EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement") is made
and entered into as of the 6th day of February, 1997, by and among (1) APPLE
SOUTH, INC., a Georgia corporation ("Apple South"), (2) M&S ACQUISITION OF
DELAWARE, INC., a Delaware corporation wholly owned by Apple South ("Merger
Sub"), (3) ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ HOLDING CORP., a Delaware corporation (the
"Company"), (4) ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇▇▇"), ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
IRREVOCABLE TRUST, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ CHARITABLE REMAINDER TRUST NO. 2, ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ IRREVOCABLE TRUST, and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ CHARITABLE REMAINDER TRUST NO. 2,
who hold a majority of the Class B Common Stock of the Company (collectively the
"Accredited Class B Shareholders"), and (4)THE OTHER SHAREHOLDERS OF THE COMPANY
ALL OF WHOM APPEAR AS SIGNATORIES AT THE FOOT OF THIS AGREEMENT (collectively
with the Accredited Class B Shareholders, the "Shareholders " ), and
(5) ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇"),
W I T N E S S E T H:
WHEREAS, Company is engaged in the business of owning and
operating seventeen upper-end casual seafood restaurants (collectively, the
"Business"); and
WHEREAS, Apple South desires to acquire the Company, and the
Shareholders desire to sell the Company to Apple South;
WHEREAS, Apple South, Shareholders, and the Company deem it
advisable and in their respective best interests to effect the sale of the
Company through the merger of Merger Sub with and into the Company, all on the
terms and subject to the conditions set forth herein;
NOW, THEREFORE, for and in consideration of the premises, and
the mutual covenants and agreements contained herein, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound, agree as
follows:
1. THE MERGER
1.1. The Merger. At the Effective Time, as defined in
Paragraph 3.4, upon the terms and subject to the conditions set forth herein,
and in accordance with the corporate Laws of the State of Delaware (the
"Corporate Laws"), Merger Sub shall be merged with and into the Company, the
separate existence of Merger Sub shall cease, and the Company shall continue as
the surviving corporation (the "Merger"). Merger Sub and the Company are
sometimes hereafter referred to as the "Constituent Corporations" and the
Company after the Merger is sometimes hereafter referred to as the "Surviving
Corporation."
1.2. Effect of the Merger. At the Effective Time, the
Surviving Corporation shall continue its corporate existence under the Laws of
the State of Delaware and shall possess all the rights, privileges, powers, and
franchises of a public as well as of a private nature, and be subject to all the
restrictions, disabilities, and duties of each of the Constituent Corporations;
and all and singular rights, privileges, powers, and franchises of each of the
Constituent Corporations, and all property, real, personal, and mixed, and all
debts due to either of the Constituent Corporations on whatever account, as well
as for stock subscriptions and all other things in action or belonging to each
of the Constituent Corporations, shall be vested in the Surviving Corporation,
and all property, rights, privileges, powers, and franchises, and all and every
other interest shall be thereafter as effectually the property of the Surviving
Corporation as they were of the Constituent Corporations, and the title to any
real estate vested by deed or otherwise in either of the Constituent
Corporations, shall not revert or be in any way impaired; but all rights of
creditors and all liens upon any property of either of the Constituent
Corporations shall be preserved unimpaired, and all debts, liabilities, and
duties of the Constituent Corporations shall thereafter attach to the Surviving
Corporation, and may be enforced against it to the same extent as if such debts
and liabilities had been incurred by it.
2. THE SURVIVING CORPORATION
2.1. Articles. The certificate of incorporation of the Company as in effect
immediately prior to the Effective Time shall be the certificate of
incorporation of the Surviving Corporation until thereafter amended in
accordance with applicable Law.
2.2. Bylaws. The bylaws of the Company as in effect immediately prior to
the Effective Time shall be the bylaws of the Surviving Corporation until
thereafter amended in accordance with applicable Law.
2.3. Board of Directors. The persons whose names are set forth on Exhibit A
shall constitute the board of directors of the Surviving Corporation immediately
following the Merger.
2.4. Officers. The officers of the Company immediately prior to the
Effective Time shall be the initial officers of the Surviving Corporation.
3. MERGER CONSIDERATION; CONVERSION
3.1. Company Shares. (a) At the Effective Time, by virtue of the Merger,
and without any action on the part of the Holders, all of the issued and
outstanding shares (other than treasury shares) of capital stock of the Company
(the "Shares") shall be canceled and retired and shall be converted into and
become the right to receive the Merger Consideration described in this Article
3, and the Holders shall have no further rights with respect to the Shares
except the right to receive the Merger Consideration. All shares of the
Company's capital stock that are held by the Company
as treasury shares shall be canceled at the Effective Time and no Merger
Consideration shall be paid with respect thereto.
(b) At the Closing, as defined in Paragraph 3.4, Apple South
shall deliver the Merger Consideration (less that amount delivered to the Escrow
Agent pursuant to Paragraph 3.5 and less expenses under Paragraphs 4.1 and 4.2)
due to those Holders who have surrendered for cancellation certificates
representing their Shares accompanied by blank stock powers. The Merger
Consideration due to any Holder who does not so surrender certificates
evidencing his Shares at Closing (less two percent thereof which shall be
delivered to the Escrow Agent at Closing in accordance with Paragraph 3.5) shall
be held by Apple South for such Holder pending the surrender of such
certificates.
3.2. Merger Consideration. (a) The "Merger Consideration"
shall be (A) $43,006,550 delivered by wire transfer to accounts designated in
writing to Apple South by Holders or by check, and (B) the number of shares of
Apple South's common stock, $0.01 par value per share ("Apple South Stock"),
determined by dividing (i) $3,210,327 by (ii) the average of the closing sales
prices (the "Average Price"), without regard to volume (adjusted for any stock
splits or other reclassification during the applicable time period) for shares
of Apple South's common stock on the Nasdaq Stock Market as reported by The Wall
Street Journal, for each of the five consecutive trading days preceding the
trading day prior to the Closing Date. No fractional shares shall be issued, and
an amount in cash (if any) shall be paid in lieu thereof equal to such
fractional part of a share multiplied by the Average Price.
b) The Merger Consideration shall be allocated among the Holders as
follows:
(i) $7,500,000 in cash to the Holders of the Company's Preferred Stock;
(ii) $30,319,754 in cash to the Holders of the Company's Class A Common
Stock;
(iii) $3,210,327 in Apple South Stock (valued at the Average Price) to the
Accredited Class B Shareholders, $1,605,163 in cash to the Accredited Class B
Shareholders, and $535,055 in cash to the other holders of the Company's Class B
Common Stock; and
(iv) $3,046,578 in cash to the Holders of the Company's Class C Common
Stock.
(c) Each payment of Merger Consideration allocated to the Holders of each
class of capital stock of the Company shall be allocated among the Holders pro
rata in accordance with their respective ownership of shares of such class.
However, in no event shall any Apple South Stock be allocated or issued to any
Holder who is not an "accredited investor" as defined in Rule 501 of Regulation
D of the Securities and Exchange Commission ("SEC"). Any such non-accredited
Holder
shall receive all cash and the portion of the Merger Consideration consisting of
Apple South Stock shall be allocated proportionately among the Holders of such
class who are accredited investors.
3.3. Merger Sub Shares. Each share of common stock of Merger Sub issued and
outstanding immediately prior to the Effective Time shall be converted into and
become one fully paid and nonassessable share of Class A Common Stock of
Surviving Corporation.
3.4. Closing. Subject to termination of this Agreement pursuant to Article
11, the consummation of the transactions contemplated in this Agreement (the
"Closing") shall take place at the offices of ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, ▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, at 10:00 a.m., Atlanta time, on
the second Business Day after all the conditions set forth in Articles 8 and 9
hereof have been satisfied or waived or on such other date upon which parties
hereto may mutually agree. On the date of the Closing, the Company and Merger
Sub shall file the documents required by the Corporate Laws to effect the
Merger. The Merger shall become effective at the time of filing of such
documents (the "Effective Time").
3.5 Escrow. At the Closing, two percent of the Merger
Consideration (including two percent of those shares of Apple South Stock
constituting part of the Merger Consideration), in such amount for each Holder
as shall be set forth on a schedule to the Escrow Agreement, shall be delivered
to the Escrow Agent to be held and disbursed by it in accordance with the terms
of an Escrow Agreement in substantially the form attached hereto as Exhibit B
and mutually acceptable to Apple South and the Shareholders Representative on
behalf of the Holders (the "Escrow Agreement").
4. ADDITIONAL AGREEMENTS
4.1. Expenses. Except as otherwise provided herein, all
expenses incurred by Apple South and Merger Sub in connection with the
negotiations among the parties, and the authorization, preparation, execution,
and performance of this Agreement and the transactions contemplated hereby shall
be paid by Apple South. Except as otherwise provided herein, all expenses
incurred by the Holders or the Company in connection with the negotiations among
the parties, and the authorization, preparation, review, execution, and
performance of this Agreement and other related documents and the transactions
contemplated hereby (except for such expenses as relate to post-Closing
employment of any Holder or other employee of the Company, which shall be paid
by the Surviving Corporation) shall be paid by the Holders (in such proportion
as shall be indicated by the Holders) and no part thereof shall be paid by the
Company or the Surviving Corporation. The Holders (in such proportion as shall
be indicated by the Holders) and Apple South shall each pay one-half of the
filing fee required by the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976,
as amended, (the "HSR Act"). If the Company so directs, any of the foregoing
expenses or expenses under Paragraph 4.2 of the Holders or the Company required
to be paid hereunder by the Holders may be paid by Apple South at the Closing
and the amount so paid credited pro rata against the amount of cash and stock
due to the Holders as Merger Consideration; provided, that, such election
shall be deemed to have been made with respect to any Holder expenses
payable pursuant to the preceding sentence. Any tax deduction or credit
allowable as the result of any such expenses shall be allocated to, and inure to
the benefit of, the Holders and shall not be claimed by Apple South. Apple South
or Surviving Corporation shall pay any costs associated with the transfer of
liquor licenses, consents of landlords, or the issuance of Apple South Stock.
4.2. Brokers. Except for ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & Company, which
shall be paid by the Holders (in such proportion as shall be indicated by the
Holders), each party hereby represents and warrants to the others that no broker
or finder has acted on its behalf in connection with this Agreement or the
transactions contemplated herein and agrees to indemnify the other parties from
and against any and all claims or demands for commissions or other compensation
by any broker, finder, or similar agent claiming to have been employed by or on
behalf of such party.
4.3. Publicity. All press releases and other public
announcements respecting the subject matter hereof shall be made only with the
mutual written agreement of Apple South and the Shareholders' Representative;
provided, however, that Apple South may make any disclosure required to be made
under any applicable securities Law or NASDAQ rule if Apple South has determined
in good faith that it is necessary to do so and used its best efforts, prior to
the issuance of the disclosure (i) to provide the Shareholders' Representative
with a copy of the proposed disclosure; (ii) to discuss the proposed disclosure
with the Shareholders' Representative; and (iii) to incorporate any reasonable
comments on the disclosure received from the Shareholders' Representative to the
extent consistent with Apple South's disclosure obligations.
4.4. Access and Inspection. The Company shall provide Apple
South, and its authorized representatives full access at reasonable times during
normal business hours from and after the date hereof until the Closing to the
books and records of the Company for the purpose of making such investigation as
they may reasonably desire, and the Company shall furnish such information
concerning the Company as they may reasonably request. The Company shall assist
Apple South in making such investigation and shall cause the Company's counsel,
accountants, consultants, and other non-employee representatives to be
reasonably available for such purposes. No investigation made heretofore or
hereafter by Apple South shall limit or affect the representations, warranties,
covenants, and indemnities of the Company hereunder, each of which shall survive
any such investigation.
4.5. Cooperation. The parties shall cooperate fully with each
other and with their respective counsel and accountants in connection with any
steps required to be taken as part of their respective obligations hereunder,
and all parties shall use commercially reasonable efforts to consummate the
transactions contemplated herein and to fulfill their obligations hereunder,
including, without limitation, causing to be fulfilled at the earliest practical
date the conditions precedent to the obligations of the parties to consummate
the transactions contemplated hereby. From time to time and at any time, at a
party's request and expense, whether on or after the date hereof, and without
further consideration, the other parties shall execute and deliver such further
documents and instruments of conveyance, assignment, and transfer and shall take
such further actions as may be necessary or desirable, in the reasonable opinion
of the requesting party, in connection with the consummation of the transactions
described herein. It shall be the responsibility of Apple South to seek any
consents of lessors required under Paragraph 8.11 and Government consents or
approvals with respect to liquor, beer, or wine licenses under Paragraph 8.5 and
Apple South shall use reasonable commercial efforts to obtain all such consents
and approvals prior to the Closing Date
4.6. Covenant Against Competition. (a) In order to induce Apple South
and Merger Sub to enter into this Agreement and for the additional consideration
set forth below, each of ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ agrees that for a period of three
years following the Closing Date, he shall not, directly or indirectly, for his
own account or on behalf of any other person or entity, as principal, agent,
executive, manager, officer, employee, or otherwise, own, manage, operate, or
control, or hold any ownership, financial, or beneficial interest in any
business that operates, manages, controls, or owns one or more Competing
Restaurants in the Territory. Ownership of an equity interest of less than five
percent of a corporation subject to the reporting requirements of the Exchange
Act shall not be prohibited by this Paragraph 4.6.
(b) As used in this Section, "Territory" means the United States.
"Competing Restaurant" means a restaurant primarily offering entrees priced
between $10.00 and $20.00, including but not limited to a seafood or steak
oriented restaurant.
(c) ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ hereto specifically acknowledge and agree that
the remedy at law for any breach of the foregoing covenant not to compete will
be inadequate and that Apple South, in addition to any other relief available to
it, shall be entitled to temporary and permanent injunctive relief without the
necessity of proving actual damage.
(d) In consideration for the provisions of this Paragraph 4.6, Apple South
shall pay to each of ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ $166,666.67 on the Closing Date and
on the first and second anniversary thereof, for a total payment of $500,000 to
each of them.
(e) For a period of three years following the Closing neither ▇▇▇▇▇▇▇▇▇ nor
Schmick shall solicit or induce, or in any manner assist in the solicitation or
inducement of, any Person employed by Apple South or Surviving Corporation or
any of their Subsidiaries or other Affiliates to leave such employment, whether
or not such employment is pursuant to a contract and whether or not such
employment is at will.
(f) The obligations of Messrs. ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ under this Paragraph
4.6 shall terminate if Apple South has failed to make any installment payment
due hereunder within thirty days of written notice from ▇▇▇▇▇▇▇▇▇ and/or Schmick
that such payment has become due and has not been paid; provided, however, that
such termination shall not occur if such payment is not made by Apple South as a
result of the person to whom the payment is due being in violation of any
restriction imposed by this Paragraph 4.6.
(g) Although the parties have, in good faith, used their best efforts to
make the provisions of this Paragraph 4.6 reasonable in both geographic area and
in duration, and it is not anticipated, nor is it intended, by any of the
parties hereto that a court of competent jurisdiction would find it necessary to
reform the provisions hereof to make it reasonable in both geographic area and
in duration, or otherwise, the parties understand and agree that if a court of
competent jurisdiction determines it necessary to reform the scope of this
Paragraph 4.6 in order to make it reasonable in either geographic area or
duration, or otherwise, damages, if any, for a breach hereof, as so reformed,
would be deemed to accrue to Apple South as of and from the date of such a
breach only insofar as the damages for such breach relate to an action which
occurred within the scope of the geographic area and duration as so reformed.
4.7. Apple South's Public Documents and Access to Information. Apple South
has delivered to each of the Accredited Class B Shareholders a true and complete
copy of (i) Apple South's Annual Reports on Form 10-K and its Annual Reports to
Shareholders for the years ended December 31, 1994, and 1995; (ii) Apple South's
Quarterly Reports on Form 10-Q for its first three quarters of fiscal 1996;
(iii) Apple South's definitive proxy statements relating to its 1995 and 1996
annual shareholders meetings; (iv) that certain Prospectus offering $125,000,000
of 9 3/4% Senior Notes due 2006; and (v) all other filings (other than Form D's
and preliminary registration and proxy statements) made by Apple South with the
SEC between December 31, 1995, and the date hereof (collectively, the "SEC
Documents"). Apple South agrees to provide to the Accredited Class B
Shareholders a true and complete copy of each other document filed with the SEC
between the date hereof and the date of the Closing (other than Form D's and
preliminary material) ("Current SEC Documents"). In addition to the SEC
Documents and the Current SEC Documents, Apple South will provide, through its
Chief Financial Officer, each of the Accredited Class B Shareholders with
opportunities to become familiar with the business, financial condition,
management, prospects, and operations of Apple South, including reasonable
opportunities to ask questions of, receive answers from and obtain information
regarding Apple South and its business which is material to their investment
decision.
4.8. Legending of Apple South Stock. There shall be placed on
all certificates representing the shares of Apple South Stock issued to the
Accredited Class B Shareholders pursuant to this Agreement appropriate
restrictive legends referencing the restrictions imposed by applicable
securities Laws. Each of the Accredited Class B Shareholders agrees that he will
not offer to sell, sell, or otherwise dispose of any of the Apple South Stock
issued to him except pursuant to an effective registration statement under the
Securities Act of 1933, as amended (the " Securities Act"), and any applicable
state securities Law or an exemption from the registration requirements of the
Securities Act and any applicable state securities Law. With respect to any such
sale or disposition, each of the Accredited Class B Shareholders agrees to
furnish to Apple South upon request such information as its counsel may
reasonably deem necessary to assure that such sale or disposition is made in
full compliance with applicable federal and state securities Laws.
4.9. Non-Solicitation of Third Party Offers. Each Shareholder,
for itself, agrees that neither the Shareholder nor any of his Relatives,
Affiliates, agents, or representatives, and the Company agrees that neither the
Company, or any of its officers, directors, management, Affiliates, related
persons, or entities or agents, will (a) negotiate or discuss with any other
Person any other transaction involving a merger of the Company, or the sale of
any shares in or assets of the Company (except for sales of inventory in the
ordinary course of business) or any other business combination involving the
Company, (b) reveal the terms of this Agreement to any Person except for the
purpose of carrying out the transactions contemplated herein and except to the
extent not prohibited by Section 4.3 or permitted by Section 4.10, or (c)
solicit, encourage, consider, entertain, or accept any offer, bid, or proposal
from any other Person respecting any transaction involving a merger of the
Company, or the sale of any shares in or assets of the Company (except for sales
of inventory in the ordinary course of business) or any other business
combination involving the Company. If the Company or any Shareholder receives a
proposal of the kind described in the preceding clause (c) prior to the date of
the Closing, then the Company or such Shareholder (as the case may be) shall
immediately notify Apple South of the receipt of such proposal and shall
promptly provide Apple South with a copy of such proposal (or if such proposal
is not in writing, a written summary of its terms).
4.10. Confidentiality. In connection with the negotiation of
this Agreement and the consummation of the transactions contemplated hereby, a
party hereto and its Affiliates, directors, employees, attorneys, and
accountants (the "Disclosing Party") may disclose Confidential Information, as
defined below, to one of the other parties hereto (the "Disclosee"). Each
Disclosee agrees that if the transactions contemplated herein are not
consummated, it will return to the Disclosing Party all documents and other
written information furnished to it. Each Disclosee further agrees to maintain
the confidentiality of any and all Confidential Information of a Disclosing
Party and not disclose any Confidential Information to any Person other than its
Affiliates, directors, employees, attorneys, or accountants performing services
with respect to the transactions contemplated hereby, or use such Confidential
Information for any purpose other than the evaluation and consummation of the
transactions contemplated hereby; provided, however, the foregoing obligations
shall not apply to (i) any information which was independently developed by the
Disclosee prior to its disclosure by the Disclosing Party without violating any
rights of the Disclosing Party; (ii) any information in the public domain
through no fault or action of the Disclosee; (iii) any information which is
disclosed to the Disclosee by a third party, other than an Affiliate, director,
employee, attorney, or accountant performing services with respect to the
matter, having the legal right to make such disclosure; or (iv) any information
which is required to be disclosed by Order of any Forum. Should Disclosee become
legally compelled to disclose any portion of the Confidential Information by
Order of any Forum, Disclosee shall give Disclosing Party prompt notice of such
fact, including in its notice the legal basis for the required disclosure and
the nature of the Confidential Information that must be disclosed. Disclosee
shall cooperate fully with Disclosing Party in obtaining a protective order or
other appropriate protection relating to the disclosure and subsequent use of
the Confidential Information. Disclosee will disclose only that portion of the
Confidential Information that is legally required to be disclosed. For purposes
of this Paragraph 4.10, " Confidential Information" shall mean any and all
technical, business, and other information which is possessed or hereafter
acquired by a Disclosing Party and disclosed to the Disclosee, including,
without limitation, technical or nontechnical data, compositions, devices,
methods, techniques, drawings, inventions, processes, financial data, financial
plans, product plans, lists of actual or potential customers or suppliers, and
information regarding the business plans and operations of the Disclosing Party.
If the transactions contemplated herein are consummated, "Confidential
Information" of Apple South shall be deemed to include all Confidential
Information of Company and Surviving Corporation, and the Shareholders shall be
subject to the obligations of non-use and non-disclosure contained in this
Agreement with respect to all of such information; provided that,
notwithstanding any other provision of this Agreement, ▇▇▇▇▇▇ ▇▇▇▇▇▇ Partners
II, L.P. may disclose financial information of the Company relating to the
period prior to the Closing and the terms of the transactions contemplated
hereby to its partners. The provisions of this Paragraph 4.10 shall survive any
termination of this Agreement for any reason. The restrictions of this Paragraph
4.10 shall expire three years from the date hereof with respect to any
Confidential Information that does not constitute a trade secret under
applicable law.
4.11. Reports Under the Exchange Act. With a view to making
available to the Accredited Class B Shareholders the benefits of Rule 144
promulgated under the Securities Act and any other rule or regulation of the SEC
that may at any time permit them to sell Apple South Stock to the public without
registration, Apple South shall furnish to them, forthwith upon request (i) a
written statement by Apple South stating whether it has complied with the
reporting requirements of the Securities Exchange Act of 1934 (the "Exchange
Act"), (ii) a copy of the most recent annual or quarterly report of Apple South
filed by Apple South with the SEC, and (iii) such other information as may be
reasonably requested in availing them of any rule or regulation of the SEC which
permits the selling of any shares of Apple South Stock without registration.
4.12. Section 338 Election. Apple South shall not make any election
pursuant to Section 338 of the Internal Revenue Code of 1986, as amended, or any
similar provision of state or local law, with respect to the transactions
contemplated hereby. --------------------
4.13 Indemnification. Apple South shall not amend or repeal any
provision of the certificate of incorporation or bylaws of the Surviving
Corporation or any Subsidiary in any manner that would adversely affect the
indemnification or exculpatory provisions therein insofar as they pertain to the
present officers and directors of the Company or any Subsidiary. Following the
Closing, each of such officers and directors who continue to serve as an officer
or director of the Surviving Corporation or any Subsidiary shall be entitled to
the benefit of all exculpation and indemnification provisions generally made
available by Apple South to persons serving in similar capacities with Surviving
Corporation or any other subsidiary of Apple South.
4.14 Shareholders' Representative. Each Holder hereby irrevocably
appoints ▇▇▇▇▇▇ ▇▇▇▇▇▇ Partners II, L.P. as its duly authorized representative
to act as such Holder's attorney-in-fact and representative (the "Shareholders'
Representative"), to do any and all things and to execute any and all documents,
including, but not limited to, the Escrow Agreement, in such Holder's name,
place and stead, in any way in which such Holder could do if personally present,
in connection with this Agreement and the Escrow Agreement and the transactions
contemplated hereby and thereby, including, without limitation, to accept on
such Holder's behalf any amount payable to such Holder under this Agreement or
the Escrow Agreement, or to amend, cancel, extend, or waive the terms of this
Agreement or the Escrow Agreement. The Shareholders' Representative shall have
the sole and exclusive right on behalf of the Holders to take any action
pursuant to Paragraph 4.3 or Article 10 (other than, with respect to Article 10,
any matter, claim, action or proceeding in respect of which liability of the
Shareholders' Representative and/or its officers, directors, and employees, is
not asserted).
4.15 Cancellation of Agreements. The Company and ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇
agree that the employment agreements between the Company and each of ▇▇▇▇▇▇▇▇▇
and ▇▇▇▇▇▇▇ shall terminate automatically at the Closing.
--------------------------
5. REPRESENTATIONS, WARRANTIES, AND COVENANTS OF THE COMPANY
The Company represents and warrants to Apple South and Merger Sub that
the statements contained in this Article 5 are true and correct, except as set
forth in the disclosure schedule delivered by the Company to Apple South and
Merger Sub on the date of this Agreement, as amended or supplemented by the
Company on or prior to the Closing Date to reflect any event occurring
subsequent to the date hereof ("Disclosure Memorandum"). The Disclosure
Memorandum shall be arranged in paragraphs corresponding to the numbered and
lettered paragraphs contained in this Article 5 and the disclosures in any
paragraph shall apply to each other paragraph in this Article 5.
5.1. Organization, Authority and Qualification. (a) The
Company is a corporation duly organized and validly existing under the Laws of
the State of Delaware. Each of the Subsidiaries is a corporation duly organized
and validly existing under the Laws of its state of incorporation as shown in
the Disclosure Memorandum. The Company has offices and Restaurants at the
locations specified in the Disclosure Memorandum. Each of the Company and its
Subsidiaries has full corporate power and authority and is entitled to own or
lease its properties and to carry on its business as presently conducted.
Company has previously made available to Apple South true, correct, and complete
copies of the articles of incorporation and bylaws of Company and each
Subsidiary and true, correct, and complete copies of the minutes and other
similar records of meetings of the shareholders of Company and each Subsidiary
and their boards of directors, which contain all written records of meetings of,
and written actions taken in lieu thereof by shareholders, board of directors,
or any committees thereof.
(b) The Company has all requisite corporate power and
authority to enter into this Agreement and the Escrow Agreement and to
consummate the transactions contemplated by this Agreement. The execution and
delivery of this Agreement and the Escrow Agreement and the consummation of the
transactions contemplated by this Agreement have been duly authorized, or will
be duly authorized prior to the Closing, by all necessary corporate action on
the part of Company, including the approval of the Merger by Company's
shareholders. This Agreement has been duly executed and delivered by Company and
constitutes the valid and binding obligation of Company, enforceable in
accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium, or other similar laws affecting the rights of
creditors generally and general principles of equity.
(c) The execution and delivery of this Agreement by Company
does not, and the execution and delivery of the Escrow Agreement and the
consummation of the transactions contemplated by this Agreement will not, (i)
conflict with, or result in any violation or breach of any provision of the
articles of incorporation or bylaws of Company, (ii) result in any violation or
breach of, or constitute (with or without notice or lapse of time, or both) a
default (or give rise to any right of termination, cancellation, or acceleration
of any obligation or loss of any benefit) under any of the terms, conditions, or
provisions of any Company Contract, or (iii) conflict with or violate any
permit, concession, franchise, or license held by the Company or any Subsidiary,
or any Order or Law.
(d) Each of the Company and its Subsidiaries is qualified to transact
business as a foreign corporation in all those states and jurisdictions in which
its activities require it to so qualify. A list of states and jurisdictions
where the Company or a Subsidiary is so qualified to transact business as a
foreign corporation is set forth in the Disclosure Memorandum.
5.2. Ownership of Shares; Subsidiaries. (a) The total authorized capital
stock of Company is as set forth in the Disclosure Memorandum.
(b) All of the Shares and the issued and outstanding shares of
capital stock of each Subsidiary ("Subsidiary Shares") are owned of record and
beneficially held by the Persons listed in the Disclosure Memorandum, free and
clear of any Liens (including, without limitation, free and clear of any adverse
claims of any Persons). There are no outstanding contracts, demands,
commitments, or other agreements or arrangements under which any holder of
Shares or Subsidiary Shares is or may become obliged to sell, transfer, or
assign any of the Shares or Subsidiary Shares. There are no Persons with any
claims or rights to any Shares or Subsidiary Shares.
(c) All the Shares and Subsidiary Shares are duly authorized,
validly issued, fully paid, and nonassessable and were authorized, offered,
issued, and sold in accordance with all applicable securities and other Laws and
all rights of shareholders and other persons. No person has any preemptive
rights or other rights to acquire, or adverse claims with respect to, any
unissued shares of capital stock of Company or any Subsidiary. There are no
outstanding securities convertible into the capital stock or rights to subscribe
for or to purchase, or any options for the purchase of, or any agreements or
arrangements providing for the issuance (contingent or otherwise) of, or any
Actions relating to, the capital stock of Company or any Subsidiary. There are
no voting trusts, proxies, or other agreements or understandings with respect to
the voting of the capital stock of Company or any Subsidiary. Neither the
Company nor any Subsidiary is subject to any obligation to repurchase or
otherwise acquire or retire any of its capital stock or has any liability for
dividends declared or accrued, but unpaid, with respect to its capital stock.
Company has not purchased or redeemed any of its capital stock, and has not paid
any dividend or made any other distribution or payment in respect of such stock
to any Person since the Reference Date.
(d) The Subsidiaries of the Company and the ownership thereof
are listed in the Disclosure Memorandum. Each Subsidiary is, directly or
indirectly, wholly owned by the Company. Except for the Subsidiaries set forth
in the Disclosure Memorandum, Company does not, directly or indirectly, own and
has no interest, direct or indirect, or any commitment to purchase or otherwise
acquire, any capital stock or other equity interest, direct or indirect, in any
other Person.
5.3. Consents. No consent, approval, order, or authorization
of, or registration, declaration, or filing with, any Government is required by
or with respect to Company or any of its Subsidiaries in connection with the
execution and delivery of this Agreement or the Escrow Agreement or the
consummation of the transactions contemplated hereby, except for (i) the filing
of the pre-merger notification report under the HSR Act; (ii) the filing of
Articles of Merger with the Secretary of State of the State of Delaware; and
(iii) consents or approvals of the Governments issuing liquor licenses in the
jurisdictions where the Restaurants are located.
5.4. Legal Compliance. Neither the Company nor any Subsidiary
is in default under or in violation of (a) its articles of incorporation or
bylaws or (b) any Order. The operations of Company, the Subsidiaries, and their
respective predecessors, if any, have been conducted in all material respects in
compliance with all applicable Laws. (For purposes of this paragraph, any
violation of applicable Law that could result in imposition of a fine or other
monetary penalty shall be deemed to be a material non-compliance.) Neither
Company nor any Subsidiary has received any notification of any asserted past or
present failure to comply with any applicable Law.
5.5. Possession of Permits. Each of the Company and its
Subsidiaries possesses all franchises, certificates, licenses, permits, bonds,
and other authorizations from Governments and all other Persons that are
necessary for the ownership, maintenance, and operation of its properties and
assets and the conduct of its business ("Permits") and is not in violation
thereof. Each of the Company and its Subsidiaries holds such Permits free of any
claims or restrictions (other than any restrictions in existence at the time
such Permits were issued) and has fulfilled and performed all of its material
obligations with respect to such Permits and no event has occurred which allows,
nor after notice of lapse of time or both would allow, revocation or early
termination thereof or would result in any other impairment of the rights of the
holder of any such Permits. Except as set forth in the Disclosure Memorandum,
the consummation of the Merger will not result in the revocation, termination,
or impairment of any Permit or require the consent of any Person in order to
avoid any such revocation, termination, or impairment.
5.6. Financial Statements. Prior to the date hereof, the
Company has delivered to Apple South copies of the unaudited consolidated
balance sheet of Company (the "Reference Balance Sheet") dated January 4, 1997
("Reference Date"), and the unaudited consolidated statements of operations,
stockholders' equity, and cash flow of the Company for the fiscal year ended
January 4, 1997 (such financial statements being hereafter collectively referred
to as the "Financial Statements"). The Financial Statements have been prepared
in accordance with GAAP consistently applied, present fairly the financial
condition of the Company as at the date thereof and the results of the Company's
operations and cash flows for the periods then ended, and are consistent with
the books and records of the Company, which are true, correct, and complete in
all material respects.
5.7. Liabilities. Except for (i) liabilities incurred in the
ordinary course of business since the Reference Date consistent with past
experience of the Company and its Subsidiaries during the period covered by the
Financial Statements (none of which results from, arises out of, relates to, is
in the nature of, or was caused by any breach of contract, breach of
representation or warranty, tort, product liability, "dram shop" liability,
infringement, or violation of any Law or Order) and (ii) liabilities reflected
in the Reference Balance Sheet, neither the Company nor any Subsidiary has any
liability.
5.8. Events Subsequent to Reference Date. Since the Reference
Date, neither Company nor any Subsidiary has: (i) issued any stock, bond,
options, warrants, rights, or other corporate securities; (ii) borrowed any
amount or incurred any obligations or liabilities (absolute or contingent),
except current obligations and liabilities incurred in the ordinary course of
business of the type and in the amounts consistent with the period covered by
the Reference Balance Sheet; (iii) sold, assigned, mortgaged, pledged, subjected
to lien or otherwise transferred any interest in any of the assets (other than
inventory and other than as a result of wear and tear in the ordinary course of
business) reflected in the Financial Statements or canceled any debts or claims;
(iv) suffered any casualty losses in excess of $25,000, or waived any rights in
excess of $25,000 in value; (v) made any changes in employee compensation
generally or in compensation of any executive officer; (vi) materially reduced
its level of inventory or supplies; (vii) materially changed the number of
employees or management personnel; (viii) canceled, entered into, or amended any
Company Contract or agreement except in the ordinary course of business and
consistent with past practice; and (ix) materially changed the manner in which
the business of the Company is operated.
5.9. Taxes. Company and any entity at any time eligible or
required to file a consolidated or combined Tax return with Company
(individually, an "Affiliated Entity" and collectively, the "Affiliated
Entities"), have duly and timely filed all federal, state, municipal, local, and
foreign, if any, Tax returns and reports (including returns for estimated tax),
and all reports and returns of all other Governments having jurisdiction
(collectively, "Returns") with respect to all Taxes (including, without
limitation, consolidated or combined Tax returns of some or all of Company and
the Affiliated Entities). Company has previously provided to Apple South true,
correct, and complete copies of all Returns filed with respect to the three tax
years preceding the date hereof. All Taxes imposed on Company and its Affiliated
Entities by any Government (including all deposits in connection therewith
required by applicable Law, and all interest and penalties thereon) which have
become due and payable by Company for all periods through the date hereof either
have been paid in full or adequate reserves have been set up on the books of
Company with respect to such Taxes. Company has not received any proposed
assessment against Company or any Affiliated Entity of additional Taxes of any
kind. Company is not a party to any Tax sharing or Tax allocation agreement,
understanding, arrangement, or commitment that includes any party other than the
Company or any Subsidiary. There is no dispute or Action concerning any Tax
Liability of Company raised by a Government in writing.
5.10. Title to Properties. Company or its Subsidiaries has
good title to all properties and assets reflected in the Reference Balance
Sheet, except inventories and other immaterial assets which have been disposed
of in the ordinary course of business since the Reference Date, and all other
properties and assets necessary to conduct its business as currently being
conducted and as conducted during the period covered by the Financial Statements
(other than any leased property), free and clear of Liens, except as may be set
forth in the notes to the Reference Balance Sheet.
5.11. Real Estate.
(a) The water, electric, gas, and sewer utility services, and
storm drainage facilities currently available to the real property owned or
leased by Company and its Subsidiaries (the "Real Property") are adequate for
the conduct of the business of the Company and its Subsidiaries, and to
Company's knowledge, there is no condition which will result in the termination
of the present access from the Real Property to such utility services and other
facilities.
(b) Company or its Subsidiaries have obtained, or, to the
knowledge of the Company, landlords have obtained on their behalf, all
authorizations and rights-of-way, which are necessary to ensure vehicular and
pedestrian ingress and egress to and from the Real Property. There are no
restrictions on entrance to or exit from the Real Property to adjacent public
streets, roadways, or parking lots presently used and to the knowledge of
Company no conditions which will result in the termination of the present access
from the Real Property to existing highways and roads and parking lots or
private drives presently used.
(c) Neither the Company nor any Subsidiary has received any notices, oral
or written, that any Government having the power of eminent domain over the Real
Property has commenced or intends to exercise the power of eminent domain or a
similar power with respect to all or any part of the Real Property.
(d) The Real Property and the present uses thereof by the Company and its
Subsidiaries comply with all regulations of any Government having jurisdiction
over the Real Property.
(e) The improvements located on the Real Property used by the
Company or its Subsidiaries are in good condition and are structurally sound,
and all mechanical and other systems located therein are in good operating
condition, in each case, subject to normal wear and tear, and no condition
exists requiring material repairs, alternations, improvements, or corrections.
(f) The site of each Restaurant located on owned Real Property provides,
and, to the knowledge of the Company, the site of each Restaurant located on
leased real property provides, adequate access and parking for the operation of
the Restaurant located thereon in accordance with all applicable Laws.
(g) No work for municipal improvements has been commenced on
or in connection with the Real Property or any street adjacent thereto and to
the knowledge of Company no such improvements are contemplated. No assessment
for public improvements has been made against the owned Real Property, or, to
the knowledge of the Company, the leased Real Property, which remains unpaid. No
notice from any county, township, or Government has been served upon the owned
Real Property or received by Company or any Subsidiary, or to Company's
knowledge received by the owner of the leased Real Property, requiring or
calling attention to the need for any work, repair, construction, alteration, or
installation on or in connection with the Real Property which has not been
complied with.
5.12. Leased Real Property. The Disclosure Memorandum
identifies each parcel or tract of real property which is used by Company or any
Subsidiary in its business which is subject to a lease or sublease to which
Company or any Subsidiary is a party as lessee or sublessee (individually, a
"Real Property Lease"). All Real Property Leases are valid and in full force and
effect in accordance with their terms. The Company has made available to Apple
South true, correct, and complete copies of all Real Property Leases. There is
not, with respect to any Real Property Lease (a) any default by Company or any
Subsidiary, or any event of default or event which with notice or lapse of time,
or both, would constitute a default by Company or any Subsidiary or (b) to
Company's knowledge, any existing default by any other party to any Real
Property Lease, or event of default or event which with notice or lapse of time,
or both, would constitute a default by any other party to any Real Property
Lease.
5.13. Personal Property. (a) All machinery, equipment,
vehicles, and other items of tangible personal property which are owned or
leased by Company or any Subsidiary are in good condition and repair, subject to
normal wear and tear, suited for the use intended, and are and have been
operated in conformity with applicable Laws. To Company's knowledge, there are
no defects or conditions which would cause such tangible personal property to be
or become inoperable or unsafe.
(b) Neither the Company nor any Subsidiary is in default under
any lease of machinery, equipment, or other tangible personal property. To
Company's knowledge, all lessors of machinery, equipment, or other tangible
personal property leased by Company or any Subsidiary have performed and
satisfied their respective duties and obligations under such leases. Neither the
Company nor any Subsidiary has brought or threatened any unresolved Action
against any such lessor for failure to perform and satisfy its duties and
obligations thereunder.
5.14. Intellectual Property Rights. (a) All of the patents,
copyrights, trademarks, service marks, trade names, and applications therefor or
registrations thereof which are owned or used by the Company or any Subsidiary
are set forth in the Disclosure Memorandum. Neither the Company nor any
Subsidiary is a party to, either as a licensor or licensee, and/or is bound by
or subject to, any license agreement (except for software licenses) for any
patent, process, trademark, service ▇▇▇▇, trade name, copyright, trade secret,
or confidential information that is material to the operation of the
Restaurants. Company and the Subsidiaries have complied with all applicable Laws
relating to the filing or registration of "fictitious names" or trade names.
(b) To the knowledge of Company, neither Company nor any
Subsidiary has interfered with, infringed, misappropriated, or otherwise come
into conflict with any intellectual property rights of any other person, and
neither Company, any Subsidiary, nor any of their officers and directors has
within the last five years received any charge, complaint, claim, demand, or
notice alleging any such interference, infringement, misappropriation, or
violation. To Company's knowledge, no Person has interfered with, infringed
upon, misappropriated, or otherwise come into conflict with the proprietary
inventions, designs, ideas, processes, methods and other know-how, trademarks,
service marks, trade names, copyrights, or other intellectual property of
Company or any Subsidiary which are owned or used in the operation of its
business.
5.15. Contracts. (a) All Company Contracts are valid and
enforceable in all material respects in accordance with their terms, are in full
force and effect, and will continue to be valid and enforceable and in full
force and effect on identical terms immediately following Closing. All Company
Contracts are listed in the Disclosure Memorandum, and true, correct, and
complete copies of all Company Contracts have been delivered or made available
to Apple South.
(b) There are no existing material defaults, events of default or events
which, with the giving of notice or lapse of time or both, would constitute a
material default by Company or any Subsidiary under any Company Contract. No
event has occurred which may hereafter give rise to any right of termination,
acceleration, damages or any other remedy under any Company Contract.
(c) To Company's knowledge, neither this Agreement, the Closing or the
relationship between Company and Apple South has caused or will cause the
termination or nonrenewal of any Company Contract.
5.16. Insurance. The Disclosure Memorandum lists the types,
amounts of coverage, and deductibles of all insurance policies of the Company
and its Subsidiaries, and true, correct, and complete copies thereof have been
delivered or made available to Apple South. All premiums due on such policies
have been paid, and neither Company nor any Subsidiary has received any notice
of cancellation with respect thereto. Neither Company nor any Subsidiary has any
Liability for premiums past due or to the knowledge of Company for retrospective
premium adjustments for any period through the date hereof.
5.17. Environmental Matters. Company and its Subsidiaries hold
all Environmental Permits necessary for conducting their business and operations
and have conducted, and are presently conducting, their business and operations
in full compliance with all applicable Environmental Laws and Environmental
Permits held by them, including, without limitation, all record keeping and
filing requirements. To the knowledge of Company, there is no existing or
pending Environmental Law with a future compliance date that will require
operational changes, business practice modifications, or capital expenditures at
any Real Property (or any other property presently or formerly owned, operated,
or controlled by Company or as to which Company or any Subsidiary may bear
responsibility or Liability), or any Improvements thereon. There are no
presently pending, or to Company's knowledge, threatened Actions or Orders
against or involving Company or any Subsidiary (including any other Person for
whose acts or omissions Company or any Subsidiary is responsible) relating to
any alleged past or ongoing violation of any Environmental Laws or Environmental
Permits, nor is Company or any Subsidiary subject to any Liability for any such
past or ongoing violation.
5.18. Conditions Affecting Business. There is no fact,
development, or threatened development with respect to the markets, products,
services, customers, facilities, personnel, vendors, suppliers, operations, or
assets of the business of the Company and its Subsidiaries which are known to
Company and which may reasonably be expected to materially adversely affect the
business of the Company or the prospects of the business of the Company, other
than such conditions as may affect the local, regional, or national economy
generally or any industry segment in which the Company and its Subsidiaries
compete. Company does not have any reason to believe that any loss of any
employee in senior management, agent, customer, or supplier or other
advantageous arrangement will result because of the consummation of the
transactions contemplated hereby.
5.19. Litigation. There is no Action or investigation pending
or, to the knowledge of Company, threatened against Company or any Subsidiary,
or any of their properties or rights before any court or by or before any Forum.
To the knowledge of Company, there does not exist any basis for any such Action,
or investigation. There are no unsatisfied judgments or Orders against Company,
any Subsidiary, or any of their predecessors or to which any of them or their
assets and properties are subject.
5.20. Labor Matters. Neither the Company nor any Subsidiary is
or has ever been a party to any collective bargaining or other labor agreement.
There is not pending or, to the knowledge of the Company, threatened any labor
dispute, strike, work stoppage, union representation, election, negotiation of
collective bargaining agreement, or similar labor matter. To the knowledge of
Company, neither Company nor any Subsidiary is involved in any controversy with
any of its employees or any organization representing any such employees of
Company, and Company and its Subsidiaries are in compliance with all applicable
Laws concerning the employer/employee relationship. Company and its Subsidiaries
are in compliance with all of their agreements relating to the employment of
their respective employees, including, without limitation, provisions thereof
relating to wages, bonuses, hours of work, and the payment of Social Security
taxes, and, to the extent already due and payable, neither Company nor any
Subsidiary is liable for any unpaid wages, bonuses, or commissions, or any tax,
penalty, assessment, or forfeiture for failure to comply with any of the
foregoing.
5.21. Employee Benefits.
(a) The Disclosure Memorandum hereto contains a true and complete list of
all the following agreements or plans of Company or any Subsidiary which are
presently in effect:
(i) "employee welfare benefit plans" and "employee pension benefit plans,"
as defined in Sections 3(1) and 3(2), respectively, of the Employee Retirement
Income Securities Act of 1974, as amended ("ERISA"); -----
(ii) any other pension, profit sharing, retirement, deferred compensation,
stock purchase, stock option, incentive, bonus, vacation, severance, disability,
health, hospitalization, medical, life insurance, vision, dental, prescription
drug, supplemental unemployment, layoff, automobile, apprenticeship and
training, day care, scholarship, group legal benefits, fringe benefits, or other
employee benefit plan, program, policy, or arrangement, whether written or
unwritten, formal or informal, which Company or any Subsidiary maintains or to
which Company or any Subsidiary has any outstanding, present, or future
obligation to contribute to or make payments under, whether voluntary,
contingent, or otherwise (the plans, programs, policies or arrangements
described in clauses (i) or (ii) are herein collectively referred to as the
"ERISA Plans").
(b) Except as described on the Disclosure Memorandum, neither Company nor
any Subsidiary has an employee stock ownership plan as defined in Sections
4975(e)(7) or 409 of the Code.
(c) Company does not presently contribute and has never contributed or been
obligated to contribute to a multi-employer pension plan as defined in section
3(37)(A) of ERISA.
(d) No ERISA Plan is subject to Title IV of ERISA.
5.22. Agreements and Transactions with Related Parties. Neither Company nor
any Subsidiary is directly or indirectly a party to any contract, agreement, or
lease with, or any other commitment to, (a) a Shareholder, (b) any Affiliate or
Relative of a Shareholder, (c) any director or officer of Company, (d) any
Person in which any of the foregoing Persons has, directly or indirectly, at
least a 5% beneficial interest in the capital stock or other type of equity
interest of such Person, or (e) any partnership in which any of the foregoing
Persons is a general partner or has at least a 5% beneficial interest (any or
all of the foregoing being referred to herein as "Related Parties"). Without
limiting the generality of the foregoing, (x) no Related Party, directly or
indirectly, owns or controls any assets or properties which are used in
Company's business, except as set forth in the Disclosure Memorandum, and (y)
except as set forth in the Disclosure Memorandum, no Related Party, directly or
indirectly, engages in or has any significant interest in or in connection with
any business which is or which within the last three years has been a supplier
of Company or any Subsidiary or has done business with Company or any
Subsidiary.
5.23. Securities Law Matters.
(a) Each of the Accredited Class B Shareholders understands
and acknowledges (i) that the Apple South Stock has not been registered under
the Securities Act or under applicable state securities laws in reliance upon
the exemptions provided by Section 4(2) of the Securities Act and in reliance
upon the relevant exemptions provided by applicable state securities laws and
that the Apple South Stock may not be resold, transferred, assigned, pledged,
hypothecated, or any interest therein otherwise disposed of unless the Apple
South Stock is registered under the Securities Act and applicable state
securities laws or unless the shares are the subject of an opinion of counsel,
which opinion and counsel are reasonably acceptable to Apple South, addressed to
Apple South that such registration is not required; (ii) that the stock
certificates evidencing the Apple South Stock will bear legends setting forth
the restrictions on transfer described above and stop-transfer instructions will
be delivered by Apple South to the Apple South's stock transfer agent reflecting
such restrictions; (iii) each of them must bear the risk of an investment in the
Apple South Stock for an indefinite period of time and the financial condition
of each of them is currently adequate to bear the risk of an investment in the
Apple South Stock; (iv) they have received copies of the SEC Documents and
Current SEC Documents; and (v) they have had the opportunity to ask questions of
and receive answers from the officers of Apple South concerning the Apple South
Stock, Apple South, and Apple South's business, plans, and prospects.
(b) Each of the Accredited Class B Shareholders is acquiring the Apple
South Stock issuable to him hereunder for his own account for investment with no
intention of dividing his participation with others or otherwise participating,
directly or indirectly, in a distribution of the Apple South Stock.
(c) Each of the Accredited Class B Shareholders has such experience in
business, financial, and investment matters as to be able to evaluate the merits
and risks of an investment in the Apple South Stock.
(d) Each of the Accredited Class B Shareholders is an "accredited investor"
as defined in Rule 501 of Regulation D of the SEC.
6. REPRESENTATIONS AND WARRANTIES OF APPLE SOUTH
As an inducement to the Company and the Holders to enter into
and perform this Agreement, Apple South hereby represents and warrants to the
Holders as follows:
6.1. Organization. Apple South is a corporation duly organized and validly
existing under the Laws of the State of Georgia. Merger Sub is a corporation
duly organized and validly existing under the Laws of the State of Delaware.
Each of Apple South and its subsidiaries has ------------ full corporate power
and authority to own or lease its properties and carry on its business as
presently conducted.
6.2. Authorization; No Inconsistent Agreements. Each of Apple
South and Merger Sub has all requisite corporate power and authority to enter
into this Agreement and, in the case of Apple South, the Escrow Agreement and to
consummate the transactions contemplated by this Agreement. The execution and
delivery of this Agreement and, in the case of Apple South, the Escrow Agreement
and the consummation of the transactions contemplated by this Agreement and the
Escrow Agreement have been duly authorized by all necessary corporate action on
the part of Apple South and Merger Sub. This Agreement and the Escrow Agreement
have, to the extent applicable, been duly executed and delivered by each of
Apple South and Merger Sub and constitute the valid and binding obligation of
each of them, enforceable in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium, or other similar laws
affecting the rights of creditors generally and general principles of equity.
The execution and delivery of this Agreement by Apple South and Merger Sub does
not, and the execution and delivery of the Escrow Agreement by Apple South and
the consummation of the transactions contemplated by this Agreement and the
Escrow Agreement will not, (i) conflict with, or result in any violation or
breach of any provision of the articles of incorporation or bylaws of Apple
South or Merger Sub, (ii) result in any violation or breach of, or constitute
(with or without notice or lapse of time, or both) a default (or give rise to
any right of termination, cancellation, or acceleration of any obligation or
loss of any benefit) under any of the terms, conditions, or provisions of any
material agreement of Apple South or Merger Sub, or (iii) conflict with or
violate any permit, concession, franchise, or license held by Apple South or
Merger Sub or any Order or Law.
6.3. Authorization of Apple South Stock. The shares of the Apple South
Stock to be issued pursuant to Paragraph 3.2 have been duly authorized for
issuance at the Closing and upon issuance in accordance with this Agreement will
constitute duly authorized, fully paid and non-
---------------------------------- assessable shares of Common Stock of Apple
South.
6.4. Apple South Documents. The SEC Documents, together with
the Current SEC Documents when filed, constitute all of the documents (other
than Form D's and preliminary filings and material) that Apple South was or will
be required by applicable securities Laws and regulations to file with the SEC
since December 31, 1995 through the Effective Time. The financial statements of
Apple South included in the SEC Documents and, to the extent applicable, the
Current SEC Documents were prepared in accordance with GAAP and fairly present,
in all material respects in accordance with GAAP, the financial condition and
results of operations and changes in financial position as of the dates thereof
and for the periods then ended. The SEC Documents do not, and the Current SEC
Documents will not when filed, contain any misstatement of a material fact or
omit to state a material fact necessary to make the statements contained therein
not misleading.
6.5 Consents. No consent, approval, order, or authorization
of, or registration, declaration, or filing with, any Government is required by
or with respect to Apple South or Merger Sub in connection with the execution
and delivery of this Agreement or the Escrow Agreement or the consummation of
the transactions contemplated hereby or thereby, except for (i) the filing of
the pre-merger notification report under the HSR Act; (ii) the filing of
Articles of Merger with the Secretary of State of the State of Delaware; and
(iii) consents to approvals of the Governments issuing liquor licenses in the
jurisdictions where the Restaurants are located.
7. CONDUCT OF BUSINESS OF THE COMPANY, APPLE SOUTH AND MERGER SUB PENDING
CLOSING
The Company covenants and agrees that, except as may otherwise
be provided herein, without the prior written consent of Apple South, between
the date hereof and the date of the Closing:
7.1. Business in the Ordinary Course. ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ and Company
shall ensure that the business of Company and its Subsidiaries is conducted only
in the ordinary course and consistent with its prior practices. Without limiting
the generality of the foregoing: -------------------------------
(a) Except for the sale of inventory in the ordinary course of
its business and consistent with prior practices, neither Company nor any
Subsidiary shall sell, assign, transfer, convey, pledge, mortgage, encumber, or
otherwise dispose of, or cause the sale, assignment, transfer, conveyance,
pledge, mortgage, encumbrance, or other disposition of, any asset or property.
(b) Company and each Subsidiary shall protect, preserve, and maintain all
its assets in good condition, except for ordinary wear and tear; and shall use
commercially reasonable efforts to maintain in full force and effect all
insurance coverage described in the Disclosure Memorandum.
(c) The books, records, and accounts of Company shall be maintained in the
ordinary course of business on a basis consistent with prior practices and in
accordance with GAAP.
(d) Company shall use its commercially reasonable efforts, and
shall cause its Subsidiaries to use respective commercially reasonable efforts,
to preserve the business and assets of Company and its Subsidiaries, including,
without limitation, the Company Contracts (subject to any expiration date
contained in any such Company Contract), and the goodwill of suppliers,
customers, and others having business relations with them which relate to their
business, and subject to existing performance standards applied by the Company
and its Subsidiaries, to retain the services of the employees, agents, and
contractors of Company and its Subsidiaries.
(e) Company and its Subsidiaries shall continue to replenish its
inventories in the ordinary course and consistent with prior practices.
(f) Holders and Company shall not take, or agree to take, any
action that would make any representation or warranty of them contained herein,
untrue, incorrect, or misleading in any material respect as of the date when
made or at any time through Closing, or that would cause any covenant by them or
any of them contained herein not to be fulfilled in any material respect.
7.2. No Material Changes. Except as expressly provided in this
Agreement or as the result of the exercise of any warrant, option, or other
right the existence of which is disclosed in the Disclosure Memorandum, neither
Company, any Subsidiary, nor any Holder shall take any action which shall
materially alter the organization, capitalization, financial structure,
practices, or operations of Company or any Subsidiary. Without limiting the
generality of the foregoing:
(a) No change shall be made in the articles of incorporation or bylaws of
Company or any Subsidiary.
(b) No change shall be made in the authorized or issued capital stock of
Company or any Subsidiary.
(c) Neither Company nor any Subsidiary shall issue or grant any right or
option to purchase or otherwise acquire any capital stock or other security of
Company or create or suffer any Lien on any Share or any share of capital stock
of any Subsidiary.
(d) No dividend or other distribution or payment shall be declared or made
with respect to any capital stock of Company, and Company shall not, directly or
indirectly, redeem, purchase or otherwise acquire any capital stock.
(e) Company shall not liquidate or voluntarily declare bankruptcy or seek
the appointment of a receiver, trustee or custodian.
7.3 Apple South Actions. Apple South and Merger Sub shall not
take, or agree to take, or cause or permit any other subsidiary of Apple South
to take, or agree to take any action that would make any representation or
warranty of Apple South or Merger Sub contained herein, untrue, incorrect, or
misleading in any material respect as of the date when made or at any time
through Closing, or that would cause any covenant by them contained herein not
to be fulfilled in any material respect.
8. CONDITIONS TO OBLIGATIONS OF APPLE SOUTH AND MERGER SUB
All obligations of Apple South and Merger Sub hereunder are
subject to the fulfillment and satisfaction of each and every one of the
following conditions on or prior to the Closing, any or all of which may be
waived in whole or in part by Apple South, provided that no such waiver shall be
effective unless it is set forth in a writing executed by Apple South:
8.1. Representations and Warranties. Subject to the exceptions
and supplemental information set forth in the Disclosure Memorandum, the
representations and warranties contained in Article 5 shall be true and correct
in all material respects as of the date when made and shall be deemed to be made
again at and as of the date of the Closing and shall be true and correct in all
material respects at and as of such time.
8.2. Compliance with Agreements and Conditions. The Company and the Holders
shall have materially performed and complied with all agreements and conditions
required hereby to be performed or complied with by them prior to or on the date
of the Closing. -----------------------------------------
8.3. Certificate of the Holders. Company shall have delivered
to Apple South a certificate executed by Messrs. ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇, dated
the date of the Closing, certifying as to the fulfillment and satisfaction of
the conditions specified in Paragraphs 8.1 and 8.2 (except as to the accuracy of
the representations and warranties set forth in Paragraph 5.23, as to which
▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ shall provide a separate certificate).
8.4. Resolutions. Apple South shall have received duly adopted
resolutions of the board of directors and the shareholders of the Company,
certified by the Secretary of the Company as of the date of the Closing,
authorizing and approving the execution hereof and all other documents executed
by it including, without limitation, the Escrow Agreement, and the taking of any
and all other actions necessary to enable the Company to comply with the terms
hereof and to consummate the Merger.
8.5. Government Consents. Apple South and Merger Sub shall
have received all necessary Government consents or approvals with respect to
liquor, beer or wine licenses, and the Company shall have received from any and
all Governments or Forums having jurisdiction over the transactions contemplated
hereby, or any part hereof, any and all other necessary consents and approvals
for the consummation of the transactions contemplated hereunder; provided, that,
with respect to any consent or approval of any Government with respect to any
liquor, wine or beer license, any such consent or approval shall constitute a
condition to the obligations of Apple South and Merger Sub hereunder only to the
extent that the failure to obtain such consent or approval (alone or together
with any other such consents or approvals that are not obtained) would have a
material adverse effect on the Company and the Subsidiaries, taken together as a
whole.
8.6. No Material Adverse Change. There shall have been no material adverse
change in the financial condition, results of operations, business, or assets of
the Company since the date hereof. --------------------------
8.7. No Inconsistent Requirements. No Action shall be pending
by any Government or Person (i) against a party hereto to restrain or prohibit
the consummation of the transactions herein or (ii) to the extent not disclosed
in the Disclosure Memorandum on the date hereof, which could reasonably be
expected to have a material adverse effect on the Company.
8.8. Opinion. ▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇, LLP and ▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇,
counsel to Company, shall have delivered to Apple South its opinion in
substantially the form of Exhibit C hereto (in each case to the extent indicated
therein), subject to customary assumptions, limitations ------- --------- and
qualifications.
8.9. Escrow Agreement. The Escrow Agreement shall have been fully executed
and delivered by the other parties thereto.
8.10. ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇. Any applicable filings under the HSR shall have
been made, and all applicable waiting periods thereunder shall have expired or
been terminated.
8.11 Consents of Lessors. The consent and approval to the Merger and/or the
resulting change of control of the Company (to the extent required to avoid any
default, penalty, or acceleration of obligations) of the lessors of all
Restaurant sites, buildings, and fixtures leased to the Company or any
Subsidiary, any lessors of personal property to the Company or any Subsidiary,
and the other parties to any Company Contract shall have been obtained;
provided, that, with respect to any such consent or approval, such consent and
approval shall constitute a condition to the obligations of Apple South and
Merger Sub hereunder only to the extent that the failure to obtain such consent
or approval (alone or together with any other such consents or approvals that
are not obtained) would have a material adverse effect on the Company and the
Subsidiaries, taken together as a whole.
8.12 Audit. The Company's audited consolidated balance sheet dated
January 4, 1997, and the audited consolidated statements of operations,
stockholders' equity, and cash flow of the Company for the fiscal year ended
January 4, 1997, shall not reflect any material adverse change from the
Financial Statements.
8.13 Exercise of Options. All options, warrants, and other rights to
acquire any security of the Company shall have been exercised or canceled prior
to or simultaneously with the Closing. -------------------
8.14 Stock Certificates. Company shall have obtained affidavits and/or
indemnities reasonably acceptable to Apple South with respect to all stock
certificates that have been issued and subsequently canceled or transferred but
which have not been returned to Company for ------------------ cancellation.
9. CONDITIONS TO OBLIGATIONS OF THE HOLDERS AND THE COMPANY
All obligations of the Holders and the Company hereunder are
subject to the fulfillment and satisfaction of each and every one of the
following conditions on or prior to the Closing, any or all of which may be
waived in whole or in part by the Holders:
9.1. Representations and Warranties. The representations and
warranties contained in Article 6 hereof shall be true and correct in all
material respects on and as of the date when made and shall be deemed to be made
again at and as of the date of the Closing and shall be true and correct in all
material respects at and as of such time.
9.2. Compliance with Agreements and Conditions. Apple South and Merger Sub
shall have materially performed and complied with all agreements and conditions
required hereby to be performed or complied with by Apple South and Merger Sub
prior to or on the date of the Closing.
-----------------------------------------
9.3. Certificate. Each of Apple South and Merger Sub shall have delivered
to Company and the Holders a certificate executed by an executive officer, dated
the date of the Closing, as to the fulfillment and satisfaction of the
conditions specified in Paragraphs 9.1 and 9.2.
-----------
9.4 Escrow Agreement. The Escrow Agreement shall have been fully executed
and delivered by the parties thereto. ----------------
9.5 ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇. Any applicable filings under the HSR shall have been
made, and all applicable waiting periods thereunder shall have expired or been
terminated. -----------------
9.6. Consents. Apple South, Merger Sub, and the Company shall
have received from any and all Governments or Forums having jurisdiction over
the transactions contemplated hereby, or any part hereof, and from all lessors
of real property any and all necessary consents and approvals for the
consummation of the transactions contemplated hereunder (including, but not
limited to, consents or approvals required in order to maintain liquor, beer and
wine licenses for sale of the same at the Restaurants and consents to the Merger
and/or the resulting change of control of the Company under real property leases
to the extent required to avoid any default, penalty or acceleration of
obligations).
9.7. No Material Adverse Change. There shall have been no material adverse
change in the financial condition, results of operations, business, or assets of
Apple South since the date hereof. --------------------------
9.8. No Inconsistent Requirements. No Action shall have been instituted by
any Government or Person (i) against a party hereto to restrain or prohibit the
consummation of the transactions herein or (ii) which could reasonably be
expected to have a material adverse effect on ---------------------------- Apple
South.
9.9. Opinion. ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, LLP counsel to Apple South, shall have
delivered to Holders its opinion in substantially the form of Exhibit D hereto.
10. INDEMNITIES
10.1. Indemnification by Holders. (a) In accordance with and subject to the
provisions of this Article 10, the Holders shall indemnify and hold harmless,
Apple South, its Affiliates (including the Surviving Corporation), and the
officers, directors, agents and -------------------------- employees of Apple
South and its Affiliates (collectively, the "Apple South Indemnitees") from and
against and in respect of any and all loss, damage, Liability, cost, and
expense, including reasonable attorneys' fees and amounts paid in settlement
(collectively, "Apple South's Indemnified Losses"), suffered or incurred by any
one or more of the Apple South Indemnitees by reason of, or arising out of (i)
any breach of a representation or warranty contained in this Agreement or the
Disclosure Memorandum or any certificate, instrument, agreement, or other
writing delivered by or on behalf of any Holder or the Company pursuant to this
Agreement or in connection with the transactions contemplated herein; (ii) the
breach of any covenant or agreement of any Holder or the Company contained in
this Agreement or any certificate, instrument, agreement, or other writing
delivered to Apple South by or on behalf of any Holder or the Company pursuant
to this Agreement or in connection with the transactions contemplated herein; or
(iii) enforcement of this indemnification (provided that only the breaching
party with respect to an underlying breach shall be liable for enforcement costs
with respect thereto).
(b) Notwithstanding any other provision of this Agreement, the
Apple South Indemnitees shall not be entitled to recover from any Person as a
result of Apple South's Indemnified Losses that result from a breach of a
representation or warranty set forth in Article 5 (other than Paragraphs 5.1(b),
5.2, and 5.23), any amount in excess of the value of the funds or Apple South
Stock held in escrow on behalf of such Person pursuant to the Escrow Agreement
and such escrowed funds or Apple South Stock shall be the sole source of
recovery from such Person for Apple South's Indemnitees on account of any such
Apple South Indemnified Losses that result from a breach of a representation or
warranty set forth in Article 5 (other than Paragraphs 5.1(b), 5.2, and 5.23).
(c) The indemnification by the Holders pursuant to this Paragraph
10.1 shall be joint (but only up to each Holder's pro rata share of such loss)
and several with respect to a breach of a representation or warranty contained
in this Agreement except as set forth in this subparagraph. The indemnification
provided by this Paragraph 10.1 shall be made severally by (i) each Holder as to
the individual security holdings of such Holder, (ii) the Accredited Class B
Shareholders with respect to the representations and warranties set forth in
Paragraph 5.23 and the other Holders shall have no liability with respect
thereto and (iii) any Holder whose agreement or action or any claim or right
affecting such Holder or any of its securities (in each case, to which the
Company or any Subsidiary is not a party and does not join in) gives rise to a
breach of a representation or warranty set forth in Paragraph 5.2. Liability for
breach of any representation or warranty in a certificate, instrument, other
agreement, or other writing to the extent not delivered on behalf of the
Company, shall be the several liability of the breaching party and there shall
be no joint liability therefore. The Holders shall have several liability only
for any indemnification under this Paragraph 10.1 arising out of any breach of a
covenant or agreement contained in this Agreement or any certificate,
instrument, agreement, or other writing delivered to Apple South by or on behalf
of any Holder pursuant to this Agreement or in connection with the transactions
contemplated herein, and each Holder shall be liable for its own breach of such
covenant or agreement and not for a breach by the Company or any other Holder.
10.2 Indemnification by Surviving Corporation. Apple South
shall indemnify Holders, and their officers, directors, agents, employees, and
Affiliates, from and against (i) any losses, damages, Liabilities, costs and
expenses, including reasonable attorneys' fees and amounts paid in settlement to
a third party, that they may incur or suffer as a result of the actions or
omissions to act of the Surviving Corporation or any of its Affiliates following
Closing and (ii) any damages, losses, Liabilities, costs, and expenses,
including reasonable attorneys' fees and amounts paid in settlement, that result
from a breach of any representation, warranty, covenant, or agreement of Apple
South contained in this Agreement or any certificate, instrument, agreement or
other writing delivered by or on behalf of Apple South or Merger Sub pursuant to
this Agreement or in connection with the transactions contemplated herein or in
enforcing this indemnification (collectively "Shareholders' Indemnified Losses",
and together with Apple South's Indemnified Losses, "Indemnified Losses").
10.3. No Liability or Contribution by the Surviving
Corporation. The Surviving Corporation shall not have any Liability to any
Holder as a result of any misrepresentation or breach of representation or
warranty by the Company contained in this Agreement, the Disclosure Memorandum,
or any certificate, instrument, agreement, or other writing delivered by or on
behalf of any Holder or the Company pursuant to this Agreement or in connection
with the transactions contemplated herein, or the breach of any covenant or
agreement of any Holder or the Company contained in this Agreement or in the
Disclosure Memorandum, or in any certificate, instrument, agreement, or other
writing delivered to Apple South by or on behalf of any Holder or the Company
pursuant to the provisions of this Agreement or in connection with the
transactions contemplated herein, and, subject to Paragraph 4.13 hereof, no
Shareholder shall have any right of indemnification or contribution against the
Surviving Corporation on account of any event or condition occurring or existing
prior to or on the date hereof.
10.4. Survival. The representations and warranties of the
Company (and the indemnification by the Holders relating thereto) and of Apple
South contained in Article 5 of this Agreement or in the Disclosure Memorandum
or any certificate, instrument, agreement, or other writing delivered by or on
behalf of the Company or Apple South pursuant to this Agreement or in connection
with the transactions contemplated herein shall survive any investigation
heretofore or hereafter made by another party and the consummation of the
transactions contemplated herein and shall continue in full force and effect
through the later of January 31, 1998, or the date of completion of the audit of
Apple South for fiscal year 1997, but no later than March 31, 1998 ("Survival
Period"). Anything herein to the contrary notwithstanding, the Survival Period
shall be extended automatically to include any time period necessary to resolve
a claim for indemnification which was made before expiration of the Survival
Period but not resolved prior to its expiration, and any such extension shall
apply only as to the claims asserted and not so resolved within the Survival
Period.
10.5 Defense of Third Party Claims. With respect to any claim
under Paragraph 10.1 relating to a third party claim or demand (including any
third party claims for Taxes relating to a breach of Paragraph 5.9), Apple South
shall provide the Holders with prompt written notice thereof and the
indemnifying parties may defend, in good faith and at their expense, by legal
counsel chosen by them and reasonably acceptable to Apple South, any such claim
or demand, and Apple South, at its expense, shall have the right to participate
in the defense of any such third party claim.
So long as the indemnifying parties are defending in good faith any such third
party claim, Apple South shall not settle or compromise such third party claim;
provided, that, Apple South shall not settle or compromise any third party claim
being defended by the indemnifying parties except (i) upon 20 days' prior
written notice and (ii) if the indemnifying parties do not object to such
settlement or compromise. In any event Apple South shall cooperate in the
settlement or compromise of, or defense against, any such asserted claim. If the
appropriate indemnifying parties do not so elect to defend any such third party
claim, Apple South shall have no obligation to do so.
10.6 Limitation of Liability. Except for breach of any
representation or warranty contained in Paragraph 5.1(a), 5.1(b), and 5.2 of
this Agreement, for which a claim for Apple South's Indemnified Losses may be
made regardless of the amount of all claimed Apple South's Indemnified Losses,
Apple South Indemnitees shall not be entitled to any recovery under this Article
10 with respect to a breach of any representation or warranty unless and to the
extent that the aggregate amount of Apple South's Indemnified Losses exceeds
$250,000. Notwithstanding any other provision of this Agreement, the amount of
Apple South's Indemnified Losses shall be computed on an after-tax basis and
shall be net of any insurance proceeds received with respect to the matter out
of which the Apple South Indemnified Losses arose.
10.7 Exclusivity The rights and remedies afforded by the parties
under this Article 10 shall be the sole and exclusive rights and remedies
available in the event of a breach or default under this Agreement or in any
certificate, instrument, agreement or writing delivered by any party pursuant to
this Agreement or in connection with the transactions contemplated herein and
shall be in lieu of any other common law or statutory rights; provided, however,
that any such rights and remedies as a party may have to seek and obtain
injunctive relief for specific performance with respect to any breach of any
covenant or failure to fulfill any agreement hereunder shall remain available to
the parties and none of such rights or remedies shall be affected or diminished
hereby.
11. TERMINATION
11.1 Termination. This Agreement may be terminated prior to
the Closing (i) at the election of the Shareholders' Representative if any one
or more of the conditions to the obligations of the Holders to close has not
been fulfilled as of the Termination Date; (ii) at the election of Apple South,
if any one or more of the conditions to its obligations to close has not been
fulfilled as of the Termination Date; (iii) upon at least five days' prior
written notice, at the election of the Shareholders' Representative, if Apple
South has breached any material representation, warranty, covenant or agreement
contained in this Agreement, which breach cannot be or is not cured by the
Termination Date; (iv) upon at least five days' prior written notice, at the
election of Apple South, if any of the Holders has breached any material
representation, warranty, covenant, or agreement contained in this Agreement,
which breach cannot be or is not cured by the Termination Date; (v) at the
election of Apple South if any amendment or supplement to the Disclosure
Memorandum delivered subsequent to the date of this Agreement reflects any
material adverse change to the business, assets, financial condition, or
prospects of the Company and the Subsidiaries taken together as a whole, any
material increase in a Liability of the Company and the Subsidiaries taken
together as a whole, or any material adverse change in the ownership rights of a
Holder with respect to the ownership of Shares or the right to convey the same
free of any Lien or claim; or (vi) at any time or prior to the Closing Date, by
mutual written consent of the Shareholders' Representative and Apple South. Upon
any such termination, no party shall have any further rights, Liabilities, or
obligations hereunder (except with respect to Paragraphs 4.1, 4.2, 4.3, 4.10,
4.14, and Article 12, all of which shall survive the termination of this
Agreement); provided, however, if any of the terms and conditions contained
herein have been breached by any party, the non-breaching
parties may pursue whatever rights and remedies they may have at Law, in equity
or otherwise by reason of such breach regardless of such termination, and such
termination shall not constitute an election of remedies.
12. MISCELLANEOUS
12.1. Notices. All notices or other communications required or
permitted to be given or made hereunder shall be in writing and delivered
personally, by courier service or sent by pre-paid, first class certified or
registered mail, return receipt requested, or by facsimile transmission, to the
intended recipient thereof at its address or facsimile number set out below with
copies to the Persons set forth below. Any such notice or communication shall be
deemed to have been duly given upon receipt (if given or made in person, by
delivery service or by facsimile confirmed by mailing a copy thereof to the
recipient in accordance with this Paragraph 12.1 on the date of such facsimile),
or four days after mailing (if given or made by mail), and in proving same it
shall be sufficient to show that the envelope containing the same was delivered
personally or by the delivery service to the recipient, or that receipt of a
facsimile was confirmed by the recipient. The addresses and facsimile numbers of
the parties for purposes of this Agreement are set forth on the signature page
hereto below their respective signatures. Any party may change the address to
which notices or other communications to such party shall be delivered or mailed
by giving notice thereof to the other parties hereto in the manner provided
herein.
12.2. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument. ------------
12.3. Governing Law. The validity and effect of this Agreement shall be
governed by and construed and enforced in accordance with the Laws of the State
of Georgia, without regard to its conflicts of laws rules. -------------
12.4. Successors and Assigns. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors and permitted assigns. No party may assign, delegate, or otherwise
transfer any of its rights or obligations under this Agreement without the
written consent of the other parties hereto. Notwithstanding the foregoing, at
any time prior to the Closing, any party may dispose of any of its Shares by
gift or charitable contribution, in which case the transferee shall be bound by
Article 10 of this Agreement only to the extent of any portion of the Merger
Consideration received by such transferee subject to the Escrow Agreement;
provided that the transferor shall continue to be bound by the provisions of
Article 10, except to the extent of any claim to be satisfied out of the escrow
contemplated herein, unless the transferee expressly assumes all of the
obligations of the transferor under Article 10 hereof.
12.5. Partial Invalidity and Severability. All rights and
restrictions contained herein may be exercised and shall be applicable and
binding only to the extent that they do not violate any applicable Laws and are
intended to be limited to the extent necessary to render this Agreement legal,
valid and enforceable. If any term of this Agreement, or part thereof shall be
held to be illegal, invalid, or unenforceable by a Forum of competent
jurisdiction, it is the intention of the parties that the remaining terms
hereof, or part thereof, shall constitute their agreement with respect to the
subject matter hereof and all such remaining terms, or parts thereof, shall
remain in full force and effect.
12.6. Waiver. Any term or condition of this Agreement may be
waived at any time by the party which is entitled to the benefit thereof, but
only if such waiver is evidenced by a writing signed by such party. No failure
on the part of any party hereto to exercise, and no delay in exercising any
right, power, or remedy created hereunder, shall operate as a waiver thereof,
nor shall any single or partial exercise of any right, power, or remedy by any
party preclude any other or further exercise thereof or the exercise of any
other right, power, or remedy. No waiver by any party hereto of any breach of or
default in any term or condition of this Agreement shall constitute a waiver of
or assent to any succeeding breach of or default in the same or any other term
or condition hereof.
12.7. Headings. The headings of particular provisions of this Agreement are
inserted for convenience only and shall not be construed as a part of this
Agreement or serve as a limitation or expansion on the scope of any term or
provision of this Agreement. --------
12.8. Number and Gender. Where the context requires, the use of the
singular form herein shall include the plural, the use of the plural shall
include the singular, and the use of any gender shall include any and all
genders. -----------------
12.9. Entire Agreement. This Agreement supersedes all prior
discussions and agreements between the parties (including, but not limited to,
the letter of intent dated January 7, 1997) with respect to the subject matter
hereof, and this Agreement contains the sole and entire agreement between the
parties with respect to the matters covered hereby. This Agreement shall not be
altered or amended except by an instrument in writing signed by or on behalf of
the party entitled to the benefit of the provision against whom enforcement is
sought.
13. DEFINITIONS
For purposes of this Agreement, the following capitalized
terms shall have the meanings specified with respect thereto below:
"Accredited Class B Shareholders" shall have the meaning set forth in the
preamble.
"Action" shall mean any action, suit, litigation, complaint,
counterclaim, claim, petition, mediation contest, or administrative proceeding,
whether at Law, in equity, in arbitration or otherwise, and whether conducted by
or before any Government or other Person.
"Affiliate" of any Person shall mean any other Person directly
or indirectly Controlling, Controlled by, or under direct or indirect common
Control with, the former Person.
"Affiliated Entity" or "Affiliated Entities"13.3.Affiliated
Entity or Affiliated Entities shall have the meaning set forth in Paragraph 5.9.
"Apple South"▇▇.▇▇.▇▇▇▇▇ South shall have the meaning set forth in the
Preamble.
"Apple South Indemnitees"▇▇.▇▇.▇▇▇▇▇ South shall have the
meaning set forth in the Paragraph 10.1.
"Apple South's Indemnified Losses"▇▇.▇▇.▇▇▇▇▇ South shall have
the meaning set forth in Paragraph 10.1.
"Apple South Stock"▇▇.▇▇.▇▇▇▇▇ South Stock shall have the
meaning set forth in Paragraph 3.2.
"Average Price" shall have the meaning set forth in Paragraph 3.2.
"Business Day"▇▇.▇.▇▇▇▇▇▇▇▇ Day shall mean any day other than a Saturday, a
Sunday, or a day on which commercial banks in the United States are required or
authorized to be closed. ------------
"Closing"13.8.Closing shall have the meaning set forth in Paragraph 3.4.
"Closing Date" shall mean the day on which the Closing occurs.
"Company"▇▇.▇.▇▇▇▇▇▇▇ shall have the meaning set forth in the Preamble.
"Company Contracts"▇▇.▇▇.▇▇▇▇▇▇▇ Contracts means all existing
written and oral agreements and commitments of the Company or any Subsidiary,
including without limitation all employment and consulting contracts, union
contracts, agreements with suppliers and customers, personal property leases,
licenses, employee benefit plans, deferred compensation agreements, indentures,
notes, bonds, mortgages, security agreements, loan agreements, guarantees,
franchise agreements, agreements in respect of the issuance, sale, repurchase or
transfer of the Company's or any Subsidiary's capital, stock, bonds or other
securities or powers of attorney, which involve a payment of more than $25,000
annually and are not cancellable upon notice of thirty days or less.
"Confidential Information"▇▇.▇▇.▇▇▇▇▇▇▇ Contracts shall have the meaning
set forth in Paragraph 4.10.
"Control"13.12.Control means a Person possesses, directly or indirectly,
the power to direct or cause the direction of the management and policies of
another Person, whether through the ownership of voting securities, by contract
or otherwise. -------
"Corporate Laws"13.13.Corporate Laws shall have the meaning set forth in
Paragraph 1.1.
"Current SEC Documents"13.14.Current SEC Documents shall have
the meaning set forth in Paragraph 4.7.
"Disclosee"13.14.Current SEC Documents shall have the meaning set forth in
Paragraph 4.10.
"Disclosing Party"13.14.Current SEC Documents shall have the
meaning set forth in Paragraph 4.10.
"Disclosure Memorandum"13.14.Current SEC Documents shall have
the meaning set forth in Section 5.
"Effective Time"13.16.Effective Time shall have the meaning set forth in
Paragraph 3.4.
"Environmental Laws"13.17.Environmental Laws shall mean all
federal, state, provincial, municipal, and local Laws, statutes, ordinances,
rules, regulations, general or particular conditions, conventions, requirements,
and decrees relating to health, safety, and the environment, including without
limitation, those relating to emissions, discharges, releases, or threatened
releases of pollutants, contaminants, chemicals, or industrial, toxic, or
Hazardous Materials or wastes of every kind and nature into the environment
(including without limitation ambient air, surface water, ground water, soil,
and subsoil), or otherwise relating to the manufacture, generation, processing,
distribution, application, use, treatment, storage, disposal, transport, or
handling of pollutants, contaminants, chemicals, or industrial, toxic, or
hazardous substances or wastes, or to occupational or worker safety and health,
and any and all Laws, rules, regulations, codes, directives, orders, decrees,
judgments, injunctions, consent agreements, stipulations, provisions, and
conditions of Environmental Permits, licenses, injunctions, consent agreements,
stipulations, certificates of authorization, and other operating authorizations,
entered, promulgated, or approved thereunder.
"Environmental Permits"13.18.Environmental Permits shall mean
all permits, licenses, certificates, approvals, authorizations, regulatory plans
or compliance schedules required by applicable Environmental Laws, or issued by
a Government pursuant to applicable Environmental Laws, or entered into by
agreement of the party to be bound, relating to activities that affect human
health or the environment, including without limitation, permits, licenses,
certificates, approvals, authorizations, regulatory plans and compliance
schedules for air emissions, water discharges, pesticide and herbicide or other
agricultural chemical storage, use or application, and Hazardous Material or
Solid Waste generation, use, storage, treatment and disposal.
"ERISA13.19.ERISA " shall have the meaning set forth in Paragraph
5.21(a)(i).
"ERISA Plans"13.14.Current SEC Documents shall have the
meaning set forth in Paragraph 5.21(a)(ii).
"Escrow Agent" shall mean the bank agreed upon by Apple South
and Shareholders' Representative.
"Escrow Agreement" shall have the meaning set forth in Paragraph 3.5.
"Exchange Act" shall have the meaning set forth in Paragraph 4.11.
"Forum"▇▇.▇▇.▇▇▇▇▇ shall mean any federal, state, local, municipal, or
foreign court, governmental agency, administrative body or agency, tribunal,
private alternative dispute resolution system, or arbitration panel. -----
"Financial Statements"13.14.Current SEC Documents shall have
the meaning set forth in Paragraph 5.6.
"GAAP"13.21.GAAP shall mean generally accepted accounting principles,
consistently applied.
"Government"13.22.Government shall mean any federal, state,
provincial, local, municipal, or foreign government or any department,
commission, board, bureau, agency, instrumentality, unit, or taxing authority
thereof.
"HSR Act" shall have the meaning set forth in Paragraph 4.1.
"Hazardous Material"13.23.Hazardous Material shall mean any
substance or material, including, without limitation, raw materials, commercial
products and wastes or waste products that, because of its quantity,
concentration, or physical, chemical or infectious characteristics may cause or
significantly contribute to an increase in mortality or an increase in serious,
irreversible or incapacitating illness, or pose a substantial hazard to human
health or the environment, including without limitation all substances and
materials designated as hazardous or toxic under any applicable Environmental
Law.
"Holders"13.24.Hereof, herein, hereunder shall mean the Shareholders and
any Person becoming a stockholder of the Company as the result of the exercise
of any warrant, option, or other right or otherwise becoming a stockholder of
the Company subsequent to the date of this ------- Agreement.
"Hereof," "herein," "hereunder"13.24.Hereof, herein, hereunder and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement, and "Article,"
"Paragraph," "Disclosure Memorandum," "Exhibit" ------ ------ --------- and like
references are to this Agreement unless otherwise specified.
"Improvements"13.25.Improvements shall mean all buildings, structures and
other improvements of any and every nature located on the Real Property and all
fixtures attached or affixed, actually or constructively, to the Real Property
or to any such buildings, structures or other ------------ improvements.
"Indemnified Losses"13.27.Indemnified Losses shall have the meaning set
forth in Paragraph 10.2.
"Known,"13.28.Known, "to the knowledge of," "to the best
knowledge of," "aware" or words of similar import employed in this Agreement
with reference to any individual or entity shall mean the actual knowledge of
the individual or entity and, in the case of the Company, such words or words or
similar import shall be deemed to be the actual individual or collective
knowledge of Messrs. ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇ Skele, and ▇▇▇▇ ▇▇▇▇.
"Law"▇▇.▇▇.▇▇▇ shall mean all federal, state, provincial,
local, municipal or foreign constitutions, statutes, rules, regulations,
ordinances, acts, codes, legislation, treaties, conventions, judicial decisions,
and similar laws and legal requirements, whether of the United States of America
or any other jurisdiction as in effect from time to time.
"Liability"13.30.Liability shall mean, to the extent
applicable in the context used, any liability or obligation whether known or
unknown, asserted or unasserted, absolute or contingent, accrued or unaccrued,
liquidated or unliquidated, and whether due or to become due, to the extent
required by the accounting principles followed by the Company to be set forth in
a financial statement or in the notes thereto.
"Lien"13.31.Lien shall mean any mortgage, pledge,
hypothecation, security interest, encumbrance, claim, restriction on use, lien
or charge of any kind, or any rights of others, however evidenced or created
(including any agreement to give any of the foregoing, any conditional sale or
other title retention agreement, any lease in the nature thereof, and the filing
of or agreement to give any financing statement under the lien notice records or
other similar legislation of any jurisdiction).
"Merger"13.32.Merger shall have the meaning set forth in Paragraph 1.1.
"Orders"13.34.Orders shall mean all applicable orders, writs, judgments,
decrees, rulings, consent agreements, and awards of or by any Forum or entered
by consent of the party to be bound. ------
"Person"13.38.Person shall include an individual, a partnership, a joint
venture, a corporation, a limited liability company, a trust, an unincorporated
organization, a Government, and any other legal entity. ------
"Real Property"13.42.Real Property shall have the meaning set forth in
Paragraph 5.11(a).
"Real Property Lease"13.43.Real Property Lease shall have the meaning set
forth in Paragraph 5.12.
"Reference Balance Sheet"13.14.Current SEC Documents shall
have the meaning set forth in Paragraph 5.6.
"Reference Date"13.44.Reference Date shall have the meaning set forth in
Paragraph 5.6.
"Related Parties"13.45.Related Parties shall have the meaning set forth in
Paragraph 5.22.
"Relative" shall mean (i) the spouse of a Shareholder or (ii) any sibling,
parent, grandparent, child, or grandchild of a Shareholder or Shareholder's
spouse and any spouse of any of the foregoing persons.
"Restaurants" means those restaurants contemplated by the first recital to
this Agreement.
"SEC"13.46.SEC shall have the meaning set forth in Paragraph 3.2(c).
"SEC Documents"13.47.SEC Documents shall have the meaning set forth in
Paragraph 4.7.
"Securities Act"13.48.Securities Act shall have the meaning set forth in
Paragraph 4.8.
"Shareholders"13.49.Shareholders shall have the meaning set forth in the
Preamble.
"Shareholders' Indemnified Losses"▇▇.▇▇.▇▇▇▇▇ South shall have the meaning
set forth in Paragraph 10.2.
"Shareholders' Representative" shall have the meaning set forth in
Paragraph 4.14.
"Shares"13.50.Shares shall have the meaning set forth in Paragraph 3.1.
"Solid Waste"13.51.Solid Waste shall mean any garbage, refuse,
sludge from a waste treatment plant, water supply treatment plant, or air
pollution control facility, and other discarded material, including solid,
liquid, semisolid, or contained gaseous material resulting from industrial,
commercial, mining, and agricultural operations, and from community activities.
"Subsidiaries" shall mean the corporations listed in the
Disclosure Memorandum pursuant to Paragraph 5.2(d).
"Subsidiary Shares" shall have the meaning set forth in Paragraph 5.2(b).
"Survival Period"13.53.Survival Period shall have the meaning set forth in
Paragraph 10.4.
"Surviving Corporation"13.54.Surviving Corporation shall have the meaning
set forth in Paragraph 1.1.
"Taxes"13.55.Taxes shall mean any present or future taxes,
levies, imposts, duties, fees, assessments, deductions, withholdings or other
charges of whatever nature, including without limitation income, gross receipts,
excise, property, sales, use, customs, value added, consumption, transfer,
license, payroll, employee income, withholding, social security, and franchise
taxes, imposed or levied by the United States of America or any Government or by
any department, agency or other political subdivision or taxing authority
thereof or therein, all deposits required in connection therewith, and all
interests, penalties, additions to tax, and other similar Liabilities with
respect thereto.
"Termination Date" shall mean sixty days following the date hereof.
[SIGNATURES ON NEXT PAGE]
IN WITNESS WHEREOF, the parties have executed this Agreement
under seal or caused it to be executed by their duly authorized officers and
agents and their corporate seals affixed as of the day and year first above
written. Signatures of the parties transmitted by facsimile shall be valid and
binding for all purposes.
ATTEST: APPLE SOUTH:
___________________________________ APPLE SOUTH, INC.
By:
Name: Name:
Title: Title:
Address:
(CORPORATE SEAL)
Facsimile No.:
ATTEST: MERGER SUB:
___________________________________ M&S ACQUISITION OF DELAWARE, INC.
By:
Name: Name:
Title: Title:
Address:
(CORPORATE SEAL)
Facsimile No.:
ATTEST: COMPANY:
-----------------------------------
▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ HOLDING CORP.
Name: By:
Title: Name:
Title:
(CORPORATE SEAL) Address:
Facsimile No.:
CLASS A COMMON AND/OR PREFERRED STOCKHOLDERS:
▇▇▇▇▇▇ ▇▇▇▇▇▇ PARTNERS II, L.P.
ATTEST: By:
Name:
___________________________________ Title:
Address:
Name:
Title:
Facsimile No.:
(CORPORATE SEAL)
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Address:
Facsimile No.:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Address:
Facsimile No.:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Address:
Facsimile No.:
▇▇▇▇▇ ▇. ▇▇▇▇
Address:
Facsimile No.:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Address:
Facsimile No.:
▇▇▇▇▇▇ ▇▇▇▇▇
Address:
Facsimile No.:
ATTEST: QUANTUM RESTAURANT GROUP, INC.
By:
___________________________________ Name:
Title:
Name: Address:
Title:
(CORPORATE SEAL) Facsimile No.:
CLASS B COMMON STOCKHOLDERS:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Address:
Facsimile No.:
ATTEST: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ IRREVOCABLE
TRUST
-----------------------------------
By:
Name: Name:
Title: Title:
Address:
(CORPORATE SEAL)
Facsimile No.:
ATTEST: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ CHARITABLE
___________________________________ REMAINDER TRUST NO. 2
Name: By:
Title: Name:
Title:
(CORPORATE SEAL) Address:
Facsimile No.:
ATTEST: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ CHARITABLE REMAINDER TRUST NO. 2
___________________________________ By:
Name:
Name: Title:
Title: Address:
(CORPORATE SEAL)
Facsimile No.:
ATTEST: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ IRREVOCABLE TRUST
___________________________________ By:
Name:
Name: Title:
Title: Address:
(CORPORATE SEAL)
Facsimile No.:
▇▇▇▇▇▇ ▇▇▇▇▇▇
Address:
Facsimile No.:
▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Address:
Facsimile No.:
EXHIBIT A
Directors of Surviving Corporation
▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
1
341988.7
EXHIBIT B
ESCROW AGREEMENT
THIS AGREEMENT, dated as of ______________ __, 1997, by and among
______________________________________ ("Escrow Agent"); APPLE SOUTH, INC., a
Georgia corporation ("Parent"); M&S ACQUISITION OF DELAWARE, INC., a Delaware
corporation ("Merger Sub"); ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ HOLDING CORP., a Delaware
corporation (the "Company"); ▇▇▇▇▇▇ ▇▇▇▇▇▇ PARTNERS II, L.P., a Delaware limited
partnership and a principal stockholder of the Company ("Representative"); and
the other holders of capital stock of the Company, all of whom are signatories
hereof (together with Representative hereinafter collectively referred to as the
"Holders" and individually as a "Holder").
W I T N E S S E T H:
WHEREAS, pursuant to an Agreement and Plan of Merger (the "Merger
Agreement"), dated _____________ __, 1997, Company, Parent, and Merger Sub
agreed that Merger Sub was to merge with and into Company, with Company being
the surviving corporation in the merger (the "Merger") (Company after the Merger
is sometimes hereinafter referred to as the "Surviving Corporation"); and
WHEREAS, as a condition to the consummation of the Merger and the other
transactions contemplated by the Merger Agreement, Parent, Merger Sub, Company,
Representative, and Holders have agreed to enter into this Agreement in order to
secure certain indemnifications of Parent and Surviving Corporation by Holders
pursuant to Paragraph 10.1 of the Merger Agreement; and
WHEREAS, Escrow Agent is willing to act as escrow agent hereunder;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements contained herein, and intending to be legally bound,
the parties hereby agree as follows:
Article I - Establishment of Escrow
1.1 Delivery of Cash and Shares. Simultaneously with the execution
hereof, pursuant to Paragraph 3.5 of the Merger Agreement, (i) Parent has
delivered to Escrow Agent the sum of _________________ Dollars ($_____________)
(such sum together with any income or interest earned thereon being hereinafter
referred to as the "Escrow Fund") and (ii) Parent, Company, and the Accredited
Class B Shareholders (such term and other capitalized terms not defined herein
having the meanings set forth in the Merger Agreement) have delivered to the
Escrow Agent certificates evidencing _____ shares (hereinafter referred to as
the "Escrow Shares") of common stock of the Parent (the "Common Stock") issued
in the names of the Accredited Class B Shareholders along with stock transfer
powers executed by the Accredited Class B Shareholders with respect to the
Escrow Shares issued in their names, the amount of such Escrow Fund allocated to
each Holder and the number of such Escrow Shares issued in the name of each
Class B Shareholder being set forth on Schedule I hereto.
1.2 Voting. The Accredited Class B Shareholders, as record holders, shall
have the right to vote the Escrow Shares during the period that the certificates
for such Escrow Shares are held by the Escrow Agent. ------
1.3 Dividends. Any cash dividends on the Escrow Shares shall be paid to
and retained by the Accredited Class B Shareholders, respectively, in accordance
with their record ownership thereof. Any shares of Common Stock issued as a
share dividend (as defined in ss. 14-2-623 of the Georgia Business Corporation
Code) with respect to the Escrow Shares shall be issued in the names of the
record holders of the underlying Escrow Shares, and certificates evidencing such
shares shall be delivered to the Escrow Agent to be held as Escrow Shares in
accordance with all the terms of this Escrow Agreement.
1.4 Investment of Escrow Fund. The Escrow Fund shall be invested by Escrow
Agent in _______________________________ [TO BE DETERMINED BY ESCROW AGENT AND
REPRESENTATIVE PRIOR TO EXECUTION HEREOF]. -------------------------
Article II - Claims and Disbursements
2.1 Claims. The Escrow Fund and the Escrow Shares shall secure the
obligations of the Holders to the Apple South Indemnitees under item (i) of
Paragraph 10.1(a) of the Merger Agreement (and item (iii) thereof to the extent
that such enforcement relates to item (i)); provided, however, that the Escrow
Fund and Escrow Shares shall not secure any indemnification under Paragraph 10.1
for a breach of a representation and warranty set forth in Paragraph 5.1(b),
5.2, or 5.23 of the Merger Agreement. If an Apple South Indemnitee shall assert
a claim secured by the Escrow Fund and/or Escrow Shares pursuant to the
preceding sentence (a "Claim"), such Apple South Indemnitee shall deliver
written notice of the Claim to the Escrow Agent and to Representative. As
promptly as possible after an Apple South Indemnitee has given such notice, the
Apple South Indemnitee and Representative shall establish the validity of the
Claim (by mutual agreement, arbitration, litigation, or otherwise), and, upon
final determination of the merits of the Claim, shall notify Escrow Agent
(either by means of a certified copy of the judgment, a certified copy of the
arbitration decision, or a written instrument executed by the Apple South
Indemnitee and Representative on behalf of the Holders), of the terms of such
determination. Upon receipt of such document, Escrow Agent shall thereupon cause
to be transferred to such Apple South Indemnitee out of the Escrow Fund and the
Escrow Shares amounts of cash and the number of shares which, when valued
according to this Article, equal the amount of the Claim as set forth in the
terms of such document. The portion of the amount delivered in satisfaction of
the Claim consisting of Escrow Shares shall be the percentage that Escrow Shares
(valued per this Article) constituted of the entire value of Escrow Shares and
cash delivered to the Escrow Agent at the time of establishment of the escrow
hereunder. If Escrow Shares are transferred to an Apple South Indemnitee
hereunder, Escrow Agent shall cause certificates for any shares not so
transferred to be reissued in the names of the Accredited Class B Shareholders
and such reissued certificates shall continue to be held in accordance with the
terms of this Agreement.
2.2 Disbursement.
(a) Distribution Date. Upon the later of (i) the completion
(which shall not be later than March 31, 1998)of the audited financial
statements of Parent for fiscal year 1997 or (ii) January 31, 1998 (such later
date referred to as the "Distribution Date"), the Escrow Agent shall transfer to
one or more accounts designated by Representative pursuant to Paragraph 3.1
hereof (the "Disbursement Accounts") the amount of cash remaining in the Escrow
Fund and shall transfer to the Accredited Class B Shareholders the remaining
number of Escrow Shares issued in their respective names, (w) after any
transfers of amounts from the Escrow Fund and of shares from the Escrow Shares
to Apple South Indemnitees pursuant to Paragraph 2.1 hereof and (x) after
deducting (only for purposes of calculating the amount of this distribution)
from the Escrow Fund and the Escrow Shares any amounts and/or shares subject to
a Claim pending pursuant to Paragraph 2.1 and the last sentence of Section 10.4
of the Merger Agreement.
(b) Subsequent Distributions. Any amount of the Escrow Fund
and any shares of Escrow Shares that remain in escrow following the Distribution
Date shall be disbursed, respectively, to the Disbursement Accounts and to the
Accredited Class B Shareholders as soon thereafter as all Claims are resolved
and any transfers due to any Apple South Indemnitees as a result of such
resolution have been made.
(c) Termination of Escrow. The escrow provided for hereunder shall
terminate as soon as all of the Escrow Fund and all of the Escrow Shares are
disbursed in accordance with Paragraph 2.1 hereof and this Paragraph 2.2.
---------------------
2.3 Valuation of Escrow Shares. For the purpose of this Article II, each
Escrow Share shall be valued at the "Average Price" as defined in the Merger
Agreement, as adjusted to reflect any stock split, stock dividend,
consolidation, recapitalization or similar event occurring after
-------------------------- ------------- date hereof.
2.4 Proportion of Escrow Fund to Escrow Shares. Whenever this Agreement
requires any payment to an Apple South Indemnitee or any disbursement to a
Holder, such payment or disbursement shall be made out of cash in the Escrow
Fund and out of shares of the Escrow Shares in the same proportion as the total
value of the Escrow Fund bears to the total value of the Escrow Shares delivered
pursuant to Paragraph 1.1 hereof.
2.5 Representative. The Holders hereby appoint Representative as their
sole representative and agent, with full power and authority to act on their
behalf, with regard to (i) the resolution, settlement, arbitration, litigation,
or other disposition of any Claim and the execution and delivery of any
agreement, order, settlement, or other document in connection therewith and (ii)
the transfer or other distribution of any or all of the Escrow Fund and the
Escrow Shares pursuant to the terms hereof. Parent, Surviving Corporation, and
Escrow Agent may conclusively rely on any action by and any document executed by
or done by Representative in the name and on behalf of Holders, as the action or
document of Holders, and they shall not be required to seek or obtain any
further evidence of Representative's authority with regard thereto.
Article III - Disbursement Accounts and Addresses
3.1. Designation of Disbursement Accounts and Addresses. No later than
thirty days prior to the Distribution Date, Representative shall provide notice
to Escrow Agent of the designation of the Disbursement Accounts to receive
disbursements by Escrow Agent of amounts from the Escrow Fund and the addresses
of Accredited Class B Shareholders to receive shares from the Escrow Shares
pursuant to Paragraph 2.2 hereof.
3.2 Transfers to Disbursement Account. Escrow Agent, Parent, and Surviving
Corporation shall have no obligation, duty, or responsibility to direct or
insure that funds transferred to the Disbursement Accounts be actually
distributed to Holders, and may rely on transfers to the Disbursement Accounts
designated by Representative to satisfy any disbursement obligations under this
Agreement.
Article IV - Escrow Agent
4.1 Duties. Escrow Agent's obligations and duties in connection
herewith are confined to those specifically enumerated in this Agreement. Escrow
Agent shall not be in any manner liable or responsible for the sufficiency,
correctness, genuineness, or validity of any documents deposited with it or with
reference to the form of execution thereof, or the identity, authority, or
rights of any person executing or depositing same, and Escrow Agent shall not be
liable for any loss that may occur by reason of forgery, false representation,
or the exercise of its discretion in any particular manner or for any other
reason, except for its own gross negligence or willful misconduct. Except in
instances of Escrow Agent's own gross negligence or willful misconduct, each of
Parent, Surviving Corporation, Company, Representative, and Holders shall
indemnify, defend, and hold Escrow Agent harmless from any demands, suits, or
causes of action arising out of this Agreement instituted by such indemnifying
party.
4.2 Disputes. If a dispute occurs between the parties hereto sufficient
in the discretion of Escrow Agent to justify its doing so, Escrow Agent shall be
entitled to tender into the registry or custody of any court of competent
jurisdiction all of the Escrow Fund and Escrow Shares and other property in its
hands under this Agreement, together with such legal pleadings as it deems
appropriate, and thereupon be discharged from all further duties and liabilities
under this Agreement. Any such legal action may be brought in such court as
Escrow Agent shall properly determine to have jurisdiction thereof. The filing
of any such legal proceedings shall not deprive Escrow Agent of its compensation
earned prior to such filing.
4.3 Fees. The Escrow Agent's fees hereunder shall be as set forth in
Schedule II hereto, which will be paid half by Parent and half by Holders. The
fee agreed to be paid by such parties is intended as full compensation for
Escrow Agent's services as contemplated by this Agreement; however, if the
conditions of this Escrow Agreement are not fulfilled or Escrow Agent renders
any material service not contemplated in this Agreement, or there is any
assignment of interest in the subject matter of this Escrow Agreement, or any
material modification hereof, or if any material controversy arises hereunder,
or Escrow Agent is made a party to or justifiably intervenes in any litigation
pertaining to this Escrow Agreement, or the subject matter hereof, Escrow Agent
shall be reasonably compensated for such extraordinary services and reimbursed
for all costs and expenses, including reasonable attorney's fees, occasioned by
any delay, controversy, litigation, or event, and the same may be recoverable
from Parent and Surviving Corporation.
4.4 Resignation. (a) The Escrow Agent may resign at any time from its
obligations under this Escrow Agreement by providing written notice to the
parties hereto. Such resignation shall be effective not less than thirty (30)
days after such written notice has been delivered. The ----------- Escrow Agent
shall have no responsibility for the appointment of a successor escrow agent.
(b) In the event of resignation of the Escrow Agent, a successor escrow
agent, which shall be a national bank, shall be appointed as soon as practicable
by Parent and Representative.
4.5 Termination. Apple South and Representative may terminate the
escrow (including in connection with the appointment of a new escrow agent) by
joint written notice which shall specify the disposition of the Escrow Fund and
Escrow Shares and Escrow Agent shall, upon receipt thereof, promptly disburse
the Escrow Fund and Escrow Shares in accordance with such specified disposition.
Article V - Miscellaneous
5.1 Binding Effect. This Agreement shall inure to the benefit of and shall
be binding upon Parent, Surviving Corporation, Company, Representative, and
Holders and their respective successors, personal representatives, executors,
heirs, beneficiaries and assigns. --------------
5.2 Governing Law. This Agreement shall be deemed to be made in, and in all
respects shall be interpreted, construed and governed by and in accordance with,
the laws of the State of Georgia. -------------
5.3 Headings. The section and paragraph headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. --------
5.4 Notices. All notices and communications provided for hereunder shall be
in writing and shall be deemed to be given only if delivered personally or sent
by first class, registered or certified United States Mail, with proper postage
prepaid, as follows: -------
(a) If to Parent, Surviving Corporation, With a required copy to: or Merger
Sub, addressed to: Apple South, Inc. ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP ▇▇▇▇▇▇▇ at
Washington Suite 2800, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇▇ Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇ Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
(b) If to Representative, or With a required copy to: Holders, addressed
to:
▇▇▇▇▇▇ ▇▇▇▇▇▇ Partners II, ▇.▇. ▇▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇, L.L.P.
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, Esq.
(c) If to Escrow Agent, addressed to:
=========================
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Attention: ________________
or to such other address or person as the addressee may have specified in a
notice duly given to the sender as provided herein. Such notices and
communications will be deemed to have been given as of the date actually
delivered, or if mailed, three days after deposit in the U.S. Mail properly
addressed with adequate postage affixed.
5.5 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument. ------------
5.6 Modification. This Agreement may be modified only by a written
instrument signed by each of the parties hereto. ------------
[SIGNATURES LOCATED ON FOLLOWING PAGES]
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
to the date first written above.
APPLE SOUTH:
APPLE SOUTH, INC.
By:___________________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇, Chief Financial Officer
MERGER SUB (SURVIVING CORPORATION):
[--------------------]
By: ___________________________________
------------------, ----------------
REPRESENTATIVE:
[--------------------]
By: ___________________________________
------------------, ----------------
HOLDERS:
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[--------------------]
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[--------------------]
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[--------------------]
ESCROW AGENT:
By: _________________________________________
Name: _________________________________________
Title: _________________________________________