GOURMET SYSTEMS, INC.
AND
THE OZARK APPLES, INC.
ASSET PURCHASE AGREEMENT
April 8, 2005
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TABLE OF CONTENTS
Page
ARTICLE I PURCHASE AND SALE OF ASSETS..............................................................................2
SECTION 1.1 PURCHASED ASSETS...................................................................................2
SECTION 1.2 EXCLUDED ASSETS....................................................................................3
ARTICLE II PURCHASE PRICE OF ASSETS................................................................................3
SECTION 2.1 PURCHASE PRICE; XXXXXXX MONEY......................................................................3
SECTION 2.2 FORM OF PAYMENT....................................................................................4
SECTION 2.3 ADJUSTMENT OF PURCHASE PRICE.......................................................................4
SECTION 2.4 OBLIGATIONS ASSUMED BY BUYER.......................................................................4
SECTION 2.5 OBLIGATIONS SATISFIED BY SELLER....................................................................5
SECTION 2.6 ALLOCATION OF PURCHASE PRICE.......................................................................5
SECTION 2.7 TAXES..............................................................................................5
ARTICLE III CLOSING................................................................................................5
SECTION 3.1 DATE, TIME AND PLACE OF CLOSING....................................................................5
SECTION 3.2 DELIVERIES BY SELLER AT CLOSING....................................................................5
SECTION 3.3 DELIVERIES BY BUYER AT CLOSING.....................................................................7
SECTION 3.4 TRANSFER OF OPERATIONS.............................................................................7
SECTION 3.5 ASSIGNMENT BY BUYER................................................................................7
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF SELLER................................................................7
SECTION 4.1 EXISTENCE; OWNERSHIP...............................................................................7
SECTION 4.2 POWER AND AUTHORITY................................................................................7
SECTION 4.3 EXECUTION AND DELIVERY PERMITTED...................................................................8
SECTION 4.4 THE PURCHASED ASSETS...............................................................................8
SECTION 4.5 BINDING EFFECT.....................................................................................9
SECTION 4.6 LICENSURE..........................................................................................9
SECTION 4.7 CONDITION OF PURCHASED ASSETS.....................................................................10
SECTION 4.8 ABSENCE OF OTHER ASSETS...........................................................................10
SECTION 4.9 OWNERSHIP OF PURCHASED ASSETS.....................................................................10
SECTION 4.10 REAL PROPERTY....................................................................................10
SECTION 4.11 INTENTIONALLY DELETED............................................................................11
SECTION 4.12 DOCUMENTS SUFFICIENT.............................................................................12
SECTION 4.13 LITIGATION OR CONDEMNATION.......................................................................12
SECTION 4.14 TAXES............................................................................................12
SECTION 4.15 CONTRACTS........................................................................................12
SECTION 4.16 DISCLOSURE.......................................................................................13
SECTION 4.17 EMPLOYMENT MATTERS...............................................................................13
SECTION 4.18 EMPLOYEE BENEFIT PLANS...........................................................................13
SECTION 4.19 LIABILITIES OF SELLER............................................................................15
SECTION 4.20 INSURANCE COVERAGE...............................................................................15
SECTION 4.21 SEVERANCE PAY....................................................................................15
SECTION 4.22 ENVIRONMENTAL MATTERS............................................................................15
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SECTION 4.23 RESTAURANT LOCATIONS.............................................................................17
SECTION 4.24 ACCURACY OF REPRESENTATIONS AND WARRANTIES.......................................................17
SECTION 4.25 INTENTIONALLY DELETED............................................................................17
SECTION 4.26 AFFILIATED TRANSACTIONS..........................................................................17
SECTION 4.27 SUBSIDIARIES.....................................................................................17
SECTION 4.28 STATUS OF ADDITIONAL RESTAURANTS.................................................................17
SECTION 4.29 FINANCIAL STATEMENTS.............................................................................17
ARTICLE V COVENANTS OF SELLER.....................................................................................18
SECTION 5.1 EMPLOYEE BENEFIT PLANS............................................................................18
SECTION 5.2 PERFORMANCE OF REAL PROPERTY LEASES AND MATERIAL CONTRACTS........................................18
SECTION 5.3 TRANSFER OF LICENSES AND PERMITS..................................................................18
SECTION 5.4 AGREEMENTS RESPECTING EMPLOYEES OF SELLER.........................................................19
SECTION 5.5 MAINTENANCE OF EXISTENCE..........................................................................19
SECTION 5.6 CONDUCT OF BUSINESS...............................................................................19
SECTION 5.7 BROKER'S FEES.....................................................................................20
SECTION 5.8 ACCESS TO INFORMATION AND PROPERTIES..............................................................20
SECTION 5.9 INTENTIONALLY DELETED.............................................................................20
SECTION 5.10 INTENTIONALLY DELETED............................................................................20
SECTION 5.11 INTENTIONALLY DELETED............................................................................20
SECTION 5.12 SURVEY AND TITLE REPORT..........................................................................20
SECTION 5.13 FINANCIAL STATEMENTS.............................................................................21
SECTION 5.14 NO SECURITIES TRADING............................................................................21
SECTION 5.15 CHANGE OF NAME...................................................................................21
SECTION 5.16 COOPERATION......................................................................................22
SECTION 5.17 RIGHT TO INSPECT.................................................................................22
SECTION 5.18 DEFICIENCIES--REPAIRS AND REPLACEMENTS...........................................................22
SECTION 5.19 RESTRICTIVE COVENANTS............................................................................23
SECTION 5.20 NO SALE NEGOTIATIONS.............................................................................24
SECTION 5.21 POTENTIAL SITES..................................................................................24
SECTION 5.22 SALE OR ASSIGNMENT OF POTENTIAL SITES............................................................24
SECTION 5.23 ADDITIONAL RESTAURANTS; REIMBURSEMENT............................................................24
SECTION 5.24 DEVELOPMENT ACTIVITIES...........................................................................24
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF BUYER................................................................24
SECTION 6.1 CORPORATE EXISTENCE...............................................................................25
SECTION 6.2 CORPORATE POWER AND AUTHORITY.....................................................................25
SECTION 6.3 EXECUTION AND DELIVERY PERMITTED..................................................................25
ARTICLE VII COVENANTS OF BUYER....................................................................................25
SECTION 7.1 BUYER PERFORMANCE.................................................................................25
SECTION 7.2 DEVELOPMENT OF ADDITIONAL RESTAURANTS.............................................................25
SECTION 7.3 POTENTIAL SITES...................................................................................25
SECTION 7.4 RIGHT TO INSPECT..................................................................................26
SECTION 7.5 BUYER'S OPTIONS...................................................................................26
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ARTICLE VIII PRORATIONS AND PURCHASE PRICE ADJUSTMENT; CONDITIONS TO CLOSING......................................26
SECTION 8.1 PRORATIONS AND PURCHASE PRICE ADJUSTMENTS.........................................................26
SECTION 8.2 INVENTORY ADJUSTMENT AND VACATION CREDIT..........................................................27
SECTION 8.3 AMOUNTS OWED BUYER; STORE CASH....................................................................27
SECTION 8.4 BUYER'S CONDITIONS TO CLOSING.....................................................................27
SECTION 8.5 SELLER'S CONDITIONS TO CLOSING....................................................................29
ARTICLE IX INDEMNIFICATION AGAINST LOSS...........................................................................29
SECTION 9.1 INDEMNIFICATION BY SELLER AND THE SHAREHOLDERS....................................................29
SECTION 9.2 INDEMNIFICATION BY BUYER..........................................................................30
SECTION 9.3 LIMITATIONS.......................................................................................30
ARTICLE X MISCELLANEOUS...........................................................................................30
SECTION 10.1 NOTICES..........................................................................................30
SECTION 10.2 APPLICABLE LAW...................................................................................31
SECTION 10.3 BINDING ON SUCCESSORS; ASSIGNMENT................................................................31
SECTION 10.4 PAYMENT OF COSTS.................................................................................31
SECTION 10.5 CLOSING NOT TO PREJUDICE CLAIM FOR DAMAGES.......................................................32
SECTION 10.6 SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND UNDERTAKINGS..............................33
SECTION 10.7 ADDITIONAL DOCUMENTS.............................................................................33
SECTION 10.8 TIME IS OF THE ESSENCE...........................................................................33
SECTION 10.9 INTERPRETATION...................................................................................33
SECTION 10.10 ENTIRE AGREEMENT................................................................................33
SECTION 10.11 COUNTERPARTS....................................................................................33
SECTION 10.12 TERMINATION.....................................................................................33
SECTION 10.13 PUBLIC ANNOUNCEMENTS............................................................................34
SECTION 10.14 CONFIDENTIALITY.................................................................................34
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made and entered into
this day of April, 2005, by and among The Ozark Apples, Inc., a Missouri
corporation ("Seller"), Ozark Holdings, Inc., a Missouri corporation
("Holdings"), Xxxxxxx X. Xxxxxx ("Xxxx Xxxxxx"), Xxxxxx X. Xxxxxx ("Xxxxxx
Xxxxxx") Xxxxxx X. Xxxxxx, Voting Trustee under Voting Trust dated June 29,
1992, as amended ("Xxxxxx Xxxxxx Trust"), Xxxxxxx X. Xxxxxx, Trustee under
Voting Trust, dated August 12, 2002 f/b/o Xxxxxx X. Xxxxxx and Xxxxxxx X. Xxxxxx
(the "Xxxxxx Trust"), G. Xxxx Xxxxxx, Trustee under the Xxxxxxxxxxx Xxxx Xxxxxx
Irrevocable Trust, dated November 25, 1977 (the "Xxxxxxxxxxx Xxxxxx Trust"), G.
Xxxx Xxxxxx, Trustee under the Xxxxx X. (Xxxxxx) Xxxxx Irrevocable Trust, dated
November 25, 1977 (the "Xxxxx Xxxxx Trust"), Xxxxxxx X. XxXxxx, Trustee of the
Xxxxxxx X. XxXxxx Revocable Trust, dated September 16, 2002 (the "Xxxxxxx XxXxxx
Trust"), Xxxxxxx XxXxxx ("XxXxxx"), Xxxxxx X. XxXxxx, Trustee of the Xxxxxx X.
XxXxxx Revocable Trust, dated September 16, 2002 (the "Xxxxxx XxXxxx Trust") and
Xxxxxx X. XxXxxx ("Xxxxxx XxXxxx") (collectively, Holdings, Xxxx Xxxxxx, Xxxxxx
Xxxxxx, Xxxxxx Xxxxxx Trust, the Xxxxxx Trust, the Xxxxxxxxxxx Xxxxxx Trust, the
Xxxxx Xxxxx Trust, the Xxxxxxx XxXxxx Trust, XxXxxx, the Xxxxxx XxXxxx Trust and
Xxxxxx XxXxxx shall be referred to herein as the "Shareholders") and Gourmet
Systems, Inc., a Missouri corporation (the "Buyer").
RECITALS
WHEREAS, Seller owns various items of personal property and interests in
real property (i) used in the operation of eleven (11) Xxxxxxxx'x Neighborhood
Grill & Bar restaurants (the "Existing Restaurants") at the locations set forth
on Exhibit A to this Agreement; and (ii) intended to be used in the operation of
one (1) Xxxxxxxx'x Neighborhood Grill & Bar restaurants under construction at
the location set forth on Exhibit B to this Agreement (the "Additional
Restaurants") (collectively, the Existing Restaurants and the Additional
Restaurant shall hereinafter be defined as the "Restaurants" and the locations
of all such Restaurants shall be defined as (the "Restaurant Locations"));
WHEREAS, Seller may acquire or occupy, or enter into purchase contracts or
leases to acquire or occupy, two (2) potential development sites (the "Potential
Sites") for Applebee's Neighborhood Bar & Grill restaurants in or near Fort
Xxxxxxx Wood, Missouri and Webb City, Missouri;
WHEREAS, Seller desires to sell such personal property and to convey certain
interests in such real property to Buyer;
WHEREAS, Buyer desires to purchase such personal property and real property
interests from Seller; and
WHEREAS, Buyer and Seller have agreed upon the terms and conditions of such
sale and desire to reduce the same to writing.
NOW, THEREFORE, in consideration of the foregoing and the mutual agreements,
covenants, representations, warranties and promises set forth herein, and in
order to prescribe the terms and conditions of such purchase and sale, the
parties hereto agree as follows:
ARTICLE I
PURCHASE AND SALE OF ASSETS
Section 1.1 Purchased Assets. Subject to the terms and conditions set
forth in this Agreement, Seller hereby agrees that at the Closing (as defined in
Section 3.1, below) it shall sell, transfer, convey, and assign to Buyer and
Buyer hereby agrees at the Closing to purchase and accept from Seller, free and
clear of all mortgages, liens, security interests, pledges and encumbrances, the
following assets (collectively, the "Purchased Assets"):
(a) All of Seller's right, title and interest in and under all of the
Franchise Agreements listed on Exhibit C (the "Franchise Agreements") and
all operating manuals, recipes, proprietary information and similar
documents and information held by Seller in connection with Seller's status
as a franchisee of Xxxxxxxx'x International, Inc., a Delaware corporation
("AII") and all copies and extracts therefrom;
(b) All of Seller's right, title and interest at the Closing in and to
the real and personal property (of whatever nature) intended to be used in
the operation of the Additional Restaurant and leased by Seller;
(c) All real and personal property (of whatever nature) intended to be
used in the operation of the Additional Restaurant and owned by Seller;
(d) Subject to the consultation and approval of Buyer as set forth in
Section 5.22 herein, all of Seller's right, title and interest, if any, at
the Closing in and to the Potential Sites;
(e) Seller's interest as lessee in and to the Real Property Leases (as
defined in Section 4.4(c), below), including all of Seller's interest under
the Real Property Leases in the buildings, fixtures, signs, parking
facilities, trash facilities, fences, other leasehold improvements,
appurtenances, and hereditaments subject to such Real Property Leases;
(f) All Owned Real Property (as defined in Section 4.4(a), below),
including all of Seller's interest in the buildings, fixtures, signs,
parking facilities, trash facilities, fences, other improvements,
appurtenances and hereditaments related to the Owned Real Property;
(g) All Material Contracts (as defined in Section 4.4(g), below),
including, but not limited to, all confidentiality agreements,
non-competition agreements and non-solicitation agreements between Seller
and its employees;
(h) All equipment, vehicles and leasehold improvements used in the
normal and customary operations of the Restaurants, including but not
limited to the furniture, machinery, equipment, tables, chairs, cash
registers, ovens, refrigerators, display cases, shelves, utensils, tools,
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pans, lights, uniforms, curtains, signs, menus, tablecloths, glasses,
plates, dishes, silverware, pitchers, books, cabinets, racks, towels,
ornaments, artifacts, decor, collectibles, bars, and bar equipment located
at the Restaurant Locations or the Additional Restaurants, as the case may
be (the "Equipment") ;
(i) All inventories of foodstuffs, beverages, paper products, cleaning
supplies and other supplies (the "Inventories") which are in the Restaurant
Locations or the Additional Restaurant, as the case may be, on the Closing
Date (as defined in Section 3.1, below);
(j) All of Seller's other rights and property interests of any nature
which are customarily used in the operation of the Restaurants or intended
to be used in the operation of the Additional Restaurant, including, but not
limited to rights to use existing telephone numbers, fax numbers, keys,
security system codes, copyrights, trademarks and service marks (and all
goodwill associated with such trademarks or service marks), and rights
arising under equipment or other warranties;
(k) All data transmission equipment and related software and software
licenses ("Transferred Licenses"), computer software (subject to Seller's
ability to assign or transfer such software) and related materials and
portable computers used by field personnel and used only in connection with
the operation of the Restaurants;
(l) All records and files related to the Real Property (as defined in
Section 4.4(b), below) such as rent calculations, landlord correspondence,
purchase agreements, deeds, construction documents, title reports,
environmental and engineering reports, appraisals, surveys, etc., and the
Material Contracts and all personnel records and files related to Seller
employees who accept employment with Buyer as of the Effective Time (as
defined below in Section 3.4, below); and
(m) All cash amounts normally used to operate the Restaurants,
provided that in no event shall such cash be in excess of $1,500 per
Restaurant.
Section 1.2 Excluded Assets. Excluded from sale under this Agreement are
the assets of Seller listed or described on Schedule 1.2 to this Agreement.
ARTICLE II
PURCHASE PRICE OF ASSETS
Section 2.1 Purchase Price; Xxxxxxx Money. The purchase price paid for
the Purchased Assets shall be (a) Thirty-Four Million Eight Hundred Seventy-Two
Thousand Two Hundred Ninety-Eight and No/100 Dollars ($34,872,298.00), adjusted
as set forth in Section 2.3 and Article VIII below, plus (b) the amount set
forth on Exhibit D attached hereto as the amount of Seller's out-of-pocket costs
paid in connection with the development and construction of the Restaurant
located in Osage Beach, Missouri (the "Purchase Price"). The Purchase Price
shall be paid at Closing in accordance with Section 2.2 below and will be
adjusted pursuant to Section 2.3 and Article VIII below, which adjustments will
include payments for the Potential Sites, if any, and the Construction Costs
(defined herein) relating to the Additional Restaurant.Pursuant to the Letter of
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Intent between the parties, dated February 28, 2005, Buyer agreed to deliver to
Seller xxxxxxx money in the total amount of Two Hundred Fifty Thousand and
No/100 Dollars ($250,000.00) (the "Xxxxxxx Money"), of which Fifty Thousand and
No/100 Dollars ($50,000.00) has already been delivered to Seller from Buyer as
of March 3, 2005. Simultaneously with the execution of this Agreement, Buyer
shall pay to Seller the remainder of the Xxxxxxx Money in the amount of Two
Hundred Thousand and No/100 Dollars ($200,000.00). The Xxxxxxx Money shall be
refunded to Buyer in the event the Closing is not consummated on account of
termination of this Agreement by either party pursuant to the rights contained
herein. Upon Closing, the Xxxxxxx Money will be retained by Seller and will
reduce the Purchase Price on a dollar for dollar basis.
Section 2.2 Form of Payment. At the Closing, Buyer shall pay Seller the
Purchase Price, as adjusted herein, in cash by wire transfer of funds, or in
such other manner reasonably acceptable to Seller.
Section 2.3 Adjustment of Purchase Price. Within five (5) business days
prior to the Closing, Seller will deliver to Buyer a preliminary statement (the
"Initial Closing Statement") of the Purchase Price adjustments and prorations as
set forth in Article VIII. The amounts on the Initial Closing Statement, as
reasonably agreed to by Buyer, shall constitute the initial adjustments to the
Purchase Price at Closing. Within one hundred eighty (180) days following the
Closing, Buyer will deliver to Seller, subject to the reasonable agreement of
Seller, a final statement (the "Final Closing Statement") of any such
adjustments and prorations. Any differences in the adjustment to the Purchase
Price between the Final Closing Statement and the Initial Closing Statement
shall be paid by the applicable party within five (5) days after the execution
of the Final Closing Statement. The parties agree that payments owed by Buyer to
Seller pursuant to Section 7.2 herein will be paid in accordance with said
section even if the payment date occurs after the date for Final Closing
Statement payments required under this Section 2.3.
Section 2.4 Obligations Assumed by Buyer. In addition to the payment of
the Purchase Price, Buyer hereby agrees to (a) assume responsibility for all
earned and unused vacation, as of the Closing Date, of all employees of Seller
who are hired by Buyer and (b) assume and perform all of Seller's obligations
with respect to the Real Property Leases and Material Contracts (the "Assumed
Liabilities"); however, except as specifically provided herein, Buyer shall not
assume or be responsible for any liability, indebtedness, or contractual
obligation of Seller relating to Restaurant operations or other events, acts or
omissions occurring prior to the Effective Time, even if such liability,
indebtedness or contractual obligation does not arise until after the Effective
Time. Without limiting the generality of the foregoing, in no case shall Buyer
be required to assume any obligation which:
(a) Is prorated to Seller under Section 2.3 or Article VIII of this
Agreement;
(b) Arises from an event (including any action or inaction on the part
of Seller) occurring on or prior to the Effective Time which, with notice,
the passage of time or both, would result in an event of default occurring
under any lease or agreement to which Seller is a party;
(c) Is represented or warranted by Seller in this Agreement, or in the
Exhibits and Schedules attached hereto, not to exist;
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(d) Relates to Seller's payroll or pension, incentive or benefit
plans;
(e) Relates to any lease of personal property used in the operation of
any Restaurant Location or in connection with the operations or development
of the Additional Restaurant, unless it is a Material Contract; or
(f) Any other liability of Seller not expressly assumed by Buyer
hereunder.
Section 2.5 Obligations Satisfied by Seller. Seller shall pay all trade
payables, accounts payable, utility payments, tax withholding, payroll taxes,
wages and similar operating expenses which are incurred, or related to a time
prior to, the Effective Time.
Section 2.6 Allocation of Purchase Price. Buyer and Seller agree that the
Purchase Price shall be allocated to the Purchased Assets as set forth on
Schedule 2.6 attached hereto, which schedule will be completed as mutually
agreed to by the parties on or before the Closing Date. Such allocation shall be
binding on Buyer and Seller for all purposes, including the reporting of gain or
loss and determination of basis for income tax purposes, and each of the parties
hereto agrees that it or they will file a statement setting forth such
allocation with its or their federal income tax returns and will also file such
further information or take such further actions as may be necessary to comply
with the Treasury Regulations that have been promulgated pursuant to Section
1060 of the Internal Revenue Code of 1986, as amended (the "1060 Regulations").
The parties also agree that such allocations will be consistent with Generally
Accepted Accounting Principles ("GAAP") to the extent not inconsistent with the
1060 Regulations.
Section 2.7 Taxes. Seller shall be liable for and shall pay all transfer
or sales taxes and all filing fee and documentary fees or taxes related to the
recording of all deeds and lease assignments payable in connection with the
purchase, sale or transfer of the Purchased Assets to, and the assumption of the
Assumed Liabilities by, Buyer pursuant to this Agreement.
ARTICLE III
CLOSING
Section 3.1 Date, Time and Place of Closing. The consummation of the
transactions contemplated hereby (the "Closing") shall be held on May 23, 2005
(the "Closing Date"), beginning at 9:00 a.m. central time in the offices of
Xxxxxxxxx Xxxxxxx Xxxxx Xxxxxx LLP, 0000 Xxxx Xxxxxx, Xxxxx 0000, Xxxxxx Xxxx,
Xxxxxxxx, 00000, or at such other place, time or date as the parties hereto
shall mutually agree.
Section 3.2 Deliveries by Seller at Closing. At the Closing and
thereafter as may be reasonably requested by Buyer, Seller shall convey,
transfer, assign, and deliver the Purchased Assets to Buyer, and shall also
deliver to Buyer the following:
(a) Duly executed bills of sale, easements, assignments, leases,
subleases, lease assignments and acceptances (including the Real Property
Leases), estoppel certificates, consents to lease assignments or Material
Contracts (if consent to assignment is required under the terms of an
existing lease or a Material Contract), nondisturbance agreements, UCC
5
termination statements, satisfactions of mortgage, special warranty deeds
regarding the real property and improvements to be conveyed, and other
appropriate instruments of transfer as Buyer has requested, all in
recordable form, of content acceptable to Buyer and Buyer's counsel and
sufficient to vest in Buyer good and marketable title to all of the
Purchased Assets which, with regard to interests in Real Property, is
subject to no exception to title insurance coverage which could, in Buyer's
sole discretion, substantially affect the operation of the subject
Restaurant Location as a Restaurant or the operations or development of the
Additional Restaurant, and, with regard to both real and personal property,
is free and clear of all mortgages, deeds of trust, liens, security
agreements, charges, or other encumbrances;
(b) Certified copies of duly adopted resolutions of the Board of
Directors and the stockholders of Seller authorizing, approving, and
consenting to the execution and delivery of this Agreement, to the
consummation of the transactions contemplated herein, and to performance of
the agreements set forth herein;
(c) Except for the consent of AII, the waiver, release, consent,
estoppel certificate or other document of any person, corporation,
association, or other entity of any nature whatsoever which is necessary to
consummate the transactions contemplated hereby, and to make the warranties
and representations made in this Agreement true;
(d) Proof that all real and personal property taxes upon the Purchased
Assets which are due and payable as of the Closing Date have been paid;
(e) Letters of good standing from the tax commission for the States of
Missouri, Kansas and Arkansas, as appropriate, indicating that all sales,
employment, franchise, and income tax liabilities of Seller have been
satisfied through the date of Closing;
(f) A duly executed Assignment of Franchise Agreements in the form
attached hereto as Exhibit E;
(g) Certificates of good standing for Seller dated within ten (10)
days of the date of Closing from the States of Missouri, Kansas and Arkansas
and each other state wherein business is conducted by Seller;
(h) An ALTA policy of title insurance regarding each Restaurant,
Additional Restaurant and Potential Site (if applicable) (each, a "Title
Policy") insuring fee or leasehold title, as applicable, to such properties
and containing only such exceptions and exclusions as could not, in Buyer's
sole discretion, substantially affect the operation of the Restaurant
Location as a Restaurant or the operations or development of the Additional
Restaurant or transfer of title to Buyer;
(i) Lien and UCC search reports and other documentation sufficient to
ensure that all leases of equipment employed in the operation of the
Restaurant Locations or in connection with the operations or development of
the Additional Restaurants which are not Material Contracts have been
terminated and that all obligations of Seller thereunder have been
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satisfied, or that arrangements have been made to apply such amount of the
Purchase Price received from Buyer hereunder as may be necessary to fully
satisfy the obligations of Seller in connection with such Equipment;
(j) A duly executed release and waiver of claims in favor of Buyer
from Seller;
(k) A duly executed Cross-Receipt; and
(l) Wire transfer instructions regarding delivery of the Purchase
Price.
Section 3.3 Deliveries by Buyer at Closing. Upon receipt and review by
Buyer's counsel of all of the documents specified in Section 3.2 above, duly
authorized and validly executed, Buyer shall deliver to Seller's representatives
in attendance at Closing:
(a) The Purchase Price;
(b) Assignments and Acceptances of the Real Property Leases and
Material Contracts; and
(c) A duly executed Cross-Receipt.
Section 3.4 Transfer of Operations. Buyer shall be entitled to immediate
possession of, and to exercise all rights arising under, the Purchased Assets
from and after the time that the Restaurants open for business on the Closing
Date, and operation of the Restaurant Locations shall transfer at such time (the
"Effective Time"). Except as provided hereby, all profits, losses, liabilities,
claims, or injuries arising before the Effective Time shall be solely to the
benefit or the risk of Seller. All such occurrences after the Effective Time
shall be solely to the benefit or the risk of Buyer. The risk of loss or damage
by fire, storm, flood, theft, or other casualty or cause shall be in all
respects upon Seller prior to the Effective Time and upon Buyer thereafter.
Section 3.5 Assignment by Buyer. Buyer may assign any or all of its
rights and benefits under this Agreement to any entity or entities that control,
are controlled by or are under common control with Buyer, upon written notice to
Seller of such assignment.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER
As an inducement to Buyer to enter this Agreement and to consummate the
transactions contemplated hereby, Seller and each of the Shareholders, jointly
and severally, hereby represent and warrant to Buyer as follows:
Section 4.1 Existence; Ownership. Seller is duly organized, validly
existing, and in good standing under the laws of the State of Missouri and is
qualified to do business and in good standing in all jurisdictions where its
activities so require. Except for the Shareholders, no other person or entity
owns, directly or indirectly, any shares of any class of stock of Seller.
Section 4.2 Power and Authority. Seller has the power and authority to
own its properties and assets, specifically including but not limited to the
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Purchased Assets, and to carry on its business as now conducted, and to convey,
assign, and transfer the Purchased Assets as set forth in this Agreement.
Section 4.3 Execution and Delivery Permitted. The execution, delivery and
performance of this Agreement will not (a) violate or result in a breach of any
term of Seller's Articles of Incorporation or Bylaws, (b) result in a breach of
or constitute a default under any term in any agreement or other instrument to
which Seller is a party, such default having not been previously waived by the
other party to any such agreement, (c) violate any law or any order, rule or
regulation applicable to Seller, of any court or of any regulatory body,
administrative agency or other governmental instrumentality having jurisdiction
over Seller or its properties or (d) result in the creation or imposition of any
lien, charge, or encumbrance of any nature whatsoever upon any of the Purchased
Assets. The Board of Directors and the stockholders of Seller have taken all
action required by law and by Seller's Articles of Incorporation and Bylaws to
authorize the execution and delivery of this Agreement, and the transfer of the
Purchased Assets to Buyer in accordance with this Agreement. Except as set forth
on Schedule 4.3, the execution, delivery and performance of this Agreement and
the other agreements executed in connection herewith, and the consummation of
the transactions contemplated hereby and thereby do not require any filing with,
notice to or consent, waiver or approval of any third party, including but not
limited to, any governmental body or entity. Schedule 4.3 identifies separately
each notice, consent, waiver or approval by reference to each Real Property
Lease and to each Material Contract to which it is applicable.
Section 4.4 The Purchased Assets.
(a) Attached hereto as Schedule 4.4(a) is a complete and accurate list
of each parcel of real property owned by Seller on which a Restaurant is
located or which is being held for development of a Restaurant (the "Owned
Real Property"), listing the street address and providing the true legal
description of each such parcel, and stating whether any improvements are
located thereon and, if so, whether such improvements are owned or leased by
Seller;
(b) Attached hereto as Schedule 4.4(b) is a complete and accurate list
of each parcel of real estate leased by Seller or in which Seller has a
leasehold or other interest on which a Restaurant is located or which is
being held for development of a Restaurant (the "Leased Real Property"), and
stating whether any improvements are located thereon and, if so, whether
such improvements are owned or leased by Seller, listing the street address
of such property and the name and address of the landlord's agent to which
Seller is obligated to provide notices regarding the Leased Real Property,
(collectively, the Owned Real Property and the Leased Real Property are
referred to as the "Real Property");
(c) Attached hereto as Schedule 4.4(c) is a complete and accurate list
of all agreements or documents under which Seller claims or holds such
leasehold or other interest or right to the use of the Leased Real Property
(the "Real Property Leases") and showing the street address, exact name of
the parties to such Real Property Lease, the date of such Real Property
Lease, each amendment, modification or extension thereof and the exact name
of the parties thereto, and the dates of each such amendment, modification
or extension;
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(d) Attached hereto as Schedule 4.4(d) is a complete and accurate list
of all material liens, claims, encumbrances, security interests and
restrictions on the Purchased Assets or any portion thereof;
(e) Attached hereto as Schedule 4.4(e) is a complete and accurate list
of all leases of personal property used in the operation of the Restaurants
or in connection with the operations or development of the Additional
Restaurants (the "Equipment Leases"), identified by parcel of Owned Real
Property or Leased Real Property or otherwise where the leased equipment is
located, and identifying the parties thereto, the property leased
thereunder, the rental and other payment terms, expiration date and
cancellation and renewal terms thereof;
(f) Attached hereto as Schedule 4.4(f) is a complete and accurate list
of all loan agreements, indentures, mortgages, pledges, security agreements,
guarantees, leases or lease purchase agreements (not listed on Schedule
4.4(c) or 4.4(e)) to which Seller is a party and to which any of the
Purchased Assets are subject;
(g) Attached hereto as Schedule 4.4(g) is a complete and accurate list
of all other contracts, agreements, commitments or other understandings or
arrangements to which Seller is a party that relate to the Restaurants or to
the operations or development of the Additional Restaurant and by which any
of the Purchased Assets are bound or affected, identified by parcel of Owned
Real Property or Leased Real Property or otherwise to which such is
applicable. The contracts listed on Schedules 4.4(e) and 4.4(g) are the
"Material Contracts," which will be transferred to Buyer hereunder;
(h) Except as set forth on Schedule 4.4(h), there are no contracts,
agreements, commitments, understandings or arrangements affecting or
relating to the Purchased Assets or the Restaurants to which any Affiliate
of Seller is a party or by which any such Affiliate is bound; and
(i) The items listed in the above Schedules constitute all of the
matters required to be shown on such Schedules. A true and complete copy, or
with respect to oral agreements an accurate summary, of each item listed on
the above Schedules has been made available to Buyer.
Section 4.5 Binding Effect. This Agreement and each other agreement
required to be executed and delivered by Seller in connection herewith, when
executed and delivered, will be the legal, valid and binding obligation of
Seller, enforceable in accordance with its terms, except as enforceability may
be limited by (i) applicable bankruptcy, reorganization, insolvency, moratorium
and similar laws affecting the enforcement of creditors' rights generally, and
(ii) general equitable principles (regardless of whether enforceability is
considered in a proceeding in equity or at law).
Section 4.6 Licensure. Seller has all state, county, and municipal
permits and licenses necessary to operate the Restaurants, except for those
permits and licenses which are not material to such operation. Seller is in
9
material compliance with all requirements and limitations set forth in such
permits and licenses. All requisite and necessary state, county and municipal
permits and licenses necessary to operate the Restaurant Locations are listed on
Schedule 4.6 hereto.
Section 4.7 Condition of Purchased Assets.
(a) Each Restaurant contains all Equipment and Inventories required by
the applicable Franchise Agreement and/or necessary to operate the
Restaurant in accordance with Seller's historical practices. The Equipment
is in good operating condition, commensurate with its age, with reasonable
wear and tear excepted, and the Equipment complies with all material
federal, state and local laws, rules and regulations, and all material
occupational safety and health act regulations.
(b) All Inventories are saleable or usable in the ordinary course of
business for their intended use and exist in such quantity as necessary to
operate the Restaurants in accordance with Seller' historical practices.
(c) The buildings, fixtures, parking facilities, trash facilities,
fences and other improvements, appurtenances and hereditaments at or on each
Restaurant are in good condition, commensurate with their age, with
reasonable wear and tear excepted, and in compliance in all material
respects with all federal, state and local laws, rules and regulations and
leases and lease provisions.
Section 4.8 Absence of Other Assets. Except as specifically provided in
this Agreement, there is no asset, property, or right of any nature which has
not previously or is not now being transferred to Buyer hereunder by Seller or
which is being retained by Seller that has been customarily employed, owned,
held, or used in connection with the operation of any Restaurant Location.
Except for the Purchased Assets used by field personnel referenced in Section
1.1(k) above, all Purchased Assets used in the operation of any Restaurant
Location are situated entirely upon the premises of such Restaurant Location.
All assets located upon the Restaurant Locations have been or are being conveyed
to Buyer pursuant to this Agreement.
Section 4.9 Ownership of Purchased Assets. (a) Seller has good and
marketable title to the Purchased Assets, which title is free and clear of all
deeds of trust, mortgages, liens, security interests, charges, and encumbrances
of any nature whatsoever; (b) Seller has the full, absolute and unrestricted
right to assign, transfer and convey the Purchased Assets to Buyer, subject only
to such consents as Seller shall deliver to Buyer at Closing; (c) no person or
entity, other than Seller has any interest in the Purchased Assets other than
the interests of the lessors under the Real Property Leases and Equipment Leases
and the interests of the other parties to the Material Contracts; and (d) all
Equipment employed in the operation of the Restaurant Locations which is leased
under leases other than Material Contracts has been acquired and the purchase
price therefore fully paid, or arrangements have been made to apply such amount
of the Purchase Price received from Buyer hereunder as may be necessary to fully
pay the purchase price therefore.
Section 4.10 Real Property.
(a) Seller has good and marketable title to all of the Owned Real
Property and has the full, absolute and unrestricted right to assign,
10
transfer and convey to Buyer said Owned Real Property, subject only to such
consents as Seller shall deliver to Buyer at Closing.
(b) Each of the Restaurant Locations is adequately serviced by all
utilities necessary for the effective operation of the Restaurants and has
not, during the last two years, experienced any material interruption in the
delivery of adequate quantities of any utilities (including, without
limitation, electricity, natural gas, potable water, water for cooling or
other business uses and fuel oil, but excluding any electricity interruption
due to storm damage) or other public services, including, without
limitation, sanitary and industrial sewer services, required by Seller in
the operation of the Restaurants.
(c) Seller is not in default under and has not breached, and existing
improvements do not violate and no event has occurred or is continuing which
with notice or the passage of time, or both, would constitute a default by
Seller under, any of the covenants, restrictions, rights-of-way, licenses,
leases, agreements or easements affecting title to or relating to the use of
the Restaurant Locations, and no such covenant, restriction, right-of-way,
license, lease, agreement or easement has impaired in any material way the
right of Seller to operate the Restaurants. Seller has not received any
notice or has any knowledge of any encroachments, fence dispute, boundary
dispute, boundary line question, water dispute or drainage dispute
concerning or affecting the Restaurant Locations. Seller has not received
any notice that the use or occupancy of the Restaurant Locations by Seller
violates any statute, law or ordinance applicable to the Restaurant
Locations, or conflicts with or is in the violation of the rights of any
other person or entity.
(d) There are no outstanding options or rights of first refusal to
purchase any Restaurant Location or any portion thereof or any interest
therein. Except as set forth on Schedule 4.10(d), the use and occupancy of
the Restaurant Locations, and the operation of the Restaurants, do not (i)
use or require the use of, adjacent property or the property of any other
person, whether for ingress, egress, access, parking, storage, or other
business operations, or otherwise, or (ii) require the consent or approval
of any other person.
(e) Each Real Property Lease is in full force and effect; the terms
contained in the Real Property Leases have not been modified or amended in
any respect except as disclosed on Schedule 4.4(c), and each constitutes the
legal, valid, binding and enforceable obligation of the parties thereto.
Seller is current in all obligations under each Real Property Lease. There
have been no events of default, and, to the best of Seller's knowledge, no
state of facts exists which with notice or the passage of time, or both,
would constitute an event of default under any Real Property Lease. Subject
to the consents listed on Schedule 4.3, the consummation of the transactions
contemplated by this Agreement will not (and will not give any person a
right to) terminate or modify any rights of, or accelerate or increase any
obligation of Seller under any Real Property Lease.
Section 4.11 Intentionally Deleted.
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Section 4.12 Documents Sufficient. The documents delivered by Seller to
Buyer pursuant to Section 3.2 of this Agreement are valid, sufficient and
effective to completely transfer to Buyer full legal and equitable title to all
of the Purchased Assets.
Section 4.13 Litigation or Condemnation. Except as set forth on Schedule
4.13 to this Agreement, there are no suits, actions, condemnation actions,
investigations, complaints, or other proceedings of any nature whatsoever in law
or in equity, which are pending or, to the best of their knowledge, threatened
against, or which affect in any manner, Seller or any of the Purchased Assets,
by or before any federal, state, municipal, or other governmental court,
department, commission, board, bureau, agency, or other instrumentality (whether
domestic or foreign). Seller is not in default with respect to any order, writ,
injunction, garnishment, levy, or decree of any federal, state, municipal, or
other governmental court, department, commission, board, bureau, agency, or
instrumentality, and the use, occupancy, ownership, or transfer of the Purchased
Assets do not constitute a default thereunder. The operations of Seller at the
Restaurant Locations and the condition of the Purchased Assets do not violate
any federal, state, or municipal law, regulation or rule (including any
applicable zoning or similar use regulation or law). Seller's operations at the
Restaurant Locations have not received a citation, warning, or reprimand for, or
otherwise been notified of, any violation of any law, rule or regulation
governing alcoholic beverages, or any health, environmental, or similar
municipal, state, or federal law or regulation which has not been cured. Seller
has not served any food or foodstuff which is adulterated, spoiled, or contains
foreign substances, nor has Seller served any food item which has or, except as
set forth on Schedule 4.13 to this Agreement, is claimed to have caused any
illness or injury to the consumer thereof.
Section 4.14 Taxes. All ad valorem and other property taxes relating to
the Purchased Assets have been fully paid to the extent due, and there are no
delinquent property tax liens or assessments. Seller has also timely filed (or
will timely file after giving effect to any applicable extensions) all federal,
state, local and other tax returns and reports required to be filed by Seller
for all periods up to and including the Closing Date, and no request has been
made for any extension of time within which to file such returns and reports,
except for those returns and reports which have since been filed. Seller has
paid (or will timely pay) all taxes, interest, penalties, governmental charges,
duties, fees, and fines imposed by the United States, foreign countries, states,
counties, municipalities, and subdivisions, and by all other governmental
entities or taxing authorities, which are due and payable (or which relate to
any period prior to the Closing Date) or for which assessments have been
received, the nonpayment of which would result in a lien on any of the Purchased
Assets. There are no audits, suits, actions, claims, investigations, inquiries,
or proceedings pending or to the best of their knowledge, threatened against
Seller with respect to taxes, interest, penalties, governmental charges, duties,
or fines, nor are any such matters under discussion with any governmental
authority, nor have any claims for additional taxes, interest, penalties,
charges, fines, fees or duties been received by or assessed against Seller.
Section 4.15 Contracts. The Material Contracts have been entered into in
the ordinary course of Seller's business and, to Seller's knowledge, contain
commercially reasonable terms. Subject to the consents delivered to Buyer at
Closing, Seller has full, absolute and unrestricted right to assign, transfer
and convey to Buyer the Material Contracts. Each Material Contract is in full
12
force and effect; the terms contained in the Material Contracts have not been
modified or amended in any respect except as disclosed on Schedule 4.4(e) or (g)
and each constitutes the legal, valid, binding and enforceable obligation of the
parties thereto. Seller is current in all obligations under each Material
Contract. There have been no events of default, and, no state of facts exists
which with notice or the passage of time, or both, would constitute an event of
default under any Material Contract. The consummation of the transactions
contemplated by this Agreement will not (and will not give any person a right
to) terminate or modify any rights of, or accelerate or increase any obligation
of Seller under any Material Contract.
Section 4.16 Disclosure. No representation or warranty by Seller in this
Agreement, nor any statement or certificate furnished, or to be furnished, by or
on behalf of Seller, nor any document or certificate delivered to Buyer pursuant
to this Agreement, or in connection with the transactions contemplated hereby,
contains any untrue statement of material fact, or omits to state any material
fact necessary to make any statement contained therein not misleading.
Section 4.17 Employment Matters.
(a) No employees of the Restaurants are on strike, nor are any such
employees threatening to strike, and there is no strike in progress in any
collective bargaining unit of any union to which Seller's employees belong.
Seller has no knowledge that any labor union has recently attempted, or is
presently attempting, to organize Seller's employees into a collective
bargaining unit, and no group of employees of Seller is presently organized
into a collective bargaining unit. None of Seller's employees are a party to
a written or oral agreement with Seller and all of Seller's employees are
employees at will whose employment may be terminated at any time, with or
without cause or prior notice.
(b) Schedule 4.17(b) hereto is a true and complete list as of March 3,
2005, (i) of each person employed in connection with the operation of the
Restaurants from and including each assistant manager and assistant kitchen
manager up through area director; and (ii) of each other employee whose
duties are primarily related to Seller's Restaurant operations. For each
such person, Schedule 4.17(b) shows the full name, job title or duty, wages
or salary and estimated bonus.
(c) Seller has operated all Restaurants in accordance with all local,
state and federal laws and regulations related to employment matters
including, but not limited to, payment of wages and benefits and employee
discrimination.
Section 4.18 Employee Benefit Plans.
(a) Schedule 4.18(a) contains a true and complete list of each
pension, profit sharing, other deferred compensation, bonus, incentive
compensation, stock purchase, stock option, supplemental retirement,
severance or termination pay, medical, hospitalization, life insurance,
dental, disability, salary continuation, vacation, supplemental unemployment
benefits plan, program, arrangement or contract, and each other employee
benefit plan, program, arrangement or contract, maintained, contributed to,
or required to be contributed to, by Seller or any Related Party
13
(hereinafter defined) for the benefit of any current or former employee,
director or agent of Seller or any Related Party, whether or not any of the
foregoing is funded, whether formal or informal, whether or not subject to
the Employee Retirement Income Security Act of 1974, as amended ("ERISA")
and whether legally binding or not (collectively, the "Benefit Plans").
Seller and its Related Parties do not have any express or implied plan or
contract, whether legally binding or not, to create any additional Benefit
Plan or modify any existing Benefit Plan, other than as may be required to
comply with the Tax Reform Act of 1986. Seller has delivered to Purchaser,
with respect to each applicable Benefit Plan (1) true and complete copies of
all documents embodying or relating to each Benefit Plan including, without
limitation, the plan and trust or other funding arrangement relating
thereto, summary plan descriptions, employee handbooks or personnel manuals
and all amendments and supplements thereto; (2) the most recent annual
report (Series 5500 and all schedules thereto), if any, required by ERISA;
and (3) the most recent determination letter received from the Internal
Revenue Service ("IRS"), if any. "Related Party" means any member of a
controlled group of corporations, a group of trades or businesses under
common control or an affiliated service group, within the meaning of Section
414(b), (c), (m) or (o) of the Internal Revenue Code of 1986, as amended
(the "Code"), of Seller;
(b) The Benefit Plans that are intended by Seller or any Related Party
to meet the requirements of Section 401(a) of the Code now meet and since
their inception have met, the requirements for qualification under Section
401(a) of the Code and the related trusts are now, and since their inception
have been, exempt from taxation under Section 501(a) of the Code and nothing
has occurred or, in connection with the transaction contemplated by this
Agreement, will occur that has or could have an adverse affect on the
qualified status of any such Benefit Plan.
(c) Seller and any Related Party have performed in all material
respects obligations required to be performed by them under, and are not in
default under or in violation of, any and all of the Benefit Plans, and each
Benefit Plan has been operated in all material respects in accordance with
its provisions and in compliance with all applicable laws and regulations.
Neither any Benefit Plan or fiduciary nor Seller or any Related Party has
taken any action, or failed to take any action, that could subject it or any
other person to any liability for any excise tax under Chapter 43 of the
Code or for breach of fiduciary duty with respect to or in connection with a
Benefit Plan;
(d) At no time has Seller or any Related Party been required to
contribute to any "multiemployer plan" (within the meaning of Section 3(37)
of ERISA) and Seller and its Related Parties have no liability (contingent
or otherwise) relating to the withdrawal or partial withdrawal from a
multiemployer plan. Seller and its Related Parties do not participate in any
"multiple employer plans," within the meaning of ERISA;
(e) No Benefit Plan provides or is required to provide group health,
medical, death or survivor benefits to any former or retired employee of
Seller or beneficiary thereof, except to the extent (1) required under any
state insurance law providing for a conversion option under a group
insurance policy or (2) under Section 601 of ERISA;
14
(f) No "reportable event" (as defined in ERISA) has occurred with
respect to any Benefit Plan. No liability to the Pension Benefit Guaranty
Corporation ("PBGC") has been incurred, or is expected by Seller or any
Related Party to be incurred, by Seller or any Related Party with respect to
any Benefit Plan and no Benefit Plan has "unfunded benefit liabilities"
within the meaning of Title IV of ERISA. No steps have been taken to
terminate any Benefit Plan which is subject to Title IV of ERISA and no
proceeding has been initiated by the PBGC to terminate any such Benefit Plan
or to appoint a Trustee to administer any such Benefit Plan;
(g) Neither any Benefit Plan or fiduciary nor Seller or any Related
Party has any liability to any participant, beneficiary or other person
under any provision of ERISA or any other applicable law by reason of any
payment of, or failure to pay, benefits or other amounts with respect to or
in connection with any Benefit Plan; and
(h) Each Benefit Plan may be terminated by Seller or its Related
Parties within a period of 30 days following the date of Closing without
acceleration or additional vesting of any benefits and without payment of
any amount as a penalty, bonus, premium, severance pay or other compensation
or amount.
Section 4.19 Liabilities of Seller. All liabilities of Seller related to
the Restaurant Locations not expressly assumed by Buyer hereunder will be
promptly paid by Seller; and all liabilities secured by Purchased Assets to be
transferred to Buyer under this Agreement have been satisfied prior to, or will
be satisfied in conjunction with, Closing.
Section 4.20 Insurance Coverage. Schedule 4.20 to this Agreement is a true
and accurate list and brief description of property, fire, casualty, liability,
life, worker's compensation, and other forms of insurance of any kind owned or
held by Seller regarding the Restaurant Locations. All such policies (a) are in
full force and effect, (b) are valid and outstanding policies, (c) insure
against risks of the kind customarily insured against and in the amounts
customarily carried by entities similarly situated, and (d) provide that they
will remain in full force and effect through the respective dates set forth in
Schedule 4.20. Except as set forth on Schedule 4.20, all of the insurance
policies set forth on Schedule 4.20 are of an "occurrence-based" variety, i.e.,
even if such policies are terminated, they insure all events covered under the
applicable policy so long as such events occurred while such insurance policy
was in full force and effect.
Section 4.21 Severance Pay. No employee of Seller involved in the
operation of any Restaurant Location will be entitled to severance pay by virtue
of the transactions contemplated by this Agreement.
Section 4.22 Environmental Matters.
(a) During Seller's possession, and to the best knowledge of Seller
and the Shareholders prior to Seller's possession, Hazardous Materials (as
defined below) have never been generated, stored, discharged, disposed of,
spilled, dumped, poured, emptied, or released on, in, beside, above, or
under the real estate underlying or used in connection with the Restaurant
15
Locations (the "Real Estate"). Hazardous Materials are not currently present
at, on, in, beside, above, or under the Real Estate. No underground storage
tanks are, and to the best knowledge of Seller and the Shareholders, no
underground storage tanks have been located on the Real Estate. Seller has
at all times operated the Real Estate in compliance with all Environmental
Laws (as defined below).
(b) Seller and the Shareholders, jointly and severally, agree to
indemnify and hold harmless Buyer, for any and all losses, claims, damages,
penalties, liabilities, costs and expenses (including attorney's fees,
administrative expenses, prejudgment interest and court costs), fines,
injuries, penalties, response costs (including the cost of any required or
necessary investigation, testing, monitoring, repair, clean up,
detoxification, decontamination, preparation of any closure or other
required plans, removal, response or remedial action at or relating to the
Real Estate) (collectively, "Claims and Costs"), with respect to, as a
direct or indirect result of, or arising out of any contamination,
requirement, lawsuit, notice of violation, notice letter, warning letter,
administrative order, compliance order, enforcement action, settlement,
agreement, consent order, decree or judgment, injunction, restraining order
or prohibition (collectively "Action") relating to the generation, presence,
storage, management, disposal, release, discharge, escape, emission,
spilling, seepage, leakage, dumping, pumping, pouring, emptying or clean up
of Hazardous Materials (as herein defined) at, on, in, beside, above, from
or under all or a portion of the Real Estate which occurs from activities
undertaken prior to Closing.
(c) For the purpose of this Agreement, the term "Hazardous Materials"
shall include, but not be limited to:
any substance defined as "hazardous substances," "hazardous air
pollutant," "pollutants," "contaminants," "hazardous materials,"
"hazardous wastes," "toxic chemicals," "petroleum or petroleum
products," "toxics," "hazardous chemicals," "extremely hazardous
substances," "pesticides" or related materials, including but not
limited to radon and asbestos, as now, in the past, or hereafter
defined in any applicable federal, state or local law, regulation,
ordinance, policy or directive, including, but not limited to, the
Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended by the Superfund Amendments and Reauthorization Act of
1986, 42 X.X.X.xx. 9601 et. seq.; the Emergency Planning and Community
Right-to-Know Act, 42 X.X.X.xx. 1101 et. seq.; the Resource
Conservation and Recovery Act, 42 X.X.X.xx. 6901 et. seq.; the
Hazardous Materials Transportation Act of 1974, 49 X.X.X.xx. 1801 et.
seq.; the Federal Water Pollution Control Act, 33 X.X.X.xx. 1251 et.
seq.; the Clean Air Act, 42 X.X.X.xx. 4701 et. seq.; the Federal
Insecticide, Fungicide and Rodenticide Act, 7 X.X.X.xx. 136 et. seq.;
the Safe Drinking Water Act, 42 X.X.X.xx. 3001 et. seq.; the Toxic
Substances Control Act, 15 X.X.X.xx. 2601 et. seq.; the Oil Pollution
Act of 1990, 33 X.X.X.xx. 2701 et. seq.; and any laws regulating the
use of biological agents or substances including medical or infectious
wastes and the corresponding State laws, regulations and local
ordinances, etc. which may be applicable, ("Environmental Laws") as any
such acts may be amended.
16
(d) Seller agrees and consents to the performance of environmental
testing on the Real Estate; provided, however, that neither the performance
of nor failure to perform such tests by Buyer will negate or affect Seller's
representations or warranties or agreement to indemnify contained herein.
Section 4.23 Restaurant Locations. Exhibit A and Exhibit B include a
complete and accurate list of all Restaurant Locations owned, held or used by
Seller pursuant to the Franchise Agreements. The activities carried on in all
buildings, structures or improvements included as part of, or located on or at
the Restaurant Locations, and the buildings, structures and improvements
themselves, are not in violation of, or in conflict with, any applicable zoning
or health regulation or ordinance or any other similar law. There is no pending,
threatened or proposed proceeding or governmental action to modify the zoning
classification of, or to condemn or take by the power of eminent domain (or to
purchase in lieu thereof), or to impose special assessments on, or otherwise to
take or restrict in any way the right to use, alter or occupy all or any part of
any of the Restaurant Locations.
Section 4.24 Accuracy of Representations and Warranties. All
representations and warranties made by Seller in this Agreement or any schedule
or exhibit hereto or in any certificate or other document furnished by Seller
pursuant to this Agreement are true and correct in all material respects on and
as of the date hereof, and Seller has performed or complied in all material
respects with all covenants, agreements and conditions contained in this
Agreement on their part required to be performed or complied with at or prior to
the Closing Date.
Section 4.25 Intentionally Deleted.
Section 4.26 Affiliated Transactions. Except as set forth on Schedule
4.26, Seller has not been a party to, and there does not now exist, any
transaction affecting the Restaurants or the Purchased Assets (including without
limitation the purchase, sale or exchange of property or the rendering of any
service) with any Affiliate of Seller or any entity in which any of them owns a
beneficial interest. For purposes of this Agreement, "Affiliate" means any
person or entity that owns or controls more than a 10% interest in Seller
(a "Controlling Affiliate") or in which Seller or a Controlling Affiliate owns
or controls more than a 5% interest.
Section 4.27 Subsidiaries. No subsidiary of Seller nor any entity in which
Seller has a direct or indirect interest has any direct or indirect interest in
any of the Purchased Assets.
Section 4.28 Status of Additional Restaurant. Exhibit F contains, as of
the date of this Agreement, a description of the current status of the
Additional Restaurant, a list of all leases, contracts, or other agreements
existing or under negotiation in respect thereof, a summary of the amounts
invested therein, and a timetable and budget therefore. For the avoidance of
doubt, and notwithstanding anything herein to the contrary, the provisions of
this Agreement applicable to the Restaurants apply prospectively to the
Additional Restaurant if the Additional Restaurant is open for business prior to
the Closing.
Section 4.29 Financial Statements. The Financial Statements (defined in
Section 5.13 herein) were derived from the books and records of Seller and (i)
are true, complete and correct in all material respects, (ii) present fairly the
17
financial position and results of operations of Seller and include appropriate
reserves for liabilities at the dates and for the periods indicated, (iii) have
been prepared in accordance with GAAP applied on a consistent basis, and (iv) do
not include any untrue statement of a material fact required to be stated or
reflected therein or omit to state or reflect any material fact necessary to
make any statements therein not misleading.
ARTICLE V
COVENANTS OF SELLER
Seller covenants and agrees as follows:
Section 5.1 Employee Benefit Plans.
(a) Buyer is not obligated to assume any liability, obligation or
other responsibility under any Benefit Plan. With respect to any "defined
benefit" Benefit Plan, Seller shall treat all employees who are transferred
to Buyer pursuant to this Agreement as if they terminated employment with
Seller on the date of Closing. With respect to any "defined contribution"
Benefit Plan, Seller shall pay all amounts owed to the related trust with
respect to each Transferred Employee as of the date of Closing as soon as
reasonably practicable thereafter. Seller shall remain responsible and
liable for all payments required under the terms of any "employee welfare
benefit plan" as defined in Section 3(1) of ERISA for claims incurred and
expenses and payments accrued on and prior to the date of Closing.
(b) Seller, its Related Parties and the Shareholders, jointly and
severally, agree to pay and be liable to Buyer and shall indemnify and hold
harmless Buyer from and against all losses, expenses and liabilities,
arising under Section 4980B of the Code arising from the failure to comply
with the continuation requirements of Section 4980B of the Code and sections
601 through 608 of ERISA occurring prior to the date of Closing or as a
result of the closing of the transactions contemplated herein and the
termination of Seller's employees as a result thereof.
(c) Seller agrees that prior to the date of Closing, Seller and its
Related Parties shall not permit any event or condition to exist or occur
that would give rise to a "reportable event" (as defined in ERISA) or to
liabilities or taxes under ERISA or the Code with respect to any Benefit
Plan or incur any commitment to increase their obligation under any Benefit
Plan. Upon becoming aware of the occurrence or forthcoming occurrence of any
of the above, Seller shall provide a written notice to Buyer specifying the
nature of the event and action taken or proposed or threatened to be taken
by Seller, its Related Parties, or any governmental body with respect to
such events.
Section 5.2 Performance of Real Property Leases and Material Contracts.
Seller shall continue to faithfully and diligently perform each and every
continuing obligation of Seller, if any, under each of the Real Property Leases
and Material Contracts through the Effective Time and thereafter, to the extent
such obligations are not assumed by Buyer pursuant to Section 2.4.
Section 5.3 Transfer of Licenses and Permits. Seller shall use its best
efforts and cooperate fully in assisting Buyer with the assumption, transfer or
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reissuance of any and all required state, county or city licenses or permits
required for the operation of the Restaurant Locations, including those shown on
Schedule 4.6. Specifically, Seller agrees to take the following actions if
requested by Buyer to ensure the orderly transition of liquor licenses for the
Restaurants as of the Effective Time:
(a) Arkansas. With respect to the Restaurant located in Arkansas,
Seller will take such steps as are reasonably necessary to transfer control
of its private club that holds the liquor license for such Restaurant to
Buyer.
(b) Kansas. With respect to the Restaurant located in Kansas, Seller
agrees to execute a lease assignment for the applicable Real Property Lease
and a xxxx of sale for the liquor inventory prior to the Closing Date, which
documents will only be effective upon the Closing and the issuance of a new
liquor license for such Restaurant to Buyer. Seller agrees to use its best
efforts to obtain the consent of the landlord under such Real Property Lease
to the lease assignment contemplated herein.
(c) Missouri. With respect to the Restaurants located in Missouri,
Seller agrees to execute (i) either a lease assignment for the applicable
Real Property Leases or a deed for the Owned Real Property and (ii) a xxxx
of sale for the liquor inventory prior to the Closing Date, which documents
will only be effective upon the Closing and the issuance of a new liquor
license for such Restaurant to Buyer. Seller agrees to use its best efforts
to obtain the consent of the landlord under the Real Property Leases to the
lease assignment contemplated herein.
Section 5.4 Agreements Respecting Employees of Seller. Seller agrees to
terminate the employment of all employees involved in the operation of the
Restaurant Locations at the Effective Time.
Section 5.5 Maintenance of Existence. Seller shall maintain its existence
following Closing until such time as all closing conditions of Seller shall have
been satisfied and the continuing obligations of Seller, if any, under the Real
Property Leases and Material Contracts have been fully satisfied or adequate
provision shall have been made for the satisfaction of such obligations.
Section 5.6 Conduct of Business. From the execution of this Agreement
until the Effective Time, Seller shall operate the Restaurants as they are
currently being operated and only in the ordinary course and in compliance with
all terms and conditions of the Franchise Agreements, using commercially
reasonable efforts in keeping with Seller's historical practices to preserve and
maintain the services of its employees, and its relationships with suppliers and
customers, and to preserve its current level of sales volume, and shall continue
to insure the Purchased Assets under existing policies of insurance, including
workers' compensation and general liability insurance, at current levels. Seller
shall pay all bills and debts incurred by it related to the business and the
Restaurants promptly as they become due. Additionally, Seller shall continue
with the implementation of initiatives as scheduled with AII. Further, Seller
shall not:
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(a) Change in any manner the equity ownership of Seller or the
ownership of the Purchased Assets;
(b) Increase the overall work force at the Restaurants or increase the
rate of compensation to any officers or employees beyond the usual and
customary annual merit increases or bonuses under established compensation
plans;
(c) Incur any capital expenditure obligations for material, or acquire
by purchase, lease or otherwise, any material capital assets; provided,
however, such obligations may be incurred with respect to the development of
the Additional Restaurant, subject to the terms and conditions set forth
herein.
(d) Incur any material obligations, expenses, or liabilities except in
the usual and ordinary course of business;
(e) Mortgage, pledge or subject to lien any of the Purchased Assets;
or
(f) Sell or otherwise dispose of any Purchased Asset except for the
sale or use of Inventories in the ordinary course of business.
Section 5.7 Broker's Fees. Seller and the Shareholders, jointly and
severally, shall indemnify and hold Buyer harmless in respect to any claim for
brokerage or finder's fees or commissions with respect to the transactions
contemplated herein by anyone claiming to have acted on behalf of Seller.
Section 5.8 Access to Information and Properties. Subject to the
limitations set forth in Section 5.17 hereof, Seller shall afford Buyer, its
counsel, financial advisors, and other authorized representatives reasonable
access for any purpose consistent with this Agreement from the date hereof until
the Closing, during normal business hours, to the offices, properties, books,
and records of Seller with respect to the Purchased Assets and the Restaurants
and shall furnish to Buyer such additional financial and operating data and
other information as Seller may possess and as Buyer may reasonably request,
subject to the parties' obligations regarding confidentiality of such
information as set forth in Section 10.13 hereof.
Section 5.9 Intentionally Deleted.
Section 5.10 Intentionally Deleted.
Section 5.11 Intentionally Deleted.
Section 5.12 Survey and Title Report.
(a) Buyer, at Buyer's sole cost and expense, may obtain a survey for
each of the Restaurant Locations (each, a "Survey"). If any Survey discloses
that a portion of a Restaurant Location lies within a 100-year flood plain
or any area having special flood hazards as designated by a government
agency, then Buyer shall have the option, in Buyer's sole discretion, within
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fifteen (15) days after receipt of the applicable Survey to terminate this
Agreement, in which event the parties hereto shall have no further
obligations under this Agreement.
(b) Seller, at Seller's sole cost and expense, within ten (10) days
after the date of this Agreement, will deliver to Buyer a preliminary title
report or title policy commitment issued by Xxxxxxx-Xxxxx Land Title
Company, as agent for Chicago Title Company (the "Title Company") for each
Restaurant Location (collectively, the "Title Reports" and each, a "Title
Report"), describing such Restaurant Location, listing Buyer as the
prospective named insured and showing as the proposed policy amount an
amount to be determined by Buyer. Seller shall also furnish to Buyer and
Buyer's attorney a legible and true copy of all documents and other
instruments referenced in the Title Report.
(c) Buyer and Buyer's attorney shall have thirty (30) days after the
date of receipt of all Surveys, Title Reports and copies of all related
documents to review the same and to notify Seller in writing of any
objections to condition of the title or matters shown on the Survey or in
the Title Report. Seller shall have thirty (30) days following receipt of
Buyer's notice to rectify Buyer's objections. The parties agree that if
necessary, the time of Closing shall be extended accordingly.
(d) If Seller cannot rectify Buyer's objections within thirty (30)
days, or if the Title Reports are not delivered within the time specified,
Buyer, at Buyer's option, may: (a) terminate this Agreement or (b) elect to
waive such objections, in which case the parties shall proceed with the
Closing and shall negotiate in good faith to agree upon a reduction in the
Purchase Price corresponding to the uncured objection.
Section 5.13 Financial Statements. Seller shall obtain and deliver to Buyer
an audited balance sheet for each of the two (2) immediately preceding fiscal
years, and an audited income statement for each of the three (3) preceding
fiscal years with an unqualified opinion thereon from a certified public
accountant reasonably acceptable to Buyer (collectively, the "Financial
Statements"). The Financial Statements shall be prepared in accordance with
generally accepted accounting principles. All such accounting services and
reports shall be at the expense of Seller. Notwithstanding the foregoing,
Financial Statements delivered for periods between January 1, 2005 and the
Closing Date will be unaudited.
Section 5.14 No Securities Trading. Seller and each Shareholder
acknowledge that Buyer is a publicly-held company and dissemination of
information concerning this transaction or trading in Buyer's stock by any party
to this transaction or any party receiving information from any party to this
transaction prior to public release could result in violation of SEC xxxxxxx
xxxxxxx regulations. Therefore, Seller and each Shareholder agree not to
disseminate any information concerning this transaction and agree not to trade
in Buyer's stock until two business days after the Closing.
Section 5.15 Change of Name. Seller shall change or shall cause to be
changed the name of any affiliated entities as of the Closing to delete the use
of the name "Apple" and "Applebee's." Immediately upon the Closing, Seller and
such affiliated entities shall cease using the name "Apple" and "Applebee's" in
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all of their activities, promotions, brochures, stationery, products, and in all
other respects, and thereafter Seller and such affiliated entities shall agree
not to use the names "Apple" and "Applebee's" in any business context.
Section 5.16 Cooperation. Seller will use all commercially reasonable
efforts to facilitate and cause the consummation of the transactions
contemplated hereby; and obtain from all persons, and take all other actions
with respect to, all consent or approvals required on the part of such party
with respect to the consummation of those transactions.
Section 5.17 Right to Inspect. Buyer may, at its expense, at any time
prior to the Closing, cause inspections to be made of the Real Property and
Restaurants, including environmental or engineering inspections, to determine
the compliance with applicable law and the terms of the Franchise Agreements and
to assess the operating condition of the Purchased Assets (an "Inspection"),
subject to the following limitations: (i) inspection of any Restaurants or
offices must be conducted (A) during normal business hours, (B) upon not less
than three (3) days prior written notice to Seller, (C) under the supervision of
Xxxx XxXxxx with prior written notice to Xxxx Xxxxxx and Xxxxx Xxxxxxx, and (D)
in such a manner as to not disrupt or interfere with the operations of the
Business or any Restaurant (ii) no inquires shall be made by Buyer of any
director, officer, employee, manager or shareholder of Seller of any nature
whatsoever, except with the prior written consent of Xxxx Xxxxxx or Xxxxx
Xxxxxxx, (iii) all information regardless of medium or expression, provided by
Seller to Buyer or otherwise acquired by Buyer in connection with the
investigation of the Real Property, Business and the Restaurants, shall be
treated as confidential in accordance with Section 10.14 hereof, and (iv) all
inquires with respect to the Real Property, Business and the Restaurants shall
be directed to Xxxx Xxxxxx and Xxxxx Xxxxxxx. Buyer shall provide to Seller
copies of any Inspection conducted hereunder as soon as reasonably practicable
after the conclusion of such Inspection. Seller shall cooperate in the
performance of these inspections and shall also be responsible for correcting
any deficiency identified by an Inspection in accordance with Section 5.18
below.
Section 5.18 Deficiencies--Repairs and Replacements. Prior to Closing,
Seller shall repair, replace, correct or remediate, at its sole cost and
expense, any and all items identified as deficient pursuant to an Inspection
conducted in accordance with Section 5.17. A Purchased Asset will be deemed to
have a deficiency if all or any part of the Purchased Asset is not in good
working condition (normal wear and tear excepted) or does not operate in
accordance with applicable law or the terms of the Franchise Agreements or any
manuals issued in connection therewith. Real Property shall be deemed deficient
if it contains or is otherwise identified as having a "Recognized Environmental
Condition," as that term is defined in the American Society for Testing
Materials ("ASTM") "Standard Practice for Environmental Site Assessment: Phase 1
Environmental Site Assessment Process," ASTM E 1527-00 at 3.3.31. If an
Inspection identifies any missing equipment or other property that is required
to operate each Restaurant in accordance with AII's requirements and
specifications as of the date of this Agreement ("Missing Equipment"), Seller
will pay for and install all Missing Equipment prior to Closing.
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Section 5.19 Restrictive Covenants.
(a) Non-Solicitation. For a period of one year after the Closing Date,
neither Seller nor the Shareholders shall solicit the employment of any
employees who accept employment with Buyer at Closing. In addition, from the
date of execution of this Agreement until Closing, neither Seller nor the
Shareholders will offer continued employment to, or discourage any
Restaurant employee from accepting employment with, Buyer. Provided,
however, if a Restaurant employee independently elects not to accept
employment with Buyer, neither Seller nor the Shareholders will be in
violation of this Section 5.19 if it thereafter employs such employee.
(b) Non-Compete. Seller and each of the Shareholders covenants and
agrees that for a period of five (5) years from the Closing Date, neither
Seller nor any Shareholder shall directly or indirectly, as an employee,
employer, consultant, agent, franchisor, lender, guarantor, manager,
principal, partner, shareholder, corporate officer, director, or through any
other kind of ownership (other than ownership of securities of publicly held
corporations of which Seller or any Shareholder owns less than five percent
5% of any class of outstanding securities) or in any other representative or
individual capacity, engage in or render any services to any business in
North America engaged in the casual dining restaurant industry. For purposes
of this Agreement "casual dining restaurant industry" means any restaurant
or restaurant chain listed, at the xxxx Xxxxxx or a Shareholder engage in
such business at a specific location, on the Casual Dining Category list of
restaurants published by NPD - Crest/Recount from time to time or any
substantially equivalent replacement list of which Buyer gives Seller prior
written notice (the "Competitive List"). For purposes of this Section
5.19(b), the parties agree that the ownership and operation of one or more
Fazzoli's restaurants, whether opened now or in the future, will not be
deemed to be a violation of the covenant not to compete set forth above.
Notwithstanding anything to the contrary contained herein, the covenant not
to compete given by XxXxxx will only extend for two (2) years from the
Closing Date. Buyer agrees that the covenant not to compete will not apply
to any adult children of Xxxxxx so long as Xxxxxx is not engaged in any
activities, directly or indirectly, of such children in a manner that would
violate the covenant not to compete given by him in this Section 5.19.
(c) Understanding of the Parties. It is mutually understood and agreed
by and between the parties that the covenants contained in this Section 5.19
are fair and reasonable, and are reasonably required for the protection of
Buyer and AII, Buyer's parent.
(d) Remedies. In the event of a breach or threatened breach by Seller
and/or any of the Shareholders (the "Breaching Party") of the provisions of
this Section 5.19, Buyer and AII will be entitled to an injunction
restraining the Breaching Party from such breach or threatened breach.
Nothing contained herein will be construed to prohibit Buyer or AII from
pursuing any other remedies available to it for such breach or threatened
breach, including recovery of damages from the Breaching Party. If it is
determined in any judicial or arbitration proceeding that the Breaching
23
Party breached one or more of the covenants set forth in Sections 5.19(a) or
(b). of this Agreement, then all of such covenants will be deemed to be
extended with respect to the Breaching Party for an additional period of
time equal to the period of time during which the Breaching Party committed
the applicable breach.
(e) Savings Clause. Notwithstanding anything to the contrary herein
contained and if, and only if, provisions of the type contained in this
section are enforceable in the jurisdiction in question, if any one or more
of the provisions contained in this Section 5.19 shall for any reason be
held to be excessively broad as to time, duration, geographical scope,
activity or subject, said provisions will be construed by limiting and
reducing them so as to be enforceable to the extent compatible with the
applicable law as it should then be determined.
Section 5.20 No Sale Negotiations. From the date hereof through the later
of (a) 60 days from the date hereof and (b) the Closing, neither Seller nor any
Shareholder shall, directly or indirectly (a) entertain, solicit or encourage in
any manner, (b) furnish or cause to be furnished any information to any persons
or entities (other than Buyer) in connection with, or (c) negotiate or otherwise
pursue, the sale of the business, the Purchased Assets or the Restaurants, the
sale of stock of Seller or engage in any merger or other business combination
involving the business, the Purchased Assets or the Restaurants.
Section 5.21 Potential Sites. Seller agrees to consult with Buyer prior
to executing any purchase contract or lease for a Potential Site, including any
amendments thereto, and agrees to assign to Buyer at Closing any purchase
contract or lease for a Potential Site previously approved by Buyer.
Section 5.22 Sale or Assignment of Potential Sites. If Seller purchases a
Potential Site pursuant to a purchase contract approved by Buyer prior to the
Closing, Seller will sell, and Buyer will buy, such Potential Site for Seller's
acquisition cost plus any other Buyer approved out-of-pocket costs with respect
to such Potential Site. If Seller leases a Potential Site pursuant to a lease
approved by Buyer prior to the Closing, Seller will assign, and Buyer will
assume (to the extent obligations thereunder relate to acts or omissions
occurring from and after the date of Closing), such lease in exchange for
Buyer's payment of any Buyer approved out-of-pocket costs with respect to such
Potential Site.
Section 5.23 Additional Restaurant; Reimbursement. Subject to Sections 7.2
and Section 7.5, and reimbursement for reasonable and demonstrable Construction
Costs (as defined in Section 7.2), Seller shall complete development and
construction of the Additional Restaurant for Buyer.
Section 5.24 Development Activities. Seller shall continue ordinary
restaurant development activities (a) on the Potential Sites, to the extent
Buyer approves reimbursement of out-of-pocket costs as provided for in Section
5.23, and (b) at the Additional Restaurant.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF BUYER
As an inducement to Seller to enter into this Agreement and to consummate
the transactions contemplated hereby, Buyer hereby represents and warrants to
Seller as follows:
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Section 6.1 Corporate Existence. Buyer is a corporation validly existing
and in good standing under the laws of the State of Missouri.
Section 6.2 Corporate Power and Authority. Buyer has all requisite
corporate power and authority to own its properties and assets, and to carry on
the business in which it is now engaged. Buyer has the corporate power and
authority to perform the covenants of Buyer set forth in this Agreement.
Section 6.3 Execution and Delivery Permitted. The execution, delivery and
performance of this Agreement will not (a) violate or result in a breach of any
term of Buyer's Articles of Incorporation or of its Bylaws, (b) result in a
breach of or constitute a default under any term in any agreement or other
instrument to which Buyer is a party, such default having not been previously
waived by the other party to such agreements, (c) violate any law or any order,
rule or regulation applicable to Buyer, of any court or of any regulatory body,
administrative agency or other governmental instrumentality having jurisdiction
over Buyer or its properties, or (d) result in the creation or imposition of any
mortgage, lien, charge, or encumbrance of any nature whatsoever upon any of the
Purchased Assets purchased by Buyer hereunder. Buyer's Board of Directors, or an
authorized committee thereof, has taken all action required by law, and by
Buyer's Articles of Incorporation, its Bylaws, and otherwise to authorize the
purchase of the Purchased Assets in accordance with this Agreement.
ARTICLE VII
COVENANTS OF BUYER
Buyer hereby covenants and agrees as follows:
Section 7.1 Buyer Performance. Buyer hereby covenants and agrees to
accept conveyance of the Purchased Assets and, subject to Section 2.4 herein, to
assume and perform the obligations of Seller under the Material Contracts as of
the Effective Time.
Section 7.2 Development of the Additional Restaurant. Buyer shall on the
Closing Date reimburse Seller (in cash, by wire transfer of funds, or in such
other manner reasonably acceptable to Seller) for Seller's reasonable and
demonstrable out-of-pocket capital costs and expenses relating to the
development and construction of the Additional Restaurant and the Restaurant
located in Osage Beach, Missouri (to the extent not already reflected on Exhibit
D) if such costs and expenses fall within one of the cost categories set forth
on Exhibit G attached hereto (the "Construction Costs"). The Construction Costs
will be paid to Seller in cash at Closing to the extent that such costs have
been substantiated to Buyer's satisfaction. All other Construction Costs will be
paid to Seller within fifteen (15) days of Buyer's receipt of satisfactory
substantiation for such costs.
Section 7.3 Potential Sites. If Seller purchases a Potential Site
pursuant to a purchase contract approved by Buyer prior to the Closing, Seller
will sell, and Buyer will buy at Closing, such Potential Site for Seller's
acquisition cost plus any other Buyer approved out-of-pocket costs with respect
to such Potential Site. If Seller leases a Potential Site pursuant to a lease
approved by Buyer prior to the Closing, Seller will assign, and Buyer will
25
assume at Closing (to the extent obligations thereunder relate to acts or
omissions occurring from and after the date of Closing), such lease in exchange
for buyer's payment of any Buyer approved out-of-pocket costs with respect to
such Potential Site.
Section 7.4 Right to Inspect. Buyer may, at its expense, cause
Inspections to be made of the Restaurant Locations and the Additional
Restaurants and shall conduct such Inspections in accordance with Section 5.17.
Section 7.5 Buyer's Options. Buyer, at its sole option, may (a) engage
Xxxxxx Construction to develop the Potential Sites, and (b) elect to perform,
and incur the costs of, certain pre-opening activities in connection with the
Additional Restaurant.
ARTICLE VIII
PRORATIONS AND PURCHASE PRICE ADJUSTMENT;
CONDITIONS TO CLOSING
Section 8.1 Prorations and Purchase Price Adjustments. The following
items shall be prorated between Buyer and Seller as of 11:59 PM on the day
immediately preceding the Closing Date, or paid by one party on or after the
Closing Date, in each case as set forth below, and shall constitute an
adjustment to the Purchase Price:
(a) All ad valorem, real and personal property taxes, general and
special assessments (solely with respect to installments due in the current
tax year), and any other property taxes on the Purchased Assets for the
current tax year; however, if the amount of such tax for the current tax
year is not determinable, (i) it shall be prorated on the basis of the tax
for the immediately preceding tax year and (ii) after the amount of tax for
the current tax year becomes determinable, (A) either party, at its option,
may give the other party written notice of the correct amount of tax
(accompanied by documentation substantiating such amount) and any necessary
adjustment to the prorations and (B) the party from whom additional payment
is required will pay the applicable amount within ten (10) days after such
notice;
(b) All rentals on Real Property Leases and Equipment Leases (to the
extent assumed by Buyer), including prepaid rentals, percentage rents, and
common area maintenance charges;
(c) All prepaid insurance premiums on insurance policies covering the
Purchased Assets and regarding welfare benefit programs, but only if Buyer
elects to have said coverage remain in effect;
(d) Any amounts paid by Seller on or prior to the Closing Date with
respect to the Material Contracts for services extending beyond the Closing
Date which are assignable to Buyer;
(e) Any prepaid expenses, but not deposits, associated with the
operation of a Restaurant Location which were paid by Seller in the ordinary
course of business, including telephone expenses, billboard advertising
expenses, cooperative fees, advertising expenses, and utility charges;
26
(f) The cost to repair, replace, correct or remediate a deficiency
identified in Section 5.18 shall be paid by Seller as a reduction in
Purchase Price, to the extent not repaired, replaced, corrected or
remediated by Seller as set forth in Section 5.18 prior to Closing;
(g) All amounts paid or to be paid by Buyer with regard to Buyer's
purchase or lease of a Potential Site from Seller pursuant to Section 5.23
and Section 7.3 shall increase the Purchase Price;
(h) All amounts paid or to be paid by Buyer with regard to reimbursing
Seller in accordance with the development of the Additional Restaurant
pursuant to Section 5.24 and Section 7.2 shall increase the Purchase Price;
(i) The Xxxxxxx Money paid by Buyer to Seller shall be an offset
against the Purchase Price as set forth in Section 2.1; and
(j) The premiums for the Title Policies (excluding any premiums for
special endorsements required by Buyer) will be paid by Seller as a
reduction in Purchase Price.
Seller shall bear the cost and expense of all prorated items applicable to
periods ending on or before the Closing Date and shall receive the benefits
thereof, and Buyer shall bear the cost and expense of payment of all prorated
items applicable to periods from and after the Effective Time, and receive the
benefits thereof.
Section 8.2 Inventory Adjustment and Vacation Credit.
(a) To the extent that the value of the Inventory as of the Closing
Date, to be determined by physical audit thereof by Buyer, is (i) less than
$165,000, the Purchase Price shall be reduced by an amount equal to such
shortfall or (ii) more than $165,000, the Purchase Price shall be reduced by
an amount equal to such excess.
(b) The Purchase Price shall be reduced by the value of all earned and
unused vacation, as of the Closing Date, of all employees of Seller who are
hired by Buyer.
Section 8.3 Amounts Owed Buyer; Store Cash.
(a) The Purchase Price shall be reduced by the aggregate amount of all
sums owed by Seller to Xxxxxxxx'x International, Inc. as recorded on the
books of Xxxxxxxx'x International, Inc.
(b) The Purchase Price shall be decreased for any xxxxx cash amounts
less than $1,500.00 per Restaurant by the amount of the shortfall at the
Effective Time.
Section 8.4 Buyer's Conditions to Closing. The obligations of Buyer
hereunder are subject to satisfaction of each of the following conditions at or
before Closing, the occurrence of which may, at the option of Buyer, be waived:
27
(a) All representations and warranties of Seller in this Agreement
shall be true on and as of the Closing Date, and Seller shall have delivered
to Buyer a certificate to such effect dated as of the Closing Date;
(b) Neither the Purchased Assets nor any individual Restaurant
Location shall have been substantially damaged as a result of fire,
explosion, earthquake, disaster, accident, any action by the United States
or any other governmental authority, earthquake, flood, drought, embargo,
riot, civil disturbance, uprising, activity of armed forces, act of God, or
public enemies;
(c) There shall be no material adverse change in the Purchased Assets
or the operations of Seller at the Restaurant Locations from the date hereof
to the Closing Date;
(d) Seller shall have performed and complied with all of Seller's
covenants and obligations under this Agreement which are to be performed or
complied with by Seller prior to or on the Closing Date;
(e) Seller shall be willing and able to deliver all of the documents
required to be delivered by them by this Agreement;
(f) Buyer and Buyer's counsel shall have approved the form and
substance of the documents delivered by Seller pursuant to this Agreement;
(g) Seller shall have obtained and delivered to Buyer all necessary
consents and estoppels to transfer the Purchased Assets and assign the Real
Property Leases and Material Contracts to Buyer;
(h) Seller shall have terminated the employment of all employees
involved in the operation of the Restaurant Locations;
(i) Buyer shall have obtained, either from Seller or directly from the
issuing authority, all permits, licenses, and approvals of all governmental
and quasi-governmental authorities necessary in the operation of the
Restaurants as intended by Buyer;
(j) There shall be no claims, actions or suits pending or threatened
regarding the Purchased Assets or the Restaurant or that otherwise would
restrict or prohibit Seller from consummating the transactions contemplated
herein;
(k) Buyer shall have completed to its satisfaction any review,
investigation and due diligence of the Restaurants, Purchased Assets,
business, operations or records of Seller and shall be satisfied with the
results thereof; and
(l) Seller shall have caused any companies affiliated with Seller, to
transfer its ownership or leasehold interest in the Potential Sites or the
real property on which the Restaurants or Additional Restaurants are
situated to Buyer (for no additional consideration).
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Section 8.5 Seller's Conditions to Closing. The obligations of Seller
hereunder are subject to satisfaction of each of the following conditions at or
before Closing, the occurrence of which may, at the option of Seller, be waived:
(a) All representations and warranties of Buyer in this Agreement
shall be true on and as of the Closing in all material respects, and Buyer
shall have delivered to Seller a certificate to such effect dated as of the
Closing Date;
(b) Buyer shall have performed and complied in all material respects
with all of its obligations under this Agreement which are to be performed
or complied with by Buyer prior to or on the Closing Date;
(c) Buyer shall be willing and able to deliver the Purchase Price and
all of the documents required to be delivered by it under Section 3.3 of
this Agreement; and
(d) Seller shall have approved the form and substance of the documents
delivered by Buyer pursuant to this Agreement.
(e) The total costs to correct or remediate Real Property deficiencies
pursuant to Section 5.18 and to remove exceptions to title insurance
coverage from the Real Property required by Buyer does not exceed $300,000,
plus the cost to Seller to remove all Monetary Liens. For purposes of this
section, a "Monetary Lien" is any lien, claim or encumbrance which evidences
or secures a fixed monetary amount or which can be removed by the payment of
a liquidated sum.
ARTICLE IX
INDEMNIFICATION AGAINST LOSS
Section 9.1 Indemnification by Seller and the Shareholders. Seller and
each of the Shareholders, jointly and severally, agrees to defend, indemnify,
and hold harmless Buyer, its officers, directors, agents, employees, and
affiliates, against and in respect of any and all causes of action, claims,
losses, liabilities, liens, damages, costs and expenses (including attorneys'
fees) incurred or resulting from:
(a) Any misrepresentation, breach of warranty, or nonfulfillment of
any covenant or agreement on the part of Seller or any Shareholder under or
in connection with this Agreement;
(b) The acts or omissions of Seller alleged to be violations of Title
VII of the Civil Rights Act of 1964, as amended, 42 U.S.C. 2000e et seq.;
the Fair Labor Standards Act; the Age Discrimination in Employment Act; the
Labor Management Relations Act; state unemployment taxes and any and all
other applicable state or federal statutes or regulations;
(c) Any tax liability of Seller (including, without limitation,
liabilities for taxes, interest, penalties, governmental charges, duties,
fees, and fines imposed by the United States, foreign countries, states,
counties, municipalities, and subdivisions, and by all other governmental
entities or taxing authorities);
29
(d) Operation of the Restaurant Locations through the Effective Time;
(e) Any liability of Seller not expressly assumed by Buyer hereunder,
including but not limited to obligations arising with regard to Seller's
responsibilities under the Real Property Leases and Material Contracts
through the Effective Time; and
(f) Any and all claims, debts, liabilities, taxes and other
obligations of Buyer that are imposed on Buyer as a result of its status as
a successor to Seller except to the extent the foregoing are assumed by
Buyer pursuant to Section 2.4 of this Agreement.
Section 9.2 Indemnification by Buyer. Buyer agrees to defend, indemnify,
and hold harmless Seller against and in respect of any and all causes of action,
claims, losses, liabilities, liens, damages, costs and expenses (including
attorneys' fees) incurred or resulting from:
(a) Any misrepresentation, breach of warranty or nonfulfillment of any
covenant on the part of Buyer in connection with this Agreement;
(b) Operation of the Restaurant Locations after the Effective Time;
and
(c) Obligations arising with regard to Buyer's responsibilities under
the Real Property Leases and Material Contracts after the Effective Time.
Section 9.3 Limitations. No claim based on a breach of representation or
warranty made in this Agreement may be made against the other party after the
end of the 30th month after the Closing Date; provided, however, Buyer may bring
a claim against Seller or the Shareholders with respect to a breach of any
representation or warranty contained in Sections 4.14, 4.18 or 4.22 at any time
after the Closing until the expiration of the applicable statute of limitations
(with respect to each such date, the "Expiration Date"). Any lawsuit or
arbitration proceeding to enforce the indemnification obligations of a party
hereunder for which the indemnifying party has refused to satisfy its
obligations must be instituted within one year after the applicable Expiration
Date.
ARTICLE X
MISCELLANEOUS
Section 10.1 Notices. Except as otherwise expressly provided, all notices,
consents, requests, demands and other communications hereunder shall be in
writing and shall be deemed to have been duly given if delivered personally,
sent by facsimile transmission with confirmation of receipt, or if mailed by
certified mail, return receipt requested, with first class postage prepaid,
addressed as follows:
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(a) If to Seller: The Ozark Apples, Inc.
0000 Xxxxxxx Xxxxxx
Xxxxxx Xxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X.Xxxxxx, President
Xxxx Xxxxxx
FAX:
-------------------------------------
With a copy to: Xxxxx Xxxxxxx
0000 Xxxx Xxxxxxx, Xxxxx 000
Xxxxxx Xxxx, XX 00000
FAX: (000) 000-0000
(b) If to Buyer: Xxxxxxxx'x International, Inc.
0000 Xxxx 000xx Xxxxxx
Xxxxxxxx Xxxx, XX 00000
Attention: General Counsel
FAX: (000) 000-0000
With a copy to: Xxxxx X. Xxx, Esq.
Xxxxxxxxx Xxxxxxx Xxxxx Xxxxxx LLP
0000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxx Xxxx, XX 00000
FAX: (000) 000-0000
or to such other address as Buyer or Seller shall have last designated by notice
to the other party.
Section 10.2 Applicable Law. This Agreement shall be governed by, and
construed and enforced in accordance with, the internal laws of the State of
Missouri, without regard to the choice of law provisions thereof.
Section 10.3 Binding on Successors; Assignment. All of the terms,
provisions and conditions of this Agreement shall be binding upon and shall
inure to the benefit of the parties hereto, their respective successors, assigns
and legal representatives. Seller may not assign all or any part of its interest
in this Agreement. Buyer may assign this Agreement and any or all of its rights
or obligations hereunder to any entity that controls, is controlled by, or is
under common control with Buyer. Buyer may assign its rights under Section 5.19
of this Agreement to any party that purchases or acquires the right to operate
the Restaurants.
Section 10.4 Payment of Costs.
(a) Seller Costs. Seller shall pay:
(1) All of Seller's expenses for legal counsel, accountants,
brokers and other advisors;
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(2) All costs, search fees and expenses associated with the Title
Reports and the Title Policies, excluding any cost for special policy
endorsements required by Buyer or its lenders;
(3) All costs of any real estate title curative work required to
remove such exceptions to title insurance coverage for the Real
Property required to be removed by Buyer;
(4) All fees, costs and expenses incurred in recording all real
estate documents related to the transactions contemplated hereby;
(5) All sales, transfer or other taxes arising from the
transactions contemplated hereby arising under state law;
(6) All costs to remedy any deficiencies as described in Section
5.18;
(7) All fees or expenses charged or passed through by Seller's
lenders, including fees of counsel to any of Seller's lenders; and
(8) All other costs and expenses incurred by Seller in
negotiating this Agreement and in consummating the transactions
contemplated hereby.
(b) Buyer Costs. Buyer shall pay:
(1) All of its expenses for legal counsel, accountants, brokers
and other advisors;
(2) All costs to perform the Surveys and Phase I environmental
and audit surveys of the Restaurants, the Additional Restaurant and
Potential Sites; and
(3) All other costs and expenses incurred by Buyer in negotiating
this Agreement and in consummating the transactions contemplated
hereby, including any fees or commissions payable to any party
representing Buyer in connection with arranging or negotiating this
Agreement and the transactions contemplated hereby.
(c) Shared Costs. Buyer and Seller shall equally pay the following
costs:
(1) Any and all closing and escrow fees charged by the Title
Company.
Section 10.5 Closing Not to Prejudice Claim for Damages. Closing of the
transactions contemplated by this Agreement shall not prejudice any claim for
damages which either party may have hereunder, in law or in equity, due to a
material default in observance in the due and timely performance of any of the
covenants and agreements herein contained or for the breach of any warranty or
representation hereunder, unless such observance, performance, warranty, or
representation is specifically waived in writing by the party making such claim.
32
Section 10.6 Survival of Representations, Warranties, Covenants and
Undertakings. All of the representations, warranties, covenants and undertakings
made by the parties hereto shall survive the execution of this Agreement and
Closing.
Section 10.7 Additional Documents. After Closing, each party agrees to
furnish such additional documents as are necessary to complete the transactions
contemplated hereby.
Section 10.8 Time is of the Essence. Time is of the essence in the
performance of the obligations of the parties hereunder.
Section 10.9 Interpretation. The title of the sections of this Agreement
are for convenience of reference only, and are not to be considered in
construing this Agreement. Whenever required by the context of this Agreement,
the singular shall include the plural and the masculine shall include the
feminine and vice versa.
Section 10.10 Entire Agreement. This Agreement and the Exhibits and
Schedules attached hereto and incorporated herein by this reference contain the
entire Agreement of the parties hereto with respect to the transactions
contemplated hereby and supersede any and all prior agreements, arrangements,
and understandings between the parties, including but not limited to the letter
of Buyer addressed to The Ozark Apples, Inc. with respect to this transaction,
dated February 28, 2005. No inducements contrary to the terms of this Agreement
exist. No waiver of any term, provision, or condition of this Agreement, whether
by conduct or otherwise, in any one or more instances shall be deemed to be
construed as a further or continuing waiver of any such term, provision or
condition or any other term, provision or condition of this Agreement. This
Agreement may not be modified orally and may only be amended in a writing
executed by all parties hereto.
Section 10.11 Counterparts. This Agreement may be executed in one or more
counterparts which in the aggregate shall comprise one Agreement.
Section 10.12 Termination.
(a) This Agreement may be terminated prior to the Closing as follows:
(1) At any time by the mutual consent of Seller and Buyer;
(2) By either Seller or Buyer, at its sole election, at any time
after April 25, 2005, if the Closing shall not have occurred on or
prior to such date unless the failure of the Closing to occur by such
date shall have been as a result of a material breach by a party
hereto; provided further, however, that the right to terminate this
Agreement under this Section 10.12(a)(2) shall not be available to any
party whose failure to fulfill any obligation under this Agreement
shall have been the cause of, or shall have resulted in, the failure of
the Closing to occur on or prior to such date;
(3) By Buyer if any condition set forth in Section 8.4 hereof
shall not have been met as of the Closing; or
33
(4) By Seller if any condition set forth in Section 8.5 hereof
shall not have been met as of the Closing.
(b) In the event of the termination of this Agreement pursuant to
subparagraph (3) above because Seller shall have willingly or in bad faith
failed to satisfy a condition to the Closing, Buyer shall be entitled to
pursue, exercise, and enforce any and all remedies, rights, powers, and
privileges available to it at law or in equity.
(c) Upon termination of this Agreement, Buyer shall be entitled to a
refund of the Xxxxxxx Money paid by Buyer to Seller unless Seller terminates
this Agreement for Buyer's material breach pursuant to Section 10.12(a)(2).
Section 10.13 Public Announcements. Neither Buyer nor Seller or any of
their respective representatives, agents, or affiliates, shall make any public
announcement or other disclosure with respect to this Agreement or the
transactions contemplated hereby without the prior review of and written consent
to such disclosure by the other party.
Section 10.14 Confidentiality. Each party agrees to treat all information
concerning the other furnished, or to be furnished, by or on behalf of the other
(collectively, the "Information"), in accordance with the provisions of this
paragraph and to take, or abstain from taking, all actions set forth herein. The
Information will be used solely for the purposes of evaluating the business,
Restaurants, and the Purchased Assets, and will be kept confidential by the
receiving party and its officers, directors, employees, representatives, agents,
and advisors; provided, that (i) any of such Information may be disclosed to
officers, directors, employees, representatives, agents, and advisors of the
receiving party who need to know such information for the purpose of evaluating
the Restaurants, the business and the Purchased Assets, (ii) any disclosure of
such information may be made to which the disclosing party consents in writing,
and (iii) such information may be disclosed if required by law. If the
transaction contemplated hereby is not consummated, the receiving party will
return to the disclosing party all material containing or reflecting the
Information.
[SIGNATURE PAGES FOLLOW]
34
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day, month, and year first above written.
BUYER:
GOURMET SYSTEMS, INC.
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
SELLER:
THE OZARK APPLES, INC.
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
SHAREHOLDERS:
OZARK HOLDINGS, INC.
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
Xxxxxxx X. Xxxxxx, Trustee under Voting
Trust dated August 12, 2002 for benefit
of Xxxxxx X. Xxxxxx and Xxxxxxx X. Xxxxxx
By: /s/ Xxxxxxx X. Xxxxxx
--------------------------------------
Xxxxxxx X. Xxxxxx, as Trustee
By: /s/ Xxxxxxx X. Xxxxxx
--------------------------------------
Xxxxxxx X. Xxxxxx
35
Xxxxxx X. Xxxxxx, Trustee under Voting
Trust dated June 29, 1992, as amended
By: /s/ Xxxxxx X. Xxxxxx
--------------------------------------
Xxxxxx X. Xxxxxx, as Trustee
By: /s/ Xxxxxx X. Xxxxxx
--------------------------------------
Xxxxxx X. Xxxxxx
G. Xxxx Xxxxxx, Trustee under the
Xxxxxxxxxxx Xxxx Xxxxxx Irrevocable Trust
dated November 25, 1977
By: /s/ G. Xxxx Xxxxxx
--------------------------------------
G. Xxxx Xxxxxx, as Trustee
G. Xxxx Xxxxxx, Trustee under the Xxxxx
X. (Xxxxxx) Xxxxx Irrevocable Trust
dated November 25, 1977
By: /s/ G. Xxxx Xxxxxx
--------------------------------------
G. Xxxx Xxxxxx, as Trustee
Xxxxxxx X. XxXxxx, Trustee of the Xxxxxxx
X. XxXxxx Revocable Trust dated September
16, 2002
By: /s/ Xxxxxxx X. XxXxxx
--------------------------------------
Xxxxxxx X. XxXxxx, as Trustee
By: /s/ Xxxxxxx X. XxXxxx
--------------------------------------
Xxxxxxx X. XxXxxx
36
Xxxxxx X. XxXxxx, Trustee of the Xxxxxx
X. XxXxxx Revocable Trust dated September
16, 2002
By: /s/ Xxxxxx X. XxXxxx
--------------------------------------
Xxxxxx X. XxXxxx, as Trustee
By: /s/ Xxxxxx X. XxXxxx
--------------------------------------
Xxxxxx X. XxXxxx
37
