgment or decree approving such
petition in any such proceeding; (ix) seek, approve, consent to, or acquiesce in
any such proceeding, or in the appointment of any trustee, receiver,
sequestrator, custodian, liquidator, or fiscal agent for it, or any substantial
part of its property, or an order is entered appointing any such trustee,
receiver, custodian, liquidator or fiscal agent and such order remains in effect
for 90 days; (x) wind up, liquidate or dissolve; or (xi) take any formal action
for the purpose of effecting any of the foregoing; or
(b) An order for relief is entered under the United States
bankruptcy laws or any other decree or order is entered by a court having
jurisdiction (i) adjudging such
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Person bankrupt or insolvent; (ii) approving as properly filed a petition
seeking reorganization, liquidation, arrangement, adjustment or composition of
or in respect of such Person under the United States bankruptcy laws or any
other applicable federal or state law; (iii) appointing a receiver, liquidator,
assignee, trustee, custodian, sequestrator (or other similar official) of such
Person or of any substantial part of the property thereof; or (iv) ordering the
winding up or liquidation of the affairs of such Person, and any such decree or
order continues unstayed and in effect for a period of 90 days.
"Excess Restaurant EBITDA" shall mean the amount by which Restaurant
EBITDA exceeds the Full Target for Restaurant EBITDA as set forth in the
Additional Consideration Table.
"Federal Water Act" shall mean the Federal Water Act, 33 U.S.C. Sections
1251 et seq.
"GAAP" means generally accepted accounting principles, applied on a
consistent basis.
"Governmental Authority" shall mean any nation or government, any state or
other political subdivision thereof, any entity, authority or body exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government, including without limitation, any governmental or
regulatory authority, agency, department, board, commission, administration or
instrumentality, any court, tribunal or arbitrator or any self regulatory
organization.
"Hazardous Substances" shall mean any toxic or hazardous substances or
wastes, pollutants or contaminants (including, without limitation, asbestos,
urea formaldehyde, the group of organic compounds known as polychlorinated
by-phenyls, petroleum products including gasoline, fuel oil, crude oil, and
various constituents of such products, and any hazardous substance as defined in
CERCLA.
"Holdback Amount" shall have the meaning given to such term in Section 1.8
hereof.
"HSR Act" shall mean the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976, as amended, and the rules and regulations promulgated thereunder.
"Indemnified Party" shall mean any party entitled to indemnification under
Article VII.
"Indemnifying Party" shall mean any party that is required to indemnify
another party under Article VII.
"IRS" shall mean the Internal Revenue Service of the United States of
America.
"January 4 Note" shall mean the Promissory Note dated January 4, 2000 in
the original principal amount of $265,000 by the Old Company to Xxxxxx Xxxxx.
"Landlord Estoppel Certificates" shall mean landlord estoppel certificate
in form reasonably satisfactory to the Purchaser pursuant to which the landlords
or lessors of Company Real Property Leases (a) consent to the assignment of the
Company Real Property Leases and any change of control of the tenant pursuant to
the Reorganization and the Transactions, (b) waive any right to purchase or
terminate, or increase rent or other charges, or exercise any other
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special remedy under the Company Real Property Lease in connection with the
Reorganization and the Transactions, and (c) certify the full force and effect
of, and the absence of any default under, the Company Real Property Lease and
make such other statements or certifications as are usual and customary in such
instruments.
"Law" shall mean any statute, law, rule or regulation or any order,
decision, injunction, judgment, aware or decree.
"Letter of Intent" shall mean the Letter of Intent dated February 28, 2000
between the Selling Parties and the Purchaser.
"Liabilities" means any claim, debt, liability or obligation of any kind
whatsoever, whether arising under contract or applicable law or in connection
with a business, and whether conditioned or absolute, liquidated or
unliquidated, contingent or non-contingent.
"Loan Documents" shall have the meaning set forth in the Credit Agreement
in the form attached hereto as Exhibit 22.
"Material Adverse Effect" means any occurrence, condition or event which
when taken individually or together with other occurrences, conditions or events
would have a material adverse effect on the financial condition or results of
operations a Person or Persons.
"Membership Interest" shall mean the ownership interests of the New
Company.
"Multiemployer Plan" shall have the meaning set forth in ERISA Section
3(37).
"Net Sales" shall mean the net revenues of the Restaurants, including
total cash, credit card receipts and amounts sold on account for food and
non-food purchases minus applicable sales tax minus promotions, discounts and
complementary meals. Net Sales shall include sales made in exchange for goods or
services in a bartering transaction for the value of those services.
"New Company" shall have the meaning set forth in the introductory
paragraph hereof.
"Number of Business Units" shall mean the actual number of Restaurant
locations opened for business on December 31, 2002.
"NYSE" shall mean the New York Stock Exchange, Inc.
"Old Company" shall have the meaning set forth in the introductory
paragraph hereof.
"Pay Off Escrow" shall have the meaning given to such term in Section 1.7
hereof.
"Pay Off Escrow Agreement" shall have the meaning given to such term in
Section 1.7 hereof.
"Pay Off Escrow Holder" shall have the meaning given to such term in
Section 1.7 hereof.
"Pay Off Payment Instructions" shall have the meaning given to such term
in Section 1.7
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hereof.
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
"Permits" shall mean any business or other licenses, certificates of
authority, certificates of occupancy, permits (including, without limitation,
conditional use permits and such other entitlements), variances, exemptions,
orders or other approvals or authorizations.
"Permitted Encumbrances" shall mean (a) liens with respect to Taxes either
not delinquent or being diligently contested in appropriate proceedings; and (b)
mechanics', materialmen's or similar statutory liens for amounts not yet due or
being diligently contested in appropriate proceedings.
"Person" shall mean and include an individual, a partnership, a joint
venture, a limited liability company, a corporation, a trust, an unincorporated
organization and any Governmental Authority.
"Pledge Agreement" shall mean the Membership Interest Pledge Agreement in
the form attached to this Agreement as Exhibit 18 pursuant to which FFPE
Holding, as Pledgor, pledges the Retained Units as security for its obligations
under the Article VII hereof.
"Post-Closing Period" shall mean any taxable year or other taxable period
that begins after the Closing Date.
"Pre-Closing Period" shall mean any taxable year or other taxable period
that ends on or before the Closing Date.
"Principals" shall refer to Oscar, Pat, Xxxx, Xxxxxxxxxx and Xxxxxx, as
such terms are defined in the introductory paragraph hereof.
"Prohibited Transaction" shall have the meaning set forth in ERISA Section
406 and Code Section 4975.
"PST" shall mean Pacific Standard Time.
"Purchase Price" shall mean the consideration for the Purchased Units,
consisting of cash of $16,000,000.00, the Warrants, and the Additional
Consideration, as adjusted.
"Purchased Units" shall have the meaning set forth in the introductory
paragraph hereof.
"Purchaser" shall have the meaning set forth in the introductory paragraph
hereof.
"Purchaser's Closing Certificate" shall mean a certificate of an officer
of the Purchaser, dated as of the Closing Date, to the effect set forth in
Section 6.2(a) hereof.
"Purchaser's Knowledge" shall mean the knowledge of the officers of
Purchaser, after reasonable inquiry.
"Put Option Agreements" mean the Put Option Agreements in the form
attached to this
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Agreement as Exhibits 16 and 17, under which the Purchaser grants to FFPE
Holding an option to sell the Retained Units to the Purchaser.
"Qualified Personal Guarantee" shall mean any personal guarantee in effect
as of the date hereof (other than to Southwest Community Bank) by a Principal of
any Liability of the Company, other than a guarantee that is expected to be paid
or performed in full on or before the Closing.
"RCRA" shall mean the Resource Conservation and Recovery Act of 1976, 42
USC Section 6901 et. seq.
"Releases" shall mean the General Releases of Liability in the forms
attached to this Agreement as Exhibits 1 through 6, in which claims and
liabilities against the Company and the Purchaser are waived and released.
"Reorganization" shall mean the series of actions by which, on or before
the Closing, the Sellers and the New Company shall be organized, the Principals
shall contribute all of the issued and outstanding shares of the Old Company's
capital stock to FFPE Holding, and the Old Company shall merge with and into the
New Company, the outstanding shares of the Old Company capital stock shall be
canceled and the New Company shall issue all of its authorized Units of
Membership Interests to FFPE Holding. In connection with such transactions, FFPE
Holding shall make an election pursuant to Section 1361(b)(3) of the Code to
treat Old Company as a qualified Subchapter S subsidiary. Additionally, FFPE
Holding shall transfer a certain amount of Units of Membership Interests of the
New Company to each of JBS Investments, OMS Investments and TDM Enterprises. As
a result, FFPE Holding, JBS Investments, OMS Investments and TDM Enterprises
shall own all of the authorized Units of Membership Interests of the New
Company.
"Restaurant" means any restaurants owned or operated by the Company.
"Restaurant EBITDA" shall mean Net Sales minus Restaurant operating costs,
determined in accordance with GAAP, including, but not limited to, food,
beverage and paper products, wages, benefits, workers' compensation insurance
and payroll taxes for Restaurant employees, bonuses paid to Restaurant
employees, pre-opening costs, advertising costs directly benefiting the
Restaurants, auto and travel incurred by Restaurant employees, bank charges for
restaurant bank accounts, cash short/(over), charitable contributions, credit
card discounts, dues and subscriptions incurred by the Restaurant managers,
seminars and educational materials for Restaurant employees, authorized
entertainment expenses incurred by Restaurant employees, property, auto and
general liability insurance, Restaurant supplies, laundry and uniforms, payroll
processing costs, consulting expenses directly related to one or more allocated
salaries for corporate repair and maintenance personnel that is allocated to the
Restaurants based on actual hours worked at the Restaurants, taxes (excluding
federal and state income taxes) and licenses, telephone, utilities and various
other expenses.
"Retained Units" means the eighteen (18) outstanding units of Membership
Interest of FFPE, LLC held by FFPE Holding that are not subject to the Sale,
which units represent eighteen percent (18%) of all of the outstanding units of
Membership Interest.
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"Sale" shall have the meaning set forth in Section 1.2.
"Sellers" shall have the meaning set forth in the introductory paragraph
hereof.
"Selling Parties" shall mean the Sellers, the Principals, the
Shareholders, the Old Company and the New Company.
"Selling Parties' Closing Certificate" shall mean a certificate of, an
officer of, the Selling Parties, dated as of the Closing Date, to the effect set
forth in Section 6.3(a).
"Selling Parties' Disclosure Schedule" shall mean the Selling Parties'
Disclosure Schedule attached hereto as Exhibit 19.
"Selling Parties' Knowledge" shall mean the knowledge of FFPE Holding and
the officers and directors of the Company, in each case after reasonable
inquiry.
"Shareholders" shall mean John, Bernadette, the Oscar and Xxxxxx Trust and
the Xxxxxx Trust.
"SII Common Stock" means the common stock of Sizzler International, Inc.,
par value $.01 per share.
"Subsidiary" of any specified Person shall mean shall mean any corporation
any of the outstanding voting power of which, or any partnership, joint venture,
limited liability company or other entity any of the total equity interest of
which, is directly or indirectly owned by such specified Person.
"Tax or Taxes" shall mean all U.S. or non-U.S. federal, national, state,
county, local, municipal or provincial taxes, or assessments, duties, fees,
levies or other governmental charges in the nature of taxes, including all net
income, gross income, ad valorem, gains, profits, capital stock, advance
corporation, production, business and occupation, employment, payroll,
estimated, stamp, registration, transfer, custom duties, excise, franchise,
license, severance, premium, windfall profits, environmental (including taxes
under Code Section 59A), unemployment, disability, alternative or add-on
minimum, gross receipt, real property, capital, personal property, withholding,
FICA, sales and use taxes, VAT, taxes withheld from or payable with respect to
employees' salaries (whether or not requiring the filing of returns), and all
additions to tax, penalties (civil or criminal), and interest relating thereto.
"Tax Certificate" shall mean, with respect to a corporation, a certificate
by the appropriate official of the jurisdiction in which such corporation has
been incorporated to the effect that the corporation has no outstanding tax
delinquencies in such jurisdiction and with respect to a limited liability
company, a certificate by the appropriate official of the jurisdiction in which
such limited liability Company has been formed to the effect that the limited
liability Company has no outstanding tax delinquencies in such jurisdiction.
"Tax Returns" shall have the meaning set forth in Section 2.14(a) hereof.
"Termination Date" shall have the meaning given to such term in Section
1.8 hereof.
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"Total EBITDA" shall mean the consolidated total earnings of the Company
before deductions for interest, income taxes, depreciation and amortization as
determined in accordance with GAAP.
"Transactions" means the Sale and the other transactions contemplated by
this Agreement.
"Transfer Taxes" shall mean all stamp, deed, duties, notary public and
other similar taxes, transfer, documentary, sales, use, registration and other
such taxes and fees (including any penalties and interest) incurred in
connection with this Agreement and the sale of the Stock contemplated herein.
"Units" shall mean units of Membership Interest.
"Unit Certificates" shall mean duly executed certificates of the New
Company evidencing Units of Membership Interest.
"Warrants" shall mean the warrants to purchase 1,250,000 shares of SII
Common Stock at an exercise price of $4.00 per share, each in the form attached
to this Agreement as Exhibit 13 between the Purchaser and the Person therein
named.
"Warrant Registration Rights Agreement" shall mean the Warrant
Registration Rights Agreement attached to this Agreement as Exhibit 17.
ARTICLE X
MISCELLANEOUS
Section 10.1 Confidentiality. Unless (i) otherwise expressly provided in
this Agreement, (ii) required by applicable Law or any listing agreement with,
or the rules and regulations of, the NYSE, (iii) necessary to secure any
required Consents as to which the other party has been advised or (iv) consented
to in writing by Purchaser and the Company, any information or documents
furnished in connection herewith shall be kept strictly confidential by the
Selling Parties, Purchaser and their respective officers, directors, employees
and agents. Prior to any disclosure pursuant to the preceding sentence, the
party intending to make such disclosure shall consult with the other party
regarding the nature and extent of the disclosure. Nothing contained herein
shall preclude disclosures to the extent necessary to comply with accounting,
SEC and other disclosure obligations imposed by applicable Law. To the extent
required by such disclosure obligations, Purchaser, after consultation with
Selling Parties, may file with the SEC a Report on Form 8-K pursuant to the
Securities Exchange Act with respect to the Transactions, which report may
include, among other things, financial statements and pro forma financial
information with respect to the other party. In connection with any filing with
the SEC of a registration statement or amendment thereto under the Securities
Act, the Purchaser, after consultation with Selling Parties, may include a
prospectus containing any information required to be included therein with
respect to the Sale, including, but not limited to, financial statements and pro
forma financial information with respect to the Company, and thereafter
distribute said prospectus. Purchaser and the Selling Parties shall cooperate
with the other and provide such information and documents as may be required in
connection with any
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such filings. In the event the Sale is not consummated, each party shall return
to the other any documents furnished by the other and all copies thereof any of
them may have made and will hold in absolute confidence any information obtained
from the other party except to the extent (i) such party is required to disclose
such information by Law or such disclosure is necessary or desirable in
connection with the pursuit or defense of a claim, (ii) such information was
known by such party prior to such disclosure or was thereafter developed or
obtained by such party independent of such disclosure or (iii) such information
becomes generally available to the public other than by breach of this Section
10.1. Prior to any disclosure of information pursuant to the exception in clause
(i) of the preceding sentence, the party intending to disclose the same shall so
notify the party which provided the name in order that such party may seek a
protective order or other appropriate remedy should it choose to do so.
Section 10.2 Expenses. The Purchaser shall bear all reasonable attorneys'
fees and costs of the Selling Parties directly incurred in connection with the
Reorganization, in an amount not to exceed $20,000. Except as otherwise
expressly set forth herein, all fees and expenses incurred in connection with
this Agreement and the Transactions shall be paid by the party incurring such
costs or expenses, including, without limitation, the fees and expenses of their
respective counsel, financial advisors and accountants.
Section 10.3 Waiver of Compliance; Consents. Any failure by any of the
Selling Parties on the one hand, or the Purchaser on the other hand, to comply
with any obligation, covenant, agreement or condition herein may be waived by
Purchaser on the one hand, or the Selling Parties, on the other hand, only by a
written instrument signed by the party granting such waiver, but such waiver or
failure to insist upon strict compliance with such obligation, covenant,
agreement or condition shall not operate as a waiver of, or estoppel with
respect to, any subsequent or other failure.
Section 10.4 Governing Law; Consent to Jurisdiction. The interpretation
and construction of this Agreement, and all matters relating hereto, shall be
governed by the laws of the State of California applicable to contracts made and
to be performed entirely within the State of California by California residents
without regard to California choice of law principles.
Section 10.5 Exhibits and Schedules. All Exhibits and Schedules are
incorporated herein by reference.
Section 10.6 Captions. The Article and Section captions used herein are
for reference purposes only, and shall not in any way affect the meaning or
interpretation of this Agreement.
Section 10.7 Notices. Any notice or other communications required or
permitted hereunder shall be sufficiently given if delivered in person or sent
by telecopy or by registered or certified mail, postage prepaid, addressed as
follows:
if to the Purchaser at:
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Sizzler International, Inc.
0000 Xxxx Xxxxxxxxx Xxxxxx
Xxxxxx Xxxx, Xxxxxxxxxx 00000
Attn: Xxxxxxx X. Xxxxx, Esq.
Tel: (000) 000-0000
Fax: (000) 000-0000
with a copy to its counsel at:
Xxxxxxxxx, Stang, Ziehl, Young & Xxxxx PC
00000 Xxxxx Xxxxxx Xxxxxxxxx Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxx X. Xxxxxx, Esq.
Tel: (000) 000-0000
Fax: (000) 000-0000
and if to any of the Selling Parties at the address listed for such
party on Schedule 24:
and with a copy to their counsel at:
Sheppard, Mullin, Xxxxxxx & Hampton, LLP
000 Xxxx Xxxxxxxx
00xx Xxxxx
Xxx Xxxxx, Xxxxxxxxxx 00000-0000
Attn: Xxxxxxx X. Xxxxx, Esq.
Tel: (000) 000-0000
Fax: (000) 000-0000
or such other address or number as shall be furnished in writing by any such
party, and such notice or communication shall be deemed to have been given as of
the date so delivered, sent by telecopy or mailed. Any notice, request, demand,
claim or other communication hereunder shall be deemed duly delivered to and
received by the party to whom it is directed three (3) business days after it is
sent by registered or certified mail, return receipt requested, postage prepaid,
or upon delivery via overnight courier service, in each case addressed to the
intended recipient as described above. Any notice, request, claim, demand or
other communication given in any other manner shall only be deemed received by
the intended recipient thereof upon such recipient's actual receipt thereof.
Section 10.8 Parties in Interest. This Agreement may not be transferred,
assigned, sold, conveyed, pledged or hypothecated by any party hereto without
the express prior written consent of the other party, other than by operation of
law. This Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and permitted assigns.
Section 10.9 Counterparts. This Agreement may be executed in two or more
counterparts, all of which taken together shall constitute one instrument.
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Section 10.10 Entire Agreement. This Agreement, including the Exhibits,
Schedules and other documents referred to herein which form a part hereof,
contains the entire understanding of the parties hereto with respect to the
subject matter contained herein and therein. This Agreement supersedes the
Letter of Intent (which shall cease to have any force or effect) and all other
prior agreements and understandings (written or oral) between the parties with
respect to such subject matter.
Section 10.11 Amendments. This Agreement may not be changed orally, but
only by an agreement in writing signed by the parties hereto. Any provision of
this Agreement can be waived, amended, supplemented or modified by written
agreement of the parties hereto.
Section 10.12 Third Party Beneficiaries. Nothing contained in this
Agreement or in any instrument or document executed by any party in connection
with the Transactions shall create any rights in, or be deemed to have been
executed for the benefit of, any person or entity that is not a party hereto or
thereto or a successor or permitted assign of such a party.
Section 10.13 Waiver of Certain Damages. The parties to this Agreement
expressly waive and forgo any right to recover indirect, special, incidental,
consequential, punitive, exemplary or similar damages (collectively, "Special
Damages") in any arbitration, lawsuit, litigation or proceeding arising out of
or resulting from any controversy or claim arising out of or relating to this
Agreement, or the breach, termination or validity of this Agreement. Each party
certifies and acknowledges that (a) no representative, agent or attorney or any
other party has represented, expressly or otherwise, that such other party would
not, in the event of litigation, seek to enforce the foregoing waiver, (b) it
understands and has considered the implications of this waiver, (c) it makes
this waiver voluntarily and (d) it has been induced to enter into this Agreement
by, among other things, the mutual waivers and certifications in this Section
10.13. The parties expressly agree that nothing in this Section 10.13 shall in
any manner be deemed to modify or limit the definition of Damages for purposes
of the interpretation or enforcement of the provisions of Article VII hereof
relating to any party's obligation to defend or indemnify the other against
claims asserted against such party by third parties.
Section 10.14 Severability. In case any provision in this Agreement shall
be held invalid, illegal or unenforceable in a jurisdiction, such provision
shall be modified or deleted, as to the jurisdiction involved, only to the
extent necessary to render the same valid, legal and enforceable, and the
validity, legality and enforceability of the remaining provisions hereof shall
not in any way be affected or impaired thereby nor shall the validity, legality
or enforceability of such provision be affected thereby in any other
jurisdiction.
Section 10.15 Specific Performance. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. Accordingly, each party shall be entitled to an injunction
or restraining order to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any court of the United States
or any state having jurisdiction, in addition to any other right or remedy to
which such party may be entitled under this Agreement, at law or in equity.
Section 10.16 Disclosure Schedules. The Selling Parties and Purchaser
acknowledge that the Selling Parties' Disclosure Schedule and the Purchaser's
Disclosure Schedule (i) relate to
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certain matters concerning the disclosures required and the Transactions, (ii)
are qualified in their entirety by reference to specific provisions of this
Agreement and (iii) are not intended to constitute and shall not be construed as
indicating that such matter is required to be disclosed, nor shall such
disclosure be construed as an admission that such information is material with
respect to the Company or Purchaser, as the case may be, except to the extent
required by this Agreement.
Section 10.17 Principles of Construction
(a) All references to sections, schedules and exhibits are to
sections, schedules and exhibits in or to this Agreement unless otherwise
specified.
(b) The words "hereof", "herein" and "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement.
(c) The words "include", "includes" and "including" shall be
deemed to be followed by the phrase "without limitation", unless already
expressly followed by such phrase or the phrase "but not limited to".
(d) All references to "U.S. dollars" or "$" shall be deemed
references to lawful money of the United States of America.
(e) All accounting terms not specifically defined herein shall be
construed in accordance with generally accepted accounting principles in the
United States of America.
(f) All words importing any gender shall be deemed to include the
other genders.
(g) All references to statutes are to be construed as including
all statutory provisions consolidating, amending or replacing the statute
referred to.
(h) Unless otherwise specified, references to agreements and other
contractual instruments shall be deemed to include all subsequent amendments,
modifications and supplements thereto.
(i) Each party has reviewed and commented upon this Agreement and,
therefore, the rule of construction requiring that any ambiguity be resolved
against the drafting party shall not be employed in the interpretation of this
Agreement.
Section 10.18 WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING IN CONNECTION
WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED
BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE STATE AND
FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT,
EXCEPT AS SET FORTH IN SECTION 7.7(b) HEREOF, THEIR DISPUTES BE RESOLVED BY A
JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION
OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF
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ARBITRATION, AND UNDERSTANDING THEY ARE WAIVING A CONSTITUTIONAL RIGHT, THE
PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT, OR
PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER IN CONTRACT, TORT, OR
OTHERWISE, ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO, THIS
AGREEMENT AND/OR ANY RELATED AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY
OR THEREBY.
Section 10.19 Shareholders' Representative.
(a) The Shareholders, by entering into this Agreement and the
Transactions, hereby irrevocably appoint Xxxx Xxxxxxxxx (the "Shareholders'
Representative") as their agent and attorney-in-fact for purposes of this
Agreement, and consent to the taking by the Shareholders' Representative of any
and all actions and the making of any decisions required or permitted to be
taken by FFPE Holding or Shareholders pursuant to the EBITDA Adjustment
Guidelines attached hereto as Exhibit 26, and take all actions necessary in the
judgment of the Company Shareholders' Representative for the accomplishment of
the foregoing, and Xxxx Xxxxxxxxx hereby accepts his appointment as the
Shareholders' Representative for purposes of this Section 10.19. Purchaser shall
be entitled to deal exclusively with the Shareholders' Representative on all
matters relating to this Section 10.19, and shall be entitled to rely
conclusively (without further evidence of any kind whatsoever) on any document
executed or purported to be executed on behalf of any Shareholder by the
Shareholders' Representative, and on any other action taken or purported to be
taken on behalf of any Shareholder by the Shareholders' Representative, as fully
binding upon such Shareholder.
(b) Shareholders' Representative shall not be liable for any act
done or omitted hereunder as the Shareholders' Representative while acting in
good faith and in the exercise of reasonable judgment. The Shareholders shall
severally indemnify the Shareholders' Representative and hold the Shareholders'
Representative harmless against any loss, liability or expense incurred without
gross negligence, bad faith or willful misconduct on the part of the
Shareholders' Representative and arising out of or in connection with the
acceptance or administration of the Shareholders' Representative's duties
hereunder, including the reasonable fees and expenses of any legal counsel
retained by the Shareholders' Representative.
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IN WITNESS WHEREOF, each of the Selling Parties and the Purchaser have
executed this Agreement effective as of the day and year first above written.
PURCHASER:
Sizzler International, Inc.,
a Delaware corporation
By: /s/ XXXXXXX X. XXXXXXX
----------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: President and CEO
By: /s/ XXXXXX X. XXXXXX
----------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Vice President and CFO
FFPE HOLDING:
FFPE Holding Company, Inc.,
a Delaware corporation
By: /s/ XXXX XXXXXXXXX
----------------------------------
Name: Xxxx Xxxxxxxxx
Title: President
By: /s/ XXXXXX XXXXXXXXX-XXXXX
----------------------------------
Name: Xxxxxx Xxxxxxxxxx-Xxxxx
Title: Vice President
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PRINCIPALS AND SHAREHOLDERS:
OSCAR:
/s/ XXXXX XXXXXXXXX
-------------------------------------
Xxxxx Xxxxxxxxx
XXX:
/s/ XXXXXX XXXXXXXX XXXXXXXXX
-------------------------------------
Xxxxxx Xxxxxxxx Xxxxxxxxx
THE OSCAR AND XXXXXX TRUST:
By: /s/ XXXX XXXXXXXXX
----------------------------------
Xxxx Xxxxxxxxx, Co-Trustee of
Xxxxxxxxx Family Trust UDT
dated 7/19/95
XXXX:
/s/ XXXX XXXXXXXXX
-------------------------------------
Xxxx Xxxxxxxxx
XXXXXXXXXX:
/s/ XXXXXXXXXX XXXXXXXXX
-------------------------------------
Xxxxxxxxxx Xxxxxxxxx
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XXXXXX:
/s/ XXXXXX XXXXXXXXX-XXXXX
-------------------------------------
Xxxxxx Xxxxxxxxx-Xxxxx
THE XXXXXX TRUST:
By: /s/ XXXXXX XXXXXXXXX-XXXXX
----------------------------------
Xxxxxx Xxxxxxxxx-Xxxxx, Trustee of
the Xxxxxx Xxxxxxxxx-Xxxxx Family
Trust UDT dated 10/16/97
THE OLD COMPANY:
S & C Company, Inc.,
a California corporation
By: /s/ XXXX XXXXXXXXX
----------------------------------
Name: Xxxx Xxxxxxxxx
Title: President
By: /s/ XXXXXX XXXXXXXXX-XXXXX
----------------------------------
Name: Xxxxxx Xxxxxxxxx-Xxxxx
Title: Vice President
THE NEW COMPANY:
FFPE, LLC,
a Delaware limited liability company
By: /s/ XXXX XXXXXXXXX
----------------------------------
Xxxx Xxxxxxxxx, President
FFPE Holding Company, Inc., a
Delaware corporation, its
managing member
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JBS INVESTMENTS:
JBS INVESTMENTS, LTD.,
A Nevada limited partnership
By: /s/ XXXX XXXXXXXXX
----------------------------------
Name: Xxxx Xxxxxxxxx
--------------------------------
Title:
-------------------------------
OMS INVESTMENTS:
OMS INVESTMENTS, LTD.,
A Nevada limited partnership
By: /s/ XXXX XXXXXXXXX,
----------------------------------
as Attorney-in-Fact
Name: Xxxx Xxxxxxxxx
--------------------------------
Title:
-------------------------------
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TDM ENTERPRISES:
TDM ENTERPRISES, LTD.,
A Nevada limited partnership
By: /s/ XXXXXX XXXXXXXXX-XXXXX
----------------------------------
Name: Xxxxxx Xxxxxxxxx-Xxxxx
--------------------------------
Title: Vice President
-------------------------------
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EXHIBITS
1. General Release of Liability by Xxxx Xxxxxxxxx
2. General Release of Liability by Xxx Xxxxxxxxx
3. General Release of Liability by Xxxxx Xxxxxxxxx
4. General Release of Liability by Xxxxxx Xxxxxxxxx-Xxxxx
5. General Release of Liability by Xxxxxx Xxxxxx
6. General Release of Liability by Xxxxxxxxxxx Xxxxxx
7. Consulting Agreement of Xxxxx Xxxxxxxxx
8. Consulting Agreement of Xxx Xxxxxxxxx
9. Employment Agreement of Xxxx Xxxxxxxxx
10. Employment Agreement of Xxxxxx Xxxxxxxxx-Xxxxx
11. Employment Agreement of Xxxxxx Xxxxxx
12. Employment Agreement of Xxxxxxxxxxx Xxxxxx
13. Warrant
14. Form of Warrant Registration Rights Agreement
15. Call Option Agreement
16. Put Option Agreement (Xxxx Xxxxxxxxx)
17. Put Option Agreement (Xxxxxx Xxxxxxxxx-Xxxxx)
18. Membership Interest Pledge Agreement
19. Selling Parties' Disclosure Schedule
20. [Intentionally omitted.]
21. Business Plan
22. Credit Agreement
23. Additional Consideration Table
24. Schedule of Addresses
25. Amended and Restated Limited Liability Company Agreement of the New
Company
26. EBITDA Adjustment Guidelines
27. Allocation of Purchase Price
28. Option Agreement
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EXHIBIT 23
ADDITIONAL CONSIDERATION TABLE
------------------------- ------------------------ ----------------------------
MINIMUM CRITERIA ADDITIONAL MAXIMUM
------------------------- ------------------------ ----------------------------
MINIMUM FOR EACH ADDITIONAL FULL
PERFORMANCE CRITERIA TARGET EARN-OUT ADDITIONAL EARN-OUT TARGET EARN-OUT
-------------------- ----------- -------- ---------- ---------- ------------ ----------
Net Sales $97,137,000 $527,000 $100,000 $ 540 $114,279,000 $ 620,000
Restaurant EBITDA $17,766,000 $790,500 $100,000 $ 4,450 $ 20,901,000 $ 930,000
Total EBITDA $ 8,800,000 $527,000 $100,000 $ 5,990 $ 10,353,000 $ 620,000
No. of Business Units 15 $697,500 $ 1 $46,500 20 $ 930,000
----------
$3,100,000
==========
For example, if Net Sales, Restaurant EBITDA, Total EBITDA and Number of
Business Units are $110,000,000, $19,000,000, $9,500,000 and 19, respectively,
then the amount of the Additional Consideration under this subparagraph (i)
shall be $2,895,000 (i.e., $597,000 + $845,000 + $569,000 + $884,000 =
$2,895,000).
The minimum threshold of $100,000 for each additional increment is by way of
example. Entitlements to additional increments will be prorated from the first
dollar of overage on each of the four categories.
EXHIBIT 23
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EXHIBIT 24
Xxxx and Xxxxxxxxxx Xxxxxxxxx
X.X. Xxx 000
Xxxxxxx, XX 00000
Oscar and Xxx Xxxxxxxxx
0000 Xx Xxxxx
Xxx Xxxxxx, XX 00000
Xxxxxx Xxxxxxxxx-Xxxxx
0000 Xxxx Xxxxx
Xxx Xxxxx, XX 00000
EXHIBIT 24
66
EBITDA ADJUSTMENT GUIDELINES
The parties acknowledge that a substantial portion of the value of the sale of
the Membership Interests may be related to the Additional Consideration
described in Section 1.5 of the Agreement. Therefore, FFPE Holding and Purchaser
have agreed upon the following EBITDA Adjustment Guidelines:
1. Intercompany Accounting. During the term of the Earn Out Period, for
purposes of determining Additional Consideration, the EBITDA of the Company
shall be adjusted to eliminate any impact adverse to FFPE Holding of any of the
following items, unless such item is agreed to by FFPE Holding in the Agreement
or otherwise [or required under GAAP]:
(a) Any charge or allocation of any corporate overhead services or
similar items (collectively, "Overhead Charges");
(b) Any charge to the Company for any costs related to the Sizzler
acquisition of the Company, including, but not limited to:
acquisition expenses, legal expenses, investment banking and similar
expense;
(c) Any non-recurring or extraordinary charges other than
attributed to the Company during the Earn Out Period from any
source;
(d) Any subsequent change to the reserves of the Company
established at the Closing (as defined in the Agreement); and
(e) The 2% management fee, if any, paid or payable to Purchaser
permitted in Section 6.5 of the limited liability company agreement
of the Company.
2. Corporate Services. During the term of the Earn Out Period, in the event
that Sizzler can provide needed goods and services at a price and terms equal to
or less than the price and terms offered by and at a quality level equal to that
of unaffiliated third parties, then such goods and services shall be acquired
from Sizzler.
3. Volume Discounts. During the term of the Earn Out Period, Sizzler shall
not charge the Company for any volume purchasing discounts that the Company is
able to recognize as a result of the joint purchasing power of Sizzler and the
Company.
4. Consent. For purposes of these Guidelines, the agreement of Xxxx Xxxxxxxxx
shall be conclusively presumed to be the agreement of FFPE Holding and of the
Shareholders.
EXHIBIT 26
