Exhibit 10.6
STOCK PURCHASE AGREEMENT
Among
INWOOD INVESTORS PARTNERSHIP, L.P.
CHART HOUSE ENTERPRISES, INC.
METROPOLITAN LIFE INSURANCE COMPANY
XXXXXXX X. XXXXXX
XXXXX XXXXXX
and
LUTHER'S ACQUISITION CORP.
Dated as of October 22, 1998
TABLE OF CONTENTS
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PAGE
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ARTICLE 1 PURCHASE AND SALE OF THE SHARES....................... 1
1.1 Purchase and Sale of the Shares........................... 1
1.2 Closing................................................... 1
ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF MANAGEMENT.......... 2
2.1 Organization............................................ 2
2.2 Authorization and Enforceability........................ 2
2.3 No Violations of Laws or Agreements..................... 3
2.4 Capital Structure....................................... 3
2.5 Subsidiary and Certain Affiliates....................... 4
2.6 Financial Statements.................................... 5
2.7 Taxes................................................... 5
2.8 Properties.............................................. 7
2.9 Intellectual Property................................... 9
2.10 Contracts............................................... 9
2.11 Litigation.............................................. 11
2.12 Insurance............................................... 11
2.13 Benefit Plans........................................... 11
2.14 Absence of Changes or Events............................ 13
2.15 Compliance with Applicable Laws......................... 15
2.16 Permits; Liquor Licenses................................ 15
2.17 Environmental Matters................................... 16
2.18 Employee and Labor Relations............................ 18
2.19 Accounts and Notes Receivable........................... 19
2.20 Inventory............................................... 19
2.21 Indebtedness............................................ 19
2.22 Suppliers............................................... 19
2.23 Certain Employees....................................... 20
2.24 Potential Conflicts of Interest......................... 20
2.25 Brokers................................................. 20
ARTICLE 3 REPRESENTATION AND WARRANTIES OF SELLERS.............. 20
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3.1 Organization............................................ 20
3.2 Authorization and Enforceability........................ 21
3.3 No Violations of Laws or Agreements..................... 21
3.4 Transfer of Good Title.................................. 21
3.5 Management's Representation and Warranties.............. 21
3.6 Related Party Agreements................................ 21
3.7 Brokers................................................. 22
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF BUYER............... 22
4.1 Organization............................................ 22
4.2 Authorization and Enforceability........................ 22
4.3 No Violations of Laws or Agreements..................... 22
4.4 Sufficient Funds; Financing............................. 23
4.5 Compliance with Liquor Licenses......................... 23
4.6 Securities Act.......................................... 23
ARTICLE 5 COVENANTS............................................. 24
5.1 Access.................................................. 24
5.2 Ordinary Conduct........................................ 25
5.3 Litigation.............................................. 25
5.4 Reasonable Efforts...................................... 25
5.5 Reports................................................. 25
5.6 Confidentiality; Press Releases......................... 25
5.7 Financial Information................................... 26
5.8 Employees............................................... 26
5.9 Antitrust Notification.................................. 26
5.10 Reasonable Best Efforts................................. 27
5.11 Advice of Changes....................................... 27
5.12 No Solicitation......................................... 28
5.13 Liquor Licenses......................................... 28
5.14 Non-Competition......................................... 28
5.15 No Additional Representations........................... 29
5.16 Certain Litigation...................................... 29
5.17 Certain Agreements...................................... 29
5.18 Actions Relating to Management's Covenants.............. 29
ARTICLE 6 CONDITIONS TO CLOSING................................. 30
6.1 Conditions to Buyer's Obligations....................... 30
6.2 Conditions to Sellers' Obligations...................... 32
ARTICLE 7 INDEMNIFICATION....................................... 33
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7.1 Non-Survival of Representations and Warranties.................... 33
7.2 Indemnification by Sellers........................................ 33
7.3 Indemnification by Buyer.......................................... 33
7.4 Indemnification Limitations and Procedures........................ 33
7.5 Procedures Relating to Indemnification - Third Party Claims....... 34
7.6 Procedures for Indemnification - Other Claims..................... 35
7.7 APPLICABILITY..................................................... 35
ARTICLE 8 MISCELLANEOUS.................................................. 36
8.1 Construction of this Agreement.................................... 36
8.2 Assignment........................................................ 36
8.3 No Third-Party Beneficiaries...................................... 37
8.4 Termination....................................................... 37
8.5 Expenses.......................................................... 38
8.6 Amendments........................................................ 38
8.7 Notices........................................................... 38
8.8 Fees.............................................................. 39
8.9 Cooperation....................................................... 39
8.10 Waiver Of Jury Trial, Etc.......................................... 39
8.11 Severability...................................................... 39
8.12 Waiver............................................................ 40
8.13 Counterparts...................................................... 40
8.14 Entire Agreement.................................................. 40
8.15 Governing Law..................................................... 40
8.16 Defined Terms..................................................... 40
Exhibits
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Exhibit A - Form of Sellers' Counsel Opinion
Exhibit B - Form of Buyer's Counsel Opinion
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STOCK PURCHASE AGREEMENT
THIS IS A STOCK PURCHASE AGREEMENT, dated as of October 22, 1998
(the "Agreement"), among Inwood Investors Partnership, L.P. ("Inwood"), Chart
House Enterprises, Inc. ("Chart House"), Metropolitan Life Insurance Company
("Metropolitan") (each, a "Seller" and collectively, "Sellers"), Luther's
Acquisition Corp., a Delaware corporation ("Buyer") and Xxxxxxx X. Xxxxxx
("Xxxxxx") and Xxxxx Xxxxxx (collectively, "Management").
Background
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A. After giving effect to unissued shares underlying options, the
Sellers collectively own 2,470,000 shares of the common stock of Luther's Bar-B-
Q, Inc., a Texas corporation ("Luther's" or the "Company") and a warrant to
purchase 400,000 shares of Common Stock of the Company, par value $0.01 (such
Company shares and the shares to be issued upon the exercise of the warrant as
set forth herein as are owned by Sellers, the "Shares").
B. Upon the terms and subject to the conditions set forth in this
Agreement, Buyer desires to purchase from each Seller, and each Seller desires
to sell to Buyer, such Seller's pro rata portion of the Shares.
THEREFORE, intending to be legally bound hereby, the parties hereto
agree as follows:
ARTICLE I
PURCHASE AND SALE OF THE SHARES
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1.1 Purchase and Sale of the Shares. (a) Upon the terms and subject
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to the conditions of this Agreement, at the Closing referred to in Section 1.2
below, each Seller shall sell, transfer and deliver to Buyer such Seller's pro
rata portion of the Shares, free and clear of any Liens (as such term is defined
in Section 2.8(a)), and Buyer will purchase such Shares from each Seller for the
Purchase Price referred to below.
(b) The aggregate purchase price (the "Purchase Price") for the
Shares shall be $3.0529 per share for an aggregate purchase price of $8,761,823.
1.2 Closing. (a) The closing (the "Closing") of the purchase and sale
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of the Shares shall be held at the offices of Xxxxxx & Xxxxxx L.L.P., 0000
Xxxxxx Xxxxxx, Xxxxxxx, Xxxxx at 10:00 a.m. on the third business day after the
conditions to Closing set forth in Article 6 of this Agreement shall have been
satisfied or waived (or such other date as the parties may mutually agree). The
date on which the Closing occurs is referred to herein as the "Closing Date."
All transactions at the Closing shall be deemed to take place simultaneously.
(b) At the Closing,
(i) Each Seller shall deliver the certificates
representing the Shares being purchased hereunder, indicating that Buyer is the
registered owner thereof and dated the Closing Date. To the extent any transfer
stamps are required under applicable law, each Seller shall, at its expense,
obtain and affix such stamps to the foregoing certificates in the appropriate
amounts and canceled as of the Closing Date.
(ii) Buyer shall pay the Purchase Price to each Seller (or
any designee in writing of each Seller) by wire transfer of immediately
available funds to a bank account designated by each Seller in writing not
later than one business day prior to the Closing Date.
(iii) Each Seller shall pay all stock transfer Taxes (as
defined in Section 2.7), recording fees (other than those relating to any
financing of Buyer obtained in connection herewith), and other sales, transfer,
use, purchase or similar Taxes, if any, relating to such Seller's sale of Shares
hereunder.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF MANAGEMENT
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Management hereby represents and warrants (which words, for purposes
of this Agreement, are used interchangeably), as of the date of this Agreement:
2.1 Organization. (a) Each of the Company and Luther's Spirits, Inc.
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(the "Subsidiary") are corporations duly incorporated, validly existing and in
good standing under the laws of the state of its incorporation. Each of the
Company and the Subsidiary have the requisite corporate power and authority to
own, lease and operate its assets, properties (real, personal or mixed) and
business and to carry on its business as presently conducted. Each of the
Company and the Subsidiary is duly qualified or registered as foreign
corporations to do business, and is in good standing in the jurisdictions set
forth in Schedule 2.1, which constitute all jurisdictions in which the character
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of the properties owned, operated or leased by the Company or the Subsidiary or
the nature of its activities require such qualification, except where a failure
to so qualify or be in good standing would not, individually or in the
aggregate, have a Material Adverse Effect (as defined in Section 8.16(b)). Each
of the Company and the Subsidiary do not own or lease property in any
jurisdictions other than its jurisdiction of incorporation and the jurisdictions
set forth in Schedule 2.1.
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(b) Management has delivered to Buyer true and complete copies
of the Certificate of Incorporation, as amended to date, the Bylaws, as in
effect on the date hereof, and the actual minute books and stock ledgers of the
Company and the Subsidiary.
2.2 Authorization and Enforceability. Management has the requisite
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power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by Management and constitutes
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the legal, valid and binding obligation of such parties, enforceable against
them in accordance with its terms, except as such enforceability may be limited
by bankruptcy, insolvency or other laws affecting creditor's rights generally
and except as enforcement may be limited by general equitable principles.
2.3 No Violations of Laws or Agreements. Except as set forth in
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Schedule 2.3 the execution, delivery and performance by Management of this
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Agreement and the consummation by such parties of the transactions contemplated
hereby will not (a) violate in any material respect any provision of law or any
rule or regulation to which Management, the Company or the Subsidiary or their
respective assets or business are subject (it being understood that the
necessity for filings and consents is dealt with separately in the following
paragraph), (b) conflict with or violate any order, judgment, injunction, award
or decree binding upon Management, the Company or the Subsidiary or their
respective assets or business, (c) conflict with or violate the Certificate of
Incorporation, Bylaws or other similar governing documents of the Company or the
Subsidiary, (d) constitute a default or give rise to a right of termination,
cancellation or acceleration of any right or obligation of Management, the
Company or the Subsidiary, under any provision of any agreement, contract or
other instrument binding upon the Company or the Subsidiary or their respective
assets or business or any license, franchise, permit or other similar
authorization held by the Company or the Subsidiary, including the Leases (as
defined in Section 2.8(f)), or (e) result in the creation or imposition of any
Lien (as defined in Section 2.8(a)) upon any of the assets of Management, the
Company or the Subsidiary or the shares, except, in the case of any of the
foregoing clauses other than clause (a) and clause (c), for any such conflict,
violation, default, right or Lien which would not, individually or in the
aggregate, have a Material Adverse Effect.
Except as set forth in Schedule 2.3, the execution, delivery and
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performance by Management of this Agreement and the consummation of the
transactions contemplated hereby do not require any consent from, or filing
with, any governmental or regulatory authority, except for (a) the filing of a
report under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), and the expiration of the applicable waiting period
thereunder, (b) any action, consent or filing that Buyer is required to obtain
or make, and (c) consents and filings which, if not obtained or made, will not,
individually or in the aggregate, have a Material Adverse Effect or have a
material adverse effect on the consummation of the transactions contemplated
hereby.
2.4 Capital Structure. The authorized capital stock of the Company
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consists of 12,000,000 shares of Common Stock, par value $0.01 per share, of
which 2,517,944 shares are issued and outstanding, and 1,000,000 shares of
Preferred Stock., par value $0.01 per share, of which no shares are outstanding.
To the knowledge of Management, Schedule 2.4 sets forth the owners of all of
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the outstanding shares of Common Stock which owners own such Common Stock,
beneficially and of record, free and clear of all liens, claims or encumbrances
and have full right, power, legal capacity and authority to sell, transfer and
deliver the Shares. The Shares of Common Stock have been duly authorized and
have been duly and validly issued and are fully paid and non-assessable and
free of preemptive rights, with no personal liability attaching thereto. Except
for the Common Stock of the Company owned by Xxxxxx or held by Xxxxxx and
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other employees of the Company in the form of unissued shares underlying options
and the warrant to purchase 400,000 shares of Common Stock held by Metropolitan,
as set forth on Schedule 2.4, there are no subscriptions, options, warrants,
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calls, rights, contracts, commitments, agreements, understandings or
arrangements to issue, sell, deliver, transfer or redeem any shares of capital
stock of the Company or any securities convertible into or exercisable or
exchangeable for any shares of capital stock of the Company or rights of
conversion or exchange under any outstanding security or other instrument.
Except as set forth on Schedule 2.4, no shares of Common Stock are reserved for
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issuance for any purpose.
2.5 Subsidiary and Certain Affiliates. (a) (i) Luther's Spirits, Inc.
---------------------------------
is the sole Subsidiary of the Company. For purposes of this Agreement, the term
"Subsidiary" shall mean Luther's Spirits, Inc. and any other person (as defined
below) as to which the Company, directly or indirectly, owns more than 50% of
the voting power of the voting equity securities or interests of such person.
The Company is the record and beneficial owner of all of the outstanding shares
of capital stock of the Subsidiary, and there are no outstanding options,
warrants, convertible or exchangeable securities, subscriptions, rights
(including any preemptive rights), stock appreciation rights, calls or other
legally binding commitments requiring the issuance or sale of shares of any such
capital stock in the Subsidiary, and no agreements to which Management, the
Company or the Subsidiary are a party to issue or enter into any of the
foregoing. Except as set forth in Schedule 2.5(i), all of such shares so owned
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by the Company or the Subsidiary are owned by the applicable Company or
Subsidiary free and clear of any Liens. Except for shares of capital stock of
the Subsidiary or as set forth on Schedule 2.5(i), the Company does not,
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directly or indirectly, own or control or have any capital or other equity
interest or participation, or any interest convertible, exchangeable or
exercisable for, any capital or other equity interest or participation in, nor
is the Company, directly or indirectly, subject to any obligation or requirement
to invest in the equity securities or interests of, any person.
(ii) LBBQ of Texas, Inc. and Luther's BAR-B-Q/LA, Inc. are the only
Liquor Affiliates of the Company. For the purposes of this Agreement, the term
"Liquor Affiliate" shall mean LBBQ of Texas, Inc. and Luther's Bar-B-Q/LA, Inc.
and any other person as to which a Liquor Service Agreement (as defined in
Section 2.16(b)) is maintained with or relates to any restaurants owned and/or
operated by the Company. Xxxxxx, Xxxxx Xxxxxx (the "Texas Owners") and the
Company are the record and beneficial owners of 25.5%, 25.5% and 49% of the
outstanding shares of capital stock of LBBQ of Texas, Inc., respectively. Xxxxxx
Xxxxxxxx (the "Louisiana Owner") is the record and beneficial owner of all of
the outstanding shares of the capital stock of Luther's BAR-B-Q/LA, Inc. There
are no outstanding options, warrants, convertible or exchangeable securities,
subscriptions, rights (including any preemptive rights), stock appreciation
rights, calls or other legally binding commitments requiring the issuance or
sale of shares of any such capital stock in the Liquor Affiliates, and no
agreements to which any Liquor Affiliate is a party to issue or enter into any
of the foregoing. Except as set forth in Schedule 2.5(ii), all of such shares so
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owned by the Company, the Texas Owners or the Louisiana Owner are owned by the
Company, Texas Owners or the Louisiana Owner free and clear of any Liens. The
Company has entered into agreements (the "Call Agreements") with each of the
Texas Owners and the Louisiana Owner, pursuant to which the Company may
purchase the shares of the Liquor Affiliates held by the Texas Owners and the
Louisiana Owner
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or their heirs and assigns for a nominal consideration. The Call Agreements have
been duly executed and delivered by the Company, the Texas Owners and the
Louisiana Owner and constitute legal, valid and binding obligations, enforceable
against each party thereto in accordance with their respective terms.
(b) The term "person" in this Agreement means any individual,
corporation, general or limited partnership, firm, joint venture, association,
enterprise, joint stock company, trust, unincorporated organization or other
entity.
2.6 Financial Statements. Schedule 2.6 contains (a) the audited
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consolidated balance sheets of the Company and the Subsidiary and the unaudited
balance sheet of the Liquor Affiliates in each case as of December 31, 1997 and
December 31, 1996 and the related consolidated statements of income of the
Company, the Subsidiary and the Liquor Affiliates for the fiscal years then
ended, together with the notes to such financial statements (the "Year End
Financial Statements") and (b) the unaudited consolidated balance sheet of the
Company, the Subsidiary and the unaudited balance sheets of the Liquor
Affiliates as of August 31, 1998 (the "Interim Balance Sheet") and the related
consolidated statement of income of the Company, the Subsidiary and the Liquor
Affiliates for the eight-month period then ended, (together with the notes to
such financial statements, if any (collectively, the "Interim Financial
Statements" and, together with the Year End Financial Statements, the "Financial
Statements")). The Financial Statements have been prepared in accordance with
the books and records of the Company, the Subsidiary and the Liquor Affiliates
and in accordance with generally accepted accounting principles ("GAAP") applied
on a consistent basis throughout the periods covered thereby, except that such
Interim Financial Statements contain no notes. Except as set forth in Schedule
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2.6, the Financial Statements present fairly, in all material respects, the
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consolidated financial position of the Company, the Subsidiary and the Liquor
Affiliates as of the date of such Financial Statements and the consolidated
results of operations of the Company, the Subsidiary and the Liquor Affiliates
for applicable periods then ended, in conformity with GAAP, provided, however,
that the Interim Financial Statements are subject to normal year-end adjustments
and lack footnotes and other preparation items. All of the services provided,
and all of the assets loaned, licensed or leased to (whether or not pursuant to
any written agreement), the Company, the Subsidiary and the Liquor Affiliates by
any Seller or its affiliates (other than the Company, the Subsidiary or the
Liquor Affiliates) that are required to operate the business as it is currently
operated are set forth on Schedule 2.6. The Company, the Subsidiary and the
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Liquor Affiliates have no indebtedness for borrowed money other than as set
forth on Schedule 2.6, all of which will be repaid by the Company from funds
------------
advanced by Buyer at or prior to the Closing, as contemplated by Sections 4.4
and 6.2, without any reduction in the Purchase Price.
2.7 Taxes. (a) The Company, Subsidiary, the Liquor Affiliates and
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any affiliated group within the meaning of Section 1504 of the Internal Revenue
Code of 1986, as amended (the "Code") or consolidated, combined or unitary group
(under any state or local Tax law) of which the Company, the Subsidiary or
Liquor Affiliates is or has been a member (each such affiliated, consolidated,
combined or unitary group, an "Affiliated Group"), has filed or caused to be
filed in a timely manner (within any applicable extension periods) all material
Tax Returns required to be filed by the Code or by applicable state, local or
foreign tax laws, and all
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such Tax Returns are true, correct and complete in all material respects. All
Taxes required to be shown to be due on such Tax Returns have been timely paid
in full. No material tax liens have been filed and no material claims are being
asserted with respect to any Taxes of the Company, the Subsidiary, the Liquor
Affiliates or any Affiliated Group, and no examination, audit or inquiry is
currently being conducted by any taxing authority that could result in a
material Tax liability for which the Company, the Subsidiary or Liquor
Affiliates could be severally liable under Treasury Regulations (S) 1.1502-6 or
any comparable state, local or foreign tax provisions, except as set forth on
Schedule 2.7. None of the Company, the Subsidiary, the Liquor Affiliates or any
------------
Affiliated Group has any material liability for unpaid Taxes that are not based
upon net income or sales. The Company, the Subsidiary and the Liquor Affiliates
(including any predecessors) have complied in all material respects with all
applicable laws, rules and regulations relating to the payment and withholding
of Taxes. Since January 1993, the Company, the Subsidiary and the Liquor
Affiliates have been included only in the Affiliated Group for state, federal
and local income tax purposes described in Schedule 2.7 hereto. With respect to
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taxable years beginning before 1993, either (i) the federal income tax return of
the consolidated group that included the Company and the Subsidiary and the
federal income tax returns of the Liquor Affiliates in such year or years has
been audited by the Internal Revenue Service and such audit has been completed
or (ii) the statute of limitations with respect to federal income tax liability
has expired. There are no outstanding waivers or comparable consents regarding
the application of the statute of limitations with respect to any Taxes or Tax
Returns of the Company, the Subsidiary, the Liquor Affiliates or any Affiliated
Group. None of the Company, the Subsidiary or the Liquor Affiliates is a party
to any agreement providing for the allocation or sharing of Taxes other than
with respect to each other. None of the Company, the Subsidiary or the Liquor
Affiliates is required to include in income any adjustment pursuant to Section
481(a) of the Code by reason of a voluntary change in accounting method
initiated by the Company or the Subsidiary and none of the Company, the
Subsidiary or the Liquor Affiliates has knowledge that the Internal Revenue
Service has proposed any such adjustment or change in accounting method
except as set forth on Schedule 2.7. The acquisition of the Shares will not be a
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factor causing any payments to be made by the Company, the Subsidiary or the
Liquor Affiliates to be nondeductible (in whole or in part) pursuant to Section
280G of the Code. None of the Company, the Subsidiary or the Liquor Affiliates
has filed with respect to any item a disclosure statement pursuant to Section
6662 of the Code or any comparable disclosure with respect to foreign, state
and/or local tax statutes. Set forth on Schedule 2.7 is a list of all federal
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income tax audits with respect to the taxable years that have ended within three
years of the date of this Agreement that have been completed by the Internal
Revenue Service. No consent or election under Section 341 of the Code has been
made for the Company, the Subsidiary or the Liquor Affiliates. No property of
the Company, the Subsidiary or the Liquor Affiliates is "tax exempt use
property" within the meaning of Section 168(h) of the Code, and the Company is
not a party to any lease made pursuant to Section 168(f)(8) of the Internal
Revenue Code of 1954, as amended, except as set forth on Schedule 2.7.
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(b) For purposes of this Agreement, (i) "Tax" or "Taxes" means all
taxes, charges, fees, levies or other assessments, including all net income,
gross income, gross receipts, sales, use, rental, ad valorem, value added,
transfer, franchise, profits, alternative minimum, license, withholding,
employment, payroll, disability, excise estimated, severance,
-6-
stamp, occupation, property or other taxes, customs, duties, fees, assessments
or charges of any kind whatsoever, together with any interest and any penalties,
additions to tax or additional amounts imposed by any taxing authority (domestic
or foreign); (ii) "Tax Returns" means all returns, reports, forms or other
information required to be filed with, or supplied to, any tax authority
(federal, state, local, foreign or otherwise) with respect to any Taxes; and
(iii) "material" means material to the Company, Subsidiary and the Liquor
Affiliates taken as a whole.
2.8 Properties. (a) Schedule 2.8 contains a list of all real
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property owned by the Company or the Subsidiary (the "Owned Real Property"). The
Company and the Subsidiary have good and valid title to the personal properties
they purport, to own, whether tangible or intangible (including those reflected
on the Interim Balance Sheet or acquired by the Company or the Subsidiary since
the date of the Interim Balance Sheet, except property sold or otherwise
disposed of since the date of the Interim Balance Sheet, none of which is
material), and fee simple title to the real properties they purport to own, in
each case free and clear of all mortgages, liens, attachments, pledges,
encumbrances, charges, options, rights of first refusal, claims, leases,
easements or security interests of any nature whatsoever ("Liens"), except (i)
Liens disclosed in the Financial Statements, including the notes thereto, if
any, (ii) Liens for current Taxes not yet due and payable or which may hereafter
be paid without penalty, (iii) Liens described in Schedule 2.8 or Schedule 2.9
------------ ------------
or Schedule 2.10, (iv) zoning, building and other similar governmental
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restrictions and Liens imposed by operation of law (including without limitation
mechanics', carriers', workmen's, repairmen's, landlord's or other similar liens
arising from or incurred in the ordinary course of business and for which the
underlying payments are not yet delinquent), and liens arising under original
purchase price conditional sales contracts and equipment leases with third
parties entered into in the ordinary course of business, and (v) easements,
covenants, encroachments, rights-of-way or other similar restrictions and
imperfections of title, none of which items referred to in the foregoing clauses
(iv) and (v) materially impairs the use of the property subject thereto in the
business of the Company and the Subsidiary as presently conducted. Management
has made available to Buyer true and correct copies of all title insurance
policies, reports and commitments relating to the Owned Real Property, together
with all surveys and plans, in the Company's or the Subsidiary's possession
regarding Owned Real Property.
(b) Except as set forth in Schedule 2.8, the Owned Real Property
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is used or held for use primarily in connection with the conduct of the present
business and operations of the Company and the Subsidiary. Except as set forth
on Schedule 2.8, to the knowledge of Management, none of the improvements on any
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Owned Real Property encroaches on any adjoining property or public streets.
(c) Except as set forth in Schedule 2.8, Management and the
------------
Company have not received in writing, and Management has no knowledge of, any
notice, demand or request from any insurance company, any board of fire
underwriters (or organization exercising functions similar thereto) or any
governmental or municipal agency or any other person requesting the performance
of any work or alteration in respect to the Owned Real Property or the real
property leased by the Company and the Subsidiary under the Leases (as defined
below).
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(d) Except as set forth in Schedule 2.8, Management and the Company
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have not received written notice of, and Management has no knowledge of, any
pending or contemplated eminent domain or condemnation proceeding, or other
governmental or quasigovernmental takings of any of the Owned Real Property or
the real property leased by the Company and the Subsidiary under the Leases (as
defined below).
(e) Except as set forth in Schedule 2.8, Management and the Company
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have not received written notice of, and Management has no knowledge of, any
public improvements which have been ordered to be made, and, to Management's
knowledge, there are no special, general or other assessments pending,
threatened against or affecting the Owned Real Property or the real property
leased by the Company and the Subsidiary under the Leases (as defined below)
(other than those that might arise pursuant to the transactions contemplated
hereby).
(f) Schedule 2.8 contains a list of all real property leases pursuant
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to which the Company or the Subsidiary lease any real property, including any
amendment, modification or supplement thereto (the "Leases"). Management has
previously made available to Buyer true, correct and complete copies of the
Leases. Except as set forth in Schedule 2.8, the applicable Company or
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Subsidiary has good and valid title to the leasehold estates conveyed under each
Lease, free and clear of Liens, except (i) Liens disclosed in the Financial
Statements, including the notes thereto, if any, (ii) Liens for current Taxes
not yet due and payable or which may hereafter be paid without penalty, (iii)
Liens described in Schedule 2.8, (iv) zoning, building and other similar
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governmental restrictions and Liens imposed by operation of law (including
without limitation mechanics', carriers', workmen's, repairmen's, landlord's or
other similar liens arising from or incurred in the ordinary course of business
and for which the underlying payments are not yet delinquent), and (v)
easements, covenants, encroachments, rights-of-way or other similar restrictions
and imperfections of title, none of which items referred to in the foregoing
clauses (iv) and (v) materially impairs the use of the property subject thereto
in the business of the Company and the Subsidiary as presently conducted. Each
Lease is valid and, to the knowledge of Management, in full force and effect and
is binding and enforceable in accordance with its terms (except as may be
limited by bankruptcy, reorganization, insolvency, moratorium or other similar
laws affecting the enforcement of creditors' rights and equitable principles
affecting remedies and other matters in effect from time to time). Except as set
forth in Schedule 2.8, the Company and the Subsidiary are not in default with
------------
respect to any payment obligation under the leases, and, to the knowledge of
Management, there are no other existing defaults on the part of the Company or
the Subsidiary or any other party (including any landlord) with respect to the
Leases. To the knowledge of Management, no event has occurred which (with or
without notice, lapse of time or both) would constitute a default on the part of
the Company or the Subsidiary or such other parties under the Leases. Except as
set forth in Schedule 2.8, the consummation of the transactions contemplated by
------------
this Agreement will not constitute a default, or give rise to a right of
termination, cancellation or acceleration of any right under, any Lease.
(g) Except as set forth in Schedule 2.8, the Owned Real Property, and
------------
the real property leased by the Company and the Subsidiary under the Leases, is
in a state of,
-8-
working condition and repair (ordinary wear and tear excepted). The tangible
personal property of the Company and the Subsidiary which is material to the
business of the Company and the Subsidiary is in working condition and repair
(ordinary wear and tear excepted). During the two years prior to the date
hereof, there has not been an interruption of the operations of the Company and
the Subsidiary due to inadequate maintenance of the tangible personal property
of the Company and the Subsidiary that has had a Material Adverse Effect.
(h) The Liquor Affiliates do not own or lease any real property.
2.9 Intellectual Property. Schedule 2.9 contains a list of (a) all
------------
patents, inventions, trademarks, service marks, trade names, copyrights, trade
secrets (including recipes, formulas and other food and beverage preparation
methods) and rights of publicity (and all registrations and applications for the
foregoing) owned by or licensed to the Company, the Subsidiary and the Liquor
Affiliates that are material to the operation of the Company, the Subsidiary and
the Liquor Affiliates, and (b) all material license agreements to which the
Company, the Subsidiary or the Liquor Affiliates are a party pertaining to
patents, inventions, trademarks, service marks, trade names, copyrights, trade
secrets (including recipes, formulas and other food and beverage preparation
methods) and rights of publicity (and all registrations and applications for the
foregoing) and rights of publicity pertaining to the business of the Company,
the Subsidiary or the Liquor Affiliates. Except as set forth in Schedule 2.9,
------------
none of Management, the Company, the Subsidiary or the Liquor Affiliates has
received written notice of any objections or claim being asserted in writing by
any person with respect to the ownership, validity, enforceability or use of any
such patents, inventions, trademarks, service marks, trade names, copyrights,
trade secrets (including recipes, formulas and other food and beverage
preparation methods) or rights of publicity (or registrations or applications
for the foregoing) or challenging or questioning the validity or effectiveness
of any such license or relating to any proprietary process or confidential
information of the Company, the Subsidiary or the Liquor Affiliates which would
have a Material Adverse Effect.
2.10 Contracts. (a) Except as described in Schedule 2.10 and except
--------- -------------
for the Leases, none of the Company, the Subsidiary or the Liquor Affiliates is
a party to or bound by any written:
(i) employee collective bargaining agreement or other
contract with any labor union;
(ii) agreements with any director, officer or employee;
(iii) (A) lease or similar agreement under which any of the
Company, the Subsidiary or the Liquor Affiliates is lessee of, or holds or uses,
any material machinery, equipment, vehicle or other tangible personal property
owned by a third party, (B) continuing contract for the future purchase or sale
of materials, supplies, merchandise, equipment or services (other than with
respect to the purchase of materials and supplies in the ordinary course of
business), (C) consulting or similar contract, or (D) advertising agreement,
which (with respect to each of the foregoing clauses (A) and (B)) has an
aggregate future liability on the part of one of the Company, the Subsidiary or
the Liquor Affiliates in excess of $10,000 individually
-9-
or $75,000 in the aggregate (together with all such contracts), or which is not
terminable by the applicable Company, the Subsidiary or Liquor Affiliates (1) on
not more than 90 days' notice without penalty or premium or (2) for a cost of
less than $25,000;
(iv) agreement or contract for indebtedness for borrowed money in
excess of $10,000 individually or $50,000 in the aggregate (other than advances
to employees of the Company, the Subsidiary and the Liquor Affiliates in the
ordinary course of business); and
(v) license, royalty agreement or similar contract involving annual
payments in excess of $10,000 individually or $25,000 in the aggregate;
(vi) distributorship, representative, marketing, sales agency, or
printing agreement, in each case involving annual payments in excess of $10,000
individually or $50,000 in the aggregate;
(vii) contract for the grant to any person of any preferential
rights to purchase any of the businesses the Company, the Subsidiary or the
Liquor Affiliates;
(viii) joint venture agreement;
(ix) contract which by its terms limits the ability of the Company
or the Subsidiary to engage in any line of business in any geographic area;
(x) contract relating to the acquisition by the Company, the
Subsidiary or the Liquor Affiliates of any operating business or the capital
stock of any person;
(xi) contract for the payment of fees or other consideration to
any Seller, any officer or director of any of the Company or any Seller or any
other entity in which any of the foregoing has an interest in excess of 5%;
(xii) mortgage, pledge, security agreement, deed of trust or other
document, in each case granting a lien (including liens upon properties acquired
under conditional sales, capital leases or other title retention or security
devices) securing an obligation in excess of $10,000 individually or $50,000 in
the aggregate;
(xiii) contract under which the Company, the Subsidiary or
any Liquor Affiliate agrees to indemnify any person with respect to Tax
liability or to share Tax liability with any person;
(xiv) any other contract, whether or not in the ordinary course of
business, where the breach thereof would have a Material Adverse Effect or which
involves annual payments in excess of $50,000.
(b) To the knowledge of Management, each agreement, contract, or lease
required to be described on Schedule 2.10 (the "Contracts") is in full force
-------------
and effect. To the knowledge of Management, none of the Company, the Subsidiary
or any Liquor Affiliate is (with or without the lapse of time or the giving of
notice, or both) in breach or default under a
-10-
Contract to which it is a party, and no other party to any such Contract is
(with or without the lapse of time or the giving of notice, or both) in breach
or default thereunder, except, in either case, for such breaches or defaults
which would not, individually or in the aggregate, have a Material Adverse
Effect.
2.11 Litigation. Schedule 2.11 contains a list of (a) all lawsuits,
---------- -------------
claims, proceedings or investigations pending or, to the knowledge of
Management, threatened by or against the Company, the Subsidiary or any Liquor
Affiliate, or any of their properties, assets, operations or business, which
would reasonably be expected to have a Material Adverse Effect, and all
outstanding orders, injunctions or decrees of any court or governmental
authority against or directly involving as a named party the Company, the
Subsidiary or any Liquor Affiliate and (b) as of the date hereof, all lawsuits,
claims, proceedings or investigations pending or, to the knowledge of
Management, threatened by or against the Company, the Subsidiary or any Liquor
Affiliate, or any of their properties, assets, operations or business or which
challenge the legality of this Agreement or any action to be taken by Management
in connection herewith. The Company, the Subsidiary and the Liquor Affiliates
are not in default under any injunction, order or decree of any court or
governmental authority binding on the Company, the Subsidiary or the Liquor
Affiliates. Schedule 2.11 contains the outstanding judgments against Management,
the Company, the Subsidiary and the Liquor Affiliates that remain unpaid or
unsatisfied.
2.12 Insurance. Set forth on Schedule1e 2.12 is a list of all current
--------- ---------------
policies of insurance held by, or maintained on behalf of, the Company, the
Subsidiary or the Liquor Affiliates, indicating for each policy the carrier, the
insured, the type of insurance, the amounts of coverage and the expiration date,
as well as a description of any claims pending from a prior period involving a
retention. Buyer acknowledges that such policies are maintained by the Company.
Except as set forth on Schedule 2.12, all such policies are in full force and
-------------
effect, and the Company, the Subsidiary and the Liquor Affiliates have not
received any written notice of cancellation, material amendment or material
dispute as to coverage with respect to any such policies. Except as set forth in
Schedule 2.12 all insurance policies referenced above provide insurance coverage
-------------
(with respect to occurrences during the periods covered by such policies) for
the properties, assets, liabilities and operations of the Company, the
Subsidiary and the Liquor Affiliates of such kinds, in such amounts and against
such risks as are sufficient for compliance with all requirements of law and all
agreements to which the Company, the Subsidiary or the Liquor Affiliates are
parties, and as are reasonably believed by Management and the Company to be
adequate to insure first or third party claims related to the business of the
Company, the Subsidiary and the Liquor Affiliates as currently conducted; and
will remain in full force and effect notwithstanding the consummation of the
transaction contemplated by this Agreement, without the payment of additional
premiums in any material amount other than additional premiums in the ordinary
course prior to Closing.
2.13 Benefit Plans. (a) Schedule 2.13 lists all employee benefit
------------- -------------
plans of the Company, the Subsidiary and the Liquor Affiliates to which the
Company, the Subsidiary or the Liquor Affiliates is obligated to contribute,
including each single employer, multiemployer and multiple employer pension,
profit-sharing stock bonus, money purchase, retirement, welfare benefits
savings, insurance, vacation pay, severance pay, stock purchase, stock option,
incentive
-11-
or deferred compensation and bonus plan or arrangement, and any other employee
benefit plan covering and with respect to the Company, the Subsidiary or the
Liquor Affiliates and the Company's, Subsidiary's or Liquor Affiliates'
employees, consultants, agents and ex-employees, and their dependents and
beneficiaries (collectively, the "Benefit Plans"). Except as set forth on
Schedule 2.13, none of the Benefit Plans, which are not qualified plans exempt
-------------
from income Tax, provides or promises benefits to ex-employees (including
retirees) of the Company, the Subsidiary or the Liquor Affiliates and their
dependents and beneficiaries except as specifically required under the Code,
with respect to continuation of coverage. All of such Benefit Plans have been
operated in all material respects in accordance with their terms, and all of
such Benefit Plans that are not multiemployer plans, and that are subject to
the terms of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), the Code, or other statutes, laws, ordinances, codes, rules and
regulations comply in all material respects with ERISA, the Code, and such other
statutes, laws, ordinances, codes, rules and relations, as applicable. In
the case of each Benefit Plan which is a qualified plan exempt from Tax, a
determination has been received from the appropriate District Director of
Internal Revenue that such plan is qualified under Section 401(a) of the Code
and the trust created thereunder, if any, is exempt from federal tax under
Section 501(a) of the Code, and nothing has occurred since such determination
that would adversely affect the qualification of such plan or the tax-exempt
status of such related trust. There has been no transaction involving any
Benefit Plan maintained by the Company, the Subsidiary or the Liquor Affiliates
which is a "prohibited transaction" under ERISA or the Code in connection with
which the Company, the Subsidiary or the Liquor Affiliates would be subject to
liability under ERISA or any tax liability imposed by the Code, or which would
subject any such Benefit Plan, the Company, the Subsidiary or the Liquor
Affiliates to a penalty under ERISA, the Code or any other applicable statute,
law, ordinance, code, rule or regulation, which liability, tax liability or
penalty would have a Material Adverse Effect.
(b) Except as set forth on Schedule 2.13, none of the Benefit
-------------
Plans listed on Schedule 2.13 provides for additional or accelerated payments or
-------------
other consideration to be made on account of the transactions contemplated
hereby. No suit, action, claim, proceeding, investigation or arbitration has
been made or instituted or, to the knowledge of Management, threatened, with
respect to any of such Benefit Plans or any assets thereof.
(c) Except where failure to do so would not have a Material Adverse
Effect, all contributions or payments required to be made to such Benefit Plans
by their terms or by law and any relevant collective bargaining agreement(s),
before or after the Closing Date, with respect to all periods or events
occurring prior to the Closing Date (including all insurance premiums) have been
properly paid or accrued on the books of account of the Company, the Subsidiary
and the Liquor Affiliates prior to the Closing Date (including, without
limitation, a pro rata share with respect to any period including the Closing
Date based on the ratio of the number of days in such period to the total number
of days in the plan year).
(d) Except as set forth on Schedule 2.13, none of the Company, the
-------------
Subsidiary or the Liquor Affiliates, nor any trade or business treated as a
single employer under common control with any of the Company, the Subsidiary or
the Liquor Affiliates within the meaning of Section 414 of the Code (an "ERISA
Affiliate") maintains or has an obligation to
-12-
contribute to any Benefit Plan subject to Title IV of ERISA. None of the
Company, the Subsidiary or the Liquor Affiliates, nor any ERISA Affiliate is
subject to any asserted or unasserted withdrawal or other liability under Title
IV of ERISA or potentially secondarily liable for any withdrawal or other
liability under Title IV of ERISA which in either case would have a Material
Adverse Effect.
(e) True, complete and accurate copies of the documents setting forth
the terms of each Benefit Plan listed on Schedule 2.13 that is maintained by the
-------------
Company, the Subsidiary or the Liquor Affiliates for the benefit of employees of
the Company, the Subsidiary or the Liquor Affiliates, including plan agreements,
amendments, trusts and all related contracts and other agreements and, where
applicable, copies of the plan (i) most recent summary plan descriptions and
modifications thereto; (ii) notices distributed to employees, consultants,
agents, dependents and other beneficiaries with regard to any continuation of
coverage required under law; (iii) most recent favorable Internal Revenue
Service determination letters; (iv) three most recent annual reports (Forms
5500), including audited financial statements and all schedules thereto; and (v)
three most recent actuarial reports, have heretofore been delivered to Buyer. To
Management's knowledge, there are no oral modifications to any of such Benefit
Plans.
(f) There were no Benefit Plans in effect at any time during the three
years preceding the Closing Date with respect to which the Company, the
Subsidiary or the Liquor Affiliates has taken action during such period which
has or will result in termination that would have a Material Adverse Effect.
(g) Except as set forth on Schedule 2.13, no employee of the Company,
-------------
the Subsidiary or the Liquor Affiliates has accrued any vacation time from any
years prior to 1997 which is currently outstanding. The annual reports (Form
5500 Series) have been properly filed, including the payment in full of any late
fees, interest and penalties, if, and to the extent applicable, with respect to
such annual reports or any other material reporting and disclosure provisions of
Title I of ERISA.
2.14 Absence of Changes or Events. Except as set forth in Schedule
---------------------------- --------
2.14 (or in the other disclosure schedules to this Agreement), since the date of
----
the Interim Balance Sheet, the business of the Company, the Subsidiary and the
Liquor Affiliates has been conducted in the ordinary course consistent with past
practice, and there has not been any change in the financial condition or
results of operations of the Company, the Subsidiary and the Liquor Affiliates
(other than changes relating to the economy in general or industry conditions),
which would, individually or in the aggregate, have a Material Adverse Effect.
Except as set forth in Schedule 2.14, since the date of the Interim Balance
-------------
Sheet to the date hereof, none of the Company, the Subsidiary or the Liquor
Affiliates has:
(a) amended its Certificate of Incorporation or Bylaws or merged with
or into or consolidated with any other person, subdivided or in any way
reclassified any shares of its capital stock or changed or agreed to change in
any manner the rights of its outstanding capital stock;
-13-
(b) except as contemplated by this Agreement, issued, sold, purchased
or redeemed, or entered into any binding contracts to issue, sell, purchase or
redeem, any shares of its capital stock or any options, warrants, convertible or
exchangeable securities, subscriptions, rights (including preemptive rights),
stock appreciation rights, calls or commitments of any character whatsoever
relating to its capital stock;
(c) entered into or amended any employment agreement (other than those
terminated at will), entered into any agreement with any labor union or
association representing any employee, or adopted, entered into or amended any
Benefit Plan;
(d) declared, set aside or paid any non-cash dividends or declared,
set aside or made any non-cash distributions of any kind to its stockholders
(other than to the Company), or made any direct or indirect redemption,
retirement, purchase or other acquisition of any shares of its capital stock;
(e) adopted a plan of liquidation or resolutions providing for the
liquidation, dissolution, merger, consolidation or other reorganization of the
Company or the Subsidiary;
(f) made any change in its accounting methods, principles or practices
or made any change in depreciation or amortization policies or rates adopted by
it, except insofar as may have been required by GAAP or made or changed any tax
election adopted or changed any method of accounting (except as required by
GAAP) or taken or omitted to take any other actions which action or omission
would have had the effect of materially increasing the tax liability of the
Company or the Subsidiary with respect to periods after the Closing;
(g) revalued any portion of its assets, properties or businesses
including any write-down of the value of inventory in excess of $50,000 or any
write-off of notes or accounts receivable in excess of $50,000;
(h) other than in contemplation of the transactions contemplated
hereby, materially changed any of its advertising, pricing, purchasing,
personnel, sales, returns, budget or product acquisition policies;
(i) made any wage or salary increase or bonus, or increase in any
other direct or indirect compensation, for or to any employee with a title of
"regional manager" (or any employee having a comparable or more senior title
thereto), or made any "across the board" wage or salary increase, except as
disclosed on Schedule 2.14;
-------------
(j) made any loan or advance to any of its officers, directors,
employees, consultants, agents or other representatives (other than travel
advances made in the ordinary course of business in a manner consistent with
past practice);
(k) made any payment or binding commitment to pay severance or
termination pay to any of its officers, directors, employees, consultants,
agents or other
-14-
representatives, except pursuant to Benefit Plans currently in place or
consistent with past practices and disclosed on Schedule 2.14 or as set forth on
-------------
Schedule 2.13;
-------------
(1) entered into any lease for real property; sold, abandoned or made
any other disposition of any of its material assets, properties or businesses
other than in the ordinary course of business (other than as contemplated by
this Agreement); granted or suffered any material Lien on any of its assets,
properties or businesses other than in the ordinary course of business (other
than as contemplated by this Agreement); or entered into or amended any
agreement set forth on Schedule 2.10 to which it is a party or by or to which it
-------------
or its assets, properties or businesses are bound or subject which agreement or
amendment has had a Material Adverse Effect;
(m) except as contemplated by this Agreement, made any capital
expenditures other than in the ordinary course of business;
(n) except as contemplated by this Agreement, incurred or assumed any
material debt, obligation or liability other than in the ordinary course of
business;
(o) except in the ordinary course of business in a manner consistent
with past practice, made any acquisition of all or any part of the assets,
properties, capital stock or business of any other person; or
(p) except in respect of this Agreement, agreed in writing to do
any of the foregoing.
2.15 Compliance with Applicable Laws. Except as set forth in Schedule
------------------------------- --------
2.15, the Company, the Subsidiary and the Liquor Affiliates and their properties
----
and assets are in compliance with all applicable statutes, laws, ordinances,
rules and regulations of any governmental authority or instrumentality,
domestic or foreign (other than Environmental Laws, which are dealt with
separately in Section 2.17), except where noncompliance would not have a
Material Adverse Effect.
2.16 Permits: Liquor Licenses. (a) To the knowledge of Management all
------------------------
material governmental licenses, permits or authorizations of the Company,
the Subsidiary and the Liquor Affiliates (other than those relating to
environmental matters, which are dealt with separately in Section 2.17, and the
Liquor Licenses, which are dealt with separately in paragraph (b) below) (the
"Permits") are in full force and effect and are validly held by the Company, the
Subsidiary or the Liquor Affiliates, as applicable, and the Company, the
Subsidiary and the Liquor Affiliates are in compliance in all material respects
with such Permits. Except as set forth on Schedule 2.16 such Permits will not be
-------------
subject to suspension, modification or revocation solely as a result of the
execution and delivery of this Agreement or the consummation of the transactions
contemplated hereby. The Company, the Subsidiary and the Liquor Affiliates have
all of the Permits (other than those referred to above) which are required to
carry on the business of the Company, the Subsidiary and the Liquor Affiliates
as such business is now conducted, except where the failure to have any such
Permit would not have a Material Adverse Effect. Except as set forth on Schedule
--------
2.16 neither Management nor the Company has received written
----
-15-
notice of any violation of any Permit, and no proceeding is pending or, to the
knowledge of Management, threatened to revoke or limit any Permit.
(b) Schedule 2.16 contains a list of each restaurant owned
-------------
and/or operated by the Company and the Subsidiary (the "Restaurants") showing
the state in which such Restaurant is located. Schedule 2.16 also contains a
-------------
list of all liquor licenses held by the Subsidiary and the Liquor Affiliates in
connection with the operation of the Restaurants (the "Liquor Licenses"). The
Company has entered into an agreement with either the Subsidiary or the Liquor
Affiliates (each a "Liquor Service Agreement") pursuant to which liquor is sold
at such Restaurant by the Subsidiary or a Liquor Affiliate, as the case may be.
The Liquor Service Agreements have been duly executed and delivered by the
Company, the Subsidiary and the Liquor Affiliates and constitute legal, valid
and binding obligations, enforceable against each party thereto in accordance
with their respective terms. To the knowledge of Management, each of the Liquor
Licenses is in full force and effect and adequate for the current conduct of
operations at the Restaurant for which it is issued, and, subject to the matters
disclosed in the following sentence, has been validly issued. Except as set
forth in Schedule 2.16, neither Management nor the Company has received written
-------------
notice of any pending or threatened modification, suspension or cancellation of
a Liquor License, or any proceeding relating thereto. During the three year
period prior to the date of this Agreement, there have been no such proceedings
relating to any of the Liquor Licenses.
2.17 Environmental Matters. Except as set forth in Schedule 2.17:
--------------------- -------------
(a) The operations of the Company, the Subsidiary and the Liquor
Affiliates are in compliance with Environmental Laws, except where any non-
compliance would not have a Material Adverse Effect.
(b) The Company, the Subsidiary and the Liquor Affiliates have
obtained and are in compliance with all necessary permits or authorizations that
are required under Environmental Laws to operate the facilities, assets and
business of the Company, except where any non-compliance would not have a
Material Adverse Effect.
(c) There has been no Release at any of the properties owned by
the Company, the Subsidiary or, to the knowledge of Management, any predecessor
in interest, or at any disposal or treatment facility which received Hazardous
Materials generated by the Company, the Subsidiary, the Liquor Affiliates or, to
the knowledge of Management, any predecessor in interest, which would have a
Material Adverse Effect.
(d) No Environmental Claims have been asserted against the
Company, the Subsidiary or, to the knowledge of Management, any predecessor in
interest, which would have a Material Adverse Effect nor does the Company, the
Subsidiary or the Liquor Affiliates have knowledge or notice of any threatened
or pending Environmental Claim against the Company, the Subsidiary, the Liquor
Affiliates, or, to the knowledge of Management, any predecessor in interest,
which would have a Material Adverse Effect.
-16-
(e) No Environmental Claims which would have a Material Adverse
Effect have been asserted against any facilities that may have received
Hazardous Materials generated by the Company, the Subsidiary, the Liquor
Affiliates or, to the knowledge of Management, any predecessor in interest.
(f) To the knowledge of Management, no underground or
aboveground storage tanks are located at any of the properties owned or operated
or leased by the Company, the Subsidiary, the Liquor Affiliates or any
predecessor in interest.
(g) Management has delivered to Buyer true and complete copies
of all environmental reports, studies, investigations or correspondence
regarding any Environmental Liabilities of the Company or the Subsidiary or any
environmental conditions at any of the properties previously or currently owned
or operated by the Company, the Subsidiary, the Liquor Affiliates or any
predecessor in interest, which are in possession of the Sellers, the Company,
the Subsidiary, the Liquor Affiliates or their agents.
(h) (i) "Environmental Claims" refers to any complaint,
summons, citation, notice, directive, order, claim, litigation, investigation,
judicial or administrative proceeding, judgment, letter or other written
communication from any governmental agency, department, bureau, office or other
authority, or any third party involving violations of Environmental Laws or
Releases of Hazardous Materials from (A) any assets, properties or businesses of
the Company, the Subsidiary or the Liquor Affiliates or, to the knowledge of
Management, any predecessor in interest; (B) from adjoining properties or
businesses; or (C) from or onto any facilities which received Hazardous
Materials generated by the Company, the Subsidiary or the Liquor Affiliates or
any predecessor in interest.
(ii) "Environmental Laws" includes the Comprehensive
Environmental Response, Compensation and Liability Act ("CERCLA"), 42 U.S.C.
9601 et seq., as amended; the Resource Conservation and Recovery Act ("RCRA"),
-- ---
42 U.S.C. 6901 et seq., as amended; the Clean Air Act ("CAA"), 42 U.S.C. 7401 et
-- --- --
seq., as amended; the Clean Water Act ("CWA"), 33 U.S.C. 1251 et seq., as
--- -- ---
amended; the Occupational Safety and Health Act ("OSHA"), 29 U.S.C. 655 et seq.,
-- ---
and any other federal, state, local or municipal laws, statutes, regulations,
rules or ordinances imposing liability or establishing standards of conduct for
protection of the environment; each as in effect as of the Closing Date.
(iii) "Environmental Liabilities" means any monetary
obligations, losses, liabilities (including strict liability), damages, punitive
damages, consequential damages, treble damages, costs and expenses (including
all reasonable out-of-pocket fees, disbursements and expenses of counsel,
out-of-pocket expert and consulting fees and out-of-pocket costs for
environmental site assessments, remedial investigation and feasibility studies),
fines, penalties, sanctions and interest incurred as a result of any
Environmental Claim filed by any Governmental Authority or any third party which
relate to any violations of Environmental Laws, Remedial Actions, Releases or
threatened Releases of Hazardous Materials from or onto (A) any property
presently or formerly owned by the Company, the Subsidiary, the Liquor
Affiliates or, to the knowledge of Management, any predecessor in interest, or
(B) any facility
-17-
which received Hazardous Materials generated by the Company, the Subsidiary, the
Liquor Affiliates or, to the knowledge of Management, any predecessor in
interest.
(iv) "Hazardous Materials" shall include (A) any element,
compound, or chemical that is defined, listed or otherwise classified as a
contaminant, pollutant, toxic pollutant, toxic or hazardous substance, extremely
hazardous substance or chemical, hazardous waste, medical waste, biohazardous or
infectious waste, special waste, or solid waste under Environmental Laws; (B)
petroleum, petroleum-based or petroleum-derived products; (C) polychlorinated
biphenyls; (D) any substance exhibiting a hazardous waste characteristic
radioactive or explosive materials; and (E) any raw materials, building
components, including but not limited to asbestos-containing materials and
manufactured products containing Hazardous Materials.
(v) "Release" means any spilling, leaking, pumping,
emitting, emptying, discharging, injecting, escaping, leaching, migrating,
dumping, or disposing of Hazardous Materials (including the abandonment or
discarding of barrels, containers or other closed receptacles containing
Hazardous Materials) into the environment.
(vi) "Remedial Action" means all actions to (A) clean up,
remove, remediate, contain, treat, monitor, assess, evaluate or in any other way
address Hazardous Materials in the indoor or outdoor environment; (B) prevent or
minimize a Release or threatened Release of Hazardous Materials so they do not
migrate or endanger or threaten to endanger public health or welfare or the
indoor or outdoor environment; (C) perform pre-remedial studies and
investigations and post-remedial operation and maintenance activities; or (iv)
any other actions authorized by 42 U.S.C. 9601(24).
2.18 Employee and Labor Relations. Except as set forth in Schedule
---------------------------- --------
2.18 there is no labor strike, dispute, slowdown or work stoppage or lockout
----
pending or, to the knowledge of Management, threatened against the Company, the
Subsidiary and the Liquor Affiliates which would have a Material Adverse Effect.
Except as set forth in Schedule 2.18 during the 12 month period prior to the
-------------
date of this Agreement, there has not been any such strike, dispute, slowdown,
stoppage or lockout. Within six months prior to the date hereof, (a) neither the
Company nor the Subsidiary has effectuated (i) a plant closing (as defined in
the Workers Adjustment and Retaining Notification Act (the "WARN Act"))
affecting any group of Employees (as defined in Section 4.8) or (ii) a mass
layoff (as defined in the WARN Act) affecting any group of Employees at any site
of employment, facility or operating unit; (b) neither the Company nor the
Subsidiary has engaged in layoffs or employment terminations with respect to the
Employees sufficient in number to trigger application of any similar state or
local law; and (c) no Employees have suffered an employment loss (as defined in
the WARN Act). Except as set forth in Schedule 2.18 there are no complaints,
-------------
charges or claims pending or, to the knowledge of Management, threatened to be
brought or filed with the National Labor Relations Board or any other federal,
state or local department or agency in connection with the employment by the
Company, the Subsidiary or the Liquor Affiliates of any individual, including
any claim relating to employment discrimination, equal pay, unfair labor
practice, sexual harassment, employee safety and health, wages and hours,
workers compensation or any other, employment practice.
-18-
2.19 Accounts and Notes Receivable. All accounts and notes receivable
-----------------------------
reflected on the Interim Balance Sheet and all accounts and notes receivable
arising subsequent to the date of the Interim Balance Sheet have arisen in the
ordinary course of business and represent accounts receivable for merchandise or
services actually delivered. Schedule 2.19 hereto sets forth a true and
-------------
correct aged list of all accounts receivable of the Company and the Subsidiary
as of a date not more than 45 days prior to the date hereof either (a) in excess
of $5,000 from any one account debtor and more than 60 days past due or (b) in
excess of $25,000 from any one account debtor.
2.20 Inventory. The inventory of the Company and the Subsidiary as set
---------
forth on the Interim Balance Sheet and the inventory of the Liquor Affiliates as
set forth on the most recent balance sheets of the Liquor Affiliates was, as of
the date of such financial statements, and the inventory of the Company, the
Subsidiary and the Liquor Affiliates, existing as of the date hereof, is in
usable or salable condition in the ordinary course of business at the amounts
carried on the Interim Balance Sheet and the most recent balance sheets of the
Liquor Affiliates, or currently on the books and records of the Company, the
Subsidiary and the Liquor Affiliates, respectively, except for items not
material to the financial condition of the Company, the Subsidiary and the
Liquor Affiliates taken as a whole. The materials and supplies included in such
inventory are of at least the standard quality for such items in the restaurant
industry and are not materially in excess of the normal purchasing patterns of
the Company and the Subsidiary. Except as set forth in Schedule 2.20, the
-------------
amounts of the inventories reflected on the Interim Balance Sheet and the most
recent balance sheets of the Liquor Affiliates and on the books and records of
the Company, the Subsidiary and the Liquor Affiliates as of the date hereof have
been determined in accordance with GAAP applied on a consistent basis, subject
to normal year-end adjustments and lack footnotes and the other preparation
items. Management has no knowledge of any existing condition affecting the
supply of materials to the Company, the Subsidiary or the Liquor Affiliates
which would have a Material Adverse Effect.
2.21 Indebtedness. All Indebtedness (as defined below) of the Company
------------
and the Subsidiary and the Liquor Affiliates (other than intercompany debt) as
of the date of the Interim Balance Sheet is set forth on the Interim Balance
Sheet and the Liquor Affiliates' most recent balance sheets. Schedule 2.21 sets
-------------
forth the trade accounts payable of the Company, the Subsidiary and the Liquor
Affiliates as of a date not more than 45 days prior to the date hereof either
(a) in excess of $25,000 to any one payee and more than 60 days past due or (b)
in excess of $50,000 to any one payee. All Indebtedness reflected on the Interim
Balance Sheet and the Liquor Affiliates' most recent balance sheets or on
Schedule 2.21 or which has arisen after the date of the Interim Balance Sheet
-------------
and the Liquor Affiliates' most recent balance sheets has arisen in the ordinary
course of business and represents valid Indebtedness of the Company, the
Subsidiary and the Liquor Affiliates. As used herein, the term "Indebtedness"
shall mean all items which, in accordance with GAAP, would be included in
determining total liabilities as shown on the liability side of a balance sheet
as at the date Indebtedness is to be determined.
2.22 Suppliers. Except as set forth on Schedule 2.22 hereto, no single
--------- -------------
supplier accounted for more than 10% of purchases of supplies by the Company,
the Subsidiary and the Liquor Affiliates taken as a whole in their most recent
fiscal year (the suppliers set forth on
-19-
Schedule 2.22 hereto are referred to as the "Material Suppliers"). To the
-------------
knowledge of Management, no Material Supplier has canceled or otherwise
terminated, or threatened to cancel or otherwise terminate, its relationship
with the Company, the Subsidiary or the Liquor Affiliates or has during the last
12 months decreased or threatened to decrease or limit, its services, supplies
or materials to the Company, the Subsidiary or the Liquor Affiliates where such
cancellation, termination, decrease or limit would have a Material Adverse
Effect. Management, the Company, the Subsidiary and the Liquor Affiliates have
received no written notice that any such Material Supplier intends to cancel or
otherwise adversely modify its relationship with the Company, the Subsidiary or
the Liquor Affiliates or to decrease or limit materially its services, supplies
or materials to the Company, the Subsidiary or the Liquor Affiliates.
2.23 Certain Employees. Schedule 2.23 sets forth all of the officers
----------------- -------------
of the Company and the Subsidiary as well as all employees with a title of
"regional manager" (or any employee having a comparable or more senior title
thereto). Except as set forth in Schedule 2.23, neither the Company nor
-------------
Management has received written notice that any of such persons intends to
resign or retire as a result of the transactions contemplated hereby or
otherwise.
2.24 Potential Conflicts of Interest. None of the officers or
-------------------------------
directors of the Company, the Subsidiary, the Liquor Affiliates or any entity
controlled by any of the foregoing (other than the Company and Subsidiary) or
any member of the immediate family of any of the foregoing has commenced any
lawsuit, claims or proceeding against, or owes any amount to the Company or the
Subsidiary, except for claims in the ordinary course of business and disclosed
on Schedule 2.24.
-------------
As used in this Section 2.24, a person's immediate family shall mean
such person's spouse, parents, children, siblings, mothers- and fathers-in-law,
sons- and daughters-in-law, and brothers- and sisters-in-law.
2.25 Brokers. No banker, finder, agent or similar intermediary has
-------
acted for or on behalf of the Management or the Company in connection with this
Agreement or the transactions contemplated hereby, and no broker, finder, agent
or similar intermediary is entitled to any broker's, finder's or similar fee or
other commission in connection herewith based on any agreement with the
Company, except that Management has retained PricewaterhouseCoopers Securities
L.L.C. in connection with this Agreement. The Company will be solely responsible
for the fees and expenses of such firm.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLERS
-----------------------------------------
Each Seller individually represents and warrants with respect to
itself only to Buyer as follows:
3.1 Organization. Such Seller is duly organized, validly existing and
------------
in good standing under the laws of the State of its organization or
incorporation.
-20-
3.2 Authorization and Enforceability Such Seller has the requisite
--------------------------------
power and authority to enter into this Agreement and to sell its Shares. All
corporate or partnership acts and other proceedings required to be taken by such
Seller to authorize the execution, delivery and performance of this Agreement
and the sale of its Shares contemplated hereby by such Seller have been duly and
properly taken. This Agreement has been duly executed and delivered by such
Seller and constitutes the legal, valid and binding obligation of such Seller,
enforceable against such Seller in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency or other laws affecting
creditor's rights generally and except as enforcement may be limited by general
equitable principles.
3.3 No Violations of Laws or Agreements. Except as set forth in
-----------------------------------
Schedule 3.3, the execution, delivery and performance by such Seller of this
------------
Agreement and the consummation by such Seller of the transactions contemplated
hereby will not (a) violate in any material respect any provision of law or any
rule or regulation to which such Seller is, subject (it being understood that
the necessity for filings and consents is dealt with separately in the following
paragraph), (b) conflict with or violate any order, judgment, injunction, award
or decree binding upon such Seller, (c) conflict with or violate the Certificate
of Incorporation, Bylaws or other similar governing documents of such Seller, or
(d) result in the creation or imposition of any Lien upon the Shares owned by
such Seller, except, in the case of any of the foregoing clauses other than
clause (a) and clause (c), for any such conflict, violation, default, right or
Lien which would not, individually or in the aggregate, have a Material Adverse
Effect.
Except as set forth in Schedule 2.3 the execution, delivery and
------------
performance by such Seller of this Agreement and the consummation of the
transactions contemplated hereby do not require any consent from, or filing
with, any governmental or regulatory authority, except for (a) the filing of a
report under the HSR Act, and the expiration of the applicable waiting period
thereunder, (b) any action, consent or filing that Buyer is required to obtain
or make, and (c) consents and filings which, if not obtained or made, will not,
individually or in the aggregate, have a material adverse effect on the ability
of such Seller to consummate the transactions contemplated hereby with respect
to its Shares.
3.4 Transfer of Good Title. Upon consummation of the transactions
----------------------
contemplated hereby, such Seller will transfer to Buyer, and Buyer will have
good and valid title to, such Seller's Shares listed by such Sellers name on
Schedule 2.4, free and clear of all pledges, security interests, liens, charges,
encumbrances, equities, claims and options of whatever nature (other than such
as may be created by Buyer).
3.5 Management's Representation and Warranties. To such Seller's
------------------------------------------
actual knowledge, without any requirement for investigation, none of the
representations and warranties of Management set forth in Article 2 of this
Agreement are untrue as of the date of this Agreement; provided, however, that
-------- -------
for purposes of making the representation in this Section 3.5, references to the
"knowledge of Management" in Article 2 shall be ignored.
3.6 Related Party Agreements. To the knowledge of such Seller, there
------------------------
are no agreements or arrangements between such Seller, any directors or officers
of such Seller or any
-21-
entity controlling, controlled by or under common control with such Seller or
any directors or officers of such person or entity or any member of the
immediate family of any such officers or directors on the one hand, and the
Company, the Subsidiary or the Liquor Affiliates, on the other hand, except as
described on Schedule 2.10. As used in this Section 3.6, a person's immediate
family shall mean such person's spouse, parents, children, siblings, mothers-
and fathers-in-law, sons- and daughters-in-law, and brothers- and sisters-in-
law.
3.7 Brokers. No banker, finder, agent or similar intermediary has
-------
acted for or on behalf of such Seller in connection with this Agreement or the
transactions contemplated hereby, and no broker, finder, agent or similar
intermediary is entitled to any broker's, finder's or similar fee or other
commission in connection herewith based on any agreement with such Seller, in
either case, for which the Company is obligated to pay any fee or commission.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER
---------------------------------------
Buyer represents and warrants, as of the date of this Agreement, to
Sellers as follows:
4.1 Organization. Buyer is a corporation duly organized and validly
------------
existing under the laws of the State of Delaware. Buyer has the requisite
corporate power and authority to carry on its business as presently conducted.
4.2 Authorization and Enforceability. Buyer has the requisite
--------------------------------
corporate power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. All corporate acts and proceedings required to
be taken by Buyer to authorize the execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby have been
duly and properly taken. This Agreement has been duly executed and delivered by
Buyer and constitutes the legal, valid and binding obligation of Buyer,
enforceable against Buyer in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency or other laws affecting
creditor's rights generally and except for equitable remedies.
4.3 No Violations of Laws or Agreements. The execution, delivery and
-----------------------------------
performance by Buyer of this Agreement and the consummation by it of the
transactions contemplated hereby will not (a) violate in any material respect
any provision of law or any rule or regulation to which Buyer is subject (it
being understood that the necessity for filings and consents is dealt with
separately in the following paragraph), (b) conflict with or violate any order,
judgment, injunction, award or decree applicable to Buyer, (c) conflict with or
violate the Certificate of Incorporation, Bylaws or other similar governing
documents of Buyer, (d) constitute a default, or give rise to a right of
termination, cancellation or acceleration of any right or obligation of Buyer,
under any provision of any agreement, contract or other instrument binding upon
Buyer or any license, franchise, permit or other similar authorization held by
Buyer, or (e) result in the creation or imposition of any Lien upon any of the
assets of Buyer except, in the case of any of the foregoing clauses other than
clause (a) and clause (c), for any
-22-
such conflict, default, right or Lien which would not individually or in the
aggregate have a Material Adverse Effect.
The execution, delivery and performance by Buyer of this Agreement and
the transactions contemplated hereby do not require any consent from or filing
with any governmental or regulatory authority, except for (a) the filing of a
report under the HSR Act and the expiration of the applicable waiting period
thereunder, or (b) any action, consent or filing that Sellers or the Company or
the Subsidiary is required to obtain or make.
4.4 Sufficient Funds; Financing. Buyer represents and warrants that
---------------------------
it or an affiliate has entered, or simultaneously with the execution of this
Agreement will enter, into a letter agreement (the "Letter Agreement") relating
to debt financing to pay in full in cash at closing the Purchase Price and to
repay the indebtedness of the Company set forth on Schedule 6.2 together with
all fees and expenses of Buyer and the fees and expenses of Pricewaterhouse
Coopers Securities L.L.C. associated with the transactions contemplated hereby,
and to make any other payments necessary on the part of Buyer or its affiliates
to consummate the transactions contemplated hereby. A true and correct copy of
the Letter Agreement is attached as part of Schedule 4.4. Neither Buyer nor its
-------------
affiliates will terminate, amend or modify in any respect the Letter Agreement
in a manner which will adversely affect the probability that such financing will
be actually funded, or the timing thereof, without the prior written consent of
Sellers. Buyer or an affiliate has fully paid any and all commitment fees or
other fees required by such Letter Agreement to be paid as of the date hereof
(and will duly pay any such fees due after the date hereof). Buyer will use its
reasonable efforts to maintain the Letter Agreement in full force and effect and
will use its reasonable efforts to cause the conditions to funding under such
letter to be fulfilled on a timely basis and to obtain such funding to permit
the Closing to occur hereunder. In the event the Letter Agreement is terminated
for any reason, Buyer shall use its reasonable efforts to obtain substitute
financing sufficient to permit the Closing to occur in accordance with this
Agreement. The debt financing contemplated by the Letter Agreement or such
substitute financing is referred to herein as the "Debt Financing."
4.5 Compliance with Liquor Licenses. Buyer and its "affiliates" (as
-------------------------------
such term is defined in Rule 12b-2 under the Securities Exchange Act of 1934,
as amended) are not aware, after reasonable investigation, of any event or
condition applying to Buyer or such affiliates which will interfere with the
transfer of the Liquor Licenses to Buyer, or with any corporate change
application in connection therewith, or with the ability of Buyer to procure new
Liquor Licenses, if necessary, as may be applicable.
4.6 Securities Act. The Shares purchased by Buyer pursuant to this
--------------
Agreement are being acquired for investment only and not with a view to any
public distribution thereof, and Buyer shall not offer or sell or otherwise
dispose of the Shares so acquired by it in violation of any of the registration
requirements of the Securities Act of 1933, as amended.
-23-
ARTICLE 5
COVENANTS
---------
5.1 Access. (a) Prior to the Closing, Management shall cause the
------
Company and the Subsidiary and the Liquor Affiliates, to give Buyer and its
representatives, employees, counsel and accountants, and the lenders providing
financing to Buyer hereunder, reasonable access to the properties, books and
records of the Company, the Subsidiary and the Liquor Affiliates upon reasonable
notice and during regular business hours and will furnish to Buyer all such
contacts and other agreements and documents, and any extracts or summaries
thereof available to Management and the Company, and information with respect to
the affairs of the Company, the Subsidiary and the Liquor Affiliates as the
Buyer may from time to time reasonably request, and will cause the officers and
employees (and will use reasonable efforts to cause any agents or consultants)
of the Company, the Subsidiary and the Liquor Affiliates to keep the officers of
Buyer informed as to the affairs of the Company, the Subsidiary and the Liquor
Affiliates and to arrange for meetings with management of the Company, the
Subsidiary and the Liquor Affiliates from time to time upon Buyer's request on
reasonable notice; provided, however, that Buyer and its employees and agents
will not make any request or take any action which unreasonably interferes with
the operation of the business of the Company, the Subsidiary and the Liquor
Affiliates; and provided further that Buyer, at its expense, may conduct a Phase
I environmental site assessment (a "Phase I Assessment") on any property of the
Company, the Subsidiary and the Liquor Affiliates. Prior to the Closing, Buyer
may, at its expense, conduct an additional assessment (a "Phase II Assessment")
to further evaluate any potential environmental conditions identified in any
Phase I Assessment or other information learned by Buyer after the date hereof,
or any information known to Buyer and conveyed to Sellers, Management and the
Company prior to the date hereof, which Buyer reasonably determines require
further evaluation (subject to obtaining any required landlord consents, which
Management and the Company will use its reasonable efforts to obtain). Buyer
shall provide Sellers, Management and the Company with a copy of the proposed
actions to be taken in connection with such Phase II Assessment prior to
initiating such assessment. The Phase II Assessment may include air, soil,
surface and/or groundwater tests. If Buyer conducts a Phase II Assessment prior
to Closing which identifies an environmental condition which has a Material
Adverse Effect then Buyer may terminate this Agreement pursuant to Section
8.4(a)(v) if Buyer notifies Sellers, Management and the Company of its intention
to terminate this Agreement within 10 days after the identification of such
environmental condition.
(b) Except as otherwise provided in Schedule 5.1, notwithstanding any
------------
right of Buyer to investigate fully the affairs of the Company, the Subsidiary
and the Liquor Affiliates, and notwithstanding any knowledge of facts,
determined or determinable by Buyer pursuant to such investigation or right of
investigation, Buyer has the right to rely fully on the representations,
warranties, covenants and agreements of Management and the Sellers contained in
this Agreement. No party to this Agreement may rely on any representation or
warranty other than the representations and warranties made in this Agreement.
Buyer will use its reasonable efforts to conclude all of its environmental due
diligence as promptly as practicable after the date hereof.
-24-
5.2 Ordinary Conduct. (a) From and after the date hereof and prior to
----------------
Closing, and unless Buyer shall otherwise consent or agree in writing and except
as contemplated by this Agreement or as disclosed on Schedule 5.2, the
------------
Management shall, and shall cause the Company and the Subsidiary, and the
Company shall cause the Liquor Affiliates to:
(i) conduct their businesses in the ordinary course;
(ii) use their reasonable efforts to preserve their
business organizations to maintain the services of their present key employees
and to preserve the goodwill of the suppliers, customers and others having
business dealings with them; and
(iii) maintain in force (including necessary renewals
thereof) the insurance policies listed on Schedule 2.12 to the extent that such
-------------
policies may be maintained at commercially reasonable rates.
(b) From and after the date hereof and prior to Closing, and unless
Buyer shall otherwise consent or agree in writing and except as contemplated by
this Agreement or as disclosed on Schedule 5.2 the Management shall, and shall
------------
cause the Company, and the Company shall cause the Liquor Affiliates not to take
any of the actions specified in Section 2.14.
5.3 Litigation. Management shall, as promptly as reasonably
----------
practicable, notify Buyer of any suits, actions, claims, proceedings or
investigations which after the date of this Agreement and prior to the Closing
are threatened in writing or commenced against the Company, the Subsidiary, the
Liquor Affiliates or any officer, director or employee of the Company or the
Subsidiary, or (to the extent known to Management, the Company, the Subsidiary
or the Liquor Affiliates) any consultant or agent of the Company or the
Subsidiary, in their capacities as such, or otherwise affecting the Company, the
Subsidiary or the Liquor Affiliates.
5.4 Reasonable Efforts. Management and Buyer shall use their
------------------
reasonable efforts to conduct the respective businesses of the Company, the
Subsidiary and the Liquor Affiliates and of the Buyer in such a manner so that
the representations and warranties contained in Article 2 or Article 4, as
applicable, of this Agreement shall continue to be true and correct on and as of
the Closing Date with the same force and effect as if made on and as of the
Closing Date in a manner so as to satisfy the conditions to closing set forth in
Sections 6.1 and 6.2.
5.5 Reports. During the period from the date of this Agreement to and
-------
including the Closing Date, Management shall provide to Buyer, within 20
days after the end of each fiscal month occurring during such period, balance
sheets for the Company and the Subsidiary and for the Liquor Affiliates prepared
on the same basis as the Interim Balance Sheet. Each such statement shall
present fairly the information set forth therein in accordance with accounting
policies and procedures consistent with the Interim Balance Sheet.
5.6 Confidentiality; Press Releases. (a) Buyer, on behalf of itself
-------------------------------
and its affiliates, acknowledges that all information being provided to it by
Sellers, the Company, the
-25-
Subsidiary and the Liquor Affiliates, or their representatives, is subject to
the terms of a Confidentiality Agreement dated June 19, 1998 (the
"Confidentiality Agreement"), the terms of which are incorporated herein by
reference.
(b) Buyer, on the one hand, and each of Sellers,
Management, the Company, the Subsidiary, and the Company on behalf of the Liquor
Affiliates, on the other hand, agree that neither it nor its affiliates will
make any disclosure or statement to the press, press release or other private
or public announcement regarding this Agreement or the transactions contemplated
hereby prior to the Closing Date unless the text and time of the release of any
such statement has been approved by the other parties in writing, except (a)
where such disclosure is required pursuant to applicable law (in which case such
party will consult with the other parties regarding any such public statements
prior to disclosure) and (b) that Buyer, Sellers, the Company, the Subsidiary
and the Liquor Affiliates may communicate with advisors, consultants, and others
as necessary to complete the Transaction. Buyer, Sellers, Management, the
Company, the Subsidiary and the Liquor Affiliates agree to consult with the
other parties prior to any press release or other public announcement by it or
its affiliates relating to this Agreement in connection with the Closing of the
transactions contemplated hereby and agree that such press release or
announcement will not be made prior to such consultation.
5.7 Financial Information. Buyer shall, and the Company shall cause
---------------------
the Liquor Affiliates to permit Buyer to (a) hold all of the books and records
of the Company, the Subsidiary and the Liquor Affiliates existing on the Closing
Date and not destroy or dispose of any thereof unless it offers first in
writing, at least 60 days prior to such destruction or disposition to surrender
them to Sellers (and, if Sellers accept such offer, Buyer will so surrender
them) and (b) provide to Sellers such financial and other information with
respect to the Company, the Subsidiary and the Liquor Affiliates for the portion
of the current fiscal year during which Shares were owned by Sellers in
accordance with past practice to allow Sellers to comply with financial, tax
reporting, legal and accounting requirements.
5.8 Employees. From the date of this Agreement to the Closing Date,
---------
Management shall not cause or permit the Company, the Subsidiary or the Liquor
Affiliates to hire or fire any employees having a title of "regional manager"
(or any employee having a comparable or more senior title) without the consent
of Buyer (not to be unreasonably withheld). Management shall use reasonable
efforts to continue the employment of those employees of the Company, the
Subsidiary and the Liquor Affiliates who are employed on the Closing Date,
including those on authorized leave of absence but excluding those who have
qualified for long-term disability (the "Employees"), after the Closing Date on
substantially the same terms and conditions, including the right of the Company,
the Subsidiary or the Liquor Affiliates to terminate the employment of any such
Employee, as in effect on the Closing Date.
5.9 Antitrust Notification. Management, Sellers and Buyer shall file
----------------------
or cause to be filed, respectively, as soon as practicable after the date
hereof, to the extent required, an acquired person's and acquiring person's HSR
Act notification and report form with respect to the transactions contemplated
by this Agreement as required by the HSR Act. Management, Sellers and Buyer
agree to use their reasonable efforts to comply promptly with and, where
appropriate,
-26-
to respond in cooperation with each other to, all requests or requirements which
applicable federal, state, local, foreign or other applicable law or any
governmental authority may impose on them with respect to the transactions which
are the subject of this Agreement including taking any shareholder action.
5.10 Reasonable Efforts. Subject to the terms and conditions of this
------------------
Agreement, each party shall use its reasonable efforts to cause the Closing to
occur as promptly as reasonably possible. Sellers shall use reasonable efforts
to (a) obtain any required third party consents necessary in connection with the
transactions contemplated hereby; provided, however, that Buyer will cooperate
-------- -------
with Management in a reasonable manner and that such reasonable efforts shall
not include any requirement of Sellers, Management, the Company, the Subsidiary
or the Liquor Affiliates to expend money, commence or participate in any
litigation or offer or grant any accommodation, financial or otherwise, to any
third parties and (b) notify any third party required to be notified prior to
the Closing under a contract of the Company, the Subsidiary or the Liquor
Affiliates of the transactions contemplated hereby. At and after the Closing
Date, as and when requested by either party hereto, the other party shall
execute and deliver, or cause to be executed and delivered, any documents,
assignments or assurances and to take and do, any other actions and things to
vest, perfect or confirm of record or otherwise in Buyer any and all right,
title and interest in, to and under any of the rights, properties or assets of
the Company acquired or to be acquired by Buyer as a result of, or in connection
with, the transactions contemplated by this Agreement.
5.11 Advice of Changes. Prior to the Closing, each party shall, to the
-----------------
extent such party has knowledge of the following events or conditions, give
prompt written notice to the other of (a) any breach of any representation or
warranty of such party made herein that is qualified by the standard of
"Material Adverse Effect," (b) any breach of any representation or warranty of
such party made herein that is not qualified by the standard of "Material
Adverse Effect" if such breach has a Material Adverse Effect; (c) any failure to
comply in any material respect with any covenant or agreement to be complied
with by it prior to Closing under this Agreement; (d) any event which will
result in the failure to satisfy the conditions specified in Article 6 hereof;
(e) any notice or other written communication of or relating to a default (or
event which, with notice or lapse of time, or both, would constitute a default),
received by such party subsequent to the date hereof and prior to the Closing
Date under any contract or agreement and that would have a Material Adverse
Effect; (f) any notice or other written communication from any person alleging
that the consent of such person is or may be required in connection with the
transactions contemplated hereby; (g) any notice or other written communication
from any foreign, federal, state, county or local government or any other
governmental, regulatory or administrative agency or authority in connection
with the transactions contemplated hereby; and (h) any Material Adverse Effect
or change which would result in a Material Adverse Effect; provided, however,
that (except as otherwise provided herein) no such notice shall affect the
conditions to the obligations of Sellers or Buyer hereunder. Prior to Closing,
Management shall, to the extent that it has such knowledge, give prompt written
notice to Buyer and Sellers of any damage in excess of $10,000 to the Company's
property or other assets.
-27-
5.12 No Solicitation. Prior to the earlier of (a) the Closing or (b)
---------------
the termination of this Agreement, Management, the Company, each Seller and
Buyer shall not, and shall cause the Company, the Subsidiary, the Liquor
Affiliates and Sellers', Management's and Buyer's agents not to directly or
indirectly, solicit any inquiries or proposals for, or enter into or continue
any discussions or agreement with respect to, the acquisition of any of the
Shares or other capital stock of the Company, the Subsidiary or the Liquor
Affiliates, all or a substantial portion of the business of the Company, the
Subsidiary or the Liquor Affiliates or all or any substantial portion of the
assets of the Company, the Subsidiary or the Liquor Affiliates (an "Acquisition
Transaction"). Each Seller and Management shall promptly notify Buyer of the
terms and material facts of any inquiry or proposal received respectively by
such Seller, Management, the Company, the Subsidiary or the Liquor Affiliates
with respect to such Acquisition Transaction. Buyer shall promptly notify each
Seller of the terms and material facts of any inquiry or proposal received by
Buyer with respect to any such Acquisition Transaction. Prior to the earlier of
(a) the Closing or (b) the termination of this Agreement, except as contemplated
by this Agreement, each Seller shall not sell, transfer or otherwise dispose of,
grant any option or proxy to any person with respect to, create any Lien upon,
or transfer any interest in any of the Shares owned by such Seller, or enter
into any agreement to do so.
5.13 Liquor Licenses. Each Seller, Management, at the Company's
---------------
expense, shall reasonably cooperate with Buyer in obtaining any approvals, or
completing any filings, necessary in connection with the Liquor Licenses (and
any other permits or authorizations referred to in Section 6.1(k)) in connection
with the transactions contemplated hereby. Buyer, at its expense, will use its
reasonable efforts to complete any required filings, and obtain any required
approvals, in respect of the Liquor Licenses (and any other permits or
authorizations referred to in Section 6.1(k)) in connection with the
transactions contemplated hereby as promptly as practicable.
5.14 Non-Competition. (a) Each of Inwood and Chart House covenant and
---------------
agree that for a period of two years after the Closing Date, neither Inwood, its
general partners nor Chart House shall engage directly or indirectly in any
restaurant or catering business that generates more than 50% of its revenue from
barbecued menu items (i) in the case of Inwood and its general partners,
anywhere in the United States and (ii) in the case of Chart House, within 25
miles of any current Restaurant; provided, however, that financial institutions
-------- ------
that are affiliates of any general partner of Inwood shall be permitted to make
loans in the normal course of their lending businesses to any restaurant or
catering business that offers barbecued menu items and to exercise any remedies
upon default with respect to such loans, including exercising control or
significant influence over any such restaurant or catering business; and
provided, further, however, that Inwood and its general partners and Chart
-------- ------- -------
House shall be permitted to own less than 5% of the outstanding equity interests
as a passive investment in any restaurant or catering business that offers
barbecued menu items.
(b) Inwood and Chart House acknowledge that Buyer will be
irrevocably damaged if such covenant is not specifically enforced. Accordingly,
Inwood and Chart House agree that, in addition to any other relief to which
Buyer may be entitled, Buyer will be entitled to seek and obtain injunctive
relief (without the requirement of any bond) from a court
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of competent jurisdiction for the purposes of restraining Inwood, its general
partners, and Chart House from any actual or threatened breach of such covenant.
5.15 No Additional Representations. Buyer acknowledges that it and its
-----------------------------
representatives have had the opportunity prior to the date of this Agreement to
review the books and records of the Company, the Subsidiary and the Liquor
Affiliates and to meet with officers and employees of the Company, the
Subsidiary and the Liquor Affiliates to discuss the business and assets of the
Company, the Subsidiary and Liquor Affiliates. Buyer acknowledges that none of
Sellers, Management or any other person has made any representation or warranty,
expressed or implied, as to the accuracy or completeness of any information
regarding the Company, the Subsidiary or the Liquor Affiliates furnished or made
available to Buyer and its representatives, except as expressly set forth in
this Agreement, any certificate or other document required to be delivered in
connection with this Agreement or the Schedules hereto.
5.16 Certain Litigation. Each Seller shall, as promptly as reasonably
------------------
practicable, notify Buyer of any suits, actions, claims, proceedings or
investigations which, after the date of this Agreement and prior to the Closing,
are threatened in writing or commenced against such Seller and are directly
related to the sale of such Seller's Shares to Buyer pursuant to this Agreement.
5.17 Certain Agreement. (a) On or prior to the Closing Date Xxxxxxx X.
-----------------
Xxxxxx shall execute and deliver an agreement in form reasonably satisfactory to
Buyer providing for the contribution of 78,000 shares of common stock of the
Company to Buyer in exchange for shares of common stock of Buyer.
(b) On or prior to the Closing Date, the appropriate parties
shall execute and deliver a document, reasonably satisfactory to Buyer,
providing for the termination of payments to Inwood Management Company pro-rata
to, and effective as of, the Closing Date.
(c) On or prior to the Closing Date, the appropriate parties
shall execute and deliver a document, reasonably satisfactory to Buyer,
providing for termination of that certain Management Stock Subscription
Agreement, dated as of August 30, 1989, between the Company and Xxxxxxx X.
Xxxxxx.
(d) On or prior to the Closing Date, the appropriate parties
shall execute and deliver a document, reasonably satisfactory to Buyer,
providing for termination of that certain Shareholders' Agreement dated as of
December 30, 1988 between Luther's Acquisition Corporation and the shareholders
named therein.
5.18 Actions Relating to Management's Covenants. Each Seller agrees
------------------------------------------
that it shall not impede Management from complying with Management's covenants
in this Article 5.
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ARTICLE 6
CONDITIONS TO CLOSING
---------------------
6.1 Conditions to Buyer's Obligations. The obligation of Buyer to
---------------------------------
purchase and pay for the Shares and to take the other actions required to be
taken by Buyer at the Closing is subject to the satisfaction (or waiver by
Buyer) on or prior to the Closing of the following conditions:
(a) (i) The representations and warranties of Management and
Sellers made in this Agreement shall be true and correct on and as of the
Closing Date, as though made on and as of the Closing Date, except for (A)
changes contemplated by this Agreement, (B) those representations and warranties
(other than solely in respect of Section 2.1 and Section 3.5) that address
matters only as of a particular date (which shall be true and correct as of that
date), and (C) breaches or inaccuracies of representations or warranties that do
not, individually or in the aggregate, have a Material Adverse Effect; (ii)
Management and Sellers shall have performed in all material respects the
covenants contained in this Agreement required to be performed by Management and
Sellers prior to the Closing, and the Company and the Subsidiary shall have
performed in all material respects the covenants required to be performed by the
Company and the Subsidiary prior to the Closing; and (iii) Management and an
authorized officer of each of the Sellers reasonably acceptable to Buyer shall
have delivered to Buyer, on behalf of Management and each such Seller, a
certificate dated the Closing Date confirming the applicable statements
contained in the foregoing clauses (i) and (ii).
(b) No suit, action, claim, proceeding or investigation shall
have been instituted by or before any court or any foreign, federal, state,
county or local government or any other governmental, regulatory or
administrative agency or authority (i) seeking to restrain, prohibit or
invalidate the sale of the Shares to Buyer hereunder or the consummation of the
transactions contemplated hereby or (ii) seeking material damages in connection
with such transactions (and having a reasonable likelihood of success) or which
would adversely affect the right of Buyer to own, operate or control after the
Closing the assets, properties or business of the Company and the Subsidiary, or
have a Material Adverse Effect.
(c) The applicable waiting period under the HSR Act shall have
expired or been terminated.
(d) Buyer shall have obtained debt financing adequate to pay in
full in cash at closing the Purchase Price and to repay the indebtedness of the
Company set forth in Schedule 6.2 together with all fees and expenses of
Pricewaterhouse Coopers Securities L.L.C. associated with the transactions
contemplated hereby, and to make any other payments necessary on the part of
Buyer or its affiliates to consummate the transactions contemplated hereby.
(e) Management shall have delivered to Buyer (i) copies of the
respective Certificates of Incorporation, including all amendments thereto, of
each of the Company and the Subsidiary, certified by the Secretary of State of
its jurisdiction of incorporation; (ii) certificates from the Secretary of State
of the respective jurisdictions of
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incorporation to the effect that each of the Company and the Subsidiary is in
good standing in such jurisdiction and listing all charter documents of the
Company and the Subsidiary on file in such state; and (iii) a certificate from
the Secretary of State or other appropriate official in each state in which the
Company or the Subsidiary is qualified to do business to the effect that each of
the Company and the Subsidiary is in good standing in such state; in each case,
dated as of a date not more than five business days prior to the Closing Date.
(f) Sellers shall have delivered to Buyer the stock certificates
representing all of the Shares in accordance with Section 1.1, duly endorsed in
blank or with duly executed stock powers attached, in proper form for transfer
and with required transfer stamps, if any, affixed.
(g) Buyer shall have the received the resignation, dated the
Closing Date, of those officers and members of the Board of Directors of the
Company and the Subsidiary as shall be designated by Buyer in writing to
Sellers not less than five days prior to the Closing Date.
(h) Management and Sellers shall have delivered to Buyer
incumbency certificates with respect to each of the persons signing this
Agreement and any other document or certificate in connection herewith on behalf
of Sellers.
(i) Buyer shall have received an opinion of Xxxxxx & Xxxxxx
L.L.P., counsel to Sellers, dated the Closing Date, addressed to Buyer in form
reasonably satisfactory to Buyer.
(j) The Company shall have implemented any reasonable request of
Buyer to cancel options under the Company's stock option plans, consistent with
such plans; provided, however that no Seller shall be required to pay any amount
-------- -------
in respect thereof.
(k) Metropolitan shall have exercised all of its outstanding
options to purchase common stock of the Company.
(l) Any and all approvals necessary for the consummation of the
transactions contemplated hereby in connection with the Liquor Licenses (and any
other material governmental permits or authorizations of the Company and the
Subsidiary) or required in connection with such Liquor Licenses, permits or
authorizations for the Company and the Subsidiary to carry on their respective
businesses immediately after the Closing as currently conducted, or to maintain
such Liquor Licenses, permits or other authorizations in effect immediately
after the Closing, shall have been obtained.
(m) The consents set forth on Schedule 6.1 shall have been
received.
(n) Management shall have executed and delivered agreements
reasonably satisfactory to Buyer pursuant to which each shall have provided
indemnities to Buyer in respect of the representations and warranties of
Management contained herein (the "Indemnification Agreements").
-31-
(o) Buyer shall have been satisfied, in its sole discretion,
with the capabilities of the senior executives of the Company to run the
Company.
(p) Xxxxxxx X. Xxxxxx shall have executed and delivered
employment and non-compete agreements reasonably satisfactory to Buyer.
6.2 Conditions to Sellers' Obligations. The obligation of Sellers to
----------------------------------
sell and deliver the Shares to Buyer is subject to the satisfaction (or waiver
by Sellers) on or prior to the Closing of the following conditions:
(a) (i) The representations and warranties of Buyer made in this
Agreement shall be true and correct on and as of the Closing Date, as though
made on and as of the Closing Date, except for (A) changes contemplated by this
Agreement, (B) breaches or inaccuracies of representations and warranties that
do not, individually or in the aggregate, have a Material Adverse Effect and (C)
those representations and warranties (other than solely in respect of the first
sentence of Section 4.1) that address matters only as of a particular date
(which shall be true and correct as of that date); (ii) Buyer shall have
performed in all material respects the covenants of Buyer contained in this
Agreement required to be performed by the time of the Closing; and (iii) the
President or any Vice President of Buyer shall have delivered to Sellers, on
behalf of Buyer, a certificate dated the Closing Date confirming the
satisfaction of the foregoing clauses (i) and (ii).
(b) No suit, action, claim, proceeding or investigation shall
have been instituted by or before any court or any foreign, federal, state,
county or local government or any other governmental, regulatory or
administrative agency or authority (i) seeking to restrain, prohibit or
invalidate the sale of the Shares to Buyer hereunder or the consummation of the
transactions contemplated hereby or (ii) other than any suit, action, claim,
proceeding or investigation instituted against Sellers or its affiliates (and
not also against Buyer and its affiliates), to seek material damages in
connection with such transactions (and having a reasonable likelihood of
success) or which would have a Material Adverse Effect.
(c) Any applicable waiting period under the HSR Act shall have
expired or been terminated.
(d) Buyer shall have paid the Purchase Price to Sellers as
provided in Section 1.1.
(e) Buyer shall have paid or caused to be paid or assumed full
and complete liability for the outstanding balance of the indebtedness of the
Company set forth on Schedule 6.2.
(f) Sellers shall have received an opinion of Xxxxxxx Xxxx &
Xxxxx LLP, counsel to Buyer, dated the Closing Date, addressed to Sellers, in
the form attached hereto as Exhibit A.
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ARTICLE 7
INDEMNIFICATION
7.1 Non-Survival of Representations and Warranties. The
----------------------------------------------
representations and warranties, covenants and agreements contained in this
Agreement, shall not survive, and shall terminate as of the Closing, except that
the representations and warranties set forth in Article 3 and Article 4 and the
covenants set forth in Section 5.6, 5.7 and 5.14 shall survive the Closing
indefinitely if no term is specified therein or for the terms specified in such
Sections. The obligations to indemnify and hold harmless a Buyer Indemnified
Party or a Sellers Indemnified Party, as the case may be, (i) pursuant to
Sections 7.2(a) and 7.3(a), shall terminate when the applicable representation
or warranty terminates, an (ii) pursuant to the other clauses of Sections 7.2
and 7.3 (and Section 7.6), shall not terminate; provided, however, that such
-------- -------
obligations to indemnify and hold harmless shall not terminate with respect to
any item, as to which the person to be indemnified shall have, before the
expiration of the applicable period, previously made a claim by delivering a
notice stating in reasonable detail the basis of such claim to the party
providing the indemnification. It is understood that this Section 7.1 does not
refer or relate to the Indemnity Agreements.
7.2 Indemnification by Sellers. From and after the Closing, each
--------------------------
Seller shall, individually, indemnify Buyer and its affiliates and their
respective officers and directors (the "Buyer Indemnified Parties") against, and
hold them harmless from, any losses, liabilities, claims, damages, amounts paid
in settlement of suits, actions, claims or proceedings, judgments and expenses
(including reasonable legal fees and expenses, but not consequential damages of
any type) ("Losses") suffered or incurred by any such indemnified party, as a
direct consequence of (a) any breach of any representation or warranty of such
Seller contained in Article 3 of this Agreement, and (b) any breach in any
material respect of the covenants of such Seller contained in Section 5.6 or
5.14 of this Agreement.
7.3 Indemnification by Buyer. Buyer and, after the Closing, Buyer
------------------------
shall cause the Company, shall indemnify each Seller and its affiliates and
their respective officers and directors (the "Sellers Indemnified Parties")
against, and hold them harmless from, any Losses suffered or incurred by any
such indemnified party as a direct consequence of (a) any breach of any
representation or warranty of Buyer contained in this Agreement, and (b) any
breach in any material respect of any covenant of Buyer contained in this
Agreement.
7.4 Indemnification Limitations and Procedures. (a) The parties
------------------------------------------
hereto agree that the representations, warranties, covenants and agreements of
each contained herein or in any schedule or exhibit hereto or certificate
delivered hereunder are made for purposes of this Agreement only and are made by
the party solely in conjunction with the execution of this Agreement and with
the closing conditions and indemnification provisions set forth in Article 6 and
Article 7 of this Agreement. The parties agree that the representations,
warranties, covenants and agreements of the parties contained in this Agreement
shall not provide the basis for any action or remedy other than as set forth in,
or permitted by, this Agreement; except as provided in the Indemnification
Agreements.
-33-
(b) The parties hereto agree that the sole and exclusive
remedies for breaches of this Agreement (other than any available equitable
remedies), for negligence, negligent misrepresentation or for any tort (but not
any tort based upon intent to deceive) committed in connection with the
transactions described in, or contemplated by, this Agreement are those set
forth in this Agreement, and that no claim may be made by any party hereto for
any matter in connection with the transactions described in, or contemplated by,
this Agreement unless specifically set forth in this Agreement and then only
pursuant to the terms of this Agreement.
(c) Amounts paid in respect of indemnification obligations of
the parties pursuant to this Article 7 shall be treated as an adjustment to the
purchase price for the Shares. In determining the amount of Losses to which an
indemnified party is entitled under this Article 7, full allowance shall be made
for any proceeds recovered pursuant to the indemnified party's insurance
policies (which the indemnified party shall use its reasonable efforts to
obtain) or from any third party and for any tax benefit resulting from the
indemnified party's loss, claim or damages. In the event that any such proceeds
or recovery are received by an indemnified party after payment of an indemnity
claim by an indemnifying party hereunder, the indemnified party shall promptly
pay the amount of such proceeds or other recovery to the indemnifying party to
the extent it is duplicative with the indemnifying party's prior payment.
7.5 Procedures Relating to Indemnification - Third Party Claims. (a)
-----------------------------------------------------------
A party seeking indemnification pursuant to Sections 7.2 or 7.3 (an "Indemnified
Party") shall give prompt notice to the party from whom such indemnification is
sought (the "Indemnifying Party") of the assertion of any claim or assessment,
and shall notify the Indemnifying Party of the commencement of any action, suit,
audit or proceeding by a third party in respect of which indemnity may be sought
hereunder (a "Third Party Claim") within 30 days of such commencement; provided,
however, that the failure to give such notice in a timely manner shall not
affect the indemnity obligation of the Indemnifying Party hereunder to the
extent the Indemnified Party demonstrates that the Indemnifying Party has not
been prejudiced thereby. The Indemnified Party will give the Indemnifying Party
such information with respect thereto as the Indemnifying Party may reasonably
request. Thereafter, the Indemnified Party shall deliver to the Indemnifying
Party, within five business days after the Indemnified Party's receipt thereof,
copies of all notices and documents (including court papers) received by the
Indemnified Party relating to the Third Party Claim; provided, however, that the
failure to deliver such notices and documents in a timely manner shall not
affect the indemnity obligation of the Indemnifying Party hereunder to the
extent the Indemnified Party demonstrates that the Indemnifying Party has not
been prejudiced thereby. The Indemnifying Party shall have the right,
exercisable by written notice (the "Notice") to the Indemnified Party within 60
days following receipt of notice from the Indemnified Party of the commencement
of or assertion of any Third Party Claim, to assume the defense of such Third
Party Claim, using counsel selected by the Indemnifying Party (and reasonably
satisfactory to the Indemnified Party). Should the Indemnifying Party so elect
to assume the defense of a Third Party Claim, the Indemnifying Party will not
be liable to the Indemnified Party for legal expenses subsequently incurred by
the Indemnified Party in connection with the defense thereof unless the defense
of such claim by counsel to the Indemnifying Party presents such counsel with a
conflict of interest (other than in respect of the
-34-
indemnity obligation of the Indemnifying Party). Regardless of whether the
Indemnifying Party elects to assume the defense of any such Third Party Claim,
the Indemnified Party shall not admit any liability with respect to, or settle,
compromise or discharge, such Third Party Claim without the Indemnifying Party's
prior written consent (which shall not be unreasonably withheld).
(b) The Indemnifying Party or the Indemnified Party, as the case
may be, shall in any event have the right to participate, at its own expense, in
the defense of any Third Party Claim which the other is defending.
(c) The Indemnifying Party, if it shall have assumed the defense
of any Third Party Claim, shall have the right to consent to the entry
of judgement with respect to, or otherwise settle such Third Party Claim,
provided that as between the Indemnifying Party and the Indemnified Party,
the Indemnifying Party shall be solely obligated to satisfy and discharge
such judgment or settlement, and there is no finding or admission of any
violation of any judgment, ruling, order, writ, award, decree, statute, law,
ordinance, code, rule or regulation or any court or foreign, federal, state,
county or local government or any other governmental, regulatory or
administrative agency or authority or any violation of the rights of any person
by the Indemnified Party and no effect on any other pending or threatened in
writing suit, action, claim, proceeding or investigation. Otherwise, such
settlement only may be made with the written consent of the Indemnified Party,
which consent shall not be unreasonably withheld.
(d) Whether or not the Indemnifying Party chooses to defend or
prosecute any claim involving a third party, all the parties hereto shall
cooperate in the defense or prosecution thereof and shall furnish such records,
information and testimony, and attend such conferences, discovery proceedings,
hearings, trials and appeals as may be reasonably requested in connection
therewith. Such cooperation shall include access during normal business hours
afforded to the Indemnifying Party to, and reasonable retention by the
Indemnified Party of, records and information which are reasonably relevant to
such Third Party Claim, and making employees available on a mutually convenient
basis to provide additional information and explanation of any material provided
hereunder, and the Indemnifying Party shall reimburse the Indemnified Party for
all its reasonable out-of-pocket expenses in connection therewith.
(e) The Indemnifying Party shall pay to the Indemnified Party in
cash the amount of any Loss to which the Indemnified Party may become entitled
by reason of the provisions of this Article 7, such payment to be made within 10
days after (i) such Losses are finally agreed to by the Indemnified Party and
the Indemnifying Party or (ii) such Losses are determined by the final
unappealable judgment of a court of competent jurisdiction.
7.6 Procedures for Indemnification, Other Claims. A claim for
--------------------------------------------
indemnification for any matter not involving a Third Party Claim may be asserted
by notice to the party from whom indemnification is sought.
7.7 APPLICABILITY. THE PROVISIONS OF THIS ARTICLE 7 SHALL
-------------
APPLY NOTWITHSTANDING THE SOLE, JOINT OR CONCURRENT NEGLIGENCE, STRICT LIABILITY
OR OTHER FAULT OF THE INDEMNIFIED PARTY. IF BOTH THE
-35-
INDEMNIFIED PARTY AND THE INDEMNIFYING PARTY ARE NEGLIGENT OR OTHERWISE AT FAULT
OR STRICTLY LIABLE WITHOUT FAULT, THE CONTRACTUAL OBLIGATIONS OF INDEMNIFICATION
UNDER THIS ARTICLE 7 SHALL CONTINUE, BUT THE INDEMNIFYING PARTY SHALL INDEMNIFY
THE INDEMNIFIED PARTY ONLY FOR THE PERCENTAGE OF RESPONSIBILITY FOR THE DAMAGES,
INJURIES AND EXPENSES ATTRIBUTABLE TO THE INDEMNIFYING PARTY.
ARTICLE 8
MISCELLANEOUS
-------------
8.1 Construction of this Agreement. All of the parties to this
------------------------------
Agreement have participated jointly in the negotiation and drafting of this
Agreement. In the event any ambiguity or question of interpretation arises, this
Agreement and the other documents and instruments executed in connection with
this Agreement shall be construed as if drafted jointly, and no presumption or
burden of proof shall arise favoring or disfavoring any party by virtue of the
authorship of any provision of this Agreement or such other documents and
instruments. Any item disclosed on a disclosure schedule to this Agreement shall
be deemed disclosed for all other disclosure schedules to which such item is
applicable, provided such reference is clear. The term "including" in this
Agreement shall mean "including without limitation." References in this
Agreement to dollar amount thresholds (including references in Article 2 of this
Agreement) shall not, for purposes of this Agreement, be deemed to be evidence
of materiality or a Material Adverse Effect. All references in this Agreement to
the "knowledge of Sellers" (or similar terms) shall be interpreted as follows:
the Sellers will be deemed to have "knowledge" of a particular fact or other
matter if any officer of the Sellers (including an officer of the general
partner of Inwood), is actually aware of such fact or other matter. All
references to immediately available funds or dollar amounts contained in this
Agreement shall mean United States dollars. All references to GAAP contained in
this Agreement shall mean United States generally accepted accounting
principles. The headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. References to "schedules" or "sections" herein shall be deemed to
refer to the applicable disclosure schedule or section of this Agreement.
8.2 Assignment. This Agreement and the rights and obligations of the
----------
parties hereunder shall not be assigned, delegated or otherwise transferred by
Buyer, Sellers or the Company without the prior written consent of Buyer (where
Sellers seek to assign or delegate rights or obligations) or Sellers (where
Buyer or, following the Closing, the Company seeks to assign or delegate rights
or obligations); provided, however, that Buyer may assign its right to purchase
all or a portion of the Shares to one or more of its affiliates and may assign
any or all of its rights hereunder to a lender providing financing for the
transaction contemplated hereby, but in no event will such assignment relieve
Buyer of its obligations and liabilities hereunder. This Agreement shall inure
to the benefit of, and be binding upon and enforceable against, the successors
and permitted assigns of the respective parties hereto.
-36-
8.3 No Third-Party Beneficiaries. Except as provided in Article 7, this
----------------------------
Agreement is for the sole benefit of the parties hereto and their permitted
assigns, and nothing herein expressed or implied shall give or be construed to
give to any person or entity, other than the parties hereto and such assigns,
any legal or equitable rights hereunder.
8.4 Termination. (a) This Agreement may be terminated by written notice
-----------
given by Buyer to Sellers or Sellers to Buyer, as the case may be, (i) if the
Closing shall not have occurred by December 1, 1998, (ii) if (A) the purchase
and sale of the Shares contemplated hereby shall violate any non-appealable
final order, decree or judgment of any court or governmental authority of
competent jurisdiction or (B) there shall be an applicable statute, rule or
regulation which makes the purchase and sale of the Shares contemplated hereby
illegal or otherwise prohibited, (iii) at the election of any Seller acting by a
majority in interest of all Sellers, if Buyer has (A) failed to comply with or
perform in any material respect any covenant or agreement contained in this
Agreement or (B) breached any representation or warranty made by it in this
Agreement, and, in either of such cases, has not cured such breach or failure
within 10 days of written notice thereof and (v) at the election of Buyer, as
provided in the last sentence of Section 5.1(a).
(b) In the event of termination by Sellers or Buyer pursuant to
paragraph (a) of this Section 8.4, written notice thereof shall forthwith be
given to the other party, and the transactions contemplated by this Agreement
shall be terminated, without further action by any party hereto. If the
transactions contemplated by this Agreement are so terminated:
(i) Buyer and its affiliates shall return all documents and
other material received from Sellers, Management, the Company, the Subsidiary
or the Liquor Affiliates or any of their affiliates or representatives relating
to the transactions contemplated hereby, whether so obtained before or after the
execution hereof, to the Company;
(ii) all confidential information received by Buyer and its
affiliates with respect to the business of the Company, the Subsidiary and the
Liquor Affiliates shall be treated in accordance with the Confidentiality
Agreement, which shall remain in full force and effect notwithstanding the
termination of this Agreement;
(iii) the provisions of Sections 8.1, 8.5, 8.7 and 8.14 shall
remain in full force and effect; and
(iv) in no event shall any termination of this Agreement limit
or restrict the rights and remedies of any party hereto against any other party
which has intentionally breached any of the agreements or other provisions of
this Agreement prior to termination hereof.
-37-
8.5 Expenses. Whether or not the transactions contemplated hereby are
--------
consummated, all costs and expenses incurred in connection with this Agreement
and the transactions contemplated hereby shall be paid by the party incurring
such costs or expenses, except that the Company will be responsible for the fees
and expenses or Pricewaterhouse Coopers Securities, L.L.C. and all costs,
including filing fees, related to the HSR Act and except as may otherwise be
expressly provided in this Agreement; provided, that the Company will pay up to
a maximum amount of $5,000 with respect to legal fees related to the HSR Act.
8.6 Amendments. No amendment to or modification of this Agreement
----------
shall be effective unless it shall be in writing and signed by each of the
parties to this Agreement.
8.7 Notices. All notices and other communications given under this
-------
Agreement shall be in writing and shall be deemed given (a) on the date of
receipt, if delivered personally, (b) on the date of receipt after delivery by a
reputable nationally recognized overnight courier service, or (c) upon receipt
after being mailed by registered or certified mail (return receipt requested) to
the parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
If to Buyer:
Luther's Acquisition Corp.
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxx
Telecopier: (000) 000-0000
With a required copy to:
Xxxxxxx Xxxx & Xxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx Xxxxxxxxxx, Esq.
Telecopier: (000) 000-0000
If to Sellers:
0000 Xxxxxxx Xxxxx, 0X
Xxxxxxx, Xxxxx 00000
Attention: Xxxxxx X. Xxxxxxx III
Telecopier: (000) 000-0000
With a required copy to:
Xxxxxx & Xxxxxx L.L.P.
0000 Xxxxxx Xxxxxx
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0000 Xxxxx Xxxx Xxxxx
Xxxxxxx, XX 00000-0000
Attention: Xxxx Xxxxxx, Esq.
Telecopier: (000) 000-0000
Such addresses may be changed, from time to time by means of a notice given in
the manner provided in this Section (provided that no such notice shall be
effective until it is received by the other parties hereto).
8.8 Fees. Each of Buyer and Sellers agree that (a) the only brokers or
----
finders that have acted for such party in connection with this Agreement or the
transactions contemplated hereby or that may be entitled to any brokerage or
finder's fee or commission in respect thereof are Pricewaterhouse Coopers
Securities L.L.C., and (b) the Company will pay all fees or commissions which
may be payable to the firm so named.
8.9 Cooperation. Sellers and Buyer agree, and Buyer agrees to cause the
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Company and the Subsidiary after the Closing to agree, to provide, or cause to
be provided, at the cost of the requesting party, any assistance that the other
may reasonably request with respect to all matters relating to the income or
other Tax liabilities of the Company or Sellers for any taxable year or period
ending on or prior to the Closing Date. The requested party shall bear the cost
of: (i) providing forms, information, schedules and other assistance which would
customarily be prepared or provided in connection with the preparation of the
requested party's income tax returns, consistent with past practices; and (ii)
providing information and data which would customarily be provided in connection
with the audit of the requested party's income tax returns.
8.10 WAIVER OF JURY TRIAL, ETC. EACH OF THE SELLERS AND BUYER HEREBY WAIVES
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ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM
CONCERNING ANY RIGHTS UNDER THIS AGREEMENT, OR UNDER ANY DOCUMENT OR OTHER
AGREEMENT DELIVERED OR WHICH IN THE FUTURE MAY BE DELIVERED IN CONNECTION
THEREWITH, OR ARISING IN CONNECTION WITH THIS AGREEMENT, AND AGREES THAT ANY
SUCH ACTION, PROCEEDINGS OR COUNTERCLAIM SHALL BE TRIED BEFORE A COURT AND NOT
BEFORE A JURY. EACH OF THE SELLERS CERTIFIES THAT NO OFFICER, REPRESENTATIVE,
AGENT OR ATTORNEY OF THE BUYER HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE
BUYER WOULD NOT, IN THE EVENT OF ANY ACTION, PROCEEDING OR COUNTERCLAIM, SEEK TO
ENFORCE THE FOREGOING WAIVERS. EACH OF THE SELLERS HEREBY ACKNOWLEDGES THAT THIS
PROVISION IS A MATERIAL INDUCEMENT FOR THE BUYER ENTERING INTO THIS AGREEMENT.
8.11 Severability. If any provision of this Agreement or the application of
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any such provision to any person or circumstance shall be held invalid, illegal
or unenforceable in any respect by a court of competent jurisdiction, such
invalidity, illegality, or unenforceability shall not affect any other provision
hereof.
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8.12 Waiver. Waiver of any term or condition of this Agreement by any party
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shall be effective if in a writing signed by the party against whom such waiver
is asserted. Any such waiver shall not be construed as a waiver of any
subsequent breach or failure of the same term or condition, or a waiver of any
other term of this Agreement. No failure or delay by any party in exercising any
right, power or privilege hereunder shall operate as a waiver thereof nor shall
any single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege.
8.13 Counterparts. This Agreement may be executed in any number of
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counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more such counterparts have been signed by
each of the parties to this Agreement and delivered to the other parties.
8.14 Entire Agreement. This Agreement, including the disclosure schedules
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hereto and the other documents delivered pursuant to this Agreement (including
the Indemnification Agreements), and the Confidentiality Agreement, contain the
entire agreement and understanding between the parties hereto with respect to
the subject matter hereof and supersede all prior and contemporaneous
agreements, negotiations, correspondence, undertakings and understandings, oral
or written, relating to such subject matter.
8.15 Governing Law. This Agreement shall be governed by and construed in
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accordance with the internal laws of the State of New York applicable to
agreements made and to be performed entirely within the State of New York,
without regard to the conflicts of law principles of such state.
8.16 Defined Terms. (a) The location of certain defined terms used in this
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Agreement is as follows:
Defined Term Section
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Acquisition Transaction............................................. 5.12
Affiliate........................................................... 4.5
Agreement........................................................... Recitals
Affiliated Group.................................................... 2.7(a)
Benefit Plans....................................................... 2.13(a)
Buyer............................................................... Recitals
Buyer Indemnified Parties........................................... 7.2
CAA................................................................. 2.17(h)(ii)
Call Agreement...................................................... 2.5(a)(ii)
CERCLA.............................................................. 2.17(h)(ii)
Chart House......................................................... Recitals
Closing............................................................. 1.2(a)
Closing Date........................................................ 1.2(a)
Code................................................................ 2.7(a)
Company............................................................. Recitals
Confidentiality Agreement........................................... 5.6(a)
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Contracts........................................................... 2.10(b)
CWA................................................................. 2.17(h)(ii)
Debt Financing...................................................... 4.4
Employees........................................................... 5.8
Environmental Claims................................................ 2.17(h)(i)
Environmental Laws.................................................. 2.17(h)(ii)
Environmental Liabilities........................................... 2.17(h)(iii)
ERISA............................................................... 2.13(a)
ERISA Affiliate..................................................... 2.13(d)
Financial Statements................................................ 2.6
GAAP................................................................ 2.6
Hazardous Materials................................................. 2.17(h)(iv)
HSR Act............................................................. .2.3
Indebtedness........................................................ 2.21
Indemnification Agreements.......................................... 6.1(n)
Indemnified Party................................................... 7.5(a)
Indemnifying Party.................................................. 7.5(a)
Interim Balance Sheet............................................... 2.6
Interim Financial Statements........................................ 2.6
Inwood.............................................................. Recitals
Xxxxxx.............................................................. Recitals
Knowledge........................................................... 8.1
Leases.............................................................. 2.8(f)
Letter Agreement.................................................... 4.4
Liens............................................................... 2.8(a)
Liquor Affiliates................................................... 2.5(a)(ii)
Liquor Licenses..................................................... 2.16(b)
Liquor Service Agreement............................................ 2.16(b)
Losses.............................................................. 7.2
Louisiana Owner..................................................... 2.5(a)(iii)
Luther's............................................................ Recitals
Management.......................................................... Recitals
Material Adverse Effect............................................. 8.16(b)
Material Suppliers.................................................. 2.22
Metropolitan........................................................ Recitals
Notice.............................................................. 7.5(a)
Owned Real Property................................................. 2.8(a)
OSHA................................................................ 2.17(h)(ii)
Permits............................................................. 2.16(a)
Person.............................................................. 2.5(b)
Phase I Assessment.................................................. 5.1(a)
Phase II Assessment................................................. 5.1(a)
Purchase Price...................................................... 1.1(b)
Release............................................................. 2.17(h)(v)
Remedial Action..................................................... 2.17(h)(vi)
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RCRA............................................................... 2.17(h)(ii)
Restaurants........................................................ 2.16(b)
Sellers............................................................ Recitals
Sellers Indemnified Parties........................................ 7.3
Shares............................................................. Background
Subsidiary......................................................... 2.1(a)
Tax................................................................ 2.7(b)
Tax Returns........................................................ 2.7(b)
Texas Owners....................................................... 2.5(a)(ii)
Third Party Claim.................................................. 7.5(a)
Year End Financial Statements...................................... 2.6
WARN Act........................................................... 2.18
(b) For purposes of this Agreement, "Material Adverse Effect" means
any effect, event, circumstance or condition which when considered with all
other effects, events, circumstances or conditions would result in a "loss"
having the effect of materially adversely affecting the business, assets,
properties, results of operations or financial condition of the Company, the
Subsidiary and the Liquor Affiliates, taken as a whole. In no event shall any of
the following constitute a Material Adverse Effect: (i) effects, events,
circumstances or conditions generally affecting the industry in which the
Company, the Subsidiary or the Liquor Affiliates operate or arising from changes
in general business or economic conditions; (ii) effects, events, circumstances
or conditions directly attributable to (a) out-of-pocket expenses (including
without limitation, legal, accounting, investigatory, investment banking, and
other fees and expenses) incurred in connection with the transactions
contemplated by this Agreement, or (b) the payment by the Company, the
Subsidiary or Buyer of all amounts due to any officers or employees of the
Company under employment contracts, non-competition agreements, employee benefit
plans or severance arrangements disclosed to Buyer on or prior to the date
hereof, (iii) any effects, events, circumstances or conditions arising after the
date hereof resulting from any change in law or generally accepted accounting
principles, which affect generally entities such as the Company, the Subsidiary
or the Liquor Affiliates; and (iv) any effect resulting from compliance by the
Company, the Subsidiary or the Liquor Affiliates with the terms of this
Agreement. For purposes of this Agreement, the term "loss" shall mean any and
all direct or indirect payments, obligations, assessments, losses, loss of
income, liabilities, fines, penalties, costs and expenses paid or incurred, or
diminutions in value of any kind or character that have occurred, including
without limitation, penalties, interest on any amount payable to a third party
as a result of the foregoing and any legal or other expenses reasonably incurred
in connection with investigating or defending any demands, claims, actions or
causes of action that, if adversely determined, would result in losses, and all
amounts paid in settlement of claims or actions; provided, however, that losses
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shall be reduced by any amounts recovered or recoverable by the Company, the
Subsidiary or the Liquor Affiliates under insurance policies with respect to
such loss or from any third party, and reduced for any tax benefit realized by
the Company, the Subsidiary or the Liquor Affiliates arising from the incurrence
or payment of any such loss.
It is understood that Management may include in the disclosure
schedules to this Agreement or elsewhere items which would not have a Material
Adverse Effect within the
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meaning of the previous paragraph to avoid any misunderstanding or for any other
reason, and such inclusion shall not be deemed to be an acknowledgment by
Management that such items would have a Material Adverse Effect or further
define or bear on the meaning of such term for the purposes of this Agreement.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first written above.
INWOOD INVESTORS PARTNERSHIP, L.P.
By: Inwood Management Company
Its: General Partner
By: Cramon Corp.
Its: General Partner
By: /s/ Xxxxxx X. Xxxxxxx III
----------------------------
Name: XXXXXX X. XXXXXXX III
Title: PRESIDENT
CHART HOUSE ENTERPRISES, INC.
By: /s/ Xxxxxxx X. Xxxxxxx
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Name: XXXXXXX X. XXXXXXX
Title: CHIEF FINANCIAL OFFICER
METROPOLITAN LIFE INSURANCE COMPANY
By: /s/ Xxxxxxxxxx X. Xxxxxxx
---------------------------------------
Name: XXXXXXXXXX X. XXXXXXX
Title: DIRECTOR
LUTHER'S ACQUISITION CORP.
By: /s/ [SIGNATURE ILLEGIBLE]^^
---------------------------------------
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XXXXXXX X. XXXXXX
-------------------------------------------
XXXXX XXXXXX
EXHIBIT A
FORM OF OPINION OF BUYER'S COUNSEL
1. Buyer is a corporation validly existing and in good standing
under the laws of its jurisdiction of incorporation. Buyer, has the requisite
corporate power and corporate authority to own, lease and operate its assets,
properties (real, personal or mixed) and business and to carry on its business
as presently conducted. Buyer has the corporate power and corporate authority to
execute and deliver, and perform its obligations under, the Agreement (the
"Transaction Document").
2. The Transaction Document has been duly authorized, executed and
delivered by Buyer and are valid and binding obligations of Buyer, enforceable
against Buyer in accordance with their terms, except as the same may be limited
by bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or
other laws or equitable principles relating to or affecting the enforcement of
creditors' rights and to rules of law or equitable principles governing specific
performance, injunctive relief and other equitable remedies.
3. All corporate proceedings required to be taken by Buyer to
execute and deliver the Transaction Document and perform its obligations
thereunder, have been duly taken.
4. The execution, delivery and performance of the Transaction
Document by the Buyer do not (i) conflict with or result in a violation of any
of the provisions of the Articles of Incorporation or Bylaws of Buyer, (ii)
conflict with or violate in any material respect any law, rule or regulation
(other than any such conflict or violation that would not have a Material
Adverse Effect), (iii) to our knowledge, conflict with or violate any order,
judgment, decree or award binding upon Buyer or its assets or business (other
than any such conflict or violation that would not have a Material Adverse
Effect), (iv) constitute a default or give rise to a right of termination,
cancellation or acceleration of any right under any contract or agreement to
which Buyer is a party or which is binding upon Buyer (other than any such
default, termination, cancellation or acceleration that would not have a
Material Adverse Effect) or (v) result in the creation or imposition of any Lien
upon any of the assets of Buyer (other than any such Lien that would not have a
Material Adverse Effect), except in connection with the financing of the
transaction.
