Exhibit 2.1
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is dated as of the
15th day of April, 2003, by and among (i) VI ACQUISITION CORP., a Delaware
corporation (the "Buyer"), (ii) MIDWAY INVESTORS HOLDINGS INC., a Delaware
corporation (the "Company"), (iii) the shareholders, optionholders and
warrantholders of the Company listed on Schedule 1 hereto (collectively, the
"Sellers") and (iv) the holders of preferred stock of the Company listed on
Schedule 2 hereto (collectively, the "Preferred Holders").
WHEREAS, the Sellers collectively own all of the issued and outstanding
shares of common stock of the Company, all of the issued and outstanding
warrants to purchase shares of common stock of the Company and all of the issued
and outstanding options to purchase shares of common stock and preferred stock
of the Company;
WHEREAS, the Preferred Holders collectively own all of the issued and
outstanding shares of preferred stock of the Company;
WHEREAS, the Preferred Holders and Sellers desire that all of the
issued and outstanding shares of preferred stock of the Company (including the
shares of preferred stock of the Company to be issued upon exercise of the
Non-Rollover Options (as defined in Section 9)) be redeemed upon the terms and
subject to the conditions contained in this Agreement; and
WHEREAS, the Sellers desire to sell all of the issued and outstanding
shares of common stock of the Company, including the shares of common stock of
the Company to be issued upon exercise of the Non-Rollover Options
(collectively, the "Shares"), and the Warrants (as defined in Section 9) (the
Shares and the Warrants are collectively referred to herein as the "Common
Securities"), to the Buyer and the Buyer desires to purchase all of the Common
Securities from the Sellers, upon the terms and subject to the conditions
contained in this Agreement.
NOW, THEREFORE, in consideration of the mutual promises and agreements
set forth herein, the Buyer, the Company, the Sellers and the Preferred Holders
agree as follows:
1. SALE AND PURCHASE OF COMMON SECURITIES.
1.1. Agreement to Sell. Subject to the terms and conditions set
forth in this Agreement, each of the Sellers agrees to sell to the Buyer, and
the Buyer agrees to purchase from such Seller, at the Closing, the Common
Securities owned by such Seller, or, in the case of the Non-Rollover Options, to
be owned by such Seller upon the exercise thereof, as set forth opposite such
Seller's name on Schedule 1 hereto.
1.2. Purchase Price.
(a) At the Closing, the Buyer shall pay to the Sellers, as the
aggregate purchase price for all of the Common Securities (the "Closing Purchase
Price"), subject to adjustment as set forth in Sections 1.2(c) and 1.5 below (as
so adjusted, the "Purchase Price"), an amount equal to (i) the Enterprise Value
(as defined in Section 1.2(b) below), plus (ii) the Net Cash Amount (as defined
in Section 9) as of the Closing, less (iii) the aggregate amount of all
Indebtedness (as defined in Section 9) of the Company and its Subsidiaries
outstanding as of the Closing, less (iv) the Redemption Amount (as defined in
Section 1.3(b) below), less (v) the Transaction Expenses (as defined in Section
9), less (vi) the Aggregate Option Spreads (as defined in Section 1.2(d) below).
At the Closing, the Buyer shall (y) deposit $11,700,000 of the Closing Purchase
Price (the "Initial Escrow Funds") into an escrow account (the "Escrow Account")
maintained with a bank or trust company mutually approved by the Buyer and the
Seller Representatives (the "Escrow Agent") pursuant to an escrow agreement
substantially in the form of Exhibit A hereto, with such changes as may be
reasonably required by the Escrow Agent (the "Escrow Agreement"), and (z) pay to
each of the Sellers his, her or its applicable Pro Rata Share of the remainder
of the Closing Purchase Price (the "Cash Purchase Price") by wire transfer of
immediately available funds.
(b) As used herein, the "Enterprise Value" shall mean an amount
equal to Two Hundred Twenty-Five Million Five Hundred Thousand Dollars
($225,500,000), reduced by the amount, if any, by which negative Twenty-Three
Million Dollars (-$23,000,000) (the "Agreed Amount") exceeds the Closing Date
Net Working Capital (as defined in Section 9) of the Company and its
Subsidiaries and increased by the amount, if any, by which the Closing Date Net
Working Capital of the Company and its Subsidiaries exceeds the Agreed Amount.
(c) At the Closing the Sellers shall make a good faith estimate of
the Closing Date Net Working Capital ("Estimated Closing Date Net Working
Capital"), and such estimated amount shall be used in the calculation of
Enterprise Value for purposes of determining the Closing Purchase Price. After
the Closing, the Closing Date Net Working Capital shall be computed in
accordance with the provisions of Section 1.5 (the "Final Closing Date Net
Working Capital"). In the event that the Final Closing Date Net Working Capital
exceeds the Estimated Closing Date Net Working Capital, the Buyer shall pay to
the Sellers their respective Pro Rata Shares
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of the amount of such excess. In the event that the Final Closing Date Net
Working Capital is less than the Estimated Closing Date Net Working Capital, the
Sellers shall pay to the Buyer the amount of such deficiency. Any such amounts
payable hereunder shall be paid in cash to the party entitled thereto within
five (5) business days following the date on which the Net Working Capital
Schedule (as defined in Section 1.5) has become final and binding as provided in
Section 1.5(a), with interest from the Closing Date to the date of payment at a
rate of 6% per annum; provided, that in the event that any such amount is
payable by the Sellers, such amount, up to a maximum of $150,000, shall be paid
solely from the Escrow Funds, and any such amount in excess of $150,000 shall be
paid solely by offset against any Tax refund payments payable to the Seller
Representatives on behalf of the Sellers pursuant to Section 10.3(b) hereof, at
such time as such Tax refund payments are payable thereunder; provided, further
that if any such amounts payable by the Sellers hereunder in excess of $150,000
exceeds the Tax refund payments payable to the Seller Representatives on behalf
of the Sellers pursuant to Section 10.3(b), the Sellers shall pay to the Buyer
the amount of such excess, payable at the time the final aggregate amount of
such Tax refund payments is determined; provided, further, that the aggregate
amount payable by any Seller pursuant to the foregoing proviso shall not exceed
such excess amount multiplied by the Pro Rata Share of such Seller (determined
in accordance with Section 13.4(f)). Notwithstanding anything to the contrary
contained in this Agreement, the Minimum Claim Amount, the Deductible Amount and
the Maximum Amount (as such terms are defined in Section 13.4) shall not apply
with respect to any amounts payable under this Section 1.2(c).
(d) As used herein, the "Aggregate Option Spreads" shall mean the
sum of the Option Spreads for all of the Rollover Options. The "Option Spread"
shall mean, (i) with respect to each Rollover Option exercisable for shares of
Class B Common Stock (as defined in Section 3.3(a)), (A) the number of shares of
Class B Common Stock issuable under such Rollover Option as of the Closing
multiplied by (B) the difference between the Common Stock Price and the exercise
price per share of Class B Common Stock pursuant to such Rollover Option, (ii)
with respect to each Rollover Option exercisable for shares of Class A Preferred
Stock (as defined in Section 3.3(a)), (A) the number of shares of Class A
Preferred Stock issuable under such Rollover Option as of the Closing multiplied
by (B) the difference between the Class A Preferred Stock Redemption Price and
the exercise price per share of Class A Preferred Stock as of the Closing
pursuant to such Rollover Option and (iii) with respect to each Rollover Option
exercisable for shares of Class C Preferred Stock (as defined in Section
3.3(a)), (A) the number of shares of Class C Preferred Stock issuable under such
Rollover Option as of the Closing multiplied by (B) the difference between
$1,000 and the exercise price per share of Class C Preferred Stock as of the
Closing pursuant to such Rollover Option. The "Common Stock Price" shall mean
the quotient obtained by dividing (x) the sum of (A) the amounts set forth in
clauses (i) through (v) of the Purchase Price formula set forth in Section
1.2(a) above (for this purpose, using the Estimated Closing Date Net Working
Capital to
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determine the Enterprise Value in calculating the amount set forth in clause (i)
of such formula), plus (B) the aggregate exercise price of the Rollover Options
by (y) the number of shares of Class A Common Stock (as defined in Section
3.3(a)) and Class B Common Stock outstanding as of the Closing after giving
effect to the exercise of the Non-Rollover Options plus the number of shares of
Class B Common Stock issuable upon exercise of the Rollover Options and the
Warrants as of the Closing. The "Class A Preferred Stock Redemption Price" shall
mean the aggregate redemption price payable per share of Class A Preferred Stock
in the Redemption (as defined in Section 1.3(a)) pursuant to the terms of
Section 1.3(b) below.
1.3. Redemption of Preferred Stock.
(a) As a condition to the Closing and in accordance with Section
2.2, the Sellers shall cause the Company to validly and in compliance with all
federal and state laws redeem all of the Company's issued and outstanding shares
of Preferred Stock (as defined in Section 3.3) (including the shares of
Preferred Stock to be issued upon the exercise of the Non-Rollover Options) (the
"Redemption"). All of the foregoing issued and outstanding shares of Preferred
Stock (including the shares of Preferred Stock to be issued upon the exercise of
the Non-Rollover Options) are collectively referred to as the "Preferred
Shares", and each a "Preferred Share".
(b) Upon presentment to the Buyer at Closing of (i) certified
copies of duly and validly taken corporate and shareholder action necessary or
required for the Company to complete the Redemption, (ii) stock certificates or
lost share affidavits with appropriate indemnities representing the redeemed
shares of Preferred Stock and (iii) releases signed by each holder of Preferred
Stock releasing the Company and the Buyer from any and all further obligations
or liabilities with respect to the Preferred Stock, the Buyer shall pay to the
Company, by making a capital contribution to the Company, an amount equal to the
sum of (A) $1,000 per Preferred Share plus (B) in the case of each share of
Class A Preferred Stock and Class B Preferred Stock (each as defined in Section
3.3), the aggregate amount of all accrued and unpaid dividends owed with respect
to each such Preferred Share as of the Closing Date, in full payment for the
Redemption (the aggregate amount payable by the Buyer pursuant to this Section
1.3(b) being referred to herein as the "Redemption Amount").
(c) Each of the Preferred Holders hereby waives any notice of the
Redemption that may be required under the Company's Certificate of
Incorporation, as amended, in connection with the Redemption. Each Preferred
Holder hereby agrees to deliver to the Company or counsel to the Company the
stock certificates (or lost share affidavits) and releases referred to in
Sections 1.3(b)(ii) and (iii) at least three business days prior to the Closing.
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1.4. Options.
(a) Rollover Options. Each of the Sellers who holds Options may
elect, by delivery to the Company of a notice in the form of Exhibit D hereto
(the "Rollover Notice") received by the Company at least five business days
prior to the Closing Date, to replace the Options specified in the Rollover
Notice (the "Rollover Options") with options to purchase preferred stock of the
Buyer (the "Replacement Options"). At the Closing, the Buyer shall issue to each
such Seller who timely delivers a Rollover Notice Replacement Options having an
aggregate value (based on the price per share paid by investors in the Buyer at
the Closing for the Buyer's preferred stock less the exercise price per share
for the Replacement Options) equal to the aggregate Options Spreads under such
Seller's Rollover Options. The Replacement Options shall be issued pursuant to
stock option agreements substantially in the form of Exhibit E attached hereto
(the "New Stock Option Agreements") to be executed by the Buyer and the holders
of Rollover Options at the Closing. Any Seller holding Options who fails to
deliver a Rollover Notice to the Company at the address specified in the
Rollover Notice at least five business days prior to the Closing Date shall not
be entitled to replace any of his or her Options with Replacement Options and
shall be required to exercise all of his or her Options at the Closing in
accordance with Section 1.4(b). Notwithstanding the foregoing, (i) ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇ hereby agrees to elect to replace Options having aggregate Option
Spreads of at least $1,000,000 for Replacement Options by delivering a
corresponding Rollover Notice to the Company at least five business days prior
to the Closing Date, and if he fails to timely deliver a Rollover Notice
providing for such election, he shall be deemed to have elected to replace
Options having aggregate Options Spreads of $1,000,000 with Replacement Options,
and (ii) ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ hereby agrees to elect to replace Options having
aggregate Option Spreads of at least $500,000 for Replacement Options by
delivering a corresponding Rollover Notice to the Company at least five business
days prior to the Closing Date, and if he fails to timely deliver a Rollover
Notice providing for such election, he shall be deemed to have elected to
replace Options having aggregate Options Spreads of $500,000 with Replacement
Options. Each holder of Options who timely delivers a Rollover Notice to the
Company agrees not to exercise any Rollover Options at or prior to the Closing.
(b) Non-Rollover Options. At the Closing, each holder of Options
which are not Rollover Options (the "Non-Rollover Options") agrees to exercise
his or her Non-Rollover Options in the manner provided in Section 2.2(a).
1.5 Net Working Capital Adjustment.
(a) Within sixty (60) days after the Closing Date, the
Buyer shall cause the Company to prepare and deliver to the Seller
Representatives a schedule of the Closing Date Net Working Capital (the
"Net Working Capital Schedule"). The Net Working Capital Schedule shall
be deemed final upon the earliest of (i) the date on which the Buyer
and the Seller Representatives
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agree that the Net Working Capital Schedule is final, (ii) if the
Seller Representatives have not earlier notified the Buyer, in writing,
of any dispute over the amounts shown on the Net Working Capital
Schedule, the twentieth (20th) day following the date of delivery of
the Net Working Capital Schedule to the Seller Representatives, and
(iii) the date on which any disputes relating to the Net Working
Capital Schedule are resolved, as described in Section 1.5(b) below.
The final Net Working Capital Schedule, as adjusted by any agreement of
the Buyer and the Seller Representatives or by any resolution of
disputes as described in Section 1.5(b) below, is hereinafter referred
to as the "Final Net Working Capital Schedule".
(b) Notwithstanding anything to the contrary in this
Agreement, any disputes regarding amounts shown in the Net Working
Capital Schedule shall be resolved as set forth in this Section 1.5(b).
The Seller Representatives may dispute any amount shown on the Net
Working Capital Schedule initially delivered in accordance with Section
1.5(a) hereof by delivering written notice of each disputed item (each,
a "Disputed Item") to the Buyer (the "Dispute Notice," and, the date of
its delivery, the "Dispute Notice Date") within the 20 day period
referred to in Section 1.5(a) specifying the amount thereof in dispute
and setting forth, in reasonable detail, the basis for such dispute.
Within twenty (20) business days following the Dispute Notice Date, the
Disputed Items shall be submitted to Deloitte & Touche LLP (the
"Independent Accountant"). The Seller Representatives and the Buyer
shall each then submit evidence in support of its position on each
Disputed Item.
(c) Without limiting the generality of the foregoing, the
parties acknowledge that the Purchase Price adjustment contemplated by
this Section 1.5 is intended to reflect the difference between the
Closing Date Net Working Capital as shown on the Net Working Capital
Schedule and the Agreed Amount, and the parties further acknowledge
that such difference can only be measured if the calculation of Closing
Date Net Working Capital is performed in accordance with GAAP applied
on a basis consistent with the preparation of the Most Recent Audited
Balance Sheet (as defined in Section 3.6). The scope of the Disputed
Items to be resolved by the Independent Accountant is limited,
therefore, to whether the Net Working Capital Schedule was prepared in
accordance with the terms of this Agreement. Upon final resolution of
all Disputed Items, the Independent Accountant shall issue a report
showing a calculation of the Closing Date Net Working Capital.
(d) The Independent Accountant shall make its
determination of the Disputed Items, and such determination shall be
binding and conclusive on the parties. The parties shall cooperate
fully in assisting the Independent Accountant in calculating the
Disputed Items and shall take such actions as are necessary to expedite
and to cause the Independent Accountant to expedite such calculation.
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(e) The Buyer shall bear a percentage of the fees and
expenses of the Independent Accountant that equals (i) the difference,
if any, between the Company's calculation of Closing Date Net Working
Capital delivered pursuant to Section 1.5(a) and the Independent
Accountant's calculation of Closing Date Net Working Capital divided by
(ii) the total difference between the Company's calculation of Closing
Date Net Working Capital delivered pursuant to Section 1.5(a) and the
Seller Representatives' calculation of Closing Date Net Working Capital
delivered pursuant to Section 1.5(b).
(f) The Sellers shall bear a percentage of the fees and
expenses of the Independent Accountant that equals (i) the difference,
if any, between the Seller Representatives' calculation of Closing Date
Net Working Capital delivered pursuant to Section 1.5(b) and the
Independent Accountant's calculation of Closing Date Net Working
Capital divided by (ii) the total difference between the Seller
Representatives' calculation of Closing Date Net Working Capital
delivered pursuant to Section 1.5(b) and the Company's calculation of
Closing Date Net Working Capital delivered pursuant to Section 1.5(a).
2. CLOSING.
2.1. Time and Place. The closing of the sale and purchase of the Common
Securities (the "Closing") shall be held at the offices of ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇,
Ltd., ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, at 10:00 a.m.
on the later of (a) May 27, 2003 and (b) the third business day following
expiration or termination of the waiting period under the HSR Act (as defined in
Section 9) and the satisfaction or waiver of all other conditions set forth in
Sections 7 and 8 (other than the delivery of customary closing documents), or at
such other time, or at such other place as the Buyer and the Seller
Representatives may mutually agree. The date on which the Closing is actually
held hereunder is sometimes referred to herein as the "Closing Date".
2.2. Transactions at Closing. At the Closing:
(a) The Sellers who hold Non-Rollover Options shall
exercise such Non-Rollover Options by delivering to the Company an
executed notice of exercise and delivering a written direction to the
Buyer to deduct from the portion of the Cash Purchase Price otherwise
payable to such Seller hereunder an amount equal to the applicable
exercise price (plus the amount of any required federal, state or local
withholding Taxes payable by the Company with respect to such exercise)
and to pay such amount to the Company.
(b) The Buyer and the Sellers shall cause the Company or
its Subsidiaries to pay the Contract Termination Payments to the
recipients
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thereof, subject to delivery by such recipients of the releases
referred to in the Contract Termination Agreements.
(c) The Buyer and the Sellers shall cause the Company or
its Subsidiaries to pay to First Capital Corporation of Boston and
▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ Incorporated all accrued and unpaid
management fees and other amounts due (including the accrued pro rata
portion of management fees for the month in which the Closing occurs)
under their respective Management Fee Agreements dated as of May 14,
2001 with the Company and VICORP (collectively, the "Management Fee
Agreements").
(d) The Buyer, upon receipt of the appropriate
documentation referred to in Section 1.2, shall pay to the Company the
Redemption Amount, and the Redemption shall be completed by the Company
and the Sellers.
(e) The Sellers shall deliver to the Buyer, free and
clear of any lien, claim or encumbrance, (i) certificates representing
the Shares and (ii) the Warrants, each duly endorsed in blank or with
duly executed stock powers or other transfer documents attached.
(f) The Sellers shall cause the Company (i) to prepare
and deliver to the Buyer the Certificate of Indebtedness and Net Cash
pursuant to (and as defined in) Section 7.5, estimates of which shall
be delivered to Buyer at least three (3) business days prior to the
Closing, and (ii) to deliver to the Buyer pay-off letters, releases and
lien discharges (or agreements therefor) reasonably satisfactory to the
Buyer from each creditor listed on the Certificate of Indebtedness and
Net Cash (other than with respect to Continuing Indebtedness).
(g) The Buyer shall pay and discharge all outstanding
Indebtedness evidenced on the Certificate of Indebtedness and Net Cash
(other than Continuing Indebtedness) and all Transaction Expenses by
wire transfer of immediately available funds.
(h) The Buyer shall deliver the Initial Escrow Funds to
the Escrow Agent by wire transfer of immediately available funds.
(i) The Buyer shall deliver to each of the Sellers his,
her or its Pro Rata Share of the Cash Purchase Price by wire transfer
of immediately available funds.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to the Buyer as follows:
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3.1. Organization; Authority; Binding Effect. The Company and each
of its Subsidiaries is a corporation duly organized, validly existing and in
good standing in the state or province, as the case may be, of its
incorporation. The Company has delivered to the Buyer complete and correct
copies of the Company's and each of its Subsidiaries' charter and by-laws and
all amendments thereto. The Company and each of its Subsidiaries is qualified to
do business as a foreign corporation and is in good standing in the respective
jurisdictions listed on Schedule 3.1 hereto, and such jurisdictions constitute
all of the jurisdictions in which the Company and/or its Subsidiaries are
required to be qualified, other than those jurisdictions where the failure of
the Company and/or any of its Subsidiaries to be so qualified, either
individually or in the aggregate, would not have a Material Adverse Effect. The
Company has all requisite power and full legal right to enter into this
Agreement and to perform all of its agreements and obligations under this
Agreement in accordance with its terms. The Company has obtained all corporate
approvals necessary for the execution and delivery of this Agreement by the
Company and the consummation by the Company of the transactions contemplated
hereby. This Agreement has been duly executed and delivered by the Company and
constitutes the legal, valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, except to the extent such
enforceability is subject to the effect of any applicable bankruptcy,
insolvency, reorganization, moratorium or other law affecting or relating to
creditors' rights generally and general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
3.2. Subsidiaries. Except as set forth on Schedule 3.2 hereto, the
Company does not have any Subsidiaries and does not own or hold, of record
and/or beneficially, any shares of any class of the capital stock of any
corporation or any legal and/or beneficial interests in any partnerships,
limited liability companies, business trusts or joint ventures or in any
unincorporated trade or business enterprises.
3.3. Capitalization. (a) The authorized capital of the Company
consists of (i) 70,000 shares of Class A Preferred Stock, par value $.01 per
share (the "Class A Preferred Stock"), 20,304.8 shares of which are issued and
outstanding on the date hereof prior to the Redemption, and none of which shall
be outstanding subsequent to the Redemption; (ii) 70,000 shares of Class B
Preferred Stock, par value $.01 per share (the "Class B Preferred Stock"),
18,266.1 shares of which are issued and outstanding on the date hereof prior to
the Redemption, and none of which shall be outstanding subsequent to the
Redemption; (iii) 50,000 shares of Class C Preferred Stock, par value $.01 per
share (the "Class C Preferred Stock") and collectively with the Class A
Preferred Stock and the Class B Preferred Stock, the "Preferred Stock"),
3,127.28 shares of which are issued and outstanding on the date hereof prior to
the Redemption, and none of which shall be outstanding subsequent to the
Redemption; (iv) 70,000 shares of Class A Voting Common Stock, $.01 par value
per share (the "Class A Common Stock"), 19,397.4 shares of which are issued and
outstanding on
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the date hereof; and (v) 70,000 shares of Class B Non-Voting Common Stock, $.01
par value per share (the "Class B Common Stock"), 627.2 shares of which are
issued and outstanding on the date hereof. An aggregate of 1,543.40 shares of
Class A Preferred Stock (plus an additional number of shares of Class C
Preferred Stock determined in accordance with the applicable stock option
agreement) and 2,430.70 shares of Class B Common Stock are issuable upon
exercise of the Options. An aggregate of 1,181.88 shares of Class B Common Stock
are issuable upon exercise of the Warrants. All of the Shares are (or will be on
the Closing Date, upon the exercise of the Non-Rollover Options) validly issued
and outstanding, fully paid and nonassessable. Other than the Options and the
Warrants, there are no outstanding options, warrants or other rights to
subscribe for or purchase any securities of the Company.
(b) All of the outstanding capital stock of each of the Company's
Subsidiaries (i) is listed on Schedule 3.3(b) hereto, (ii) is owned of record
and beneficially by the Company or a Subsidiary of the Company, (iii) is, except
as set forth on Schedule 3.3(b) hereto, owned free and clear of any mortgage,
lien, pledge, charge, security interest, encumbrance, title retention agreement,
option, equity or other adverse claim thereto, and (iv) is validly issued and
outstanding, fully paid and nonassessable. There are no outstanding options,
warrants or other rights to subscribe for or purchase any securities of any of
the Company's Subsidiaries.
3.4. Non-Contravention. Except as set forth on Schedule 3.4 hereto,
neither the execution and delivery of this Agreement by the Company and the
Sellers nor the consummation by the Company and the Sellers of the transactions
contemplated hereby will constitute a violation of, or be in conflict with, or
constitute or create a material default under or result in the creation or
imposition of any material lien, claim or encumbrance upon any property of the
Company or any of its Subsidiaries pursuant to, (a) the charter or by-laws of
the Company or any of its Subsidiaries, each as amended to date; or (b) subject
to the expiration of the waiting period under the HSR Act, any statute or any
judgment, decree, order, regulation or rule of any court or governmental
authority.
3.5. Consents. Except as set forth on Schedule 3.5 hereto, and
subject to the expiration of the waiting period under the HSR Act, no notice to,
consent, approval, order or authorization of, or declaration or filing with, any
governmental authority is required to be obtained or made by the Company or any
of its Subsidiaries in connection with the consummation of the transactions
contemplated by this Agreement.
3.6. Financial Statements. The Company has delivered the following
financial statements (the "Financial Statements") to the Buyer, which are
attached hereto as Schedule 3.6: (a) the audited consolidated balance sheets of
the Company and its Subsidiaries as of October 28, 2001 and October 27, 2002
(the "Most Recent
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Audited Balance Sheet"), the related audited consolidated statements of
operations, cash flows and stockholders' equity of (i) the Company and its
Subsidiaries for the fiscal year ended October 27, 2002 and the period from May
14, 2001 through October 28, 2001 and (ii) VICORP for the period from October
30, 2000 through May 13, 2001, and (b) the unaudited consolidated balance sheet
of the Company and its Subsidiaries as of March 16, 2003 and the related
unaudited consolidated statements of income, cash flows and retained earnings of
the Company and its Subsidiaries for the twenty (20) week period then ended (the
"Interim Financials"). Subject to year-end audit adjustments and the absence of
footnotes in the case of the Interim Financials, each of the Financial
Statements has been prepared in accordance with GAAP applied on a basis
consistent with prior periods except as otherwise stated therein; each of such
balance sheets fairly presents in all material respects the consolidated
financial condition of the Company and its Subsidiaries as of its respective
date; and each of such statements of operations and stockholders' equity fairly
presents in all material respects the consolidated results of operations of the
Company and its Subsidiaries for the period covered thereby.
3.7. Taxes. Except as disclosed on Schedule 3.7 hereto:
(a) each of the Company and its Subsidiaries has duly and timely
filed with the appropriate government agencies all of the Tax Returns required
to be filed by it;
(b) no waiver of any statute of limitations relating to Taxes has
been executed or given by the Company or any of its Subsidiaries;
(c) all Taxes, assessments, fees and other governmental charges
upon the Company or any of its Subsidiaries or upon any of their respective
properties, assets, revenues, income and franchises which are currently owed by
the Company or any such Subsidiary with respect to any period ending on or
before the Closing Date have been paid, other than those currently payable
without penalty or interest;
(d) each of the Company and its Subsidiaries has withheld and paid
all Taxes required to be withheld or paid in connection with amounts paid or
owing to any employee, creditor, shareholder, independent contractor or third
party;
(e) no federal Tax Return of the Company or any of its
Subsidiaries is currently under audit by the IRS (as defined in Section 9), and
no other Tax Return of the Company or any of its Subsidiaries is currently under
audit by any other taxing authority;
(f) neither the IRS nor any other taxing authority is now
asserting or, to the Company's knowledge, threatening to assert against the
Company or any of its Subsidiaries any deficiency or claim for additional Taxes
or interest thereon or penalties in connection therewith;
11
(g) neither the Company nor any of its Subsidiaries (i) is a party
to or bound by any Tax indemnity, Tax sharing or Tax allocation agreement, or
(ii) has ever been a member of an affiliated group of corporations, within the
meaning of Section 1504 of the Internal Revenue Code of 1986, as amended (the
"Code") (other than a group the common parent of which is the Company);
(h) each Seller is a United States person within the meaning of
the Code and the transactions contemplated hereby are not subject to the
withholding provisions of Section 3406 or subchapter A of Chapter 3 of the Code;
(i) neither the Company nor any of its Subsidiaries (i) has been a
United States real property holding corporation (as defined in Section 897(c)(2)
of the Code) during the applicable period specified in Section 897(c)(1)(A)(ii)
of the Code, or (ii) has had a permanent establishment in any foreign country,
as defined in any applicable Tax treaty or convention between the United States
and such foreign country;
(j) there are no outstanding rulings, or requests for rulings,
with any Tax authority addressed to the Company or any of its Subsidiaries that
are, or if issued would be, binding upon the Company or any of its Subsidiaries
for any Tax period ending after the Closing Date;
(k) neither the Company nor any of its Subsidiaries has (i)
executed, become subject to or entered into any closing agreement pursuant to
Section 7121 of the Code that would be binding on the Company or any of its
Subsidiaries, (ii) filed for or agreed to any extension of time with respect to
the filing of any Tax Return relating to the Company or any of its Subsidiaries
or (iii) received approval from, or agreed with, any Tax authority to make a
change in accounting method or has any application pending with any Tax
authority requesting permission for any such change;
(l) no extension of time within which to file any Tax Return that
has not been filed has been requested or filed by the Company or any of its
Subsidiaries; and
(m) neither the Company nor any of its Subsidiaries is a party to
any agreement, contract, arrangement or plan (other than agreements, contracts,
arrangements or plans disclosed on Schedule 3.16) that may result, separately or
in the aggregate, in the payment of any "excess parachute payments" within the
meaning of Section 280G of the Code.
3.8. Absence of Certain Changes. Except as set forth on Schedule
3.8 hereto or as contemplated by this Agreement, since October 29, 2002 there
has not been: (a) any material change in the assets, liabilities, sales, income
or business of the Company or any of its Subsidiaries or in any of the Company's
or any of its
12
Subsidiaries' relationships with suppliers, customers or lessors, other than
changes which arose in the ordinary course of business; (b) any acquisition or
disposition by the Company or any of its Subsidiaries of any material asset or
material property other than in the ordinary course of business; (c) any
material damage, destruction or loss, whether or not covered by insurance; (d)
any declaration, setting aside or payment of any dividend or any other
distributions in respect of the Company's capital stock, other than dividends
paid in kind on shares of Preferred Stock; (e) except for the issuance of shares
pursuant to the exercise of the Non-Rollover Options, or in payment of a
dividend on the Preferred Stock paid in kind in accordance with clause (d)
above, any issuance of any shares of the capital stock of the Company or any of
its Subsidiaries or any direct or indirect redemption, purchase or other
acquisition of any of the Company's or any of its Subsidiaries' capital stock;
(f) any increase in the compensation, pension or other benefits payable or to
become payable by the Company or any of its Subsidiaries to any of their
respective officers or employees, or any bonus payments or arrangements made to
or with any of them (other than pursuant to the terms of any existing written
agreement or plan or annual or periodic increases made in the ordinary course of
business consistent with the Company's or such Subsidiary's past practice and
other than the payment of the Contract Termination Payments); (g) any entry by
the Company or any of its Subsidiaries into any material transaction other than
in the ordinary course of business or as contemplated herein; (h) any incurrence
by the Company or any of its Subsidiaries of any material obligations or
material liabilities, whether absolute, accrued, contingent or otherwise
(including, without limitation, liabilities as guarantor or otherwise with
respect to obligations of others), other than obligations and liabilities
incurred in the ordinary course of business or as contemplated herein; (i) any
discharge or satisfaction by the Company or any of its Subsidiaries of any
material lien or encumbrance or payment by the Company or any of its
Subsidiaries of any material obligation or material liability (fixed or
contingent) other than in the ordinary course of business or as contemplated
herein; (j) any forgiveness or cancellation of any material debt or claim by the
Company or any of its Subsidiaries or any waiver of any right of material value,
in each case other than in the ordinary course of business; (k) any grant or
creation of any material mortgage, pledge, lien, lease, security interest or
other charge or encumbrance on any of the assets of the Company or any of its
Subsidiaries other than Permitted Encumbrances and other than in the ordinary
course of business or pursuant to a third party's pre-existing contractual right
to obtain such mortgage, pledge, lien, lease, security interest or other charge
or encumbrance; (l) any capital expenditures by the Company or any of its
Subsidiaries which have exceeded $500,000 per expenditure or $500,000 in the
aggregate; (m) any entry into or amendment by the Company or any of its
Subsidiaries of (i) any written employment agreement that provides for a base
salary in excess of $100,000 per annum and a term in excess of one (1) year or
(ii) any collective bargaining agreement; (n) any material change in the
accounting practices of the Company or any of its Subsidiaries; (o) any entry by
the Company or any of its
13
Subsidiaries into any transaction with any Affiliate; or (p) any commitment to
do any of the foregoing.
3.9. Litigation, etc. Except as set forth on Schedule 3.9(a)
hereto, (i) neither the Company nor any Subsidiary of the Company is subject to
any unsatisfied injunction or judgment and (ii) no material action, suit,
proceeding or administrative enforcement action is pending or, to the Company's
knowledge, threatened or filed, against the Company or any of its Subsidiaries,
nor to the Company's knowledge, is any administrative or governmental
investigation pending against the Company or any of its Subsidiaries. Except as
set forth on Schedule 3.9(b) hereto, since May 13, 2001, no material action,
suit, proceeding or administrative enforcement action has been pending or, to
the Company's knowledge, filed, against the Company or any of its Subsidiaries
which has subsequently been dismissed, withdrawn, settled, adjudicated or
otherwise terminated.
3.10. Conformity to Law. The Company and each of its Subsidiaries
have complied with, and are in compliance with, in all material respects, all
laws, statutes and governmental regulations and all judicial or administrative
tribunal orders, judgments, writs, injunctions or decrees applicable to its
business, including the notice, disclosure, and registration requirements to
sell and maintain franchises in the states and jurisdictions where the Company
sells and maintains franchises. Except as set forth on Schedule 3.10 hereto,
neither the Company nor any of its Subsidiaries or Franchisees has been charged
with any material violation of any provision of any federal, state or local law
or administrative regulation in respect of its business. The Company and its
Subsidiaries have all material governmental and regulatory licenses and permits
necessary for the conduct of their business as presently conducted. Neither the
Company nor any of its Subsidiaries has sold any products prior to receiving any
required approvals or consents from the U.S. Food and Drug Administration under
the Food, Drug & Cosmetics Act of 1976, as amended, and the regulations
promulgated thereunder. Neither the Company or any of its Subsidiaries, nor, to
the knowledge of the Company, any officer, director or employee of the Company
or any of its Subsidiaries acting on behalf of the Company or any of its
Subsidiaries, has made or received any material unlawful payment.
3.11. Real Property and Environmental Matters.
(a) The Company does not own or lease any real property. Schedule
3.11(a) hereto sets forth a complete and accurate list of all of the real
property owned by any of the Company's Subsidiaries (the "Owned Real Property")
and all of the real property leased by any of the Company's Subsidiaries (the
"Leased Real Property", and together with the Owned Real Property, the "Real
Property"). Except as set forth on Schedule 3.11(a) hereto, (i) each of the
Company's Subsidiaries has valid fee simple title to its Owned Real Property,
free and clear of any mortgage, pledge, lien, encumbrance, charge, or other
security interest, easement, covenant, or other
14
restriction or other claim adversely affecting its title to or possession of its
Owned Real Property, except for installments of special assessments not yet
delinquent, recorded easements, covenants, and other restrictions, and utility
easements, building restrictions, zoning restrictions, and Permitted
Encumbrances, none of which materially impairs the use of such Real Property as
it is presently being used in the operation of the business of the Company and
its Subsidiaries, (ii) none of the Company's Subsidiaries has leased, licensed
or otherwise granted any Person the right to use or occupy any of its Owned Real
Property or any portion thereof and (iii) to the Company's knowledge, neither
the Owned Real Property nor any of the buildings, plants, improvements,
structures or fixtures located thereon are in violation of any laws, rules or
regulations regarding zoning, health, safety, building or land use. Except as
set forth on Schedule 3.11(a) hereto, the Leased Real Property is held by the
Company's Subsidiaries under outstanding leases which are in full force and
effect and none of the Company's Subsidiaries (i) is in material breach or
default under any of the real property leases to which it is a party or has
received a notice of cancellation or termination with respect to any such real
property lease, or (ii) has subleased, licensed or otherwise granted any Person
the right to use or occupy any of its Leased Real Property or any portion
thereof. To the Company's knowledge, all of real property leases to which any of
the Company's Subsidiaries is a party are valid leases. The Company and its
Subsidiaries have all material easements and licenses and other rights relating
to real estate necessary to conduct their respective businesses in the manner
heretofore conducted or carried on by them. Except as set forth on Schedule
3.11(a) hereto, neither the Company nor any of its Subsidiaries has received any
notice that or has any knowledge that either the whole or any portion of any of
the Real Property is to be, or is threatened to be, condemned, requisitioned or
otherwise taken by any public or quasi-public authority. Except as set forth on
Schedule 3.11(a) hereto, neither the Company nor any of its Subsidiaries has
received notice of or has any knowledge of any public improvements that will be
made that may result in special assessments against or otherwise affect any of
the Real Property in any material respect. Except as set forth on Schedule
3.11(a) hereto, none of the Company's Subsidiaries is a lessor of real property
and The Company has made available to the Buyer a true, correct and complete
copy of each title insurance policy, title opinion, survey and appraisal
relating to the Owned Real Property which is in its possession or is reasonably
available.
(b) Except as set forth on Schedule 3.11(b) hereto:
(i) neither the Company nor any of its Subsidiaries is in
violation, in any material respect, of any judgment, decree, order,
law, license, rule or regulation pertaining to environmental matters,
including without limitation those arising under the Resource
Conservation and Recovery Act, the Comprehensive Environmental
Response, Compensation and Liability Act of 1980 as amended ("CERCLA"),
the Superfund Amendments and Reauthorization Act of 1986, the Federal
Clean Water Act, the Federal Clean
15
Air Act, the Toxic Substances Control Act, or any state or local
statute, regulation, ordinance, order or decree relating to health,
safety or the environment, each as amended from time to time
(hereinafter "Environmental Laws");
(ii) neither the Company nor any of its Subsidiaries has
received written notice, order, demand or decree from any third party
including, without limitation, any federal, state or local governmental
authority: (A) that the Company or any of its Subsidiaries has been
identified by the United States Environmental Protection Agency as a
potentially responsible party under CERCLA with respect to any site
including any site listed on the National Priorities List, 40 C.F.R.
Part ▇▇▇ ▇▇▇▇▇▇▇▇ ▇ (1986); (B) that any hazardous waste, as defined by
42 U.S.C. Section 6903(5), any hazardous substance as defined by 42
U.S.C. Section 9601(14), any pollutant or contaminant as defined by 42
U.S.C. Section 9601(33) and any toxic substance, oil or hazardous
material or other chemical or substance (including, without limitation,
petroleum, asbestos in any form, urea formaldehyde or polychlorinated
biphenyls) designated, controlled or regulated by any Environmental
Laws ("Hazardous Materials") which the Company or any of its
Subsidiaries has or allegedly has generated, transported or disposed of
has been found at any site at which a federal, state or local agency or
other third party has conducted or has ordered that the Company or any
of its Subsidiaries conduct a remedial investigation, removal or other
response action pursuant to any Environmental Law; (C) that the Company
or any of its Subsidiaries is or shall be a named party to any claim,
action, cause of action, complaint, (contingent or otherwise) legal or
administrative proceeding arising out of any third party's incurrence
of costs, expenses, losses or damages of any kind whatsoever in
connection with the release of Hazardous Materials; or (D) that any
material payment or contribution is being demanded from the Company or
any of its Subsidiaries with respect to any damage to the environment
or any violation of any Environmental Law;
(iii) (A) in the course of any activities conducted by the Company
or any of its Subsidiaries, no Hazardous Materials have been generated
or are being used on any Real Property except in accordance, in all
material respects, with applicable Environmental Laws; and (B) no
Hazardous Materials have been released at or are present in the soil or
ground water of, or contained in any storage tank located on or under,
any Real Property, except in each case to the extent that the presence
of Hazardous Materials on or under such Real Property does not violate,
in any material respect, any applicable Environmental Laws or require
remediation by the Company or any of its Subsidiaries under any
applicable Environmental Laws or give rise to any material liability of
the Company or its Subsidiaries under any applicable Environmental
Laws;
16
(iv) no action, proceeding, revocation proceeding, amendment
procedure, writ, injunction or claim is pending, or to the knowledge of
the Company, threatened with respect to the Company or any of the
Subsidiaries or any Real Property in connection with Environmental Laws
or Hazardous Materials;
(v) to the knowledge of the Company, no underground storage tanks
for petroleum products or any other Hazardous Materials are located on
any of the Real Property;
(vi) no asbestos-containing materials are located in any of the
Real Property, except in each case to the extent that the presence of
asbestos-containing materials in such Real Property does not violate,
in any material respect, any applicable Environmental Laws or require
remediation by the Company or any of its Subsidiaries under any
applicable Environmental Laws or give rise to any material liability of
the Company or its Subsidiaries under any applicable Environmental
Laws;
(vii) no polychlorinated biphenyls are located on or in any of the
Real Property, except in each case to the extent that the presence of
polychlorinated biphenyls on or in such Real Property does not violate,
in any material respect, any applicable Environmental Laws or require
remediation by the Company or any of its Subsidiaries under any
applicable Environmental Laws or give rise to any material liability of
the Company or its Subsidiaries under any applicable Environmental
Laws;
(viii) the Company and the Subsidiaries hold all Permits required
under Environmental Laws (the "Environmental Permits") necessary for
the conduct of the Company and the Subsidiaries' businesses as such are
currently being conducted; and
(ix) the Company and the Subsidiaries are in compliance in all
material respects with all terms and conditions of the Environmental
Permits.
(c) Schedule 3.11(c) includes a listing and description of all
Environmental Permits currently held by the Company and the Subsidiaries with
respect to their pie production operations.
(d) The properties listed on Schedule 3.11(d) constitute all real
properties used or occupied by the Company and its Subsidiaries in connection
with their pie production operations.
3.12. Restaurants. Schedule 3.12 hereto lists all of the restaurants
operated by the Company or any of its Subsidiaries and all of the restaurants
operated by any franchisee of the Company or any of its Subsidiaries. Schedule
3.12 hereto also lists
17
the restaurants that the Company and its Subsidiaries currently intend to close
and the new restaurants that the Company and its Subsidiaries are in the process
of developing.
3.13. Franchise Agreements and Registrations. Schedule 3.13 lists
each of the franchise agreements to which the Company or any of its Subsidiaries
is a party (the "Franchise Agreements"). Neither the Company nor any of its
Subsidiaries is in material default of its obligations under any such Franchise
Agreement and each Franchise Agreement is in full force and effect and the terms
thereof comply in all material respects with all applicable laws and
regulations. Neither the Company nor any of its Subsidiaries has received from
any other party to a Franchise Agreement with the Company any written notice of
default or intent to terminate. Schedule 3.13 also lists each of the states in
which the Company and/or its Subsidiaries are currently registered to sell
franchises. All such registrations, disclosure requirements and related filings
are current and comply in all material respects with all applicable laws and
regulations in effect and in force as of the date of this Agreement in all
jurisdictions where the Company is engaging in franchise-related activities.
Neither the Company nor any of its Subsidiaries has offered to sell franchises
in any state in which the Company or any of its Subsidiaries was required to be
registered to sell franchises but was not so registered.
3.14. Insurance. Schedule 3.14 hereto lists all policies of fire,
liability, workmen's compensation, life, property and casualty and other
insurance owned or held by the Company or any of its Subsidiaries. Such policies
of insurance are sufficient for compliance by the Company and its Subsidiaries
with all requirements of law and all agreements to which the Company or its
Subsidiaries is a party. All such policies are in full force and effect and will
not terminate or lapse by reason of the transactions contemplated by this
Agreement. Neither Company nor any of its Subsidiaries is in default with
respect to its obligations under any of such insurance policies and neither the
Company nor any of its Subsidiaries has received any notification of
cancellation of any such insurance policies.
3.15. Contracts. Schedule 3.15 sets forth a list of all contracts to
which the Company or any of its Subsidiaries is a party or by which any of them
is bound or to which the Company or any of its Subsidiaries is subject, except
(a) any contract that does not require payment by any party thereto of more than
$250,000, (b) any contract that is terminable by the Company or any of its
Subsidiaries upon ninety (90) days' notice or less without the payment of any
material penalty or material termination fee, (c) any contract entered into,
after the date hereof and prior to Closing, with the Buyer, (d) any contract
entered into in the ordinary course of business after the date hereof and prior
to the Closing, and (e) any contract listed in any other Schedule to this
Agreement. As used in this Section 3.15, the word "contract" means and includes
every written agreement of any kind which is legally enforceable by or against
the Company or any of its Subsidiaries. Each of the
18
contracts listed on Schedule 3.15 hereto or any of the other Schedules hereto is
in full force and effect and neither the Company nor any of its Subsidiaries has
committed any material breach or default thereunder. Except as set forth on
Schedule 3.4 or Schedule 3.15, neither the execution and delivery of this
Agreement by the Company and the Sellers nor the consummation by the Company and
the Sellers of the transactions contemplated hereby will constitute a violation
of, or constitute or create a material default under, permit the termination of,
cause the acceleration or maturity of, or result in the creation or imposition
of any material lien, claim or encumbrance upon any property of the Company or
any of its Subsidiaries pursuant to, any contract listed on Schedule 3.15 or any
of the other Schedules hereto. Except as set forth on Schedule 3.5 or Schedule
3.15 hereto, no notice to or consent or approval of any Person is required to be
obtained or made by the Company or any of its Subsidiaries in connection with
the consummation of the transactions contemplated by this Agreement under any
contract listed or required to be listed on Schedule 3.15 or any of the other
Schedules hereto (other than notices, consents or approvals required under
agreements or commitments evidencing, or entered into by the Company or any of
its Subsidiaries in connection with, Indebtedness of the Company and/or any of
its Subsidiaries to be paid and discharged at Closing pursuant to Section 8.4).
3.16. Employee Benefit Plans. Except as set forth on Schedule 3.16
hereto, neither the Company nor any of its Subsidiaries maintains or has any
obligation to make contributions to, any employee benefit plan (an "ERISA Plan")
within the meaning of Section 3(3) of the United States Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), or any other retirement,
profit sharing, stock option, stock bonus or employee benefit plan (a "Non-ERISA
Plan"). All such ERISA Plans and Non-ERISA Plans have been maintained and
operated in all material respects in accordance with all federal, state and
local laws applicable to such plans and the terms and conditions of the
respective plan documents. The Internal Revenue Service has issued a favorable
determination letter with respect to each ERISA Plan that is intended to be a
"qualified plan" within the meaning of Section 401(a) of the Code. No ERISA Plan
is subject to Title IV or Section 302 of ERISA or Section 412 of the Code. No
ERISA Plan is a "multiemployer plan" within the meaning of Section 4001(a)(3) of
ERISA (a "Multiemployer Plan") or a plan that has two or more contributing
sponsors at least two of whom are not under common control, within the meaning
of Section 4063 of ERISA (a "Multiple Employer Plan"), nor has the Company or
any of its Subsidiaries nor any entity aggregated with the Company under Section
414 of the Code contributed to, or been obligated to contribute to, any
Multiemployer Plan or any Multiple Employer Plan or any other plan that is
subject to Title IV of ERISA or Section 412 of the Code. Except for continuation
coverage as required by Section 4980(B) of the Code or by applicable state
insurance laws, no ERISA Plan or Non-ERISA Plan provides life, health, medical
or other welfare benefits to former employees or beneficiaries or dependents
thereof. Except as set forth on Schedule 3.16 and except for the Contract
Termination Agreements, neither the Company nor any of its Subsidiaries are
parties
19
to (i) any written employment agreements, other than written employment
agreements that provide for base salary of less than $50,000 per annum or are
terminable at will or (ii) any written agreement providing for any severance
payment, bonus payment, acceleration of payments, increase in compensation or
benefits or similar payment in connection with any change in control of the
Company or any of its Subsidiaries, and the Contract Termination Payments,
together with any payments in connection with the sale of any Common Securities
or the redemption of any Preferred Shares hereunder, are the only payments owed
to any employee of the Company or any of its Subsidiaries as a result of the
change of control contemplated by this Agreement.
3.17. Trademarks, Patents, Etc. Schedule 3.17 hereto sets forth a
list of (a) all patents, trademarks, trade names and copyrights registered in
the name of the Company or any of its Subsidiaries and all applications
therefor, and (b) all material written agreements relating to technology,
know-how and processes which the Company or any of its Subsidiaries is licensed
or authorized to use by others or which the Company or any of its Subsidiaries
has licensed or authorized for use by others. Except to the extent set forth on
Schedule 3.17, the Company and each of its Subsidiaries owns or has permission
to use all Intellectual Property material to, and used in the ordinary course
of, the operation of its business as presently conducted. Except as set forth on
Schedule 3.17 hereto, (a) no material claims are pending or, to the knowledge of
the Company, threatened, against the Company or any of its Subsidiaries by any
Person regarding the use of any such Intellectual Property, or challenging or
questioning the validity or effectiveness of any license or agreement included
in any licensed Intellectual Property, and (b) none of the Company's or any of
its Subsidiaries' employees has any right in or to any of the Intellectual
Property that is material to the operation of the business of the Company and
its Subsidiaries. To the knowledge of the Company, no third party has infringed
or misappropriated any of the Intellectual Property used in the operation of the
business of the Company and its Subsidiaries in any material respect.
3.18. Indebtedness. Except as set forth on Schedule 3.18 hereto,
except for the Unfunded POS Price and the Unfunded Capital Expenditures and
except for Indebtedness reflected or reserved against in the Most Recent Audited
Balance Sheet or Indebtedness incurred in the ordinary course of business after
the date of the Most Recent Audited Balance Sheet, neither the Company nor any
of its Subsidiaries has any Indebtedness outstanding at the date hereof. As of
the Closing, neither the Company nor any of its Subsidiaries will have any
Indebtedness outstanding other than as described on the Certificate of
Indebtedness and Net Cash.
3.19. Labor Relations. The Company and each of its Subsidiaries have
been in compliance in all material respects with all federal and state laws
respecting employment and employment practices, terms and conditions of
employment, wages and hours and nondiscrimination in employment, and neither the
Company nor any of its Subsidiaries has engaged in any unfair labor practice.
Except as set forth on
20
Schedule 3.19 hereto, there is no material charge pending against the Company or
any of its Subsidiaries alleging unlawful discrimination in employment practices
before any court or agency, and there is no material charge of or proceeding
with regard to any unfair labor practice against the Company or any of its
Subsidiaries pending before the National Labor Relations Board. There is no
labor strike, dispute, slow-down or work stoppage actually pending against or
involving the Company or any of its Subsidiaries other than disputes with
individual employees. None of the employees of the Company or any of its
Subsidiaries is covered by any collective bargaining agreement, and no
collective bargaining agreement is currently being negotiated by the Company or
any of its Subsidiaries. Except for the union organizing petition currently
pending with respect to the employees of the Oak Forest, Illinois pie production
facility, to the knowledge of the Company, there are no other organizational
efforts presently being made or threatened by or on behalf of any labor union
with respect to employees of the Company or any of its Subsidiaries.
3.20. Title to Personal Property. Except as set forth on Schedule
3.20 hereto, the Company and each of its Subsidiaries has good title to all of
its personal property (the "Personal Property"), including, without limitation,
all such personal property reflected in the Most Recent Audited Balance Sheet
(except for personal property sold or otherwise disposed of in the ordinary
course of business since the date of the Most Recent Audited Balance Sheet),
free and clear of all liens, pledges, charges, security interests, encumbrances
or title retention agreements, other than those which arose in the ordinary
course of business and other than Permitted Encumbrances.
3.21. Accounts Receivable. All accounts receivable reflected on the
Most Recent Audited Balance Sheet, and all accounts receivable arising
subsequent to the date of the Most Recent Audited Balance Sheet, represent valid
obligations owing to the Company and its Subsidiaries.
3.22. Inventories. The inventory of the Company and its Subsidiaries
is adequate and sufficient to conduct the business of the Company and its
Subsidiaries as presently conducted.
3.23. Suppliers. Neither the Company nor any of its Subsidiaries has
received any notice that any of its fifteen (15) largest suppliers (based on the
dollar amount of purchases from such suppliers during the fiscal year ended
October 27, 2002) intends to cancel or terminate its relationship with the
Company or such Subsidiary or to materially decrease or limit its services,
supplies or materials to the Company or such Subsidiary.
3.24. Potential Conflicts of Interest. Except as set forth on
Schedule 3.24 hereto, to the knowledge of the Company, no officer, director or
shareholder of the Company or any of its Subsidiaries (other than BBV, Marathon
or LLC) owns, directly or indirectly, any interest in (excepting not more than
1% stock holdings for
21
investment purposes in securities of publicly held and traded companies) or is
an officer, director, employee or consultant of any Person which is a
competitor, lessor, lessee or supplier of the Company or any of its
Subsidiaries. Except as set forth on Schedule 3.24 hereto, to the knowledge of
the Company, no officer, director or shareholder of the Company or any of its
Subsidiaries (a) owns, directly or indirectly, in whole or in part, any material
tangible or intangible property which the Company or any of its Subsidiaries is
using or the use of which is necessary for the business of the Company or any of
its Subsidiaries or (b) has any material cause of action or other claim
whatsoever against, or owes any material amount to, the Company or any of its
Subsidiaries, except for claims which arose in the ordinary course of business,
including but not limited to accrued vacation pay, accrued benefits under
Employee Benefit Plans and similar matters and agreements.
3.25. Bank Accounts; Powers of Attorney. Except as set forth on
Schedule 3.25 hereto, neither the Company nor any of its Subsidiaries has any
account in any bank or other financial institution and no Person has any power
to act under any power of attorney granted by the Company or any of its
Subsidiaries at any time for any purpose.
3.26. Minute Books. The minute books and the Company and each of its
Subsidiaries made available to the Buyer for inspection accurately record
therein all actions taken by the boards of directors and shareholders of the
Company and its Subsidiaries.
3.27. Brokers. Except for U.S. Bancorp ▇▇▇▇▇ ▇▇▇▇▇▇▇, Inc. and
▇▇▇▇▇▇▇ Capital LLC, which have been retained by the Company, neither the
Sellers nor the Company or any of its Subsidiaries has retained, utilized or
been represented by any broker or finder in connection with the transactions
contemplated by this Agreement.
3.28. Condition and Sufficiency of Certain Assets. The Company's
machinery, vehicles, equipment and other tangible personal or movable property
and assets which are used in its pie production operations conducted at the
locations listed on Schedule 3.11(d) are in adequate condition for their present
use, ordinary wear and tear excepted.
3.29. Disclosure. No representation or warranty by the Company in
this Agreement or in any schedule attached hereto contains any untrue statement
of a material fact or omits to state a material fact required to be stated
therein or necessary to make the statements contained therein not misleading.
4. REPRESENTATIONS AND WARRANTIES OF THE SELLERS AND THE
PREFERRED HOLDERS. Each of the Sellers and the Preferred Holders (collectively,
the "Seller Indemnifying Parties"), severally and not jointly, represents and
warrants to the Buyer as follows:
22
4.1. Right to Sell Securities; Binding Effect. Such Seller
Indemnifying Party has all requisite power and full legal right to enter into
this Agreement and (if applicable) the Escrow Agreement, to perform all of its,
his or her agreements and obligations under this Agreement and (if applicable)
the Escrow Agreement in accordance with its terms, and each Seller has all
requisite power and full legal authority to sell to the Buyer all of the Common
Securities owned by such Seller. Such Seller Indemnifying Party has obtained all
necessary corporate or other applicable entity approvals, if applicable,
necessary for the execution and delivery of this Agreement and (if applicable)
the Escrow Agreement by such Seller Indemnifying Party and the consummation by
such Seller Indemnifying Party of the transactions contemplated hereby and (if
applicable) thereby. Each of this Agreement and (if applicable) the Escrow
Agreement has been duly executed and delivered by such Seller Indemnifying Party
and constitutes the legal, valid and binding obligation of such Seller
Indemnifying Party, enforceable against such Seller Indemnifying Party in
accordance with its terms, except to the extent such enforceability is subject
to the effect of any applicable bankruptcy, insolvency, reorganization,
moratorium or other law affecting or relating to creditors' rights generally and
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
4.2. Title to Securities, Liens, etc. Such Seller has, and as of
the consummation of the Closing (after giving effect to the issuance of shares
upon exercise of the Non-Rollover Options) the Buyer will have, record and
beneficial ownership of such Seller's Common Securities as set forth on Schedule
1 hereto, free and clear of any mortgage, lien, pledge, charge, security
interest, encumbrance, title retention agreement, right of first refusal or
first offer option, equity or other adverse claim thereto (any of the foregoing,
a "Lien"), other than any such Lien incurred by the Buyer. Such Seller holds
Options for the number and class of shares of capital stock of the Company set
forth opposite his or her name on Schedule 3 hereto. Such Preferred Holder has
record and beneficial ownership of the number of shares of Preferred Stock set
forth opposite his or its name on Schedule 2 hereto, free and clear of any Lien,
other than any such Lien incurred by the Buyer.
4.3. Governmental Consents. Subject to the expiration of the
waiting period under the HSR Act, no consent, approval or authorization of, or
registration, qualification or filing with, any governmental agency or authority
is required for the execution and delivery of this Agreement by such Seller
Indemnifying Party or for the consummation by such Seller Indemnifying Party of
the transactions contemplated hereby, except where the failure to obtain any
such consent, approval or authorization or to so register, qualify or file would
not reasonably be expected to materially and adversely effect such Seller
Indemnifying Party's ability to consummate the transactions contemplated hereby.
23
4.4. Non-Contravention. Neither the execution and delivery of this
Agreement or (if applicable) the Escrow Agreement by such Seller Indemnifying
Party nor the consummation by such Seller Indemnifying Party of the transactions
contemplated hereby or thereby will constitute a violation of, or be in conflict
with, or constitute or create a default under or result in the creation or
imposition of any liens upon any property of the such Seller Indemnifying Party
pursuant to, (a) if the Seller Indemnifying Party is an entity, the charter
documents, by-laws or other similar governing documents of such Seller
Indemnifying Party, each as amended to date; (b) any material agreement or
commitment to which such Seller Indemnifying Party is a party or by which such
Seller Indemnifying Party or any of his, her or its properties is bound or to
which such Seller Indemnifying Party or any of his, her or its properties is
subject; or (c) subject to the expiration of the waiting period under the HSR
Act, any statute or any judgment, decree, order, regulation or rule of any court
or governmental authority relating to such Seller Indemnifying Party.
4.5. Litigation, etc. No action, suit, proceeding or investigation
is pending or, to such Seller Indemnifying Party's knowledge, threatened,
against such Seller Indemnifying Party with respect to his, her or its execution
and delivery of this Agreement or the consummation by such Seller Indemnifying
Party of the transactions contemplated hereby.
5. REPRESENTATIONS AND WARRANTIES OF THE BUYER. The Buyer
represents and warrants to each of the Sellers as follows:
5.1. Organization and Standing of Buyer. The Buyer is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware. The Buyer has full power and authority under its Certificate
of Incorporation and by-laws and applicable laws to execute and deliver this
Agreement and the Escrow Agreement and to consummate the transactions
contemplated hereby and thereby.
5.2. Corporate Approval; Binding Effect. The Buyer has obtained all
necessary authorizations and approvals required for the execution and delivery
of this Agreement and the Escrow Agreement and the consummation of the
transactions contemplated hereby and thereby. Each of this Agreement and the
Escrow Agreement has been duly executed and delivered by the Buyer and
constitutes the legal, valid and binding obligation of the Buyer, enforceable
against the Buyer in accordance with its terms, except to the extent such
enforceability is subject to the effect of any applicable bankruptcy,
insolvency, reorganization, moratorium or other law affecting or relating to
creditors' rights generally and general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
24
5.3. Non-Contravention. Neither the execution and delivery of this
Agreement or the Escrow Agreement by the Buyer nor the consummation by the Buyer
of the transactions contemplated hereby or thereby will constitute a violation
of, or be in conflict with, constitute or create a default under, or result in
the creation or imposition of any liens upon any property of the Buyer pursuant
to, (a) the charter documents or by-laws of the Buyer, each as amended to date;
(b) any agreement or commitment to which the Buyer is a party or by which the
Buyer or any of its properties is bound or to which the Buyer or any of its
properties is subject; or (c) subject to the expiration of the waiting period
under the HSR Act, any statute or any judgment, decree, order, regulation or
rule of any court or governmental authority relating to the Buyer.
5.4. Governmental Consents. Subject to the expiration of the
waiting period under the HSR Act, no consent, approval or authorization of, or
registration, designation, declaration or filing with, any governmental agency
or authority is required in connection with the purchase of the Common
Securities pursuant to this Agreement or for the consummation by the Buyer of
any other transaction contemplated hereby, except where the failure to obtain
any such consent, approval or authorization or to so register, qualify or file
would not reasonably be expected to materially and adversely effect the Buyer's
ability to consummate the transactions contemplated hereby.
5.5. Solvency. At the Closing, the Buyer will be solvent and
capable of meeting its obligations as they become due, and has assets exceeding
its liabilities and a reasonable amount of capital for the conduct of its
business.
5.6. Buyer Financial Resources. Attached as Schedule 5.6 hereto are
commitments to provide the debt financing to the Buyer and statements of
availability to provide the equity financing to the Buyer necessary to pay the
Purchase Price. Such commitments are in full force and effect in the form
attached hereto.
5.7. Brokers. The Buyer has not retained, utilized or been
represented by any broker or finder in connection with the transactions
contemplated by this Agreement.
6. CONDUCT OF BUSINESS BY THE COMPANY AND ITS SUBSIDIARIES
PENDING CLOSING. The Company covenants and agrees that, from and after the date
of this Agreement and until the Closing, except as otherwise specifically
consented to or approved by the Buyer in writing:
6.1. Access. The Company shall, and shall cause each of its
Subsidiaries to, afford to the Buyer and its authorized representatives access
during normal business hours to all properties, books, records, contracts and
documents of the Company or such Subsidiary and an opportunity to make such
investigations as they
25
shall reasonably desire to make of the Company or such Subsidiary (provided that
such investigations shall be conducted so as to minimize any disruption of the
operations of the Company or such Subsidiary), and the Company shall, and shall
cause each of its Subsidiaries to, furnish or cause to be furnished to the Buyer
and its authorized representatives all such information with respect to the
affairs and business of the Company or such Subsidiary as the Buyer may
reasonably request. Upon the reasonable prior request of the Buyer, the Company
shall, and shall cause each of its Subsidiaries to, arrange meetings or
conference calls for the Buyer and its authorized representatives with the
Company's or such Subsidiary's executive officers, franchisees and suppliers
(provided that such meetings or conference calls shall only be held during
normal business hours and shall be conducted so as to minimize any disruption in
the business activities of such executive officer, franchisee or supplier).
6.2. Carry on in Regular Course. The Company shall, and shall cause
each of its Subsidiaries to, maintain its owned and leased properties in
accordance with its historical maintenance practices, maintain its material
licenses and permits, continue to make customary capital expenditures in the
ordinary course of business consistent with past practice and otherwise carry on
its business in the ordinary course consistent with past practice. The Company
shall not, and shall not permit any of its Subsidiaries to, incur any
Indebtedness outside the ordinary course of business.
6.3. No General Increases. Except as set forth on Schedule 6.3
hereto, the Company shall not, and shall not permit any of its Subsidiaries to,
grant any general or uniform increase in the rates of pay of its employees or in
their benefits under any bonus or pension plan or other contract or commitment,
or increase the compensation payable or to become payable to its officers, key
salaried employees or agents, or any bonus, insurance, pension or other benefit
plan, payment or arrangement made to, for or with any such officers, key
salaried employees or agents, unless such grant or increase is made in the
ordinary course of business consistent with past practices or is required by the
terms of any existing agreement.
6.4. Contracts and Commitments. Except as set forth on Schedule 6.4
hereto, the Company shall not, and shall not permit any of its Subsidiaries to,
enter into any material lease, contract or commitment or engage in any material
transaction not contemplated by this Agreement or not in the usual and ordinary
course of business and consistent with its normal business practices.
6.5. Sale of Capital Assets. The Company shall not, and shall not
permit any of its Subsidiaries to, sell or otherwise dispose of any capital
asset other than (a) any capital asset with a fair market value not in excess of
$500,000, or (b) capital assets with a fair market value aggregating not in
excess of $500,000, without the prior written consent of the Buyer.
26
6.6. Preservation of Organization. The Company shall, and shall
cause each of its Subsidiaries to, use reasonable efforts to preserve its
business organization intact, to keep available to the Buyer its present key
officers and employees, and to preserve for the Buyer its present relationships
with its franchisees, suppliers and customers and others with whom it has
business relations.
6.7. Capital Expenditures. Except as set forth on Schedule 6.7
hereto, the Company shall not, and shall not permit any of its Subsidiaries to,
make any capital expenditures which exceed $500,000 per expenditure and $500,000
in the aggregate.
6.8. Capital Stock. Except for the Redemption, the issuance of
shares upon the exercise of the Non-Rollover Options or as payment in kind of a
dividend on the Preferred Stock, the Company shall not, and shall not permit any
of its Subsidiaries to, (a) effect any issuance of any shares of its capital
stock, (b) redeem, purchase or otherwise acquire any shares of its capital stock
or (c) declare, set aside or pay any dividends or other distributions in respect
of its capital stock.
6.9. Tax Matters. Without the prior written consent of Buyer,
neither the Company nor any of its Subsidiaries shall file any amended Tax
Return, change any election or change any accounting method if such amendment or
change would have the effect of increasing the Tax liability of the Company or
any of its Subsidiaries for any period ending after the Closing Date.
6.10. Financial Statements. Within 15 days following the end of each
monthly period (or four week equivalent) ending prior to the Closing Date
beginning with the four week period ending April 13, 2003, the Company shall
deliver to the Buyer the unaudited consolidated balance sheets, income
statements and statements of cash flows of the Company and its Subsidiaries
(including VICORP and Village Inn Pancake House of Albuquerque, Inc.) for such
period, which, subject to year-end audit adjustments and the absence of
footnotes, shall be prepared in accordance with GAAP.
6.11. Notice of Breach. The Company shall promptly notify the Buyer
of any material breach of any representations and warranties of the Company set
forth in Section 3 hereof or any of the covenants of the Company contained
herein.
6.12. Schedules. The Company shall promptly supplement or amend the
Schedules hereto with respect to any matter arising after the date hereof which,
if existing or occurring on the date hereof, would have been required to be set
forth or described in the Schedules hereto, by delivering written notice thereof
to the Buyer accompanied by a copy of the applicable supplement or amendment.
Any such supplement or amendment shall be solely for the purpose of disclosure
to the Buyer hereunder, and for purposes of the conditions to closing set forth
in Section 7.1 and the indemnification provisions in Section 13 hereof shall not
be deemed to cure any
27
breach of any representation or warranty hereunder that would have occurred in
the absence of such supplement or amendment unless the Buyer specifically waives
such condition or breach in writing.
7. CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS. The obligation of
the Buyer to consummate the Closing shall be subject to the satisfaction at or
prior to the Closing of each of the following conditions (to the extent
noncompliance is not waived in writing by the Buyer):
7.1. Representations and Warranties True at Closing. The
representations and warranties made by the Company and the Seller Indemnifying
Parties in Sections 3 and 4 hereof, if qualified by a reference to materiality
or similar qualifiers, shall be true and correct, and if not so qualified, shall
be true and correct in all material respects, at and as of the Closing Date with
the same effect as though such representations and warranties had been made or
given at and as of the Closing Date, provided that this condition shall be
deemed satisfied unless the aggregate amount of Damages (as defined in Section
13.1) indemnifiable pursuant to Section 13 with respect to any such breaches of
representations and warranties at Closing would be reasonably likely to exceed
$5,000,000.
7.2. Compliance With Agreement. The Company and the Seller
Indemnifying Parties shall have performed and complied in all material respects
with all of their obligations under this Agreement to be performed or complied
with by them on or prior to the Closing Date.
7.3. Officer's Certificate. The Company shall have delivered to the
Buyer in writing, at and as of the Closing, a certificate, in form and substance
reasonably satisfactory to the Buyer, certifying that the conditions in each of
Sections 7.1 and 7.2 have been satisfied.
7.4. No Material Adverse Change. There shall have been no change as
of the Closing Date, since the date hereof, in the business or the assets of the
Company or any of its Subsidiaries which either individually or in the aggregate
is or is reasonably likely to result in a Material Adverse Effect.
7.5. Certificate of Indebtedness and Net Cash. The Sellers shall
have caused the Company to prepare and deliver to the Buyer a certificate (the
"Certificate of Indebtedness and Net Cash") certifying (a) the amount of
Indebtedness of the Company and its Subsidiaries outstanding on the Closing Date
and specifying the amount owed to each creditor listed thereon, (b) the Net Cash
Amount as of the Closing Date and (c) the amount of outstanding checks as of the
Closing Date.
7.6. No Action or Restraining Order. No action, suit or proceeding
shall have been filed or shall be threatened and no restraining order or
injunction shall be
28
in effect which would prohibit the transactions contemplated hereby or seek to
impose any material liability on any party hereto as a result of the
consummation of the transactions contemplated hereby.
7.7. Resignations of Directors and Officers. The directors and
officers of the Company and each of its Subsidiaries set forth on Schedule 7.7
hereto shall have resigned their positions with the Company and/or its
Subsidiaries on or prior to the Closing Date.
7.8. Opinion of Counsel. Each of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ LLP, counsel to
the Company and the LLC, and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇., counsel to VICORP, shall
have delivered to the Buyer a written opinion, addressed to the Buyer and dated
the Closing Date, substantially in the form of Exhibits B-1 and B-2,
respectively, hereto.
7.9. HSR Act. Any applicable waiting period under the HSR Act,
including any extension, shall have expired, or shall have been earlier
terminated.
7.10. Escrow Agreement. The Seller Representatives, the Buyer and
the Escrow Agent shall have executed and delivered the Escrow Agreement, and the
Escrow Agreement shall be in full force and effect.
7.11. Termination of Agreements. Each of the agreements listed on
Schedule 7.11 hereto shall have been terminated and (a) the Sellers party
thereto, and with respect to the Management Fee Agreements, First Capital
Corporation of Boston and ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ Incorporated shall
have released all of their rights and claims against the Company and its
Subsidiaries under such agreements and (b) the Sellers party thereto who are not
employees of the Company or any of its Subsidiaries and First Capital
Corporation of Boston and ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ Incorporated shall
also have released any and all other rights and claims against the Company and
its Subsidiaries, other than the rights and claims arising under this Agreement,
the Escrow Agreement and any other agreements to be entered into at the Closing
in connection with this Agreement.
7.12. Financing. The lenders furnishing the commitments attached as
Schedule 5.6 shall have funded such commitments in accordance with the terms
thereof; provided, however, that the Buyer shall not be entitled to assert this
condition precedent if the failure of such lenders to fund such commitments
shall have resulted from the willful failure of the Buyer to have satisfied all
material conditions within its reasonable control to funding thereunder for the
purpose of avoiding the Buyer's obligations hereunder.
7.13. Releases. Each Seller (other than those Sellers who are party
to a Contract Termination Agreement) who holds Options as of the Closing Date
shall have executed and delivered to the Company a release in the form of
Exhibit F
29
attached hereto. Each Seller who is a party to a Contract Termination Agreement
shall have executed and delivered to the Company a release in the form described
in such Contract Termination Agreement.
7.14. Certificate as to LLC Pro Rata Shares. The Seller
Representatives shall have delivered a certificate certifying the LLC Pro Rata
Share of each of the LLC Members (and the LLC Pro Rata Shares of all of the LLC
Members as set forth on such certificate shall collectively total 100%).
7.15. ▇▇▇▇▇▇▇▇▇ Leases. The issue of whether all or any portion of
the ▇▇▇▇▇▇▇▇▇ Leases constitute operating leases or capital leases shall have
been resolved to the satisfaction of the Buyer; provided, that if the Sellers
are willing to treat the ▇▇▇▇▇▇▇▇▇ Leases as capital leases, then this condition
shall be deemed to be satisfied.
7.16. Proceedings and Documents Satisfactory. All proceedings in
connection with the transactions contemplated by this Agreement and all
certificates and documents delivered to the Buyer in connection with the
transactions contemplated by this Agreement shall be satisfactory in all
reasonable respects to the Buyer and the Buyer's counsel, and the Buyer shall
have received the originals or certified or other copies of all such records and
documents as the Buyer may reasonably request.
8. CONDITIONS PRECEDENT TO SELLER INDEMNIFYING PARTIES'
OBLIGATIONS. The obligation of the Seller Indemnifying Parties to consummate the
Closing shall be subject to the satisfaction, at or prior to the Closing, of
each of the following conditions (to the extent noncompliance is not waived in
writing by the Seller Representatives):
8.1. Representations and Warranties True at Closing. The
representations and warranties made by the Buyer in Section 5 hereof, if
qualified by a reference to materiality or similar qualifiers, shall be true and
correct, and if not so qualified, shall be true and correct in all material
respects, at and as of the Closing Date with the same effect as though such
representations and warranties had been made or given at and as of the Closing
Date, provided that this condition shall be deemed satisfied unless the
aggregate amount of Damages indemnifiable pursuant to Section 13 with respect to
any such breaches of representations and warranties at Closing would be
reasonably likely to exceed $5,000,000.
8.2. Compliance with Agreement. The Buyer shall have performed and
complied in all material respects with all of its obligations under this
Agreement that are to be performed or complied with by it at or prior to the
Closing.
8.3. Officer's Certificate. The Buyer shall have delivered to the
Sellers in writing, at and as of the Closing, a certificate, in form and
substance reasonably
30
satisfactory to the Seller Representatives, to the effect that the conditions in
each of Sections 8.1 and 8.2 have been satisfied.
8.4. Discharge of Indebtedness. The Buyer shall have paid in full
and terminated all liabilities of the Company and each of its Subsidiaries for
all of the Indebtedness evidenced on the Certificate of Indebtedness and Net
Cash.
8.5. Transaction Expenses. The Buyer shall have paid in full and
terminated all liabilities of the Sellers for the Transaction Expenses.
8.6. No Action or Restraining Order. No action, suit or proceeding
shall have been filed and no restraining order or injunction shall be in effect
which would prohibit the transactions contemplated hereby or seek to impose
liability on any party hereto as a result of the consummation of the
transactions contemplated hereby.
8.7. Opinion of Counsel. ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, Ltd., counsel to the
Buyer, shall have delivered to the Sellers a written opinion, addressed to the
Sellers and dated the Closing Date, substantially in the form of Exhibit C
hereto.
8.8. HSR Act. Any applicable waiting period under the HSR Act,
including any extension, shall have expired, or shall have been earlier
terminated.
8.9. Redemption. The Buyer shall have provided the Company with the
Redemption Amount specified in Section 1.2 above, and the Redemption shall have
been completed.
8.10. Escrow Agreement. The Seller Representatives, the Buyer and
the Escrow Agent shall have executed and delivered the Escrow Agreement, and the
Escrow Agreement shall be in full force and effect.
8.11. New Stock Option Agreements. The Buyer shall have executed and
delivered the New Stock Option Agreements for each holder of Rollover Options.
8.12. ▇▇▇▇▇▇▇▇▇ Leases. The issue of whether all or any portion of
the ▇▇▇▇▇▇▇▇▇ Leases constitute operating leases or capital leases shall have
been resolved to the satisfaction of the Seller Representatives; provided, that
if the Buyer is willing to treat the ▇▇▇▇▇▇▇▇▇ Leases as operating leases, then
this condition shall be deemed to be satisfied.
8.13. Proceedings and Documents Satisfactory. All proceedings in
connection with the transactions contemplated by this Agreement and all
certificates and documents delivered to the Sellers in connection with the
transactions contemplated by this Agreement shall be satisfactory in all
reasonable respects to the Sellers and their counsel, and each Seller shall have
received the originals or certified
31
or other copies of all such records and documents as such Seller may reasonably
request.
9. CERTAIN DEFINITIONS. As used herein the following terms not
otherwise defined have the following respective meanings:
"Affiliate": As applied to any specified Person, any other Person
controlling, controlled by or under common control with such specified Person.
"BBV": BancBoston Ventures Inc., a Massachusetts corporation.
"▇▇▇▇▇▇▇▇▇ Leases": The leases of the Company and its Subsidiaries
acquired in connection with the acquisition by VICORP of all of the outstanding
capital stock of Village Inn Pancake House of Albuquerque, Inc., a New Mexico
corporation, in February, 2003.
"Closing Date Net Working Capital": The Net Working Capital as of the
Closing Date, immediately prior to giving effect to the transactions
contemplated by this Agreement; provided, that for purposes of determining the
Closing Date Net Working Capital, the amount of short-term liability for workers
compensation claims of the Company and its Subsidiaries as of the Closing Date
shall be deemed to be zero.
"Continuing Indebtedness": Any Indebtedness (i) consisting of letters
of credit issued to support workers' compensation obligations or lease
obligations, (ii) consisting of capitalized leases, (iii) consisting of the
Unfunded POS Price, (iv) consisting of the Unfunded Capital Expenditure Amount
or (v) secured by mortgages held by General Electric Capital Business Asset
Funding Corporation or any of its Affiliates on Owned Real Property located at
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
"Contract Termination Agreements": Collectively, (a) the letter
agreement dated as of April 14, 2003 among the Company, VICORP and ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇ regarding the termination of the Employment Agreement dated as of May
14, 2001 between VICORP and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ and (b) the letter agreement
dated as of April 14, 2003 among the Company, VICORP and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
regarding the termination of the Severance Agreement dated as of July 17, 1998
(as amended) among VICORP and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇.
"Contract Termination Payments": The amounts payable to ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ under their respective Contract Termination
Agreements.
32
"Escrow Funds": The amount of funds remaining in the Escrow Account
from time to time.
"GAAP": U.S. generally accepted accounting principles, consistently
applied.
"HSR Act": The ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as
amended.
"Indebtedness": As applied to any Person, all indebtedness of such
Person for borrowed money, whether current or funded, or secured or unsecured,
including without limitation, (a) all indebtedness of such Person for the
deferred purchase price of property or services represented by a note, earnout
or contingent purchase payment, (b) all indebtedness of such Person created or
arising under any conditional sale or other title retention agreement with
respect to property acquired by such Person (even though the rights and remedies
of the seller or lender under such agreement in the event of default are limited
to repossession or sale of such property), (c) all indebtedness of such Person
secured by a purchase money mortgage or other lien to secure all or part of the
purchase price of the property subject to such mortgage or lien, (d) all
obligations under leases which shall have been or must be, in accordance with
GAAP, recorded as capital leases in respect of which such Person is liable as
lessee, (e) any liability of such Person in respect of banker's acceptances or
letters of credit (provided, that any increase in the outstanding amount of
letters of credit issued to support workers' compensation obligations above the
amount of $3,862,500 outstanding as of the date hereof shall not be deemed to be
Indebtedness of the Company and its Subsidiaries as of the Closing Date for
purposes of Section 1.2(a) hereof), (f) the Unfunded POS Price, (g) the Unfunded
Capital Expenditure Amount, (h) any obligations (including, but not limited to,
interest, fees, penalties and other expenses) under any interest rate swap
agreements or instruments of the Company or its Subsidiaries, (i) all interest,
fees and other expenses owed with respect to the indebtedness referred to above,
and (j) all indebtedness referred to above which is directly or indirectly
guaranteed by such Person or which such Person has agreed (contingently or
otherwise) to purchase or otherwise acquire or in respect of which it has
otherwise assured a creditor against loss.
"Intellectual Property": All of the following (including all copies and
embodiments thereof, in whatever media): (a) registered and unregistered
trademarks, trade dress, service marks, logos, trade names, corporate names and
applications to register the same ("Trademarks"); (b) issued U.S. and foreign
patents and pending patent applications, patent disclosures and improvements
thereto ("Patents"); (c) registered and unregistered copyrights, mask work
rights and all applications to register the same ("Copyrights"); (d) computer
software and databases ("Software"); (e) licenses and agreements to use or
exercise rights in any Trademarks, Patents, Copyrights or Software; (f) Internet
domain names; and (g) all categories of trade secrets, know-how, recipes,
formulas, inventions (whether or not patentable and
33
whether or not reduced to practice), processes, procedures, drawings,
specifications, designs, plans, proposals, technical data, copyrightable works,
financial, marketing, and business data, pricing and cost information, business
and marketing plans, customer and supplier lists and information and other
confidential and proprietary information.
"IRS": The United States Internal Revenue Service.
"LLC": Midway Investors, LLC, a Delaware limited liability company.
"LLC Members": Those Preferred Holders identified on Schedule 2 hereto
as LLC Members.
"LLC Pro-Rata Share": With respect to any LLC Member, the percentage
set forth for such LLC Member on the Certificate of LLC Pro-Rata Shares
delivered pursuant to Section 7.14.
"Material Adverse Effect": A material adverse effect on the business,
operations or financial condition of the Company and its Subsidiaries, taken as
a whole.
"Net Cash Amount": As of any date, the aggregate amount of the
Company's and each of its Subsidiaries' cash and cash equivalents on hand or in
bank accounts as of such date after giving effect to the Contract Termination
Payments payable on such date and the management fees and other amounts payable
on such date under the Management Fee Agreements, minus the aggregate amount of
outstanding and unpaid checks issued by the Company and each of its Subsidiaries
as of such date, plus (without duplication) the aggregate exercise price paid or
deemed paid pursuant to Section 2.2(b) upon exercise of the Non-Rollover
Options.
"Net Working Capital": As of any date, the total (excluding
intercompany accounts) of accounts receivable, inventory and prepaid expenses
(excluding any deferred tax assets, prepaid income taxes or accrued tax refunds)
of the Company and its Subsidiaries, less the total (excluding intercompany
accounts) of accounts payable, accrued compensation (including bonuses accrued
in the ordinary course), accrued taxes (other than any liability for federal or
state income taxes or any reserves for income taxes or any deferred tax
liability), accrued insurance and accrued expenses (excluding accrued interest
and accrued management fees) of the Company and its Subsidiaries, all determined
in accordance with GAAP on a consolidated basis in accordance with the Most
Recent Audited Balance Sheet, it being understood and agreed that no long-term
assets or liabilities shall be included in any determination of Net Working
Capital.
34
"Options": As of the date hereof, the aggregate amount of unexercised
stock options to purchase shares of Class A Preferred Stock, Class C Preferred
Stock or Class B Common Stock, as the case may be, as more fully set forth on
Schedule 3 hereto.
"Permitted Encumbrances": Any (a) liens for Taxes or assessments or
other governmental charges not yet due and payable; (b) pledges or deposits of
money securing statutory obligations under workmen's compensation, unemployment
insurance, social security or public liability laws or similar legislation; (c)
pledges or deposits of money securing bids, tenders, contracts or leases to
which the Company or any of its Subsidiaries is a party as lessee made in the
ordinary course of business; (d) inchoate and unperfected workers', mechanics'
or similar liens arising in the ordinary course of business, so long as such
liens attach only to equipment, fixtures or real property of the Company or any
of its Subsidiaries; (e) carriers', warehousemen's, suppliers' or other similar
possessory liens arising in the ordinary course of business; (f) deposits
securing, or in lieu of, surety, appeal or customs bonds in proceedings to which
the Company or any of its Subsidiaries is a party; (g) zoning restrictions or
recorded easements affecting the use of any Real Property or other minor
irregularities in title (including leasehold title) affecting any Real Property,
so long as the same do not materially impair the use of such Real Property as it
is presently being used in the operation of the business of the Company and its
Subsidiaries; (h) liens presently existing or hereafter created pursuant to any
agreements or commitments evidencing, or entered into by the Company or any of
its Subsidiaries in connection with, Indebtedness of the Company and/or any of
its Subsidiaries to be paid and discharged at Closing pursuant to Section 8.4;
and (i) any leases or subleases entered into in the ordinary course of business
by the Company or any of its Subsidiaries as lessor with respect to excess or
unused Real Property.
"Person": A corporation, a limited liability company, an association, a
partnership, an organization, a trust, a business or an individual.
"Projected Capital Expenditure Amount" means (a) if the Closing Date is
prior to May 11, 2003, an amount equal to $3,478,000 plus (i) a fraction, the
numerator of which is the number of days between April 13, 2003 and the Closing
Date and the denominator of which is 28 multiplied by (ii) $931,000, (b) if the
Closing Date is on or after May 11, 2003 but prior to June 8, 2003, an amount
equal to $4,409,000 plus (i) a fraction, the numerator of which is the number of
days between May 11, 2003 and the Closing Date and the denominator of which is
28 multiplied by (ii) $2,002,000 and (c) if the Closing Date is on or after June
8, 2003, $6,411,000.
"Pro-Rata Share": With respect to each Seller, a fraction (expressed as
a percentage), the numerator of which is the number of Shares sold by such
Seller to the Buyer at the Closing (including any shares of Class B Common Stock
of the
35
Company issued to such Seller upon exercise of any Non-Rollover Options) plus
the number of shares of Class B Common Stock issuable upon exercise of any
Warrants sold by such Seller to the Buyer at the Closing and the denominator of
which is the total number of Shares sold by all of the Sellers to the Buyer at
the Closing (including the total number of shares of Class B Common Stock of the
Company issued to the Sellers upon exercise of any Non-Rollover Options) plus
the total number of shares of Class B Common Stock issuable upon exercise of the
Warrants sold by the Sellers to the Buyer at the Closing.
"Subsidiary": As applied to any specified Person, any other Person of
which such specified Person shall at the time own, directly or indirectly,
through a Subsidiary or otherwise, at least a majority of the outstanding
capital stock (or other beneficial interests) entitled to vote generally.
"Tax": Any federal, state, local, foreign and other income, profits,
franchise, capital, withholding, unemployment insurance, social security,
occupational, production, severance, gross receipts, value added, sales, use,
excise, real and personal property, ad valorem, occupancy, transfer, employment,
disability, worker's compensation or other similar tax, duty or other
governmental charge (including all interest and penalties thereon and additions
thereto).
"Tax Return": Any return, declaration, report, claim for refund,
information return, statement or other document (including any related or
supporting estimates, elections, schedules, statements or information) filed or
required to be filed in connection with the determination, assessment or
collection of any Tax or the administration of any law, regulation or
administrative requirements relating to any Tax.
"Transaction Expenses": All expenses of the Sellers and the Company
incurred in connection with the preparation, execution and consummation of this
Agreement and the Closing, including fees and disbursements of attorneys,
accountants and other advisors and service providers, payable by the Sellers
pursuant to Section 15.1 hereof that have not been paid as of the Closing.
"Unfunded Capital Expenditure Amount": The amount, if any, by which the
Projected Capital Expenditure Amount exceeds the sum of (a) the aggregate amount
of remodeling and maintenance capital expenditures of the Company and its
Subsidiaries for corporate, manufacturing (VICOM) and restaurants during the
period beginning on October 28, 2002 and ending on the Closing Date plus (b)
$50,000.
"Unfunded POS Price": The amount, if any, by which $7,489,000 exceeds
the aggregate amount of cash paid by the Company and its Subsidiaries in
connection with the POS system upgrade prior to the Closing Date.
36
"VICORP": VICORP Restaurants, Inc., a Colorado corporation.
"Warrants": The warrants to purchase shares of Class B Common Stock
issued by the Company to certain of the Sellers, as more fully set forth on
Schedule 1 hereto.
10. CERTAIN COVENANTS.
10.1. Confidential Information. Any and all information disclosed by
the Company, any of its Subsidiaries or any Seller to the Buyer as a result of
the negotiations leading to the execution of this Agreement, or in furtherance
thereof, which information was not already known to the Buyer shall remain
confidential to the Buyer and its respective employees, agents and investors
until the Closing Date. If the transactions contemplated by this Agreement are
not consummated, the Buyer agrees not to divulge or disclose or use for its
benefit or purposes any such information at any time in the future unless it has
otherwise become public (without violation of this Agreement). The information
intended to be protected hereby shall include, but not be limited to, financial
information, franchisee information, lease terms, recipes, and anything else
having an economic or pecuniary benefit to the Company, any of its Subsidiaries
or any Seller.
10.2. Releases. Each Seller (other than those Sellers party to a
Contract Termination Agreement) who holds Options as of the Closing Date shall
execute and deliver to the Company at or prior to the Closing a release in the
form of Exhibit F attached hereto. Each Seller party to a Contract Termination
Agreement shall execute and deliver to the Company at or prior to the Closing a
release in the form described in such Contract Termination Agreement. Each
Seller party to any of the agreements listed on Schedule 7.11 hereto and First
Capital Corporation of Boston and ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ Incorporated
shall execute and deliver to the Company at or prior to the Closing a
termination agreement in the form of Exhibit G attached hereto.
10.3. Tax Matters.
(a) Tax Returns.
(i) The Buyer will be responsible for and shall cause the
Company and its Subsidiaries to timely file any income Tax Returns with a filing
due date that is after the Closing Date for tax periods of the Company and its
Subsidiaries that end on or before the Closing Date. If the fiscal year 2002
federal income Tax Returns of the Company and its Subsidiaries (the "2002
Federal Tax Returns") have not been filed as of the Closing Date, the Buyer
shall cause the 2002 Federal Tax Returns to be filed within 60 days after the
Closing Date. Within 30 days after the Closing Date, the Buyer shall cause the
Company and/or its Subsidiaries to file for a refund of the
37
full amount of the estimated federal income Tax payment of $1,300,000 made by
the Company and/or its Subsidiaries on or about February 15, 2003 (the
"Estimated Tax Payment Refund Filing"). Within 150 days after the Closing Date,
the Buyer shall cause the federal income Tax Returns of the Company and its
Subsidiaries for the partial tax year ending on the Closing Date (the "Stub
Period Federal Tax Returns") to be filed. Within 60 days following the filing of
the Stub Period Federal Tax Returns, the Buyer shall cause to be filed either
(A) amendments to the fiscal year 2001 and 2002 federal income Tax Returns of
the Company and its Subsidiaries or (B) an IRS Form 1139 to apply any net
operating loss of the Company or its Subsidiaries for any partial tax year
ending on the Closing Date to the preceding tax years (either (A) or (B), the
"2001/2002 Federal Tax Return Amendments"). The Buyer shall cause the Company
and its Subsidiaries, or the accountants for the Company and its Subsidiaries,
to prepare and file each of the Tax Returns and other filings required to be
filed pursuant to this Section 10.3(a)(i) in accordance with the provisions of
Section 10.3(b)(i).
(ii) The Buyer shall provide the Seller Representatives
with copies of the 2002 Federal Tax Returns, the Stub Period Federal Tax Returns
and the 2001/2002 Federal Tax Return Amendments for their review and comment at
least 30 days prior to the applicable filing deadline set forth in Section
10.3(a)(i) above (the "Tax Refund Materials"). The Seller Representatives shall
have a period of 15 days to provide the Buyer with a statement of any disputed
items with respect to the Tax Refund Materials. In the event the Seller
Representatives and the Buyer are unable to reach agreement with respect to any
disputed items within a period of 5 days, all such disputed items shall be
submitted to the Independent Accountant for final resolution prior to the
applicable filing deadline. In addition, the Buyer shall provide the Seller
Representatives with a copy of the Estimated Tax Payment Refund Filing at least
15 days prior to the applicable filing deadline set forth in Section 10.3(a)(i)
above, and the Seller Representatives shall have a period of 5 days to provide
the Buyer with a statement of any disputed items with respect to the Estimated
Tax Payment Refund Filing. In the event the Seller Representatives and the Buyer
are unable to reach agreement with respect to any disputed items within a period
of 5 days, all such disputed items shall be submitted to the Independent
Accountant for final resolution prior to the applicable filing deadline. In the
event the Independent Accountant fails to resolve any disputed items prior to
the applicable filing deadline and, as a result, the Buyer does not make the
required filings by the applicable filing deadline, the Buyer shall not be
deemed to have breached this Section 10.3 so long as the Buyer makes the
required filings promptly following resolution of such disputed items, which
shall be no later than 30 days after the applicable filing deadline.
(iii) The Buyer shall provide the Seller Representatives
with copies of all state and local income Tax Returns of the Company and its
Subsidiaries that include a taxable period prior to the Closing Date for their
review and comment at least 30 days prior to the applicable filing deadline
(subject to any extensions of such
38
filing deadline) for such Tax Returns together with the Buyer's calculation of
the Tax refund to be received, or the Taxes payable, with respect to the
Pre-Closing Tax Period (the "Tax Materials"). The Seller Representatives shall
have a period of 15 days to provide the Buyer with a statement of any disputed
items with respect to the Tax Materials. In the event the Seller Representatives
and the Buyer are unable to reach agreement with respect to any disputed items
within a period of 5 days, all such disputed items shall be submitted to the
Independent Accountant for final resolution prior to the applicable filing
deadline. As used herein, "Pre-Closing Tax Period" means (i) any taxable period
of the Company or its Subsidiaries that begins on or before the Closing Date and
ends on or before the Closing Date and (ii) with respect to any other taxable
period of the Company or its Subsidiaries that includes the Closing Date, the
portion of such taxable period prior to and including the Closing Date.
(iv) The Buyer and the Sellers agree that if the Company
or any of its Subsidiaries is permitted under any applicable state or local
income tax law to treat the Closing Date as the last day of the taxable period
during which the Closing occurs, the Buyer and the Sellers shall treat (and
shall cause their respective Affiliates to treat) such date as the last day of
such taxable period.
(b) Tax Refunds With Respect to Pre-Closing Tax Periods.
(i) The Buyer shall cause each federal or state income
Tax Return of the Company and its Subsidiaries filed after the Closing Date that
includes a Pre-Closing Tax Period (including, without limitation, the 2002
Federal Tax Returns, the Estimated Tax Payment Refund Filing, the Stub Period
Federal Tax Returns and the 2001/2002 Federal Tax Return Amendments) to claim
the maximum amount of income tax refunds to which the Company and its
Subsidiaries may be entitled; provided, however, that each such Tax Return shall
be prepared in accordance with the most recent past practices of the Company and
its Subsidiaries. In connection with such filings, the Buyer shall cause the
Company and its Subsidiaries to apply any net operating loss of the Company or
its Subsidiaries for the tax year ending on the Closing Date (the "Pre-Closing
NOL") to any successive preceding tax years until all of the Pre-Closing NOL has
been applied. Notwithstanding the foregoing provisions of this Section
10.3(b)(i), the Buyer and the Sellers hereby acknowledge and agree that the
Company and its Subsidiaries are expected to incur certain deductible expenses
on the Closing Date immediately prior to giving effect to the Closing, including
without limitation, expenses related to the exercise of Non-Rollover Options as
contemplated by Section 2.2(a), the payment of the Contract Termination Payments
as contemplated by Section 2.2(b) and the termination or prepayment of certain
Indebtedness in connection with the Closing as contemplated by Section 2.2(g),
and such deductible expenses shall be reported in the determination of the
income or loss of the Company or its Subsidiaries pursuant to
39
any federal or state income Tax Return of the Company or its Subsidiaries filed
after the Closing Date that includes a Pre-Closing Tax Period.
(ii) The Buyer and the Sellers agree that any federal or
state income tax refunds payable to the Company or its Subsidiaries with respect
to the carryback or application of the Pre-Closing NOL to any Pre-Closing Tax
Period shall be for the account of the Sellers. Within five (5) days after
receipt of each such refund by the Company or its Subsidiaries after the Closing
Date, the Buyer shall pay to the Sellers an amount equal to such refund as
follows: (A) the initial $1,300,000 in such refunds shall be deposited into the
Escrow Account, as an addition to the Escrow Funds, by wire transfer of
immediately available funds to the Escrow Agent; provided, that in the event
that any such refunds are received by the Company or its Subsidiaries after the
tenth day prior to the date that is 18 months from the Closing Date, the Buyer
shall pay the applicable amount of such refunds by wire transfer of immediately
available funds directly to the Seller Representatives for distribution to the
Sellers in accordance with their respective Pro Rata Shares; and (B) the amount
of such refunds in excess of the initial $1,300,000 of such refunds (less any
amounts paid by offset pursuant to Section 1.2(c)) shall be paid by wire
transfer of immediately available funds to the Seller Representatives for
distribution to the Sellers in accordance with their respective Pro Rata Shares.
(iii) The Buyer shall permit the Seller Representatives to
control the prosecution of any refund claim payable for the account of the
Sellers and, where deemed appropriate by the Seller Representatives, shall cause
the Buyer to authorize by appropriate powers of attorney such Persons as the
Seller Representatives shall designate to represent the Company and its
Subsidiaries with respect to such refund claim; provided, however, that the
Sellers shall take no action that would increase the tax liability of the
Company and its Subsidiaries for any tax period beginning on or after the
Closing Date and ending after the Closing Date (other than as a consequence of
any reduction of any net operating loss of the Company or its Subsidiaries for
the partial tax year ending on the Closing Date by the carryback of all or any
portion of such net operating loss to any prior tax period) unless such action
is agreed to by the Buyer; provided, further, that the Sellers shall be
responsible for paying any costs and expenses incurred by the Seller
Representatives in connection with any such prosecution.
(iv) Buyer shall not amend, and shall not permit the
Company or any of its Subsidiaries to amend, any income Tax Return or election
made in connection with such income Tax Return for any Pre-Closing Tax Period
without the prior written consent of the Seller Representatives if such
amendment would have the effect of reducing the amount of any refunds to which
the Sellers would otherwise be entitled pursuant to this Section 10.3(b).
40
(v) The parties acknowledge and agree that the estimated
federal income tax payment of the Company and its Subsidiaries due on April 15,
2003 shall be reduced to take into account the Company's good faith estimate of
the deductions resulting from the exercise of employee stock options, the
payment of the Contract Termination Payments and certain other deductible
expenses to be incurred by the Company and its Subsidiaries as of the Closing
Date immediately prior to giving effect to the Closing, as a result of the
transactions contemplated hereby.
(vi) The Buyer and the Sellers agree that any federal,
state or local income tax refunds payable to the Company or its Subsidiaries
with respect to the carryback of any net operating loss of the Company or its
Subsidiaries for any taxable period that begins on or after the Closing Date and
ends after the Closing Date (a "Post-Closing NOL") to any Pre-Closing Tax Period
shall be for the account of the Buyer; provided, that the Buyer shall not, and
shall not permit the Company or any of its Subsidiaries to, file any Tax Return
(including, without limitation, any amendment to any Tax Return or any IRS Form
1139) of the Company or its Subsidiaries in which a Post-Closing NOL is carried
back to any Pre-Closing Tax Period (a "Post-Closing NOL Return") until such time
as the Sellers have received the maximum amount of refunds available to them
with respect to the application or carryback of the Pre-Closing NOL to the
Pre-Closing Tax Period in accordance with Section 10.3(b)(i). The Buyer shall
provide the Seller Representatives with written notice that the Buyer intends to
file a Post-Closing NOL Return at least 30 days prior to the date of filing
thereof. The Seller Representatives shall have a period of 15 days to provide
the Buyer with a written statement of objection to such filing, provided that
the basis for any such objection shall be limited to the Sellers' failure to
receive the maximum amount of refunds available to them with respect to the
application or carryback of the Pre-Closing NOL to the Pre-Closing Tax Period in
accordance with Section 10.3(b)(i). In the event that the Seller Representatives
and the Buyer are unable to reach agreement with respect to any such objection
by the Sellers within a period of 5 days, any such dispute shall be submitted to
the Independent Accountant for final resolution prior to the filing of such
Post-Closing NOL Return.
(c) Tax Cooperation. The Buyer and the Sellers shall reasonably
cooperate with each other in connection with the preparation of Tax Returns
related to the Company and its Subsidiaries and shall preserve all information,
returns, books, records and documents relating to any liabilities for Taxes with
respect to a taxable period until the later of the expiration of all applicable
statutes of limitation and extensions thereof, or a final determination with
respect to Taxes for such period and shall not destroy or otherwise dispose of
any record without first providing the other party a reasonable opportunity to
review and copy the same.
41
(d) Post-Closing Audits.
(i) The Buyer shall notify the Seller Representatives in
writing within 10 days after receipt by the Buyer, the Company or any Subsidiary
of the Company of any official inquiry, examination, audit or proceeding
("Audit") regarding any Tax Return or period with respect to which the Sellers
may have a right to a refund under Section 10.3(b) or an indemnification
obligation under Section 10.3(e). The Seller Representatives shall have the
right to exercise, on behalf of the Sellers and at the expense of the Sellers,
control at any time over the handling, disposition and/or settlement of any
issue raised in any Audit regarding any taxable period that ends on or before
the Closing Date. The Buyer shall cooperate with the Seller Representatives, as
reasonably requested by the Seller Representatives, in any such Audit.
(ii) The Buyer shall have the right, at its own expense,
to exercise control at any time over the handling, disposition and/or settlement
of any issue raised in any official inquiry, examination or proceeding regarding
any Tax Return other than as described in Section 10.3(d)(i) above (including
the right to settle or otherwise terminate any contest with respect thereto);
provided that in the case of any Tax Return for a period beginning before the
Closing Date, the Buyer shall settle any issue (if such settlement would result
in a required indemnification payment by the Sellers under Section 10.3(e)) only
with the prior consent of the Seller Representatives, which consent shall not be
unreasonably withheld.
(e) Indemnification.
(i) After the Closing Date, and regardless of whether the
Buyer would be entitled to indemnification for such amount under Section 13.1,
the Sellers shall indemnify and hold harmless the Buyer and the Company and each
of their respective Affiliates, successors and assigns from and against any
unpaid Tax liability (calculated after taking into account any unrefunded
estimated tax payments or other tax payments made by the Company prior to the
Closing Date and net of any reserve or accrual for Tax liabilities as set forth
on the Final Net Working Capital Schedule) with respect to a taxable period
ending on or before the Closing Date or a Pre-Closing Tax Period, determined on
the basis set forth in Section 10.3(e)(ii) below. The Sellers shall pay such
amounts as they are obligated to pay to the Buyer or the Company within 15
calendar days after payment of any applicable Tax liability by the Buyer or the
Company. The Sellers shall also indemnify and hold harmless the Buyer and the
Company, regardless of whether the Buyer would be entitled to indemnification
for such amount under Section 13.1, from and against any Tax liability for
periods prior to and including the Closing Date resulting from the Company or
any of its Subsidiaries being severally liable for any Taxes of any consolidated
group of which the Company or any of its Subsidiaries (prior to the Closing
Date) was or is a member pursuant to Treasury Regulations Sec. 1.1502-6 or
42
any analogous state or local tax provisions, determined on the basis set forth
in Section 10.3(e)(ii) below. The payment of any Tax liability by the Sellers as
provided under this Section 10.3(e) shall be subject to the limitations
contained in Sections 13.4(c), (d), (e), (f), (j) and (k). Claims made pursuant
to this Section 10.3 may only be asserted prior to the expiration of the
applicable statute of limitations.
(ii) Any Taxes for a period of time including both a
pre-Closing period and a post-Closing period shall be apportioned between such
pre-Closing period and the post-Closing period based, in the case of real and
personal property Taxes, in a per diem basis and in the case of other Taxes, on
the actual activities, taxable income or taxable loss of the Company during such
pre-Closing period and post-Closing period determined as if the books of the
Company and each of its Subsidiaries were closed on the Closing Date.
(iii) Notwithstanding anything to the contrary contained
herein, the Sellers shall have no liability or obligation under this Section
10.3(e) or otherwise with respect to any unpaid Tax liability of the Company or
its Subsidiaries to the extent arising from any disallowance, return, reduction
or any other adjustments of any refund of income Taxes attributable to the
carryback of any Post-Closing NOL to any Pre-Closing Tax Period.
10.4. Non-Solicitation. From and after the Closing Date until the
second anniversary of the Closing Date, neither any Seller nor BBV nor Marathon
nor any of their respective Affiliates shall, without the prior written consent
of the Buyer, solicit or encourage ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇. or ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ to leave the Company's
or such Subsidiary's employ for employment by or with such Seller, BBV, Marathon
or any of their respective Affiliates or any competitor of the Company or any of
the Company's Subsidiaries; provided, that (i) the foregoing provisions of this
Section 10.4 shall not restrict any Seller, BBV, Marathon or any of their
respective Affiliates from hiring any of the foregoing employees following any
termination of such employee by the Company or any of its Subsidiaries and (ii)
general solicitations of employment not specifically directed towards such
employees shall not be deemed to constitute a breach of the provisions of this
Section 10.4.
10.5. Certain Environmental Matters. Except with respect to those
matters listed on Schedule 3.11(b) and/or Schedule 13.1, the Buyer shall not
undertake environmental testing, sampling, monitoring or remediation activities
(any such activity or activities, an "Environmental Investigation") which are
not (a) required by applicable Environmental Laws or any federal, state or local
governmental authority, (b) in response to a third-party notice or claim
asserting liability or potential liability arising out of an environmental
condition in connection with acts, events or circumstances existing or occurring
prior to the Closing, (c) in response to due diligence or other requirements of
any Person (i) providing the Buyer with financing
43
for the consummation of the transactions contemplated hereby or any refinancing
thereof, (ii) taking a security interest in any applicable site or (iii)
purchasing any applicable site from Buyer, (d) required in connection with any
lease arrangement affecting any applicable site, (e) precipitated by Buyer's
reasonable determination that an environmental condition exists or could exist
which would present a risk of material harm to human health or the environment,
violate applicable Environmental Laws, require remediation under any applicable
Environmental Laws or give rise to any material liability of the Buyer under any
applicable Environmental Laws or (f) in response to or in connection with any
environmental condition first arising or occurring after the Closing. This
covenant shall survive the Closing for a period of eighteen (18) months
following the Closing and shall thereafter terminate and be of no further force
or effect. The parties agree that Sellers' sole remedy for a breach of this
covenant by Buyer shall be that Buyer shall not be entitled to seek
indemnification from Sellers for Damages sustained by Buyer in connection with
or arising out of an Environmental Investigation undertaken by Buyer in breach
of this provision.
10.6. Payment of Accrued Bonuses. After the Closing, the Buyer shall
cause the Company and its Subsidiaries to pay to the applicable employees of the
Company and its Subsidiaries the amount of their respective bonuses accrued in
the ordinary course as of the Closing Date in the aggregate amount set forth on
the Final Net Working Capital Schedule at such time as bonus payments for the
current fiscal year of the Company and its Subsidiaries are payable under the
terms of the applicable bonus or incentive program documents, agreements or
plans as in effect on the Closing Date; provided, however, that Buyer shall only
be required to cause the Company and its Subsidiaries to make such bonus
payments to the extent such bonus payments are actually earned in accordance
with the terms of the applicable bonus or incentive program documents,
agreements or plans as in effect on the Closing Date.
10.7. Non-Competition.
(a) Each of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇
▇. ▇▇▇▇▇ (each an "Executive") acknowledges that: (i) he is currently an
executive officer of VICORP and a shareholder or optionholder of the Company;
(ii) from and after the Closing Date, VICORP will continue to be engaged in the
business of (A) operating and managing family dining restaurants and enterprises
or (B) conducting such other activities as are undertaken from time to time by
VICORP or any of its subsidiaries or parent companies as a result of future
acquisitions, or otherwise (collectively, the "Business"); (iii) VICORP and the
Company are and will be actively engaged in the Business throughout North
America; (iv) Executive, as a selling shareholder or optionholder of the
Company, will benefit, financially and otherwise, from the consummation of the
transactions contemplated by this Agreement; (v) Executive is one of the persons
who will be developing the Business; (vi) Executive will continue to occupy a
position of trust and confidence with
44
VICORP after the Closing Date and, therefore, Executive will continue to become
familiar with VICORP's and the Company's and each of their subsidiaries'
(collectively, the "Group") trade secrets and with other proprietary and
confidential information concerning the Group and the Business (and the other
businesses of the Group); and (vii) the agreements and covenants contained in
this Section 10.7 are essential to protect the Group and the goodwill of the
Business.
(b) Each Executive hereby agrees that he will not, at any time
during the Restricted Period (as defined below), anywhere in North America (the
"Restricted Territory") (whether as an owner, partner, shareholder, agent,
officer, director, employee, independent contractor, consultant, or otherwise)
own, operate, manage, control, invest in, perform services for, or engage or
render services to (alone or through any other person or entity) the following
Entities (as defined below), or any subsidiaries or affiliates in which the
Entities have a controlling interest: ▇▇▇ ▇▇▇▇▇'; IHOP; Denny's; Perkin's; ▇▇▇▇▇
Calendar; Mimi's; and Cracker Barrel (the "Entities"); provided, however, that
the Executive can be associated with a national or state not-for-profit
restaurant association whose membership includes these corporations and as such,
from time to time, shall receive consultation and services from Executive
provided as a restaurant association officer or director, and, provided,
further, that the Executive can be employed by, engaged by or associated with, a
person or entity that provides services to the Entities so long as the Executive
does not himself provide such services or work on matters related to the
Entities. The term "Restricted Period" means (i) with respect to ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇, (A) the period of time from the Closing Date until six (6) months
after the termination for any reason of his employment relationship with the
Group or any successor thereto (whether pursuant to a written agreement or
otherwise) if such employment is terminated prior to the first (1st) anniversary
of Closing Date or (B) the period of time from the Closing Date until one (1)
year after the termination for any reason of his employment relationship with
the Group or any successor thereto (whether pursuant to a written agreement or
otherwise) if such employment is terminated on or after the first (1st)
anniversary of Closing Date or (C) such longer period of time as may be
determined pursuant to agreement between the Buyer and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ if his
employment relationship with the Group or any successor thereto is terminated
(whether pursuant to a written agreement or otherwise) at any time; (ii) with
respect to ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, the longer of (A) the period of time from the
Closing Date until one (1) year after the termination for any reason of his
employment relationship with the Group or any successor thereto (whether
pursuant to a written agreement or otherwise) or (B) such period of time as may
be determined pursuant to agreement between Buyer and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇; and
(iii) with respect to ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, the period of time from the Closing Date
until one (1) year after the termination for any reason of his employment
relationship with the Group or any successor thereto (whether pursuant to a
written agreement or otherwise). The Restricted Period shall be extended for a
period equal to any time period that a court determines Executive is in
violation of this Section 10.7(b). Nothing contained in this Section 10.7(b)
shall
45
be construed to prevent Executive from investing in the stock of any competing
corporation listed on a national securities exchange or traded in the
over-the-counter market, but only if Executive is not involved in the business
of said corporation and if Executive and Executive's associates (as such term is
defined in Regulation 14(A) promulgated under the Securities Exchange Act of
1934, as in effect on the date hereof), collectively, do not own more than an
aggregate of one percent (1%) of the stock of such corporation.
(c) The parties acknowledge that the business of VICORP and the
Company is and will be national in scope and thus the covenants in this Section
10.7 would be ineffective if the covenants were to be limited to a particular
geographic area. If any court of competent jurisdiction at any time deems the
Restricted Period unreasonably lengthy, or the Restricted Territory unreasonably
extensive, or any of the covenants set forth in this Section 10.7 not fully
enforceable, the other provisions of this Section 10.7, and this Agreement in
general, will nevertheless stand and, to the full extent consistent with law,
continue in full force and effect, and it is the intention and desire of the
parties that the court treat any provisions of this Section 10.7 which are not
fully enforceable as having been modified to the extent deemed necessary by the
court to render them reasonable and enforceable and that the court enforce them
to such extent (for example, that the Restricted Period be deemed to be the
longest period permissible by law, but not in excess of the length provided for
in Section 10.7(b), and the Restricted Territory be deemed to comprise the
largest territory permissible by law under the circumstances but not in excess
of the territory provided for in Section 10.7(b)).
11. HSR ACT. The Buyer, the Sellers and the Company shall, within
five (5) business days after the date hereof, if required by law, file with the
United States Department of Justice and the United States Federal Trade
Commission the Notification and Report Form required to be filed by them under
the HSR Act concerning the transactions contemplated hereby, and shall request
early termination of the waiting period under the HSR Act. The Buyer, the
Sellers and the Company hereby agree that they will promptly comply with any
request by the Department of Justice or the Federal Trade Commission for
additional documents or information so that such waiting period shall expire as
soon as practicable after the execution and delivery of this Agreement.
12. EXCLUSIVE DEALING. The Sellers hereby agree that during the
Exclusivity Period (as defined below), neither the Sellers, the Company or any
of its Subsidiaries nor any of their respective Affiliates shall engage in
negotiations with any Person, other than the Buyer, concerning the purchase of
all or any substantial portion of the capital stock or assets of the Company or
any of its Subsidiaries. The "Exclusivity Period" shall be the period commencing
on the date hereof and ending on the earlier of the Closing Date or the date on
which this Agreement is terminated in accordance with the provisions hereof.
46
13. INDEMNIFICATION.
13.1. Indemnity by the Seller Indemnifying Parties. Subject to the
limitations set forth in Section 10.5 and the overall limitations, the minimum
amounts, the time limitations and other provisions set forth in Section 13.4, as
applicable,
(a) each of the Sellers agrees severally, and not jointly, to
indemnify and hold the Buyer harmless from and with respect to any and all
claims, liabilities, losses, damages, costs and expenses, including without
limitation the fees and disbursements of counsel (collectively, "Damages"),
related to or arising directly or indirectly out of:
(i) any breach of any representation or warranty made by
the Company in Section 3 or by such Seller in Section 4 (other than any
representation or warranty relating to any workers compensation
claims);
(ii) any breach of any covenant made by the Company or by
such Seller in this Agreement;
(iii) any of the environmental conditions listed on
Schedule 13.1 to the extent that such environmental conditions existed
on or prior to the Closing Date, including, without limitation, the
passive migration or expansion of any such pre-existing environmental
condition, and either (x) such Damages arise out of the exercise of any
governmental authority or third party rights under applicable
Environmental Law or common law or (y) a cleanup, removal, remediation,
investigation and/or regulatory closure of such pre-existing
environmental condition is imposed on the Buyer by applicable
Environmental Law or constitutes good and customary practice
(collectively, "Special Environmental Claims"); provided, that (A) for
purposes of this Section 13.1, "good and customary practice" shall mean
those investigations, risk assessments and other steps necessary to
obtain a "no further action" letter, or letter of similar import, from
applicable regulatory authorities (a "Governmental Determination") with
respect to such pre-existing environmental condition assuming, for all
purposes, a commercial use of the relevant property; and (B) the Buyer
shall notify the Seller Representatives in writing (describing in
reasonable detail the proposed costs or expenses to be incurred) at
least 15 days prior to incurring any costs or expenses with respect to
any investigation, risk assessment or other steps necessary to obtain a
Governmental Determination for which the Buyer will be seeking
indemnification by the Sellers hereunder;
47
(iv) any claim, liability or obligation of the Company or
any of its Subsidiaries arising under any class action lawsuit or
governmental proceeding alleging any violation by the Company or any of
its Subsidiaries on or prior to the Closing Date of the Fair Labor
Standards Act or any analogous state law, rule or regulation regarding
the payment of wages or other forms of compensation ("Special Labor
Claims"); or
(v) any claim, liability or obligation of the Company or
any of its Subsidiaries with respect to any of the items disclosed on
Parts I, II or III of Schedule 3.9(a) (other than any workers'
compensation matters) to the extent that the liability with respect
thereto exceeds the reserve for legal settlements on the Final Net
Working Capital Schedule; and
(b) each of the Preferred Holders agrees severally, and not
jointly, to indemnify and hold the Buyer harmless from and with respect to any
Damages related to or arising directly or indirectly out of any breach of the
representations or warranties made by such Preferred Holder in Section 4.2
regarding title to the Preferred Stock.
13.2. Indemnity by the Buyer. Subject to the overall limitations,
the minimum amounts and the time limitations set forth in Section 13.4, the
Buyer agrees to indemnify and hold each of the Seller Indemnifying Parties
harmless from and with respect to any and all Damages, related to or arising
directly or indirectly out of any breach by the Buyer of any representation or
warranty or covenant made by the Buyer in this Agreement.
13.3. Third Party Claims. In the event that a party claiming a right
of indemnification hereunder (each an "Indemnitee") desires to make a claim
against any other party or parties (the "Indemnitor") in connection with any
action, suit, proceeding or demand at any time instituted against or made upon
the Indemnitee by any third party for which the Indemnitee may seek
indemnification hereunder (a "Third Party Claim"), the Indemnitee shall promptly
notify Indemnitor (or, if the Indemnitor is one or more of the Seller
Indemnifying Parties, the Seller Representatives) of such Third Party Claim and
of the Indemnitee's claim of indemnification with respect thereto. The
Indemnitor shall have forty-five (45) days after receipt of such notice (or by
such earlier date as may be necessary under applicable procedural rules in order
to file a timely appearance and response) to notify the Indemnitee if the
Indemnitor has elected to assume the defense of such Third Party Claim; provided
that Indemnitor shall not be entitled to assume the defense of any Third Party
Claim (but, the Indemnitor may participate in the defense of such Third Party
Claim with its own counsel at its own expense) for which the Indemnitee is
conducting such defense actively and diligently unless and until the aggregate
amount of all Damages for claims subject to the Deductible Amount exceeds the
Deductible Amount; and provided further that for so long as Indemnitor
48
is not entitled to assume the defense of a Third Party Claim arising under
Section 13.1(a)(iii) or 13.1(a)(v) and Indemnitee maintains control over the
defense of such claims, Indemnitee shall not (a) settle any Third Party Claim
arising under Section 13.1(a)(iii) or consent to the entry of judgment or take
any remedial action with respect thereto unless such settlement, consent or
action is made or taken on commercially reasonable terms or (b) settle any Third
Party Claim arising under Section 13.1(a)(v) or consent to the entry of judgment
with respect thereto in an amount in excess of $50,000 without the Indemnitor's
prior written consent (which consent shall not be unreasonably withheld or
delayed). If the Indemnitor elects to assume the defense of such Third Party
Claim pursuant to the terms hereof, the Indemnitor shall be entitled at its own
expense to conduct and control the defense and settlement of such Third Party
Claim through counsel of its own choosing; provided that (a) the Indemnitor
shall conduct such defense actively and diligently, (b) the Indemnitee may
participate in the defense of such Third Party Claim with its own counsel at its
own expense and (c) the Indemnitor may not settle any Third Party Claim or
consent to the entry of judgment with respect thereto without the Indemnitee's
prior written consent (which consent shall not be unreasonably withheld or
delayed); provided further, that in the event that the Indemnitee withholds its
consent to any settlement of, or entry of judgment with respect to, a Third
Party Claim (other than a Third Party Claim involving a claim for equitable
relief against the Company or any of its Subsidiaries), (i) the Indemnitor's
maximum liability under this Section 13 with respect to such Third Party Claim
shall be limited to the amount that would be payable by the Indemnitor under
this Section 13 if such settlement had been entered into or such judgment had
been entered and (ii) the Indemnitee shall thereafter assume the defense of such
Third Party Claim at its own expense and shall conduct such defense actively and
diligently (and the Indemnitor may participate in such defense with its own
counsel at its own expense). If the Indemnitor fails to notify the Indemnitee as
required above after receipt of the Indemnitee's notice of a Third Party Claim
or fails to conduct the defense as required above, the Indemnitee shall be
entitled to assume the defense of such Third Party Claim at the expense of the
Indemnitor, provided that the Indemnitee may not settle any Third Party Claim
without the consent (which consent shall not be unreasonably withheld or
delayed) of the Indemnitor.
49
13.4. Limitations of Liability.
(a) Subject to paragraphs (c)-(j) below, the Seller Indemnifying
Parties shall not be required to indemnify the Buyer hereunder with respect to
claims for Damages pursuant to Section 13.1(a) (other than claims for Damages
relating to a breach of Section 1.2(a), 1.2(c), 1.5 or 10.4 by the Company or
any Seller) except to the extent that the aggregate amount of Damages with
respect to any claim or series of related claims for which the Buyer is
otherwise entitled to indemnification pursuant to Section 13.1(a) exceeds
$10,000 (the "Minimum Claim Amount") (it being understood and agreed that the
Seller Indemnifying Parties shall not be liable for any Damages with respect to
any claim or series of related claims in the event that such Damages are less
than the Minimum Claim Amount) and the aggregate amount of Damages for which the
Buyer is otherwise entitled to indemnification pursuant to Section 13.1(a)
exceeds $1,000,000 (the "Deductible Amount") (it being understood and agreed
that (A) any claim or series of related claims for Damages of less than the
Minimum Claim Amount shall be disregarded for purposes of calculating the
Deductible Amount and (B) the Deductible Amount is intended as a deductible, and
the Seller Indemnifying Parties shall not be liable for any Damages less than
the Deductible Amount for which the Buyer is otherwise entitled to
indemnification); provided that the Deductible Amount shall not apply to
breaches of representations and warranties contained in Sections 3.1, 3.3, 3.7,
3.18, 4.1 and 4.2 or to claims for Damages relating to a breach of Section
1.2(a), 1.2(c), 1.5 or 10.4 by the Company or any Seller.
(b) Subject to paragraphs (c)-(j) below, except with respect to
claims for Damages relating to a breach of the representations and warranties of
the Company contained in Section 3.1, 3.3, 3.7 and 3.18 and claims for Damages
relating to a breach of the representations and warranties of each Seller
Indemnifying Party contained in Section 4 claims for Damages relating to a
breach of Section 1.2(a), 1.2(c), 1.5 or 10.4 by the Company or any Seller,
which will be limited as set forth in paragraphs (c) and (d) below, the
aggregate Damages payable by the Seller Indemnifying Parties pursuant to Section
13.1(a) with respect to all claims for indemnification (including, without
limitation, any Special Environmental Claims) shall not exceed an amount equal
to $13,000,000 (the "Maximum Amount") and the aggregate Damages payable by each
Seller pursuant to Section 13.1(a) with respect to all claims for
indemnification shall not exceed an amount equal to the Maximum Amount
multiplied by the Pro Rata Share of such Seller. For purposes of calculating a
Seller's Pro Rata Share under this Section 13 only, all shares of Common Stock
of the Company that would have been issued to such Seller upon exercise of such
Seller's Rollover Options shall be deemed to have been issued and sold to the
Buyer at the Closing. Notwithstanding the foregoing, the aggregate Damages
payable by the Seller Indemnifying Parties pursuant to Section 13.1(a)(iii) with
respect to all Special Environmental Claims shall not exceed an amount equal to
$2,500,000 (the "Special Environmental Claim Maximum Amount") and the aggregate
Damages payable by
50
each Seller pursuant to Section 13.1(a)(iii) with respect to all Special
Environmental Claims shall not exceed an amount equal to the Special
Environmental Claim Maximum Amount multiplied by the Pro Rata Share of such
Seller.
(c) The maximum liability of any Seller with respect to any claims
for Damages relating to a breach of the representations and warranties of the
Company contained in Section 3.1, 3.3, 3.7 and 3.18 or a breach of Sections
1.2(c) or 1.5 by the Sellers or a breach of Section 10.4 by such Seller ,
together with all other Damages payable by such Seller under Section 10.3(e) or
this Section 13, shall not exceed the full amount of the Purchase Price received
by such Seller, less in each case any amount previously paid or to be paid by
such Seller pursuant to Section 10.3(e) or this Section 13.
(d) The maximum liability of any Seller with respect to any Third
Party Claim or other claim for Damages shall be the amount thereof multiplied by
such Seller's Pro Rata Share; provided, however, that the representations and
warranties contained in Section 4 and (if applicable) the covenants in Sections
10.4 and 10.7 are made severally by each Seller as to himself, herself or itself
only and any Seller who has breached such representation or warranty or covenant
as to himself, herself or itself (but only such Seller) shall be liable with
respect to all Damages arising from the breach thereof, up to an amount equal to
the Maximum Amount multiplied by such Seller's Pro Rata Share and, in the case
of Damages arising from any breach of such Seller's representations and
warranties in Section 4.2 hereof, up to the full amount of the Purchase Price
and the Redemption Amount received by such Seller, less in each case any amount
previously paid or to be paid by such Seller pursuant to Section 10.3(e) or this
Section 13, and no other Seller shall be liable for any such Damages.
(e) Notwithstanding any provision herein to the contrary, the
Buyer shall seek payment for any amounts due with respect to all claims for
indemnification under Section 10.3(e) or Section 13.1 hereof solely as follows:
(i) with respect to all such claims (other than claims related to a breach of
any representations and warranties contained in Sections 3.1, 3.3, 3.7, 3.18,
4.1 or 4.2, claims for Damages relating to a breach of Section 1.2(a), 1.2(c),
1.5 or 10.4 by the Company or any Seller or claims for indemnification under
Section 10.3(e)), the Buyer shall seek payment solely from the Escrow Funds in
accordance with the provisions of the Escrow Agreement and none of the Sellers
shall have any liability for any such claims for any amount other than the
amount of the Escrow Funds; (ii) with respect to any such claims related to a
breach of any representations and warranties contained in Sections 3.1, 3.3, 3.7
or 3.18, claims for Damages relating to a breach of Section 1.2(a), or 1.5 by
the Company or the Sellers or indemnification under Section 10.3(e), the Buyer
shall seek payment only as follows: (A) first, out of the Escrow Funds in
accordance with the provisions of the Escrow Agreement and (B) second, to the
extent that amounts owing by the Sellers exceed the amount of the Escrow Funds
51
released in payment thereof, the Buyer shall be entitled to seek payment from
each Seller directly for such Seller's Pro Rata Share of the amount of such
excess; (iii) with respect to any such claims related to a breach of Section
1.2(c), the Buyer shall seek payments in accordance with Section 1.2(c); (iv)
with respect to any such claims related to a breach of any representations and
warranties contained in Section 4 (other than Section 4.1 or 4.2), the Buyer
shall seek payment only from the amount of the Escrow Funds otherwise
distributable under the Escrow Agreement to the Seller who is severally liable
for such claim; (v) the Buyer may seek payment for any amounts due with respect
to any claims related to a breach of the representations and warranties
contained in Section 4.1 or 4.2 or related to a breach of Section 10.4 or 10.7
either from the Seller Indemnifying Party who is severally liable for such claim
or from the amount of the Escrow Funds otherwise distributable to such Seller
Indemnifying Party under the Escrow Agreement; and (vi) with respect to any
Special Labor Claims brought or asserted more than eighteen (18) months after
the Closing Date, the Buyer shall seek payment solely from the Escrow Funds in
accordance with the provisions of the Escrow Agreement, up to a maximum amount
equal to the lesser of (x) the amount of the remaining Escrow Funds then
available for distribution and (y) $3,000,000, and none of the Sellers shall
have any liability for any such Special Labor Claims in excess of such amount.
(f) The Sellers and the Buyer acknowledge that at or after the
Closing, the LLC intends to distribute the amount of the Purchase Price received
by it to the LLC Members, and the Buyer desires that the LLC Members be
individually liable for their pro rata share of the obligations of the LLC for
any indemnification payments under Section 10.3(e) and Section 13. Accordingly,
notwithstanding anything to the contrary contained herein, (i) the LLC shall
have no liability for any indemnification payments under Section 10.3(e) or
Section 13 and (ii) for purposes of Section 10.3(e) and Section 13, each LLC
Member shall be treated as a Seller and shall be liable to the Buyer for
indemnification payments hereunder and thereunder (A) to the extent of such LLC
Member's LLC Pro Rata Share of any amounts that would otherwise (but for the
terms of the foregoing clause (i)) be payable by the LLC hereunder and
thereunder and (B) to the extent of any liability for indemnification for breach
of the representations and warranties contained in Section 4.2 regarding title
to shares of Preferred Stock owned by such LLC Member.
(g) Subject to paragraph (h) below, no action or claim for Damages
pursuant to this Section 13 shall be brought or asserted after the date eighteen
(18) months from the Closing.
(h) The limitations set forth in paragraph (g) above shall not
apply to any Damages arising from a breach of the representations and warranties
contained in Sections 3.1, 3.3, 3.7, 3.18, 4.1 and 4.2, a breach of Section 10.4
by any Seller or any Special Labor Claims, provided however that (i) no Seller
Indemnifying Party shall be liable for any Damages arising from a breach of the
representations and warranties
52
contained in Sections 3.1, 3.3, 3.7, 3.18, 4.1 or 4.2 unless the Buyer has
asserted a claim for such Damages prior to the sixtieth (60th) day following the
expiration of the applicable statute of limitations, (ii) no Seller Indemnifying
Party shall be liable for damages arising from any breach of Section 10.4 unless
the Buyer has asserted a claim for such Damages prior to the sixtieth (60th) day
following the second anniversary of the Closing Date and (iii) no Seller
Indemnifying Party shall be liable for Damages arising from any Special Labor
Claims unless the Buyer has asserted a claim for such Damages prior to the
sixtieth (60th) day following the fourth anniversary of the Closing Date. The
Buyer is hereby deemed to have asserted a claim as of the Closing Date for
Damages arising under Section 13.1(a)(iii) and Section 13.1(a)(v).
(i) For purposes of Section 13.1, in determining whether there has
been any breach of any representation or warranty made by the Company or any
Seller Indemnifying Party, such representations and warranties shall be read
without regard to any materiality or "Material Adverse Effect" qualifier
contained therein, and any breach thereof as so read shall be indemnifiable
hereunder, subject to the limitations set forth in this Section 13.
(j) The amount of any Damages for which indemnification is
provided for under Section 10.3(e) or this Section 13 shall be net of (i) any
amounts recovered by the Buyer or its Affiliates as a result of any
indemnification by any third party, (ii) any insurance proceeds or other amounts
received by the Buyer or its Affiliates from third parties with respect to such
Damages and (iii) any net Tax benefit actually realized by the Buyer or its
Affiliates from the incurrence or payment of any such Damage. In computing the
amount of any such Tax benefits, the Buyer and its Affiliates shall be deemed to
recognize all other items of income, gain, loss, deduction or credit before
recognizing any items arising from the receipt or accrual of any indemnity
payment hereunder or the incurrence or payment of any indemnified Damage for
which indemnification is provided under Section 10.3(e) or this Section 13. For
purposes of this Agreement, the Buyer and any of its Affiliates shall be deemed
to have "actually realized" a net Tax benefit to the extent that, and at such
time as, the amount of Taxes payable by the Buyer or such Affiliate is reduced
below the amount of Taxes that the Buyer or such Affiliate would have been
required to pay but for the receipt or accrual of the indemnity payment or the
incurrence or payment of such Damages for which indemnification is provided
under Section 10.3(e) or this Section 13. The Buyer agrees to use commercially
reasonable efforts to make any claims for insurance, tax benefits and/or
indemnification available from a third party(ies) with respect to Damages for
which it will seek indemnification hereunder and to diligently pursue such
claims in good faith. If any such insurance proceeds and/or other amounts are
received by the Buyer after payment by any Seller Indemnifying Party of any
amount otherwise required to be paid to the Buyer pursuant to Section 10.3(e) or
this Section 13, the Buyer shall repay to such Seller Indemnifying Party(ies),
promptly after receipt of such insurance proceeds and/or
53
other amounts, the amount that such Seller Indemnifying Party(ies) would not
have had to pay pursuant to this Section 13 had such insurance proceeds and/or
other amounts been received by the Buyer prior to such Seller Indemnifying
Party's payment under Section 10.3(e) or this Section 13. The Buyer further
agrees to assign (and cause the Company and its Subsidiaries to assign) to the
Sellers or another designee of the Seller Representatives all rights of the
Buyer, the Company and/or its Subsidiaries to contribution, cost recovery,
damages, equitable relief or other remedies for Damages claimed by the Buyer
under Section 13.1(a)(iii) or (with respect to claims for breach of any
representation and warranty in Section 3.11(b) or any other representation and
warranty to the extent relating to environmental matters) Section 13.1(a)(i),
but only to the extent of any payments by the Sellers to the Buyer (including
any payments from the Escrow Funds) in connection with such Damages.
(k) Any indemnification payments made by any of the Seller
Indemnifying Parties pursuant to Section 10.3(e) or this Section 13 shall be
treated by all parties as an adjustment to the Purchase Price hereunder to the
extent permitted by applicable law.
13.5. Expiration of Representations and Warranties; Scope of Seller
Indemnifying Parties' Liability. Each of the representations and warranties of
the Seller Indemnifying Parties contained in this Agreement shall irrevocably
expire on the last day on which any action or claim for breach of such
representation or warranty may be brought or asserted pursuant to Sections
13.4(g) or (h) (the "Expiration Date"). The Buyer acknowledges and agrees that
its sole remedy against the Seller Indemnifying Parties for any matter arising
out of the transactions contemplated by this Agreement is set forth in Section
10.3(e) or Section 13.1 and that, except to the extent the Buyer has asserted a
claim for indemnification prior to the applicable Expiration Date, the Buyer
shall have no remedy against any of the Seller Indemnifying Parties for any
breach of a representation or warranty made by any of them in this Agreement
except to the extent that such breach arises out of or results from fraud by the
Company or the Seller Indemnifying Parties. The Seller Indemnifying Parties and
the Buyer agree that the purpose of this Section 13.5 is to make it clear that
the Seller Indemnifying Parties are to have no liability whatsoever to the
Buyer, except as set forth in Section 13.1, and accordingly agree that this
Section 13.5 is to be construed broadly. The Buyer acknowledges that this
Section 13.5 has been negotiated fully by the Buyer and the Seller Indemnifying
Parties and that the Seller Indemnifying Parties would not have entered into
this Agreement but for the inclusion of this Section 13.5.
14. RIGHT TO TERMINATE. This Agreement may be terminated at any
time prior to the Closing as follows:
(a) By mutual written consent of the Buyer and the Seller
Representatives;
54
(b) In the event that the Closing does not occur on or before June
9, 2003, the Buyer may terminate this Agreement at any time after the close of
business on such date by delivering written notice to the Seller Representatives
so long as such failure to close is not a result of a breach by the Buyer of any
of its obligations hereunder;
(c) In the event that the Closing does not occur on or before June
9, 2003, the Seller Representatives may terminate this Agreement at any time
after the close of business on such date by delivering written notice to the
Buyer so long as such failure to close is not a result of a breach by the
Sellers of any of their obligations hereunder;
(d) In the event that Buyer fails to file with the United States
Department of Justice and the United States Federal Trade Commission the
Notification and Report Form required to be filed by it under the HSR Act in
accordance with Section 11 hereof within five (5) business days after the date
hereof, the Seller Representatives may terminate this Agreement at any time
after the close of business on such date by delivering written notice to the
Buyer; or
(e) In the event that LLC (as the ultimate parent entity of the
Company) fails to file with the United States Department of Justice and the
United States Federal Trade Commission the Notification and Report Form required
to be filed by it under the HSR Act in accordance with Section 11 hereof within
five (5) business days after the date hereof, the Buyer may terminate this
Agreement at any time after the close of business on such date by delivering
written notice to the Seller Representatives.
15. GENERAL.
15.1. Expenses. All expenses of the preparation, execution and
consummation of this Agreement and of the transactions contemplated hereby,
including, without limitation, attorneys', accountants' and outside advisers'
fees and disbursements, shall be borne by (a) the Buyer if incurred for the
Buyer's account or (b) the Company if incurred for the account of the Sellers or
the Company. Notwithstanding the foregoing, (i) all brokerage commissions of
U.S. Bancorp ▇▇▇▇▇ ▇▇▇▇▇▇▇, Inc. and ▇▇▇▇▇▇▇ Capital LLC shall be paid by the
Sellers by deduction from the Purchase Price as Transaction Expenses, and (ii)
all fees payable by the Buyer, the Company and the Sellers in connection with
the required filing under the HSR Act of the Notification and Report Form with
the United States Department of Justice and the United States Federal Trade
Commission shall be paid the Buyer.
15.2. Notices. All notices, demands and other communications
hereunder shall be in writing or by facsimile, and shall be deemed to have been
duly given if delivered personally or by overnight courier or if mailed by
certified mail, return receipt requested, postage prepaid, or sent by facsimile,
as follows:
55
If to the Company, to:
Midway Investors Holdings Inc.
c/o Goldner ▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ Incorporated
5250 ▇▇▇▇▇ Fargo Center
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Managing Partner
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with copies sent contemporaneously to:
BancBoston Ventures Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇, Managing Director
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
and
▇▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Sellers, the Preferred Holders or the Seller Representatives,
to:
Marathon Fund Limited Partnership IV
c/o Goldner ▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ Incorporated
5250 ▇▇▇▇▇ Fargo Center
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Managing Partner
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
and
56
BancBoston Ventures Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇, Managing Director
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy sent contemporaneously to:
▇▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Buyer, to:
VI Acquisition Corp.
c/o Wind Point Partners
▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇., ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy sent contemporaneously to:
▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, Ltd.
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Any such notice shall be effective (a) if delivered personally, when received,
(b) if sent by overnight courier, when receipted for, (c) if mailed, five (5)
days after being mailed as described above, and (d) if sent by facsimile, when
dispatched.
15.3. Entire Agreement. This Agreement contains the entire
understanding of the parties, supersedes all prior agreements and understandings
relating to the subject matter hereof and (except as set forth in Section 6.12)
shall not be amended except by a written instrument hereafter signed by the
Buyer, the Company, and each of the Seller Representatives.
57
15.4. Governing Law. The validity and construction of this Agreement
shall be governed by the internal laws (and not the choice-of-law rules) of the
State of Delaware.
15.5. Sections and Section Headings. All enumerated subdivisions of
this Agreement are herein referred to as "Section" or "paragraph." The headings
of Sections and paragraphs are for reference only and shall not limit or control
the meaning thereof.
15.6. Assigns. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective heirs, successors and
permitted assigns. Neither this Agreement nor the obligations of any party
hereunder shall be assignable or transferable by such party without the prior
written consent of the other parties hereto, which consent shall not be
unreasonably withheld, except that the Buyer may assign (a) its rights and
obligations hereunder to any of its Affiliates and (b) as collateral security
its rights hereunder to any Person providing the Buyer with financing for the
consummation of the transactions contemplated hereby; provided, however, that in
each such case the Buyer shall remain liable to the Sellers for all its
obligations hereunder.
15.7. Further Assurances. The Sellers, the Preferred Holders, the
Company and the Buyer shall execute and deliver to all appropriate other parties
such other instruments as may be reasonably required in connection with the
performance of this Agreement and each shall take all such further actions as
may be reasonably required to carry out the transactions contemplated by this
Agreement.
15.8. No Implied Rights or Remedies. Except as set forth in Section
10.2 and as otherwise expressly provided herein, nothing herein expressed or
implied is intended or shall be construed to confer upon or to give any person,
firm or corporation, other than the Sellers, the Preferred Holders, the Company
and the Buyer and their respective shareholders, any rights or remedies under or
by reason of this Agreement.
15.9. Knowledge. Whenever the phrase "to the knowledge of the
Company" or another similar qualification is used herein, the relevant knowledge
is limited solely to the actual knowledge of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇.
15.10. Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
58
15.11. Satisfaction of Conditions Precedent. The Sellers, the
Preferred Holders and the Buyer will each use commercially reasonable efforts to
cause the satisfaction of the conditions precedent contained in this Agreement;
provided, however, that nothing contained in this Section 15.11 shall obligate
any party hereto to waive any right or condition under this Agreement.
15.12. Public Statements or Releases. Except as otherwise required by
applicable law, each of the parties hereto agrees that prior to the Closing no
party to this Agreement will make, issue or release any public announcement,
statement or acknowledgment of the existence of, or reveal the status of, this
Agreement, the transactions contemplated hereby or any negotiations or
discussions related hereto, without first obtaining the prior consent of the
other parties hereto. Each of the parties hereto further agrees to provide
written notice to the other parties to this Agreement, immediately upon the
knowledge thereof, of any obligation under applicable law to make, issue or
release any such public announcement, statement or acknowledgment.
15.13. Business Records. The Buyer acknowledges that the business
records of the Company and each of its Subsidiaries relating to their respective
operations prior to Closing will be acquired by the Buyer in connection with the
consummation of the transactions contemplated hereby, and that the Sellers may
from time to time require access to or copies of such records. The Buyer agrees
that upon reasonable prior notice from any Seller, it will, during normal
business hours, provide such Seller with access to or copies of such records.
Each Seller hereby agrees to hold any confidential information so provided in
confidence and to use such information only for the purposes described above.
The Buyer agrees that it will not within six (6) years after the Closing Date
destroy any business records of the Company or any of its Subsidiaries prepared
prior to the Closing without first notifying BBV and Marathon, and affording BBV
and Marathon the opportunity to remove or copy such records. For purposes of the
preceding sentence, any notice from the Buyer delivered in accordance with
Section 13.4 shall be deemed to be adequate notice if not responded to in
writing by BBV and Marathon within ninety (90) days.
15.14. Seller Representatives. By the execution and delivery of this
Agreement, each of the Sellers and Preferred Holders hereby irrevocably
constitutes and appoints BBV and Marathon as the true and lawful agents and
attorneys-in-fact (the "Seller Representatives", and each a "Seller
Representative") of the Sellers and Preferred Holders with full power of
substitution to act jointly in the name, place and stead of the Sellers and the
Preferred Holders with respect to the transfer of the Common Securities owned by
the Sellers to the Buyer and the Redemption of the shares of Preferred Stock
owned by the Preferred Holders, each in accordance with the terms and provisions
of this Agreement, and to act jointly on behalf of the Sellers and the Preferred
Holders in any litigation or arbitration involving this Agreement, to jointly do
or refrain from doing all such further acts and things, and to jointly execute
59
all such documents as the Seller Representatives shall unanimously deem
necessary or appropriate in connection with the transactions contemplated by
this Agreement, including, without limitation, the power:
(a) to execute the Escrow Agreement and any amendments
thereto as the representative of the Sellers and the Preferred Holders,
to execute any instructions or directions to the Escrow Agent with
respect to disbursements or other matters thereunder, to pay any
expenses of the Sellers or the Seller Representatives from the escrow
and to take such further actions under the Escrow Agreement as the
Seller Representatives deem to be necessary or appropriate;
(b) to act jointly for the Sellers and the Preferred
Holders with regard to matters pertaining to indemnification referred
to in this Agreement, including the power to compromise any indemnity
claim on behalf of the Sellers and the Preferred Holders and to
transact matters of litigation;
(c) to jointly execute and deliver all amendments,
waivers, ancillary agreements, stock powers, certificates and documents
that the Seller Representatives unanimously deem necessary or
appropriate in connection with the consummation of the transactions
contemplated by this Agreement, including, without limitation,
agreements terminating the agreements listed on Schedule 7.11 hereto;
(d) to jointly receive funds, make payments of funds, and
give receipts for funds;
(e) to jointly receive funds for the payment of expenses
of the Sellers and the Preferred Holders and apply such funds in
payment for such expenses;
(f) to jointly do or refrain from doing any further act
or deed on behalf of the Sellers and the Preferred Holders that the
Seller Representatives unanimously deem necessary or appropriate in
their sole discretion relating to the subject matter of this Agreement
as fully and completely as the Sellers and the Preferred Holders could
do if personally present; and
(g) to jointly receive service of process in connection
with any claims under this Agreement.
In order to be effective for purposes of this Agreement and binding on each of
the Sellers and the Preferred Holders, any action of the Seller Representatives,
including but not limited to any decision to refrain from taking any action,
must be made by the Seller Representatives acting unanimously.
60
The appointment of the Seller Representatives shall be deemed coupled
with an interest and shall be irrevocable, and the Buyer and any other Person
may conclusively and absolutely rely, without inquiry, upon any unanimous action
of the Seller Representatives in all matters referred to herein. All notices
required to be made or delivered by the Buyer to the Sellers or the Preferred
Holders described above in this Section 15.14 shall be made to each of the
Seller Representatives for the benefit of the Sellers and the Preferred Holders
and shall discharge in full all notice requirements of the Buyer to the Sellers
or the Preferred Holders with respect thereto. The Sellers and the Preferred
Holders hereby confirm all that the Seller Representatives shall jointly do or
cause to be done by virtue of their appointment as the Seller Representatives of
the Sellers and the Preferred Holders. The Seller Representatives shall act for
the Sellers and the Preferred Holders on all of the matters set forth in this
Agreement in the manner the Seller Representatives unanimously believe to be in
the best interest of the Sellers and the Preferred Holders and consistent with
the obligations under this Agreement, but the Seller Representatives shall not
be responsible to the Sellers or the Preferred Holders for any loss or damages
the Sellers or the Preferred Holders may suffer by the performance of their
duties under this Agreement, other than loss or damage arising from willful
violation of the law or gross negligence in the performance of their duties
under this Agreement.
[Remainder of Page Left Intentionally Blank]
61
IN WITNESS WHEREOF, and intending to be legally bound hereby, the
parties hereto have caused this Stock Purchase Agreement to be duly executed and
delivered as of the date and year first above written.
THE COMPANY:
MIDWAY INVESTORS HOLDINGS INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President
SELLERS:
MIDWAY INVESTORS, LLC
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇, Manager
-------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇, Manager
and
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Manager
WACHOVIA INVESTORS, INC. (f/k/a First
Union Investors, Inc.)
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇
Title: Managing Director
62
SUNTRUST EQUITY FUNDING, LLC
By: /s/ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
Title: Manager
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-----------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
-----------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇.
-----------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇.
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
-----------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
/s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
-----------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇
-----------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇
-----------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇▇▇▇
-----------------------------------------
▇▇▇▇▇▇ ▇▇▇▇
63
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
-----------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇ ▇▇▇▇▇▇
-----------------------------------------
▇▇▇▇ ▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
-----------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
-----------------------------------------
▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
-----------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
-----------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇
/s/ ▇▇▇▇ ▇▇▇▇▇▇▇
-----------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
-----------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇
BANCBOSTON VENTURES INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
-------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Managing Director
64
MARATHON FUND LIMITED
PARTNERSHIP IV
By: Miltiades, LLC, its sole General
Partner
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Authorized Member
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-----------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇ ▇. ▇▇▇▇
-----------------------------------------
▇▇▇▇ ▇. ▇▇▇▇
/s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
-----------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇
-----------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇
BUYER:
VI ACQUISITION CORP.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: President
65
Schedules
1 Sellers
2 Preferred Holders
3 Stock Options
3.1 Foreign Qualifications
3.2 Subsidiaries
3.3(b) Capitalization of Subsidiaries
3.4 Non-Contravention
3.5 Consents
3.6 Financial Statements
3.7 Taxes
3.8 Absence of Certain Changes
3.9(a) Litigation, etc. (Pending)
3.9(b) Litigation, etc. (Historical)
3.10 Conformity to Law
3.11(a) Real Property
3.11(b) Environmental Matters
3.11(c) Environmental Permits
3.11(d) Pie Production Facilities
3.12 Restaurants
3.13 Franchise Agreements and Registrations
3.14 Insurance
3.15 Contracts
3.16 Employee Benefit Plans
3.17 Trademarks, Patents, Etc.
3.18 Indebtedness
3.19 Labor Relations
3.20 Title to Personal Property
3.24 Potential Conflicts of Interest
3.25 Bank Accounts; Powers of Attorney
5.6 Financing Commitments
6.3 No General Increases
6.4 Contracts and Commitments
6.7 Capital Expenditures
7.7 Resigning Directors and Officers
7.11 Termination of Agreements
13.1 Certain Environmental Matters
Exhibits
A Form of Escrow Agreement
B-1 Form of Opinion of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ LLP
B-2 Form of Opinion of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇.
C Form of Opinion of ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, Ltd.
D Form of Rollover Option Election
E Form of New Stock Option Agreement
F Form of Release (Special Compensation Payments)
G Form of Termination Agreement (Schedule 7.11 Agreements)