ASSET SALE AGREEMENT By and Between NPC INTERNATIONAL, INC. and PIZZA HUT OF AMERICA, INC. and PIZZA HUT, INC. Dated as of November 3, 2008

 

 

____________________________________________________________________________________________________________________________________________________________

 

 

ASSET SALE AGREEMENT

 

By and Between

 

 

NPC INTERNATIONAL, INC.

 

and

 

 

PIZZA HUT OF AMERICA, INC.

 

and

 

PIZZA HUT, INC.

 

 

 

 

Dated as of November 3, 2008

 

 

____________________________________________________________________________________________________________________________________________________________

 

 

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TABLE OF CONTENTS

 

 

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ii

 

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INDEX TO EXHIBITS AND SCHEDULES

 

EXHIBITS

 

 

 

SCHEDULES

 

 

iii

 

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ASSET SALE AGREEMENT

 

ASSET SALE AGREEMENT, dated as of November 3, 2008 (this "Agreement"), is by and among Pizza Hut of America, Inc. and (the "Seller") and NPC International, Inc. (the "Buyer"), and Pizza Hut, Inc. (“PHI”).

 

W I T N E S S E T H :

 

WHEREAS, the Seller operates the eighty-nine (89) Pizza Hut and/or Pizza Hut/WingStreet restaurants listed on Schedule 1.1 hereto and owns or leases certain real and personal property that it uses in connection with such restaurants; and

 

WHEREAS, the Seller desires (i) to sell, convey, assign, transfer or lease (as provided below) to the Buyer the operations of and substantially all of the real and personal property (the "Assets") owned by the Seller and used in connection with such restaurants and the Pizza Hut and/or Pizza Hut/WingStreet business being conducted with the Assets (the “PH Business”) and (ii) to assign or sublease to the Buyer substantially all of the real property leased from third parties and used in connection with such restaurants, and the Buyer desires to acquire or lease, as the case may be, such restaurants and property and the PH Business, in each case, on the terms and subject to the conditions set forth in this Agreement (collectively, the "Acquisition").

 

NOW THEREFORE, in consideration of the premises and of the mutual covenants of the parties set forth in this Agreement, the Seller and the Buyer hereby agree as follows:

 

 

 

 

 

Subject to the terms of this Agreement, at the Closing (as such term is defined in Section 7), Seller shall sell, convey, assign, transfer and deliver to the Buyer, and the Buyer shall purchase and acquire from Seller, all of Seller's right, title and interest in and to the PH Business and the following types of tangible personal property (collectively, the "Personal Property") relating to the PH Business being conducted at the restaurants listed on Schedule 1.1 hereto (collectively, the "Restaurants") that are operated by Seller:

 

 

(b)       all prepaid rents, advertising and other amounts and all utility and miscellaneous deposits relating to the Restaurants (subject to Section 1.6(c));

 

(c)       all uniforms, menus, dishes, glassware, utensils and other small wares located in the Restaurants;

 

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(d)       all inventories of usable food ingredients, packaging materials, supplies, paper products and other consumables stored in the Restaurants, as well as a change fund for each Restaurant consisting of cash in drawers and in safes located in such Restaurant (but excluding any deposits in safes located in such Restaurant and any amounts in local bank accounts) in an amount and in denominations adequate to do business at such Restaurant on the morning after the Closing Date (as such term is defined in Section 7) (subject to Section 1.6(c));

 

(e)       copies of real property records relating solely to the operations of the Restaurants, and copies of certain personnel and payroll records relating solely to the Hired Employees (as such term is defined in Section 5) who worked in the Restaurants immediately prior to the Closing; and

 

(f)        buildings and improvements, if any, owned by the Seller located on the Leased Real Property (as such term is defined in Section 1.3(b)).

 

 

 

It is expressly understood and agreed that:

 

 

The Personal Property shall not include the equipment listed or described on Schedule 1.2, which is leased by the Seller pursuant to lease agreements with third parties. Notwithstanding the foregoing, the Seller will assign and transfer to the Buyer all of Seller's right, title and interest in and to, and the Buyer will assume and will agree to faithfully perform, pay and discharge when due all of the terms, covenants, liabilities and obligations of Seller under each equipment lease (collectively, the "Equipment Leases") with respect to leased equipment located in the Restaurants (collectively, the "Leased Equipment"). The Buyer will have 90 days after the Closing Date to review any non-readily terminable Equipment Leases which the Seller may assign and transfer, and the Seller agrees to assume and may terminate those Equipment Leases rejected by the Buyer in writing within such 90 day period. Notwithstanding the foregoing, the Buyer agrees to perform the obligations arising under the Equipment Leases for at least 90 days following the Closing Date, if not terminable sooner, and for the entire term of the Equipment Leases if such Equipment Leases are not terminated or put back to the Seller within the allotted 90 days.

 

 

The Seller will assign and transfer to the Buyer all of Seller's right, title and interest in and to, and the Buyer will assume and will agree to faithfully perform, pay and discharge when due all of the terms, covenants, liabilities and obligations of Seller under each

 

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contract and agreement (including, without limitation, each service, security, maintenance, print advertising and supply contract) used on the Closing Date in the normal and customary operations of, and that relates specifically to, one or more of the Restaurants (collectively, the "Contracts"). Except as provided in Section 1.10, below, during the first 90 days after the Closing Date, the Buyer may reject any non-readily terminable contracts (other than print advertising contracts) which the Seller has assigned and transferred and the Seller agrees to assume and may terminate those Contracts rejected by the Buyer in writing within such 90 day period. Notwithstanding the foregoing, the Buyer agrees to perform the obligations arising under all of the Contracts for at least 90 days following the Closing Date, if not terminable sooner, and for the entire term of the Contracts if such Contracts are not terminated or put back to the Seller within the allotted 90 days. Additionally, the Buyer agrees that it will pay for or reimburse the Seller for any non-terminable benefits flowing from the Contracts (including print advertising) that are received by the Restaurants or the Business after the Closing Date for which PHI and/or the Seller have previously paid or will pay, regardless of the date of assignment or termination of such Contracts. The Contracts shall not include, and Seller will not assign, any contracts with hotels or motels for in-room delivery service of Pizza Hut or WingStreet products, any contracts for credit card service involving one or more of the Restaurants, any contracts with respect to participation in the National School Lunch Program, automobile leases, and any other contracts (other than print advertising contracts and computer hardware maintenance contracts) that are covered by a master agreement which includes any Pizza Hut and/or Pizza Hut/WingStreet restaurant other than the Restaurants listed on Schedule 1.1. All such contracts that are referenced in the immediately preceding sentence (other than print advertising contracts) will be terminated at Closing by Seller. Notwithstanding the foregoing, the Buyer may seek to contract with hotels, motels and school food service programs within the delivery areas, if any, designated in the Franchise Agreement (as defined at Section 1.10(a)). The parties will comply with the specifications of Schedule 1.2(b) regarding the transition of certain systems and equipment.

 

 

The Personal Property relating to any individual Restaurant shall not include any property or assets which have been disposed of prior to the Closing in the ordinary course of business consistent with the past operations of such Restaurant, and subject to the provisions of Section 4.1.

 

 

The Personal Property shall not include any patents, trademarks, copyrights, any applications or registrations for any thereof, or any trade secrets, software or other intellectual property or similar rights or assets.

 

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The Personal Property shall not include any cash (other than the change funds specifically referred to in Section 1.1(d)), bank accounts, cash equivalents or other similar types of investments or marketable securities.

 

 

 

 

The Seller owns the parcels of real estate listed or described on Schedule 1.3(a) hereto, together will all buildings and improvements located thereon (collectively, the “Owned Real Property”).

 

At Closing, the Buyer shall acquire the Owned Real Property located at ▇▇▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇▇▇, “AS IS, WHERE IS.” The Seller will convey the Owned Real Property located at ▇▇▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇▇▇, to the Buyer by special warranty deed in the form attached hereto as Exhibit “J” (the “Special Warranty Deed”).

 

At Closing, the Buyer shall lease the remaining Owned Real Property from PHI. The individual rental amounts and certain lease terms will be as provided on Schedule 1.3(a)(i).

 

 

The Seller leases from third parties the parcels of real estate listed or described on Schedule 1.3(b) (collectively, the "Leased Real Property") pursuant to existing real property leases (the "Real Property Leases"). The Buyer hereby agrees to execute an Assignment and Assumption of Lease Agreement and Blanket Guaranty, substantially in the form attached as Exhibit "F" hereto, with respect to each parcel of Leased Real Property, pursuant to which the Buyer will assume all of the Seller's right, title and interest in and to, and will agree to faithfully perform, pay and discharge when due all of the terms, covenants, liabilities and obligations of the Seller under the Real Property Lease related to such parcel of the Leased Real Property. The Buyer also agrees to name the Seller as an additional insured with respect to its insurance coverage required to be carried under the terms of the Real Property Leases related to each Leased Real Property, to indemnify the Seller from any losses resulting from any contingent liability that Seller may have with respect to the Leased Real Property. The Seller agrees to use reasonable, good-faith efforts to obtain:

 

(i)        from each landlord from whom consent to an assignment of a Real Property Lease to the Buyer is required, a consent to such assignment; and

 

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(ii)       from each landlord, an estoppel certificate with respect to each Real Property Lease.

 

The Seller need not pay any consideration or incur any incremental liability to obtain either a consent or an estoppel certificate from any landlord. If any required consent to an assignment cannot be obtained prior to Closing, the Seller may, at its option, either (i) proceed with the assignment and agree to indemnify the Buyer for any losses suffered by Buyer as a consequence of the lack of consent, or (ii) sublease the affected Leased Real Property to the Buyer, or (iii) enter into a management agreement or other similar arrangement with the Buyer on terms that are no less favorable to the Buyer than those contained in the Real Property Lease covering the affected Leased Real Property.

 

 

 

(a)       The Buyer acknowledges that certain operational licenses and permits, excluding alcoholic beverage licenses, are required in the operation of the Restaurants and the Business (collectively, "Licenses") and that neither such Licenses nor any alcoholic beverage licenses will be transferred or assigned by the Seller as part of the Acquisition. The Buyer further acknowledges, that in the event FCC licenses are currently used in the operation of the Restaurants, said licenses will not be transferred to the Buyer and the Buyer will be responsible for obtaining its own FCC licenses. The Buyer recognizes that it must make application to the appropriate regulatory agencies for all necessary Licenses. Application for all required Licenses shall be in accordance with Section 1.4(b). Upon the execution of this Agreement by all parties hereto, the Buyer agrees to promptly file all necessary applications. The Buyer acknowledges that the Buyer is responsible for obtaining alcoholic beverage licenses in the event Buyer desires to sell alcoholic beverages in the Restaurants. All costs, fees and expenses associated with the Buyer obtaining new Licenses (including alcoholic beverage licenses) shall be borne by the Buyer.

 

(b)       The Buyer hereby agrees that neither it nor any of its Affiliates (as defined in Section 8.12(e)) will take any action, or fail to take any action, which would result in any of the Seller’s Licenses (including alcoholic beverage licenses) being revoked or otherwise terminated prior to Closing. The Buyer's applications for Licenses (including alcoholic beverage licenses) shall specify that such Licenses are not to become effective until the day following the Closing Date and that the approval of such applications by the applicable agency or authority shall be conditioned upon the event of Closing. In the event that this Agreement is terminated or abandoned prior to the Closing or the Closing Date is rescheduled, the Buyer hereby agrees, at its cost, to immediately withdraw or reschedule all pending applications with respect to all Licenses (including alcoholic beverage licenses) and to otherwise take all action, in cooperation with the Seller, as may be required to cause all rights in the applicable Licenses (including alcoholic beverage

 

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licenses) to remain with or return to the Seller. This Section 1.4(b) shall expressly and permanently survive the termination or abandonment of this Agreement.

 

(c)       The Buyer and Seller acknowledge that neither this Agreement nor the Closing will be conditioned upon or subject to the Buyer's ability to obtain the Licenses (including alcoholic beverage licenses). The Seller will remove all of its Licenses (including alcoholic beverage licenses) from the Restaurants on the Closing Date.

 

(d)       The Seller agrees to provide the Buyer with license screen summaries of the Licenses (to the knowledge of Seller) under which the Seller currently operates the Restaurants, excluding any and all construction, building, zoning and occupancy permits.

 

 

 

At the close of business on the Closing Date, Seller’s representatives (who may, at the Buyer's election, be accompanied by the Buyer's representatives) will take inventory of the food ingredients, supplies, paper products, and other consumables in each Restaurant and count each Restaurant's change fund. The Buyer may, at its option, send its representatives to the Restaurants to accompany Seller’s representatives during these inventory/cash counts, and may then verify the accuracy of those inventory/cash counts. Unless the Buyer's representatives accompany Seller’s representatives during these inventory/cash counts and point out any discrepancies during the inventory/cash counts, the inventory/cash counts prepared by Seller’s representatives will be final. Any differences between the actual inventories and change funds and the estimates described in Section 1.6 will be resolved pursuant to Section 7.1.

 

 

 

As consideration for the transfer of the Assets and the other undertakings of the Seller and PHI in this Agreement, the Buyer shall pay the following amounts to the parties and at the times noted:

 

 

 

At Closing, the Buyer shall pay to the Seller the sum of $23,572,147 representing the Purchase Price.

 

 

Within fifteen (15) days after the Closing, PHI will submit a request for reimbursement from Buyer for the net amounts due PHI for useable inventories, change funds, prepaid items (including rent and advertising), property taxes, title, surveys and utilities. Buyer

 

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will promptly pay such amounts within fifteen (15) days after receiving such request for reimbursements. No amounts will be paid to PHI and/or Seller prior to the Closing.

 

 

At Closing, or when otherwise due, as provided in Section 7.8, the Buyer shall pay to the Seller, or to the appropriate governmental authority, any and all applicable sales, use, excise, transfer, documentary, and recording fees and taxes, and all other fees and taxes arising from the Acquisition (other than Seller’s income taxes) that any party hereto may be required to pay by any applicable law, rule or regulation.

 

 

 

At Closing, Buyer will reimburse Seller for the actual construction, permitting and architectural and engineering costs incurred prior to the Closing to construct the stores that are listed on Schedule 1.6. In addition, ▇▇▇▇▇ will reimburse Seller such costs for any other new construction completed or in progress at the Closing (including WingStreet conversions completed after August 1, 2008). The amounts to be reimbursed for the stores listed on Schedule 1.6 for construction actually completed as of Closing will be certified in writing by Seller at closing and such amount shall be paid at Closing, but such amount will not exceed the amounts outlined in Schedule 1.6. The Seller shall provide such detail as to such amounts to be reimbursed as shall be reasonably requested by the Buyer. The WingStreet conversions and the costs incurred, or to be incurred, for such conversions are listed on Schedule 1.6(a).

 

 

At Closing, or when otherwise due, the Buyer shall pay to the Seller, or to the appropriate payee, any other amounts due under this Agreement (including any schedule hereto) or any other agreement contemplated hereby.

 

The Purchase Price and all other amounts payable by the Buyer to Seller at Closing shall be paid by wire transfer of immediately available funds to an account designated by Seller. All such amounts must be wired to Seller by no later than 12:01 p.m. on the Closing Date. The Purchase Price includes the initial franchise fees required by the Franchise Agreement (as defined in Section 1.10(a)), which initial fees will be collected by Seller and remitted to PHI. The Purchase Price does not include any other fees due under the Franchise Agreement.

 

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1.7  Closing Documents.

 

Prior to or at the Closing of the Acquisition, the Seller, PHI, and the Buyer will exchange the following fully executed documents:

 

 

 

 

(d)       the Pepsi-Cola Beverage Supply and Marketing Agreement in the form attached as Exhibit “D”;

 

(e)       Assignment and Assumption Agreement for the Real Property Leases and Blanket Guaranty in the form of Exhibit “F” hereto, accompanied by any required consents and estoppel certificates (or indemnities) as contemplated by Section 1.3(b);

 

(f)        Assignment and Assumption Agreement for the Equipment Leases and Contracts being assumed in the form of Exhibit “G” hereto;

 

(g)       the Access and Confidentiality Agreement in the form attached as Exhibit “H”;

 

 

(i)        the WingStreet Development Authorization Agreement attached as Exhibit “K”;

 

(j)        Lessor Agreements covering the Owned Real Property in the form attached as Exhibit “L”;

 

(k)       a Special Warranty Deed for the Owned Real Property located at ▇▇▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇ ▇▇▇., ▇▇▇▇▇, ▇▇▇▇▇▇▇, in the form of Exhibit “J”; and

 

 

 

 

At the Closing, the Buyer shall assume from and after the Closing Date the liabilities that relate to the operation of the Restaurants, including the obligations of Seller under the Contracts, the Equipment Leases and the Real Property Leases to the extent provided in this Agreement (excluding liabilities arising out of or resulting from any breach by Seller or any of its predecessors in interest of any of the Contracts, the Equipment Leases and the Real Property Leases), subject to Buyer’s rejection rights under Sections 1.2(a) and 1.2(b) (the "Assumed Liabilities"). Except as specifically contemplated by this

 

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Agreement, the Buyer will not assume (i) any liabilities or obligations other than the Assumed Liabilities or (ii) any liabilities or obligations that arise from the operations of the Restaurants on or before the Closing Date. Seller agrees to timely perform all obligations relating to the Restaurants and the PH Business that arise out of operations of the Restaurants or the PH Business for the period on or prior to the Closing Date.

 

 

 

Due to the critical timeline requirements to close the transaction, PHI may order title searches on all Owned Real Property and Leased Real Property to be transferred to the Buyer pursuant to this Agreement. These title searches will be performed by a national title company approved by PHI. If PHI has established relations with such companies, the Buyer will be entitled to the benefit of PHI’s preferred rates. If permissible under applicable law and the terms of any agreement with such companies, the fees paid for the searches may be applied toward the title policy costs for title policies desired by the Buyer based upon these title searches. In the event Buyer or ▇▇▇▇▇’s lender requires environmental reports relating to the Owned Real Property, the Buyer shall first obtain PHI’s prior written consent and shall execute the Access and Confidentiality Agreement substantially in the form attached hereto as Exhibit “H”, and shall retain a nationally recognized firm approved by PHI to perform such work. PHI will not consent to any invasive environmental audit or review and the results of any permitted environmental audit or review will not affect Buyer’s obligations hereunder. To the extent that Buyer or ▇▇▇▇▇’s lender requires surveys of the Owned Real Property, Buyer shall retain a nationally recognized firm approved by PHI to perform such work. The consultants referenced in this Section 1.9 will be retained solely by ▇▇▇▇▇, but Seller shall have the right to obtain copies of any documents or reports that they prepare. As provided for in Sections 1.6 and 7.8, the Buyer shall reimburse the Seller at Closing (or at such other time as contemplated by those provisions) for all actual or estimated costs incurred by Seller in obtaining title insurance, surveys and/or environmental reports..

 

Notwithstanding the foregoing, Buyer will not be responsible for the payment or reimbursement of any costs relating to title insurance, surveys and/or environmental reports on any of the subject Owned Real Property unless such service is specifically requested by ▇▇▇▇▇, and the request is given to Seller and/or PHI forty-five (45) days prior to Closing.

 

 

 

Prior to or at Closing, Buyer will execute any and all agreements that PHI customarily requires of franchisees including, but not limited to those described in this Section 1.10.

 

(a)       Prior to or at Closing, PHI will grant and Buyer will enter into a Pizza Hut, Inc. Location Franchise Agreement in the form attached hereto as Exhibit “B” (the “Franchise

 

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Agreement”). A copy of the form of the Franchise Agreement has previously been provided to Buyer with PHI’s Franchise Disclosure Document.

 

(b)       Prior to or at Closing, PHI will grant and ▇▇▇▇▇ will execute an Amendment to the Franchise Agreement (the “Franchise Agreement Amendment”) in the form attached as Exhibit “C”;

 

(c)       If required, prior to or at Closing, Buyer will execute a franchisee version of the Pepsi-Cola Beverage Supply and Marketing Agreement (“Pepsi Agreement”) in the form attached as Exhibit “D”, pursuant to which Buyer will agree, subject to certain exceptions provided for in the Pepsi Agreement, that Pepsi products will be the exclusive beverages sold, dispensed or otherwise made available or advertised, displayed or promoted in the Restaurants.

 

(d)       Prior to or at Closing, ▇▇▇▇▇ will execute a WingStreet Development Authorization Agreement in the form attached as Exhibit “K.”

 

 

 

Seller represents and warrants to the Buyer that as of the date of this Agreement and as of the Closing, except as provided in the PH Disclosure Schedule attached hereto:

 

 

 

Seller is a corporation duly organized and in good standing under the laws of the jurisdiction of its incorporation, and has full corporate power and authority to execute, deliver and perform its obligations under this Agreement and each other agreement or document executed or to be executed by Seller in connection herewith, and to consummate the transactions contemplated hereby and thereby. Seller is authorized to do business and is in good standing in the states in which the Restaurants operated by Seller are located. This Agreement has been, and each other agreement or document to be executed by Seller in connection herewith will be, duly executed and delivered by Seller and constitutes, or will constitute, a legal, valid and binding obligation of Seller, enforceable against Seller in accordance with its terms, except as affected by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally, general equitable principles (whether considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing.

 

 

 

The execution, delivery and performance of this Agreement and any other agreements or documents contemplated hereby and the consummation by Seller of the transactions contemplated hereby or thereby do not and will not:

 

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(a)       conflict with or constitute a violation of the certificate of incorporation or by-laws of Seller;

 

(b)       conflict with or constitute a violation of (with or without the giving of notice or the lapse of time or both) any provision of any law, judgment, order, decree, rule or regulation of any legislative body, court, governmental or regulatory authority or arbitrator which is applicable to or relates to Seller; or

 

(c)       with or without the giving of notice or the lapse of time or both, violate or conflict with, constitute a default under, result in a breach, acceleration or termination of any provision of, or require notice to or the consent of any third party under, any contract, agreement, commitment, indenture, mortgage, deed of trust, lease, licensing agreement, note or other instrument or obligation to which Seller is a party or by which Seller is bound, which could, individually or in the aggregate, reasonably be expected to have a material adverse effect upon Seller or the ability of Seller to perform its obligations under this Agreement or any other agreement or document contemplated hereby.

 

 

 

Except the filings with the Federal Trade Commission (the "FTC") and the Department of Justice (the "DOJ") referred to in Section 4.3, no material consent, approval, or authorization of, or designation, declaration or filing with, or notice to, any legislative body, court, governmental or regulatory authority or arbitrator under any provision of any law, judgment, order, decree, rule or regulation is required on the part of Seller in connection with the execution, delivery and performance of this Agreement or any other agreement or document contemplated hereby or with the consummation of the transactions contemplated hereby and thereby.

 

 

 

Seller has good and marketable title to all of the Personal Property and the Owned Real Property with respect to the Restaurants operated by Seller, free and clear of any liens and encumbrances, except for (i) Personal Property, with respect to any Restaurant operated by Seller, disposed of prior to the Closing in the ordinary course of business of such Restaurant consistent with the past operations of Seller and Section 4.1, below, (ii) certain fixtures, buildings and improvements located on the Leased Real Property which Seller has the right to use pursuant to the Real Property Leases (or any of them), (iii) easements or other encumbrances which do not materially adversely affect the ownership or full use and enjoyment of the Owned Real Property, or the purposes for which it is currently used, and (iv) liens for taxes and assessments for the current period that are not yet due and payable. This representation does not constitute a representation by Seller as to the title of Seller's lessors of any Leased Real Property or Leased Equipment, nor does this representation constitute a representation of the condition of any of the Personal

 

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Property or the Owned Real Property or the Leased Real Property, which is sold or leased, as applicable, "AS IS, WHERE IS", with all faults, except as otherwise specifically provided in these representations and warranties and with respect to Critical Deficiencies.

 

 

 

The Personal Property and the Leased Equipment with respect to the Restaurants operated by Seller constitute all of the items of tangible personal property required to operate such Restaurants as Pizza Hut and/or Pizza Hut/WingStreet restaurants. This representation does not constitute a representation of the condition of the Personal Property or Leased Equipment, each of which are sold or assigned, as applicable, "AS IS, WHERE IS", with all faults, except as otherwise specifically provided in these representations and warranties and with respect to Critical Deficiencies.

 

 

 

Each of the material Equipment Leases with respect to the Restaurants operated by Seller is in full force and effect, and to the knowledge of Seller, Seller has not received notice of a material default under any of them. Each of the Real Property Leases with respect to the Restaurants operated by such Seller is in full force and effect, and such Seller has not received notice of any uncured default under any of them. Such Seller has the right to assign each such Equipment Lease and Real Property Lease to the Buyer, providing the Buyer with the right to use such Leased Equipment or to occupy such Leased Real Property, as the case may be, on terms and conditions that are materially the same as Seller had prior to any such assignment. This representation does not constitute a representation as to the adequacy of any lessor's title to any of the Leased Equipment or the Leased Real Property, as the case may be.

 

 

 

Seller carries adequate insurance (both in form and amount), subject to deductibles, with respect to the Business and real and personal property of the Restaurants operated by Seller. Such insurance is in effect and will remain in effect through the Closing Date.

 

 

 

Seller or its consolidated parent has filed all requisite federal, state and local tax returns and has paid all taxes required thereby, to the extent they have become due and payable, other than (i) those not yet delinquent and presently payable without penalty or interest, and (ii) any that are being contested in good faith by appropriate proceedings. The Seller will indemnify the Buyer for any damages suffered by the Buyer as a result of the Seller’s failure to pay any such taxes to the extent such taxes related to the ownership or operation of the Restaurants prior to the applicable Closing Date.

 

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Neither the Seller, nor any of its respective Affiliates or any of their respective stockholders, directors, officers, partners or employees, on behalf of Seller, has retained or dealt with any broker or finder, or has incurred or will incur any liability for brokerage fees, commissions or finder's or similar fees in connection with the transactions contemplated by this Agreement or the other documents contemplated hereby.

 

 

 

Each of the unaudited profit and loss summaries (the "Profit and Loss Summaries") that relate to the Restaurants for the periods ended August 15, 2008 previously delivered to the Buyer are true and correct in all material respects. Since August 15, 2008, none of the Restaurants have suffered any material adverse change in its financial condition or results of operations other than changes in the ordinary course of business that, individually or in the aggregate, have not had a Material Adverse Effect on such Restaurants. ▇▇▇▇▇▇ agrees to inform the Buyer of any material adverse changes to the financial condition or results of operations of the Restaurants prior to the Closing.

 

 

 

To the best of the Seller’s knowledge, without independent investigation and except as otherwise reflected in Seller’s files regarding the Restaurants which have been provided to Buyer:

 

 

(b)       No underground petroleum or chemical storage tanks or underground storage facilities are located under the Restaurants;

 

(c)       No contaminant, industrial waste, pollutant1, toxic or hazardous waste, or any similar substance of any kind or character has been stored, processed, or disposed of in or around the Restaurants by the Seller in conducting its business, or discharged at any time by the Seller directly or indirectly into the environment in violation of any law or

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¹             The term "pollutant" means any substance subject to control under the Federal Water Pollution Act, 33 U.S.C. §1251, et seq., or the Clean Air Act, 42 U.S.C. §7401, et seq., or regulations promulgated thereunder. The term "toxic or hazardous waste" means any chemical, substance, or material that is classified by the Environmental Protection Agency as a hazardous substance under the Comprehensive Environmental Response, Compensation' and Liability Act of 1980, 42 U.S.C. §9601, et seq., or regulations promulgated thereunder, or under the Resource Conservation and Recovery Act of 1976, 42 U.S.C. §6901, et seq., or regulations promulgated thereunder, or which is a petroleum product, or which is classified by any applicable state or local regulation or statute as a hazardous was te.

 

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governmental regulation applicable to the Seller, or into any sanitary sewer connection or treatment system except in conformity with requirements of all applicable laws, regulations and valid permits nor has any such act or occurrence taken place under the ownership of a prior owner which has not been cured, except in such instances which would not have a Material Adverse Effect on the Restaurants taken as a whole; and

 

(d)       With respect to the Restaurants, the Seller has not at any time been the subject of any governmental investigation or proceeding pertaining to the use, storage, processing, transportation or disposition of toxic or hazardous waste or any other subject or material that has been determined to be hazardous to human health under applicable law or government regulation, nor has it been the subject of any governmental investigation or proceeding pertaining to violation of any waste water or sewage disposal statutes or regulations applicable to the business and operations of the Seller.

 

 

 

The Buyer represents and warrants to the Seller that as of the date of this Agreement and as of the Closing, except as provided in the NPC Disclosure Schedule attached hereto:

 

 

 

The Buyer is a duly organized corporation and in good standing under the laws of the jurisdiction in which it is incorporated and in which it is doing business, and has full power and authority to execute, deliver and perform its obligations under this Agreement and each other agreement or document executed or to be executed by it in connection herewith, and to consummate the transactions contemplated hereby and thereby. The Buyer meets all of the standards for, and requirements of, franchisees of PHI, including without limitation the standards set forth in the Manual (as defined in the Franchise Agreement) and the requirements set forth on Schedule 3.1 hereto. This Agreement has been, and each other agreement or document to be executed by the Buyer in connection herewith will be, duly executed and delivered by the Buyer and constitutes, or will constitute, a legal, valid and binding obligation of the Buyer, enforceable against the Buyer in accordance with its terms, except as affected by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally, general equitable principles (whether considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing.

 

 

 

The execution, delivery and performance of this Agreement and any other agreements or documents contemplated hereby and the consummation by the Buyer of the transactions contemplated hereby or thereby do not and will not:

 

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(a)       conflict with or constitute a violation of the articles of incorporation or by-laws or other organizational documents, as applicable, of the Buyer or any of its Affiliates that sign this Agreement and/or the Franchise Agreement;

 

(b)       conflict with or constitute a violation of (with or without the giving of notice or the lapse of time or both) any provision of any law, judgment, order, decree, rule or regulation of any legislative body, court, governmental or regulatory authority or arbitrator which is applicable to or relates to the Buyer; or

 

(c)       with or without the giving of notice or the lapse of time or both, violate or conflict with, constitute a default under, result in a breach, acceleration or termination of any provision of, or require notice to or the consent of any third party under, any contract, agreement, commitment, indenture, mortgage, deed of trust, lease, licensing agreement, note or other instrument or obligation to which the Buyer is a party or by which the Buyer is bound, which could, individually or in the aggregate, reasonably be expected to have a material adverse effect upon the Buyer or the ability of the Buyer to perform its obligations under this Agreement or any other agreement or document contemplated hereby.

 

 

 

No consent, approval, or authorization of, or designation, declaration or filing with, or notice to, any legislative body, court, governmental or regulatory authority or arbitrator under any provision of any law, judgment, order, decree, rule or regulation is required on the part of the Buyer in connection with the execution, delivery and performance of this Agreement or any other agreement or document contemplated hereby or with the consummation of the transactions contemplated hereby and thereby, except for the filings with the FTC and the DOJ referred to in Section 4.3.

 

 

 

Neither the Buyer nor any of its Affiliates or any of its respective stockholders, directors, officers, partners or employees, on behalf of the Buyer, has retained or dealt with any broker or finder, or has incurred or will incur any liability for brokerage fees, commissions or finder's or similar fees in connection with the transactions contemplated by this Agreement or the other documents contemplated hereby.

 

 

 

Neither the Buyer nor any Affiliate of it is in default under any existing franchise agreement with PHI or with YUM! Brands, Inc. or any division or subsidiary thereof, nor does there exist any condition or conditions that, with the giving of notice, the passage of time, or both, would ripen into a default thereunder.

 

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Buyer shall have satisfied, or agreed to satisfy, in a manner satisfactory to Seller and PHI, the operational and financial conditions set forth on Schedule 3.7 attached hereto, which include by way of example, the conditions applicable to all current or future sale/leaseback transactions involving any of the Restaurants or any other Yum! Brands restaurants or businesses that Buyer and/or its affiliates may now or hereafter own, operate or otherwise be involved in. Any such failure by Buyer to satisfy the conditions set forth on Schedule 3.7 shall constitute a breach by Buyer under the PHI Franchise Agreement.

 

 

 

 

 

Prior to and including the Closing Date, the Seller will operate the Restaurants in the ordinary course of business. Seller will maintain all of the Assets with respect to the Restaurants operated by Seller in substantially the same condition (ordinary wear and tear excepted) as they were in on the date of this Agreement, except for (i) Personal Property disposed of in the ordinary course of business consistent with the past operations of such Restaurant; provided, however, any such Personal Property must be replaced by similar assets of equal or greater value in like or better condition than those assets transferred or removed or (ii) Personal Property transferred among Restaurants that are subject to this Agreement. Seller will only make capital improvements to the Restaurants that have been authorized as evidenced by a fully approved and executed CAPEX dated prior to the date of this Agreement. Notwithstanding the foregoing, Seller will not perform any CAPEX work that is otherwise scheduled to occur after the Closing Date. The damage or destruction of any Restaurant operated by Seller before the Closing will not affect the Buyer's obligation to close the transactions contemplated by this Agreement. Subject to the requirements of any applicable Real Property Lease, Seller shall proceed to repair the damage or, if such repair is not reasonably practicable in the opinion of Seller prior to the Closing Date, then Seller shall credit to the Buyer at the Closing an amount equal to the sum of the reasonable cost (as agreed by the Buyer and the Seller) of repairing or restoring the damaged or destroyed restaurant to substantially the same condition as immediately before the damage or destruction.

 

 

 

The Buyer (and/or its consultants, attorneys, lenders or advisors) may not inspect any Restaurant or contact any Pizza Hut employees working in such Restaurant or market until (i) Seller has made Employee Announcements to the employees of the Restaurants, and (ii) the Buyer (and when applicable in Seller and PHI’s sole discretion, the Buyer’s

 

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consultants, attorneys, lenders or other advisors) has executed the Access and Confidentiality Agreement in the form attached hereto as Exhibit “H”. Once these conditions have been met, if the Buyer chooses to inspect the Restaurants (under the conditions set forth herein and in the Access and Confidentiality Agreement), the Buyer must schedule such inspections with PHI, the Buyer must be accompanied by an agent or employee of PHI and the Buyer must conduct the inspections in a manner that minimizes disruption to the Restaurant’s operations. Any such inspections are for the Buyer’s information only; the Restaurants are being sold “AS IS, WHERE IS”, except as otherwise provided in the representations and warranties in this Agreement and with respect to Critical Deficiencies. Buyer’s (and/or its consultant’s, attorney’s, lender’s or advisor’s) right to perform environmental audits on the Owned Real Property is subject to PHI’s prior written consent (which shall not be unreasonably withheld, conditioned or delayed) and the conditions set forth in Section 1.9, as well as the execution and delivery of the Access and Confidentiality Agreement, described above, and the terms and conditions contained therein. Buyer does not have the right to perform environmental audits of the Leased Real Property. Buyer acknowledges and agrees that a violation of this Section 4.2 shall constitute a default under this Agreement by ▇▇▇▇▇ and Seller shall have, in addition to any other rights or remedies hereunder, at law or in equity, the right to terminate this Agreement.

 

 

 

The Buyer and the Seller shall, in cooperation with each other, file (or cause to be filed) with each of the DOJ and the FTC any reports or notifications that may be required to be filed by them under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976 (the "HSR Act") in connection with the transactions contemplated by this Agreement. If the Seller, based upon the advice of counsel, determines that any filings with the DOJ and the FTC are necessary, the Buyer and any necessary Affiliates of the Buyer agree to make any such filings in connection with the transactions contemplated by this Agreement upon request from PHI. The Buyer and the Seller shall promptly comply with all requests for further documents and information made by the DOJ or the FTC, shall use their reasonable best efforts to obtain early termination of all waiting periods under the HSR Act, and shall furnish to the others all such information in its possession as may be necessary for the completion of the reports or notifications to be filed by the others. All fees due from any party to the FTC or the DOJ under the HSR Act in connection with the filing of any of those reports or notifications shall be shared equally between Buyer and PHI.

 

 

 

(a)       Prior to execution of this Agreement, the Buyer (i) shall notify the Sellers of the source(s) of financing that the Buyer proposes to use to consummate the transactions contemplated by this Agreement, and (ii) shall provide the Sellers with a copy of the commitment(s) of the source(s) to provide such financing. The Buyer hereby

 

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acknowledges and agrees that at least 20% of the total transaction costs (which include the Purchase Price and all closing costs and other costs or indebtedness to be incurred by the Buyer related to the Acquisition) (collectively, the “Total Transaction Costs”), must be in the form of at-risk equity, as determined by the Sellers, and that no more than 80% of the Total Transaction Costs may be secured by a lien on the real and personal property (the "Property") being sold by the Sellers to the Buyer pursuant hereto. A Sources and Uses of Funds Statement, detailing all amounts and sources of equity, closing costs and any indebtedness to be incurred by Buyer related to the Acquisition, has been provided by Buyer and is attached as Schedule 4.4 hereto. The Buyer acknowledges that PHI and the Sellers' approval of the Buyer's equity structure and financing was a condition to entry into this Agreement and the Acquisition. The Buyer agrees that it will not refinance the Buyer's debt or equity, without the prior written consent of PHI, for a period of three years from the Closing Date, which consent shall not be unreasonably withheld. The Buyer and Sellers and PHI agree, however, that it shall not be unreasonable for PHI to withhold consent if such refinancing or restructuring would result in a reduction of the equity of the Buyer below 20% of the Total Transaction Costs. The Buyer agrees to, and ▇▇▇▇▇▇ does, authorize each proposed source of third-party financing to provide to the Sellers, from time to time, information with respect to the likelihood and form in which financing will be provided to the Buyer. At the time of applying for any third-party financing, the Buyer shall notify the third party of the Sellers' right to the information described in this Section and of the terms and requirements of this transaction and of this Agreement and the agreements contemplated hereby.

 

(b)       The Buyer hereby acknowledges and agrees that the Buyer shall not pledge or ▇▇▇▇▇ ▇ ▇▇▇▇ or security interest or otherwise encumber any portion of its interest in or under (i) any of the Real Property Leases or Equipment Leases without the prior written consent of the lessor thereunder (which consent shall be in such lessor's sole discretion, with the Sellers having no control over whether or not such lessor will consent), including the filing of leasehold mortgages or financing statements, (ii) any of the Contracts without the prior written consent of the other party thereto (which consent shall be in such other party's sole discretion, with the Sellers having no control over whether or not such other party will consent), (iii) the Franchise Agreement and any other franchise agreements between PHI and the Buyer or its Affiliates, or (iv) any intellectual property of PHI, any rights in any "Pizza Hut Marks" (as defined in the Franchise Agreement), any proprietary PHI software or computer operating system or any PHI trademarked property. The Buyer further acknowledges and agrees that it will not permit any of the equity interests in the Buyer to be pledged or otherwise encumbered for any reason. The Buyer agrees that the Buyer will not take any action which alters or affects any of the Sellers' rights under the Real Property Leases or the Assignment and Assumption of Lease Agreements and that the terms of any financing obtained by the Buyer shall not violate the terms of the Franchise Agreement, this Agreement (including any schedules and exhibits thereto) or the Real Property Leases, including but not limited to terms concerning payment of insurance proceeds. The Sellers agree that the Buyer may grant

 

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and file leasehold mortgages covering the Owned Real Property pursuant to the terms of a Lessor Agreement in the form attached as Exhibit “L”.

 

(c)       Without the prior written consent of the PHI Law Department, attention ▇▇▇▇ ▇. ▇▇▇▇▇▇, none of the Buyer, its Affiliates or any of its respective agents or representatives, including any parties who may be providing financing to the Buyer, shall have any contact with any of the lessors of the Leased Real Property or the Leased Equipment or any of the parties to the Contracts (other than the Sellers) prior to the Closing.

 

(d)       The covenants contained in this Section 4.4, or some of them will also be contained in an amendment to the Franchise Agreement and any breach of such covenants shall also constitute a default under Section 18.2 of the Franchise Agreement.

 

 

 

 

 

The Buyer shall cause all Memoranda of Lease covering the Owned Real Property and all Assignment and Assumption of Lease Agreements relating to the transfer of all Leased Real Property pursuant to this Agreement to be recorded in the local county or applicable authority’s recording or real estate recording office where each such property is located no later than five (5) business days after the Closing Date.

 

 

 

 

 

Unless otherwise agreed before Closing, with respect to any of Seller’s restaurant-level employees, Seller will terminate the employment of those employees at the close of business on the Closing Date. Seller will directly pay all terminated employees, including any of the employees hired by the Buyer (the "Hired Employees") for earned and unused vacation, in accordance with Seller’s normal policies (which does not call for Seller to pay for accrued but unearned vacation).The terminated employees may become employees of the Buyer as of the day following the Closing Date and PHI hereby waives any violation of Section 13.2 of the Franchise Agreement with respect to the Hired Employees. All claims of the employees arising out of their employment with Seller on or before the Closing Date will be the sole liability of Seller, and Seller will indemnify the Buyer from all claims of that nature.

 

As between ▇▇▇▇▇▇ and the Buyer, the Buyer assumes all claims of the Hired Employees relating to employment by the Buyer arising after the Closing Date, and the Buyer will indemnify Seller from all such claims by them. For the purpose of determining benefits for Hired Employees, the Buyer agrees to honor the Hired Employees' length of service and anniversary dates with the Seller. The Seller will furnish the Buyer a list of the Hired Employees that defines their length of

 

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service and anniversary dates. The Buyer understands that the active participation of the Hired Employees in all benefit plans maintained by the Seller will end on the Closing Date. Seller will continue any employee benefit payment obligations for Hired Employees who are on leave of absence or disabled on the Closing Date in accordance with the Seller’s or PHI's policies.

 

If any of the Seller’s above restaurant employees are transferred to other operations of the Seller ("Transferred Employees"), the Seller will (upon request by the Buyer) use its reasonable best efforts to provide to the Buyer the services of some or all of the Transferred Employees (as chosen by the Buyer) for up to 60 days after the Closing. The Buyer will reimburse the Seller for all payroll and benefit costs associated with any such loaned Transferred Employees. Compensation increases to employees of the PH Business shall be permitted as provided in Schedule 5.

 

 

 

(a)       The obligations of the Seller, on the one hand, and the Buyer, on the other hand, to consummate the transactions contemplated by this Agreement are subject to the fulfillment, at or prior to the Closing, of each of the following conditions:

 

(i)        there shall not be in effect any preliminary or permanent injunction or other order issued by any federal or state court of competent jurisdiction in the United States or by any United States federal or state governmental or regulatory body nor any statute, rule, regulation or executive order promulgated or enacted by any United States federal or state governmental authority which restrains, enjoins or otherwise prohibits the consummation of the transactions contemplated by this Agreement or any other agreement or document contemplated hereby; and

 

(ii)       any filings required to be made under the HSR Act shall have been made, and all applicable waiting periods thereunder with respect to the transactions contemplated by this Agreement shall have expired or been terminated.

 

(b)       Seller's obligations to consummate the transactions contemplated by this Agreement are subject to the fulfillment, at or prior to the Closing, of each of the following conditions (any of which may be waived in writing by Seller):

 

(i)        The representations and warranties of the Buyer set forth in this Agreement shall be true and correct (disregarding all qualifications or limitations as to “materiality,” “Material Adverse Effect” and words of similar import set forth therein (other than the representations and warranties contained in Section 2.1)) as of the date of this Agreement and as of the Closing Date as though made on the Closing Date (except to the extent such representations and warranties expressly relate to an earlier date, in which case as of such earlier date), except where the failure of such representations and warranties (other than the representations and warranties contained in Section 2.1) to be so true and correct

 

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has not had and would not have, individually or in the aggregate, a Material Adverse Effect;

 

(ii)       the Buyer shall have performed and complied with each obligation, covenant and condition required by this Agreement and the other documents contemplated hereby to be performed or complied with by it prior to or at the Closing, with such exceptions as could not reasonably be expected to result in a material adverse effect on the ability of the Buyer to perform its obligations under this Agreement or any other agreement or document contemplated hereby provided, however, that nothing in this subparagraph shall affect Seller’s rights under Section 4.2 in the event of a default thereunder;

 

(iii)      the YUM! Brands, Inc. Board of Directors, and PHI will have approved the transactions contemplated by this Agreement;

 

(iv)      the Seller will have received a copy of resolutions adopted at a meeting or unanimous written consent evidencing the action by the Buyer's Board of Directors approving the purchase of the Assets under this Agreement, which resolutions shall be certified by an authorized officer;

 

(v)       (A) the Buyer will deliver to Seller a statement, signed by the Buyer's Chief Financial Officer, certifying that the aggregate amount of the stockholders’ equity shown on Buyer’s pro forma balance sheet (which shall be prepared as of September 23, 2008 and shall give effect to the transactions contemplated by this Agreement (excluding any gain or loss associated with this transaction) and any net financing needed by Buyer to pay the Total Transaction Costs) and will constitute at least 20% of the total of such equity plus all funded indebtedness, in each case, on the same pro forma basis, and (B) Seller shall otherwise be reasonably satisfied in all respects with the capital structure of the Buyer; and

 

(vi)      the Buyer shall deliver to Seller and PHI, and the Seller and PHI shall have received from the Buyer and its Affiliates, as the Seller and PHI deem reasonably necessary, all Franchise Disclosure Document receipts, including those relating to any Addenda or Amendments.

 

(c)       The Buyer's obligation to consummate the transactions contemplated by this Agreement are subject to the fulfillment, at or prior to the Closing, of each of the following conditions (any of which may be waived in writing by the Buyer):

 

(i)        The representations and warranties of Seller set forth in this Agreement shall be true and correct (disregarding all qualifications or limitations as to “materiality,” “Material Adverse Effect” and words of similar import set forth therein (other than the representations and warranties contained in Section 2.1)) as of the date of this Agreement and as of the Closing Date as though made on the

 

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Closing Date (except to the extent such representations and warranties expressly relate to an earlier date, in which case as of such earlier date), except where the failure of such representations and warranties (other than the representations and warranties contained in Section 2.1) to be so true and correct has not had and would not have, individually or in the aggregate, a Material Adverse Effect;

 

(ii)       Seller shall have performed and complied with each obligation, covenant and condition required by this Agreement and the other documents contemplated hereby to be performed or complied with by it prior to or at the Closing, with such exceptions as could not reasonably be expected to result in a material adverse effect on the ability of the Seller to perform its obligations under this Agreement or any other agreement or document contemplated hereby; provided, however, that nothing in this subparagraph shall affect Buyer’s rights under Section 4.2 in the event of a default thereunder; and

 

(iii)      the Buyer will have received a copy of a resolution of Seller’s Board of Directors approving the sale of the Assets certified by an authorized officer of the Seller.

 

Notwithstanding the foregoing, however, ▇▇▇▇▇’s obligation to consummate the transaction contemplated by this Agreement is conditioned upon its ability to obtain the necessary financing upon terms that are acceptable to Buyer that does not result in the repricing of any of Buyer’s existing debt while preserving adequate liquidity as determined by Buyer in its sole discretion.

 

 

 

Unless otherwise agreed, the consummation of the transactions contemplated by this Agreement will occur at the "Closing", at 10:00 a.m. (local time) on December 8, 2008, at the offices of PHI in Dallas, Texas, or such other location as may be designated by the Seller in its reasonable discretion. (As used herein, the date the Closing actually occurs is referred to in this Agreement as the "Closing Date"). At the Closing, the Seller shall deliver to the Buyer such bills of sale, instruments of assignment, transfer and conveyance and the other documents contemplated by this Agreement. Against such delivery, the Buyer shall pay to the Seller the Purchase Price and all other amounts required to be paid at the Closing in accordance with Section 1.6 above and shall deliver the other documents contemplated by this Agreement. All actions taken at the Closing shall be deemed to have been taken simultaneously at the time the last of any such actions is taken or completed. Upon the completion of the Closing, title to the Assets and the assumption of the Assumed Liabilities will be deemed to be effective as of 11:59 p.m. on the Closing Date. The Seller will cooperate with the Buyer to see that the transfer of the Assets proceeds smoothly.

 

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From time to time after the Closing Date, the Buyer or the Seller may prepare and submit to the other party one or more post-closing statements concerning any obligations that become due under this Agreement that were not paid at Closing. The net amount owed will be paid within 30 days after receipt of the post-closing statement. Any amount not paid within 30 days after receipt of a post-closing statement will bear interest at the rate of 18% per annum, or the maximum legal rate. Without limiting the generality of this provision, the following is a non-exclusive list of some of the types of items that may be reimbursed through use of post-closing statements: rent; equipment lease payments; utilities; inventories and change funds; sales taxes and any applicable interest and penalties; real or personal property taxes; and advertising and other prepaid expenses. Reimbursement for certain smallware expense will be as provided in Schedule 7.1.

 

 

 

The Buyer will indemnify the Seller, its affiliates, subsidiaries, employees, officers, directors, and agents, on an after-tax basis, against any loss, cost, damage, or other expense (including attorney's fees) (collectively, "Losses") that arise from operation of the Restaurants or related properties after Closing. The Seller and PHI (jointly and severally) will indemnify the Buyer, its affiliates, subsidiaries, employees, officers, directors, and agents, on an after-tax basis, against any Losses that arise from operation of the Restaurants or related properties on or before the Closing.

 

 

 

Notwithstanding that the Assets are being sold to Buyer “AS IS, WHERE IS” except as otherwise provided in the respective representations and warranties of the parties in this Agreement), with all faults, and subject to the limitations set forth herein, Seller agrees to indemnify the Buyer for the actual costs incurred by Buyer to cure any Critical Deficiency. For purposes of this section, a “Critical Deficiency” is a deficiency in the kitchen (or other area of the Restaurant that is not accessible to the general public) that a local health department determines is of such a magnitude that the Buyer would not be permitted to open the subject Restaurant for business while such deficiency exists. Seller’s obligation to provide the Buyer such indemnity is conditioned upon the Buyer notifying the Seller of the Critical Deficiencies within seven (7) days after Closing and providing Seller with copies of all relevant inspection reports citing the Critical Deficiencies within thirty (30) days after Closing.

 

The maximum amount of the indemnity for which Seller will be liable hereunder will not exceed the lesser of $10,000 per Critical Deficiency or, in the aggregate for all Restaurants listed on Schedule 1.1, $3,000 per Restaurant. Seller will have no obligation to indemnify the Buyer for lost profits or other consequential damages resulting from any business interruption while the Critical Deficiencies are cured. Buyer specifically

 

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acknowledges that this provision supersedes entirely all prior oral or written discussions, agreements or understandings regarding the Seller’s responsibility for the costs to repair Critical Deficiencies or other faults related to the Assets. ▇▇▇▇▇▇ agrees to reimburse Buyer within forty-five (45) days after receiving a reimbursement request from ▇▇▇▇▇.

 

 

 

For the period of two years following the Closing, each of the parties covenants to cooperate and provide such additional documents or instruments as the other party may reasonably request for the purpose of carrying out this Agreement. Each of the parties will use reasonable efforts, none of which shall require the payment of any consideration, to have their present officers, directors, and employees cooperate after the Closing in furnishing information, evidence, testimony and other assistance concerning matters, including but not limited to litigation and employment matters, that occurred prior to or after the Closing.

 

 

 

For the period of twelve months after the Closing, the Buyer agrees to provide to the Seller complete monthly profit and loss statements on a unit by unit basis within 20 days after the end of each month. Additionally, for the period of twelve months after Closing and thereafter, the Buyer agrees to also provide the Seller (i) a statement of monthly gross sales on a unit by unit basis for each month within 10 days after the end of each month, (ii) profit and loss statements for each quarter within 45 days after the end of each quarter, and (iii) an annual profit and loss statement, an annual statement of cash flows and a consolidated balance sheet within 90 days after the end of each of the Buyer's fiscal years. All financial reporting referred to in this subsection shall be prepared and consistently applied in accordance with generally accepted accounting principles.

 

 

 

The Buyer acknowledges that:

 

(a)       Except as set forth in Section 7.6(b), below, the Seller (and its agents and employees) have made no statements, representations or warranties to the Buyer as an inducement for the Buyer's decision to purchase, except as contained in this Agreement or in the PHI Franchise Disclosure Document, and the Buyer's decision to purchase was made independently by it with the aid of professional counselors, including legal, accounting, and financial advisors.

 

(b)       The Seller has made available to the Buyer, before the Buyer's execution of this Agreement, the Profit and Loss Summaries. The Buyer's decision to purchase the Assets for the consideration set forth in this Agreement was made independently, based on this Agreement and on inspection of the Profit and Loss Summaries by the Buyer or its agents

 

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or representatives (and on other information available to the Buyer), without reliance on the book ledgers or on any oral statements of any kind or character by the Seller or its representatives.

 

 

 

The Buyer and the Seller will timely file any information statement required by regulations issued pursuant to Section 1060(b) of the Internal Revenue Code of 1986, as amended.

 

 

 

The Buyer will pay and indemnify the Seller from any and all closing costs including, but not limited to, environmental reports, title search fees, title insurance premiums, recording costs and survey costs, sales, use, excise, transfer, documentary, recording, property and other taxes and fees (except the Seller’s income taxes) and other costs for which Seller is to be reimbursed hereunder that arise out of the transactions contemplated by this Agreement that either the Seller or the Buyer may be required to pay, which shall become due and payable prior to, on or after the Closing Date.

 

 

 

 

 

Any notice or other communication under this Agreement shall be in writing (including, without limitation, by telecopy or like transmission) and shall be considered given (a) when delivered personally (including, without limitation, by overnight courier), (b) when telecopied (with confirmation of transmission having been received), or (c) three days after being mailed by registered mail (postage prepaid, return receipt requested), in each case to the respective parties at the addresses set forth below (or at such other address as a party may specify by notice to the other):

 

if to the Seller, c/o:

 

Pizza Hut, Inc.

▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇

Dallas, Texas 75254

Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.

Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇

 

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if to the Buyer, to:

 

NPC International, Inc.

▇▇▇▇ ▇. ▇▇▇^▇▇ ▇▇.

Overland Park, KS 66213

Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, President

 

With a copy to:

 

▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.

▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ LLP

Suite 2900

1200 Walnut

Kansas City, Missouri 64105

 

 

 

The provisions set forth in subsections 1.3(a), 1.4(b), 2.1, 2.2, 3.1, 3.2, 4.4, 8.4, 8.8 and 8.14 of this Agreement shall expressly and permanently survive the termination or abandonment of this Agreement. All covenants and agreements contained in this Agreement shall expressly and permanently survive the Closing Date and shall remain in full force and effect, except for the representations set forth in Sections 2 and 3, that are not listed in the first sentence of this Section 8.2, which representations shall expressly survive the Closing Date for a period of twelve months following the Closing Date.

 

 

 

This Agreement will terminate and be of no further force and effect if the transfer has not been consummated by the close of business on December 22, 2008.

 

 

 

No modification or waiver of any of the provisions of this Agreement, and no consent by any of the parties to any departure from the provisions of this Agreement by the other party, will be effective unless the modification or waiver is in writing and signed by the party or parties to be bound. Each modification or waiver will be effective only for the period, on the conditions, and for the specific instances and purposes specified in the writing. No notice to or demand on any of the parties in any case will entitle it, them, or any of them to any other or further notice or demand in similar or other circumstances.

 

 

 

This Agreement is intended to inure to the benefit of, and is binding upon, the parties and all of their respective successors and permitted assigns. This Agreement is not, however,

 

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assignable or transferable, in whole or in part, by any of the parties except upon the express prior written consent of all of the other parties, and nothing contained in this Agreement is intended to confer upon any person, other than the parties and their respective heirs, successors, and permitted assigns, any rights, remedies, or obligations under, or by reason of, this Agreement. Any request by the Buyer for the Seller’s consent to the assignment of this Agreement will be subject to the conditions on assignment contained in the Franchise Agreement. PHI and its respective successors and assigns are intended third-party beneficiaries of this Agreement. Notwithstanding the foregoing, however, PHI may assign all of its rights and obligations hereunder to YUM! Brands, Inc. ("YUM") or to any subsidiary of YUM that is the franchisor of the "Pizza Hut" concept and, upon such assignment, PHI will have no further liability hereunder.

 

 

 

If any provision or provisions of this Agreement or of any of the documents or instruments delivered pursuant hereto, or any portion of any provision hereof or thereof, is invalid or unenforceable pursuant to a final determination of any court of competent jurisdiction or a result of future legislative action, that determination or action will be construed (whenever possible) so as not to affect the validity or enforceability hereof or thereof and will not affect the validity or effect of any other portion hereof or thereof which shall remain in full force and effect.

 

 

 

This Agreement (including the Exhibits and the Schedules, which are incorporated into this Agreement by reference) contains the entire understanding of the parties with respect to the transactions contemplated by this Agreement and may be amended, modified, supplemented, or altered only by a writing duly executed by all of the parties. Any prior agreements or understandings relating to the same subject matter, whether oral or written, are entirely superseded by this Agreement (other than the confidentiality letter between the parties dated October 11, 2006).

 

 

 

This Agreement, the terms of the transactions contemplated by this Agreement, and any other information heretofore or hereafter disclosed or obtained in connection with this Agreement concerning the business, operations, affairs, or financial condition of any party hereto (collectively, the "confidential information"), will be kept confidential, except as otherwise required by law or legal process and except to the extent (i) the confidential information is or hereafter becomes lawfully obtainable from other sources who are under no confidentiality or fiduciary obligation not to make disclosure, or (ii) this duty of confidentiality is waived in writing by the party to whom the confidential information relates; provided however, that notwithstanding the foregoing, the confidential information may be disclosed to any lender, to YUM! Brands, Inc. or any of

 

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its Affiliates, or to the respective attorneys, accountants, and financial advisors of any party hereto and its Affiliates, provided that such persons or entities agree to keep such information confidential. These obligations of confidentiality will permanently survive termination or abandonment of this Agreement.

 

 

 

THIS AGREEMENT, AND ALL INSTRUMENTS DELIVERED IN CONNECTION WITH THIS AGREEMENT, UNLESS OTHERWISE EXPRESSLY PROVIDED IN THOSE OTHER INSTRUMENTS, SHALL IN ALL RESPECTS BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE SUBSTANTIVE LAWS OF THE STATE OF TEXAS WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.

 

 

 

The Seller and the Buyer each waive compliance by the other with any bulk sales or similar laws that may be applicable to the transactions contemplated by this Agreement.

 

 

 

Except as otherwise expressly provided in this Agreement, each of the parties will bear its own expenses incident to this Agreement and the transactions contemplated by this Agreement, including without limitation all fees and disbursements of counsel and accountants retained by the party, whether or not the transactions contemplated by this Agreement are consummated.

 

 

 

(a)       The headings of the various articles, sections and subsections of this Agreement have been inserted for the purpose of convenience of reference only, are not a part of this Agreement and shall not be deemed in any manner to modify, explain, enlarge or restrict any of the provisions of this Agreement.

 

(b)       When reference is made in this Agreement to an Article, Section, subsection, Schedule or Exhibit, such reference shall be to an Article, Section, subsection, Schedule or Exhibit of this Agreement unless otherwise indicated. Whenever the words "included", "includes" or "including" (or any other tense or variation of the word "include") are used in this Agreement, they shall be deemed to be followed by the words "without limitation". As used in this Agreement, the auxiliary verbs "will" and "shall" are mandatory, and the auxiliary verb "may" is permissive (and, by extension, is prohibitive when used negatively, as a denial of permission). All accounting terms used but not defined in this Agreement shall have the meanings determined by generally accepted accounting principles. The words "hereof", "herein" and "hereunder" and words

 

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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. The definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms and to the masculine as well as to the feminine and neuter genders of such term, and references to a person include any individual, corporation, partnership or other entity and its permitted heirs, successors and assigns. Any agreement, instrument or statute defined or referred to herein or in any agreement or instrument that is referred to herein means such agreement, instrument or statute as from time to time amended, modified or supplemented, including (in the case of agreements or instruments) by waiver or consent and (in the case of statutes) by succession of comparable successor statutes.

 

(c)       When reference is made in this Agreement to the "relevant" Franchise Agreement, such reference shall be to the Franchise Agreement to which the Buyer being referred to in the context of such reference is a party.

 

(d)       For purposes of this Agreement, the term "Affiliate" shall mean, with respect to any person or entity, any other person or entity that directly or indirectly controls, is controlled by, or is under common control with, such first person or entity.

 

(e)       The term “Material Adverse Effect” shall mean any circumstance, change in or effect on a party or its respective Business that, individually or in the aggregate with all other circumstances, changes in or effects on such party or its respective Business, is or is reasonably likely to be materially adverse to the franchise relationships, results of operations, financial condition or assets of the respective Business taken as a whole; provided, however, that none of the following shall be considered in determining whether there has been a breach of a representation, warranty, covenant or agreement in this Agreement that is qualified by the term “Material Adverse Effect” or whether a “Material Adverse Effect” has occurred: (a)(i) the taking of any action by a party approved or consented to in writing by the other party or (ii) any action specifically required to be taken or not taken by any party pursuant to the terms and covenants contained in this Agreement or (b)(i) changes in general economic conditions, (ii) changes in laws or interpretations thereof by a governmental authority, (iii) changes in generally accepted accounting principles, or (iv) changes in current conditions caused by acts of terrorism or war (whether or not pending, threatened or declared) occurring after the date hereof, which, in the case of each of the items in clause (b) of this proviso, do not materially disproportionately affect the respective Business relative to others persons or entities operating in the same industry.

 

 

 

Time is of the essence in the performance of this Agreement. Facsimile signatures, including signatures relating to the execution of this Agreement, shall be deemed legally binding.

 

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(a)       Except as required by law or legal process, Buyer, its Affiliates or any of its respective subsidiaries, employees, officers, directors, agents or representatives may not, without the prior written consent of the Seller (which consent shall not be unreasonably withheld, conditioned or delayed after the Closing Date but may be arbitrarily withheld, conditioned or delayed prior thereto), make any announcement to the public concerning the transactions contemplated by this Agreement.

 

(b)       Except as required by law or legal process, the Seller, its Affiliates or any of their respective subsidiaries, employees, officers, directors, agents or representatives may not, without the prior written consent of the Buyer (which consent shall not be unreasonably withheld, conditioned or delayed after the Closing Date but may be arbitrarily withheld, conditioned or delayed prior thereto), make any announcement to the public concerning the transactions contemplated by this Agreement, except as required by law.

 

(c)       This subsection 8.14 shall expressly and permanently survive the termination or abandonment of this Agreement.

 

 

 

This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which together shall constitute one and the same instrument.

 

 

 

Each of the parties to this Agreement acknowledges that the Restaurants, the Assets, the Owned Real Property and the Leased Real Property are not of a special, unique or extraordinary character, and that any breach of this Agreement or any of the agreements or documents contemplated hereby by any party hereto could be compensated for by damages. Accordingly, if any party hereto breaches its obligations under this Agreement or any of the agreements or documents contemplated hereby, the other party hereto shall not be entitled to enforcement of this Agreement or such other agreement or document by a decree of specific performance requiring that the breaching party fulfill its obligations hereunder or thereunder.

 

 

 

For purposes of any legal action or proceeding relating to this Agreement or any other agreements or documentation contemplated by the Acquisition, including recognition or enforcement of any judgment, the Buyer and Seller hereby irrevocably and unconditionally submit themselves and their property to the non-exclusive general jurisdiction of the state and federal courts of the county in which PHI then has its

 

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principal place of business, and any applicable appellate courts. The Buyer and Seller waive any objection to venue or the inconvenience of such courts. The Buyer and Seller waive, to the extent not prohibited by law, any right they may have to claim any special, exemplary or consequential damages in such action or proceeding.

 

 

 

This Agreement has been negotiated "at arms length" by the parties hereto, each represented by counsel of its choice and each having an equal opportunity to participate in the drafting of the provisions hereof. Accordingly, in construing the provisions of this Agreement no party shall be presumed or deemed to be the "drafter" or "preparer" of the same.

 

 

 

The Buyer expressly acknowledges and agrees that it has no rights to acquire any additional restaurants or properties, other than those expressly provided in this Agreement, from PHI or any of its Affiliates. Any future rights to acquire restaurants or properties would only arise pursuant to a separate written agreement between PHI or any of its Affiliates and Buyer.

 

REMAINDER OF ▇▇▇▇ LEFT BLANK INTENTIONALLY.

 

SIGNATURES FOLLOW ON NEXT PAGE.

 

 

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IN WITNESS WHEREOF, the parties have hereunto set their hands and seals on the date and year first above written.

 

 

 

 

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List of Schedules and Similar Attachments Omitted from Asset Sale Agreement

 

 

 

Upon request, the registrant agrees to furnish supplementally to the Securities and Exchange Commission a copy of any omitted schedule or similar attachment to the Asset Sale Agreement; provided, however, that the registrant may request confidential treatment of omitted items prior to any public disclosure.