EXHIBIT 2(d)
STOCK PURCHASE AGREEMENT
by and between
FRI-MRD CORPORATION
and
OTHELLO HOLDING CORPORATION
Dated as of October 23, 2001
TABLE OF CONTENTS
Page
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ARTICLE I PURCHASE AND SALE OF STOCK............................................1
SECTION 1.1 Purchase and Sale................................1
SECTION 1.2 Purchase Price...................................2
ARTICLE II THE CLOSING...........................................................4
SECTION 2.1 Closing Date.....................................4
SECTION 2.2 Transactions To Be Effected at the Closing.......5
ARTICLE III REPRESENTATIONS AND WARRANTIES........................................6
SECTION 3.1 Representations and Warranties of Seller.........6
SECTION 3.2 Representations and Warranties of Purchaser.....18
ARTICLE IV COVENANTS............................................................19
SECTION 4.1 Conduct of Business.............................19
SECTION 4.2 Access to Information...........................20
SECTION 4.3 Consents........................................21
SECTION 4.4 Further Assurances..............................22
SECTION 4.5 Employee Benefit Plans..........................22
SECTION 4.6 Employees.......................................24
SECTION 4.7 Cooperation With Respect to Tax Matters.........24
SECTION 4.8 Tax Indemnity...................................26
SECTION 4.9 Financial Information...........................27
SECTION 4.10 Expenses.......................................28
SECTION 4.11 Insurance......................................28
SECTION 4.12 Publicity......................................28
SECTION 4.13 Certain Understandings.........................28
SECTION 4.14 Cooperation with Respect to Insurance
Matters........................................29
SECTION 4.15 Closing Deliveries.............................30
SECTION 4.16 Notice and Cure................................30
SECTION 4.17 Exclusivity....................................31
SECTION 4.18 Financing......................................31
ARTICLE V SALE ORDER; TERMINATION FEE..........................................31
SECTION 5.1 Approval of this Agreement......................31
ARTICLE VI CONDITIONS PRECEDENT.................................................36
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SECTION 6.1 Conditions Precedent to Obligations of
Purchaser.......................................36
SECTION 6.2 Conditions Precedent to Obligations of
Seller..........................................38
ARTICLE VII TERMINATION AND AMENDMENT..............................................39
SECTION 7.1 Termination.....................................39
SECTION 7.2 Effect of Termination...........................40
SECTION 7.3 Termination Fee.................................40
SECTION 7.4 Amendment.......................................41
ARTICLE VIII INDEMNIFICATION.......................................................41
SECTION 8.1 Indemnification Generally.......................41
SECTION 8.2 Indemnification of Purchaser Indemnitees........41
SECTION 8.3 Indemnification of Seller Indemnitees...........42
SECTION 8.4 Limitation on Indemnification Obligations.......42
SECTION 8.5 Cooperation.....................................43
SECTION 8.6 Third Party Claims Procedure....................43
SECTION 8.7 General.........................................45
ARTICLE IX MISCELLANEOUS...........................................................46
SECTION 9.1 Notices.........................................46
SECTION 9.2 Interpretation..................................47
SECTION 9.3 Severability....................................47
SECTION 9.4 Counterparts....................................47
SECTION 9.5 Entire Agreement................................47
SECTION 9.6 Governing Law; Forum............................48
SECTION 9.7 Survival of Representations.....................48
SECTION 9.8 Assignment......................................48
SECTION 9.9 No Third-Party Beneficiaries....................48
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EXHIBITS
Exhibit A Escrow Agreement
Exhibit B Estoppel Certificate
SCHEDULES
Schedule 3.1(b) Subsidiaries
Schedule 3.1(d) Capital Stock
Schedule 3.1(e)-1 No Conflict
Schedule 3.1(e)-2 No Conflict
Schedule 3.1(f) Financial Statements
Schedule 3.1(h) Absence of Certain Changes or Events
Schedule 3.1(i) Compliance with Applicable Laws
Schedule 3.1(j) Litigation; Decrees
Schedule 3.1(k)-1 Title to Properties; Assets
Schedule 3.1(k)-2 Title to Properties; Assets
Schedule 3.1(l) Applicable Contracts
Schedule 3.1(m) Taxes
Schedule 3.1(n) Employee Benefit Plans
Schedule 3.1(o)-1 Employees and Labor Matters
Schedule 3.1(o)-2 Employees and Labor Matters
Schedule 3.1(p) Intellectual Property
Schedule 3.1(q) Insurance
Schedule 3.1(r) Environment Matters
Schedule 3.1(t) Brokers, Finders, etc.
Schedule 3.2(c)-1 No Conflict
Schedule 3.2(c)-2 No Conflict
Schedule 4.1 Conduct of Business
Schedule 4.5-1 Prandium Severance Plan
Schedule 4.5-2 Severance Benefits
Schedule 4.6 Resignations
Schedule 6.1(b) Required Consents
Schedule 6.1(f) Estoppel Certificates
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TABLE OF DEFINITIONS
Defined Term Initial Section Reference
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Acquired Companies................................ Recitals
Acquisition....................................... 1.1
Affected Persons.................................. 3.1(n)(i)
Affiliates........................................ 8.2
Agreement......................................... First Paragraph
Applicable Contracts.............................. 3.1(l)
Auction........................................... 5.1(b)(v)
Audit............................................. 4.7(g)
Balance Sheet Date................................ 3.1(f)
Bankruptcy Code................................... Recitals
Bankruptcy Court.................................. Recitals
Bid Deadline...................................... 5.1(b)(i)
Business.......................................... 3.1(h)
Closing........................................... 2.1
Closing Date...................................... 2.1
Code.............................................. 3.1(n)(i)
Competing Agreement............................... 5.1(b)(l)
Confidentiality Agreement......................... 4.2(b)
Contracts......................................... 3.1(e)
Current Employees................................. 4.5(a)
Damages........................................... 8.6(d)
Eligible Receivables.............................. 1.3(a)(iii)
Employee Benefit Plans............................ 3.1(n)(i)
Employees......................................... 3.1(o)
Environmental Laws................................ 3.1(r)
ERISA............................................. 3.1(n)(i)
Escrow Agent...................................... 2.2(c)
Escrow Agreement.................................. 2.2(c)
Escrowed Amount.................................. 1.2
Final Order....................................... 6.1(g)
Financial Statements.............................. 3.1(f)
GAAP.............................................. 3.1(f)
Going Forward Tax Issues.......................... 4.7(b)
Hamlet............................................ Recitals
Indemnified Party................................. 8.5
Indemnifying Party................................ 8.5
Initial Bid....................................... 5.1(b)(i)
Initial Purchase Price............................ 1.2
Intellectual Property............................. 3.1(p)
Liens............................................. 3.1(k)
Liquidated Damages................................ 7.3(b)
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Material Adverse Effect........................... 3.1(a)
Objection Letter.................................. 1.3(c)
Overbidder's Deposit.............................. 5.1(b)(i)(7)
Overbidder........................................ 5.1(b)(i)
Pension Plan...................................... 3.1(n)(vi)
Permitted Liens................................... 3.1(k)
Post-Closing Employee Benefits.................... 4.5(b)
Post-Closing Period............................... 4.7(a)
PP&E.............................................. 1.3(a)(v)
Prandium.......................................... 2.1
Pre-Closing Period................................ 4.7(a)
Procedures Order.................................. 5.1(b)
Prohibited Transaction............................ 3.1(n)(vi)
Projections....................................... 4.13(a)
Purchase Price.................................... 1.2
Purchase Price Adjustments........................ 1.3(a)
Purchaser......................................... First Paragraph
Purchaser Indemnitee.............................. 8.2
Purchaser Threshold Amount........................ 8.4(b)
Qualified Overbidder.............................. 5.1(b)(ii)
Related Company................................... 3.1(n)(i)
Reorganization Case............................... Recitals
Replacement Period................................ 7.1(f)
Sale Hearing...................................... 5.1(b)
Sale Motion....................................... 5.1(a)
Sale Order........................................ 5.1(a)
Sales Procedures.................................. 5.1(b)
Securities Act.................................... 3.2(e)
Seller............................................ First Paragraph
Seller Indemnitee................................. 8.3
Seller Threshold Amount........................... 8.4(c)
Seller's Insurance Policies....................... 3.1(q)
Seller's Pre-Closing Liabilities.................. 4.14(a)
Seller's Pre-Closing Claims....................... 4.14(a)
Social Security Taxes............................. 4.7(g)
Stock............................................. Recitals
Straddle Tax Returns.............................. 4.7(a)
Sub 1............................................. Recitals
Sub 2............................................. Recitals
Tax or Taxes...................................... 4.7(g)
Tax Returns....................................... 4.7(g)
Termination Fee................................... 7.3(a)
Third Party Claim................................. 8.6(e)
WARN ACT.......................................... 4.6
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STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT (this "Agreement"), dated as of October
23, 2001, by and between FRI-MRD Corporation, a Delaware corporation ("Seller")
and Othello Holding Corporation, a Delaware corporation ("Purchaser").
WHEREAS, Seller owns all of the outstanding shares of capital
stock (the "Stock") of The Hamlet Group, Inc., a California corporation
("Hamlet") and Hamlet owns all of the outstanding shares of capital stock of
H.H. of Maryland, Inc., a Maryland corporation ("Sub 1") and H.H.K. of Virginia,
Inc., a Virginia corporation ("Sub 2") (Hamlet together with Sub 1 and Sub 2,
the "Acquired Companies");
WHEREAS, Seller desires to sell to Purchaser, and Purchaser
desires to purchase from Seller, all of the shares of Stock owned by Seller,
upon the terms and subject to the conditions set forth herein;
WHEREAS, it is a condition precedent to the Acquisition (as
defined below) that Seller commence a case (the "Reorganization Case") under
chapter 11 of the United States Bankruptcy Code, 11 U.S.C. (S)(S) 101 et seq.
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(the "Bankruptcy Code") in the United States Bankruptcy Court for the Central
District of California (the "Bankruptcy Court") and obtain a Bankruptcy Court
order in the Reorganization Case approving the Acquisition under Bankruptcy Code
(S) 363, as set forth in Section 5.1(a) below.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
PURCHASE AND SALE OF STOCK
SECTION I.1 Purchase and Sale. Upon the terms and subject to the
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conditions set forth herein, Seller agrees to sell, assign, transfer, convey and
deliver to Purchaser, and Purchaser agrees to purchase and accept from Seller,
on the Closing Date (as defined below), all of Seller's rights, title and
interest in and to the Stock (the "Acquisition").
SECTION I.2 Purchase Price. In consideration for the purchase by
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Purchaser of the Stock, Purchaser shall pay to Seller on the Closing Date an
aggregate of
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$16,100,000 (the "Initial Purchase Price"). The Initial Purchase Price shall be
paid as follows: $1,000,000 (the "Escrowed Amount") in accordance with Section
2.2(c) hereof and the balance of the Initial Purchase Price by wire transfer of
immediately available funds to such account or accounts as Seller shall have
designated at least two business days prior to the Closing Date. The Initial
Purchase Price shall be subject to the Purchase Price Adjustments determined
pursuant to Section 1.3(a). The Initial Purchase Price, as adjusted by the
Purchase Price Adjustments, shall be referred to herein as the "Purchase Price."
SECTION 1.3 Purchase Price Adjustments.
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(a) Subject to the thresholds set forth in Section 1.3(d),
the Initial Purchase Price shall be subject to the following adjustments in the
aggregate (collectively, the "Purchase Price Adjustments"):
(i) The Initial Purchase Price shall be decreased
by the amount by which the accounts payable of the Acquired Companies
as of the Closing Date exceeds $785,000 and increased by the amount by
which the accounts payable of the Acquired Companies as of the Closing
Date is less than $785,000; provided, however, to the extent that the
accounts payable of the Acquired Companies have been reduced as a
result of settlement of amounts due on a discounted basis, any increase
of the Initial Purchase Price pursuant to this Section 1.3(a)(i) shall
only be equal to the actual discounted amount paid to reduce such
accounts payable;
(ii) The Initial Purchase Price shall be decreased
by the amount by which the value of the inventory of the Acquired
Companies as of the Closing Date is less than $250,000 and increased by
the amount by which the value of the inventory of the Acquired
Companies as of the Closing Date exceeds $250,000;
(iii) The Initial Purchase Price shall be decreased
by the amount by which Eligible Receivables as of the Closing Date is
less than $300,000 and increased by the amount by which Eligible
Receivables as of the Closing Date exceeds $300,000 (for purposes of
this Section 1.3, "Eligible Receivables" are those receivables of the
Acquired Companies that have been outstanding for not more than two (2)
business days);
(iv) The Initial Purchase Price shall be decreased
by the amount by which Other Accrued Liabilities (as such term is
defined in the Financial Statements) as of the Closing Date exceeds
$1,143,000 and increased by
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the amount by which Other Accrued Liabilities as of the Closing Date is
less than $1,143,000; provided, however, to the extent that the Other
Accrued Liabilities of the Acquired Companies have been reduced as a
result of settlement of amounts due on a discounted basis, any increase
of the Initial Purchase Price pursuant to this Section 1.3(a)(iv) shall
only be equal to the actual discounted amount paid to reduce such Other
Accrued Liabilities;
(v) The Initial Purchase Price shall be decreased
by the amount by which the value of gross Plant, Property, and
Equipment ("PP&E") as of the Closing Date is less than $12,041,000 and
increased by the amount by which the value of PP&E as of the Closing
Date exceeds $12,041,000;
(vi) The Initial Purchase Price shall be decreased
by the amount by which the Other Current Assets (as such term is
defined in the Financial Statements) of the Acquired Companies as of
the Closing Date is less than $101,000 and increased by the amount by
which the Other Current Assets of the Acquired Companies as of the
Closing Date exceeds $101,000; and
(vii) The Initial Purchase Price shall be decreased
by the amount by which the Cash (as such term is defined in the
Financial Statements) of the Acquired Companies as of the Closing Date
is less than $50,000 and increased by the amount by which the Cash of
the Acquired Companies as of the Closing Date exceeds $50,000.
(b) As promptly as practicable after the Closing Date, but
not later than 60 calendar days thereafter, Purchaser shall deliver to Seller a
schedule setting forth in reasonable detail Purchaser's calculation of the
Purchase Price Adjustments, determined on a consistent basis with the Financial
Statements, as of the Closing Date based on actual results.
(c) Within 30 calendar days after its receipt of
Purchaser's calculation of the Purchase Price Adjustments, Seller may deliver to
Purchaser a letter describing its exceptions to Purchaser's calculation of the
Purchase Price Adjustments (an "Objection Letter"). If Seller fails to submit an
Objection Letter within such period, the Purchase Price Adjustments shall be
conclusive and binding on Purchaser and Seller. If Seller submits an Objection
Letter within such period, then (i) if both Purchaser's initial calculation of
the Purchase Price Adjustments and the Objection Letter contemplate a payment by
the same party, then within five business days following receipt of the
Objection Letter, such party shall pay to the other party the lesser of the
payments contemplated by Purchaser's initial calculation of the Purchase Price
Adjustments and the
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Objection Letter subject to the thresholds set forth in Section 1.3(d), (ii) for
20 days following the date Purchaser receives such letter, Seller and Purchaser
shall use their commercially reasonable efforts to agree on the calculation of
the Purchase Price Adjustments under dispute and (iii) lacking such agreement,
the Purchase Price Adjustments that remain under dispute shall be referred to an
independent "Big 5" accounting firm, who shall determine the correct Purchase
Price Adjustments within 30 days following such referral, which determination
shall be final and binding on Purchaser and Seller for all purposes. The costs
and expenses of the chosen independent accounting firm shall be borne by
Purchaser and Seller in proportion to the difference between such parties
proposed Purchase Price Adjustment and the binding Purchase Price Adjustment
determined by such accounting firm; provided, however, if the binding Purchase
Price Adjustment is more favorable to a party than such party requested, all of
such costs and expenses shall be borne by the other party.
(d) No Purchase Price Adjustment shall be made unless the
adjustments, in the aggregate, exceed $25,000. If the Purchase Price
Adjustments, in the aggregate, exceeds $25,000 and is a reduction to the Initial
Purchase Price, then within five business days following the final determination
of the Purchase Price Adjustments, Seller shall pay to Purchaser the total
amount of such adjustment. If the Purchase Price Adjustments, in the aggregate,
exceeds $25,000 and is an increase to the Initial Purchase Price, then within
five business days following the final determination of the Purchase Price
Adjustments, Purchaser shall pay to Seller the total amount of such adjustment.
ARTICLE II
THE CLOSING
SECTION II.1 Closing Date. The consummation of the Acquisition
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(the "Closing") shall take place at the offices of Prandium, Inc. ("Prandium"),
▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, or such other
place as the parties shall mutually agree, at 10:00 a.m. (local time) on the
date on which the conditions set forth in Article VI shall be satisfied or
waived, or such other date as the parties shall mutually agree upon (the date of
the Closing being herein referred to as the "Closing Date"). The Closing shall
be deemed effective as of the end of the business day of the calendar day
preceding the Closing Date.
SECTION II.2 Transactions To Be Effected at the Closing. At the
------------------------------------------
Closing:
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(a) Seller shall deliver to Purchaser (i) certificates
representing the Stock, duly endorsed in blank, or accompanied by stock powers
duly executed in blank, by Seller and (ii) such other documents as provided in
Section 4.15(a) and Section 6.1 of this Agreement;
(b) Purchaser shall deliver to Seller (i) payment as
provided in Section 1.2 and (ii) such other documents as provided in Section
4.15(b) and Section 6.2 of this Agreement; and
(c) Seller, Purchaser and Escrow Agent (as defined below)
shall enter into an Escrow Agreement, substantially in the form attached hereto
as Exhibit A (the "Escrow Agreement"), with a bank, trust company or escrow
company as shall be acceptable to Seller and Purchaser as trustee on behalf of
the parties as their interest may appear (the "Escrow Agent"), and Purchaser
shall deposit the Escrowed Amount in cash with the Escrow Agent at the Closing
pursuant to the Escrow Agreement. The Escrowed Amount shall be used as the
first, but not the exclusive, source of satisfying Seller's indemnification
obligations and Seller's obligations with respect to any amounts payable to
Purchaser pursuant to the provisions of Section 1.3. Notwithstanding the
foregoing, it is the intent of the parties that the Escrowed Amount be set aside
from the estate of Seller in the Reorganization Case and that the Escrowed
Amount not be subject to claims from creditors of Seller, Prandium or their
Affiliates. Accordingly, if the Bankruptcy Court's Sale Order does not include
provisions approving the Escrow Agreement substantially in the form attached
hereto as Exhibit A and the findings and directions described in Sections
5.1(a)(iv) and (v), Purchaser may, at its option (i) terminate this Agreement
under Section 7.1(g) or (ii) elect to proceed with the Closing and deposit the
Escrowed Amount into a separate bank account of Purchaser; provided, however,
until, and to the extent, disbursed to Seller, the funds in such account shall
be the property of Purchaser. If Purchaser makes the election described in the
foregoing clause (ii), Purchaser may apply the Escrowed Amount to Seller's
indemnification obligations and obligations under Section 1.3 as otherwise
provided herein and in the Escrow Agreement, and Purchaser shall pay to Seller
any amount not so applied on the date provided in the Escrow Agreement for the
final distribution of amounts held therein.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION III.1 Representations and Warranties of Seller. Seller
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represents and warrants to Purchaser as follows:
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(a) Organization, Standing and Power. Subject to the
--------------------------------
applicable provisions of the Bankruptcy Code, Seller and each of the Acquired
Companies (i) is a corporation duly organized, validly existing and in good
standing under the laws of its state of incorporation, (ii) has all requisite
power and authority to own, lease or operate the assets it now owns, leases or
operates and (iii) is duly qualified or licensed to do business in each
jurisdiction in which the ownership or use of its assets or conduct of its
business requires it to be so qualified, in each case except for such failures
that would not have a material adverse effect on the business, financial
condition, or results of operations of the Acquired Companies taken as a whole
(a "Material Adverse Effect").
(b) Subsidiaries. Except as set forth on Schedule 3.1(b),
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as of the Closing, none of the Acquired Companies will own, directly or
indirectly, any of the capital stock or other equity securities of any other
person other than holdings of shares of common stock of publicly traded
restaurant companies.
(c) Authority. Subject to the Bankruptcy Court's entry of
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the Sale Order as described in Section 5.1 below, the execution and delivery of
this Agreement, the performance by Seller of its obligations hereunder, and the
execution and delivery by Seller of each of the additional documents
contemplated hereby, have been duly authorized by all necessary action on the
part of Seller. This Agreement has been duly executed and delivered by Seller
and, upon entry of the Sale Order and assuming the due execution and delivery of
this Agreement by Purchaser, this Agreement constitutes a valid and binding
obligation of Seller, enforceable against Seller in accordance with its terms.
(d) Capital Stock. Seller owns all of the outstanding
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capital stock of Hamlet, and Hamlet owns all of the outstanding capital stock of
Sub 1 and Sub 2. The entire authorized and issued capital stock of each of the
Acquired Companies is set forth on Schedule 3.1(d). The shares of Stock are duly
authorized, have been validly issued and are fully paid and nonassessable. The
shares of Stock have not been issued in violation of, and are not subject to,
any preemptive rights. Upon consummation of the Acquisition, Purchaser will
acquire title to the Stock, free and clear of all Liens, other than those
arising from the actions of Purchaser.
(e) No Conflict. Except for the consents, approvals,
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orders, authorizations, registrations, declarations and filings (i) set forth on
Schedule 3.1(e)-1, (ii) that become applicable solely as a result of the
specific regulatory status of Purchaser and its affiliates, (iii) arising out of
the Reorganization Case or (iv) the failure of which to make or obtain would not
have a Material Adverse Effect, to the knowledge of Seller, the consummation of
the transactions hereunder will not require the consent of any party to
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any contract, lease, agreement, mortgage or indenture (collectively,
"Contracts") to which Seller, or any of its affiliates is a party, including the
Applicable Contracts, or the consent, approval, order or authorization of, or
the registration, declaration or filing with, any governmental authority.
Except as set forth on Schedule 3.1(e)-2, assuming the consents,
approvals, orders, authorizations, registrations, declarations and filings
contemplated by the immediately preceding sentence are obtained or made, as
applicable, the execution, delivery and performance by Seller of this Agreement
will not (i) violate any material law applicable to Seller or the Acquired
Companies, (ii) result in a breach or violation of any material provision of, or
constitute a material default under, any Contract to which Seller or any of the
Acquired Companies is a party, or (iii) conflict with any provision of the
certificate of incorporation or by-laws of Seller or the Acquired Companies, in
each case except for any such violation, breach, default or conflict which would
not have a Material Adverse Effect.
(f) Financial Statements. Attached hereto as Schedule
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3.1(f) are copies of the audited consolidated balance sheets of the Acquired
Companies at July 1, 2001 (the "Balance Sheet Date"), and at December 31, 2000
and December 26, 1999, and the related statements of income, net consolidated
equity and cash flows for the 26 weeks ended July 1, 2001 and the fiscal years
ended December 31, 2000 and December 26, 1999 (collectively, the "Financial
Statements"). The Financial Statements present fairly, in all material respects,
the consolidated financial position and the consolidated results of operations
and cash flows of the Acquired Companies as of the dates and periods indicated,
in each case in accordance with generally accepted accounting principles
("GAAP") applied on a basis consistent with prior periods (except as otherwise
indicated therein or on the notes thereto).
(g) No Undisclosed Liabilities. The Acquired Companies do
--------------------------
not have any liabilities of a nature required by GAAP to be reflected on a
balance sheet or in notes thereto, except (i) as set forth or reflected on the
Financial Statements (or described in the notes thereto), (ii) as disclosed in
the Schedules hereto, or (iii) for liabilities incurred in the ordinary course
of business since the Balance Sheet Date that do not, with respect to Section
3.1(g)(iii), in the aggregate, constitute a Material Adverse Effect.
(h) Absence of Certain Changes or Events. Since July 1,
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2001, except (i) as and to the extent set forth on Schedule 3.1(h), (ii) as
would not have a Material Adverse Effect on the Business or (iii) for the
transactions contemplated by this Agreement, (A) Seller and the Acquired
Companies have operated the fourteen (14) restaurants owned and operated by the
Acquired Companies (the "Business") in the
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ordinary course, (B) Seller and the Acquired Companies have maintained and
preserved the assets, relationships and goodwill of the Business, (C) Seller and
the Acquired Companies have complied with all applicable legal requirements
governing the Business and (D) there has been no physical damage, destruction or
loss or other event (taking into account any insurance recoveries payable in
respect thereof).
(i) Compliance with Applicable Laws; Permits. To the
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knowledge of Seller, except as set forth on Schedule 3.1(i) and except for
environmental matters (which are addressed in Section 3.1(r) of this Agreement),
the conduct of the Acquired Companies complies with all statutes, laws,
regulations and ordinances applicable thereto, except where the failure to so
comply would not have a Material Adverse Effect. Except as set forth on Schedule
3.1(i), each of the Acquired Companies owns and possesses, and has been issued
in its name, all material permits, licenses and franchises from governmental
authorities necessary to conduct their respective businesses as currently
conducted. No material violations exist or, to the knowledge of Seller, have
been reported in respect of such permits, licenses and franchises. To the
knowledge of Seller, a list of the permits required in the operation of the
Business is set forth on Schedule 3.1(i).
(j) Litigation; Decrees. Except as set forth on Schedule
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3.1(j) and except for environmental matters (which are addressed in Section
3.1(r) of this Agreement), as of the date of this Agreement, to the knowledge of
Seller, (i) there is no suit, action or proceeding pending against the Acquired
Companies in any Federal, state or local court or agency that seeks (A) monetary
damages, or (B) any injunctive relief, and Seller has not received written
notice that any such suit, action or proceeding is threatened and (ii) the
Acquired Companies are not in default under any judgment, order or decree of any
governmental authority applicable to their business, except for any such default
which would not have a Material Adverse Effect.
(k) Title to Properties; Assets. The Acquired Companies
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(i) have good and marketable title to all the real properties and other assets
(tangible, intangible or mixed) reflected in the Financial Statements as owned,
free and clear of all liens, pledges and encumbrances (collectively, "Liens")
other than Liens (collectively, "Permitted Liens") (w) that will be released in
connection with the Closing, (x) that are set forth or described on Schedule
3.1(k)-1 (y) for current Taxes not yet due, or (z) which do not materially
detract from the value or impair the use of the property subject thereto, or
impair the operation of the Business, which have arisen only in the ordinary
course of business and which do not exceed $25,000 in the aggregate and (ii)
have a leasehold interest under all leases of property to which any Acquired
Company is a lessee. Additionally, to the knowledge of Seller, there are no
facts that would give rise to any Liens other than (i) Permitted Liens and (ii)
Liens that would not, in the aggregate,
8
constitute a Material Adverse Effect. All of the leases to which any Acquired
Company is a party are legal, valid and binding obligations of such Acquired
Company. No property or asset, the value of which is reflected in the balance
sheets included in the Financial Statements, is held under any lease (other than
a capitalized lease) or under any conditional sale or other title retention
agreement. The tangible, intangible, and other assets, plants and facilities
owned by the Acquired Companies (A) are adequate for the operation of the
Business, (B) are adequate for the uses to which they are being put or would be
put in the ordinary course of business and (C) are in good working order and
condition, ordinary wear and tear excepted, in each case, other than as would
not constitute a Material Adverse Effect. Furthermore, there are no deposits,
bank accounts, credits or other assets (such other assets include only (i) those
assets set forth in the Financial Statements or whose value is included in the
Financial Statements, and (ii) those assets located at the premises of the
Business) associated with the Business (including unused job tax credits and
unemployment reserve funds) that are held or controlled by any entity other than
the Acquired Companies. A list of all deposits and bank accounts owned by the
Acquired Companies or associated with the Business is set forth in Schedule
3.1(k)-2.
(l) Contracts. Except for those Contracts listed on
---------
Schedule 3.1(l) (the "Applicable Contracts"), as of the date of this Agreement,
the Acquired Companies are not a party to:
(i) any Contract relating to the borrowing or
lending of $100,000 or more by the Acquired Companies;
(ii) any written employment agreement with any
person;
(iii) any Contract not made in the ordinary course
of business;
(iv) any Contract for the sale of any of the
Acquired Companies' assets (other than inventory sales in the ordinary
course of business), or the grant of any preferential rights to
purchase any of the Acquired Companies' assets;
(v) any Contract that is terminable by the other
party thereto upon the occurrence of the transactions contemplated
hereby that, if terminated, would have a Material Adverse Effect; or
9
(vi) any material Contract that contains a "change
of control", "potential change of control", or other similar provisions
or any material Contract for which the Acquisition will accelerate the
time or amount of payment or otherwise enhance any benefit due any
other person.
Except as disclosed in Schedule 3.1(l), to the knowledge of
Seller, as of the date of this Agreement, no party is in breach or default in
any material respect under any Contract to which an Acquired Company is a party,
including but not limited to, any Applicable Contract, except for such breaches
and defaults as to which requisite waivers or consents have been or will be
obtained prior to the Closing Date or which would not have a Material Adverse
Effect. Complete and correct copies of all Applicable Contracts, together with
all modifications and amendments thereto, have been delivered or made available
to Purchaser; provided, that to the extent any of such Contracts are items
--------
susceptible to duplication and are either (i) used in connection with any of
Seller's businesses other than those relating to the Acquired Companies or (ii)
are required by law to be retained by Seller, Seller may deliver photostatic
copies or other reproductions from which Seller may delete information
concerning Seller's businesses other than those relating to the Acquired
Companies. For purposes of this subsection 3.1(l), the term "Contract" shall not
include Employee Benefit Plans referred to in Section 3.1(n).
(m) Taxes.
-----
(i) All material income Tax Returns (including
consolidated federal income tax returns of Seller which include any of
the Acquired Companies) required to be filed by any Acquired Company
have been filed and all such returns are true, complete, and correct in
all material respects. All material Taxes that are due or claimed to be
due from any Acquired Company for all periods up to the Closing Date
have been paid other than those (A) currently payable without penalty
or interest or (B) being contested in good faith and by appropriate
proceedings and for which adequate reserves have been established in
accordance with GAAP. The liabilities for Taxes, if any (determined in
accordance with GAAP), reflected on the Financial Statements are
adequate for the payment of all Taxes due and payable as of July 1,
2001. There are no material Liens for Taxes upon the properties or
assets of the Acquired Companies, other than Liens for current Taxes
not yet due and payable.
(ii) Except as provided in Schedule 3.1(m), the
Acquired Companies (and Seller in respect of any period that the
Acquired Companies were part of its consolidated group for Federal
income tax purposes) have not requested any extension of time within
which to file any Tax Return in respect of any
10
taxable year which has not since been filed and no outstanding waivers
or comparable consents that are still in effect regarding the
application of the statutory period of limitations with respect to any
Taxes or Tax Returns has been given by or on behalf of the Acquired
Companies.
(iii) Except as provided in Schedule 3.1(m), no
Audits exist or have been initiated with regard to any Taxes or Tax
Returns of the Acquired Companies (including consolidated federal
income tax returns of Seller which include any of the Acquired
Companies) and the Acquired Companies (or Seller, as the case may be)
have not received any notice in writing that such an Audit is pending
or threatened with respect to any Taxes due from or with respect to the
Acquired Companies or any Tax Return filed by or with respect to the
Acquired Companies.
(iv) Except as provided in Schedule 3.1(m), the
Acquired Companies (or Seller in respect of any period that the
Acquired Companies were part of Seller's consolidated group for federal
income tax purposes) have not requested nor received an adverse ruling
from any taxing authority or signed a closing or other agreement with
any taxing authority.
(v) Except as provided in Schedule 3.1(m), the
applicable statute of limitations for the assessment of Taxes for
taxable periods ending before December 31, 1997 has expired.
(vi) Except as provided in Schedule 3.1(m), the
Acquired Companies are not required to include in income any adjustment
pursuant to Section 481(a) of the Code, by reason of any voluntary or
involuntary change in accounting method (nor has any taxing authority
proposed in writing any such adjustment or change in accounting
method).
(vii) Except as provided in Schedule 3.1(m), the
Acquired Companies are not a party to, or bound by, and do not have any
obligation under, any Tax sharing agreement, Tax indemnification
agreement or similar Contract or arrangement. All such Tax sharing
agreements, Tax indemnification agreements or similar Contracts or
arrangements have been or will be cancelled effective as of the Closing
Date.
(viii) The Acquired Companies have not with regard
to any assets or property held, acquired or to be acquired by any of
them, filed a consent to the application of Section 341(f) of the Code,
or agreed to have Section
11
341(f)(2) of the Code apply to any disposition of a subsection (f)
asset (as such term is defined in Section 341(f)(4) of the Code) owned
by any Acquired Company.
(ix) Except as provided in Schedule 3.1(m), none of
the Acquired Companies has been a member of an affiliated group filing
a consolidated federal income Tax Return other than a group a member of
which is Seller.
(x) The Acquired Companies (or Seller, in respect
of any period during which any of the Acquired Companies were part of
its consolidated group for federal income tax purposes) have not
received notice of any claim made by a governmental authority in a
jurisdiction where the Acquired Companies (or Seller, as the case may
be), as applicable, do not file a Tax Return, that the Acquired
Companies are or may be subject to taxation by that jurisdiction.
(xi) The Acquired Companies have previously
delivered or made available to Purchaser complete and accurate copies
of each of: (A) all Audit reports, letter rulings, technical advice
memoranda and similar documents issued by a taxing authority relating
to the federal, state, local or foreign Taxes due from or with respect
to the Acquired Companies (or Seller, in respect of any period that any
Acquired Companies were members of Seller's consolidated group for
federal income tax purposes); (B) the federal income Tax Returns, and
those state, local and foreign income Tax Returns filed by the Acquired
Companies (or Seller, in respect of any period that any Acquired
Companies were members of Seller's consolidated group for federal
income tax purposes); and (C) any closing agreement entered into by the
Acquired Companies (or Seller, in respect of any period that any
Acquired Companies were members of Seller's consolidated group for
federal income tax purposes) with any taxing authority in each case
existing as of the Closing Date. The Acquired Companies shall deliver
to Purchaser all materials with respect to the foregoing for all
matters arising after the Closing Date.
(n) Employee Benefit Plans.
----------------------
(i) Set forth on Schedule 3.1(n) is a list of each
bonus, deferred compensation, pension, profit-sharing, retirement,
stock purchase or stock option, hospitalization or other medical, life
or other insurance plan, including any policy, plan, program or
agreement that provides for the payment of severance benefits, salary
continuation, salary in lieu of notice or similar benefits
12
and any other employee benefits of any kind, whether formal or
informal, funded or unfunded or written or oral, maintained, sponsored
or contributed to by the Acquired Companies, or Seller or any business
or entity which is a member of a "controlled group of corporations"
under "common control" or an "affiliated service group" with any of the
Acquired Companies within the meaning of Sections 414(b), (c) or (m) of
the Internal Revenue Code of 1986, as amended (the "Code") or required
to be aggregated with the Acquired Companies under Code Section 414(o)
or is under "common control" with the Acquired Companies within the
meaning of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA") (each referred as a "Related Company") under which
the Acquired Companies, Seller or Related Company has any material
(individually or in the aggregate) present or future obligations or
liability on behalf of the Acquired Companies' employees or former
employees or their dependents or beneficiaries of the Acquired
Companies (collectively, the "Affected Persons"). (The benefit
arrangements described in the foregoing sentence are collectively
referred to as "Employee Benefit Plans.") The Acquired Companies have
made available to Purchaser correct and complete copies of all of the
Employee Benefit Plans.
(ii) The Employee Benefit Plans are in compliance
in form and in operation in all material respects with the applicable
provisions of ERISA and the Code. All reports and descriptions
(including Form 5500 Annual Reports and Summary Plan Descriptions) have
been filed or distributed in accordance with the applicable provisions
of ERISA and the Code with respect to each Employee Benefit Plan.
(iii) All contributions made or required to be made
under any Employee Benefit Plan meet the requirements for deductibility
under the Code in all material respects, and all contributions that are
required but have not been made have been properly recorded on the
books of the Acquired Companies or Seller to the extent required under
GAAP. All obligations have been performed under the Employee Benefit
Plans and all appropriate entries have been made in the financial
records and statements for all obligations and liabilities under such
Employee Benefit Plans. Any payments required to be made under the
Prandium Severance Plan to individuals terminated on or before the
Closing Date have been made on or before the Closing Date.
(iv) No Employee Benefit Plan is a "multiemployer
plan" (within the meaning of section 4001(a)(3) of ERISA), a "multiple
employer plan"
13
(within the meaning of section 413(c) of the Code) or "defined benefit
plan" (within the meaning of Section 3(35) of ERISA.
(v) No event has occurred which could subject the
Acquired Companies to any material liability or Lien with respect to
any Employee Benefit Plan under ERISA or the Code.
(vi) Except with respect to the execution of this
Agreement and the transactions contemplated herein, no Employee Benefit
Plan that is an "employee pension benefit plan" as defined in ERISA
Section 3(2) ("Pension Plan") has been completely or partially
terminated. To the extent the transactions contemplated herein result
in a termination or partial termination of a Pension Plan, Seller shall
comply with all of the applicable requirements of the Code and ERISA in
connection with such termination or partial termination. There have
been no non-exempt "prohibited transactions" as defined in ERISA
Section 406 and Code Section 4975 ("Prohibited Transactions") with
respect to any Employee Benefit Plan that could give rise to a material
liability under Section 4975 of the Code to the Acquired Companies. No
Acquired Company has any material liability for breach of fiduciary
duty or any other failure to act or comply in connection with the
administration or investment of the assets of any Employee Benefit
Plan. With respect to any Employee Benefit Plan (other than routine,
non material claims or benefits) and with respect to the Prandium
Severance Plan, to the knowledge of Seller with respect to amounts to
which the Acquired Companies could be liable, (i) no action is pending
or demand or statement has been made (orally or in writing), (ii) no
notice has been given (orally or in writing) and (iii) no other event
has occurred and no other circumstances exist that would lead a prudent
person to conclude that a cause of action or other matter is likely to
be asserted, commenced, taken or otherwise (and there is no basis
therefor) that could result in liability to the Acquired Companies.
(vii) Except to the extent required by Code Section
4980B or under the Prandium Severance Plan and Section 4.5 hereof, the
Acquired Companies, Seller or any Related Companies (i) do not maintain
or contribute to any Employee Benefit Plan that provides, or has any
Liability to provide, life insurance, medical, severance or other
employee welfare benefits to any Affected Person or any dependant of
any Affected Person upon his or her retirement or termination of
employment or (ii) have never represented, promised or contracted
(whether in oral or written form) to any Affected Person (either
individually or to Affected Person as a group) that such Affected
Person or dependents would be
14
provided with life insurance, medical, severance or other employee
welfare benefits upon their retirement or termination of employment.
(viii) Except with respect to the Prandium
Severance Plan, or as otherwise required by law, the execution of this
Agreement and the transactions contemplated herein will not (either
alone or upon the occurrence of any additional or subsequent events)
(i) constitute an event under any Employee Benefit Plan, employment
agreement, trust or loan that will or may result in any payment
(whether severance pay or otherwise), acceleration, forgiveness of
indebtedness, vesting, distribution, increase in benefits or obligation
to fund benefits with respect to any Affected Person, or (ii) result in
the triggering or imposition of any restrictions or limitations on the
right of the Acquired Companies to amend or terminate any Employee
Benefit Plan and receive the full amount of any excess assets remaining
or resulting from such amendment or termination, subject to the terms
of such plans and applicable law and/or Taxes.
(o) Employees and Labor Matters. Schedule 3.1(o)-1 sets
---------------------------
forth the total compensation (including, but not limited to, salary, bonus and
otherwise) being paid by, or on behalf of, the Acquired Companies (or to whom
the Acquired Companies have agreed or are obligated to pay) to each officer,
director and employee of the Acquired Companies other than those persons set
forth on Schedule 4.6 whose resignations are required to be tendered in
connection with the Closing ("Employees"). The above definition of "Employees"
shall not be affected by the fact that Seller utilized FRI-Admin Corporation as
a common paymaster for certain of the Employees. Set forth on Schedule 3.1(o)-2
are all agreements with labor unions or associations representing Employees in
effect as of the date of this Agreement. As of the date of this Agreement, no
material work stoppage against the Acquired Companies is actually pending or, to
the knowledge of Seller, threatened. There are no pending, or, to the knowledge
of Seller, threatened, labor disputes, arbitrations, lawsuits or administrative
proceedings relating to labor matters involving the Employees (excluding routine
workers' compensation claims) that would have a Material Adverse Effect.
(p) Intellectual Property. Set forth on Schedule 3.1(p) is
---------------------
all Intellectual Property (as defined below) except for know-how and trade
secrets. The Acquired Companies own, or possess adequate rights to use, all
Intellectual Property used in the Business. No consent of any person is required
as a result of the transactions contemplated herein for the continued use by the
Acquired Companies of the Intellectual Property after the Closing. There are no
existing, or, to the knowledge of Seller, threatened, claims based on the use
by, or challenging the ownership of, the Acquired Companies of any Intellectual
Property that would have a Material Adverse Effect.
15
Except as set forth on Schedule 3.1(p), Seller does not have any knowledge of
any infringing use of any Intellectual Property by any other person.
"Intellectual Property" shall mean all material trademarks, copyrights and other
intellectual property rights used or held for use including, but not limited to
all know-how and trade secrets (trade secrets including, without limitation, all
recipes, procedures and processes of the Acquired Companies necessary to operate
the Business).
(q) Insurance. Set forth on Schedule 3.1(q) is a list of
---------
all insurance policies held by or otherwise protecting the assets of the
Acquired Companies (the "Seller's Insurance Policies"). Copies of all material
insurance policies held by the Acquired Companies or by Seller or Prandium for
the benefit of the Acquired Companies have been made available to Purchaser.
Such policies (together with self-insurance programs in effect) provide coverage
for the Acquired Companies' business in amounts and against risks consistent
with past practice. No representation or warranty is made by Seller hereunder
that any such policy will not lapse or terminate by reason of consummation of
the transactions contemplated hereby. All such material insurance policies are
currently in full force and effect. The Acquired Companies are beneficiaries
under those policies set forth on Schedule 3.1(q).
(r) Environmental Matters. Except as set forth on Schedule
---------------------
3.1(r) or as would not have a Material Adverse Effect, to the knowledge of
Seller, (i) the Acquired Companies are in compliance with all applicable
federal, state and local laws governing pollution or the protection of human
health or the environment ("Environmental Laws"), (ii) the Acquired Companies
have not received any written notice or claim from any governmental authority or
third party alleging that the Acquired Companies are not in compliance with any
Environmental Law, and (iii) there has been no release of a Hazardous Substance,
as that term is defined in the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. (S)(S) 9601 et seq., in excess of a
reportable quantity on any of the real properties owned or leased by the
Acquired Companies.
(s) Government Regulations. The Acquired Companies are not
----------------------
subject to regulation under the Investment Company Act of 1940, as amended, the
Public Utility Holding Act of 1935, as amended, the Federal Power Act, the
Interstate Commerce Act, the Commodity Exchange Act or any Federal or State
statute or regulation limiting its ability to incur or assume indebtedness for
borrowed money.
(t) Brokers, Finders, etc. Except as set forth on Schedule
---------------------
3.1(t), Seller is not subject to any valid claim of any broker, investment
banker, finder or other intermediary in connection with the transactions
contemplated by this Agreement. Seller
16
is solely responsible for any payment, fee or commission that may be due to the
parties referenced on Schedule 3.1(t) in connection with the transactions
contemplated hereby.
(u) Disclosure. No representation or warranty made by
----------
Seller or the Acquired Companies in this Agreement or any disclosure schedule or
certificate delivered hereunder contains any untrue statement of a material fact
or omits any material fact necessary to make the statements contained herein or
therein not materially misleading.
SECTION III.2 Representations and Warranties of Purchaser.
-------------------------------------------
Purchaser hereby represents and warrants to Seller as follows:
(a) Organization and Standing. Purchaser is a corporation
-------------------------
duly organized, validly existing and in good standing under the laws of its
state of incorporation.
(b) Authority. The execution and delivery of this
---------
Agreement, and the performance by Purchaser of its obligations hereunder, have
been duly authorized by all necessary action on the part of Purchaser. This
Agreement has been duly executed and delivered by Purchaser and assuming the due
execution and delivery of this Agreement by Seller, this Agreement constitutes a
valid and binding obligation of Purchaser, enforceable against Purchaser in
accordance with its terms, except as such enforcement may be limited by (i)
bankruptcy, insolvency, reorganization, moratorium or similar laws now or
hereafter in effect relating to creditors' rights generally and (ii) general
principles of equity (regardless of whether such enforcement is sought in a
proceeding in equity or at law).
(c) No Conflict. Except for the consents, approvals,
-----------
orders, authorizations, registrations, declarations and filings (i) set forth on
Schedule 3.2(c)-1, or (ii) that become applicable solely as a result of the
specific regulatory status of Seller and its affiliates, to the knowledge of
Purchaser, the consummation of the transactions hereunder will not require the
consent of any party to any material Contract to which Purchaser, or any of its
affiliates, is a party or by which any of them is bound, or the consent,
approval, order or authorization of, or the registration, declaration or filing
with, any governmental authority. Except as set forth on Schedule 3.2(c)-2,
assuming the consents, approvals, orders, authorizations, registrations,
declarations and filings contemplated by the immediately preceding sentence are
obtained or made, as applicable, the execution, delivery and performance by
Purchaser of this Agreement will not (i) violate any material law applicable to
Purchaser or any of its respective affiliates, (ii) result in a breach or
violation of any material provision of, or constitute a material default
17
under, any such Contract, or (iii) conflict with any provision of the
certificate of incorporation or by-laws of Purchaser.
(d) Financing. Purchaser will have available as of the
---------
Closing Date funds sufficient to pay the Purchase Price.
(e) Purchase For Investment. Purchaser is acquiring the
-----------------------
Stock being acquired by it hereunder for investment (for its own account or for
accounts over which it exercises investment control), and not with a view to, or
for offer or sale in connection with, any distribution thereof, which would be
in violation of the Securities Act of 1933, as amended (the "Securities Act"),
or any applicable state securities law, without prejudice, however, to
Purchaser's right at all times to sell or otherwise dispose of all or any part
of said Stock pursuant to an effective registration statement under the
Securities Act and applicable state securities laws, or under an exemption from
such registration available under the Securities Act and other applicable state
securities laws.
(f) Brokers, Finders, etc. Except for Trenwith Securities,
---------------------
LLC, Purchaser is not subject to any valid claim of any broker, investment
banker, finder or other intermediary in connection with the transactions
contemplated by this Agreement. Purchaser is solely responsible for any payment,
fee or commission that may be due to Trenwith Securities, LLC in connection with
the transactions contemplated hereby.
ARTICLE IV
COVENANTS
SECTION IV.1 Conduct of Business. From the date of this Agreement
-------------------
through the Closing, Seller agrees that, except (i) as disclosed in Schedule 4.1
of this Agreement or otherwise provided for in, or contemplated by, this
Agreement or (ii) as approved by Purchaser:
(a) The Acquired Companies shall carry on their business
and operate in the ordinary course in substantially the same manner as currently
conducted.
(b) Except in the ordinary course of business or as
required by law or by contractual obligations or other understandings or
arrangements existing on the date of this Agreement, the Acquired Companies
shall not knowingly perform any act, or omit to perform any act within their
reasonable control, which will cause a breach of any representation, warranty or
obligation contained in this Agreement, which breach will result in a Material
Adverse Effect.
18
(c) Seller shall transfer ownership of any assets related
to the operation of the Business but held by any entity other than the Acquired
Companies to the appropriate Acquired Company (such assets limited to those set
forth in the Financial Statements or located at the premises of the Business).
(d) Notwithstanding the fact that Section 1.3(ii) and
Section 1.3(vii) provide for Purchase Price Adjustments with respect to
inventory and cash, Seller and the Acquired Companies shall maintain the
inventory and cash of the Acquired Companies at levels sufficient to continue
current levels of services and in any event, shall provide at Closing that the
amount of cash shall be at least $20,000.
(e) Seller and the Acquired Companies shall not, except in
the normal course of business, (i) hire or employ any additional hourly
employees of the Acquired Companies or (ii) increase the compensation of any
hourly Employee. Notwithstanding the preceding sentence, under no circumstances
shall the aggregate compensation as of the date of this Agreement of all hourly
Employees be increased by more than 5% prior to the Closing Date.
(f) Seller and the Acquired Companies shall not (i) hire
or employ any additional salaried employees (including officers and directors)
of the Acquired Companies, except to replace, at no greater level of
compensation, current positions that become open, or (ii) increase the
compensation of any salaried Employee.
SECTION IV.2 Access to Information.
---------------------
(a) Access. Seller shall afford to representatives of
------
Purchaser, including its counsel, accountants and lenders, reasonable access
during normal business hours during the period prior to the Closing Date to
inspect all assets, properties, books, Contracts and records of the Acquired
Companies, and reasonable access to the employees and representatives of the
Acquired Companies. Purchaser shall indemnify Seller and hold it harmless from
all liabilities, and for all losses, arising out of such representatives' acts
or omissions in connection with such access and, after making any investigation
of such properties, books, Contracts or records, Purchaser shall promptly
restore such properties, books, Contracts and records to their condition prior
to such investigation. If, in the course of any investigation pursuant to this
Section 4.2(a), Purchaser discovers any breach of any representation or warranty
contained in this Agreement or any circumstance or condition that, upon Closing,
would constitute such a breach, Purchaser shall promptly inform Seller in
writing of any such breach.
19
(b) Confidentiality. Purchaser acknowledges that the
---------------
information being provided to Purchaser and its representatives by Seller is
subject to, and Purchaser agrees to be bound by, a confidentiality agreement
between Roscoe's and Hamlet, dated June 6, 2001 (the "Confidentiality
Agreement"), which terms are incorporated herein by reference.
SECTION IV.3 Consents.
--------
(a) Subject to the terms and conditions of this Agreement,
Seller and Purchaser agree (without being obligated to make any payment to any
third party) to use their best efforts to take, or cause to be taken, all
actions and to do, or cause to be done, all things necessary, proper or
advisable to consummate and make effective as promptly as practicable the
transactions contemplated by this Agreement:
(i) Seller shall obtain, and Purchaser shall
cooperate in obtaining, all necessary waivers, consents and approvals
from other parties to material Contracts.
(ii) Purchaser shall obtain, and Seller shall
cooperate in obtaining, any and all approvals required in connection
with any and all liquor licenses held by the Acquired Companies in
connection with the operation of the Business, and Purchaser shall be
responsible for maintaining such liquor licenses after the Closing
Date.
(iii) Seller and Purchaser shall use their
reasonable best efforts to obtain all consents, approvals and
authorizations that are required to be obtained under any Federal,
state, local or foreign law or regulations (other than as set forth in
(ii) above.
(iv) Seller and Purchaser shall use their
reasonable best efforts to obtain all documents, certificates and
consents requested by Purchaser's financing sources.
(v) Seller and Purchaser shall use their reasonable
best efforts to prevent the entry, enactment or promulgation of any
threatened or pending injunction or order that would adversely affect
the ability of the parties hereto to consummate the transactions
contemplated hereby.
20
(vi) Seller and Purchaser shall use their
reasonable best efforts to lift or rescind any injunction or order
adversely affecting the ability of the parties hereto to consummate the
transactions contemplated hereby, and
(vii) Seller and Purchaser shall use their
reasonable best efforts to effect all necessary registrations and
filings, and submissions of information requested by governmental
authorities.
(b) Purchaser recognizes that certain consents to the
transactions contemplated by this Agreement may have been or may be required
from third parties, including parties to Contracts and governmental authorities.
Purchaser agrees that Seller shall not have any liability whatsoever arising out
of or relating to the failure to obtain any such consent or because of the
termination of any Contract or any permit, license or other governmental
authorization as a result thereof. Purchaser further agrees that no
representation, warranty or covenant of Seller contained herein shall be
breached or deemed breached as a result of (i) the failure to obtain any such
consent or any such termination or (ii) any lawsuit, action, claim, proceeding
or investigation commenced or threatened by or on behalf of any person arising
out of or relating to the failure to obtain any such consent or because of any
such termination.
SECTION IV.4 Further Assurances. From time to time, whether
------------------
before, at, or after the Closing, each party hereto, shall execute and deliver,
or cause to be executed and delivered, all such documents and instruments and
shall take, or cause to be taken, all such other actions as may be reasonably
necessary to consummate the transactions contemplated by this Agreement.
SECTION IV.5 Employee Benefit Plans.
----------------------
(a) If the employment of an individual employed by the
Acquired Companies immediately prior to the Closing Date (other than the
officers and directors of the Acquired Companies set forth on Schedule 4.6 whose
resignations are required to be tendered in connection with the Closing) (the
"Current Employees") is terminated by Purchaser within the six month period
following the Closing Date and such Current Employee would have otherwise been
eligible to receive a severance benefit under the Prandium Severance Plan,
Purchaser shall provide each such Current Employee with a severance benefit no
less favorable (except with respect to any acceleration of vesting on options to
purchase common stock of Prandium) to the severance benefit such Current
Employee would have received under the Prandium Severance Plan as set forth on
Schedule 4.5-1 had such Current Employee remained employed by the Acquired
Companies at the time of such termination. As of the Closing, Seller shall cease
to provide coverage or benefits that arise or accrue on or after the Closing
Date for Current
21
Employees under any Employee Benefit Plan maintained by Seller, Prandium or any
of their subsidiaries, except as required by applicable law or otherwise agreed
to by the parties hereto.
(b) For a period of six months following the Closing Date,
Purchaser shall continue to provide, subject to earlier termination in
accordance with Section 4.5(a), Current Employees with (i) salary and wages no
less favorable to the salary and wages received by each such Current Employee as
set forth in Schedule 3.1(o)-1 and (ii) subject to Seller's compliance with
Sections 4.2(a) and 4.5(c) and provided the Closing Date is no earlier than
November 15, 2001 (or if the Closing occurs prior to November 15, 2001,
Purchaser's obligations to provide benefits under this subsection (ii) shall not
commence until November 15, 2001) employee benefits that are no less favorable
to those set forth in Schedule 4.5-2 (the "Post Closing Employee Benefits"). To
the extent applicable and not otherwise prohibited by any applicable law,
service by Current Employees with the Acquired Companies or Seller shall be
recognized under each of the Post Closing Employee Benefits for purposes of (i)
eligibility to participate and (ii) vesting, but in no event shall such service
be taken into account in determining the accrual of benefits under any such
benefit plan or arrangement, including, but not limited to, a defined benefit
plan. To the extent applicable and not otherwise prohibited by any applicable
law, Purchaser shall waive any pre-existing conditions, limitations or waiting
periods under such employee benefit plans. Notwithstanding anything to the
contrary, each Affected Person shall receive full credit under the time-off
benefits listed on Schedule 4.5-2 applicable to such Affected Person, for all
accrued and unused time-off benefits to which such Affected Person is entitled
as of the Closing Date.
(c) Seller and Purchaser agree to cooperate in carrying
out the duties and responsibilities contained in this Section 4.5. In addition,
Seller agrees to make available to Purchaser in a timely manner, such
information as Purchaser may reasonably request to facilitate the determination
of (i) the period of service of any Current Employees with the Acquired
Companies or Seller prior to the Closing Date, (ii) individual service accruals
and salary histories of Current Employees, and (iii) such other information as
Purchaser may reasonably request to carry out the provisions of this Section
4.5.
(d) Notwithstanding any other provision of this Agreement
to the contrary, the provisions of this Section 4.5 shall not confer any rights
or remedies upon any person other than the parties to this Agreement and their
respective successors and assigns, and the Current Employees shall not be "third
party beneficiaries" of this Agreement for purposes of this Section 4.5 and the
enforcement thereof.
22
SECTION IV.6 Employees. Purchaser acknowledges and agrees that
---------
any employment loss within the meaning of the Worker Adjustment and Retraining
Notification Act (the "WARN Act"), 29 U.S.C. 2101 et seq., suffered by any
------
Employee immediately upon or within 90 days following the Closing (other than
those Affected Persons set forth on Schedule 4.6 whose resignations are required
to be tendered in connection with the Closing), shall have been caused by
Purchaser's decision not to continue the employment of such Employee, and not by
the sale of the Acquired Companies. Purchaser further acknowledges and agrees
that it shall be responsible for giving any notices required by the WARN Act,
that it is liable to any Employee who does not receive notice under, and who
suffers an employment loss, as defined in, the WARN Act and that it is
responsible to and shall indemnify and hold harmless Seller and its affiliates
for any and all claims asserted under the WARN Act because of a "plant closing"
or "mass layoff," as defined therein, occurring on or after the Closing Date.
For purposes of this Agreement, the Closing Date is and shall be the same as the
"effective date" of the sale within the meaning of the WARN Act.
SECTION IV.7 Cooperation With Respect to Tax Matters.
---------------------------------------
(a) Seller and Purchaser recognize that the Acquired
Companies have joined with Seller in filing unitary, consolidated, or combined
Tax Returns. After the Closing Date (i) Seller shall include (to the extent
required by law) the taxable income or loss, and all other items, of the
Acquired Companies for periods ending before or on the Closing Date, in their
unitary, consolidated or combined Tax Returns, and (ii) with respect to any
other Tax Returns for any taxable period that includes but does not end on the
Closing Date (the "Straddle Tax Returns"), Seller shall prepare a schedule
allocating, on a basis consistent with the preparation of Seller's consolidated
Federal income tax return for the taxable period ending on the Closing Date, the
taxable income or loss, and all other items, of the Acquired Companies to the
period commencing with the first day of the taxable period covered by such
Straddle Tax Return up to and including the Closing Date (the "Pre-Closing
Period") and the period commencing with the first day after the Closing Date and
ending with the last day of the taxable period covered by such Straddle Tax
Return (the "Post-Closing Period").
(b) Seller shall be responsible for, and shall have
ultimate discretion with respect to, (i) all Tax Returns required or permitted
by applicable law to be filed by the Acquired Companies (or by Seller on its
behalf) with respect to periods that end on or before the Closing Date, (ii) any
elections and/or payments related to such Tax Returns, and (iii) any Audit
(including the execution of any waiver of limitation with respect to any Audit)
relating to any such Tax Returns. The foregoing Tax Returns shall be prepared
and filed consistently with Seller's past practices. Seller shall consult in
good
23
faith with Purchaser in any audit with respect to specific issues that may
reasonably be expected to materially affect Purchaser's future Tax liability
("Going Forward Tax Issues") and Seller shall consult with Purchaser and shall
not settle any Going Forward Tax Issues without the consent of Purchaser, which
consent shall not be unreasonably withheld. Purchaser and the Acquired Companies
shall cooperate with Seller for the purpose of making any reasonable election
under applicable law.
(c) Purchaser and the Acquired Companies shall be
responsible for, and shall have ultimate discretion with respect to, (i) all Tax
Returns required to be filed by the Acquired Companies with respect to periods
that begin after the Closing Date and (ii) the Straddle Tax Returns, if any, and
(iii) any Audit (including the execution of any waiver of limitation with
respect to any Audit) relating to any such Tax Returns; provided, however, that
-------- -------
(x) in the case of any Straddle Tax Return, the preparation and filing of such
Tax Return shall be subject to review and approval of Seller which consents
shall not be unreasonably withheld, and (y) in the event that any Audit for
which Purchaser is responsible pursuant to this Section 4.7(c) could reasonably
be expected to result in a material increase in Tax liability for which Seller
would be responsible, Purchaser shall consult in good faith with Seller in
respect of the specific issues that could give rise to such increased Tax
liability.
(d) After the Closing Date, each of Purchaser and the
Acquired Companies, on the one hand, and Seller, on the other, shall (i)
provide, or cause to be provided, to each other's respective subsidiaries,
officers, employees, representatives and affiliates, such assistance as may
reasonably be requested, including making available employees and the books and
records of the Acquired Companies, by any of them in connection with the
preparation of any Tax Return or any Audit of the Acquired Companies in respect
of which Purchaser, the Acquired Companies or Seller, as the case may be, is
responsible pursuant to Sections 4.7(b) or (c) of this Agreement and (ii)
retain, or cause to be retained, for so long as any such taxable years or Audits
shall remain open for adjustments, any records or information which may be
relevant to any such Tax Returns or Audits.
(e) Each of Purchaser and the Acquired Companies, on the
one hand, and Seller, on the other, shall promptly inform, keep regularly
apprised of the progress with respect to, and notify the other party in writing
not later than (i) ten business days after the receipt of any notice of any
Audit or (ii) fifteen business days prior to the settlement or final
determination of any Audit for which it was responsible pursuant to Section
4.7(b) or (c) of this Agreement which could affect the Tax liability of such
other party for any taxable year.
24
(f) Seller hereby agrees that it will not file an election
pursuant to Treasury Regulation section 1.1502-20(g)(4) to reattribute any of
the net operating losses or capital loss carry forwards of the Acquired
Companies to itself.
(g) As used in this Agreement:
(i) "Social Security Taxes" shall include any Taxes
imposed pursuant to the Federal Insurance Contributions Act under
section 3101 et seq. of the Code;
(ii) "Tax" or "Taxes" shall include all Federal,
state, local and foreign taxes, assessments, and governmental charges
(whether imposed directly or through withholdings), including any
interest, penalties and additions to Tax applicable thereto including
without limitation, liability imposed pursuant to Treasury Regulation
Section 1.1502-6 (or any similar provision of state, local or foreign
law) which may be imposed upon on entity as a transferee or successor
and any Taxes payable by the Acquired Companies under contract or
otherwise;
(iii) "Tax Returns" shall include any Federal,
state, local and foreign tax returns, declarations, elections,
statements, reports, schedules and information returns or the refiling
of any such Tax Returns previously filed; and
(iv) "Audit" shall include any audit, assessment of
Taxes, reassessment of Taxes, or other examination by any taxing
authority or any judicial or administrative proceedings or appeal of
such proceedings.
SECTION IV.8 Tax Indemnity.
-------------
(a) Seller shall be liable for, shall pay to the
appropriate Tax authorities, and shall hold Purchaser and the Acquired Companies
harmless against, all Taxes of the Acquired Companies in excess of any liability
for Taxes (whether or not shown due on any Tax Return) which has been accrued
for or reserved on the respective balance sheets of the Acquired Companies as of
the Closing Date taking into account all adjustments made pursuant to Section
1.3 that relate to (i) the taxable periods ending before or on the Closing Date
and (ii) the Pre-Closing Period. Seller shall be entitled to all Tax refunds
(including interest) attributable to the taxable periods in respect of which
Seller is so obligated to indemnify Purchaser and the Acquired Companies.
(b) Purchaser and the Acquired Companies shall be liable
for, shall pay to the appropriate Tax authorities, and shall hold Seller
harmless against all
25
Taxes of the Acquired Companies that relate to (i) the taxable periods that
begin after the Closing Date and (ii) the Post-Closing Period. Purchaser and the
Acquired Companies shall be entitled to any Tax refund (including interest)
attributable to the taxable periods in respect of which Purchaser and the
Acquired Companies are so obligated to indemnify Seller.
(c) Upon receipt of notice from any taxing authority of
any tax liability that would be subject to indemnity pursuant to this Section
4.8, Seller or Purchaser shall in writing notify the other party to this
Agreement within 20 days of receiving such notice; provided, however, that the
failure to give such notice shall not reduce the indemnification obligations of
the indemnifying party unless and only to the extent that such failure
materially prejudices the rights of the indemnifying party.
SECTION IV.9 Financial Information.
---------------------
(a) After the Closing, upon reasonable written notice,
Purchaser and Seller shall furnish or cause to be furnished to each other and
their respective accountants, counsel and other representatives access, during
normal business hours, such information (including records pertinent to the
Acquired Companies) as is reasonably necessary for financial reporting and
accounting matters.
(b) Purchaser shall retain all of the books and records of
the Acquired Companies for a period of ten years after the Closing Date or such
longer time as may be required by law. After the end of such period, before
disposing of such books or records, Purchaser shall give notice to such effect
to Seller and give Seller an opportunity to remove and retain all or any part of
such books or records as Seller may select.
(c) After the Closing, and for so long as Seller has any
material contingent or other obligation under any of the Applicable Contracts to
any party other than Purchaser or the Acquired Companies, Purchaser shall
provide to Seller (i) within 90 days after the end of each fiscal year of
Purchaser, any financial statements of Purchaser prepared for such fiscal year
and (ii) within 45 days after the end of each fiscal quarter (other than the
last fiscal quarter of any fiscal year) of Purchaser, any financial statements
of Purchaser prepared for such fiscal quarter. Seller shall not disclose such
information to any person other than its affiliates, accountants, counsel or
representatives or any lessor, mortgagee or prospective purchaser who agrees to
keep such information confidential. The confidentiality restrictions of this
Section 4.9(c) shall not apply to information which (x) was or becomes generally
available to the public other than as a result of a disclosure by Seller or (y)
was or becomes available to Seller on a
26
nonconfidential basis from a source other than Purchaser or its affiliates,
accountants, counsel or representatives or any person known by Seller to be
bound by a confidentiality agreement with Purchaser.
SECTION IV.10 Expenses. Whether or not the Closing takes place,
--------
except as otherwise provided herein, all costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby shall be
paid by the party incurring such costs or expenses.
SECTION IV.11 Insurance. Purchaser shall secure insurance with
---------
respect to the Acquired Companies' business from the Closing Date covering
general liability (including premises liability), products liability and workers
compensation in amounts customary for the industries in which the Acquired
Companies operate.
SECTION IV.12 Publicity. Seller and Purchaser agree that, prior
---------
to the Closing, no public release or announcement concerning the transactions
contemplated hereby shall be issued by any party without the prior written
consent (which consent shall not be unreasonably withheld) of the other party,
except as such release or announcement may be required by law. Seller and
Purchaser agree that, prior to the Closing, no disclosure of the terms or
provisions of this Agreement shall be made except to representatives, advisors,
counsel, and lenders to the parties hereto who acknowledge the confidentiality
of this Agreement, and except as required by law.
SECTION IV.13 Certain Understandings.
----------------------
(a) Purchaser has received from Seller certain projected
financial information ("Projections") relating to the Acquired Companies.
Purchaser acknowledges that (i) there are uncertainties inherent in such
Projections, (ii) Purchaser is familiar with such uncertainties and is taking
full responsibility for making its own evaluation of the adequacy and accuracy
of all Projections so furnished to it and (iii) Purchaser shall not have any
claim against Seller or its agents with respect thereto. Accordingly, Seller
makes no representation or warranty with respect to such Projections.
(b) Purchaser acknowledges that, except as expressly set
forth herein, neither Seller, nor any other person, has made any representation
or warranty, express or implied, as to the accuracy or completeness of any
Projections regarding the Acquired Companies, and other than as expressly set
forth herein, neither Seller nor any other person will be subject to any
liability to Purchaser or any other person resulting from the distribution to
Purchaser, or the use of, any such Projections. Purchaser acknowledges that,
should the Closing occur, Purchaser will acquire the Acquired Companies'
business in an "as is" condition and on a "where is" basis, without any
27
representation or warranty of any kind, express or implied, except such
representations and warranties of Seller expressly set forth in this Agreement,
in the Escrow Agreement and in the certificate referenced in Section 6.1(c).
(c) Purchaser acknowledges that, except as expressly set
forth herein, neither Seller, nor any other person, has made any representation
or warranty, express or implied, as to (i) the physical condition or state of
repair of the Acquired Companies' real property, the improvements constituting a
part thereof or the equipment and fixtures appurtenant thereto, (ii) the gross
or net income derived therefrom, (iii) the cost, book value or market value
thereof, (iv) the use or potential use thereof, or (v) any other matter
affecting, or relating to, such property or the operation or management thereof.
SECTION IV.14 Cooperation with Respect to Insurance Matters.
---------------------------------------------
(a) Seller shall be responsible for any claim (including,
without limitation, claims related to worker's compensation and general
liability), loss, liability, damage or expense relating to any of the Acquired
Companies solely relating to or arising out of events (known or unknown) prior
to the Closing Date that are covered by any Seller's Insurance Policies (the
"Seller's Pre-Closing Liabilities"). Purchaser and the Acquired Companies shall
cooperate and cause their subsidiaries to cooperate with Prandium and Seller in
submitting claims with respect to Seller's Pre-Closing Liabilities ("Seller's
Pre-Closing Claims") (or pursuing Seller's Pre-Closing Claims previously made).
It is further understood and agreed that any deductibles and/or self-insured
retentions applicable to Seller's Pre-Closing Liabilities under Seller's
Insurance Policies will be the sole responsibility of Seller and Prandium.
Purchaser shall be responsible for any loss, liability, claim, damage or expense
relating to any of the Acquired Companies relating to or arising out of (i)
events (known or unknown) occurring on or after the Closing Date and (ii) events
(known or unknown) occurring prior to the Closing Date that are not Seller's
Pre-Closing Liabilities.
(b) To the extent that, after the Closing Date, Purchaser
or Seller reasonably require any information regarding claim data, payroll or
other similar information in order to make filings with insurance carriers,
Seller or Purchaser, as the case may be, shall promptly supply such information
to the other.
(c) Seller shall provide Purchaser with such information
in its possession that Purchaser reasonably requires to obtain insurance for the
Acquired Companies.
28
SECTION IV.15 Closing Deliveries.
------------------
(a) At the Closing, in addition to the documents required
to be delivered pursuant to Section 2.2(a) above, Seller shall (i) deliver to
Purchaser short-form certificates of good standing for each of the Acquired
Companies, dated as of a date within 20 days of the Closing Date, issued by the
Secretary of State of the state of incorporation of such Acquired Company; (ii)
deliver to Purchaser true, complete and correct copies of resolutions duly
adopted by the Board of Directors of Seller, relating to the approval of the
transactions contemplated by this Agreement; (iii) deliver or make available to
Purchaser at the locations at which the business of the Acquired Companies is
being conducted all of the Acquired Companies' books and records, including all
Intellectual Property; (iv) deliver a statement (in form and substance
reasonably satisfactory to Purchaser) that satisfies Purchaser's obligations
under Treasury Regulation section 1.1445-2(b)(2); and (v) deliver fully-executed
resignations from the then current officers and directors of the Acquired
Companies set forth on Schedule 4.6.
(b) At the Closing, in addition to the documents required
to be delivered pursuant to Section 2.2(b) above, Purchaser shall (i) deliver to
Seller a short-form certificate of good standing for Purchaser, dated as of a
date within 20 days of the Closing Date, issued by the Secretary of State of the
state of incorporation of Purchaser; and (ii) deliver to Seller true, complete
and correct copies of resolutions duly adopted by the Board of Directors of
Purchaser, relating to the approval of the transactions contemplated by this
Agreement.
SECTION IV.16 Notice and Cure. Seller will notify Purchaser prior
---------------
to the Closing in writing of, and contemporaneously will provide Purchaser with
true and complete copies of any and all information or documents relating to,
and will use all commercially reasonable efforts to cure before the Closing any
event, transaction or circumstance, as soon as practicable after Seller has
knowledge thereof, that causes or will cause any covenant or agreement of Seller
or the Acquired Companies under this Agreement to be breached in any material
respect or that renders or will render untrue in any material respect any
representation or warranty of Seller or the Acquired Companies contained in this
Agreement as if the same were made on or as of the date of such notice.
29
SECTION IV.17 Exclusivity. From the date hereof until the Closing
-----------
Date or the termination of this Agreement pursuant to Section 7.1, Seller shall
not solicit any offers for purchase of the Stock from any parties other than
Purchaser, nor shall Seller provide material due diligence documents or
information to third parties; provided, however, that upon commencement of the
-------- -------
Reorganization Case, Seller may advise third parties of the terms and conditions
of this Agreement and respond to requests for due diligence material. Seller
will advise Purchaser of any third party due diligence requests for material not
previously provided to Purchaser and will, at Purchaser's request, provide the
same material to Purchaser.
SECTION IV.18 Financing. On or prior to November 15, 2001,
---------
Purchaser shall deliver to Seller an executed commitment letter or letters from
responsible financial institution(s) in form and substance satisfactory to
Seller for the provision of funds sufficient to consummate the transactions
contemplated by this Agreement. Purchaser shall use its best efforts to prevent
such letters from being withdrawn.
ARTICLE V
SALE ORDER; TERMINATION FEE
SECTION V.1 Approval of this Agreement
--------------------------
(a) Seller shall, as quickly as reasonably practicable
under the circumstances, but in any event no later than (I) two court days after
the commencement of the Reorganization Case, or (II) if the execution date of
this Agreement is less than six days before the date on which the Reorganization
Case commences, the tenth calendar day after the execution date of this
Agreement (or the next court day, if the tenth calendar day is not a court day),
file a motion (the "Sale Motion") requesting that the Bankruptcy Court enter an
order approving this Agreement (the "Sale Order"). The Sale Order shall be in a
form and substance reasonably acceptable to Purchaser and, among other things,
shall:
(i) approve the sale of the Stock to Purchaser on
the terms and conditions set forth in this Agreement and authorize
Seller to proceed with the Acquisition;
(ii) state that the sale of the Stock to Purchaser
shall be free and clear of all liens, claims, interests, and
encumbrances whatsoever;
30
(iii) state that the Sale Order shall be
immediately effective upon entry, notwithstanding the provisions of
Rule 6004(g) of the Federal Rules of Bankruptcy Procedure and Rule
62(g) of the Federal Rules of Civil Procedure;
(iv) find and direct that the Escrowed Amount shall
be disbursed to Purchaser or Seller, as the case may be, only in
accordance with the express terms of the Escrow Agreement;
(v) order that the automatic stay under Bankruptcy
Code (S) 362(a) is modified to the extent required to permit, and no
injunction shall be issued by the Bankruptcy Court that would stay,
impede, or otherwise interfere with, the disbursement of the Escrowed
Amount in whole or in part, to Purchaser or Seller, as the case may be,
pursuant to the terms of the Escrow Agreement;
(vi) provide that Purchaser and Seller may cause
the Closing to occur as soon as practicable after the Sale Order's
entry; and
(vii) contain at least the following findings of
fact and conclusions of law, in form and substance satisfactory to
Purchaser, in its reasonable discretion:
(1) the Notice of Sale, Assignment, and Transfer of the
Stock free and clear of liens, and the parties who were
served with copies of such Notice, were in compliance with
Sections 102 and 363 of the Bankruptcy Code and Bankruptcy
Rules 2002, 6004, and 9014 and any other applicable
provision of the Bankruptcy Code, the Bankruptcy Rules, or
any local bankruptcy rule governing the sale of assets
free and clear of liens, or as directed by the Bankruptcy
Court as long as the Bankruptcy Court finds that such
notice is sufficient under the circumstances;
(2) all requirements imposed by Section 363(f) of the
Bankruptcy Code for the sale of the Stock free and clear
of Liens have been satisfied;
(3) Purchaser is a purchaser of the Stock in "good faith"
pursuant to Section 363(m) of the Bankruptcy Code, and the
Acquisition is entitled to the protections of 363(m);
31
(4) Purchaser and Seller did not engage in any conduct
which would allow this Agreement or the Acquisition to be
set aside pursuant to Section 363(n) of the Bankruptcy
Code;
(5) pursuant to Section 105 of the Bankruptcy Code, any
creditors of Seller are prohibited from taking any actions
against Purchaser or the Stock except in connection with
liabilities expressly assumed by Purchaser, if any; and
(6) the terms and provisions of this Agreement are fair
and reasonable.
(7) The Bankruptcy Court shall not confirm any
reorganization plan that modifies in any material respect
Seller's obligations under Section 4.14 of this Agreement.
All of Seller's obligations under this Agreement,
including without limitation its obligations under
Sections 4.14 and Article VIII, constitute administrative
expenses of the Reorganization Case entitled to priority
under Bankruptcy Code (S) 507(a)(1) until such time as
Seller's reorganization plan is confirmed. Upon
confirmation, Seller's obligations under Section 4.l4 and
Article VIII shall become direct obligations of the
reorganized debtor.
(b) Simultaneously with filing the Sale Motion, Seller
shall file a motion in the Bankruptcy Court for an order (the "Procedures
Order") approving, on an expedited basis and, in any event, before the hearing
on the Sale Motion (the "Sale Hearing"), the payment of the Termination Fee in
accordance with Section 7.3 below and the Sales Procedures. The Procedures Order
shall be in form and substance acceptable to Purchaser in its reasonable
discretion. As used herein, "Sales Procedures" means all of the following
procedures for the submission of competing offers for the Stock at the hearing
on the Sale Motion:
(i) Any entity other than Purchaser (an
"Overbidder") that is interested in purchasing the Stock must file with
the Bankruptcy Court and serve on Seller and Purchaser an "Initial
Overbid" in conformance with this paragraph, so that it is actually
received by Purchaser and Seller no later than five court days before
the Sale Hearing (the "Bid Deadline"). Any Initial Overbid must:
(1) include a proposed Stock Purchase Agreement (the
"Competing Agreement"), executed by the Overbidder, that
is on
32
substantially the same terms and conditions as those in
this Agreement, along with a redlined, marked copy showing
all changes between the Competing Agreement and this
Agreement;
(2) remain open until the conclusion of the Sale Hearing;
(3) contain terms and conditions no less favorable to
Seller than the terms and conditions of this Agreement;
(4) provide for an all-cash purchase price to be paid to
Seller that exceeds the Purchase Price herein by at least
the sum of (i) the Termination Fee and (ii) $100,000;
(5) be accompanied by admissible evidence in the form of
affidavits or declarations establishing the Overbidder's
good faith, within the meaning of Section 363(m) of the
Bankruptcy Code;
(6) be accompanied by admissible evidence in the form of
affidavits or declarations establishing that the
Overbidder is capable and qualified, financially, legally,
and otherwise, of unconditionally performing all
obligations under the Competing Agreement;
(7) be accompanied by a cashier's check made payable to
the order of Seller in the amount of the Termination Fee,
as set forth in Section 7.3 (the "Overbidder's Deposit"),
and further provide that (A) if the Bankruptcy Court
approves a sale of the Stock to Overbidder, Seller may
retain the Overbidder's Deposit for application as a
non-refundable deposit for application against the
purchase price at the closing of the transaction, and (B)
if the Bankruptcy Court does not approve a sale of the
Stock to Overbidder, Seller will promptly return the
Overbidder's Deposit to Overbidder;
(8) disclaim any right of Overbidder to receive a fee
analogous to the Termination Fee or to compensation under
Bankruptcy Code Section 503(b) for making a substantial
contribution; and
(9) contain a proposed closing date that is not later than
the Closing Date hereunder.
33
(ii) Any entity that submits a timely, conforming
Initial Overbid, as set forth above, shall be deemed a "Qualified
Overbidder" and may bid for the Stock at the Sale Hearing.
(iii) Any entity that fails to submit a timely,
conforming Initial Overbid, as set forth above, shall be disqualified
from bidding for the Stock at the Sale Hearing.
(iv) If no timely, conforming Initial Overbid is
submitted, Seller shall request at the Sale Hearing that the Court
approve the proposed sale of the Stock to Purchaser under the
Agreement.
(v) If Seller receives one or more timely,
conforming Initial Overbids, Seller may nevertheless request either
that the Court approve this Agreement and the proposed sale of the
Stock to Purchaser, or that the Court conduct an auction of the Stock
at the Sale Hearing (the "Auction") in which Purchaser and all
Qualified Overbidders may participate. The Auction shall be governed by
the following procedures:
(1) all bidders shall be deemed to have consented to the
core jurisdiction of the Bankruptcy Court and to have
waived any right to jury trial in connection with any
disputes relating to the Auction or the sale of the Stock;
(2) bidding will commence at the amount of the highest bid
submitted by a Qualified Overbidder, as determined by the
Bankruptcy Court;
(3) each subsequent bid shall be in increments of no less
than $100,000;
(4) Purchaser shall have the right, in its sole and
absolute discretion, to match bids made by any Qualified
Overbidder and, in such event, Purchaser's matching bid
shall be deemed the highest and best bid for the Stock;
(5) if, upon conclusion of the Auction, and consistent
with the terms of these bidding procedures, Purchaser's
final bid matches or is greater than the highest bid made
by a Qualified Overbidder, Seller shall recommend that the
Bankruptcy Court approve the Agreement and authorize
Seller to sell the Stock to Purchaser, and
34
the amount of Purchaser's final bid (less the amount of
the Termination Fee) shall constitute the Purchase Price
under this Agreement;
(6) Seller may, with Bankruptcy Court approval, elect to
deem Purchaser's final bid to be the highest bid,
notwithstanding the receipt of an apparently higher bid
from another Overbidder, if Seller reasonably concludes
that the Overbidder may not be able to close, or for any
other reason.
(c) Purchaser and Seller shall use their reasonable best
efforts to cause the Bankruptcy Court to enter the Procedures Order and the Sale
Order. Unless the Bankruptcy Court fails to approve the payment of the
Termination Fee as provided herein, neither Purchaser nor any of its agents
shall seek compensation from Seller under Bankruptcy Code (S) 503(b) or
otherwise for making a substantial contribution in the Reorganization Case.
ARTICLE VI
CONDITIONS PRECEDENT
SECTION VI.1 Conditions Precedent to Obligations of Purchaser.
------------------------------------------------
The obligation of Purchaser to purchase the Stock shall be subject to the
satisfaction or waiver on the Closing Date of the following conditions precedent
(which shall not be construed as covenants):
(a) No Injunctions or Restraints. No temporary restraining
----------------------------
order or preliminary or permanent injunction of any court or administrative
agency of competent jurisdiction prohibiting the purchase and sale of the Stock
shall be in effect.
(b) Consents. All consents, approvals and waivers from
--------
third parties and governmental authorities and other parties set forth on
Schedule 3.1(e)-1 or necessary to permit Seller to transfer the Stock to
Purchaser shall have been obtained. The consent or approval of each third party
whose consent or approval shall be required in connection with the transactions
contemplated hereby under any Contract or permit set forth on Schedule 6.1(b)
hereto shall have been obtained.
(c) Representations and Warranties. The representations
------------------------------
and warranties of Seller set forth in this Agreement shall be true and correct
in all material respects on and as of the Closing Date, as though made on and as
of the Closing Date,
35
except as otherwise contemplated by this Agreement, and Purchaser shall have
received a certificate signed by an authorized officer of Seller to such effect.
(d) Performance of Obligations of Seller. Seller shall
------------------------------------
have performed all material obligations required to be performed by them under
this Agreement on or prior to the Closing Date, and Purchaser shall have
received a certificate signed by an authorized officer of Seller to such effect.
(e) Financing. Purchaser shall have satisfied any and all
---------
conditions required of it by a responsible financial institution(s), which
institution(s) shall be reasonably acceptable to both Prandium and Seller, and
such institution(s) shall have provided Purchaser with the cash funds necessary
to consummate the Acquisition.
(f) Estoppel Certificates. Seller shall have delivered to
---------------------
Purchaser estoppel certificates, substantially in the form attached hereto as
Exhibit B, from each real property lessor of each lease listed on Schedule
6.1(f).
(g) Sale Order. The Bankruptcy Court shall have entered
----------
the Sale Order in a form acceptable to Purchaser in its reasonable discretion,
which shall contain, among other things, the provisions required by Article V of
this Agreement, and the Sale Order shall have become a Final Order. As used
herein, "Final Order" means an order, entered by a court of competent
jurisdiction, that has not been withdrawn, modified, or reversed, remains in
full force and effect, and as to which (i) the time to seek rehearing or to
appeal has expired, (ii) no request for rehearing or appeal is pending, and
(iii) no stay is in effect. Notwithstanding the foregoing, Purchaser may waive
the requirement that the Sale Order be a Final Order and may cause the Closing
to occur at any time after the Sale Order's entry, so long as on the Closing
Date (i) all other conditions to Closing are satisfied or waived, and (ii) the
Sale Order is in full force and effect and is not the subject of a stay.
SECTION VI.2 Conditions Precedent to Obligations of Seller. The
---------------------------------------------
obligation of Seller to sell, assign, transfer, convey and deliver the Stock is
subject to the satisfaction or waiver on the Closing Date of each of the
following conditions precedent (which shall not be construed as covenants):
(a) No Injunctions or Restraints. No temporary restraining
----------------------------
order or preliminary or permanent injunction of any court or administrative
agency of competent jurisdiction prohibiting the purchase and sale of the Stock
shall be in effect.
36
(b) Consents. All consents, approvals and waivers from
--------
third parties and governmental authorities and other parties set forth on
Schedule 3.1(e)-1 shall have been obtained.
(c) Representations and Warranties. The representations
------------------------------
and warranties of Purchaser set forth in this Agreement shall be true and
correct in all material respects on and as of the Closing Date, as though made
on and as of the Closing Date, except as otherwise contemplated by this
Agreement, and Seller shall have received a certificate signed by an authorized
officer of Purchaser to such effect.
(d) Performance of Obligations of Purchaser. Purchaser
---------------------------------------
shall have performed all material obligations required to be performed by it
under this Agreement on or prior to the Closing Date, and Seller shall have
received a certificate signed by an authorized officer of Purchaser to such
effect.
(e) Sale Order. The Bankruptcy Court shall have entered
----------
the Sale Order, and the Sale Order shall have become a Final Order, except that
it shall not be a condition to Seller's obligations hereunder that the Sale
Order become a Final Order if Purchaser has waived that condition, as provided
in Section 6.1(g), and the Sale Order is not the subject of a stay.
37
ARTICLE VII
TERMINATION AND AMENDMENT
SECTION VII.1 Termination. This Agreement may be terminated and
-----------
the Acquisition may be abandoned at any time prior to the Closing:
(a) by mutual written consent of Seller and Purchaser;
(b) by either Seller or Purchaser, by written notice to
the other party, if there has been a violation or breach of any of the other
party's material covenants, agreements, or representations or warranties or if
there has been a failure on a scheduled Closing Date of satisfaction of any of
the material conditions to the obligations of the terminating party which has
not been cured within 10 business days after written notice thereof by the
terminating party to the other party;
(c) by either Seller or Purchaser, by written notice to
the other party, if the Acquisition has not been consummated by ninety days from
the date hereof (or such later date, as is agreed to in writing by Seller and
Purchaser), and such failure to consummate is not caused by a breach of this
Agreement (or any representation, warranty, covenant, or agreement included
herein) by the party electing to terminate pursuant to this clause (c);
(d) by either Seller or Purchaser, by written notice to
the other party, if there shall be any law or regulation that makes consummation
of the Acquisition illegal or otherwise prohibited or if any judgment,
injunction, order or decree enjoining Seller or Purchaser from consummating the
Acquisition is entered and such judgment, injunction, order or decree shall
become final and nonappealable;
(e) by either Seller or Purchaser, if the Bankruptcy Court
authorizes Seller to sell the Stock to an Overbidder;
(f) by Seller, (i) on November 15 or November 16, 2001, if
Purchaser has not delivered to Seller an executed commitment letter or letters
from responsible financial institution(s) in form and substance satisfactory to
Seller for the provision of funds sufficient to consummate the transactions
contemplated by this Agreement, or (ii) if any of such commitment letters are
withdrawn such that the remaining effective letters no longer provide funds
sufficient to consummate the transactions contemplated by this Agreement and
such withdrawn letters are not replaced with effective letters in form and
substance satisfactory to Seller within ten business days
38
following such withdrawal (the "Replacement Period"), then at the expiration of
the Replacement Period;
(g) by Purchaser, if the Bankruptcy Court's Sale Order
does not include provisions approving the Escrow Agreement in substantially the
form attached hereto as Exhibit A and the findings and directions described in
Sections 5.1(a)(iv) and (v); or
(h) by Purchaser, if Seller does not commence the
Reorganization Case within 45 days of the date hereof.
SECTION VII.2 Effect of Termination. In the event of termination
---------------------
of this Agreement in accordance with Section 7.1, this Agreement shall forthwith
become void and have no effect, except (a) to the extent that such termination
results from the breach by a party hereto of its obligations hereunder (in which
case such breaching party shall be liable for all damages allowable at law and
any relief available at equity), (b) as otherwise set forth in any written
termination agreement and (c) that Sections 4.2(b), 4.10, 4.12 and 7.3 shall
survive termination of this Agreement.
SECTION VII.3 Termination Fee. Notwithstanding anything herein to
---------------
the contrary, in the event that:
(a) Purchaser or Seller terminates the Agreement under
Section 7.1(e), Seller shall pay to Purchaser no later than two business days
after the entry of the Bankruptcy Court's order approving the transaction with
an Overbidder the sum of $700,000 (the "Termination Fee"), which amount shall be
paid directly from the winning Overbidder's Overbidder's Deposit provided under
Section 5.1(b)(i)(7);
(b) a Sale Order has been entered approving the sale of
the Stock to the Purchaser pursuant to this Agreement, Seller breaches its
obligation to close the Acquisition and such breach is not remedied within five
business days, and Purchaser is not in breach of its material representations,
warranties, covenants or agreements herein, then, within ten days of Seller's
termination of this Agreement, Seller shall pay to Purchaser the sum of $450,000
as liquidated damages (the "Liquidated Damages"); or
(c) a Sale Order has been entered approving the sale of
the Stock to the Purchaser pursuant to this Agreement, Purchaser breaches its
obligation to close the Acquisition and such breach is not remedied within five
business days, and Seller is not in breach of its material representations,
warranties, covenants or agreements herein, then,
39
within ten days of Seller's termination of this Agreement, Purchaser shall pay
to Seller the Liquidated Damages.
The obligation of Seller to pay the Termination Fee or Liquidated Damages, as
the case may be, shall constitute an administrative expense in the
Reorganization Case having super-priority administrative status ahead of all
other super-priority administrative claims allowed under Code Sections 503(b),
507(b) and 364(c)(1).
SECTION VII.4 Amendment. This Agreement may not be amended except
---------
by an instrument in writing signed by the party against whom enforcement of any
such amendment is sought. Any party hereto may, only by an instrument in
writing, waive compliance by the other party hereto with any term or provision
of this Agreement. A party's waiver of a breach of any term or provision of this
Agreement shall not be construed as a waiver of any subsequent breach.
ARTICLE VIII
INDEMNIFICATION
SECTION VIII.1 Indemnification Generally. In addition to and not
-------------------------
in limitation of the indemnities provided in Section 4.8, from and after the
Closing, subject to the other provisions of this Article VIII, the parties shall
be indemnified as provided in this Article VIII. All amounts payable pursuant to
this Article VIII shall be treated as adjustments to the Purchase Price.
SECTION VIII.2 Indemnification of Purchaser Indemnitees. Seller
----------------------------------------
and Prandium shall indemnify, save and keep Purchaser and its "Affiliates" (such
term having the meaning set forth in Rule 12b-2 promulgated under the Securities
Exchange Act of 1934, as amended), successors and permitted assigns, and their
respective directors, officers, employees and agents, and the heirs, executors
and personal representatives of each of the foregoing (each a "Purchaser
Indemnitee" and collectively the "Purchaser Indemnitees"), harmless against and
from all Damages sustained or incurred by any Purchaser Indemnitee on an
after-Tax basis, as a result of or arising out of:
(a) any inaccuracy in or breach of any representation and
warranty made by Seller to Purchaser herein or in the Schedules or in any other
document or certificate executed in connection with the Closing; or
(b) any breach by Seller, or failure of Seller to comply
with, any of the covenants or obligations under this Agreement to be performed
by Seller (including, without limitation, the obligations of Seller under this
Article VIII).
40
SECTION VIII.3 Indemnification of Seller Indemnitees. Purchaser
-------------------------------------
shall indemnify, save and keep Seller and its Affiliates, successors and
permitted assigns, and their directors, officers, employees and agents, and the
heirs, executors and personal representatives of each of the foregoing (each a
"Seller Indemnitee" and collectively the "Seller Indemnitees"), harmless against
and from all Damages sustained or incurred by any Seller Indemnitee on an
after-Tax basis, as a result of or arising out of:
(a) any inaccuracy in or breach of any representation and
warranty made by Purchaser to Seller herein or in the Schedules or in any other
document or certificate executed in connection with the Closing;
(b) any breach by Purchaser, or failure of Purchaser to
comply with, any of the covenants or obligations under this Agreement to be
performed by Purchaser (including, without limitation, the obligations of
Purchaser under this Article VIII); or
(c) the ownership or operation of the Business from and
after the Closing.
SECTION VIII.4 Limitation on Indemnification Obligations.
-----------------------------------------
(a) All representations and warranties of Seller and
Purchaser contained in this Agreement shall survive the Closing and continue in
full force and effect for a period of twelve months thereafter. A claim by a
Purchaser Indemnitee or a Seller Indemnitee for indemnification under Section
8.2 or 8.3(a), respectively, shall be ineffective unless such person delivers a
written claim for indemnification within the survival period specified in this
Section 8.4(a).
(b) Purchaser Indemnitees shall only be entitled to
indemnification pursuant to Section 8.2 once the aggregate amount otherwise
payable to Purchaser Indemnitees pursuant to such Section exceeds an amount
equal to $50,000 (the "Purchaser Threshold Amount"), and then to the full amount
of such claims. The indemnification to which Purchaser Indemnitees are entitled
pursuant to Section 8.2 and Section 4.8(a) shall be subject to an aggregate
ceiling equal to $1,000,000.
(c) Seller Indemnitees shall only be entitled to
indemnification pursuant to Section 8.3 once the aggregate amount otherwise
payable to Seller Indemnitees pursuant to such Section exceeds an amount equal
to $50,000 (the "Seller Threshold Amount"), and then to the full amount of such
claims. The indemnification to which Seller Indemnitees are entitled pursuant to
Section 8.3 shall be subject to an aggregate ceiling equal
41
to $1,000,000. The limitations on Purchaser's indemnification set forth in this
Section 8.4(c) shall not apply to claims made by Seller Indemnitees under
Section 8.3(c).
SECTION VIII.5 Cooperation.
-----------
The party that is required to provide indemnification to another
party pursuant to this Article VIII (and "Indemnifying Party") shall have the
right, at the Indemnifying Party's own expense, to participate in the defense of
any Third Party Claim, and if said right is exercised, the Indemnifying Party
and any party that is entitled to indemnification from another party pursuant to
this Article VIII (an "Indemnified Party") shall cooperate in the investigation
and defense of said Third Party Claim.
SECTION VIII.6 Third Party Claims Procedure.
----------------------------
(a) Promptly following the receipt of notice of a Third
Party Claim for which it may seek indemnification hereunder, the party receiving
the notice of the Third Party Claim shall notify the Indemnifying Party of such
Third Party Claim explaining in reasonable detail the Third Party Claim. The
failure to give such notice shall not relieve the Indemnifying Party of its
obligations under this Agreement except to the extent that the Indemnifying
Party is prejudiced as a result of the failure to give such notice. Within 15
business days after receipt of the notice by the Indemnifying Party pursuant to
the preceding sentence, the Indemnifying Party shall notify the Indemnified
Party whether it elects to undertake the defense of the Third Party Claim;
provided that the Indemnifying Party may so elect to undertake the defense of
-------- ----
such claim without the consent of the Indemnified Party only if such claim
involves money damages and if the adverse determination of such claim, singly or
in the aggregate, would not reasonably be expected to have a Material Adverse
Effect on the business of the Indemnified Party; provided, further, the
-------- -------
Indemnifying Party must elect to undertake the defense of any Third Party Claims
relating to Section 8.3(c). Each Indemnified Party shall make available to the
Indemnifying Party all information reasonably available to it relating to such
Third Party Claim. In addition, the parties hereunder shall render to each other
such assistance as may reasonably be requested in order to ensure the proper and
adequate defense of any such action or claim. If the Indemnifying Party elects
to undertake the defense of such Third Party Claim, it shall do so at its own
expense with counsel of its own choosing and it shall acknowledge in writing its
indemnification obligations as provided in this Agreement to the Indemnified
Party as to such Third Party Claim. If the Indemnifying Party elects not to
defend such Third
42
Party Claim or fails to pursue the defense of such Third Party Claim diligently,
the Indemnified Party shall have the right to undertake the defense of such
Third Party Claim through counsel of its own choosing. The party that defends
the Third Party Claim shall keep the other party fully advised of the progress
and disposition of such claim.
(b) In the event the Indemnifying Party elects not to
undertake the defense of a Third Party Claim or fails to pursue diligently the
defense of such claim and the Indemnified Party litigates or otherwise contests
or settles the Third Party Claim, then, the Indemnifying Party shall promptly
reimburse the Indemnified Party for all Damages, including any amounts paid to
litigate or otherwise contest or settle such claim and all amounts paid in
satisfaction of a judgment against the Indemnified Party in contesting such
claim and in providing its right to indemnification hereunder, all in accordance
with the provisions of this Article VIII.
(c) No Third Party Claim will be settled by the
Indemnifying Party or the Indemnified Party without the consent of the other,
which consent will not be unreasonably withheld or delayed; provided, however,
--------
that if such claim asserts that the Indemnifying Party is jointly and severally
liable and the Indemnified Party shall be fully released from all liability
relating to such Third Party Claim in connection with such settlement, the
Indemnifying Party shall not be required to obtain the consent of the
Indemnified Party. The party in charge of the defense or any settlement
negotiations shall keep the other party apprised at all times as to the status
of the defense or any settlement negotiations with respect thereto.
(d) "Damages" shall mean all liabilities, assessments,
levies, losses, fines, penalties, damages (including punitive damages),
settlements, costs and expenses, including reasonable fees and expenses of
attorneys, accountants, consultants and other professionals sustained or
incurred by an Indemnified Party and resulting from, arising out of or incident
to (a) any matter for which indemnification is provided under this Agreement, or
(b) the enforcement by an Indemnified Party of its rights to indemnification
under this Agreement; provided that Damages shall not include any amounts paid
--------
in connection with Section 1.3 of this Agreement.
(e) "Third Party Claim" shall mean any claims for Damages
which are asserted or threatened by a person, other than a party to this
Agreement or a successor or
43
assign of a party to this Agreement, against any Indemnified Party or to which
an Indemnified Party is subject from such a person.
SECTION VIII.7 General.
-------
(a) Each Indemnified Party shall be obligated in
connection with any claim for indemnification under this Article VIII to use all
commercially reasonable efforts to obtain any insurance proceeds available to
such Indemnified Party with regard to the applicable claims under the
Indemnified Party's insurance policies. The amount that an Indemnifying Party is
or may be required to pay to any Indemnified Party pursuant to this Article VIII
shall be reduced (retroactively, if necessary) by the net insurance proceeds
received under any such insurance policies. If an Indemnified Party shall have
received the entire payment required by this Agreement in respect of Damages and
shall subsequently receive insurance proceeds under any such insurance policies
or other amounts in respect of such Damages, then such Indemnified Party shall
promptly repay to the Indemnifying Party a sum equal to the amount of such
insurance proceeds or other amounts actually received (net of any direct
collection costs).
(b) In addition to the requirements of Section 8.7(a),
each Indemnified Party shall be obligated in connection with any claim for
indemnification under this Article VIII to use all commercially reasonable
efforts to mitigate Damages upon and after becoming aware of any event which
could reasonably be expected to give rise to such Damages. Notwithstanding the
foregoing, (i) Damages incurred by any Indemnified Party in pursuit of such
mitigation shall constitute indemnifiable Damages hereunder and (ii) no
Indemnified Party shall be so obligated if such mitigation could adversely
affect such Indemnified Party in a significant manner other than solely as a
result of monetary damages for which such persons would be entitled to
indemnification hereunder.
(c) Subject to the rights of insurers of an Indemnified
Party, an Indemnifying Party shall be subrogated to any right of action which
the Indemnified Party may have against any other person, other than another
Indemnified Party, with respect to any matter giving rise to a claim for
indemnification hereunder.
(d) The indemnification provided in Section 4.8 and in
this Article VIII and the specific remedies provided for elsewhere in this
Agreement shall be the exclusive
44
post-Closing remedy available to any party with respect to any breach of any
representation or warranty made by the other party in Article III of this
Agreement at law or in equity.
ARTICLE IX
MISCELLANEOUS
SECTION IX.1 Notices. All notices and other communications
-------
hereunder shall be in writing and shall be deemed given (i) when delivered
personally or by documented overnight courier or (ii) upon return of the receipt
after being mailed by registered or certified mail (return receipt requested) to
the parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
(a) if to Purchaser, to
Othello Holding Corporation
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇. ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, President
with a copy to:
Akin, Gump, Strauss, ▇▇▇▇▇ & ▇▇▇▇, LLP
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
(b) if to Seller, to
Prandium, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇, Esq.
with a copy to:
45
Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
SECTION IX.2 Interpretation. When a reference is made in this
--------------
Agreement to a Section, Schedule or Exhibit, such reference shall be to a
Section, Schedule or Exhibit of this Agreement unless otherwise indicated. When
a reference is made in this Agreement to a specific Schedule, such reference
shall be deemed to include, to the extent applicable, all the other Schedules.
All references to Schedules herein shall be deemed to be a reference to such
Schedule as it may be amended on or prior to the twenty-first day after the
execution of this Agreement. The table of contents, table of definitions and
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement. When the
words "includes" or "including" are used in this Agreement, they shall be deemed
to be followed by the words "without limitation." When any representation or
warranty in Section 3.1 is made to the knowledge of Seller, such term shall mean
only the actual knowledge of Seller's executive officers and the knowledge of no
other person shall be imputed to any such executive officer or to Seller. All
accounting terms not defined in this Agreement shall have the meanings
determined by generally accepted accounting principles as of the date of this
Agreement. All capitalized terms defined herein are equally applicable to both
the singular and plural forms of such terms.
SECTION IX.3 Severability. If any provision of this Agreement or
------------
the application of any such provision shall be held invalid, illegal or
unenforceable in any respect by a court of competent jurisdiction, such
invalidity, illegality or unenforceability shall not affect any other provision
of this Agreement. In lieu of any such invalid, illegal or unenforceable
provision, the parties hereto intend that there shall be added as part of this
Agreement a provision as similar in terms to such invalid, illegal or
unenforceable provision as may be possible and be valid, legal and enforceable.
SECTION IX.4 Counterparts. This Agreement may be executed in one
------------
or more counterparts, all of which shall be considered one and the same
agreement and shall become effective when one or more counterparts have been
signed by each of the parties and delivered to the other parties.
46
SECTION IX.5 Entire Agreement. This Agreement (including
----------------
agreements incorporated herein) and the Schedules and Exhibits hereto constitute
the entire agreement, and supersede all prior agreements and understandings,
both written and oral, among the parties with respect to the subject matter of
this Agreement.
SECTION IX.6 Governing Law; Forum. This Agreement shall be
--------------------
governed by and construed in accordance with the laws of the State of California
without giving effect to the principles of conflicts of laws thereof. Seller and
Purchaser agree that, so long as the Reorganization Case is pending, the
Bankruptcy Court shall have exclusive jurisdiction to resolve any dispute
related to the interpretation or performance of this Agreement.
SECTION IX.7 Survival of Representations. Except as specifically
---------------------------
set forth herein, the representations or warranties contained in this Agreement
or in any other instrument delivered in connection herewith shall terminate at,
and shall not survive or have any force or effect after the Closing.
SECTION IX.8 Assignment. This Agreement shall be binding upon and
----------
inure to the benefit of the parties hereto and their respective successors and
assigns. Neither this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned or delegated by any of the parties hereto without
the prior written consent of the other parties.
SECTION IX.9 No Third-Party Beneficiaries. Except as provided in
----------------------------
Section 4.5, nothing herein expressed or implied shall be construed to give any
person other than the parties hereto (and their successors and assigns permitted
by Section 9.8) any legal or equitable rights hereunder.
47
IN WITNESS WHEREOF, this Agreement has been signed by or on
behalf of Seller and Purchaser, all as of the date first written above.
FRI-MRD CORPORATION
By: /s/ ▇. ▇. ▇▇▇▇▇▇▇, ▇▇.
-----------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
Title: President
OTHELLO HOLDING CORPORATION
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇.
-----------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: Chief Executive Officer
BY SIGNING BELOW, PRANDIUM, INC. INDICATES ITS ACKNOWLEDGMENT AND ACCEPTANCE
OF THE PROVISIONS OF ARTICLE VIII HEREOF, AND AGREES TO BE BOUND BY THE TERMS
OF ARTICLE VIII.
PRANDIUM, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
-----------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Executive Vice President